Interim Results - Part 1
Hongkong Land Hldgs Ld
29 July 2003
To:Business Editor 29th July 2003
For immediate release
The following announcement was today issued to the London
Stock Exchange.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 2003
Highlights
> Hong Kong office market remains weak
> Further decline in property values
> Occupancy in Central portfolio over 90% with Chater House 79% let
> First phase of Central Park residential project in Beijing substantially sold
'Further weakness is expected in the Hong Kong property market
in the second half of the year as new developments continue to
put pressure on values and rents. Hongkong Land will remain
focused on providing superior levels of customer service and
property management so as to attract a greater share of
tenants and maintain a high level of occupancy.'
Simon Keswick, Chairman
29th July 2003
Results
Prepared in accordance with (unaudited)
IFRS as modified by revaluation Six months ended 30th June
of leasehold properties# 2003 2002 Change
US$m US$m %
-----------------------------------------------------------------------------------
Underlying net profit 84 96 -13
Net loss (872) (506) n/m
-----------------------------------------------------------------------------------
USc USc %
-----------------------------------------------------------------------------------
Underlying earnings per share 3.76 4.30 -13
Loss per share (39.19) (22.73) n/m
Interim dividend per share 2.00 3.50 -43
-----------------------------------------------------------------------------------
US$ US$ %
-----------------------------------------------------------------------------------
Net asset value per share 1.80 2.23* -19
-----------------------------------------------------------------------------------
* At 31st December 2002
# The Group's financial statements are prepared under
International Financial Reporting Standards ('IFRS') which
do not permit leasehold interests in land to be carried at
valuation. This treatment does not reflect the generally
accepted accounting practice in the territories in which the
Group has significant leasehold interests, nor how
management measures the performance of the Group.
Accordingly, the Group has presented supplementary financial
information prepared in accordance with IFRS as modified by
the revaluation of leasehold properties in addition to the
IFRS financial statements. The figures included in the above
summary and the Chairman's Statement are based on this
supplementary financial information unless otherwise stated.
The interim dividend of USc2.00 per share will be payable on
15th October 2003 to shareholders on the register of members
at the close of business on 22nd August 2003. The ex-dividend
date will be on 20th August 2003, and the share registers will
be closed from 25th to 29th August 2003, inclusive.
HONGKONG LAND HOLDINGS LIMITED
INTERIM REPORT 2003
OVERVIEW
The Hong Kong office market is experiencing a period of
negative net demand not seen for more than 20 years. The
completion of new buildings in such an environment has
inevitably placed downward pressure on rents. Against this
very competitive background, Hongkong Land has continued to
gain market share and has succeeded in reducing vacancy in the
first half to under 10% of its portfolio.
PERFORMANCE
Underlying net profit for the six months ended 30th June 2003
was US$84 million, a reduction of 13% compared with the first
half of 2002. Net income from properties trended lower as
rental reversions continued to be negative. Underlying
earnings per share at USc3.76 fell in line with underlying
profit.
Under the provisions of International Financial Reporting
Standards, the Group is required to take any movement in the
value of its investment property portfolio to profit and loss
account. At 30th June 2003, on the basis of an external
valuer's report, a net revaluation deficit of some US$952
million has been taken to profit and loss account, reflecting
a reduction in the value of the portfolio of 15% since 31st
December 2002. This has led to an overall reported loss for
the half year of US$872 million. With no short-term recovery
anticipated, the Directors have concluded that it would be
prudent to reduce the interim dividend for 2003 to USc2.00 per
share.
GROUP REVIEW
Commercial Property
The cyclical downturn in the office market in Hong Kong has
continued with weak demand for additional space. The market
remains active however, with a range of businesses concluding
that space consolidation and relocation decisions are best
implemented when the market is competitively priced. Hongkong
Land continued to win a significant proportion of these
relocating tenants in the first half of 2003, thereby reducing
committed vacancy to single figures by the end of June.
In addition to the tough economic environment, Hong Kong had
to deal with the outbreak of SARS. This led to a sharp,
though uneven, short-term reduction in turnover for many
retailers. Hongkong Land, however, remains confident in the
recovery of the high-end retail sector, and has launched the
first phase of its project to enhance the Landmark complex.
The Group's joint-venture development in Singapore, One
Raffles Quay, is under construction. Although the market is
presently weak, the prime location of this development has
been underscored by the Singapore authorities' announcement
that the new Business and Financial Centre of the city will be
focused in the Marina Boulevard area.
Residential Property
Despite the hiatus in the Beijing property market in the
second quarter, created by the outbreak of SARS, sales have
steadily risen at Hongkong Land's joint venture with the
Vantone Group, Central Park. Phase One is now substantially
sold and will be completed in mid-2004. The second phase of
the development is being planned.
