Final Results

RNS Number : 4572Z

Hongkong Land Hldgs Ld

07 March 2013

 



To:	Business Editor	7th March 2013
		For immediate release
The following announcement was issued today to a Regulatory Information Service approved by the Financial Services Authority in the United Kingdom.

HONGKONG LAND HOLDINGS LIMITED

2012 PRELIMINARY ANNOUNCEMENT OF RESULTS

Highlights

·   Good results in mixed markets

·   Positive reversions in Hong Kong

·   Higher contribution from residential operations

·   Final dividend up 10% at US¢11.00

"While office leasing demand remains subdued, the Group's Hong Kong portfolio will continue to benefit in 2013 from limited new supply as well as strong demand for luxury retail space.  Three residential projects are due for completion in Singapore, including the Marina Bay Suites development.  The Group remains well positioned with its outstanding assets, strong reputation and wide experience of regional markets."

Simon Keswick, Chairman

7th March 2013

Results

Year ended 31st December
	2012	2011	Change
	US$m	US$m	%
Underlying profit attributable to shareholders*	777	703	+11
Profit attributable to shareholders	1,439	5,306	-73
Shareholders' funds	26,148	24,739	+6
Net debt	3,273	2,359	+39
	US¢	US¢	%
Underlying earnings per share*	33.14	30.29	+9
Earnings per share	61.36	228.48	-73
Dividends per share	17.00	16.00	+6
	US$	US$	%
Net asset value per share	11.11	10.58	+5
*   The Group uses 'underlying profit attributable to shareholders' in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more fully described in note 1 to the financial statements.  Management considers this to be a key measure which provides additional information to enhance understanding of the Group's underlying business performance.
The final dividend of US¢11.00 per share will be payable on 22nd May 2013, subject to approval at the Annual General Meeting to be held on 15th May 2013, to shareholders on the register of members at the close of business on 22nd March 2013.  The ex-dividend date will be on 20th March 2013, and the share registers will be closed from 25th to 29th March 2013, inclusive.

HONGKONG LAND HOLDINGS LIMITED

PRELIMINARY ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED 31ST DECEMBER 2012

OVERVIEW

Hongkong Land performed well during the year despite the effects on the region of the prevailing global economic uncertainty.  Rental reversions in the Group's prime Hong Kong Central office portfolio remained positive overall as the market was supported by a lack of new supply.  The contribution from the Group's Singapore commercial portfolio rose due to improved rents and the completion of the final office tower at Marina Bay Financial Centre.  The contribution from residential development activities was higher than originally anticipated with two Singapore projects completing and further unit sales in Hong Kong.

PERFORMANCE

In 2012, underlying profit attributable to shareholders rose 11% to US$777 million. Underlying earnings per share were up by 9%, reflecting the larger number of issued shares due to the conversion of convertible bonds during the year.

Including the net gains of US$662 million resulting from higher independent valuations of the Group's investment property interests, the profit attributable to shareholders for the year was US$1,439 million.  This compares with US$5,306 million in 2011, which included a net gain of US$4,603 million arising from revaluations.  The net asset value per share at 31st December 2012 was US$11.11 compared with US$10.58 at the end of 2011.

The Directors are recommending a final dividend of US¢11.00 per share for 2012, providing a total dividend for the year of US¢17.00 per share compared with US¢16.00 per share for 2011.

GROUP REVIEW

Commercial Property

Leasing demand was relatively weak in both Hong Kong and Singapore during the year, particularly in the financial services sector.  The effects were, however, tempered by the limited vacancy within the Group's buildings.  In the Hong Kong Central office portfolio, vacancy was 3.4% at the year end, while the retail portfolio remained fully let.  As a result, rental reversions continued to be generally positive with improvements in both the average office and retail rents.

In Singapore, the office portfolio was fully leased, with the exception of the third tower at Marina Bay Financial Centre, which was almost 80% let by the end of the year.  The Group's 50%-owned office portfolio in Jakarta was 94% let.

In mainland China, the Group's commercial development projects are progressing well.  Construction has commenced at the prime Wangfujing site in Beijing, which will be developed as a luxury retail complex including a Mandarin Oriental hotel.  During the year, the Group acquired a 30% interest in a site on which a Grade A office building of some 120,000 sq. m. will be developed in the CBD Core Area of the Chaoyang District of Beijing.

Residential Developments

The Group's residential operations performed well.  In Hong Kong, 20 units of the Serenade were handed over to buyers while the four remaining units at The Sail were sold.  In Macau, 12 units were handed over to buyers at One Central.  In Singapore, two fully pre-sold projects, D'Mira and 50%-owned Parvis, were completed and a site for future development was acquired in August 2012 for approximately US$300 million.  In January 2013, a further site was secured for approximately US$350 million.

In mainland China, the Group benefited from continuing sales completions at Maple Place in Beijing and at its 50%-owned joint venture, Bamboo Grove, in Chongqing.  Sales also continued at other Group projects in Chongqing, Chengdu and Shenyang. 

Hongkong Land entered the Indonesian residential market in 2012 with a 49% interest in a joint venture that will develop a prime residential community on a 68 hectare site southwest of central Jakarta.

Financing

The Group's financial position remained strong with net debt of US$3.3 billion at the end of 2012, compared with US$2.4 billion at the end of 2011.  The increase was due to site acquisition costs for the Beijing commercial projects and residential site payments.  Gearing at the end of the year was 13%, compared with 10% at the end of 2011.

