AGP.L Regulatory News (AGP)

21 August 2013

Asian Growth Properties Limited

Immediate Release

Results for the six months ended 30 June 2013

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 six months ended 30 June 2013 as follows:

Financial Highlights

n Profit attributable to the Company's shareholders of HK$277.3 million (£23.5 million) (2012: HK$367.4 million (£30.4 million))

n Profit attributable to the Company's shareholders (excluding revaluation surplus net of deferred tax) was HK$125.3 million (£10.6 million) (2012: HK$8.2 million (£0.7 million)) 

n Earnings per share for profit attributable to the Company's shareholders of HK31.3 cents (2.6 pence) (2012: HK41.4 cents (3.4 pence))

n Net asset value per share attributable to the Company's shareholders as at 30 June 2013 of HK$13.8 (116.8 pence) (31 December 2012: HK$13.4 (106.9 pence))

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

n Gearing ratio of 9.0% (31 December 2012: 9.9%)

Operational Highlights

n Increased 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 satisfactory.

n Major mixed use development projects in Chengdu and Kaifeng, Mainland China are progressing. Site formation works for Phase I of Chengdu project and superstructure works for Phase I of Kaifeng project are planned to commence in the third quarter of 2013.

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 Shareholders' information, the exchange rate on 20 August 2013 was £1 = HK$12.1505

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 2013, which have been approved by the Board of Directors on 21 August 2013.

The 2013 Interim Report is expected to be posted to shareholders and holders of depositary interests in late September 2013.

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.

CHAIRMAN'S REVIEW

I am pleased to present the unaudited consolidated financial results of Asian Growth Properties Limited ("AGP" or the "Company", together with its subsidiaries, the "Group") for the first six months of 2013 to the shareholders of the Company.

Results

AGP reported a profit attributable to the Company's shareholders of HK$277.3 million (£23.5 million) for the six months ended 30 June 2013 (2012: HK$367.4 million (£30.4 million)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$152.0 million (£12.9 million) (2012: HK$359.2 million (£29.7 million)). By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$125.3 million (£10.6 million) (2012: HK$8.2 million (£0.7 million)). 

As at 30 June 2013, the Group's equity attributable to the Company's shareholders amounted to HK$12,206.2 million (£1,033.1 million), representing an increase of HK$344.8 million (£86.6 million) over 31 December 2012. The net asset value per share as at 30 June 2013 was HK$13.8 (116.8 pence) as compared with HK$13.4 (106.9 pence) as at 31 December 2012.

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 

For the first half of 2013, 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. Turnover for the period has included the sale of the commercial podium, all public car parking spaces and one residential unit of The Forest Hills. Crowne Plaza Hong Kong Causeway Bay has also performed satisfactorily with improvements in room rate compared to the prior year.

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

Outlook

Market sentiment remains very unclear and is affected by the global moves of central banks and governments' intervention. In the past month, the Federal Reserve has given mixed signals about the timing of tapering quantitative easing. The uncertainties of U.S. economic growth and Eurozone debt levels remain one of the major risks.

Mainland China continued to experience strong economic growth with GDP growth rate maintained at 7.5% in the second quarter of 2013. In June, China's central bank has been forced to intervene in the inter-bank market in order to ensure enough liquidity in the market. However, the Central Government has introduced further measures to control investment and speculative activities over the property market which make the market more difficult to forecast. The imposition of additional stamp duties in Hong Kong has quietened down the property market in term of transaction volume but there is no signal of property prices going down as the supply of new residential units in the foreseeable future is limited.

During the period under review, the Group has disposed of most of the remaining properties held for sale and believes that our development projects will start to create significant profits over the coming few years. The Group continues to examine ways and means to enhance shareholders' value but in the present circumstances it is believed the conservative approach on both the debt and development phasing is the right decision.

Interim Dividend

The Board does not propose the payment of an interim dividend for the six months ended 30 June 2013 (2012: 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

England, 21 August 2013

EXECUTIVE DIRECTORS' REVIEW

FINANCIAL SUMMARY

Turnover for the six months ended 30 June 2013 amounted to HK$485.7 million (£41.1 million) (2012: HK$291.9 million (£24.2 million)). The turnover was principally attributable to the recognition of rental income from investment properties, revenue from hotel operation and the sales of commercial podium and all public car parking spaces of The Forest Hills.