In Hong Kong, construction work is continuing at Ivy on
Belcher's, the Group's small development in Western District.
Grosvenor Land, the Group's joint-venture property fund with
Grosvenor Estate, made no new acquisitions, and its existing
portfolio is almost fully let.
Infrastructure
As announced in February, the Group's strategy is to extract
value from existing infrastructure assets, while minimising
further investment. In Mainland China, the Group has agreed
to sell the majority of its stake in China Water Company,
reducing its interest to 2.4% and realising a profit of some
US$3 million. Central China Power has been liquidated and the
assets sold, creating a small write-back to the Group's
accounts. The future of China Infrastructure Group is under
review.
In Hong Kong, construction is continuing on the new container
terminal with completion expected in 2004, when Asia Container
Terminals, in which the Group has a 28.5% stake, will exchange
its interest in CT9 for two berths in CT8. The Tradeport
logistics terminal became operational in the first half and
has signed its first customers.
Finance
The Group's strategy of extending the maturity of its
borrowing facilities made progress with an issue of HK$1.5
billion 3-year fixed rate bond in April and the signing of a
HK$5 billion 7-year bank syndicated loan in July. The average
life of the Group's facilities has now been extended to over
five years.
OUTLOOK
In conclusion, the Chairman, Simon Keswick said, 'Further
weakness is expected in the Hong Kong property market in the
second half of the year as new developments continue to put
pressure on values and rents. Hongkong Land will remain
focused on providing superior levels of customer service and
property management so as to attract a greater share of
tenants and maintain a high level of occupancy.'
-----------------------------------------------------------------------------------------------------------------
Hongkong Land Holdings Limited
Consolidated Profit and Loss Account
-----------------------------------------------------------------------------------------------------------------
Prepared in accordance with
Prepared in accordance IFRS as modified by revaluation
with IFRS of leasehold properties*
Year ended (unaudited) (unaudited) Year ended
31st Six months ended Six months ended 31st
December 30th June 30th June December
2002 2002 2003 2003 2002 2002
US$m US$m US$m Note US$m US$m US$m
------------------------------------ ------------------------------------
396.6 190.6 183.8 2 Revenue 183.8 190.6 396.6
Recoverable and non-
(115.1) (48.9) (56.1) recoverable costs (39.3) (37.0) (84.2)
----------- ----------- ---------- ----------- ---------- ----------
281.5 141.7 127.7 Net income from properties 144.5 153.6 312.4
0.5 0.2 0.2 Other income 0.2 0.2 0.5
(29.6) (14.5) (14.8) Administrative and other expenses (14.8) (14.5) (29.6)
----------- ----------- ---------- ----------- ---------- ----------
252.4 127.4 113.1 129.9 139.3 283.3
Decrease in fair value of
- - - investment properties (951.8) (601.1) (987.7)
(97.7) (55.1) (36.0) 3 Asset impairments and disposals 1.7 2.2 (25.3)
----------- ----------- ---------- ----------- ---------- ----------
154.7 72.3 77.1 4 Operating profit/(loss) (820.2) (459.6) (729.7)
(64.8) (29.7) (33.1) Net financing charges (33.1) (29.7) (64.8)
Share of results of associates
(1.9) (0.8) (2.2) 5 and joint ventures (5.5) (2.7) (4.1)
----------- ----------- ---------- ----------- ---------- ----------
88.0 41.8 41.8 Profit/(loss) before tax (858.8) (492.0) (798.6)
(27.2) (14.0) (13.2) 6 Tax (13.3) (13.9) (26.9)
----------- ----------- ---------- ----------- ---------- ----------
60.8 27.8 28.6 Profit/(loss) after tax (872.1) (505.9) (825.5)
(0.1) (0.1) (0.1) Minority interests (0.1) (0.1) (0.1)
----------- ----------- ---------- ----------- ---------- ----------
60.7 27.7 28.5 Net profit/(loss) (872.2) (506.0) (825.6)
----------- ----------- ---------- ----------- ---------- ----------
-------------------------------------- ---------------------------------------
USc USc USc USc USc USc
-------------------------------------- ---------------------------------------
7 Earnings/(loss) per share
2.73 1.24 1.28 - basic (39.19) (22.73) (37.10)
7.17 3.72 2.97 - underlying 3.76 4.30 8.64
-------------------------------------- ---------------------------------------
* The basis of preparation of this supplementary financial information is set out in Note 1.
