| To: Business Editor | 13th September 1999 For immediate release |
The following announcement was today issued to the London Stock Exchange.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 1999 HIGHLIGHTS
Results
"The sharp falls experienced in 1998 in property markets throughout the region have slowed significantly in 1999. Those markets in which the Group operates, in particular Hong Kong's Central District, have stabilised. Negative reversions will, however, continue to affect results in the period ahead and the level of supply is likely to make any recovery in rentals a slow one."
Simon Keswick, Chairman
13th September 1999
The interim dividend of US¢3.50 per share will be payable on 23rd November 1999 to Shareholders on the register of members at the close of business on 1st October 1999. The ex-dividend date will be on 27th September 1999, and the share registers will be closed from 4th to 8th October 1999, inclusive.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 1999
Hongkong Land Holdings Limited today announced that the Group has maintained high levels of occupancy in its properties throughout the Asian recession. Good progress has been made in letting properties under development. Signs of recovery in some of the Asian economies worst affected by the economic upheavals of the last two years are encouraging, and property values and rentals in the Group's core market in Hong Kong have stabilised. Any recovery from these levels is, however, likely to be sluggish.
PERFORMANCE
Net profit for the six months ended 30th June 1999 was US$149 million compared with US$169 million in the first half of 1998. Excluding the exceptional charge in 1998, profit declined by 25% from US$199 million mainly due to the negative rental reversions working through the Group's Hong Kong property portfolio. Earnings per share were US¢5.91 for the period, also a decline of 25% on underlying earnings.
Hongkong Land's investment and development properties are held at their end 1998 valuation. The Directors do not believe that these values have changed significantly since then.
The Group's balance sheet remains strong with substantial cash and bank facilities at its disposal. Net borrowings rose from US$480 million at 31st December 1998 to US$560 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.
GROUP REVIEW
Hong Kong Investment Properties
Turning to the operations, the Chairman, Simon Keswick, said that during the first half of 1999, the rate of decline in office and retail rents in Hong Kong's Central District slowed significantly. Occupancy levels in the Group's Central portfolio remained high at over 94%, despite substantial new supply in Central, which continues to inhibit a recovery in rentals. This new space is, however, progressively letting up and Central District vacancy is beginning to fall.
The Group completed its refurbishment of the retail element of Prince's Building during the first half of 1999. This space is now fully let with fitting out being completed while the luxury retail market is experiencing a mild recovery.
Development Properties
The demolition of the Group's property at 11 Chater Road has been completed. Work on the substructure of a new retail podium and office tower totalling some 570,000 sq. ft will now commence.
An occupation permit for the Group's new 300,000 sq. ft office building at 1063 King's Road, Quarry Bay was obtained in July 1999 and leasing of the building has commenced. At 1st September 1999 the building was 40% committed.
In Mainland China the Group's 40%-owned residential development in Beijing, Maple Place, is continuing to lease satisfactorily although the luxury residential market is beginning to weaken.
The construction of One Raffles Link, the Group's 395,000 sq. ft office and retail development in Singapore is nearing completion. Leasing interest in the project has been encouraging and both office and retail elements of the scheme are currently over 60% committed. The office element will be completed in late 1999 and the retail in early 2000.
The construction of Roxas Triangle Towers, Manila, in which the Group has a 40% interest, is progressing, with completion expected in mid-2000. While the luxury residential market in Manila remains weak, there are some signs of recovery in the Philippines economy.
Infrastructure
In Hong Kong, Asia Container Terminals, in which the Group has a 28.5% interest, has appointed underwriting banks for the debt portion of the financing. Financial close is expected before the end of the year.
In Mainland China the development of China Water Company and Central China Power slowed, as growth in the Chinese economy has moderated. In Indonesia there has been an improved performance at the Group's toll road investment.
YEAR 2000
Work has proceeded on schedule to ensure that the Group is Y2K ready in all business critical activities by the year end. Testing, risk identification and solution implementation has been completed on plan in relation to all internal systems. Contingency plans against the risk of external failures have been written and are in the process of testing in readiness for the year end. The Audit Committee has been monitoring progress and reporting to the Board.
Costs relating to resolving this issue are expensed as incurred. Total costs are estimated to be US$1.4 million.
While the Group continues to make satisfactory progress and is making every effort to reduce the risks of the Y2K issue, there can be no absolute assurance that the Y2K programmes will be completely successful due to the inherent unpredictability and scope of the Y2K problem.
OUTLOOK
In conclusion, Simon Keswick said, "The sharp falls experienced in 1998 in property markets throughout the region have slowed significantly in 1999. Those markets in which the Group operates, in particular Hong Kong's Central District, have stabilised. Negative reversions will, however, continue to affect results in the period ahead and the level of supply is likely to make any recovery in rentals a slow one."
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The unaudited interim condensed financial statements have been prepared in accordance with International Accounting Standard 34 on Interim Financial Reporting.
