Decline in sales contributes to disappointing New World Development results
New World Development turned in a disappointing first-half profit of HK$52.5 million, down 94.9 per cent from HK$1.03 billion a year earlier.
The result last year included a large profit on the sale of the Regent Hotel. A decline in development sales also played a part in the slide, as turnover in property sales fell to HK$487.8 million from HK$3.71 billion.
A HK$180 million property provision and a HK$180.9 million loss from the sale of investment in Chinadotcom further hit the result.
The property provision was made for Queen's Terrace in Sheung Wan and Bijou Court on Prince Edward Road. The two other projects, in Yuen Long, booked into the interim account managed to break even only.
As a result, the group's property sales division recorded a HK$185.3 million loss.
Analysts had forecast New World's profit would be about HK$185 million to HK$440 million for the six months ended on December 31.
Managing director Henry Cheng Kar-shun said the group achieved growth in certain business areas despite the challenging environment.
The contribution from property rentals increased by about 9 per cent to HK$518.6 million during the six months, he said.
Traditional infrastructure operations contributed HK$700.9 million, a 28 per cent increase, while hotels and restaurants brought in HK$161 million, up 24 per cent.
The contribution from construction and engineering fell 39.6 per cent to HK$137.2 million. Finance costs held at HK$860 million, compared with HK$867.1 million previously.
Earnings per share were two HK cents. The group will pay an interim dividend of six HK cents.
Mr Cheng said there was downward pressure on office rentals due to high supply levels.
He said New World had five million square feet of development projects under construction.
With 40 projects in the pipeline and a land bank of more than 20 million square feet, he said the group would take a prudent approach while considering new projects. The group has nine projects including joint ventures with more than 6,000 units scheduled for sale this year.
Mr Cheng said the group's net debt was HK$30.68 billion, representing a gearing ratio of 57 per cent. It will make an early repayment of HK$1 billion of debt by June and intends to reduce another HK$5 billion worth of debt in three years.
Meanwhile, New World Infrastructure recorded a HK$98.16 million loss in the first half, compared with a HK$100.11 million profit previously.
This was due to losses of HK$191.4 million in the sale of Chinadotcom and the impairment loss on other investments.
Mainland property arm New World China Land saw half-year profit fall 83 per cent to HK$17.06 million due to the delay in completion of the existing phase of Changqing Garden in Wuhan.
NWS Holdings, formerly known as Pacific Ports Co, reported a HK$174.7 million profit, up from HK$12.54 million previously, due to robust growth in the container-handling business.
New World shares fell 20 HK cents, or 5.84 per cent, to HK$3.225 yesterday on the profit decline.