PEOPLE

Our staff continued to provide high levels of professionalism.  We are grateful to them for their enthusiasm, hard work and commitment in providing excellent property management services to our customers and in the development of our commercial and residential activities throughout the region.

We were pleased to welcome to the Board Michael Wu in December 2012 and Lord Sassoon in January 2013.

I will be stepping down as Chairman of the Company after the Annual General Meeting on 15th May 2013.  I will remain as a non-executive Director.  I am pleased to advise that Ben Keswick will be succeeding me as Chairman.

OUTLOOK

While office leasing demand remains subdued, the Group's Hong Kong portfolio will continue to benefit in 2013 from limited new supply as well as strong demand for luxury retail space.  Three residential projects are due for completion in Singapore, including the Marina Bay Suites development.  The Group remains well positioned with its outstanding assets, strong reputation and wide experience of regional markets.

Simon Keswick

Chairman

7th March 2013

CHIEF EXECUTIVE'S REVIEW

Hongkong Land performed ahead of expectations in 2012, supported by higher earnings from its commercial property interests and a good contribution from its residential property business.  Given the uncertain economic environment, our results reflect well on the strength and resilience of our business model and strategy.

BUSINESS MODEL AND STRATEGY

While the Group's Central portfolio in Hong Kong remains its most significant investment, the completion of the final office tower at Marina Bay Financial Centre in Singapore has provided Hongkong Land with a second important source of commercial property earnings and future capital appreciation.  Our objective is to continue to grow the Group's investment portfolio of exceptional properties, which is well demonstrated by the acquisition in 2011 of the Wangfujing site in Beijing and by the acquisition last year of a 30% interest in a central Beijing office project.

At the same time, we continue to expand our residential business.  In China, our attributable interest in the combined total developable area of our projects totals some 4.8 million sq. m. of which only 0.5 million sq. m. have been developed and sold.  In Singapore, our wholly-owned subsidiary, MCL Land continues to perform well and acquire sites for future development.  In Indonesia, we entered a 49%-owned joint venture to develop a residential site within BSD City, one of Jakarta's largest satellite townships, our first residential project in the country.

Hong Kong's Central Portfolio

The Group's most significant investment is its prime portfolio in the heart of Hong Kong's Central district of some 450,000 sq. m. of Grade A office and luxury retail space.  The location of this portfolio and its size provides a strong competitive position for the Group.  Continued focus on the returns from this portfolio is fundamental to our ongoing success.  While demand for this space depends on overall economic conditions, the tenor of the lease arrangements provides some protection against market volatility.

We continue to manage our 12 Grade A office and retail buildings as a large, integrated mixed-use development and look for opportunities to improve their value, such as the redevelopment of The Forum in Exchange Square from ancillary retail premises into an office building.  At the same time, significant enhancements will be made to the surrounding Exchange Square Plaza.

Retail space in the Central portfolio now totals 55,000 sq. m. and our objective is to ensure that this continues to be viewed as the most exclusive shopping and dining destination in Hong Kong.  In turn, this contributes significantly to the prestige and convenience of the office space, which increases its attractiveness for premium tenants.  The restaurants across the portfolio, which have been accorded a total of nine Michelin stars, are performing well and are attracting customers to Central throughout the day and in the evenings.

Our intention is to continue to upgrade the portfolio, ensuring it remains the most prestigious within Hong Kong.  At the same time, we will seek to grow our rentals over the long term, recognising the desirability of both the quality of space and of service which it is Hongkong Land's mandate to provide to each tenant.

Commercial Property Investments in Asia

Over the past few years, the Group has extended its commercial property interests outside Hong Kong.  Expansion has been assisted by both the Group's strong financial position and its reputation for quality.  To date, the principal focus has been in Singapore where the Group now has attributable interests of 166,000 sq. m. (including its share of properties held through joint ventures).  This is principally premium Grade A office space.  The intention is also to expand the Group's portfolio in Jakarta which currently consists of 140,000 sq. m. of prime office space.  This is held by a 50%-owned joint venture.  In Beijing, two new projects are now underway. 

We continue to look for attractive high-quality commercial projects throughout Asia which will offer development profits as well as long-term investments to be held for rental yield and capital appreciation.

In general, our performance in these markets depends on the levels of demand for and supply of commercial space, both of which are influenced by the overall economic environment. 

Residential Developments

Based on the Group's experience in Greater China and Southeast Asia, a strong and profitable residential business has been established focusing on premium properties.  While the capital invested in this activity is significantly smaller than our commercial business, the residential projects enhance the Group's overall profits and returns on capital. 

Annual returns from residential developments fluctuate due to the nature of the projects and the accounting policy of only recognising profits on sold units at completion.  Demand is also dependent on overall economic conditions, which can be significantly affected by government policies.  Ongoing land acquisitions are necessary to continue to build this income stream over the longer term.

REVIEW OF COMMERCIAL PROPERTY

Hong Kong

Leasing activity was relatively subdued in 2012 as demand from the financial services sector was weaker.  As a result, market rents for Grade A office space decreased.  Financial institutions, law firms and accounting firms comprise some 75% of the office space in our portfolio.  Nonetheless, the Group achieved largely positive reversions on expiring leases or those coming due for rent review as the market was well supported by the limited new supply.  In addition, no large tenants reduced significantly their space requirements.  The average rent in 2012 was HK$90.3 per sq. ft, the highest Hongkong Land has achieved, compared with HK$87.0 per sq. ft in 2011.  Vacancy at the end of 2012 was 3.4% compared with 2.0% at the end of 2011, which was exceptionally low.  This compares favourably to the vacancy across the entire Grade A Central market of some 4.5% as at 31st December 2012.

