AGP.L Regulatory News (AGP)

30 August 2017

Asian Growth Properties Limited

Results for the period ended 30 June 2017

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 2017. These financial results are the first results since the completion of the disposal of the Company's non-China properties on 15 May 2017. 

Financial Highlights

n Profit attributable to the Company's shareholders of HK$2,599.4 million (£256.7 million) (2016: HK$561.3 million (£53.7 million)).

n Profit attributable to the Company's shareholders (excluding revaluation surplus net of deferred tax) was HK$2,590.6 million (£255.9 million) (2016: HK$573.9 million (£54.9 million) excluding revaluation deficit net of deferred tax). The increment was a result of a realized gain of HK$2,549.9 million (£251.9 million) on the sale of the entire issued share capital of Benefit Strong Group Limited which holds the non-PRC assets pursuant to the sale and purchase agreement dated 31 March 2017 made between the Company and S E A Holdings Limited ("SEA").

n Earnings per share for profit attributable to the Company's shareholders of HK293.3 cents (29.0 pence) (2016: HK63.3 cents (6.1 pence)).

n Net asset value per share attributable to the Company's shareholders as at 30 June 2017 of HK$4.9 (48.4 pence) (31 December 2016: HK$14.4 (150.5 pence)). 

n The Group's equity attributable to the Company's shareholders amounted to HK$4,295.6 million (£424.3 million) as at 30 June 2017 (31 December 2016 pro forma (unaudited) Note 1: HK$4,263.5 million (£445.5 million)).

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

n As at 30 June 2017, bank balances and cash of the Group amounted to HK$1,724.5 million (£170.3 million). After netting off bank borrowings of HK$129.0 million (£12.7 million), the Group had a net cash position of HK$1,595.5 million (£157.6 million) at period end date, compared to a net cash position of HK$6,320.3 million (£660.4 million) as at 31 December 2016. 

n The Board declared a special dividend of HK$10.35 (£1.06 Note 2) per common share to the shareholders of the Company and the special dividend was paid on 15 May 2017.

Operational Highlights

n On 31 March 2017, the Company entered into a sale and purchase agreement with SEA pursuant to which the Company conditionally agreed to sell the entire issued share capital of Benefit Strong Group Limited, which owns Crowne Plaza Hong Kong Causeway Bay in Hong Kong and a commercial property at 20 Moorgate in UK, at an aggregate consideration of HK$8,913.4 million (£913.6 million Note 2). Completion of the disposal took place on 15 May 2017.

n The sale of Benefit Strong Group Limited realised a gain on disposal of HK$2,549.9 million (£251.9 million). The consideration of HK$8,913.4 million (£913.6 million Note 2) was settled by offsetting the special dividend of HK$10.35 (£1.06 Note 2) per share that SEA was entitled to receive.

n Prior to the completion of disposal of Benefit Strong Group Limited in May 2017, stable gross rental income was generated from an investment property in UK and the hotel operation results of Crowne Plaza Hong Kong Causeway Bay were in general in line with the weaker hotel business environment in 2017.

n The rental income from investment properties situated in the PRC continued to provide stable returns to the Company.

Notes:

1. The unaudited pro forma financial information was disclosed by the Company in the Circular dated 31 March 2017.

2. Amounts in Pounds Sterling use the exchange rates which were previously disclosed by the Company in the relevant announcements.

3. Other 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:

4. For the Company's shareholders' information, the exchange rate on 29 August 2017 was £1 = HK$10.1375.

Miscellaneous

The results included in this announcement are extracted from the unaudited condensed consolidated financial statements of the Company for the period ended 30 June 2017, which have been approved by the Board of Directors on 30 August 2017.

The 2017 Interim Report is expected to be posted to the Company's shareholders and holders of depositary interests in late September 2017.

This announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

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 2017 to the shareholders of the Company.

Results

AGP reported a profit attributable to the Company's shareholders of HK$2,599.4 million (£256.7 million) for the period ended 30 June 2017 (2016: HK$561.3 million (£53.7 million)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$8.8 million (£0.9 million) (2016: revaluation deficit of HK$12.6 million (£1.2 million)). By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$2,590.6 million (£255.9 million) (2016: HK$573.9 million (£54.9 million) excluding revaluation deficit net of deferred tax), including a realised gain of HK$2,549.9 million (£251.9 million) on the sale of the entire issued share capital of Benefit Strong Group Limited which holds the non-PRC assets pursuant to the sale and purchase agreement dated 31 March 2017 made between the Company and SEA.

