Li Ka-shing's flagship Cheung Kong (Holdings) yesterday reported a worse than expected 78.1 per cent plunge in interim profit to $3.02 billion after making its biggest-ever provisions on property projects and securities investments. Hit by the dramatic plunge in stock and property prices since January, Cheung Kong said in the period to June it made provisions of $3.43 billion, including $2.45 billion for two joint-venture projects and $985 million for securities. The provisions came in way above market forecasts, with many analysts predicting it would report a 58 per cent to 65 per cent earnings drop. Cheung Kong made $13.78 billion in the same period last year, boosted by a $7.72 billion exceptional gain from a restructuring. Before the provisions, Cheung Kong's operating profits plus associated income rose 97.6 per cent to $5.05 billion against last year's figure. Interim earnings per share were $1.32, down from $6 previously. Directors declared a 28.2 per cent drop in interim dividend to 28 cents, down from 39 cents. Analysts said the aggressive provisions for uncompleted properties paved the way for a strong recovery in the 2000 and 2001 financial years when the projects were due for completion. They said if the stockmarket accepted Cheung Kong's policy on provisions, other property companies would follow the same strategy and make aggressive provisions this financial year. Cheung Kong shares were unchanged at $34. Asked about the Government's intervention in the share market, chairman Li Ka-shing said the Government was working in the best interests of Hong Kong. 'I think the Government is trying to do something good for Hong Kong. I personally do support this decision. The Government has tried very hard. They have no choice.' He said Cheung Kong's provisions fully reflected the reduction in value of its property projects and stock investments during the period, including its shares in Hongkong Land and Jardine Matheson. 'Following the provisions, we can make some profits at those projects based on current price levels.' The property provisions include $1.7 billion for its joint venture phase three housing site at Tung Chung Airport Station and $750 million for a residential site in Hunghom, equally owned with associate Hutchison Whampoa. In the 1997 year-end results, Cheung Kong had made a $750 million provision against its Hunghom property. At that time, it also made a provision of $1.26 billion on listed investments. A $1.5 billion provision was made for the Hunghom site, representing a 50 per cent fall from the average price the company paid last year, said Mr Li. Despite the market correction this year, he said 80 per cent of the buyers for the company's projects sold at last year's peak have signed up for mortgages and completed their transactions. Vickers Ballas HK analyst Herbert Lau Chung-kwan said core earnings achieved a big increase as a higher volume of property sales had been booked during the period. Pre-tax development income was about $4.4 billion but it was mostly offset by the provisions. A key income source during the period included its 49.99 per cent stake in Hutchison, which announced a lower than expected $4.31 billion in its first-half profits. Some analysts said they would revise down Cheung Kong's full-year profits and expected it would make further provisions for property and stocks in the second half.