Demand for retail space in Hong Kong remained strong and there was a limited new supply of high quality space.  During 2012, Hongkong Land announced its new 'Landmark' brand which encompasses all of the Group's luxury retail space in Central, comprising The Landmark Atrium, Prince's Building, Alexandra House and Chater House.  'Landmark', with some 210 stores and restaurants, is one of the largest luxury shopping destinations on Hong Kong Island.  The launch was accompanied by a significant conventional and social media campaign, targeting both the local and the important mainland China visitor market.  Ensuring Landmark is the most prestigious retail centre in the region both for shoppers and brand owners is a key objective for us.

The average retail rent was HK$170.7 per sq. ft, an 11% increase over the 2011 average of HK$153.8 per sq. ft, adjusted to exclude The Forum building at Exchange Square now under redevelopment.  The portfolio at the end of 2012 remained fully occupied.

The value of the combined portfolio at 31st December 2012, based on independent valuations, was US$22.1 billion compared with US$21.7 billion a year earlier.

Singapore

There was also much less office leasing activity in Singapore compared with prior years, although our portfolio continued to perform well.  Financial institutions, law firms and accounting firms account for some 85% of total leasable area within the portfolio.  The office portfolio was fully leased with the exception of Tower 3 of Marina Bay Financial Centre, which was completed in the first half of the year.  Excluding Tower 3, the average rent across the office portfolio in 2012 was S$8.9 per sq. ft compared with S$8.6 per sq. ft in the previous year.

At the end of 2012, Tower 3 was 78% let compared with 65% pre-let at the end of 2011.  This increase was achieved despite the weaker demand and the competition from other new office buildings.

Vacancy across the Group's Singapore portfolio, including its one-third interest in Tower 3 at the end of 2012 was 5.6% compared with 9.2% at the end of 2011.  This compares favourably to the vacancy across the entire Grade A CBD market of 8.4% as at 31st December 2012.

Other Commercial Property Investments

In 2012, the Group took a 30% interest in a consortium that will develop a prime Grade A office building of some 120,000 sq. m. in the CBD Core Area of Beijing's Chaoyang District. Construction is beginning on the Group's project in Wangfujing located in the heart of Beijing.  This mixed-use project will be developed into the city's most prestigious shopping and dining destination, and will include a Mandarin Oriental hotel.

The Group's 47%-owned joint venture project in Macau, One Central, continued to benefit from growing retail sales, thereby increasing its contribution to Group results.  With its 20,000 sq. m. of luxury retail space, One Central is regarded as the preeminent shopping destination in the Territory.  Occupancy at the end of 2012 was 95%, up from 93% a year earlier with 2012 revenues increasing by 34%.  Mandarin Oriental, Macau, the 213-room hotel which is seamlessly connected to the retail areas of One Central, continues to consolidate its position as one of the market's most exclusive hotels.

In Jakarta, a fourth tower was completed by the Group's 50%-owned joint venture, Jakarta Land, which is now 92% let.  While rents remain low compared with other markets, they have increased significantly over the past two years.  At 31st December 2012, vacancy across the portfolio was only 6%, including the new tower.  The average gross rent in 2012 was US$20.6 per sq. m. compared with US$18.2 per sq. m. in 2011, the increase due in part to the higher rents of the newly completed tower.

In Phnom Penh, Cambodia, planning has advanced for the development of one of the prime sites acquired in 2011 as a high quality office and retail complex.

The Group's other commercial investment properties in Hanoi, Bangkok and Bermuda continued to perform satisfactorily. 

REVIEW OF RESIDENTIAL PROPERTY

Results from the Group's residential property activities were ahead of our original expectations due to higher than anticipated sales at two residential projects in Hong Kong, Serenade and The Sail, and the completion of two projects in Singapore, with the second, D'Mira, ahead of the original timing.

2012 was also an active year for sales launches.  In Singapore, MCL Land launched its 679-unit Ripple Bay development, which was 96% sold at the year end.  In mainland China, the Group's attributable interest in contracted sales across our six development projects was US$429 million in 2012, compared with US$160 million in the prior year.  Despite the satisfactory sales performance, overall demand remained adversely affected by various government measures designed to dampen sentiment. 

Hong Kong

A further 20 units were handed over to buyers at the Group's 97-unit Serenade project, compared with 23 units in 2011.  At the end of the year, there were 18 units remaining for sale, in addition to three units whose sales are scheduled for completion in 2013.  The remaining four units of the 95-unit The Sail development were also sold in 2012, compared to only one unit in 2011.

Macau

In Macau, 12 units were handed over to buyers at the Group's One Central joint venture development, including eight Residences at Mandarin Oriental, adjoining the hotel.  This compares to 82 units in 2011.  At the end of the year, there were three units remaining for sale in addition to ten units which are scheduled for completion over the next 18 months.

Singapore

Two projects were completed in 2012, Parvis, a 248-unit development held through a 50%-owned joint venture, and D'Mira, a 100%-owned, 65-unit development.  In 2011, the only project completed in Singapore was the 180-unit Peak@Balmeg development.