As at 30 June 2017, the Group's equity attributable to the Company's shareholders amounted to HK$4,295.6 million (£424.3 million) (31 December 2016 pro forma (unaudited) Note 1: HK$4,263.5 million (£445.5 million)). The net asset value per share attributable to the Company's shareholders as at 30 June 2017 was HK$4.9 (48.4 pence) as compared with pro forma (unaudited) Note 1 HK$4.8 (50.2 pence) as at 31 December 2016. 

Unless stated otherwise, 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 2017, the Group has continued to focus on property development and property investment projects. The rental income from investment properties situated in the PRC continued to provide stable returns to the AGP Group.

The Company completed the sale of the entire issued share capital of Benefit Strong Group Limited, which owns the Crowne Plaza Hong Kong Causeway Bay in Hong Kong and a commercial property at 20 Moorgate in UK, at an aggregate consideration of HK$8,913.4 million (£913.6 million Note 2). Completion of the disposal took place on 15 May 2017 and realised a gain on disposal of HK$2,549.9 million (£251.9 million). The consideration in relation to the sale was satisfied by AGP offsetting an amount equal to the consideration against the proportion of the Company's special dividend of HK$10.35 (£1.06 Note 2) per share that SEA was entitled to receive. 

The Group will continue to monitor the property markets of the PRC and other markets closely, in order to identify potential acquisition targets at opportune times.

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

Share Exchange and Cash Offer

Reference is made to the joint announcement dated 28 August 2017 made by the Company and Nan Luen International Limited ("NLI") regarding the results of the share exchange and cash offer by NLI. Upon the close of the offer on 28 August 2017, NLI had received acceptances totalling 304,264,521 shares in the Company (including all acceptances with cooling-off period and without cooling-off period elected as at 28 August 2017) which represents approximately 34.33% of the entire issued share capital of the Company. If there is no withdrawal in respect of those acceptances which are subject to a cooling-off period, NLI will hold a total of 866,605,133 shares in the Company, representing approximately 97.77% interest therein. The Company and NLI will make further announcement on the results of final acceptances including any remaining withdrawal of acceptances on 11 September 2017.

Outlook

The global economy is likely to improve gradually, given that many advanced economies are poised for sustaining modest to moderate growth. Many countries also adopt a somewhat relaxing fiscal policy stance. However, the downside risks in the external environment such as US interest rate normalization, Brexit-related negotiations & various uncertainties surrounding policy and political developments in the US and Europe, still warrant attention.

China's economy continued its stabilizing trend with 6.9% GDP growth in the second quarter of 2017 compared with 6.7% in 2016. Growth momentum has stayed pretty high. Infrastructure investment is picking up on the back of regional development initiatives, including the "Belt and Road". Real estate investment is expected to remain buoyant, private investment growth has bottomed out and consumption growth is expected to remain stable, underpinned by continued strong job creation.  

Interim Dividend

The Board does not propose the payment of an interim dividend for the period ended 30 June 2017 (2016: 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, 30 August 2017

EXECUTIVE DIRECTORS' REVIEW

FINANCIAL SUMMARY

Turnover for the period ended 30 June 2017 amounted to HK$232.2 million (£22.9 million) (2016: HK$294.6 million (£28.2 million)). The turnover was principally attributable to the recognition of rental income from investment properties, revenue from hotel operation and the income from financial investment.

Profit attributable to the Company's shareholders for the period amounted to HK$2,599.4 million (£256.7 million) (2016: HK$561.3 million (£53.7 million)), equivalent to a basic earnings per share of HK293.3 cents (29.0 pence) (2016: HK63.3 cents (6.1 pence)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$8.8 million (£0.9 million) (2016: revaluation deficit of HK$12.6 million (£1.2 million)). By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$2,590.6 million (£255.9 million) (2016: HK$573.9 million (£54.9 million) excluding revaluation deficit net of deferred tax), equivalent to HK292.3 cents (28.9 pence) (2016: HK64.8 cents (6.2 pence)) per share.

