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Joseph Lo

Wharf (Holdings)' year-end net profit rose just 2.09 per cent after it took a $599.6 million net exceptional loss for the fall in value of properties under development.

 The company said yesterday attributable profit increased to $1.92 billion for the year to December 31, from the previous year's $1.88 billion.

 Wharf is involved in property investment and development, ports, trading, telecommunications and cable television.

 Chairman Gonzaga Li Wei-jen described the performance as 'satisfactory', given that projected business targets had been met.

 'Hong Kong continued to experience the unprecedented disruption of its financial markets and economy [last year],' he said.

 While some 'semblance of order' had returned during the last quarter, 'full recovery was not expected for some time'.

 The company said rental earnings - its single largest source of income - remained stable last year, while overall occupancy rates at four of its largest developments - Harbour City, Times Square, The Gateway, and Plaza Hollywood - averaged 'close to 95 per cent throughout the year'.

 Operating profit fell 2.61 per cent to $3.19 billion.

 Wharf took a $676 million exceptional provision for the slide in value of properties under development, although it did not break the provision down project by project.

 The company also booked an exceptional profit of $76.4 million from the disposal of long-term investments.

 The exceptional loss surprised analysts. They had expected Wharf to report a net profit of between $2.2 billion and $2.4 billion.

 'I think it was a prudent move on the part of Wharf to write down the value of its properties for sale but, to be honest, I was not expecting it at all,' one analyst said.

 He said he had previously expected Wharf to write down the value of its stock portfolio at mid-year through an exceptional loss, but its failure to do so at the time suggested that the company would also not revalue any of its properties under development.

 Turnover grew only 0.26 per cent to $9.97 billion, up from $9.94 billion the previous year.

 Wharf said it would pay shareholders a final dividend of 50 cents for an annual payout of 78 cents per share, unchanged from the year before.

 The company said plans for construction of the 2.3 million square feet Kowloon Station II residential project - in which Wharf has a 40 per cent stake - would begin next month.

 Meanwhile, Wharf said land premium negotiations with the Government for the redevelopment of the old San Miguel Brewery site in Sham Tseng were continuing.

 Mr Li said: 'Wharf will participate jointly with other associated companies in developing seven million square feet of residential projects over the next five to six years, which will generate regular sales proceeds annually.'  He said Wharf's Serenade Cove development in Tsuen Wan was in 'active stages of launch preparation' while its two Waterloo Road sites had been amalgamated into a single one which was now ready for redevelopment pending the resolution of land-premium negotiations.

 The company said Hong Kong Cable TV's subscription levels remained steady at 400,000, while revenues grew 22 per cent over the year.

 Wharf's container terminal business Modern Terminals handled 2.5 million standard containers, or teu (20-ft equivalent units) last year, a healthy increase of 23 per cent.

 Wharf's total net debt increased by 3 per cent last year, while its average interest cost was about 7 per cent.

 Its 60.5 per cent held subsidiary Harbour Centre Development said net profit fell 80.69 per cent to $162.4 million.

 Harbour Centre will pay shareholders a 15 cent final dividend for a year-end payout of 20 cents per share, down from last year's 52 cents.



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