Core Hong Kong property market stabilises
Occupancy remains high at over 94%
Negative rent reversions impact income
Good progress on property developments
Results (unaudited) Six months ended 30th June
US$m
Operating profit
1999 170
1998 228
Change% -25
Profit after taxation and minority interests
1999 149
1998 169
Change% -12
Profit after taxation and minority interests
excluding exceptional items
1999 149
1998 199
Change% -25
US¢
Earnings per share
1999 5.91
1998 6.68
Change% -12
Earnings per share excluding exceptional items
1999 5.91
1998 7.87
Change% -25
Interim dividend per share
1999 3.50
1998 3.50
Change% -
"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."