New World Development (NWD), controlled by one of Hong Kong’s richest families, looks set to report a loss for its financial year ending June, as property market woes continue to beset the city and the Chinese mainland.
According to its statement to the Hong Kong stock exchange on Friday, NWD said it expects to record a loss attributable to shareholders of the company that range from HK$19 billion (US$2.4 billion) to HK$20 billion for the 12 months ended June 30.
That preliminary estimate stems from the lack of revenue recognition of major projects – such as Pavilia Farm I and II – completed and handed over in the previous financial year, a revaluation or impairment loss on investment and development properties and goodwill, loss recognised on the disposal of its shares in NWS Holdings, together with the continuous interest rate hikes experienced during the year as well as the depreciation of yuan, according to the statement.
The developer also said that it may record core operating profit from continuing operations of between HK$6.5 billion to HK$6.9 billion, representing a year-on-year decrease of 18 per cent to 23 per cent.
In its statement, NWD pointed out that it suffered from a non-cash impairment loss of as much as HK$9.5 billion owing to a reassessment of its investment and development properties in the past financial year.
“These proactive provisions are one-off non-cash and unrealised items,” an NWD spokeswoman said. “They do not affect the group’s cash flow, and will better position us for the future.”
The group also recorded a one-off non-cash loss of HK$8.3 billion from the disposal of all its stakes in NWS Holdings, a Hong Kong-listed firm with businesses ranging from construction and logistics to insurance.
The company’s annual results announcement will be published this September, according to the statement.
Shares of NWD rose 1.8 per cent to HK$7.85 on Friday, trimming its loss to 35 per cent this year. The stock is heading for a fourth consecutive annual decline.
NWD’s latest earnings guidance reflects the property sector’s struggles, as a downturn persists in the residential markets of Hong Kong and the mainland.
The city’s lived-in home prices, for example, fell to the lowest in almost eight years last month, as homebuyers were deterred by borrowing costs that rose in lockstep with the US interest rate. Meanwhile, property prices on the mainland continued to decline in July in spite of a slew of forceful rescue measures from Beijing.
NWD has been battling to cut its debts and return to financial health in recent years. It has set an ambitious target of reducing its gearing ratio to below 40 per cent by 2027, from around 50 per cent at present.
The company “has completed over HK$50 billion loan arrangements and debt repayments”, the NWD spokeswoman said. “The overall financial position of the group remains solid.”
In a separate statement on Friday, NWD said that it is making steady progress on fulfilling repayments and reworking its debt obligations. The firm completed more than HK$16 billion of loan arrangements and debt repayments in July and August. That followed its HK$35 billion worth of debt repayments in the first half of the year.
