AGP.L Regulatory News (AGP)

21 August 2015

Asian Growth Properties Limited

Immediate Release

Results for the period ended 30 June 2015

Asian Growth Properties Limited (the "Company") (AIM Stock Code: AGP), the Hong Kong based China property development and investment company, announces its unaudited condensed consolidated results for the period ended 30 June 2015 as follows:

Financial Highlights

n Profit attributable to the Company's shareholders of HK$274.7 million (£22.6 million) (2014: HK$297.5 million (£22.4 million))

n Profit attributable to the Company's shareholders (excluding revaluation surplus net of deferred tax) was HK$39.2 million (£3.2 million) (2014: HK$65.1 million (£4.9 million))

n Earnings per share for profit attributable to the Company's shareholders of HK31.0 cents (2.6 pence) (2014: HK33.6 cents (2.5 pence))

n Net asset value per share attributable to the Company's shareholders as at 30 June 2015 of HK$15.2 (125.3 pence) (31 December 2014: HK$14.8 (122.7 pence))

n Geographical location of the Group's property assets were as follows:

n Gearing ratio of 9.1% (31 December 2014: 9.3%)

Operational Highlights

n Stable gross rental income generated from Dah Sing Financial Centre in Hong Kong and its occupancy rate remains high.

n The hotel operation results of Crowne Plaza Hong Kong Causeway Bay were in line with the weaker hotel business environment starting especially in the second quarter.

n Major mixed use development projects in Chengdu and Kaifeng, Mainland China are progressing. Site formation works for Phase I of Chengdu project have been completed and superstructure works for Phase I of Kaifeng project are in progress. 

Notes:

1. Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting periods. The relevant exchange rates adopted are stated as follows:

2. For the Company's shareholders' information, the exchange rate on 20 August 2015 was £1 = HK$12.1272

Miscellaneous

The results included in this announcement are extracted from the unaudited condensed consolidated financial statements of the Company for the six months ended 30 June 2015, which have been approved by the Board of Directors on 21 August 2015.

The 2015 Interim Report is expected to be posted to the Company's shareholders and holders of depositary interests in late September 2015.

For further information, please contact:

Attached:-

1. Chairman's Review;

2. Executive Directors' Review;

3. Condensed Consolidated Statement of Profit or Loss;

4. Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income;

5. Condensed Consolidated Statement of Financial Position;

6. Condensed Consolidated Statement of Changes in Equity;

7. Condensed Consolidated Statement of Cash Flows; and

8. Notes to the Condensed Consolidated Financial Statements.

This announcement can also be viewed on the Company's website at:

http://www.asiangrowth.com/html/eng/news.asp

CHAIRMAN'S REVIEW

I am pleased to present the unaudited condensed consolidated financial results of Asian Growth Properties Limited ("AGP" or the "Company", together with its subsidiaries, the "Group") for the first six months of 2015 to the shareholders of the Company.

Results

AGP reported a profit attributable to the Company's shareholders of HK$274.7 million (£22.6 million) for the six months ended 30 June 2015 (2014: HK$297.5 million (£22.4 million)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$235.5 million (£19.4 million) (2014: HK$232.4 million (£17.5 million)). By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$39.2 million (£3.2 million) (2014: HK$65.1 million (£4.9 million)). 

As at 30 June 2015, the Group's equity attributable to the Company's shareholders amounted to HK$13,429.2 million (£1,106.6 million) (31 December 2014: HK$13,148.1 million (£1,090.0 million)). The net asset value per share attributable to the Company's shareholders as at 30 June 2015 was HK$15.2 (125.3 pence) as compared with HK$14.8 (122.7 pence) as at 31 December 2014.

Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting periods.

Operations 

During the period ended 30 June 2015, the Group has continued the development of various property projects in Hong Kong and Mainland China.

The rental income from investment properties situated in both Hong Kong and Mainland China continue to provide stable returns to the Group. Crowne Plaza Hong Kong Causeway Bay's performance dropped significantly in the second quarter which was in line with the weaker hotel business environment in Hong Kong arising from, among other things, the tense relationship between Hong Kong residents and China visitors during the period and the adjustment of multiple-entry endorsements for Shenzhen residents under the Individual Visit Scheme. Nevertheless, the hotel was able to achieve a relatively better performance among its primary competitors.

