Guoco Group Limited
(Incorporated in Bermuda with limited liability)
ANNOUNCEMENT OF 1999/2000 FINAL RESULTS
RESULTS
The Board of Directors of Guoco Group Limited ("the Company" or "the Group") is pleased to announce its audited consolidated net profit after taxation and minority interests for the financial year ended 30th June, 2000 together with comparative figures for the previous year as follows:
Note 2000 1999 Change
HK$'000 HK$'000 %
Turnover 1 10,870,022 12,504,508 -13.1
Cost of property sales (713,670) (2,361,639)
Interest expenses of
banking operations (5,572,902) (5,921,657)
Other attributable costs (158,584) (130,047)
----------- -----------
4,424,866 4,091,165
Other revenue 17,774 16,345
Other net (loss)/income (21,929) 384,749
Administrative expenses (1,761,136) (1,639,361)
Other operating expenses (43,405) (14,817)
Provisions for bad and
doubtful loans and advances
for banking operations (365,913) (856,762)
----------- -----------
Operating profit before
finance cost 2,250,257 1,981,319
Finance cost for
non-banking operations (399,301) (481,089)
----------- -----------
Operating profit 1,850,956 1,500,230
Provision for diminution
in value of development
properties (64,282) (1,307,302)
Write back/(provision) for
investment in associates and
jointly controlled entities 14,546 (374,416)
Net profit/(loss) on disposal of
investment properties 246,494 (5,539)
Net loss on disposal of
fixed assets (33,887) (6,796)
Net profit on disposal of
associates - 1,214,468
Loss on deemed disposal of a
subsidiary's property
portfolio (296,938) -
----------- -----------
Operating profit on
ordinary activities 1,716,889 1,020,645 68.2
Share of losses less
profits of associates (2,939) (104,517)
Share of profits less
losses of jointly controlled
entities 29,802 8,363
----------- -----------
Profit from ordinary activities
before taxation 1,743,752 924,491 88.6
Taxation 2 (386,384) (349,584)
----------- -----------
Profit from ordinary activities 1,357,368 574,907 136.1
Minority interests 3 (604,900) 37,376
----------- -----------
Profit attributable to
shareholders 752,468 612,283 22.9
Appropriations:
Dividends 4 (298,642) (255,979)
----------- -----------
Retained profit for the year 453,826 356,304
=========== ===========
Retained in:
The Company and
its subsidiaries 523,316 452,559
Associates (93,983) (104,424)
Jointly controlled entities 24,493 8,169
----------- -----------
453,826 356,304
=========== ===========
Earnings per share
Basic 5 HK$1.76 HK$1.44 22.2
=========== ===========
Diluted 5 HK$1.73 N/A
=========== ===========
Notes:
1. Turnover
2000 1999
HK$'000 HK$'000
Interest income from banking operations 8,640,291 8,550,681
Interest income from non-banking operations 59,160 70,508
Income from sale of investments in securities 88,861 31,154
Securities commission, brokerage and other income 144,817 57,165
Gross insurance premiums 162,934 157,105
Income from sale of properties 730,298 2,298,555
Rental income from properties 149,774 199,833
Other income from banking operations 881,118 1,126,474
Dividend income from listed securities 12,769 13,033
----------- -----------
10,870,022 12,504,508
=========== ===========
2. Taxation
2000 1999
HK$'000 HK$'000
Hong Kong profits tax 269,911 203,565
Overseas taxation 58,170 219,413
Deferred taxation (38,050) (73,495)
-------- --------
290,031 349,483
Share of associates' taxation 91,044 (93)
Share of jointly controlled entities' taxation 5,309 194
-------- --------
386,384 349,584
======== ========
Provision for Hong Kong profits tax is based on the estimated assessable profits for the year at the rate of 16% (1999: 16%). Taxation for overseas subsidiaries is charged at the appropriate rates of taxation ruling in the countries in which they operate.
Deferred taxation is provided using the liability method in respect of the taxation effect arising from all material timing differences between the accounting and tax treatment of income and expenditure, which are expected with reasonable probability to crystallize in the foreseeable future.
3. Minority interests
The increase in minority interests is primarily attributable to the improvement of profitability of subsidiaries during the year.
