Sun Hung Kai & Co, a local financial institution founded in 1969, posted a 26 per cent drop in net profit for the first six months, dragged down by material losses from its principal investments arm. The firm, which owns broker Sun Hung Kai Financial (SHKF) and consumer-finance firm United Asia Financial (UAF), said its net profit fell to HK$380.2 million in the first half, compared with HK$514.3 million in the same period last year. The principal investments arm, which operates a portfolio of listed and non-listed companies, lost HK$88.8 million, compared with a profit of HK$167.1 million last year. The firm said its proprietary unit's HK$92.9 million loss on financial assets was unrealised and that it had lessened since the start of the second half of the year. The group said it spent HK$31.5 million on the completion of the liquidation of a subsidiary in the Philippines that ceased operations many years ago. Earnings per share fell 27 per cent to 17.8 HK cents, compared with 24.5 HK cents a year earlier. The drop in earnings came despite a jump in group revenue. Turnover rose 23 per cent year on year to HK$2.17 billion in the first half. Finance costs spiked 130 per cent to HK$183.8 million on interest payments on US$350 million of guaranteed notes. Cash and cash equivalents item fell to HK$3.5 billion in June from HK$4.6 billion at the end of last year. SHKF's net gearing ratio, a measure of indebtedness, rose to 34.4 per cent from 19.4 per cent. In June, SHKF, which is transforming itself into a wealth manager from a conventional brokerage, entered into a partnership with China Everbright Bank to sell its products and services to the mainland lender's high-net-worth clients. UAF, which raised a second HK$500 million yuan dim-sum bond in May, opened 15 operations in the mainland in the first half, as it bets on growth in consumer finance there.