For details of the Group's operations, please refer to the Executive Directors' Review.

Outlook

In the year ahead, the global economy remains uncertain amid volatility in the global financial markets. While the US economy continued its recovery trend, the economic growth of the Eurozone and Japan were below the desired level. The timing and quantum of the interest rate rise of the US remain uncertain and are affected by both the US's domestic economic performance and the volatility of global economic conditions.

China's economy is growing at a moderate but steady pace. The government of Mainland China has taken various measures in order to sustain the growth. The government in the past few months has relaxed certain tax regulations and cut down payments for second-home buyers from 60% to 40%. The government's policy, which included four cuts to benchmark interest rates since November 2014, also helped boost property sales and improve the sentiment of the residential real estate market.

Interim Dividend

The Board does not propose the payment of an interim dividend for the period ended 30 June 2015 (2014: Nil).

Acknowledgement

The Board would like to take this opportunity to thank the executive and management team for the execution of the Board's strategy and their ongoing support.

Richard Prickett

Non-Executive Chairman

Hong Kong, 21 August 2015

EXECUTIVE DIRECTORS' REVIEW

FINANCIAL SUMMARY

Turnover for the period ended 30 June 2015 amounted to HK$308.6 million (£25.4 million) (2014: HK$327.3 million (£24.6 million)). The turnover was principally attributable to the recognition of rental income from investment properties and revenue from hotel operation.

Profit attributable to the Company's shareholders for the period amounted to HK$274.7 million (£22.6 million) (2014: HK$297.5 million (£22.4 million)), equivalent to a basic earnings per share of HK31.0 cents (2.6 pence) (2014: HK33.6 cents (2.5 pence)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$235.5 million (£19.4 million) (2014: HK$232.4 million (£17.5 million)). By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$39.2 million (£3.2 million) (2014: HK$65.1 million (£4.9 million)), equivalent to HK4.4 cents (0.4 pence) (2014: HK7.3 cents (0.5 pence)) per share. 

As at 30 June 2015, the Group's equity attributable to the Company's shareholders amounted to HK$13,429.2 million (£1,106.6 million) (31 December 2014: HK$13,148.1 million (£1,090.0 million)). The net asset value per share attributable to the Company's shareholders as at 30 June 2015 was HK$15.2 (125.3 pence) as compared with HK$14.8 (122.7 pence) as at 31 December 2014.

For the Company's shareholders' information, figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting periods and the relevant exchange rates adopted are stated as follows:

For 30 June 2015: £1 = HK$12.1357

For 31 December 2014: £1 = HK$12.0627

For 30 June 2014: £1 = HK$13.2822

BUSINESS REVIEW

Property Investment and Development

The Group continues to focus on its development and investment projects in Hong Kong and Mainland China. It is the Group's approach to review and optimise the project portfolios from time to time. The Group's core projects located in Hong Kong and Mainland China are listed below.

Hong Kong

The office leasing market was stable during the period. With several tenancies of Dah Sing Financial Centre, a 39-storey commercial building, being renewed at market rates, rental income received during the period increased. The occupancy rate of Dah Sing Financial Centre remains at a high level of approximately 93% as at 30 June 2015 (31 December 2014: 94%).

The negotiation of the land premium with the Government for the development project at Fo Tan remains in progress. This development project has a site area of approximately 20,000 square metres and envisages, among other facilities, residential units, car parks, educational facilities and a bus terminus. The foundation work of the project has been completed and advanced pile cap is in progress.

Mainland China

Chengdu, Sichuan Province

During the period under review, the occupancy rate for the two 30-storey office towers of Plaza Central remained at a high level and its retail podium with a gross floor area of about 29,000 square metres is fully let principally to Chengdu New World Department Store on a long-term lease. As at 30 June 2015, the aggregate occupancy rate for the two office towers and the retail podium was approximately 86% (31 December 2014: 89%). Leasing activities for the remaining areas of Plaza Central continue.

The shopping arcade of New Century Plaza with a gross floor area of about 16,300 square metres was fully let to a hotel on a long-term lease in late 2014.