4. Dividends
2000 1999
HK$'000 HK$'000
Interim dividend of HK$0.15 per share
(1999: HK$0.10 per share) 63,995 42,663
Final dividend of HK$0.55 per share
(1999: HK$0.50 per share) 234,647 213,316
-------- --------
298,642 255,979
======== ========
5. Earnings per share
(a) Basic earnings per share
The calculation of basic earnings per share is based on the profit attributable to shareholders of HK$752,468,000 (1999: HK$612,283,000) and on the 426,631,086 shares (1999: 426,631,086 shares) in issue during the year.
(b) Diluted earnings per share
The calculation of diluted earnings per share is based on the profit attributable to shareholders of HK$740,011,000 and the weighted average number of 426,631,086 shares in issue during the year after adjusting for the effect of all dilutive potential ordinary shares. During the year ended 30th June, 1999, there were no dilutive potential shares. Fully diluted earnings per share are not disclosed.
6. Comparative figures
The presentation and classification of items in the consolidated profit and loss account have been changed due to the adoption of the requirements of Statement of Standard Accounting Practice 2.101 (revised) "Presentation of financial statements" ("SSAP 1 (revised)"). As a result, additional line items have been included on the face of the consolidated profit and loss account as required by SSAP 1 (revised) such as other revenue, finance cost and an analysis of expenses. Comparative figures have been reclassified to conform with the current year's presentation.
7. The accounts of the Company are maintained in United States dollars. The accounting figures shown above have been translated from United States dollars into Hong Kong dollars equivalents at the rates ruling at the respective financial year ends for presentation purposes only (2000: US$1=HK$7.7955; 1999: US$1=HK$7.7575).
DIVIDENDS
The Directors are recommending to the shareholders, for approval at the forthcoming Annual General Meeting, payment of a final dividend of HK$0.55 (1999: HK$0.50) per share amounting to HK$235 million for the financial year ended 30th June, 2000 (1999: HK$213 million). Together with the interim dividend of HK$0.15 (1999: HK$0.10) per share totalling HK$64 million (1999: HK$43 million) paid on 17th April, 2000, the total distribution of the year will amount to HK$0.70 per share totalling HK$299 million (1999: HK$0.60 per share totalling HK$256 million). The final dividend will be payable on 21st November, 2000 to the shareholders whose names appear on the Register of Members on 20th November, 2000.
REVIEW OF ACTIVITIES
Dao Heng Bank Group Limited ("DHBG") - 71.47% owned by the Group
The consolidated net profit of DHBG for the 1999/2000 fiscal year ended 30th June, 2000, after minority interests, provisions for doubtful loans, depreciation and taxation amounted to HK$1,730 million, an increase of 43.8% from the previous fiscal year. Earnings per share were HK$2.49.
DHBG has completed restructuring its domestic branch network during the past year and is now more focused to pursue its goal of becoming a leading universal consumer and commercial bank in Hong Kong. This reorganisation repositions the physical branch network to concentrate on community banking for consumers, while all business banking activities are being conducted from two centralized units, one in Kowloon and the other on Hong Kong Island.
The Global Private Banking and Premier Banking units are stepping up their wealth management capabilities by providing an increasingly wide range of investment and lending products to meet their customers' more sophisticated financial services needs.
Dao Heng Card Centre continues to experience good growth in its cardholder base, accounts receivable, and turnover. Mortgage Banking Division was established to build upon the success of DHBG's innovative and market leading Mortgage Direct operation. It is considered that the specialisation afforded by such a structure will enable Dao Heng to compete effectively in Hong Kong's increasingly challenging residential mortgage market.
Dao Heng Markets has further enhanced its market penetration, and is now the second largest local bank participant in Hong Kong's debt capital markets. On a corporate level, Dao Heng Bank Group is honored to be named as the second best bank in Asia in a survey conducted by Asiamoney and was chosen to be a Hang Seng Index constituent stock effective 6th December, 1999.
DHBG, in co-operation with its sister company, Dao Heng Securities Ltd., continues to expand the services and channels available to its customers to deliver a comprehensive share trading capability. These channels include mobile phone and internet share trading, as well as our market leading Share Direct product that is delivered through a state of the art Call Centre.
DHBG is intensifying its investments in technology, particularly in developing its alternate delivery channels including the internet. One of the first banks in Hong Kong to provide an internet payment gateway with both SSL and SET capability, DHBG continues to expand its cyber-merchant base. A full range of internet banking services including an internet enabled virtual credit card has been launched to provide its customers with a comprehensive e-banking and e-commerce platform.
