Results. The audited consolidated results for the year ended 31st December 1999 were:

The Group's profit attributable to shareholders for the year was HK$59.4 million. This represents a decrease of 59.2% from that of 1998. Profit attributable to shareholders before restructuring costs, which were incurred in both 1999 and 1998, decreased by 25.4%.

The Company's operating profitability declined during 1999 as revenues and margins in both technical and non-technical line maintenance remained under severe competitive pressure. The Company's airframe heavy maintenance facilities have been reasonably busy, but worldwide rates for such work have shown some signs of softening in recent months.

A comprehensive restructuring of the Company's operations was carried out during the fourth quarter of 1999. This involved the realignment of certain wage and salary structures to meet market conditions and some reduction in staff numbers in all areas of the Company. As a result, approximately 720 staff left the Company through a combination of voluntary severance and involuntary retrenchment.

Contributions from jointly controlled companies improved, with the major portion of the increase provided by Taikoo (Xiamen) Aircraft Engineering Company Limited (TAECO).

There have been signs in the last few months of an upturn in the airline industry in the Asia-Pacific region. In due course, this should lead to increased aircraft movements and to improved revenue opportunities for aviation industry service providers. However, in the short term the competitive pressures at Hong Kong International Airport are likely to remain intense.

Operations

At the end of 1999 the Company, either directly or through its jointly-controlled company in Xiamen, TAECO, had comprehensive maintenance contracts covering twenty-five Boeing 747s, eleven B777s, fourteen Airbus Industrie A340s and twelve A330s for Cathay Pacific Airways, five A320s, two A321s and five A330s for Dragonair and three B747s for Air Hong Kong. These contracts cover the provision of line maintenance and hangar-based maintenance as well as the overhaul of certain components.

The Company maintains a strong position in technical and non-technical line maintenance at Hong Kong International Airport, where such services are performed for more than 40 international airlines. However, the market is extremely price-sensitive.

In addition to work carried out for Hong Kong based airlines, extensive hangar-based maintenance work packages were also carried out on aircraft for Evergreen International Airlines, American International Airlines, American Trans Air, Northwest Airlines, Saudi Arabian Airlines, Philippine Airlines, Air Macau, Polar Air Cargo, General Electric and Transasia.

Utilisation of the Company's component overhaul facilities during the year was reasonable.

Facilities

The Company is the sole provider of comprehensive aircraft maintenance at Chek Lap Kok. The Company's premises comprise a single hangar capable of fully enclosing three wide-bodied aircraft, together with associated backshops, and a five-storey building at Tseung Kwan O housing component and avionic overhaul workshops and administration offices. The Company also occupies space at the airport terminal.

Share Capital

During 1999, no purchase, sale or redemption of the shares of the Company has been effected by the Company or its subsidiary company.

Taxation

Included in the taxation charge for the year is HK$10.4 million taxation on the Company's share of its jointly controlled companies' profits (1998 : HK$1.5 million). The taxation charge comprises deferred tax calculated at 16.0% (1998 : 16.0%) for all material timing difference less last year's Hong Kong profits tax rebate. There is no overseas taxation during the year.

Final Dividend

The Directors will recommend to shareholders at the annual general meeting to be held on 16th May 2000 the payment of a final dividend of HK$0.30 per ordinary share for the year ended 31st December 1999 which, together with the interim dividend of HK$0.14 per ordinary share paid on 27th September 1999, makes a total dividend for the year of HK$0.44 per ordinary share. This represents a total distribution for the year of HK$81.4 million. Subject to the approval of the 1999 final dividend by the shareholders at the annual general meeting on 16th May 2000, it is expected that the dividend will be paid on 22nd May 2000 to shareholders registered on 16th May 2000. The shareholders' register will be closed from 8th May 2000 to 16th May 2000, both dates inclusive.

Year 2000

The Company addressed the millennium date change issue (Y2K) as a matter of priority. Full details of the Company's assessment of the Y2K issue were contained in the Company's interim report 1999, which was published on 10th August 1999. As noted at that time, the Company achieved compliance on 30th June 1999. A steering committee of executives led by a Director of the Company directed the activities of a Y2K project office, under the guidance of a Swire Group Programme Office and external consultants. This process ensured that the Company, its subsidiary and its jointly controlled companies identified and mitigated any potential adverse effects of any Y2K-related failures both in internal systems and equipment and in those of critical suppliers. Business continuity plans were formulated and tested extensively prior to 31st December 1999.

No operational problems attributable to a Y2K-related event have been encountered.

As at 31st December 1999 the Company had incurred total capital expenditure of HK$1.2 million and had expensed through profit and loss account a total of HK$23.7 million in relation to the millennium date change issue. Of these amounts, HK$0.1 million and HK$15.5 million related to capital expenditure and expense through profit and loss account respectively in the year ended 31st December 1999. No further expenditure on this project has been committed or is anticipated.

Prospects

The Company has emerged from a very difficult 1999 in an improved competitive position. Whilst revenue growth is unlikely in the short term as competitive pressures show little sign of easing, the cost savings that have been implemented should ensure an improvement in core profitability. The Company continues to enjoy the confidence of customers and maintains an unparalleled reputation for quality and service, which will enable it to take advantage of new business opportunities. TAECO is proving to be very successful and is well placed to secure additional heavy maintenance contracts, whilst HAESL's future looks encouraging.

The annual report for 1999, including the Chairman's Statement and the audited accounts for the year ended 31st December 1999, will be sent to shareholders on 13th April 2000.

D M Turnbull
Chairman

Hong Kong, 7th March 2000

For further information, please contact:

Mr. Andrew Herdman	2840 8092
Mrs. Maisie Shun Wah	2840 8097

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