CHARIMAN'S STATEMENT
Results
In 1997, the Group had added two landmark properties to its quality investment property portfolio - The Lee Gardens and Entertainment Building - and experienced a firm property leasing environment despite difficult economic conditions towards the year end.
The Group's audited consolidated profit attributable to shareholders was HK$1,178.29 million for the year 1997, which compared to HK$1,349.04 million in 1996 showed a decrease of 12.66%. The decrease was due to a provision for diminution in value of marketable securities of HK$280.80 million which is 8.29% of the portfolio cost. The profit attributable to shareholders would be 8.16% higher than last year if no provision were made. Earnings per share in 1997, after provision was HK$1.14 (1996:HK$1.31).
Notes:
1. Taxation:
2. Earnings Per Share
The calculation of the earnings per share is based on the consolidated net profit after taxation for the year ended 31st December 1997 of HK$1,178,290,600 (1996:HK$1,349,036,897) - and weighted average number of 1,029,408,218 (1996:1,028,635,846) shares in issue during the year. The exercise of the subscription rights attached to the outstanding warrants, convertible bonds and executive share options would not materially dilute the earnings per share.
Dividends
Your Directors propose to recommend a final dividend of 53.5 cents per share (1996:72 cents per share) at the Annual General Meeting to be held on 28th April 1998. Together with the interim dividend of 44 cents per share already paid on 16th October 1997, the Group's total distribution will be 97.5 cents per share for the whole year (1996:HK$1.12 per share).
The Register of Members will be closed from 22nd April 1998 to 28th April 1998, both dates inclusive, during which period no transfer of shares can be registered. The final dividend will be payable on 29th April 1998 to shareholders whose names appear on the Register of Members on 28th April 1998.
Bonus Issue of Warrants
Your Directors propose to recommend a bonus issue of warrants of 1 warrant for every 10 shares held by the shareholders. Each Warrant will entitle the holder to subscribe for shares of the Company at an exercise price of HK$16.00 per share during the proposed period from 4th May 1998 to 30th April 1999.
Investment Properties
1. Residential Properties
Following a strong residential leasing market throughout most of 1997, leasing activity began to slow down from the last quarter. The occupancy level of the Group's residential portfolio is about 95%.
2. Office Properties
The office leasing market was firm in 1997, and the Group's new development, The Lee Gardens, is fully let. The occupancy rate of the Group's office portfolio is about 98%.
3. Retail Properties
The retail podium of The Lee Gardens opened for business in the second half of 1997 and is virtually fully let. The occupancy of the Group's retail portfolio is about 98%.
Development Projects
Singapore
1. Stratford Court, Upper Changi Road
About 46% of this residential project in which the Group has a 10% interest has been pre-sold. This residential development, consisting of 268 units with a total gross floor area of 35,976 square metres (387,100 square feet), is scheduled for completion by the end of 1998.
2. Tanjong Rhu
Building plans for this 522-unit residential development have been approved. Piling work is now in hand. The Group has a 10% interest in this 66,040 square metres (710,929 square feet) project.
3. Sin Ming Avenue
Revised building plans for this 760-unit residential development will be submitted for approval shortly. Total gross floor area is about 87,373 square metres (940,570 square feet). The Group has a 10% interest in the project.
The People's Republic of China
1. Peace Garden, Shanghai
The occupation permit for Phase 1 of Peace Garden was issued in May 1997. Phase 1 consists of three residential towers with a total area of 65,828 square metres (708,310 square feet). Sale of the units is in progress with some units offered for lease.
2. Grand Gateway, Shanghai
Construction of the superstructure of Phase 1, which comprises of a residential tower and part of the retail podium, has basically been completed. The Group has a 15% interest in this development which has gross floor area of about 340,000 square metres (3.66 million square feet) of retail, office and residential space.
Acquisitions and Disposal
1. Melville Park, Singapore
This 1,232-unit residential development in which the Group has a 10% interest has been completely sold. The outstanding tax issue has been cleared in December 1997 and profits have been declared to shareholders.
2. Newton Grove, Singapore
During the year, the Group participated in a joint venture in Singapore for the development of a residential project at Newton Grove. Building plans are being finalised and pending submission for approval. The Group has a 25% interest in this project which has a total gross floor area of 34,920 square metres (375,878 square feet).
3. Investment in China Telecom
The Group was one of the nine companies in Hong Kong selected for a share placement of a 1% stake in China Telecom for HK$1,370 million. China Telecom currently provides cellular telecommunications services to only two of the China's 27 provinces and regions.
Net Asset Value
An independent valuation of the Group's investment properties has been carried out by Knight Frank. Taking into account the revaluation of all the Group's investment properties including the newly completed The Lee Gardens and other investments, the net asset value of the Group as at 31st December 1997 was HK$33.71 per share (1996:HK$36.70 per share) based on the shares outstanding as at 31st December 1997 (1,029,325,779 shares).
The investment properties were appraised on open market value basis by capitalising the net income with due allowance for outgoings and provisions for reversionary income potential. However, no allowance has been made in the valuation for any expenses or taxation which may be incurred in effecting a sale.
Re-purchase of Company's Listed Securities
During the year, 750,000 ordinary shares of the Company were repurchased at an average price of HK$14.84 per share and US$7.4 million convertible bonds of the Company were also repurchased at 98.93% of the issue cost.
Directors and Staff
I would also like to take this opportunity to express my sincere thanks to my fellow Directors for their guidance and support and to all members of the staff for their loyalty and dedication throughout the year.
Prospects
In the first three quarters of 1997, the Hong Kong economy and property market in particular, experienced strong growth. However, by the final quarter, Hong Kong economy faced a slowdown as the territory felt the impact of the financial turmoil in Asia. Consumer spending, stock market and property prices were all affected.
In 1998, it is anticipated that the economy will experience a slower growth as a result of the regional financial uncertainty. Given an uncertain interest rate outlook, coupled with tight liquidity and increasing property supply, the property leasing market is likely to face a difficult environment not seen in many years. With secure financial support, I am confident that the Group with a majority of leases not due for renewal for another two years, is in a solid position to face the challenges ahead.
H. C. LEE
Chairman
Hong Kong, 11th March 1998
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