New World Development

New World Development's net profit dives 54.6 pc in first half

Developer blames sharp fall in revaluation gains for the performance as it maps strategy to counter negative effect of property cooling measures

PUBLISHED : Wednesday, 26 February, 2014, 2:55pm
UPDATED : Thursday, 27 February, 2014, 12:53am

New World Development's first-half net profit plunged 54.6 per cent, but the company said it would take measures to offset the negative impact of the cooling measures in the property market which might affect earnings.

The developer yesterday said net profit for the six months to December dropped to HK$4.53 billion from HK$9.99 billion a year earlier, mainly because of a sharp fall in revaluation gains.

Our strategy is to try to lower the cost and achieve stronger sales

Excluding those gains, underlying profit was up 3 per cent at HK$4.21 billion.

Turnover grew 11.14 per cent to HK$27.18 billion.

Earnings per share dropped to 72 HK cents from HK$1.62.

The company will pay a dividend of 12 HK cents per share, unchanged from a year earlier.

Shares of New World closed flat at HK$9.67.

"The government's cooling measures and increase in land supply would affect property price movements in the next few years. It would dampen people's interest in buying homes," New World chairman Henry Cheng Kar-shun said.

Cheng sounded a note of optimism though.

"We can't be over-pessimistic about property prices. Interest rates would stay at low levels in the coming two years," he said.

"The land price of the Kai Tak site [sold on Tuesday] is over 10 per cent higher than our expectations. It shows many mainland and Hong Kong developers are interested in buying sites in Hong Kong.

"If land prices are unlikely to fall, property prices would not fall substantially."

Cheng acknowledged, however, that Hong Kong developers are facing a fall in profit.

"Prices are facing downward pressure under the cooling measures," he said. "Profits are affected. Our strategy is to try to lower the cost and achieve stronger sales by simplifying the structure, develop better quality products and enhance after-sales service."

Cheng said the government should use the money from the extra stamp duty "to build more public housing and speed up their construction".

New World's revenue from property sales in Hong Kong and on the mainland, including three residential projects in Yuen Long and Sha Tin, grew 10 per cent in the first half to HK$14.03 billion.

The company has already achieved its contracted sales target of HK$10 billion for this financial year ending June, with sales reaching HK$11.7 billion.

The major contributor was the Austin, a luxury residential project in West Kowloon launched in November.

Joint general manager Adrian Cheng Chi-kong said contracted sales had climbed to more than HK$13.6 billion by the middle of this month.

New World had a land bank of about 8.9 million square feet and agricultural land reserves of 19.4 million square feet at the end of last year.