In 2013, three projects are scheduled for completion.  These developments include MCL Land's The Estuary with 608 units and Este Villa with 121 freehold townhouses, both of which are 100% pre-sold.  In addition, the 221-unit Marina Bay Suites development, which has been 87% pre-sold, will be completed.  This is one-third owned by Hongkong Land and is the final residential component of the Marina Bay Financial Centre complex.

In 2014, two projects are scheduled for completion, Uber 388 with 95 units and Terrasse with 414 units.  At the end of 2012, these projects had been 86% and 100% pre-sold, respectively.  In 2015, the 96% pre-sold Ripple Bay project with 679 units will be completed.  In addition, the Group has four other projects that have not yet been launched for sale which will provide 1,500 units with a total area of 130,000 sq. m.  This includes the two sites in Jurong which were acquired in August 2012 for some US$300 million and in January 2013 for some US$350 million.

Mainland China

The Group's residential business was active in four cities across mainland China.  These are long-term projects of different product types that are being developed in phases over time.  While conditions in 2012 remained challenging due to various government measures to dampen the residential property market, sales at our various projects have been encouraging.  In the longer term, we believe that these projects are well positioned to meet market demand and should produce strong earnings for the Group.

Chongqing, the largest city in western China, is where the Group's most significant residential developments are located.  These consist of four projects, Bamboo Grove, Landmark Riverside, Yorkville South and the adjacent Yorkville North, a large site which was acquired in December 2011.

At Bamboo Grove, the Group's 50%-owned joint venture with Longfor Properties, a total of 1,289 units were completed and handed over to buyers in 2012 with a combined developable area of 184,000 sq. m.  This was more than expected as in addition to the high-rise apartments in Phase 4B which were sold, the low-rise apartments in Phase 5A were completed ahead of time and handed over to buyers.  In 2011, sales were recognised on 1,384 units covering 195,000 sq. m.

The townhouses of Phase 3C and the high-rise apartments of Phase 5B which have been 63% and 74% pre-sold, respectively, are scheduled for completion in 2013.

When completed, Bamboo Grove will comprise some 1.5 million sq. m. of mainly residential space, of which 766,000 sq. m. have already been developed and sold while 282,000 sq. m. are now under construction.

Landmark Riverside at Dan Zishi is the Group's second project in Chongqing.  It is a 50%-owned joint venture with China Merchants Group, which will consist of approximately 1.5 million sq. m. of residential and some prime retail space built over a 34 hectare site in phases.  A total of 1,249 high-rise apartments are being constructed in Phase 1 of the project, of which 56% have been pre-sold.  The first units are scheduled to be handed over to buyers at the end of 2013.

Yorkville South is the Group's third project in Chongqing and is wholly-owned.  The development is at Zhaomushan, near the core of the Two-River New Area.  This wholly-owned project consists of a site of almost 39 hectares for mainly residential development with a small portion of retail.  The total developable area of approximately 880,000 sq. m. is also being developed in phases.  In 2012, construction continued on the 324 townhouses of Phase 1, which are targeted for completion in 2013.  These have been 73% pre-sold.

Yorkville North is a 52 hectare site acquired in late 2011 and is the Group's fourth project in the city.  It will be a premium residential development with some commercial components with a total gross floor area of some one million sq. m.  Site preparations are underway for a phased development.

In Chengdu, construction is now underway at the 19 hectare site owned in a 50%-joint venture with KWG Property Holding Group.  It is a mixed-use residential and commercial project with a developable area of approximately 900,000 sq. m.  Phase 1 of the development will consist of 1,300 high-rise apartments, with the first completions due in 2014.  53% of the 383 units launched for sale have been pre-sold.

In Shenyang, construction continued at two of our 50%-owned residential projects in the city, which are located to the north and south of the Central Business District.  At One Capitol, Phase 1A, consisting of 236 townhouses and low-rise apartments, was completed in 2012 and 85% of the units were handed over to buyers.  At Park Life, the 140 townhouses and 234 low-rise apartments of Phases 2A and 2B were completed, and 67% of the units were handed over to buyers.

In Beijing, at the Group's 90%-owned Maple Place project, 13 additional units were handed over to buyers.  A further 98 units are available for future sale.  These consist of villas, townhouses and apartments with a total area of 23,000 sq. m.  Most of the units are currently leased but our intention remains to refurbish and sell these units.

At Central Park, our 40%-owned joint venture with the Vantone Group continues to hold 72 apartments which are being operated as serviced apartments.

OUTLOOK

The year ahead looks generally positive but significant challenges remain in the overall trading environment.  Longer term, Hongkong Land's strong financial and competitive position will enable it to benefit from its existing commercial and residential property interests, as well as to capitalise on opportunities that are expected to become available as the region's development continues apace.

In 2013, in addition to solid returns from our existing commercial property interests, we expect an increased contribution from our Singapore residential business due to the anticipated completion of three projects.  The results in China will continue to benefit from sales completions at Bamboo Grove and Maple Place, while in 2014 and beyond the Group should begin to see more significant profits from the residential sites it has acquired over the past few years.  The scale of these profits will be significantly affected by selling conditions over the next 18 months which remain difficult to predict.

Meanwhile, we will remain focused on providing excellent service to our office and retail tenants and on ensuring a high quality product for our residential buyers.  This is the foundation on which the Group's long-term competitive position is built.

