Interim result first take: Swung to the black
- Returned to profitability due to lower impairment provisions for development properties in China
- Logistics operation a bright spot
- Financially sound with <10% gearing
Wharf Holdings recorded underlying profit of HK$428m in 1H22 (1H21: loss of HK$360m), due to lower impairment provisions of HK$2.5bn for development properties. (1H21: HK$3.65bn). Excluding property provisioning and other non-core items, the company’s earnings would have been in line with our expectations
Interim DPS stayed flat at HK$0.20.
Income from the China rental portfolio posted a 4% decline, dragged by lower retail turnover rents and tenant sales. While rental margins improved to 69% from 1H21’s 66%, rental earnings from China stayed flat at HK$1.78bn.
Including those from associates and joint ventures, operating profit from property development in China tumbled 44% to HK$609m, led by lower sales completions. Operating margins edged down slightly to 12% in 1H22 f. Operating profit from Hong Kong development projects was 40% lower at HK$412m, mostly from apartment sales at the 50%-owned Mount Nicholson.
In China, attributable contracted sales declined 60% to Rmb2.3bn, dragged by a slowdown in selling activities as a result of the pandemic. As of Jun 22, Wharf Holdings’ net order book stood at Rmb14.8bn (or 0.46msm).
In Hong Kong, attributable contracted sales amounted to HK$292m, down 95%, in 1H22.
Hotel operations recorded operating loss of HK$47m (1H21: profit of HK$35m) as a result of adverse impacts of pandemic-induced measures in 1H22.
The logistics operation saw its operating profit climb 41% to HK396m, thanks to higher overtime storage income from Modern Terminals Limited.
Net debt edged down by 18% to HK$10.9bn in Jun 22 from Dec 21’s HK$13.2bn. Gearing improved to 7% in Jun 22 from Dec 21’s 8%.
As of Jun 22, Wharf Holdings had long-term investments of HK$54.8bn (Dec 21: HK$52.9bn), with properties and new economy stocks accounting for 45% and 37%, respectively. Sitting on a cash balance of HK$18bn, the company is well positioned to make acquisitions when opportunities arise.