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Sandy Li

Shares in Jusco Stores (Hong Kong) dived more than 18 per cent at one stage yesterday as investors dumped the stock following a 76.66 per cent drop in interim profit.

A sharp fall in profit contribution from the mainland and the effects of the battered SAR retail market took a toll on Jusco, Hong Kong's largest general merchandise store operator. The company has eight stores in Hong Kong and four on the mainland.

For the six months to August 31, the company reported a net profit of HK$3.56 million, down from HK$15.26 million in the same period last year.

Yesterday, its shares closed at HK$2.70, down 17.5 per cent from Thursday.

Profit from mainland operations was HK$2.37 million, down 86.31 per cent from HK$17.3 million previously. Arnold Wong, Jusco's accounts and finance director, said the fall was due to a HK$6 million provision for pre-operation expenses for new stores in Shenzhen and Dongguan.

The company's tax expenses increased to HK$10.9 million, up 41.6 per cent year on year.

Mr Wong said the soaring tax payment resulted mainly from its mainland operation, which had to pay an effective rate of more than 33 per cent.

But he said the tax charge should be lowered once joint assessment permission had been secured from the central government.

Last month, Jusco opened its fourth mainland general merchandise store - City Plaza Store (Shenzhen). Mr Wong said it would take about four years for a new store to achieve break-even.

The profit contribution from the company's Hong Kong operation, which accounted for 84 per cent of its HK$1.8 billion turnover, rose 21.21 per cent to HK$8.26 million.

'The overall economic conditions in Hong Kong continue to be challenging. The unemployment rate is at a historical high, which has adversely affected consumer confidence,' said managing director Kazumasa Ishii.

The group's average customer spending had also dropped 10 per cent from a year ago, he said. The net profit margin in Hong Kong was just 0.4 per cent, down 0.1 per cent.

Delta Asia Financial head of research Conita Hung said nervous investors probably unloaded the stock yesterday after the company announced its disappointing interim result soon after the opening of the afternoon trading session.

She said the company's business largely depended on its mainland operation, given the SAR's retail market had became saturated.

However, Jusco's plan to open 50 new stores in Hong Kong and southern China in the next five years remains unchanged.

Mr Ishii said capital expenditure for opening new stores was HK$60 million this year. The group had cash on hand of HK$326 million and no bank borrowings.

No interim dividend was recommended while earnings per share were 1.37 HK cents, down 76.66 per cent from 5.87 HK cents previously.



Jusco shares plunge on 76pc profit dip