Wharf Real Estate Turns Losses into Profits in H1 2023
August 7, 2023 – Wharf Real Estate (01997) has reported its interim results for the first half of the year, revealing a significant turnaround from losses to profits. The Hong Kong-based company announced that its profit attributable to shareholders for the period was HK$1.805 billion. This marks a positive change compared to the previous year.
The unaudited basic net profit for the period ending June 30, 2023, decreased by 9% to HK$3.059 billion, equivalent to HK$1.01 per share. However, when including the net revaluation loss of HK$1.133 billion on investment properties, the profit attributable to shareholders reached HK$1.805 billion, with basic earnings per share of HK$0.59.
Wharf Real Estate attributed the improvement in its financial performance to the reopening of the border in January, which led to an improved business environment. However, challenges remain due to the strengthening of the local currency and the slow recovery of travel logistics, including flight capacity and valid travel documents. The company has also been affected by global geopolitical and economic uncertainties, hindering the post-pandemic recovery.
Retail sales growth in Hong Kong has slowed from 24% in the first quarter to 18% in the second quarter. Additionally, the number of tourists visiting Hong Kong and retail sales in the first half of 2023 remain significantly below pre-pandemic levels, at only 37% and 85% respectively.
Despite the modest market recovery, Wharf Real Estate’s high-quality investment properties continue to attract discerning tenants and shoppers. Although shopping mall rents have stabilized, the amortization of rent concessions granted during the pandemic has impacted the rate of rent recovery. Oversupply in the office market has also weighed on rents and occupancy rates.
In contrast, the hotel segment has experienced a relatively obvious profit recovery in the first half of the year, albeit with limited growth momentum in the second quarter. Rising costs, particularly manpower and energy costs, have squeezed profit margins in both the investment property and hotel segments.
Wharf Real Estate acknowledges that investment property valuations have yet to reach their lowest point due to the challenging macro environment. The company expects the office market to continue facing oversupply and low occupancy rates until there is a major shift in business sentiment.
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