Y.K. Pang

Chief Executive

7th March 2013

Hongkong Land Holdings Limited Consolidated Profit and Loss Account for the year ended 31st December 2012
		2012												2011
Underlying business performance US$m						Non- trading items US$m				Total US$m		Underlying business performance US$m						Non- trading items US$m				Total US$m
Revenue (note 2)		1,114.8				-				1,114.8				1,223.7				-				1,223.7
Net operating costs (note 3)		(314.5)				-				(314.5)				(392.0)				-				(392.0)
		800.3				-				800.3				831.7				-				831.7
Change in fair value of    investment properties (note 7)		-				306.4				306.4				-				4,382.7				4,382.7
Asset disposals (note 7)		-				1.6				1.6				-				-				-
Operating profit (note 4)		800.3				308.0				1,108.3				831.7				4,382.7				5,214.4
Net financing charges
- financing charges		(98.8)				-				(98.8)				(99.7)				-				(99.7)
- financing income		37.9				-				37.9				33.2				-				33.2
		(60.9)				-				(60.9)				(66.5)				-				(66.5)
Share of results of associates and    joint ventures (note 5)
- before change in fair value      of investment properties		165.8				(0.1)				165.7				76.3				(17.0)				59.3
- change in fair value of      investment properties		-				360.8				360.8				-				238.7				238.7
		165.8				360.7				526.5				76.3				221.7				298.0
Profit before tax		905.2				668.7				1,573.9				841.5				4,604.4				5,445.9
Tax (note 6)		(124.4)				0.6				(123.8)				(133.6)				(0.9)				(134.5)
Profit after tax		780.8				669.3				1,450.1				707.9				4,603.5				5,311.4
Attributable to:
Shareholders of the Company		777.0				661.5				1,438.5				703.4				4,603.0				5,306.4
Non-controlling interests		3.8				7.8				11.6				4.5				0.5				5.0
		780.8				669.3				1,450.1				707.9				4,603.5				5,311.4
		US¢								US¢				US¢								US¢
Earnings per share (note 8)		33.14								61.36				30.29								228.48

Hongkong Land Holdings Limited Consolidated Statement of Comprehensive Income for the year ended 31st December 2012
				2012 US$m						2011 US$m
Profit for the year				1,450.1						5,311.4
Revaluation of other investments				33.9						(10.7)
Net actuarial loss on employee benefit plans				(1.1)						(4.6)
Net exchange translation differences				146.1						36.9
Cash flow hedges
- net gain/(loss) arising during the year				7.6						(1.2)
- transfer to profit and loss				4.0						5.8
				11.6						4.6
Share of other comprehensive income of associates and joint ventures				97.1						2.8
Tax relating to components of other comprehensive    income (note 6)				(2.0)						(0.2)
Other comprehensive income for the year				285.6						28.8
Total comprehensive income for the year				1,735.7						5,340.2
Attributable to:
Shareholders of the Company				1,723.7						5,335.2
Non-controlling interests				12.0						5.0
				1,735.7						5,340.2

Hongkong Land Holdings Limited Consolidated Balance Sheet at 31st December 2012
			At 31st December
			2012 US$m				2011 US$m
Net operating assets
Tangible assets			5.6				5.3
Investment properties (note 9)			23,493.7				22,529.9
Associates and joint ventures			4,270.4				3,551.8
Other investments			82.6				48.6
Non-current debtors			68.4				72.0
Deferred tax assets			5.2				5.5
Pension assets			5.5				6.4
Non-current assets			27,931.4				26,219.5
Properties for sale			2,513.4				1,521.2
Current debtors			351.0				313.5
Current tax assets			7.1				1.5
Bank balances			982.1				967.9
Current assets			3,853.6				2,804.1
Current creditors			(1,142.6)				(746.3)
Current borrowings (note 10)			(364.5)				(58.0)
Current tax liabilities			(59.8)				(82.5)
Current liabilities			(1,566.9)				(886.8)
Net current assets			2,286.7				1,917.3
Long-term borrowings (note 10)			(3,891.0)				(3,269.2)
Deferred tax liabilities			(66.4)				(59.4)
Non-current creditors			(76.3)				(44.4)
			26,184.4				24,763.8
Total equity
Share capital			235.3				233.8
Revenue and other reserves			25,912.4				24,504.7
Shareholders' funds			26,147.7				24,738.5
Non-controlling interests			36.7				25.3
			26,184.4				24,763.8

