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Recurring business profit dropped 40.6% to $HK 2.6bn, while underlying business profit dropped 26% to $HK 3.4bn, caused largely by the troubled Shatin – Central Link (SCL) project in Hong Kong and an onerous contract for the South Western Railway (SWR) franchise in Britain.
Excluding these contracts, recurring business profit would have risen by 13.8%, while underlying business profit would have increased by 26.4%.
The SCL project faced delays following alleged poor construction and a reported cover-up of mismanaged construction work on extending platforms at Hung Hom station. In addition, 40% of the documents certifying work on two approach tunnels and stabling sidings at the station disappeared.
In July, MTR announced a phased opening of the Tuen Ma Line (TML) section of the project, which would see three new stations at Hin Keng, Diamond Hill and Kai Tak open in the first quarter of 2020.
However, MTR is still liable for the cost of the delays and overruns and has made a provision of $HK 2bn to cover these.
South Western Railway
In March 2017, Britain’s Department for Transport (DfT) awarded the SWR franchise to First MTR South Western Trains Limited, jointly held by MTR (30%) and FirstGroup (70%), under a seven-year contract starting on August 20 2017.
In its 2018 annual results released in March, MTR said SWR’s financial performance had been impacted by a number of adverse factors, including an industry-wide slowdown in growth in passenger numbers, strikes, the delayed introduction of timetable changes and incidents involving infrastructure under the control of British infrastructure manager Network Rail.
MTR says these factors have continued to impact the franchise and, while it has been in discussions with the DfT, the franchise agreement is considered as an onerous contract. The company has made a provision of $HK 436m for the contract, which represents its 30% share of the maximum potential loss under the agreement.
MTR achieved 99.9% punctuality on the Hong Kong rail network, which it says is its best result since the merger with Kowloon Canton Railway (KCRC) in 2007.
MTR says patronage on the Hong Kong – Shenzhen – Guangzhou high-speed line has been good, with 9.9 million passengers using the service in the first half of 2019.
The Hong Kong government has also invited MTR to submit project proposals for the Hung Shui Kiu Station and South Island Line (West) projects.
MTR also marked the opening of the Sydney Metro Northwest on May 26, along with the initial section of Hangzhou Metro Line 5 on the Chinese mainland on June 24, both of which will be operated by MTR.
While MTR says its business in Hong Kong is prepared for slower economic growth, the company says it will have to contend with a variety of risks in the remainder of 2019
The full Hangzhou Metro Line 5 and Macau LRT Taipa Line are expected to open by the end of 2019 while, subject to market conditions, MTR will invite tenders for Wong Chuk Hang Station Package 4 and Lohas Park Package 12.
The post Hong Kong project and British franchise impact MTR half-year results appeared first on International Railway Journal.
This article first appeared on www.railjournal.com
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