DHBG continues to maintain five offices in Mainland China, and one office each in Macau and Taipei; new business activity in these markets however continues to be subdued. In the Philippines, DHBG is in the process of implementing a major strategic shift by merging its 60% owned subsidiary bank with Banco de Oro Universal Bank, a highly respected domestic bank. Linking up with Banco de Oro Universal Bank as a strong local partner will materially strengthen DHBG's competitive position in the Philippines, providing wider access for our extensive range of financial products and services.
First Capital Corporation Ltd ("FCC") - 54.28% owned by the Group
For the year ended 30th June, 2000, FCC reported a profit after tax and minority interests of S$55 million, a turnaround from a loss of S$179 million for the previous financial year. This is attributable mainly to gains from the sale of a subsidiary which owned the Century Square Shopping Mall, investment dealing activities and write-back in provisions for earlier foreseeable losses on development projects.
FCC's investment in Benchmark Group PLC, a specialist Central London property investment development company listed on the London Stock Exchange, continues to perform well and made a contribution before tax of S$34 million which includes revaluation surpluses arising from disposal of investment properties during the year.
Despite the lacklustre property market in Singapore, FCC sold 153 apartments in the Aquarius By The Park and 161 apartments in Sanctuary Green in the financial year under review. FCC will continue to focus on the sale of these leasehold projects and others such as The Gardens at Bishan.
During the financial year, FCC acquired a freehold 12,323 square metre residential site at Paya Lebar Road and a 40% stake in a prime residential site in Cuscaden Walk in the prime District 9.
As provisions were made for FCC group's overseas investments, FCC group's associates turned in a loss before tax of S$24.8 million.
During the year under review, FCC has initiated myhome.com, an information portal for property related business, in association with another reputable property developer in Singapore.
imGO Limited ("imGO") - formerly Guoco Land Limited - 17.61% owned by Guoco Group Limited and 6.64% by FCC
imGO reported a consolidated net loss after taxation of HK$457 million for the year under review. The loss was mainly attributable to deficits from revaluation of investment properties of HK$185 million and provision for interests in jointly controlled entities of HK$270 million.
Pursuant to the Main Subscription Agreement and the Hutchison Subscription Agreement dated 25th March, 2000, the new incoming investors comprising Investor AB, Ericsson and Hutchison have acquired a controlling stake in imGO which will focus on opportunities in the wireless sector leveraging the combined industry knowledge and expertise of the new investors. The Group's interests in imGO has diluted from 73% to 24.25%.
In accordance with the Main Subscription Agreement, the Group had acquired from imGO a 50% stake in a development property project in Tsim Sha Tsui and a 25% interest in a residential project in Tai Hang Road under two JV Sale Agreements for an aggregate consideration of HK$112 million. The Tsim Sha Tsui transfer has been approved by the Hong Kong Department of Lands while similar regulatory approval is pending for the Tai Hang Road property.
Guoco Properties Limited ("GPL") - 55% owned by Guoco Group Limited and 45% by FCC
GPL has a 75% interest in Corporate Square, a 17-storey office development in Beijing. Approximately 14% of the office space in Corporate Square were sold and about 60% of the office areas had been leased out.
Guoco Holdings (Philippines), Inc. ("GHPI") - 36.61% owned by the Group
GHPI reported substantial losses mainly due to high finance cost and substantial provisions for investment losses. GHPI continued to face difficult operating conditions during the period, exacerbated by the currently weak economic and market conditions in the Philippines. Notwithstanding these difficult conditions, GHPI has achieved some tangible progress in its major initiatives to improve its financial position including extensive cost control, rightsizing programs for its operating subsidiaries and divesting of non-core assets. The GHPI group will continue to pursue its financial restructing plan which will involve asset rationalization, capital and debt restructuring as the market permits.
The industry-wide problems confronting Pepsi Cola Products Philippines, Inc. ("PCPPI") last year have abated. The decline in sugar prices, a price increase and the support extended by PepsiCo Inc. have stabilized operations, allowing the company to generate a positive cash flow. The management of PCPPI has undertaken significant measures to achieve material productivity enhancement through the recently launched entrepreneur distribution system and third party systems for warehousing and trucking. Continuing the implementation of these measures and further initiatives are expected to transform PCPPI into an efficient and sustainable operation going forward.
Hong Leong Credit Berhad ("HLC") - 20.87% owned by the Group
HLC achieved a profit before taxation ("PBT") of RM550.3 million for the financial year under review compared with RM58.7 million recorded in the last financial year. Except for the Property Division, all other divisions in HLC reported higher profits.
