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Kenneth Ko

The firm is forced to make a $1.76 billion write-down for developments

Substantial provisions for property projects have caused Wheelock and Co's   profit  to plummet by 88.3 per cent to $64 million for the year to March 31.

The group made a $1.76 billion provision for property developments, mainly the loss-making Sorrento and Bellagio projects, and a provision of $662.8 million for its investment properties.

The listed flagship of chairman Peter Woo Kwong-ching  said net profit before provision was $1.62 billion, an increase of 12.3 per cent year on year.

Analysts were not surprised by the sharp profit decline, saying  huge property provisions had been expected because of the weakened property market.

BNP Paribas Peregrine head of regional property Adrian Ngan Wai-hung  said the business performance was not too bad, excluding the provisions.

The main drivers behind the growth of profit before provision were a contribution from associate Wharf (Holdings) and lower finance costs,  while Wheelock's fundamentals were sound and the stock was worth re-rating.

Wharf's net profit contribution to Wheelock, before its share of provisions for Sorrento and Bellagio, was $1.36 billion. Wheelock's borrowing costs fell to $254.8 million from $554.2 million previously.

South China Securities analyst Jeff Yau  said Wheelock's financial position had been improving  over the past few years with its continued debt reduction.

The ratio of net debt to shareholders' equity fell to 37.8 per cent from 49.7 per cent a year earlier.

At the end of March, the group's net debt was reduced by 33.2 per cent to $8.79 billion.The decrease in debt was caused by net cash generated mainly from property sales and cash inflow of $2.82 billion from the disposal of  non-trading securities.

Wheelock will pay an unchanged final dividend of five  cents a share, maintaining the full-year payout at 7.5 cents.

During the year, the group's turnover rose 37.7 per cent to $9.86 billion, mainly because property sales increased from $4.48 billion to $7.44 billion. At the end of March, more than 82 per cent of phase-one units in Sorrento and 37 per cent of phase-two units were sold, while 75 per cent of Bellagio phases one and two were sold.

Despite the lacklustre market conditions, the operating profit of its property investment division increased by $11.2 million to $253.1 million on improved occupancy.

The group realised a net gain of $31.5 million from the sale of its retail business portfolio, including Lane Crawford, Joyce and City Super, during the year.

The profit contribution from  investments and other segments fell by $173.5 million to $38 million after including a $192.6 million loss on disposal of certain non-trading securities. At the end of March, Wheelock maintained a portfolio of long-term investments worth $753.2 million.



Wheelock's earnings slide on the back of property provisions