Cheung Kong half-year profits down 13 percent

Analysis 02 Aug 2013
Cheung Kong half-year profits down 13 percent

Revenue from Hutchison Whampoa fails to support profits

Danny Chung:

An increase in profits booked from sister company Hutchison Whampoa (0013) failed to lift profits at leading developer Cheung Kong (Holdings) (001) as it faced challenging trading conditions.

For the six months to 30 June 2013, the profit attributable to shareholders slid 13 percent year on year to HK$13.4 billion while turnover also fell 17 percent to HK$14.7 billion.

Its share of profit from Hutchison Whampoa jumped 23 percent to HK$6.2 billion.

“The first half results of the Group reflect the continued difficult operating environment,” the company said in a stock exchange notice.

The company, controlled by Hong Kong’s richest man Li Ka-shing, saw its revenue from property sales shrink dramatically, plunging 46 percent to HK$5.5 billion.

It expected better performance in the second half when profits can be booked from more developments.

“The local property market will continue to be subject to external economic conditions and the development of the housing policies, and our strategy is to be responsive to market developments and property-related policies,” the company said.

The property market has come back down to earth after the government imposed a buyer’s stamp duty and special special stamp duty to drive out property speculation last October.

New property launches have also slowed with cautious developers grappling with the strict Residential Properties (First-hand Sales) Ordinance that came into effect last April.

Looking out of place -  Cheung Kong's residential project near Fung Yuen village in a rural area outside of Tai Po, with some tower blocks reaching 28 storeys in height, is due for completion this year   (Danny Chung)

Looking out of place – Cheung Kong’s residential project near Fung Yuen village in a rural area outside of Tai Po, with some tower blocks reaching 28 storeys in height, is due for completion this year (Danny Chung)

Statistics compiled by leading estate agent Midland Realty paint a grim picture for the property sector.

For the second half of 2012, the transaction volume for first hand sales by developers was 7,305 cases with consideration totalling HK$65.8 billion.

But for the first half of 2013, with the full force of the new stamp duty and first hand sales regulations bearing down on the market, transaction volume shrank to 4,424 cases with consideration plunging to HK$39.6 billion.

The company said it was business as usual however with its development projects progressing as scheduled and it would be looking to add to its land bank.

Projects scheduled for completion in 2013 include The Beaumount, One West Kowloon, Kennedy Park at Central and its Fung Yuen project in Tai Po.

Its sister company, retail to ports and telecommunications conglomerate Hutchison Whampoa, fared better during the first half with profit attributable to ordinary shareholders jumping 23 percent to HK$12.4 billion.

Total revenue however edged up by only two percent to HK$199 billion.

In terms of revenue, its retail segment performed the best during the period, leaping 38 percent year on year to HK$7.5 billion.

However in terms of EBITDA (earnings before interest, tax, depreciation and amortization), the business segment of Cheung Kong Infrastructure took the lead, booking a 26 percent increase to HK$11.5 billion.

 

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