| To: Business Editor | 1st August 2000 For immediate release |
The following announcement was today issued to the London Stock Exchange.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 2000 HIGHLIGHTS
Results
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"The healthy upturn in our core market, together with the limited supply over the next two years, will provide a firm platform for the growth of our business. As Asia generally, and Hong Kong in particular, extends its recovery, sensibly-priced investment opportunities are becoming more common. Although in the short-term the impact on earnings of the final period of reversions in this cycle will be negative, with our conservative financial structure we are well-positioned to take opportunities without creating undue financial risk."
Simon Keswick, Chairman
1st August 2000
The interim dividend of US¢3.50 per share will be payable on 18th October 2000 to shareholders on the register of members at the close of business on 25th August 2000. The ex-dividend date will be on 23rd August 2000, and the share registers will be closed from 28th August to 1st September 2000, inclusive.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 2000
Hongkong Land Holdings Limited today announced that the recovery in Asia Pacific markets that began last year gathered pace in the first half of 2000. While the property sector's recovery in the Hong Kong market has been variable, Hongkong Land's Central portfolio is concentrated in the best performing location. With a strong recovery in demand coinciding with tightening supply in the Grade A market, rents have increased significantly. The reversion pattern of the Group's leases inevitably delays the impact of this recovery on profit. The absence of any significant supply in Central over the next two years, however, will underpin the recovery in the Group's cashflow and profitability when reversions turn positive.
PERFORMANCE
Net profit for the six months ended 30th June 2000 was US$118 million compared with US$149 million in the first half of 1999. The decline of 21% is mainly due to the negative rental reversions working through the Group's Hong Kong property portfolio. Earnings per share were US¢4.68 for the period, also a decline of 21%.
Hongkong Land's investment and development properties are held at their end 1999 valuation and will not be revalued until the year end. Rentals have since shown a good recovery, whose positive impact on capital values will be measured at the year end.
The Group's balance sheet remains strong with substantial cash and bank facilities at its disposal. Net borrowings increased from US$608 million at 31st December 1999 to US$687 million mainly as a result of capital expenditure on development properties.
The Board has declared an unchanged interim dividend of US¢3.50 per share, payable in cash.
BUSINESS REVIEW
Commercial Property
Turning to the operations, the Chairman, Simon Keswick, said that in Hong Kong's Central District, vacancy in good quality buildings fell below 5% in the first quarter. Shrinking supply coincided with an abrupt recovery in demand, as a range of tenants implemented expansion plans, adding to the demands of new entrants to the portfolio. Face rents improved by over 25%, with effective rents rising by more than 50% as incentives quickly reverted to market norms. Vacancy is now 2% in the office portfolio and is likely to remain at very low levels in the absence of any significant supply over the next two years. At the end of that period, 11 Chater Road will be ready for occupation. It is expected to release the final designs for this building at the end of the year. Investment in the rest of the Central portfolio has continued, both in physical refurbishment in the Exchange Square Podium and the footbridge network, and in positioning Central as the location of choice for both office and retail tenants through the "Brand Central" media campaign.
The Group's flagship office development in Singapore, One Raffles Link, opened fully let in the first half, setting new standards for the market. The retail element of the development, CityLink Mall, was successfully launched with all 70,000 sq. ft of lettable space committed. Complementing One Raffles Link, CityLink Mall brings a new concept to Singapore retail, an air-conditioned underground destination, with substantial footfall guaranteed by its unique location.
e-business
Supporting the Brand Central campaign, the Group's forthcoming community website Centralhk.com was recently launched. The Group also positioned itself to benefit from the growth of e-business start-ups by acquiring a 25% stake in a new virtual office business, Network Centers. Presently located in Landmark East in Hong Kong, Network Centers plans to expand to Singapore and elsewhere in the region.
Residential Property
The Group's joint venture with Grosvenor Estates, formed at the end of 1999 to make small-scale investments in luxury residential units in the region, has made a series of investments in Hong Kong and now plans to raise third party funds to support its continued expansion. The Group's small wholly-owned portfolio in Hong Kong is fully let at encouraging yields. In Beijing, the Group's 40% associate Beijing Riviera has steadily improved occupancy to over 75% with rental levels beginning to stabilise as market sentiment improves.
Infrastructure
In Hong Kong, the Group's 28.5% owned associate Asia Container Terminals successfully completed its debt financing and awarded the main construction contract. With capital costs and the terms of the debt financing comparing favourably with earlier projections, and the throughput in the Hong Kong port increasing strongly, the outlook for this investment is very encouraging.
In Mainland China, both China Water Company (CWC) and Central China Power (CCP) have made progress. CWC has commenced two new investments, in Taixing and Changchun, while CCP has commissioned its most recent plant and reorganised its capital structure to reduce its risk exposure. As a result of this reorganisation, Hongkong Land's stake is now 36%. Its infrastructure business has also made a small investment in the India Project Development Fund (IPDF), which develops infrastructure projects to a bankable stage.
