Midland Holdings has sunk into the red with an annual net loss of HK$41.39 million as property transactions in the second half of last year dropped to a post-Sars low. The deficit, the firm's first since 2002, also stemmed from HK$199.75 million of provisions - a rise of 80.27 per cent from a year ago - made for collectible receivables and charges related to transaction cancellations. Revenue fell 41.86 per cent to HK$2.25 billion as a result of a drop in agency fees. In 2002, the firm announced a net loss of HK$73.72 million. In 2007, net profit was HK$672.21 million. With the local economy declining sharply over the last few months, the company took sweeping measures to rationalise business operations, including reducing the number of branches and staff. 'This prudent strategy sets the stage for the group to maintain sustained business development and take on the challenges this year,' said chairman Wong Kin-yip. The firm cut the final dividend to 1 HK cent, compared with 21 HK cents and a 35th anniversary special cash bonus of 10 HK cents a year ago. In response to the poor results, Midland shares yesterday dropped 0.86 per cent to close at HK$2.29. As banks have been tightening their lending policy since the fourth quarter of last year, Mr Wong said, registered property transactions plunged to their lowest level for nearly 20 years in November while average property prices fell by almost 20 per cent in the second half. According to the Land Registry, there were 3,786 transactions in November, down 37.46 per cent from October. However, the number of property transactions rebounded to 5,437 last month. The firm said its mainland operation had suffered a loss of HK$100 million because of the property market slowdown coupled with rising operation costs. Mr Wong said Midland would take prompt action to restructure its business there, including downsizing the branch network and streamlining the workforce.