Hong Leong Bank Berhad achieved a pre-tax profit of RM465.7 million for the current financial year as compared to RM107.1 million in the previous year, representing a three-fold increase of RM358.6 million.
The Insurance Division achieved a PBT of RM89.3 million as compared to RM80.0 million for the last financial year on the back of a 14% increase in combined net premium income.
The Stockbroking Division recorded a PBT of RM65.3 million as compared to a loss of RM88.8 million for the last financial year. The substantial improvement was due mainly to the increase in the Kuala Lumpur Stock Exchange trading volume during the period and growth in market share for both our institutional and retail businesses. Lower interest expense and reduced provisioning for doubtful debts further helped the turnaround in profitability.
The Property Division recorded a pre-tax loss of RM88.0 million for the current financial year primarily as a result of an exceptional write-down of its hotel assets to market value. Discounting this item, Hong Leong Property Berhad would have recorded a pre-tax profit of RM8.1 million.
Other Financial Services
Dao Heng Securities Limited ("DHS") performed satisfactorily during the year. Full service internet share trading was launched in January 2000 which offers customers direct access to comprehensive research, financial news and real-time quotes. A new division, DHS Online has been formed to focus on the development and servicing of online electronic channels in tandem with DHS's participation in the soon to be launched Automatic Matching System 3 (AMS3) on the Stock Exchange of Hong Kong.
Dao Heng Insurance Co., Limited ("DHI") has focused on expanding its personal lines insurance business. In collaboration with DHBG's Call Centre, DHI has created a new economy thrust in aggressive customer base expansion by providing cost efficient policy origination and servicing through Dao Heng Direct. The MPF project remained the main focus for Dao Heng Fund Management Limited ("DHFM"). In order to fully utilize DHBG's powerful distribution capabilities and offer a much wider range of investment products to clients, DHFM is expanding its range of best of breed unit trusts and mutual funds to the market in collaboration with the Group's 50% joint venture with Friends Ivory & Sime plc and other third party asset management firms.
OUTLOOK
Hong Kong recorded an encouraging growth in GDP of 14.3% in the first quarter of 2000. A reducing unemployment rate, escalating export and improving internal consumption are indications that the economy is on its recovery track, paving its way for future growth.
Over the past year, the Group has taken bold measures to dispose some of its non core businesses and has focused its main emphasis on its core financial services business that has been the main revenue generator. The Group has devoted resources to develop its e-business, a wide range of products of the banking division will be rolled out on the Group's website for retail and corporate customers.
To seize the investment opportunities arising from the information revolution, the Group has identified and established strategic alliances with promising partners both locally and overseas to explore opportunities provided by the new technology in improving efficiency and effectiveness in delivery channels, products and service enhancement and greater customer satisfaction.
China's imminent entry to the World Trade Organisation, the regional economic recovery and technological development in Hong Kong will present ample business opportunities for the local market. Having braced the regional financial adversity, the Group has emerged as a more focused entity and is well positioned to capture these investment opportunities.
SHARE BUY BACK
Pursuant to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited on share buy back and to the Bye-Laws of the Company, the Directors intend to seek the shareholders' approval at the forthcoming Annual General Meeting for the grant of an unconditional general mandate to repurchase shares of the Company to an extent not exceeding 10% of the issued share capital of the Company prevailing at the date of passing the resolution approving the mandate for share buy back.
A circular containing an explanatory statement on the general mandates to the Directors to repurchase shares and to issue new shares will be despatched to the shareholders as soon as possible.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
During the year, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities.
CORPORATE GOVERNANCE
The Company has complied throughout the year with the Code of Best Practice adopted by the Company based on the guidelines set out in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
A Board Audit Committee has been established on 9th October, 1998 with written terms of reference. The Audit Committee comprises Messrs. Harry Richard Wilkinson, Sat Pal Khattar and Kwek Leng Hai. The Audit Committee meets regularly to consider the nature and scope of audit reviews and the effectiveness of the system of internal control and compliance.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members will be closed from 14th November, 2000 to 20th November, 2000, both days inclusive, during which period no transfer of shares can be effected.
In order to qualify for the above dividend, all share transfers accompanied by the requisite share certificates must be lodged with the Company's Branch Share Registrars in Hong Kong, Central Registration Hong Kong Limited, at Shops 1712-6, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, for registration not later than 4:00 p.m. on 13th November, 2000.
By Order of the Board
Doris W. N. Wong
Company Secretary
Hong Kong, 13th October, 2000