The master layout plan of the Longquan project (known as "Chengdu Nova City"), which has a site area of 506,000 square metres, was approved by the local government in January 2014. Preliminary site works and site formation works for Phase I of the project have been completed. Superstructure works for Phase I are now scheduled to commence in the third quarter of 2015.

Kaifeng, Henan Province

The Kaifeng project, known as "Kaifeng Nova City", is situated in Zheng-Kai District, a new town in Kaifeng and envisages a shopping mall, premium offices, exhibition hall, hotel, serviced apartments and residential towers. This project has a site area of 735,000 square metres and for providing a better living environment, the gross floor area of the development will vary from 2,000,000 to 2,500,000 square metres only. The master layout plan has been approved by the local government and foundation work for Phase I of the residential has been completed. The superstructure works for Phase IB of the residential are in progress. The superstructure works and landscape works of Phase IA of the residential are scheduled to complete in the fourth quarter of 2015. Pre-sale consent for Phase IA was issued and 50% of the residential units was launched to the market. VIP sales program is being conducted.

Guangzhou, Guangdong Province

As at 30 June 2015, the occupancy rate of the 14-storey office tower of Westmin Plaza Phase II of about 16,100 square metres was 98% with more than one-third of the total office space being leased to AIA (31 December 2014: 100%). Leasing activities for the 3-storey shopping arcade of Westmin Plaza Phase II with a total gross floor area of about 26,400 square metres are in progress.

Huangshan, Anhui Province

The project in Huangshan has a site area of about 337,000 square metres comprising of development land of about 117,000 square metres and landscape land of 220,000 square metres. The master layout plan for the development of the project comprising a hotel, serviced apartments and resort villas in the integrated resort site has been approved by the local government and site formation work for Phase I of the project has been completed. Phase I substructure works are in progress.

Chi Shan, Nanjing, Jiangsu Province

The Group has established two 51%-owned joint venture companies to participate in the tenant relocation arrangements and excavation and infrastructure works on certain pieces of land in Chi Shan. The Group intends to acquire such lands through land auctions by different stages.

Hotel Operation

Crowne Plaza Hong Kong Causeway Bay is a 29-storey five-star hotel comprising 263 guest rooms with ancillary facilities and is managed by the InterContinental Hotels Group. Its performance was in line with the weaker hotel business environment starting especially in the second quarter, however, the hotel will strive to gain market share in the challenging market situation.

WORKING CAPITAL AND LOAN FACILITIES

As at 30 June 2015, the Group's total cash balance was HK$2,581.2 million (£212.7 million) (31 December 2014: HK$2,646.8 million (£219.4 million)) and unutilised facilities were HK$830.0 million (£68.4 million) (31 December 2014: HK$845.0 million (£70.1 million)).

The gearing ratio as at 30 June 2015, calculated on the basis of net interest bearing debts minus cash and restricted and pledged deposits as a percentage of total property assets, was 9.1% (31 December 2014: 9.3%). 

As at 30 June 2015, the maturity of the Group's outstanding borrowings was as follows:

Pledge of Assets

For the Company's subsidiaries operating in Hong Kong and Mainland China, the total bank loans drawn as at 30 June 2015 amounted to HK$3,981.1 million (31 December 2014: HK$4,042.1 million) which comprised secured bank loans of HK$3,881.1 million (31 December 2014: HK$3,942.1 million) and unsecured bank loans of HK$100.0 million (31 December 2014: HK$100.0 million). The secured bank loans were secured by properties valued at HK$12,322.8 million (31 December 2014: HK$12,086.4 million) and note receivables of HK$54.3 million (31 December 2014: HK$54.3 million). 

Treasury Policies

The Group adheres to prudent treasury policies. As at 30 June 2015, all of the Group's borrowings were raised through its wholly-owned or substantially controlled subsidiaries on a non-recourse basis.

International Financial Reporting Standards ("IFRS")

The Group has adopted IFRS and the unaudited condensed consolidated financial statements accompanying this Review have been prepared in accordance with IFRS.

OUTLOOK

In Mainland China, GDP growth of 7.0% in the first half year of 2015 was reported. Mainland China home prices rose for a second month in June 2015, on a monthly basis, indicating that government's efforts to boost the property market have started to gain traction. Overall average new home prices increased 0.56% in June 2015 versus May 2015, which is higher than the 0.45% increase in May 2015, the first monthly increase since April 2014. Such second month of increasing prices is a sign of bottoming out for the property market.

