| To: Business Editor | 16th September 1998 For immediate release |
The following announcement was today issued to the London Stock Exchange.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 1998 HIGHLIGHTS
Results
"The Group will continue to focus on enhancing the core office and retail properties in Hong Kong which are held for long-term investment. Other projects are proceeding as planned but further new commitments are being considered with caution.
Increased competition in the Group's core Hong Kong market and the economic outlook in Asia will, inevitably, affect earnings and property values. Nevertheless we remain confident of the long-term attractions of both Hong Kong and regional markets."
Simon Keswick, Chairman
16th September 1998
The interim dividend of US¢3.50 per share will be payable on 24th November 1998 to Shareholders on the register of members at the close of business on 2nd October 1998. The share registers will be closed from 5th to 9th October 1998, inclusive.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 1998
Hongkong Land Holdings Limited today announced that the results for the first half of 1998 reflect the underlying operational and financial strength of the Group as well as weakness in the Asian economies. Good progress has been made on the construction of its development properties in Hong Kong, Singapore and Manila, although current market conditions are considerably weaker than originally anticipated. The Group has the financial capacity to undertake its current capital investment plans involving expenditure of some US$900 million but, until economic conditions improve in Asia, a cautious approach is being taken towards further new projects. In addition, further share repurchases will be contemplated where Shareholder value can be enhanced.
PERFORMANCE
Net profit for the six months ended 30th June 1998 was US$169 million, compared with US$206 million in the first half of 1997. The 18% decline is due largely to a general provision of US$30 million against certain Southeast Asian assets. Underlying earnings per share remained steady at US¢7.87.
Hongkong Land's investment properties have been included in the balance sheet at their end of 1997 valuation. The Directors believe that the value of these properties has fallen by some 35% since the beginning of the year, in line with the Grade 'A' market in Hong Kong, and some further decline is likely. It is the Group's policy to revalue its investment properties at the year end and it may also be prudent to take into account the decline in the value of its development properties at the same time.
The Group's balance sheet remains strong with substantial cash and bank facilities at its disposal, and net borrowings have fallen to US$450 million.
The Board has declared an unchanged interim dividend of US¢3.50 per share, payable in cash.
GROUP REVIEW
Hong Kong Investment Properties
Turning to the operations, the Chairman, Simon Keswick, said that demand for office and retail space has been adversely affected by economic uncertainty and the prospect of new supply. As a result, rental levels fell sharply during the first half year, though the main financial impact of this will not be felt in 1998 because of the Company's three-year rent review cycle.
Occupancy remains high in the Company's office portfolio at 96%. The luxury retail market, however, has been especially weak in 1998, and this is beginning to affect retail rental income. Occupancy in the retail portfolio has fallen to 93%.
Preparations continue for the redevelopment of the new 650,000 sq.ft office building at 11 Chater Road (currently known as Swire House), and demolition is expected to begin in January 1999. Major upgrades of the Group's principal retail properties are under way.
Development Properties
Construction of the Group's new office building at 1063 King's Road, Hong Kong is proceeding satisfactorily, with completion expected in the third quarter of 1999. The rental market in Quarry Bay, however, is likely to remain weak for the foreseeable future.
In Mainland China, the Group's 40%-owned residential property joint venture in Beijing has leased half of the first phase at Maple Place, Beijing Riviera and is currently taking possession of the second phase.
The Group's office and retail development in Singapore, One Raffles Link, continues on schedule, with completion expected by the end of 1999. Interest has been shown from a number of potential tenants in the financial sector.
Construction of Roxas Triangle Towers, a luxury residential joint venture project in Makati, Manila, is progressing well. Completion of the first tower is expected in the year 2000. The market, however, continues to be weak and committed sales remain at some 25%.
In Hanoi, the Group's second office building at 63 Ly Thai To was completed in March. Progress has been made in letting the building which is 35% committed, although rents reflect the weak market.
Infrastructure
In Hong Kong, negotiations between 28.5%-held Asia Container Terminals, the other container port operators and the Government to finalise the terms of the Consortium's participation in the port extension are expected to reach a conclusion later this year.
In Mainland China, the Group's investments in the China Water Company and Central China Power Corporation made satisfactory progress during the first half of 1998.
YEAR 2000
Good progress has been made in reviewing, testing and, where necessary, rectifying the Group's computerised building management systems and internal computerised information systems. The directly attributable cost to date, which has been expensed, is not significant.
OUTLOOK
In conclusion, Simon Keswick said, "The Group will continue to focus on enhancing the core office and retail properties in Hong Kong which are held for long-term investment. Other projects are proceeding as planned but further new commitments are being considered with caution.
"Increased competition in the Group's core Hong Kong market and the economic outlook in Asia will, inevitably, affect earnings and property values. Nevertheless we remain confident of the long-term attractions of both Hong Kong and regional markets."
1. BASIS OF PREPARATION
The unaudited half-year results have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets at 31st December 1997. In accordance with the revised International Accounting Standard 12 on Income Taxes which is effective on 1st January 1998, deferred taxation is provided, using the liability method, in respect of all temporary differences between the tax bases of assets and liabilities and their carrying values. This is a change in accounting policy as previously deferred taxation was provided under the liability method in respect of timing differences between profit as computed for taxation purposes and profit as stated in the Financial Statements to the extent that a liability or asset is expected to be payable or receivable in the foreseeable future.
The comparative figures for 1997 have been restated to reflect the change in policy. The effect of this change has been to decrease the profit after taxation and minority interests for the six months ended 30th June 1997 and for the year ended 31st December 1997 by US$0.9 million and US$2.3 million respectively. Shareholders' funds have been increased by US$1.6 million at 1st January 1997 and decreased by US$0.7 million at 1st January 1998. There have been no other changes to the Group's accounting policies described in the 1997 Financial Statements.
2. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES AND OTHERS
3. TAXATION
Taxation on profits is provided at the rates of taxation prevailing in the territories in which the Group operates.
4. EARNINGS PER SHARE
5. CURRENT ASSETS
Bank balances and other liquid funds include liquid investments of US$120.2 million (1997: US$112.9 million).
6. OTHER NON-CURRENT ITEMS
7. CASH FLOW PER SHARE
Cash flow per share is based on operating cash flow and maintenance capital expenditure for investment properties, amounting to US$197.7 million (1997: US$212.9 million) and it is calculated on the weighted average of 2,526.7 million (1997: 2,630.1 million) shares in issue during the period, which excludes 69.6 million shares in the Company held by a subsidiary.
8. INTERIM REPORT
The Interim Report will be posted to Shareholders on or about 8th October 1998. Copies may be obtained from Butterfield Corporate Services Limited, P.O. Box HM 1540, Hamilton HM FX, Bermuda; 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 24th November 1998 to Shareholders on the register of members at the close of business on 2nd October 1998. The share registers will be closed from 5th to 9th October 1998, inclusive. Shareholders will receive their dividends in United States Dollars, unless they are registered on the United Kingdom 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 5th November 1998. 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.
- end -
For further information, please contact:
| Hongkong Land Limited I C Durant | (852) 2842 8428 (office) |
| Ludgate Asia Limited Martin Spurrier | (852) 2543 5413 (office) |
Full text of this announcement can be accessed through the Internet at
"http://www.irasia.com/listco/sg/hkland". It is also available through "First Call".
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