Interim Results
Hong Kong Land Hldgs Ld
1 August 2000
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 2000 HIGHLIGHTS
* Hong Kong's Central commercial property market recovers
strongly
* Occupancy in Central portfolio exceeds 98%
* Completed developments in Singapore and Hong Kong fully
let
* Current earnings continue to be affected by negative
reversions
Results
______________________________________________________________
(unaudited)
Six months ended 30th June
2000 1999 Change
US$m US$m %
_____________________________________________________________
Operating profit 144 170 -15
Net profit 118 149 -21
_____________________________________________________________
USc USc %
_____________________________________________________________
Earnings per share 4.68 5.91 -21
Interim dividend per share 3.50 3.50 -
_____________________________________________________________
'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 USc3.50 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 USc4.68 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
USc3.50 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.'
Hongkong Land Holdings Limited
Consolidated Profit and Loss Account
_________________________________________________________________
(unaudited) Year ended
Six months ended 30th June 31st December
2000 1999 1999
US$m US$m US$m
_________________________________________________________________
Revenue (note 2) 187.8 213.9 418.9
Recoverable and non-recoverable
costs (31.0) (31.2) (76.9)
------ ------ ------
Net income from properties 156.8 182.7 342.0
Other income 0.8 0.3 0.4
Administrative and other expenses (13.3) (12.7) (25.2)
------ ------ ------
144.3 170.3 317.2
Asset impairment reversals - - 2.2
------ ------ ------
Operating profit (note 3) 144.3 170.3 319.4
Net financing charges (21.4) (12.0) (30.9)
Share of results of associates and
joint ventures (note 4) 9.9 6.0 10.2
------ ------ ------
Profit before tax 132.8 164.3 298.7
Tax (note 5) (14.7) (15.5) (30.6)
------ ------ ------
Profit after tax 118.1 148.8 268.1
Minority interests (0.1) 0.3 (1.0)
------ ------ ------
Net profit 118.0 149.1 267.1
====== ====== ======
_________________________________________________________________
USc USc USc
_________________________________________________________________
Earnings per share (note 6)
- basic 4.68 5.91 10.59
- diluted 4.68 5.91 10.59
Earnings per share excluding asset
impairment reversals (note 6)
- basic 4.68 5.91 10.48
- diluted 4.68 5.91 10.48
_________________________________________________________________
Hongkong Land Holdings Limited
Consolidated Balance Sheet
_________________________________________________________________
(unaudited) At
At 30th June 31st December
2000 1999 1999
US$m US$m US$m
_________________________________________________________________
Net operating assets
Tangible assets (note 7)
Investment properties 5,182.4 4,681.4 4,848.8
Development properties 374.9 671.6 697.6
Others 15.7 16.4 16.1
------ ------ ------
5,573.0 5,369.4 5,562.5
Associates and joint ventures 412.7 389.1 397.1
Other investments 13.9 12.9 12.9
Other non-current assets 11.8 11.6 11.7
------ ------ ------
Non-current assets 6,011.4 5,783.0 5,984.2
Current assets (note 8) 1,366.7 1,393.4 1,449.0
Current liabilities (note 9) (460.1) (338.1) (522.0)
Net current assets 906.6 1,055.3 927.0
Term loans (note 10) (1,719.0) (1,758.8) (1,674.0)
Other non-current liabilities (12.2) (9.4) (11.3)
------ ------ ------
5,186.8 5,070.1 5,225.9
====== ====== ======
Capital employed
Share capital 259.2 259.2 259.2
Revenue and other reserves
Property revaluation reserve 3,653.4 3,524.1 3,654.3
Exchange fluctuation reserve (62.6) (37.6) (44.2)
Revenue reserves 1,414.1 1,403.2 1,434.0
5,004.9 4,889.7 5,044.1
Own shares held (77.7) (77.7) (77.7)
------- ------- -------
Shareholders' funds 5,186.4 5,071.2 5,225.6
Minority interests 0.4 (1.1) 0.3
------- ------- -------
5,186.8 5,070.1 5,225.9
======= ======= =======
________________________________________________________________
US$ US$ US$
________________________________________________________________
Net asset value per share 2.06 2.01 2.07
________________________________________________________________
No interim valuation of the Group's investment properties has
been undertaken. Stated values at 30th June 2000 and 1999
reflect the values at the previous 31st December.