Management
Management accountabilities have been restructured to reflect the Group's focus in three distinct business segments. In place of functionally-related accountabilities, the management team has been reorganised into three business groups led by a Director of Commercial Property, a Director of Residential Property and a Director of Infrastructure. The Projects, Property Management and Financial teams have been restructured as professional teams delivering services to its core businesses. It is believed this structure will clarify roles and improve accountabilities.
Kuah Boon Wee was appointed as Chief Financial Officer in May.
OUTLOOK
In conclusion, Simon Keswick said, "The healthy upturn in our core market, together with the limited supply over the next two years, will provide a firm platform for the growth of our business. As Asia generally, and Hong Kong in particular, extends its recovery, sensibly-priced investment opportunities are becoming more common. Although in the short-term the impact on earnings of the final period of reversions in this cycle will be negative, with our conservative financial structure we are well-positioned to take opportunities without creating undue financial risk."
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The unaudited interim condensed financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting. The accounting policies used in the preparation of the interim financial statements are consistent with those used in the annual financial statements for the year ended 31st December 1999.
2. REVENUE
3. OPERATING PROFIT
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
5. TAX
Tax on profits is provided at the rates of taxation prevailing in the territories in which the Group operates.
6. EARNINGS PER SHARE
Earnings per share are calculated on the net profit of US$118.0 million (1999: US$149.1 million) and on the weighted average of 2,522.8 million (1999: 2,522.8 million) shares in issue during the period, which excludes 69.6 million shares held by a subsidiary.
The convertible bonds are anti-dilutive and therefore ignored in calculating diluted earnings per share. As a result, earnings per share and diluted earnings per share are the same.
7. TANGIBLE ASSETS AND CAPITAL COMMITMENTS
8. CURRENT ASSETS
Bank balances and other liquid funds include liquid investments of US$186.0 million (1999: US$103.7 million).
Bank balances include an amount of US$134.6 million (1999: US$134.6 million) subject to collateralised arrangements.
9. CURRENT LIABILITIES
10. TERM LOANS
During the six months ended 30th June 2000, the Company repurchased and cancelled US$5.1 million nominal of its convertible bonds for an aggregate consideration of US$5.0 million.
11. DIVIDENDS
An interim dividend in respect of 2000 of US¢3.50 (1999: US¢3.50) per share amounting to a total of US$88.3 million (1999: US$88.3 million) is declared by the Board and will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2000.
12. CASH FLOW PER SHARE
Cash flow per share is based on cash flows from operating activities less major renovations expenditure amounting to US$104.9 million (1999: US$145.3 million) and is calculated on the weighted average of 2,522.8 million (1999: 2,522.8 million) shares in issue during the period, which excludes 69.6 million shares in the Company held by a subsidiary.
13. CONTINGENT LIABILITIES
A subsidiary of the Group has given guarantees in respect of the Group's obligations to the Container Terminal 9 development in Hong Kong. The anticipated commitment to the build out of two berths in the project is estimated to be approximately US$160.0 million. However, were the subsidiary required to provide additional funds for the build out cost of the other berths, the maximum contingent liability assumed in respect of the guarantees would be US$272.1 million (1999: US$278.8 million).
14. INTERIM REPORT
The Interim Report will be posted to shareholders on or about 25th August 2000. Copies may be obtained from Jardine Matheson International Services Limited, P.O. Box HM 1068, Hamilton HM EX, Bermuda; Capita IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England and M & C Services Private Limited, 16 Raffles Quay #23-01, Hong Leong Building, Singapore 048581.
The interim dividend of US¢3.50 per share will be payable on 18th October 2000 to shareholders on the register of members at the close of business on 25th August 2000. The ex-dividend date will be on 23rd August 2000, and the share registers will be closed from 28th August to 1st September 2000, inclusive. Shareholders will receive their dividends in United States Dollars, unless they are registered on the Jersey branch register where they will have the option to elect for Sterling. These shareholders may make new currency elections by notifying the United Kingdom transfer agent in writing by 28th September 2000. The Sterling equivalent of dividends declared in United States Dollars will be calculated by reference to a rate prevailing ten business days prior to the payment date. Shareholders holding their shares through The Central Depository (Pte) Limited ("CDP") in Singapore will receive United States Dollars unless they elect, through CDP, to receive Singapore Dollars.
| For further information, please contact: | |
| Hongkong Land Limited N R Sallnow-Smith/Kuah Boon Wee | (852) 2842 8300 |
| Forrest International Limited Rosemary Sayer/Sauw Yim | (852) 2522 6475 |
This and other Group announcements can be accessed through the Internet at "www.irasia.com/listco/sg/hkland".
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