20 March 2000
1999 Results Announcement
The Group's audited consolidated profit attributable to shareholders was HK$1,204.0 million for the year 1999, an increase of 5.7% from 1998's restated profit of HK$1,139.3 million. Earnings per share was correspondingly HK$1.16 as compared to HK$1.11 in 1998. The above profits have been restated as a result of the adoption of the new Statement of Standard Accounting Practice 24. Consolidated profits for 1999 and 1998 prior to restatement were HK$1,164.4 million and HK$900.4 million respectively.
1999 continued to be a challenging year for the Hong Kong property market. In the face of such an environment, the Group focused on strengthening its property leasing operations, prudent debt reduction and judiciously exploring growth opportunities. Nevertheless, rental income decreased due largely to continued negative rental reversions. However, the reduction was offset by gains from the sale completion of residential units and decreased interest expense.
The Group's audited consolidated results for the year ended 31 December 1999, with comparative figures for the corresponding period in 1998, are as follows:
Year ended 31 December
1999 1998
HK $'000 HK $'000
Turnover 2,905,213 6,425,549
Property Expenses (242,227) (202,407)
Cost of Sales of Interests in Securities (433,312) (2,850,180)
Cost of Property Sales (164,923) (416,408)
--------- ---------
Gross Profit 2,064,751 2,956,554
Other Revenue 859 6,883
Administrative Expenses (70,680) (55,614)
--------- ---------
Operating Profit (Note 1) 1,994,930 2,907,823
Finance Costs (526,819) (1,251,944)
Provision for Decline in Value of
Interests in Associates (98,418) (108,000)
Impairment Losses on Interests in
Other Securities - (134,558)
Share of Results of Associated Companies (4,284) (75,702)
--------- ---------
Profit Before Taxation 1,365,409 1,337,619
Taxation (Note 2) (86,795) (111,551)
--------- ---------
Profit After Taxation 1,278,614 1,226,068
Minority Interests (74,656) (86,797)
--------- ---------
Profit Attributable to Shareholders 1,203,958 1,139,271
Retained Profits at the Beginning of Year 2,318,862 1,578,616
Transfer to Capital Redemption Reserve - (12,025)
Premium on Shares Repurchased - (5,901)
--------- ---------
Profit Available for Appropriations 3,522,820 2,699,961
Appropriations (412,795) (381,099)
--------- ---------
Retained Profits to be carried forward 3,110,025 2,318,862
========= =========
Earnings per share (Note 3)
- Basic HK$1.16 HK$1.11
- Diluted HK$1.16 N/A
Notes:
1. Operating profit figure for 1998 has been restated to conform to current year's presentation.
2. Taxation:
1999 1998
HK$'000 HK$'000
Hong Kong Profits Tax
(1999:16.0%, 1998:16.0%)
- for the year 87,485 111,890
- under (over) provision in prior years 15,905 (399)
- tax rebate (15,904) -
--------- ---------
Taxation attributable to the Company &
Subsidiaries 87,486 111,491
Share of (tax rebate) taxation attributable
to Associates (691) 60
--------- ---------
86,795 111,551
========= =========
3. The calculation of the basic and diluted earnings per share is based on the following data :-
1999 1998
HK$ HK$
Earnings for the purposes of basic and
diluted earnings per share (net
profit for the year) 1,203,957,528 1,139,270,849
============= =============
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 1,034,513,350 1,028,509,445
=============
Effect of dilutive potential ordinary shares:
Share options 167,091
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 1,034,680,441
=============
a. No diluted earnings per share for 1998 has been presented as the exercise of the subscription rights attached to the outstanding share options and convertible bonds would not have any dilutive effect.
b. The adjustment to comparative basic earnings per share arising from the change in accounting policy to the financial statements is as follows:
HK$
Reconciliation of 1998 basic earnings per share:
Reported figures before adjustments 0.88
Adjustments arising from the adoption of SSAP 24 0.23
---------
Restated 1.11
=========
The Group had HK$6,013 million total debt outstanding on 31 December 1999 (excluding amount due to minority shareholders), which is a reduction of HK$1,211 million from the previous year end. Net debt totalled HK$3,330 million after accounting for cash, deposits and marketable securities at fair value. As a result of debt reduction and increase in value of the Group's securities portfolio, net debt as a percentage of equity on 31 December 1999 decreased to 16.5% from 31.6% at the previous year end. With the additional benefit of lower and less volatile interest rates, the Group's net interest expense coverage ratio also improved to 4.2 in 1999 from 3.1 in 1998.
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 the Group's investment properties and other investments, the net asset value of the Group as at 31 December 1999 increased by 8.9% year-on-year to HK$19.80 per share (1998: HK$18.19 per share) based on 1,036,761,998 shares outstanding (1998: 1,031,627,199 shares).