The Hong Kong economy is also expected to continue to grow moderately in 2015, given rising household income from favourable employment conditions and steady growth in domestic consumption. The Grade-A office leasing market remained positive with continual expansion demand coming from the Mainland financial institutions, fund and asset management companies. In residential markets, housing prices in Hong Kong reached a record high in May 2015 with sales volume continuing to rebound, especially in the primary market, despite the government's series of property market cooling measures. Having said that, we remain cautious that Hong Kong's property market could be facing a downturn in the coming years, given the government's measures to an increase in housing supply and uncertainties in light of a potential rise in interest rates.

Negotiation of the land premium of our Fo Tan project is still in progress. This is a lengthy process, and we are awaiting a revised land premium to be offered from the Hong Kong Lands Department. The overall hotel industry business in Hong Kong was soft in the first half of 2015 as a result of, among other things, the tense relationship between Hong Kong residents and China visitors during the period and the adjustment of multiple-entry endorsements for Shenzhen residents under the Individual Visit Scheme. Crowne Plaza Hong Kong Causeway Bay's performance dropped significantly in the second quarter which was in line with the weaker hotel business environment in Hong Kong. Nevertheless, the hotel was able to achieve a relatively better performance among its primary competitors. For the second half of 2015, the general hotel market is still expected to be challenging, but the hotel is striving to gain market share in this challenging market situation.

In respect to our development projects in Mainland China, Phase IA of Kaifeng project with 444 residential units is still under construction, of which 128 units were sold in the pre-sale. The sales of these units will be recognized as revenue upon obtaining an occupation permit which is expected for the end of this year. In Chengdu, the master layout plan of Longquan project was approved and superstructure works are being planned to commence in the third quarter of 2015.

On behalf of the Executive Directors

Lu Wing Chi

Executive Director

Hong Kong, 21 August 2015

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 June 2015

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 June 2015

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 June 2015

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - continued

AT 30 June 2015

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2015

Other reserves comprise (i) a discount on acquisition/assumption of certain assets and liabilities from the intermediate holding company, S E A Holdings Limited ("SEA") and the excess of the consideration over the market closing price of the shares issued for the acquisition. The amounts attributable to those assets and liabilities derecognised in subsequent years will be recognised in profit or loss; and (ii) the excess of the consideration paid for acquisition of an additional interest in a subsidiary from a non-controlling shareholder over the carrying amount of the non-controlling interests acquired.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 June 2015

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 June 2015

1. GENERAL

The Company is a public company incorporated in the British Virgin Islands with limited liability and its shares are admitted for trading on the AIM Market of London Stock Exchange plc.

The Company acts as an investment holding company. The principal subsidiaries of the Company are engaged in property investment, property development and the operation of a hotel.

2. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting" issued by the International Accounting Standards Board (the "IASB").

3. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for investment properties, which are measured at fair values, as appropriate.

Except as described below, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2015 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014.

In the current interim period, the Group has applied, for the first time, the following amendments to International Financial Reporting Standards ("IFRSs") issued by the IASB that are relevant for the preparation of the Group's condensed consolidated financial statements.

The application of the above amendments to IFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements.

4. SEGMENT INFORMATION

Information reported to the executive directors of the Company, being the chief operating decision makers, for the purposes of resource allocation and assessment of segment performance is mainly focused on the property development, property investment and hotel operation. No operating segments identified by the chief operating decision markers have been aggregated in arriving at the reportable segments of the Group.

Property investment and development activities are in Hong Kong and the People's Republic of China (the "PRC") whereas the hotel operation is in Hong Kong.

The following is an analysis of the Group's revenue and results by reportable segment:

Six months ended 30 June 2015

Six months ended 30 June 2014

4. SEGMENT INFORMATION - continued

Segment profit of the property investment division for the six months ended 30 June 2015 included an increase in fair value of investment properties of HK$238,001,000 (2014: HK$240,840,000).

The Group does not allocate interest income, corporate income less expenses and finance costs to individual reportable segment profit or loss for the purposes of resource allocation and performance assessment by the chief operating decision makers.

The accounting policies adopted in preparing the reportable segment information are the same as the Group's accounting policies.