In 1999, the Group implemented IAS 19 (Revised) on Employee Benefits. In accordance with this revised standard, pension costs are assessed using the projected unit credit method. Under this method, plan assets are measured at fair value, pension obligations are measured as the present value of the estimated future cash flows by reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms of the related liability. This is a change in accounting policy as in previous years pension costs were assessed using the attained age normal method and pension obligations were discounted at the expected rate of return on plan assets. The comparative figures for 1998 have been restated to reflect this change. The effect of this change has been to increase the profit after taxation and minority interests for the year ended 31st December 1998 by US$0.2 million. Shareholders' funds at 1st January 1998 and 1999 have been increased by US$7.9 million and US$8.1 million respectively.
The Group also implemented IAS 10 (Revised) on Events After the Balance Sheet Date in advance of its effective date. In accordance with this revised standard, dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date. In previous years, dividends proposed or declared after the balance sheet date were recognised as a liability at the balance sheet date. The effect of this change has been to increase the Shareholders' funds at 1st January 1998 and 1999 by US$215.7 million and US$138.8 million respectively.
In addition, the Group implemented IAS 14 (Revised) - Segment Reporting, IAS 17 (Revised) - Leases and IAS 35 - Discontinuing Operations. The provisions of IAS 16 (Revised) - Property, Plant and Equipment, IAS 22 (Revised) - Business Combinations, IAS 28 (Revised) - Accounting for Investments in Associates, IAS 31 (Revised) - Financial Reporting of Interests in Joint Ventures, IAS 36 - Impairment of Assets, IAS 37 - Provisions, Contingent Liabilities and Contingent Assets and IAS 38 - Intangible Assets are applied in advance of their effective dates. There are no changes in accounting policy that affect operating profit or Shareholders' funds resulting from the adoption of the above standards in these condensed financial statements as the Group was already following other relevant recognition and measurement principles in those standards.
Apart from the above, there have been no other changes to the Group's accounting policies used in the preparation of the annual financial statements for the year ended 31st December 1998.
The disclosure requirements of IAS 1 (Revised) - Presentation of Financial Statements will be complied with in the Group's 1999 annual financial statements.
Taxation is recognised based on the best estimate of the weighted average annual income tax rate expected for the full financial year.
These interim condensed financial statements should be read in conjunction with the annual financial statements for the year ended 31st December 1998.
2. SEGMENT INFORMATION
3. SHARE OF RESULTS OF ASSOCIATES, JOINT VENTURES AND OTHERS
4. TAXATION
Taxation on profits is provided at the rates of taxation prevailing in the territories in which the Group operates.
The applicable tax rate represents the weighted average of the rates of taxation prevailing in the territories in which the Group operates.
5. EARNINGS PER SHARE
The convertible bonds were anti-dilutive and therefore ignored in calculating diluted earnings per share. As a result, earnings per share and diluted earnings per share were the same.
6. TANGIBLE ASSETS AND CAPITAL COMMITMENTS
7. CURRENT ASSETS
Bank balances and other liquid funds include liquid investments of US$103.7 million (1998: US$120.2 million).
US$134.6 million of the bank balances was subject to collateralised arrangements.
8. CURRENT LIABILITIES
9. TERM LOANS
During the six months ended 30th June 1999, the Company repurchased and cancelled US$17.0 million nominal of its convertible bonds for an aggregate consideration of US$16.2 million. In addition, during the period from 1st July 1999 to 1st September 1999 the Company repurchased and cancelled further US$1.5 million nominal for an aggregate consideration of US$1.4 million.
10. DIVIDENDS
An interim dividend in respect of 1999 of US¢3.50 (1998: US¢3.50) per share amounting to a total of US$88.3 million (1998: US$88.3 million) is declared and will be accounted for as an appropriation of revenue reserves in the year ending 31st December 1999.
11. CASH FLOWS FROM OPERATING ACTIVITIES
12. CASH FLOW PER SHARE
Cash flow per share is based on cash flows from operating activities less major renovations expenditure amounting to US$144.7 million (1998: US$201.7 million) and is calculated on the weighted average of 2,522.8 million (1998: 2,526.7 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. 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$278.8 million (1998: nil).
14. INTERIM REPORT
The Interim Report will be posted to Shareholders on or about 5th October 1999. Copies may be obtained from Jardine Matheson International Services Limited, P.O. Box HM 1068, Hamilton HM EX, 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 23rd November 1999 to Shareholders on the register of members at the close of business on 1st October 1999. The ex-dividend date will be on 27th September 1999, and the share registers will be closed from 4th to 8th October 1999, 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 4th November 1999. 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 E P K Weatherall/N R Sallnow-Smith | (852) 2842 8300 |
| Forrest International Limited Sue Gourlay/David Dodwell | (852) 2522 6475 |
Full text of this and other Group announcements can be accessed through the Internet at
"http://www.irasia.com/listco/sg/hkland".
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