Hongkong Land Holdings Limited Consolidated Statement of Changes in Equity for the year ended 31st December 2012
	Attributable to shareholders of the Company														Attributable to non-
		Share capital US$m		Share premium US$m		Revenue reserves US$m	Capital reserves US$m			Hedging reserves US$m		Exchange reserves US$m		Total US$m	controlling interests US$m			Total equity US$m
2012
At 1st January		233.8		315.8		23,881.1		1.5		(13.7)		320.0		24,738.5		25.3		24,763.8
Total comprehensive income		-		-		1,471.5		-		7.8		244.4		1,723.7		12.0		1,735.7
Dividends paid by the Company		-		-		(375.1)		-		-		-		(375.1)		-		(375.1)
Dividends paid to non-controlling shareholders		-		-		-		-		-		-		-		(0.6)		(0.6)
Unclaimed dividends forfeited		-		-		4.9		-		-		-		4.9		-		4.9
Issue of shares		1.5		54.2		-		-		-		-		55.7		-		55.7
Transfer		-		-		1.5		(1.5)		-		-		-		-		-
At 31st December		235.3		370.0		24,983.9		-		(5.9)		564.4		26,147.7		36.7		26,184.4
2011
At 1st January		225.1		5.3		18,900.7		62.5		(16.2)		279.2		19,456.6		20.9		19,477.5
Total comprehensive income		-		-		5,291.9		-		2.5		40.8		5,335.2		5.0		5,340.2
Dividends paid by the Company		-		-		(372.5)		-		-		-		(372.5)		-		(372.5)
Dividends paid to non-controlling shareholders		-		-		-		-		-		-		-		(0.6)		(0.6)
Issue of shares		8.7		310.5		-		-		-		-		319.2		-		319.2
Transfer		-		-		61.0		(61.0)		-		-		-		-		-
At 31st December		233.8		315.8		23,881.1		1.5		(13.7)		320.0		24,738.5		25.3		24,763.8
The comprehensive income included in revenue reserves comprises profit attributable to shareholders of US$1,438.5 million (2011: US$5,306.4 million), fair value gain on other investments of US$33.9 million (2011: loss of US$10.7 million) and net actuarial loss on employee benefit plans of US$0.9 million (2011: US$3.8 million).   Cumulative fair value gain on other investments and net actuarial loss on employee benefit plans amounted to US$42.7 million (2011: US$8.8 million) and US$3.9 million (2011: US$3.0 million), respectively.

Hongkong Land Holdings Limited Consolidated Cash Flow Statement for the year ended 31st December 2012
			2012 US$m				2011 US$m
Operating activities
Operating profit			1,108.3				5,214.4
Depreciation			2.1				1.7
Reversal of writedowns on properties for sale			(7.5)				(44.2)
Change in fair value of investment properties			(306.4)				(4,382.7)
Asset disposals			(1.6)				-
Increase in properties for sale			(907.6)				(298.8)
Decrease/(increase) in debtors			72.7				(70.7)
Increase in creditors			380.7				33.2
Interest received			37.4				35.8
Interest and other financing charges paid			(71.7)				(93.0)
Tax paid			(147.4)				(117.4)
Dividends from associates and joint ventures			139.7				58.0
Cash flows from operating activities			298.7				336.3
Investing activities
Major renovations expenditure			(47.8)				(50.8)
Developments capital expenditure			(515.0)				(38.3)
Investments in and loans to associates and joint ventures			(179.0)				(146.2)
Deposit for a joint venture			(112.1)				-
Disposal of an investment property			8.3				-
Cash flows from investing activities			(845.6)				(235.3)
Financing activities
Drawdown of borrowings			1,550.1				1,068.1
Repayment of borrowings			(635.9)				(1,193.4)
Contribution from/(repayment to) non-controlling shareholders			22.1				(6.1)
Dividends paid by the Company			(374.3)				(370.9)
Dividends paid to non-controlling shareholders			(0.6)				(0.6)
Cash flows from financing activities			561.4				(502.9)
Effect of exchange rate changes			(0.2)				2.9
Net increase/(decrease) in cash and cash equivalents			14.3				(399.0)
Cash and cash equivalents at 1st January			966.7				1,365.7
Cash and cash equivalents at 31st December			981.0				966.7

Hongkong Land Holdings Limited Notes
1.	ACCOUNTING POLICIES AND BASIS OF PREPARATION
	The financial information contained in this announcement has been based on the audited results for the year ended 31st December 2012 which have been prepared in conformity with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board. In 2012, the Group adopted amendments to IFRS 7 'Financial Instruments: Transfers of Financial Assets' which are effective in the current accounting year and relevant to the Group's operations.  The amendments promote transparency in the reporting of such transfer transactions and improve users' understanding of the risk exposures relating to transfer of financial assets and the effect of those risks on an entity's financial position particularly those involving securitisation of financial assets.  The adoption of these amendments does not have a material impact on the Group's disclosures. There have been no changes to the accounting policies described in the 2011 annual financial statements.
2.	REVENUE
			2012 US$m		2011 US$m
	Rental income		745.5		700.3
	Service income		117.2		110.9
	Sales of properties		252.1		412.5
			1,114.8		1,223.7
	Service income includes service and management charges and hospitality service income. Total contingent rents included in rental income amounted to US$12.9 million (2011: US$12.5 million).

3.	NET OPERATING COSTS
				2012 US$m				2011 US$m
	Cost of sales			(234.6)				(320.2)
	Other income			4.9				4.0
	Administrative expenses			(84.8)				(75.8)
				(314.5)				(392.0)
4.	OPERATING PROFIT
				2012 US$m				2011 US$m
	By business
	Commercial property			719.9				673.1
	Residential property			140.2				209.1
	Corporate			(59.8)				(50.5)
				800.3				831.7
	Change in fair value of investment properties			306.4				4,382.7
	Asset disposals			1.6				-
				1,108.3				5,214.4
5.	SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
				2012 US$m				2011 US$m
	By business
	Commercial property			58.2				46.5
	Residential property			107.6				29.8
	Underlying business performance			165.8				76.3
	Non-trading items:
	Change in fair value of investment properties (net of    deferred tax)
	- Commercial property			357.7				235.8
	- Residential property			3.1				2.9
				360.8				238.7
	Asset disposals/impairment provisions			(0.1)				(17.0)
				360.7				221.7
				526.5				298.0