-----------------------------------------------------------------------------------------------------------------
Hongkong Land Holdings Limited
Consolidated Balance Sheet
-----------------------------------------------------------------------------------------------------------------
Prepared in accordance with
Prepared in accordance IFRS as modified by revaluation
with IFRS of leasehold properties*
At 31st (unaudited) (unaudited) At 31st
December At 30th June At 30th June December
2002 2002 2003 2003 2002 2002
US$m US$m US$m Note US$m US$m US$m
------------------------------------- -----------------------------------
Net operating assets
8 Tangible assets
911.4 921.0 909.8 Investment properties 5,309.4 6,626.7 6,249.8
4.3 4.6 3.9 Others 12.5 13.3 13.0
----------- ----------- ---------- ----------- ---------- ----------
915.7 925.6 913.7 5,321.9 6,640.0 6,262.8
666.7 682.6 624.9 Leasehold land payments - - -
227.3 395.1 250.5 Associates and joint ventures 266.2 414.3 246.3
3.7 18.3 3.7 Other investments 3.7 18.3 3.7
0.9 2.4 1.0 Deferred tax assets 1.0 2.4 0.9
9.4 9.4 9.1 Pension assets 9.1 9.4 9.4
----------- ----------- ---------- ----------- ---------- ----------
1,823.7 2,033.4 1,802.9 Non-current assets 5,601.9 7,084.4 6,523.1
48.1 45.7 46.5 Properties held for sale 46.5 45.7 48.1
240.9 78.7 201.4 Debtors, prepayments and others 201.4 78.7 240.9
Bank balances and other
550.6 460.8 560.9 liquid funds 560.9 460.8 550.6
----------- ----------- ---------- ----------- ---------- ----------
839.6 585.2 808.8 Current assets 808.8 585.2 839.6
----------- ----------- ---------- ----------- ---------- ----------
(219.1) (244.0) (190.4) Creditors and accruals (190.4) (244.0) (219.1)
(68.1) (82.3) (92.4) 9 Borrowings (92.4) (82.3) (68.1)
(26.9) (23.1) (23.3) Current tax liabilities (23.3) (23.1) (26.9)
----------- ----------- ---------- ----------- ---------- ----------
(314.1) (349.4) (306.1) Current liabilities (306.1) (349.4) (314.1)
525.5 235.8 502.7 Net current assets 502.7 235.8 525.5
(2,074.6) (1,854.2) (2,075.9) 9 Long-term borrowings (2,075.9) (1,854.2) (2,074.6)
(14.2) (13.6) (16.5) Deferred tax liabilities (18.5) (15.7) (16.2)
----------- ----------- ---------- ----------- ---------- ----------
260.4 401.4 213.2 4,010.2 5,450.3 4,957.8
----------- ----------- ---------- ----------- ---------- ----------
Capital employed
229.5 229.5 229.5 Share capital 229.5 229.5 229.5
108.3 249.3 60.9 Revenue and other reserves 3,857.6 5,297.9 4,805.4
(77.7) (77.7) (77.7) Own shares held (77.7) (77.7) (77.7)
----------- ----------- ---------- ----------- ---------- ----------
260.1 401.1 212.7 Shareholders' funds 4,009.4 5,449.7 4,957.2
0.3 0.3 0.5 Minority interests 0.8 0.6 0.6
----------- ----------- ---------- ----------- ---------- ----------
260.4 401.4 213.2 4,010.2 5,450.3 4,957.8
-------------------------------------- ---------------------------------------
US$ US$ US$ US$ US$ US$
-------------------------------------- ---------------------------------------
0.12 0.18 0.10 Net asset value per share 1.80 2.45 2.23
-------------------------------------- ---------------------------------------
* The basis of preparation of this supplementary financial information is set out in Note 1.