DIVIDENDS
Your Directors propose to recommend a final dividend of 30 cents per share (1998: 27 cents per share), an increase of 11.1%, at the Annual General Meeting to be held on 8 May 2000. The dividend will be payable in cash with a scrip dividend alternative. Shareholders who elect for the scrip dividend will be allotted with new ordinary shares of HK$5 each credited as fully paid subject to the Listing Committee of The Stock Exchange of Hong Kong Limited agreeing to grant the listing of and permission to deal in the new shares to be issued by way of scrip dividend. A circular containing details of the scrip dividend and the form of election will be mailed to shareholders on or about 8 May 2000. Together with the interim dividend of 10 cents per share already paid (with a scrip alternative) on 5 November 1999, the Group's total distribution will be 40 cents per share for the entire year (1998: 37 cents per share). This is a 8.1% increase year-on-year.
INVESTMENT PROPERTIES
1. Office Properties
The office leasing market continued to face new supply and weak demand in 1999. However, the improved economic sentiment and gradual take-up of vacant space during the second half of the year helped reduce downward pressures on rental rates. The occupancy rate of the Group's office portfolio is about 92%.
2. Retail Properties
The retail sector experienced improved sentiment this past year. The Group's retail space is located primarily in Causeway Bay, the retail hub of Hong Kong island. As a result, the Group's retail portfolio has maintained high occupancy throughout the difficult economic environment of the past year with current occupancy at about 98%.
3. Residential Properties
The luxury residential leasing market remained slow in 1999 due largely to weak demand from the scaled back expatriate community. The occupancy rate of the Group's residential portfolio is about 90%.
DEVELOPMENT PROJECTS
1. Singapore
Sales marketing has commenced for the 66,040 square metre (710,929 square foot) Sanctuary Green residential development with about 70% of the 172 units in the first phase already pre-sold. Superstructure work is scheduled to commence in the third quarter of this year. The Group has a 10% interest in this development.
Piling work has been completed for the 10%-owned, 87,373 square metre (940,570 square foot) Garden Palace residential project. Further work is currently on hold pending market conditions.
With respect to the 34,920 square metre (375,878 square foot) Newton Grove residential project, piling work is in progress. The Group has a 25% interest in this project.
2. Shanghai, The People's Republic of China
About 94% of the 712 units in Phase One of the Peace Garden residential project have been sold with Phase Two remaining on hold pending stronger market conditions.
With The Grand Gateway, the occupation permit for the 33,479 square metre (360,234 square foot), 268-unit residential apartment, Grand Gateway Garden, has been received. The 99,251 square metre (1,067,941 square foot) retail podium has also opened and is being occupied. Currently, about 50% of the residential tower and about 85% of the retail podium have been leased and occupied.
STRATA-TITLE SALE OF RESIDENTIAL PROPERTIES
In 1999, sale of the remaining 36 units of No. 3 Garden Terrace was completed, generating cash proceeds and profit for the Group.
OTHER DEVELOPMENTS
The Group is undertaking steps to integrate the Internet and recent telecommunication advances into its property operations with respect to increased efficiency and new growth opportunities. The Group's corporate website is located at www.hysan.com.hk.
REPURCHASE OF COMPANY'S SECURITIES
To enhance shareholder value, the Group periodically repurchases its ordinary shares when they are significantly undervalued. The Group did not repurchase any ordinary shares in 1999. In 2000, the Group has repurchased 6,194,000 shares thus far at an average price of HK$8.44 per share. The repurchased shares were cancelled thereafter.
The Group has also repurchased during the year US$25.93 million of convertible bonds of a Group subsidiary at an average price of 99.77% of the issue cost.
Save as disclosed above, neither the Company nor its subsidiaries had repurchased, sold or redeemed any of the Company's listed securities during the year.
YEAR 2000 COMPLIANCE
Since 1997, the Group has developed and implemented a Year 2000 compliance programme ("Programme") to ensure that all major systems can properly function prior to, during and after the transition into year 2000. The major systems achieved Year 2000 readiness at the end of June 1999.
The Group's operations proceeded smoothly through the millennium changeover period.
Total costs required for the Programme is estimated to be in the region of HK$1.5 million, of which around HK$1.2 million have been spent as at 31 December 1999, principally being costs relating to rectifications and testings. These costs have been or will be expensed through the profit and loss account. Costs relating to upgrading the mainframe computer system that are not directly related to the Programme but which address some Year 2000 issues are not included in these costs.
DIRECTORS AND STAFF
I would like to take this opportunity to express my sincere appreciation to my Directors for their guidance and to all members of the staff for their dedication and hard work. Mr. Michael C.K. Moy, Chief Financial Officer, was appointed Director on 26 November 1999.
PROSPECTS
Whilst the property investment market has started to stabilize, activity remains slow. However, the continuing improvement of the economy and limited supply of new commercial space is expected to provide support for the market's recovery. The Group will continue to focus on enhancing the value of its investment property portfolio and seek opportunities for synergistic growth. With our solid financial standing, the Group is well positioned to capitalize on developing opportunities going forward.
H.C. LEE
Chairman
Hong Kong, 20 March 2000
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