Core earnings disappoint as interest costs erode strong rents
Great Eagle Holdings is banking on a proposed asset spin-off to slash its hefty debts and fuel earnings, after last year's robust rental growth was largely overshadowed by a sharp rise in interest expenses.
The property investor, which aims to raise up to $5.46 billion by floating its prime office asset in a real estate investment trust this year, saw last year's core earnings edge up only 5.75 per cent despite a 70 per cent rally in its Hong Kong rental revenue.
'The significant rise in interest rates during the past year adversely affected the group's financial results, although the impact was mitigated by the incremental revenue from Langham Place,' deputy chairman and managing director Lo Ka-shui said.
'Looking forward, interest rates are likely to move further upwards in the coming months. Nonetheless, we remain committed to our goal to significantly reduce our financial gearing through asset divestiture, to enhance our financial manoeuvrability.'
Although the company transformed a once-seedy part of Mongkok into the popular Langham Place retail hub, the project has left a mountainous debt on its balance sheet as interest expenses surged 88.17 per cent to $760.71 million last year.
Net attributable debt stood at $14.31 billion at the end of last year, a drop of $352 million from 2004. Its gearing ratio was 59 per cent.
