HONG KONG: Shimao Property Holdings Ltd, one of the major developers on the mainland, said yesterday its net profit for 2008 suffered a steep fall, dropping 79 percent year-on-year as revenue from property sales shrunk due to delays in completion of some projects and a slump in the mainland property market.

Net profit for the year came in at 841 million yuan, down sharply from 4.1 billion yuan in 2007, while earnings per share shrank to 0.256 yuan from 1.274 yuan.

However, the Hong Kong-listed developer noted that core profit for the year dropped a milder 39 percent to 1.1 billion yuan from 1.8 billion yuan in the previous year.

Core profits excluded the impact of revaluation on investment properties, goodwill adjustments, tax rate adjustments and one-off items.

The company posted a one-off gain of 752 million yuan from the sales of a 30 percent stake in its Wuhan project in 2007. It also booked an 866 million yuan revaluation gain on its investment properties and 316 million yuan gain in tax rate adjustment in 2007.

Total revenue for the year amounted to 7.2 billion yuan, down 22 percent from 9.3 billion yuan in the previous year, mainly because of the delay in obtaining completion certificates for some projects until the first half of 2009, the developer said.

Of the total revenue, that from sales of residential properties was 6.2 billion yuan, down 28 percent compared with 2007.

The company blamed the negative impact to market sentiment of natural disasters, such as the snowstorms that hit North China in early 2008 and the Sichuan earthquake, for the delays in project completion.

It also cited a slump in the mainland property market after the central government implemented some macro-control measures in the first half of 2008 and the slowdown in the domestic economy after the global financial crisis hit the world in the second half.

There were bright spots, though, in its performance last year.

Contracted sales in 2008 amounted to 12 billion yuan, up 28.4 percent from the previous year.

Meanwhile, revenue from investment properties, including hotels, office and shopping malls, surged 48 percent year-on-year to 951 million yuan.

Gross profit margin for 2008 improved to 45 percent from 43 percent in 2007, despite the fact that around 70 percent of sales revenue was generated from projects in second- and third-tier cities, Vice Chairman Jason Hui said.

He attributed the "relatively" high level of profit margin to Shimao's low land costs.

The company noted significant improvement in property sales during the first four months of this year.

As of April 24, contracted sales stood at 6.6 billion yuan, representing 44 percent of the 2009 contracted sales target, Hui said.

"Sales were strong so far this year. We are very confident that we can achieve the full-year sales target. We could even overshoot the target," he told a press briefing yesterday following the release of the company's results.

In the wake of the strong sales performance during the first four months of the year, Shimao has raised its full-year contracted sales target to 17 billion yuan from 15 billion yuan previously, Hui said.

The company proposed to pay a final dividend of 13 Hong Kong cents per share for 2008, down from 16 cents in the previous year.

(HK Edition 04/28/2009 page16)