Tough years 'in the past' as $2.9b profit heralds new era of earnings growth New World Development (NWD) yesterday claimed to have put two difficult years behind it and entered a new era of steady earnings growth and aggressive debt reduction. Announcing a better than expected net profit of $2.98 billion for the year to June, managing director Henry Cheng Kar-shun said: 'We anticipate a more stable revenue stream in the next one to two years.' NWD's auditors, however, gave the company's accounts only a qualified opinion for the second year, citing the potential impact of a lingering United States court dispute involving its 54.44 per cent-owned subsidiary New World TMT. Last year, provisions for the pending US$700 million legal battle with Californian-based PrediWave forced the company to make massive provisions, resulting in a $976.2 million loss for NWD. However, Mr Cheng brushed aside the concerns, saying the qualified opinion from joint auditors PricewaterhouseCoopers and HC Watt was a standard accounting treatment due to the litigation and would not affect daily operations. 'Things will become more certain after the proceedings start in June next year,' Mr Cheng told reporters yesterday. Meanwhile, overall business 'has been strong on the steady cash flow from our properties, infrastructure and hotel operations. We expect these segments to continue to drive our earnings in the year to come', he said. NWD, which reclaimed its blue-chip status four months ago after being removed from the Hang Seng Index in 2003, would replenish its land bank as well as launch new property projects to buoy its business, Mr Cheng said. The company has 24 million square feet in its land bank and is liaising with the government on agricultural land conversion, including three million sqft from several sites in Wu Kai Sha, Yuen Long and Sai Kung. Analysts were generally optimistic about the company's outlook. 'NWD has been quiet in the market for the past few years,' UBS analyst Eric Wong said. 'As long as it doesn't invest blindly like it did during the dotcom bubble and keeps its eye on the return, NWD is an operationally sound company.' After two years of earnings disappointment, NWD's net profit was above the market consensus estimate of $2.68 billion polled by Thomson Financial. The final result, which represented 86 cents per share, was largely prepared under the old accounting standard apart from the treatment of goodwill. Should the developer adopt the new accounting standard fully, its earnings would rise $2.8 billion on revaluation of its investment properties, Mr Cheng said. Debt fell 35 per cent to $14 billion, for a gearing ratio of 23 per cent, and Mr Cheng expects to cut that to less than 20 per cent by December. Two years ago, NWD's debt had risen as high as $31 billion for a gearing ratio of 68 per cent. However, turnover dropped 13.18 per cent to $22.27 billion. The company declared a final dividend of 20 cents per share, up from four cents a year ago. NWD's mainland property arm New World China Land saw its net profit jump 73.97 per cent to $221.54 million, or 11.18 cents per share, on sales of $1.65 billion for the year to June. It declared a final dividend of three cents compared with zero last year.