"Although the pace of recovery in rents in Hong Kong's Central district has moderated, the lack of new supply of Grade A space over the year ahead will continue to set a positive tone to the market. Rental reversions are expected to turn positive in the middle of the year."
Simon Keswick, Chairman.
Results Year ended 31st December
2000 1999 Change
US$m US$m %
Operating profit
408 319 +28
Net profit
355 267 +33
Underlying profit
230 265 -13
US¢ US¢ %
Earnings per share
14.08 10.59 +33
Underlying earnings per share
9.11 10.48 -13
Dividends per share
9.00 9.00 -
US$ US$ %
Net asset value per share
2.91 2.07 +41OVERVIEW
After more than two years of decline, rentals in Hong Kong's Central business district recovered strongly in 2000, although the pace of that recovery moderated in the fourth quarter. Capital values also rebounded, though they have yet fully to reflect the recovery in rentals. Singapore saw a more moderate strengthening in commercial property values as rental levels rose. Other markets where Hongkong Land is invested were mixed.
PERFORMANCE
Hongkong Land Holdings Limited today announced that the net profit for the year ended 31st December 2000 was US$355 million, 33% higher than 1999. The major factor underlying this increase was a US$133 million write-back of provisions taken in 1998 against the value of development properties. Excluding these items, underlying earnings fell by 13%, to US$230 million, as negative rental reversions continued to reduce property income in the Hong Kong Central portfolio. Earnings per share rose by 33% to US¢14.08. Excluding asset impairment reversals and disposals, earnings per share fell 13% to US¢9.11 compared with US¢10.48 in 1999.
The Group's investment property portfolio was valued by independent professional valuers at 31st December 2000, as is the practice every year. This led to a net valuation surplus of US$1,766 million, which has been credited to reserves. Shareholders' funds accordingly rose strongly, up by 33% on the end of 1999 to US$6,947 million. Net asset value per share increased by 41% to US$2.91 per share.
In November 2000, the Company invited shareholders to tender shares to the Company at prices up to US$2.20 per share. Some 132 million of shares were tendered and cancelled at a cost of US$292 million. As a consequence of the reduction in the number of shares outstanding, net asset value per share at 31st December 2000 improved by 1% or US¢4 per share.
The Directors recommend a final dividend of US¢5.50 per share which, together with the interim dividend of US¢3.50 per share, gives a total annual dividend of US¢9.00 per share, unchanged from 1999.
GROUP REVIEW
Turning to the operations, the Chairman, Simon Keswick, said that the advantages of the Group's focus on prime Central Business District locations were demonstrated in 2000 as those sectors of the office markets in Hong Kong and Singapore recovered more quickly than decentralised locations. This has been reflected in substantial increases in the values of its investment properties, and in increases in occupancy. The Group's office occupancy in Hong Kong and Singapore rose to 98%, while its retail portfolio is effectively fully let. The Group's key Central portfolio in Hong Kong continues to benefit from refurbishment spending, both on the visible face of public areas and on the mechanical & electrical and IT infrastructure. Central will be further enhanced in 2002 by the completion of 11 Chater Road. In the residential sector, the Group will commence the redevelopment of its site in Hong Kong's Western district late in 2001.
The Group's infrastructure portfolio has also developed. It has taken a 24% stake in China Infrastructure Group, a port business focused on Mainland China, and, since the year closed, a consortium in which Hongkong Land has a 30% stake was awarded the right to build the logistics terminal at Hong Kong's Chek Lap Kok airport.
OUTLOOK
In conclusion, Simon Keswick said, "Although the pace of recovery in rents in Hong Kong's Central district has moderated, the lack of new supply of Grade A space over the year ahead will continue to set a positive tone to the market. Rental reversions are expected to turn positive in the middle of the year.
"The Group has confidence in the future development of Asia's financial centres and will continue to invest and develop business partnerships in these key locations, creating value for shareholders as these centres grow."