Wheelock and Co has made an unexpected provision of almost HK$1 billion for mainland and Hong Kong properties that have been in its land bank for at least six years. The huge provision restricted group profit to HK$723 million for the year to March 31. That was a rise of 9.98 per cent from the previous year but 45 per cent less than the consensus estimate of HK$1.32 billion reported by First Call. Analysts questioned the group's disclosure policy following the results announcement, saying they were unaware of the mainland investments. They also questioned the timing of the provisions, pointing out that mainland property prices had started falling years ago. 'This is a surprise - I didn't even realise Wheelock had some China property,' said Robert Sassoon, analyst at SG Securities. 'This is the kind of thing that will not help the reputation of the management.' Wheelock had made no mention of the mainland property investments in its annual report for the past four years. The most recent reference was in the group's 1994-95 annual report, which said it had made capital commitments of almost HK$5 billion in mainland property joint ventures. Of the HK$998.8 million provision, 60 per cent related to properties in Guangdong and the rest to two Hong Kong projects, Wheelock management said yesterday. The company had already made provisions of HK$235.2 million in respect of the mainland properties last year, analysts were told. Wheelock spokesmen said the provision did not relate to any projects undertaken by subsidiary Wharf (Holdings), which contributes the bulk of the group's profits. Wharf has committed HK$3.7 billion to mainland property through its Times Square retail and office developments in Beijing and Shanghai. Analysts believed the company's downside risk was limited following the latest writedowns. 'Asset prices in the mainland have bottomed out,' said Franklin Lam, property analyst at UBS Warburg. 'All bad news has been discounted for Wheelock.' Wheelock shares lost 25 HK cents, or 4.85 per cent, to close at HK$5.15 yesterday in the wake of the results announcement. Based on the closing price, the company is trading at a 70 per cent discount to UBS Warburg's estimated net asset value of HK$17.8. The two Hong Kong projects written down were the former San Miguel brewery site in Sham Tseng and an 11 million square feet project in Yau Tong. Analysts were concerned the company might need to make further provisions for the Sham Tseng site, where Wheelock is developing a residential project. The project had a break-even cost of HK$4,000 per square foot, versus estimated selling prices in the area of HK$3,500 per square foot, said Mr Sassoon. The Sham Tseng project and the Kowloon Station Package II development were expected to generate HK$33 billion of income for the group over the next few years, Wheelock said. It also expects to receive about HK$4.49 billion profit before tax from its Singapore residential development, Ardmore Park. Group turnover dropped 36 per cent to HK$4.55 billion, due to lack of development project bookings. Properties contributed about 70 per cent of the turnover, with retail operations accounting for the remainder. Lane Crawford, which was privatised by Wheelock last year, bounced back to a profit of HK$102.3 million, having made a loss of HK$66.6 million the previous year. Wheelock booked HK$327.3 million in profits from trading securities but the value of its stock portfolio decreased by HK$2.4 billion due to adoption of a new accounting standard requiring securities to be recorded at their market price. Earnings per share were 35.6 HK cents, from 32.4 cents last year. The company announced a final dividend of five cents, the same as last year.