-----------------------------------------------------------------------------------------------------------------
Hongkong Land Holdings Limited
Consolidated Statement of Changes in Shareholders' Funds
-----------------------------------------------------------------------------------------------------------------
Prepared in accordance with
Prepared in accordance IFRS as modified by revaluation
with IFRS of leasehold properties*
Year ended (unaudited) (unaudited) Year ended
31st Six months ended Six months ended 31st
December 30th June 30th June December
2002 2002 2003 2003 2002 2002
US$m US$m US$m Note US$m US$m US$m
------------------------------------ ------------------------------------
465.4 465.4 260.1 At beginning of period 4,957.2 6,048.1 6,048.1
Net exchange translation
differences
25.8 23.8 (1.7) - amount arising in the period (1.4) 23.4 26.5
- transfer to consolidated profit
3.1 - - and loss account - - 3.1
Revaluation of other investments
14.2 14.9 (0.1) - fair value (losses)/gains (0.1) 14.9 14.2
- transfer to consolidated profit
(87.2) - - and loss account on disposal - - (87.2)
Cash flow hedges
(46.2) (20.2) 1.0 - fair value gains/(losses) 1.0 (20.2) (46.2)
- transfer to consolidated profit
24.6 11.9 13.9 and loss account 13.9 11.9 24.6
Net gains/(losses) not recognised
in consolidated profit and loss
(65.7) 30.4 13.1 account 13.4 30.0 (65.0)
60.7 27.7 28.5 Net profit/(loss) (872.2) (506.0) (825.6)
(200.3) (122.4) (89.0) 10 Dividends (89.0) (122.4) (200.3)
----------- ----------- ---------- ----------- ---------- ----------
260.1 401.1 212.7 At end of period 4,009.4 5,449.7 4,957.2
----------- ----------- ---------- ----------- ---------- ----------
* The basis of preparation of this supplementary financial information is set out in Note 1.
-----------------------------------------------------------------------------------------------------------------
Hongkong Land Holdings Limited
Consolidated Cash Flow Statement
-----------------------------------------------------------------------------------------------------------------
Prepared in accordance with
Prepared in accordance IFRS as modified by revaluation
with IFRS of leasehold properties*
Year ended (unaudited) (unaudited) Year ended
31st Six months ended Six months ended 31st
December 30th June 30th June December
2002 2002 2003 2003 2002 2002
US$m US$m US$m Note US$m US$m US$m
------------------------------------ ------------------------------------
Cash flows from operating activities
154.7 72.3 77.1 Operating profit/(loss) (820.2) (459.6) (729.7)
32.1 14.5 17.4 Depreciation and amortisation 0.6 2.6 1.2
Decrease in fair value of
- - - investment properties 951.8 601.1 987.7
97.7 55.1 36.0 Asset impairments and disposals (1.7) (2.2) 25.3
(Increase)/decrease in debtors,
(22.0) 0.8 (13.0) prepayments and others (13.0) 0.8 (22.0)
Decrease in creditors and
(0.9) (6.0) (3.6) accruals (3.6) (6.0) (0.9)
29.5 12.8 10.2 Interest received 10.2 12.8 29.5
Interest and other
(88.8) (43.9) (42.5) financing charges paid (42.5) (43.9) (88.8)
(11.5) (4.9) (14.4) Tax paid (14.4) (4.9) (11.5)
2.0 0.8 0.5 Dividends received 0.5 0.8 2.0
192.8 101.5 67.7 67.7 101.5 192.8
Cash flows from investing
activities
(21.5) (8.9) (10.3) Major renovations expenditure (10.3) (8.9) (21.5)
(102.7) (72.1) (15.6) Developments capital expenditure (15.6) (72.1) (102.7)
Investments in and loans
(20.3) (1.7) (27.0) to joint ventures (27.0) (1.7) (20.3)
(1.3) - - Purchase of other investments - - (1.3)
Disposal of associates,joint
4.0 - 79.6 ventures and other investments 79.6 - 4.0
(141.8) (82.7) 26.7 26.7 (82.7) (141.8)
Cash flows from financing
activities
- - 190.5 Net proceeds from issue of notes 190.5 - -
(618.0) (391.0) (262.9) Repayment of secured bank loans (262.9) (391.0) (618.0)
751.9 391.0 91.2 Drawdown of unsecured bank loans 91.2 391.0 751.9
(5.8) (5.7) (12.8) Repayment of unsecured bank loans (12.8) (5.7) (5.8)
(199.3) (121.5) (88.5) Dividends paid by the Company (88.5) (121.5) (199.3)
(71.2) (127.2) (82.5) (82.5) (127.2) (71.2)
0.6 0.2 (0.3) Effect of exchange rate changes (0.3) 0.2 0.6
----------- ----------- ---------- ----------- ---------- ----------
Net increase/(decrease) in cash and
(19.6) (108.2) 11.6 cash equivalents 11.6 (108.2) (19.6)
Cash and cash equivalents at
566.2 566.2 546.6 beginning of period 546.6 566.2 566.2
----------- ----------- ---------- ----------- ---------- ----------
Cash and cash equivalents at
546.6 458.0 558.2 end of period 558.2 458.0 546.6
----------- ----------- ---------- ----------- ---------- ----------
-------------------------------------- ---------------------------------------
USc USc USc USc USc USc
-------------------------------------- ---------------------------------------
7.70 4.16 2.58 11 Cash flow per share 2.58 4.16 7.70
-------------------------------------- ---------------------------------------
* The basis of preparation of this supplementary financial information is set out in Note 1.
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