Hong Kong company reporting season

China Travel’s first half profit plunges 71pc on yuan depreciation

PUBLISHED : Thursday, 18 August, 2016, 4:06pm
UPDATED : Thursday, 18 August, 2016, 11:01pm

China Travel International Investment Hong Kong, the Hong Kong-listed subsidiary of China National Travel Service, said its net profit fell 71 per cent in the first half, adding that its business hasn’t benefited directly from a merger with its parent in July.

The merger between China National Travel Service (HK) Group with China International Travel Service Group (CITS) gave birth to the country’s largest tourism conglomerate.

“The consolidation will lead to synergies for the agency business and the potential introduction of duty-free shops at tourist attractions as well as new projects development, but it has not seen any direct help for our company’s business so far,” said Qu Tao, China Travel’s executive deputy general manager.

China Travel, which operates hotels, theme parks and leisure resorts, reported net profit of HK$270 million for the six months ended June 30, down 71.2 per cent year on year.

Revenue slipped 13 per cent year on year to HK$1.82 billion. The firm approved the payment of an interim dividend of 2 HK cents per share for the first half.

China Travel chairman Xu Muhan said the plunge in profit for its core business was mainly attributable to the ongoing depreciation of the yuan against the Hong Kong dollar.

Earnings from the hotel business in Hong Kong continued to decline and only contributed 6 per cent to the company’s results. Qu said its Hong Kong hotels saw average hotel occupancy rates rising but room prices slipped in the first half.

“With the economic and political stability in the city improving, I think the hotel business will not drop further in the second half,” said Qu.

The company is seeking potential opportunities for tourist attraction operations in Yunnan, Sichuan and Jiangsu province, as well as looking for overseas project acquisitions, said Qu.

Zhao Huanyan, Shanghai-based chief knowledge officer with Hotel Solution Consulting, said he doesn’t expect China Travel will benefit from its parent company’s consolidation anytime soon.

“The merger could see the two former rival firms consolidate their resources in many areas and eliminate competition. HKCTS will [also] benefit from CITS’s duty-free business,” said Zhao. “However, I think the consolidation needs three years to contribute to the companies’ performance.”

Zhao added that competition has intensified in China’s booming tourism sector and that will also put pressure on China Travel. China’s online travel business has undergone industry-wide consolidation that saw Baidu-backed online travel agent Ctrip enter into a share-swap deal this year with rival Qunar.