As at 30 June 2017, the Group's equity attributable to the Company's shareholders amounted to HK$4,295.6 million (£424.3 million) (31 December 2016: HK$12,789.5 million (£1,336.3 million)). The net asset value per share attributable to the Company's shareholders as at 30 June 2017 was HK$4.9 (48.4 pence) as compared with HK$14.4 (150.5 pence) as at 31 December 2016.

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 2017:   £1 = HK$10.1244

For 31 December 2016: £1 = HK$9.5710

For 30 June 2016:   £1 = HK$10.4562

BUSINESS REVIEW

Property Investment and Development

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

Following the disposal of certain properties as summarized in these results, the Group owns four properties in China (one property held for sale and three investment properties).

Chengdu, Sichuan Province

Plaza Central

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 2017, the aggregate occupancy rate for the two office towers and the retail podium was approximately 77% (31 December 2016: 79%) with a weighted average lease length of 10.9 years) (31 December 2016: 10.8 years). Leasing activities for the remaining areas of Plaza Central continue.

New Century Plaza

The shopping arcade of New Century Plaza with a gross floor area of about 16,300 square metres is fully let to a hotel operator on a long-term lease of approximately 12.5 years (31 December 2016: 12.5 years). 

Guangzhou, Guangdong Province

Westmin Plaza Phase II, office tower

As at 30 June 2017, the occupancy rate of the 14-storey office tower of Westmin Plaza Phase II of about 16,100 square metres was 100% with more than one-third of the total office space being leased to AIA (31 December 2016: 95%) with a weighted average lease length of 4.2 years) (31 December 2016: 4.3 years). 

Westmin Plaza Phase II, commercial podium (held for sale)

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.

New Cost Sharing Agreement

The Company and its various subsidiaries and South-East Asia Investment And Agency Company, Limited ("SEAI"), a wholly-owned subsidiary of SEA, entered into a cost sharing agreement on 29 July 2014 (the "Old Cost Sharing Agreement") whereby SEAI agreed to provide to AGP and its subsidiaries and associates personnel and facilities.

With respect of the restructuring of the Company and SEA (the "Restructuring"), the Company and SEAI entered into a new cost sharing agreement on 31 March 2017 (the "New Cost Sharing Agreement") to terminate and replace the Old Cost Sharing Agreement whereby SEAI will continue to provide the Company and its subsidiaries with certain services such as compliance and company secretarial support for a period of up to 1 year from 15 May 2017.

The Company currently has its own administrative, finance and operational staff separate from those of SEA. Furthermore, it operates & manages its own business at separate office premises. 

WORKING CAPITAL AND LOAN FACILITIES

As at 30 June 2017, the Group's total cash balance was HK$1,724.5 million (£170.3 million) (31 December 2016: HK$9,778.9 million (£1,021.7 million)) without unutilised facilities (31 December 2016: unutilised facilities of HK$627.4 million (£65.6 million)).

As at 30 June 2017, after netting off bank borrowings of HK$129.0 million (£12.7 million), the Group had a net cash position of HK$1,595.5 million (£157.6 million) (31 December 2016: HK$6,320.3 million (£660.4 million)). 

As at 30 June 2017, 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 2017 amounted to HK$131.9 million (£13.0 million) (31 December 2016: HK$3,476.0 million (£363.2 million)) which comprised secured bank loans of HK$131.9 million (£13.0 million) (31 December 2016: HK$3,396.0 million (£354.8 million)). The secured bank loans were secured by properties valued at HK$1,401.9 million (£138.5 million) (31 December 2016: properties valued at HK$3,747.0 million (£391.5 million), listed debt securities of HK$882.1 million (£92.2 million), pledged cash of HK$533.1 million (£55.7 million) and note receivables of HK$54.3 million (£5.7 million)).

Treasury Policies

The Group adheres to prudent treasury policies. As at 30 June 2017, all of the Group's borrowings were raised through its wholly-owned 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

Mainland China economy growth accelerated to 6.9% in the second quarter of 2017 as compared with a 6.7% GDP growth rate in 2016. It was achieved by implementing a proactive fiscal policy and prudent monetary policy, which was within the China Central Government's targeted range. Steady growth continued in early 2017. The "Belt and Road" initiative has continued to promote development and business co-operation among the participating regions and nations, which is expected to benefit Hong Kong and Mainland China. 