Profit attributable to the Company's shareholders for the period amounted to HK$277.3 million (£23.5 million) (2012: HK$367.4 million (£30.4 million)), equivalent to a basic earnings per share of HK31.3 cents (2.6 pence) (2012: HK41.4 cents (3.4 pence)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$152.0 million (£12.9 million) (2012: HK$359.2 million (£29.7 million)). By excluding the effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$125.3 million (£10.6 million) (2012: HK$8.2 million (£0.7 million)), equivalent to HK14.1 cents (1.2 pence) (2012: HK0.9 cents (0.1 pence)) per share. 

As at 30 June 2013, the Group's equity attributable to the Company's shareholders amounted to HK$12,206.2 million (£1,033.1 million) (31 December 2012: HK$11,861.4 million (£946.5 million)). The net asset value per share attributable to the Company's shareholders as at 30 June 2013 was HK$13.8 (116.8 pence) as compared with HK$13.4 (106.9 pence) as at 31 December 2012.

For 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 2013: £1 = HK$11.8152

For 31 December 2012: £1 = HK$12.5323; and

For 30 June 2012: £1 = HK$12.0836

BUSINESS REVIEW

Property Investment and Development

The Group continues to focus on 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. During the period, the Group has completed the disposal of the entire interest in the 50%-owned Leiyang project to the joint venture partner in May 2013. 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 97% as at 30 June 2013.

The Group has sold the commercial podium, all public car parking spaces and all the remaining residential units of The Forest Hills for the period under review. Four of the sold units of The Forest Hills will be completed in the third quarter of this year and the sale of the residents' car parking spaces arecontinuing.

The proposed development project at Fo Tan envisages, among other facilities, residential units, car parks, educational facilities and a bus terminus and has a site area of approximately 20,000 square metres. The foundation work has been completed and the building plans were approved by the Buildings Department.

Mainland China

Chengdu, Sichuan Province

During the period, 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 2013, the aggregate occupancy rate for the two office towers and the retail podium was approximately 93%. 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 is fully let to a furniture retailer on a medium-term lease.

The Group submitted to the local government the master layout plan of the Longquan project, which has a site area of 506,000 square metres, in December 2012. Preliminary site works of the project have been completed and site formation works for Phase I are planned to commence in the third quarter of 2013.

Kaifeng, Henan Province

The project in Kaifeng, known as "Nova City", has a site area of 735,000 square metres and it is to be developed into an integrated complex in Zheng-Kai District, a new town in Kaifeng. In order to provide a better living environment with lower density, the gross floor area of the proposed development will vary from 2,000,000 to 2,500,000 square metres and envisage shopping mall, premium offices, exhibition hall, hotel, serviced apartments and residential towers. The master layout plan was approved by the local government in April 2013. Foundation work for Phase I of the residential component has been completed and the superstructure works are scheduled to commence in the third quarter of 2013.

Guangzhou, Guangdong Province

As at 30 June 2013, the occupancy rate of the 14-storey office tower of Westmin Plaza Phase II of about 16,100 square metres was approximately 97% with more than one-third of the total office space being leased to AIA. 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. An overall development plan for a hotel, serviced apartments and resort villas in the integrated resort site has been prepared and conceptual design has been completed.

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. It has achieved satisfactory occupancy and room rates for the period under review.

WORKING CAPITAL AND LOAN FACILITIES

As at 30 June 2013, the Group's total cash balance was HK$1,860.7 million (£157.5 million) (31 December 2012: HK$1,389.3 million (£110.9 million)) and unutilised facilities were HK$763.0 million (£64.6 million) (31 December 2012: HK$910.0 million (£72.6 million)).

The gearing ratio as at 30 June 2013, calculated on the basis of net interest bearing debts minus cash and restricted and pledged deposits as a percentage of total property assets, was 9.0% (31 December 2012: 9.9%). 

As at 30 June 2013, 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 2013 amounted to HK$3,099.3 million (31 December 2012: HK$2,725.1 million) which comprise secured bank loans of HK$3,069.3 million (31 December 2012: HK$2,725.1) and unsecured bank loans of HK$30.0 million (31 December 2012: Nil). The secured bank loans were secured by properties valued at HK$11,161.7 million (31 December 2012: secured by properties valued at HK$10,872.8 million and fixed deposits of HK$58.8 million). 

