TRADING AND RETAIL DIVISION
This division recorded a satisfactory improvement in 1985 with a net profit before extraordinary items of HK$87 million (1984 — HK$71 million). Turnover grew 13% to HK$3,148 million (1984 -- HK$2,794 million).
A. S. Watson & Company, Limited
Despite highly competitive trading conditions, a satisfactory growth in turnover and profits was recorded by the company.
Profits of the manufacturing division fell short of expectations due mainly to the imposition in February, 1985, of a duty on non-alcoholic beverages, equivalent to 60 cents a litre. Nevertheless, substantial volume growth was achieved by the division in China, thus strengthening our market position there.
Further gains in market share were obtained by Park'N Shop. A total of 17 supermarkets were opened during 1985 with the 100th store milestone reached in May.
Another notable success was the launching of an "own label" range of products in November. The Watson's retail chain performed well with a marked increase in both turnover and profits. An additional eight stores were opened in 1985 and the chain now comprises 39 outlets. The Peter Pan chain of toy stores had another good year.
Hutchison-Boag Engineering Limited (HBEL)
The general improvement in the construction industry and particularly in the residential sector has directly benefited HBEL with turnover and profits after tax recording increases of 22% and 59% respectively over 1984.
During the year, HBEL established a China trade department and announced the planned acquisition of Fortress Building Materials Limited and Fortress Limited, the largest electrical appliance retailer in Hong Kong. These acquisitions were completed effective 1st January, 1986. The Trifair switchpanel manufacturing company was acquired in 1985 and made an acceptable contribution to profits. The underlying combined strengths of the new HBEL group coupled with its broad trading base in engineering, building materials and consumer product market sectors should result in a significant increase in profits.
John D. Hutchison Group Limited (JDH)
Acceptable levels in sales volumes and profitability were maintained by JDH which is probably the largest consumer products distribution group in Hong Kong. However, 1985 saw a slowdown in spending in relation to fast moving consumer goods. This has affected the progress of JDH in its mainstream business but growth in profitability was achieved by Watsons Pharmaceutical Limited and Cambridge Sports Limited. These companies joined the JDH group in 1982 and 1983 respectively and their integration is now bearing tangible results. During 1985, Man Hing Loong division was added to John D. Hutchison Trading Limited and this increases the emphasis now placed on the catering trade. Also, John D. Hutchison (China) Limited was established to formalise the group's previous sales efforts in China and negotiations were concluded with Mothercare plc of the United Kingdom to open the first franchised store in April, 1986 at Windsor House, Causeway Bay.
The trading activities of the JDH group will continue to be enhanced through diversification and, with this broader platform of operations, material growth in sales and profitability is expected.
Hutchison China Trade Holdings Limited (HCT)
Although HCT made a modest profit last year, its major contribution was in the development of trade and investment opportunities in China on behalf of its principals and Group companies. Several major contracts were concluded during the year involving aviation, power generation, mining, manufacturing, transport equipment, hotels and food processing. In anticipation of the potential of China trade, HCT continues to add to its capabilities by staffing its offices in Beijing, Shanghai and Guangzhou with officers well qualified to assist the company's principals and Group companies in developing their business with China.
Coal Trading
In January, 1986, the Group entered into a 50:50 joint venture arrangement with Total Compagnie Francaise des Petroles of France to pool resources in the area of coal trading. This joint venture, which will trade in Hong Kong under the name Total Energy Resources (Hong Kong) Limited and in other areas of the Pacific under the name Total Hutchison Energy Limited, will market coal in the Pacific rim and act as agent for a number of coal producers. The venture is expected to make a satisfactory contribution in its first year of operation.
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HUTCHISON WHAMPOA LIMITED
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