Duty-free loss To take toll on NWS profits

Executives upbeat after boom year but firm faces challenges in wake of lost airport licence and changes to mainland toll road charges

PUBLISHED : Wednesday, 26 September, 2012, 12:00am
UPDATED : Wednesday, 26 September, 2012, 3:33am

NWS Holdings, which operates duty-free shops and toll roads in Hong Kong and on the mainland, is bracing for a hit from a change in mainland toll road policy and the end of its duty-free licence at the Hong Kong International Airport.

Net profit rose 13 per cent in the fiscal year ended June to a record HK$5.25 billion from a year earlier. Sales jumped 56 per cent to HK$14.95 billion, mostly due to the company increasing its stake in the Hangzhou Ring Road during the year. Earnings per share rose 9 per cent to HK$1.53, while the company declared a final dividend of 25 HK cents a share.

Duty-free sales at the airport, Hung Hom and along the border at Lo Wu and Lok Ma Chau, as well as rent from the Convention and Exhibition Centre in Wan Chai, contributed HK$1.2 billion in operating profit, up 35 per cent.

"We are expecting the duty-free business to be hindered by the expiry of the airport licence," Patrick Lam, executive director of NWS, a listed unit of Hong Kong property developer New World Development, said yesterday. "But we are confident that the sales at other borders" can make up the shortfall later.

Lam did not provide a breakdown for the turnover at the airport.

A new toll road policy to be implemented on the mainland from September 30 will exempt private cars from tolls during annual Golden Week holidays.

NWS has invested in 20 toll roads in Guangdong, Guangxi, Shanxi, Zhejiang and Tianjin.

The company said it was negotiating with local governments over how to apply the new policy. "We aim to find a way to protect the interests of our shareholders," said Tommy Cheng, executive director of NWS.

At present, only a few provinces, including Hunan, Henan, Sichuan and Jiangxi, have released details of how they will implement the new policy.

NWS is looking to diversify its footprint by acquiring infrastructure projects elsewhere, including Australia, Britain and other European countries.

"The timing of the acquisitions will depend on the market conditions and the negotiations," said Brian Cheng, executive director and grandson of chairman Cheng Yu-tung.

When asked about the health of his grandfather, who was recently admitted to Hong Kong Sanatorium & Hospital for an undisclosed reason, Cheng said he did not want to comment on personal issues.

Separately, New World Department Store China, a sister company of NWS, reported a 10.6 per cent net profit rise to HK$561.3 million in the year ended June. Earnings per share were 36 HK cents and the company declared a final dividend of 8.2 HK cents a share.