Treasury Policies

The Group adheres to prudent treasury policies. As at 30 June 2013, 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

The Mainland China property market continues to grow with the 100-cities index recording thirteen months growth since June 2012. However, the growth momentum seems to be slowing down. In Hong Kong, the sales of first-hand properties became much quieter following the new Residential Properties (First-hand Sales) Ordinance in April this year. Developers are slowing down their sale plans to assess the means of compliance with the new law.

Despite the uncertainty of the economic environment, the Group continues to progress well. Occupancy of our investment property in Hong Kong remains high and the hotel continues to achieve high occupancy levels. The investment properties in the Mainland China have also achieved high occupancy levels and in particular in Chengdu where there is an oversupply of offices but the Group has managed to retain a large number of tenants by proactive management.

In Hong Kong, the foundation work of the Fo Tan project has been completed but the development will not proceed until a more realistic land premium payment is agreed with the Government. The Group is currently in an appeal process to ensure that the land premium payment is in line with the market conditions where land prices paid for development sites are currently falling.

In respect to the development projects in Mainland China, Phase I of the Kaifeng project is underway. Around 1,200 residential units will be released for sale in the fourth quarter of this year and will be priced in line with the current competitive developments. As the site was purchased on good terms, it is foreseen that the project will provide good potential returns to the Group. The master layout plan of our Longquan project is now approved and the first pre-sales are expected to take place in mid 2014. 

In view of the turbulence of the worldwide finance markets, the Board will continue the conservative approach on cash management until a clearer picture is seen. 

On behalf of Executive Directors

Lu Wing Chi

Executive Director

Hong Kong, 21 August 2013

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 JUNE 2013

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2013

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2013

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - continued

AT 30 JUNE 2013

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2013

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 2013

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 June 2013

1. GENERAL

The Company is a public limited 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 hotel operation.

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 2013 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2012.

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

3. PRINCIPAL ACCOUNTING POLICIES - continued

The application of the above new or revised 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 except as described below.

IFRS 11 Joint Arrangements

IFRS 11 replaces IAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation, SIC 13 Jointly Controlled Entities - Non-Monetary Contributions by Venturers, has been incorporated in IAS 28 (as revised in 2011). Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of parties to the joint arrangements. In contract, under IAS 31, there are three types of joint arrangements - jointly controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint arrangements under IAS 31 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was classified as a jointly controlled entity).

In addition, joint ventures under IFRS 11 are required to account for using the equity method, whereas jointly controlled entities under IAS 31 can be accounted for using equity method of accounting or proportionate consolidation.

The directors of the Company reviewed and assessed the classification of the Group's investments in joint arrangements in accordance with the requirements of IFRS 11. The directors concluded that the Group's joint venture arrangements, which were classified as jointly controlled entities under IAS 31 and were accounted for using the equity method, should be classified as joint ventures under IFRS 11 and continue to be accounted for using the equity method upto the date of the joint arrangements are classified as assets held for sale.

Amendments to IAS 1 Presentation of Items of Other Comprehensive Income

The amendments to IAS 1 introduce new terminology for statement of comprehensive income and income statement. Under the amendments to IAS 1, a statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income and an income statement is renamed as a statement of profit or loss. The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis - the amendments do not change the existing option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively and hence the presentation of items of other comprehensive income has been modified to reflect the changes.

3. PRINCIPAL ACCOUNTING POLICIES - continued

Amendments to IAS 34 Interim Financial Reporting

(as part of the Annual Improvements to IFRSs 2009 - 2011 Cycle)

The Group has applied the amendments to IAS 34 Interim Financial Reporting as part of the Annual Improvements to IFRSs 2009 - 2011 Cycle for the first time in the current interim period. The amendments to IAS 34 clarify that the total assets and total liabilities for a particular reportable segment would be separately disclosed in the interim financial statements only when the amounts are regularly provided to the chief operating decision makers (the "CODM") and there has been a material change from the amounts disclosed in the last annual financial statements for that reportable segment.

Since the CODM do not review assets and liabilities of the Group's reportable segments for performance assessment and resource allocation purposes, the Group has not included total asset information as part of segment information.

4. SEGMENT INFORMATION

Information reported to the executive directors of the Company, being the CODM, for the purposes of resource allocation and assessment of segment performance is mainly focused on the property development, property investment and hotel operation.

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 2013