No segment assets and liabilities are presented as the information is not reportable to the chief operating decision makers in the resource allocation and assessment of performance.

5. PROPERTY AND RELATED COSTS

6. OTHER EXPENSES

7. FINANCE COSTS

8. PROFIT BEFORE TAXATION

9. INCOME TAX EXPENSE

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for each of the periods.

PRC Enterprise Income Tax is calculated at 25% of the estimated assessable profits for each of the periods.

10. EARNINGS PER SHARE

The calculation of the basic earnings per share attributable to the Company's shareholders is based on the following data:

No diluted earnings per share is presented as the Company did not have any potential ordinary shares in issue during both periods or at the end of each reporting period.

10. EARNINGS PER SHARE - continued

For the purpose of assessing the performance of the Group, the directors of the Company are of the view that the profit for the period should be adjusted for the fair value changes on investment properties recognised in profit or loss and the related deferred taxation in arriving at the "adjusted profit attributable to the Company's shareholders". A reconciliation of the adjusted earnings is as follows:

The denominators used in the calculation of adjusted earnings per share are the same as those detailed above.

11. DIVIDENDS

No dividends were paid, declared or proposed during the reported period. The directors of the Company do not recommend the payment of any interim dividend.

12. INVESTMENT PROPERTIES

In estimating the fair value of investment properties, the Group uses market-observable data to the extent it is available. The Group engages third party qualified valuers to perform the valuation of the Group's investment properties. At the end of each reporting period, the Group works closely with the qualified external valuers to establish and determine the appropriate valuation techniques and inputs to the model.

The fair values of investment properties as at 30 June 2015 and 31 December 2014 were arrived at on the basis of valuations carried out at those dates by Savills Valuation and Professional Services Limited ("Savills"), a firm of Chartered Surveyors not connected to the Group, recognised by The Hong Kong Institute of Surveyors, that has appropriate qualifications and recent experience in the valuation of properties in the relevant locations.

12. INVESTMENT PROPERTIES - continued

The valuation, which conforms to the appropriate sections of both the current Practice Statements, and United Kingdom Practices Statements contained in the RICS Valuation Standards published by the Royal Institution of Chartered Surveyors in the United Kingdom (the "Red Book"), was arrived at by reference to market evidence of transaction prices or by capitalisation of future rental which is estimated by reference to comparable rental as available in the relevant markets. In the valuation, the market rentals of all lettable units as well as those of similar properties are made by reference to the rentals achieved by the Group in the lettable units as well as those of similar properties in the neighbourhood. The capitalisation rate adopted is by reference to the yield rates observed by the valuer for similar properties in the locality and adjusted for the valuer's knowledge of factors specific to the respective properties.

The resulting increase in the fair value of investment properties of HK$238,001,000 (1.1.2014 - 30.6.2014: HK$240,840,000) has been recognised directly in the condensed consolidated statement of profit or loss.

13. PROPERTIES FOR DEVELOPMENT

The carrying amount represents the Group's interest in certain pieces of land located in the PRC to be held for future development.

The carrying amount is amortised on a straight-line basis over the lease terms ranging from 40 to 70 years.

14. OTHER RECEIVABLES

At 30 June 2015, the Group had incurred a total amount of RMB321,060,000 (31.12.2014: RMB321,060,000) equivalent to HK$407,136,000 (31.12.2014: HK$406,976,000) for the tenant relocation arrangements, excavation and infrastructure work on certain pieces of land in Nanjing, the PRC. The amount, together with further costs to complete the work, are wholly refundable from the relevant PRC local government either by deduction against the consideration payable if the Group is successful in bidding for the land or out of the proceeds received by the relevant PRC local government from another successful tenderer. The directors of the Company estimated that, based on the Group's development plan, the time schedule for auction of the relevant land will be initiated before the end of 2016 and by then the full amount will be recovered.

The balance of HK$391,327,000 (31.12.2014: HK$391,173,000) represents the Hong Kong dollar equivalent of the present value of the original amount of RMB321,060,000 (31.12.2014: RMB321,060,000) expected to be recovered in 2016 discounted at the rate of 2% per annum.

15. TRADE RECEIVABLES, DEPOSITS AND PREPAYMENTS