Underlying profit up 15.5pc on property sales and rental reversions
Interim profit at Swire Properties (1972), a unit of airline-to-beverage conglomerate Swire Pacific (19) plunged by nearly a third despite increased property sales.
For the six months to 30 June 2013, the company reported profit attributable to shareholders of HK$6.95 billion, representing a plunge of 29.4 percent year-on-year.
However underlying profit, which strips out the revaluation of investment properties and items such as deferred tax, climbed by 15.5 percent to HK$2.81 billion, slightly under the median estimate of HK$2.95 billion from stock analysts polled by Bloomberg.
Turnover rose 17.3 percent to HK$5.75 billion.
Commenting on the results, company chairman Christopher Pratt said the increase in underlying profit was due to more profit from property trading, mainly from sales of the AZURA residential project at Mid-Levels West as well as positive rental reversions, that is increased rent upon lease renewals or from new incoming tenants, for its investment portfolio in Hong Kong, Guangzhou and Beijing.
Gross rental income was HK$4.71 billion during the first half, up 7.3 percent year-on-year.
It was a different story for the hotel side.
“The owned and managed hotels in Hong Kong did well, but this was more than offset by operating losses at the hotels in mainland China,” Pratt said in a stock exchange announcement.
Looking ahead, Pratt expected continued weak market demand for office space at the company’s portfolio, especially in Central.
“At Island East, rents are expected to remain robust due to high occupancy,” he said.
Demand for retail space was likely to remain strong for its retail space albeit with more moderate rental increases.
For the luxury residential market, Pratt expected the government’s continued use of heavy stamp duties to avert a property bubble would keep a lid on demand.
Despite this, the company expects higher property trading profits in the second half of 2013 when the sales of pre-sold units at the ARGENTA and other completed developments are completed.