6.	TAX
	Tax charged to profit and loss is analysed as follows:
				2012 US$m				2011 US$m
	Current tax			(118.4)				(128.6)
	Deferred tax
	- changes in fair value of investment properties			0.6				(0.9)
	- other temporary differences			(6.0)				(5.0)
				(5.4)				(5.9)
				(123.8)				(134.5)
	Tax relating to components of other comprehensive    income is analysed as follows:
	Actuarial valuation of employee benefit plans			0.2				0.8
	Cash flow hedges			(2.2)				(1.0)
				(2.0)				(0.2)
	Tax on profits has been calculated at the rates of taxation prevailing in the territories in which the Group operates.  The Group has no tax payable in the United Kingdom (2011: nil). Share of tax charge of associates and joint ventures of US$89.8 million (2011: US$61.8 million) is included in share of results of associates and joint ventures.
7.	NON-TRADING ITEMS
	An analysis of non-trading items after interest, tax and non-controlling interests is set out below:
				2012 US$m				2011 US$m
	Change in fair value of investment properties			306.4				4,382.7
	Deferred tax on change in fair value of investment    properties			0.6				(0.9)
	Share of change in fair value of investment properties of    associates and joint ventures (net of deferred tax)			360.8				238.7
	Asset disposals			1.6				-
	Share of asset disposals/impairment provisions of    associates and joint ventures			(0.1)				(17.0)
	Non-controlling interests			(7.8)				(0.5)
				661.5				4,603.0

8.	EARNINGS PER SHARE
	Earnings  per  share  is  calculated  on  profit  attributable  to  shareholders  of      US$1,438.5 million (2011: US$5,306.4 million) and on the weighted average number of 2,344.5 million (2011: 2,322.5 million) shares in issue during the year.
	Earnings per share is additionally calculated based on underlying profit attributable to shareholders.  A reconciliation of earnings is set out below:
				2012					2011
			US$m		Earnings per share US¢				US$m		Earnings per share US¢
	Underlying profit attributable to   shareholders			777.0		33.14			703.4		30.29
	Non-trading items (note 7)			661.5					4,603.0
	Profit attributable to shareholders			1,438.5		61.36			5,306.4		228.48
9.	INVESTMENT PROPERTIES
									2012 US$m		2011 US$m
	At 1st January							22,529.9			18,036.0
	Exchange differences								99.3		28.1
	Additions								564.7		83.1
	Disposal								(6.6)		-
	Net increase in fair value								306.4		4,382.7
	At 31st December								23,493.7		22,529.9

10.	BORROWINGS
				2012 US$m				2011 US$m
	Current
	Bank overdrafts			1.1				1.2
	Current portion of long-term borrowings
	- bank loans			363.4				0.3
	- 2.75% United States dollar convertible bonds due 2012			-				56.5
				364.5				58.0
	Long-term
	Bank loans			844.1				1,062.7
	5.5% United States dollar bonds due 2014			527.7				544.8
	3.65% Singapore dollar notes due 2015			308.1				290.3
	Medium term notes
	- due 2017			44.6				41.0
	- due 2019			103.0				102.8
	- due 2020			323.3				312.7
	- due 2021			74.5				71.6
	- due 2022			614.2				-
	- due 2025			657.0				644.6
	- due 2026			38.5				38.4
	- due 2027			185.7				-
	- due 2030			103.2				103.0
	- due 2031			25.4				25.3
	- due 2032			9.6				-
	- due 2040			32.1				32.0
				2,211.1				1,371.4
				3,891.0				3,269.2
				4,255.5				3,327.2

11.	DIVIDENDS
			2012 US$m		2011 US$m
	Final dividend in respect of 2011 of US¢10.00 (2010: US¢10.00) per share		234.2		232.3
	Interim dividend in respect of 2012 of US¢6.00 (2011: US¢6.00) per share		140.9		140.2
			375.1		372.5
	A final dividend in respect of 2012 of US¢11.00 (2011: US¢10.00) per share amounting to a total of US$258.8 million (2011: US$234.2 million) is proposed by the Board.  The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting.  The amount will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2013.
12.	CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
			2012 US$m		2011 US$m
	Capital commitments		566.1		891.1
	Contribution to associates and joint ventures		272.1		480.2
	Various Group companies are involved in litigation arising in the ordinary course of their respective businesses.  Having reviewed outstanding claims and taking into account legal advice received, the Directors are of the opinion that adequate provisions have been made in the financial statements.

13.

RELATED PARTY TRANSACTIONS

The parent company of the Group is Jardine Strategic Holdings Limited and the ultimate holding company is Jardine Matheson Holdings Limited ('JMH').  Both companies are incorporated in Bermuda. In the normal course of business, the Group has entered into a variety of transactions with the subsidiaries, associates and joint ventures of JMH ('Jardine Matheson group members').  The more significant of these transactions are described below: Management fee The management fee payable by the Group, under an agreement entered into in 1995, to  Jardine Matheson Limited ('JML') in 2012 was US$3.9 million (2011: US$3.5 million), being 0.5% per annum of the Group's underlying profit in consideration for management consultancy services provided by JML, a wholly-owned subsidiary of JMH. Property and other services The Group rented properties to Jardine Matheson group members.  Gross rents on such properties in 2012 amounted to US$21.4 million (2011: US$20.6 million). Jardine Matheson group members provided property construction, maintenance and other services to the Group in 2012 in aggregate amounting to US$34.7 million (2011: US$30.0 million). The outstanding balances arising from the above services at 31st December 2012 are not material. Hotel management services Jardine Matheson group members provided hotel management services to the Group in 2012 amounting to US$2.7 million (2011: US$1.9 million). The outstanding balances arising from the above services at 31st December 2012 are not material. Outstanding balances with associates and joint ventures Amounts of outstanding balances with associates and joint ventures are included in debtors and creditors as appropriate.