________________________________________________________________
Hongkong Land Holdings Limited
Consolidated Statement of Changes in Shareholders' Funds
________________________________________________________________
(unaudited) Year ended
Six months ended 30th June 31st December
2000 1999 1999
US$m US$m US$m
_______________________________________________________________
At beginning of period 5,225.6 5,071.7 5,071.7
Net revaluation surplus - - 162.5
Provision against a
development property - - (29.5)
Share of reserve movements of
associates and joint
ventures (1.5) (3.0) (0.7)
Provision against a short-term
leasehold investment
property - - (5.6)
Deferred tax on provision
against a short-term
leasehold investment
property - - 1.0
Net exchange translation
differences (16.9) (7.8) (13.8)
Net (losses)/gains not
recognised in the
consolidated profit and
loss account (18.4) (10.8) 113.9
Net profit 118.0 149.1 267.1
Dividends (note 11) (138.8) (138.8) (227.1)
------ ------ ------
At end of period 5,186.4 5,071.2 5,225.6
======= ======= =======
_________________________________________________________________
Hongkong Land Holdings Limited
Consolidated Cash Flow Statement
_________________________________________________________________
(unaudited) Year ended
Six months ended 30th June 31st December
2000 1999 1999
US$m US$m US$m
_________________________________________________________________
Cash flows from operating activities
Operating profit 144.3 170.3 319.4
Depreciation 2.5 2.8 5.7
Asset impairment reversals - - (2.2)
Increase in working capital (3.0) (3.2) (9.0)
Interest received 44.8 13.0 73.0
Interest and other financing
charges paid (67.5) (25.7) (101.8)
Tax paid (8.7) (5.9) (32.1)
Dividends received 1.0 0.5 0.3
----- ----- -----
113.4 151.8 253.3
Cash flows from investing activities
Developments capital
expenditure (44.4) (79.5) (134.7)
Major renovations
expenditure (8.5) (6.5) (11.6)
Investments in and loans
to joint ventures (9.5) (11.6) (13.3)
Purchase of other investments (1.0) - -
Disposal of other investments - 0.4 0.4
------ ------ ------
(63.4) (97.2) (159.2)
Cash flows from financing activities
Repayment of secured
bank loans (3.9) - -
Drawdown of secured
bank loans 23.9 58.7 151.1
Repayment of unsecured
bank loans (20.4) (37.3) (49.7)
Drawdown of unsecured
bank loans 32.1 - -
Repurchase of 4% convertible
bonds (5.0) (16.2) (27.2)
Dividends paid by the
Company (136.3) (137.6) (226.1)
------ ------ ------
(109.6) (132.4) (151.9)
------ ------ ------
Net decrease in cash and cash
equivalents (59.6) (77.8) (57.8)
Cash and cash equivalents at
beginning of period 1,353.1 1,410.9 1,410.9
-------- -------- --------
Cash and cash equivalents at
end of period 1,293.5 1,333.1 1,353.1
======= ======= =======
_________________________________________________________________
USc USc USc
_________________________________________________________________
Cash flow per share (note 12) 4.16 5.76 9.58
_________________________________________________________________
_________________________________________________________________
Hongkong Land Holdings Limited
Notes
_________________________________________________________________
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
(unaudited)
Six months ended 30th June
2000 1999
US$m US$m
---------------------
By business
Property
Rental income 162.2 191.2
Service and management charges 25.6 22.7
----- -----
187.8 213.9
===== =====
3. OPERATING PROFIT
(unaudited)
Six months ended 30th June
2000 1999
US$m US$m
--------------------
By business
Property 152.0 178.1
Infrastructure (0.5) (0.8)
------ ------
151.5 177.3
Other income 0.4 0.3
Unallocated administrative and
other expenses (7.6) (7.3)
------ ------
144.3 170.3
====== ======
4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
(unaudited)
Six months ended 30th June
2000 1999
US$m US$m
--------------------
Connaught Investors 7.4 4.3
Joint ventures 2.5 1.7
------ ------
9.9 6.0
====== ======
5. TAX
(unaudited)
Six months ended 30th June
2000 1999
US$m US$m
--------------------
Company and subsidiaries 14.4 15.3
Associates and joint ventures 0.3 0.2
----- -----
14.7 15.5
===== =====
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$149.1 million) and on the weighted average of
2,522.8 million (1999: 2,522.8 million) shares in issue during
the period, which excludes 69.6 million shares held by a
subsidiary.
