16 January 2019
Wharf may find it difficult to sustain the growth pace of the past, says deputy chairman Stephen Ng. Photo: HKEJ
Wharf may find it difficult to sustain the growth pace of the past, says deputy chairman Stephen Ng. Photo: HKEJ

Wharf cites challenging market conditions as core profit falls

The Wharf (Holdings) Ltd. (00004.HK) expects operating conditions to remain challenging this year, with the conglomerate particularly concerned about a slowdown in the retail industry in Hong Kong and uncertain prospects for the property business in the mainland.

“Our business has grown in the previous year, as revenue went up by 20 percent. But it was more difficult to do business,” deputy chairman Stephen Ng Tin-hoi said on Monday.

“We think we will still have growth in revenue this year… but it will be difficult to maintain the growth seen in previous years,” he said.

The group’s turnover rose by HK$6.2 billion to HK$38.13 billion in the year ended December, but core profit dropped 7 percent to HK$10.47 billion.

The Wharf, whose flagship properties in Harbour City and Times Square shopping centers in Hong Kong contribute more than half its underlying profit, has been one of the beneficiaries of the individual visit scheme for mainlanders, which was launched in 2003.

But the retail industry outlook has dimmed of late due to China’s anti-extravagance campaign and competition from Europe, Korea and Japan as their currencies weakened relative to the Hong Kong dollar.

Retail sales in Hong Kong fell 0.2 percent from a year earlier in 2014. The downtrend intensified this year, with sales in January slumping 14.6 percent compared to the same month a year ago and marking the biggest drop since the SARS outbreak in 2003.

While there was an overall slowdown, both Harbour City and Times Square were still able to outperform the market last year. Turnover at Harbour City grew by 3.4 percent to a record HK$35 billion while that in Times Square was up 11 percent to HK$10.5 billion, also a fresh high.

“We made record highs in our investment properties last year. We hope that we will still have growth this year, but may see some slowdown in the pace,” Ng said.

As for the mainland property development business, Ng said it may be difficult to achieve the sales target this year due to market uncertainties.

Contracted sales of residential units in China reached 21.5 billion yuan in 2014. The group hopes to improve the sales this year but acknowledges that the task won’t be easy.

“Sales largely depend on when the projects get the [official] permits… whether we can earn 20 billion yuan in the remaining 10 months of the year mainly depends on macroeconomic conditions and sales strategy of our peers,” Ng said.

Operating profit on development properties in the mainland dropped by 33 percent last year.

Wharf booked an impairment provision of HK$2 billion against its mainland assets.

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EJ Insight reporter

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