Hongkong Land Holdings Limited Principal Risks and Uncertainties
The Board has overall responsibility for risk management and internal control.  The process by which the Group identifies and manages risk will be set out in more detail in the Corporate Governance section of the Company's 2012 Annual Report (the 'Report').  The following are the principal risks and uncertainties facing the Company as required to be disclosed pursuant to the Disclosure and Transparency Rules issued by the Financial Services Authority in the United Kingdom and are in addition to the matters referred to in the Chairman's Statement and Chief Executive's Review.
Economic Risk The Group is exposed to the risk of negative developments in global and regional economies, and financial and property markets, either directly or through the impact on the Group's joint venture partners, bankers, suppliers or tenants.  These developments can result in:
•	recession, inflation, deflation and currency fluctuations;
•	restrictions in the availability of credit, increases in financing and construction costs and business failures; and
•	reductions in office and retail rents, office and retail occupancy and sales prices of, and demand for, residential developments.
Such developments might increase costs of sales and operating costs, reduce revenues, or result in reduced valuations of the Group's investment properties or in the Group being unable to meet in full its strategic objectives.
Commercial Risk and Financial Risk Risks are an integral part of normal commercial practices, and where practicable steps are taken to mitigate such risks.  These risks are further pronounced when operating in volatile markets. The Group makes significant investment decisions in respect of commercial and residential development projects that take time to come to fruition and achieve the desired returns and are, therefore, subject to market risks.  These risks are further pronounced when operating in volatile markets.  The Group operates in areas that are highly competitive, and failure to compete effectively in terms of price, product specification or levels of service can have an adverse effect on earnings as can construction risks in relation to new developments.  Significant pressure from such competition may lead to reduced margins.  The quality and safety of the products and services provided by the Group are also important and there is an associated risk if they are below standard. The steps taken by the Group to manage its exposure to financial risk will be set out in the Financial Review and in a note to the Financial Statements in the Report.
Regulatory and Political Risk The Group is subject to a number of regulatory environments in the territories in which it operates.  Changes in the regulatory approach to such matters as foreign ownership of assets and businesses, exchange controls, planning controls, tax rules and employment legislation have the potential to impact the operations and profitability of the Group.  Changes in the political environment in such territories can also affect the Group.
Terrorism, Pandemic and Natural Disasters A number of the Group's interests are vulnerable to the effects of terrorism, either directly through the impact of an act of terrorism or indirectly through the impact of generally reduced economic activity in response to the threat of or an actual act of terrorism. The Group would be impacted by a global or regional pandemic which could be expected to seriously affect economic activity and the ability of our business to operate smoothly.  In addition, many of the territories in which the Group is active can experience from time to time natural disasters such as earthquakes and typhoons.

Responsibility Statement
The Directors of the Company confirm to the best of their knowledge that:
(a)	the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board; and
(b)	the sections of the Company's 2012 Annual Report, including the Chairman's Statement, Chief Executive's Review and Principal Risks and Uncertainties, which constitute the management report include a fair review of all information required to be disclosed by the Disclosure and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Services Authority of the United Kingdom.
For and on behalf of the Board Y.K. Pang John R. Witt Directors 7th March 2013

	The final dividend of US¢11.00 per share will be payable on 22nd May 2013, subject to approval at the Annual General Meeting to be held on 15th May 2013, to shareholders on the register of members at the close of business on 22nd March 2013.  The ex-dividend date will be on 20th March 2013, and the share registers will be closed from 25th to 29th March 2013, 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 for the 2012 final dividend by notifying the United Kingdom transfer agent in writing by 26th April 2013.  The sterling equivalent of dividends declared in United States dollars will be calculated by reference to a rate prevailing on 8th May 2013.  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.
Hongkong Land Group Hongkong Land is one of Asia's leading property investment, management and development groups.  Founded in Hong Kong in 1889, Hongkong Land's business is built on partnership, integrity and excellence. In Hong Kong, the Group owns and manages some 450,000 sq. m. (five million sq. ft) of prime commercial space that defines the heart of the Central Business District.  In Singapore, it has been instrumental in the creation of the city-state's new Central Business District at Marina Bay with the expansion of its joint venture portfolio of new developments.  Hongkong Land's properties in these and other Asian centres are recognised as market leaders and house the world's foremost financial, business and luxury retail names. Hongkong Land develops premium residential properties in a number of cities in the region, principally in China and Singapore where its subsidiary, MCL Land, is a significant developer. Hongkong Land Holdings Limited is incorporated in Bermuda.  It has a premium listing on the London Stock Exchange, and secondary listings in Bermuda and Singapore.  The Group's assets and investments are managed from Hong Kong by Hongkong Land Limited.  Hongkong Land is a member of the Jardine Matheson Group. - end -
For further information, please contact:
Hongkong Land Limited
Y.K. Pang		(852) 2842 8428
John R. Witt		(852) 2842 8101
GolinHarris
Sue So		(852) 2501 7984
Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 2012 can be accessed through the Internet at 'www.hkland.com'.

 

END

 

 

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