The convertible bonds are anti-dilutive and therefore ignored
in calculating diluted earnings per share. As a result,
earnings per share and diluted earnings per share are the
same.
7. TANGIBLE ASSETS AND CAPITAL COMMITMENTS
(unaudited) At
At 30th June 31st December
2000 1999 1999
US$m US$m US$m
----------------------------------
Tangible assets
Net book value at
beginning of period 5,562.5 5,296.2 5,296.2
Exchange translation
differences (25.0) (11.7) (17.1)
Additions 38.0 87.7 164.4
Depreciation (2.5) (2.8) (5.7)
Net revaluation surplus - - 124.7
------ ------ ------
Net book value at end
of period 5,573.0 5,369.4 5,562.5
======= ======= =======
Capital commitments 547.1 643.2 622.7
======= ======= =======
8. CURRENT ASSETS
(unaudited) At
At 30th June 31st December
2000 1999 1999
US$m US$m US$m
----------------------------------
Property held for sale 40.9 36.2 41.1
Debtors, prepayments and
others 30.9 20.6 34.6
Bank balances and other
liquid funds 1,294.9 1,336.6 1,373.3
------- ------- -------
1,366.7 1,393.4 1,449.0
======= ======= =======
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$134.6 million) subject to collateralised
arrangements.
9. CURRENT LIABILITIES
(unaudited) At
At 30th June 31st December
2000 1999 1999
US$m US$m US$m
-----------------------------------
Creditors and other
accruals 179.1 172.7 201.5
Bank and other advances 262.8 137.7 306.9
Current tax liabilities 18.2 27.7 13.6
------ ------ ------
460.1 338.1 522.0
====== ====== ======
10. TERM LOANS
(unaudited) At
At 30th June 31st December
2000 1999 1999
US$m US$m US$m
-----------------------------------
Hong Kong Dollar
Secured bank loans 1,109.6 1,054.0 1,116.3
Unsecured bank loans
wholly repayable within
five years 173.2 141.8 141.6
7.625% bonds - 1993/2001 64.1 64.4 64.3
-------- -------- --------
1,346.9 1,260.2 1,322.2
Singapore Dollar
Secured bank loans 110.9 60.9 90.5
United States Dollar
Secured bank loans 2.9 3.7 3.4
Unsecured bank loans wholly
repayable within five
years 113.8 113.8 113.8
4% convertible bonds due
2001 353.3 368.4 357.6
-------- -------- --------
470.0 485.9 474.8
-------- -------- --------
1,927.8 1,807.0 1,887.5
Less: Current portion
included in current
liabilities (208.8) (48.2) (213.5)
-------- -------- --------
1,719.0 1,758.8 1,674.0
======== ======== ========
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$5.0 million.
11. DIVIDENDS
(unaudited)
Six months ended 30th June
2000 1999
US$m US$m
---------------------
Final dividend in respect of 1999
of USc5.50 (1998: USc5.50) per
share 138.8 138.8
====== ======
An interim dividend in respect of 2000 of USc3.50 (1999:
USc3.50) 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 USc3.50 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 (852) 2842 8300
N R Sallnow-Smith/Kuah Boon Wee
Forrest International Limited (852) 2522 6475
Rosemary Sayer/Sauw Yim
This and other Group announcements can be accessed through the
Internet at 'www.irasia.com/listco/sg/hkland'.
NOTE TO EDITORS
Hongkong Land is a property investment, management and
development group with a major portfolio in Hong Kong and with
other property and infrastructure interests in Asia.
The primary share listing of Hongkong Land Holdings Limited is
in London, and the bulk of its shares are traded in Singapore.
The Company is incorporated in Bermuda and the Group's
operations are managed from Hong Kong by Hongkong Land
Limited.
Hongkong Land China Holdings Limited owns and manages some 5
million sq. ft of prime office and retail space in the heart
of Hong Kong's Central business district, some 10% of which is
under redevelopment.
Hongkong Land International Holdings Limited is establishing a
portfolio of property projects elsewhere in Asia, and is
active in Singapore, the Philippines and Vietnam.
Hongkong Land Infrastructure Holdings Limited holds
infrastructure investments in Hong Kong, Mainland China and
Indonesia and is seeking to develop a regional portfolio.
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