The Hong Kong economy expanded 3.8% in the second quarter compared with 4.3% in the first quarter of 2017, after growing by 2% in 2016. Even though the tourism and retail industries are still suffering from structural adjustment, major economies around the world, including the US, China and Eurozone, maintained stable growth and the global political uncertainties did not derail the recovery. 

The global economic conditions are solidly improving as healthy global demand and rising consumer spending are propelling economic growth. The global economy is benefiting from accommodative monetary policies and less tight fiscal policies. The downside risks such as political instability in Europe and rising trade protectionism have not disappeared, but have certainly receding. The Group is closely monitoring the evolving market developments and intends to adopt a prudent and effective policy in managing risks associated with the various challenges ahead.

After the completion of the disposal of the non-China assets, the Group is currently focusing on the property developments & investments in Mainland China. However, the Group has not committed to limit its sphere of activities solely to China. The Group's strategy will be determined by the Company's board taking into consideration market opportunities, its financial resources and core competence.

On behalf of the Executive Directors

Lincoln Lu

Chief Executive Officer and Executive Director

Hong Kong, 30 August 2017 

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSSFOR THE SIX MONTHS ENDED 30 JUNE 2017

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED 30 JUNE 2017

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAT 30 JUNE 2017

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - continuedAT 30 JUNE 2017

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2017

Notes: 

(i) Other reserves comprise (i) a discount on acquisition/assumption of certain assets and liabilities from the intermediate holding company prior to the completion of Distribution in Specie (as defined on page 16), 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 retained profits; 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.

(ii) Based on the cooperation agreement, profit and loss of the subsidiaries should be shared by the Group and the counterparties in proportion to the capital contribution of respective parties. Thus, the deficit balance represents the losses attributable to the non-controlling interest.

(iii) Pursuant to a special resolution passed on 10 November 2016, the Company has changed its domicile from the British Virgin Islands to Bermuda with effect from 5 December 2016. The balance of approximately HK$4,836 million, which was formerly known as "Share Premium" has been transferred to "Contributed Surplus" under the Laws of Bermuda, Amended Bye-laws and the Companies Act.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED 30 JUNE 2017

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2017

1. GENERAL

The Company is a public company incorporated in the British Virgin Islands and migrated to Bermuda on 5 December 2016 with limited liability and its shares are admitted for trading on the AIM Market of The London Stock Exchange plc..

On 15 May 2017, pursuant to the distribution in specie by the Company's intermediate holding company, SEA, a limited liability company incorporated in Bermuda with its shares listed on the Stock Exchange of Hong Kong Limited, the shares of the Company held by SEA have been distributed to the SEA's shareholders ("Distribution in Specie"). After the completion of Distribution in Specie, the Company ceased to be a subsidiary of SEA and SEA is no longer the Company's immediate holding company. The Company's immediate holding company become Nan Luen International Limited, a company incorporated in Bermuda as exempted company with limited liability. The directors of the Company considered that the Company's ultimate holding company is JCS Limited, a company incorporated in Bermuda as exempted company with limited liability.

The addresses of the registered office and the principal place of business of the Company are Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and Suites 2506-10, 25/F., Everbright Centre, 108 Gloucester Road, Wanchai, Hong Kong, respectively.

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 2017 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2016.

In the current interim period, the Group has applied, for the first time, the following new and amendments to International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board that are mandatorily effective for an accounting period that begins on or after 1 January 2017:

3. PRINCIPAL ACCOUNTING POLICIES - continued

The application of the above new and 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, but additional disclosures about changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes on application of amendments to IAS 7 will be provided in the consolidated financial statements for the year ending 31 December 2017.

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, hotel operation and financial investment. No operating segments identified by the chief operating decision markers have been aggregated in arriving at the reportable segments of the Group.

Property investment activity is in the People's Republic of China (the "PRC"). The Group has disposed of an investment property in United Kingdom (the "UK") and the hotel operation in Hong Kong as set out in note 23 during the period.

The financial investment segment includes investment income from bank balances and investment income from equity or bond investments under investment portfolio.

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

Six months ended 30 June 2017

4. SEGMENT INFORMATION - continued

Six months ended 30 June 2016