H.k.land Regulatory News (HKLD)

6 Mar 2007 09:05

Hongkong Land Hldgs Ld06 March 2007 To: Business Editor 6th March 2007 For immediate release The following announcement was today issued to a Regulatory Information Serviceapproved by the Financial Services Authority in the United Kingdom. HONGKONG LAND HOLDINGS LIMITED2006 PRELIMINARY ANNOUNCEMENT OF RESULTS Highlights• Capital values and rents continue to rise• Adjusted net assets per share* up 23%• Highly successful residential sales in Singapore and Macau• Full year dividend per share increased by 25% to USc10 "The prospects for Hongkong Land are encouraging on a number of fronts. Theoffice leasing reversion cycle in Hong Kong will continue to benefit income inthe period ahead, at the same time as the retail element of our portfolio isperforming strongly. This positive trend in our commercial portfolio will becomplemented in the coming years by the recognition of profits on residentialsales already achieved." Simon Keswick, Chairman6th March 2007 Results+--------------------------------------------------------------------------------+| Year ended 31st December | | 2006 2005 Change|| US$m US$m %|+--------------------------------------------------------------------------------+|Underlying profit attributable to shareholders 245 188 +31||Profit attributable to shareholders 1,901 2,061 -8||Shareholders' funds 9,197 7,215 +27||Adjusted shareholders' funds* 10,922 8,592 +27|+--------------------------------------------------------------------------------+| USc USc %|+--------------------------------------------------------------------------------+|Underlying earnings per share 10.98 8.42 +30||Earnings per share 85.31 92.58 -8||Dividends per share 10.00 8.00 +25|+--------------------------------------------------------------------------------+| US$ US$ %|+--------------------------------------------------------------------------------+|Net asset value per share 4.01 3.24 +24||Adjusted net asset value per share* 4.76 3.86 +23|+--------------------------------------------------------------------------------+ * In preparing the Group's financial statements under International Financial Reporting Standards ('IFRS'), the fair value model for investment properties has been adopted. In accordance with this model,the Group's investment properties have been included at their openmarket value as determined by independent valuers. As there is nocapital gains tax in territories where the Group has significantleasehold investment properties, no tax would be payable if thoseproperties were to be sold at the amounts included in the financialstatements. In relation to leasehold investment properties, however,IFRS require deferred tax on any revaluation amount to be calculatedusing income tax rates. This is in contrast to the treatment for therevaluation element of freehold properties where IFRS require capitalgains tax rates to be used. As Management considers that the Group's long leasehold properties havevery similar characteristics to freehold property, the adjustedshareholders' funds and adjusted net asset value per share informationis presented on the basis that would be applicable if the leaseholdproperties were freeholds. The adjustments made add back the deferredtax provided in the financial statements that would not have beenprovided if the properties were freeholds, which in any event would notbe payable on a sale of the properties. The final dividend of USc7.00 per share will be payable on 16th May 2007,subject to approval at the Annual General Meeting to be held on 9th May 2007, toshareholders on the register of members at the close of business on 23rd March2007. The ex-dividend date will be on 21st March 2007, and the share registerswill be closed from 26th to 30th March 2007,inclusive. HONGKONG LAND HOLDINGS LIMITED PRELIMINARY ANNOUNCEMENT OF RESULTSFOR THE YEAR ENDED 31ST DECEMBER 2006 OVERVIEWBroad-based demand and shrinking supply in Hong Kong's Central district droverents and capital values higher in both the office and retail sectors. With itstenant base performing strongly, the rental premium commanded by Centrallocations compared with decentralised districts has grown further. PERFORMANCEWith rents rising throughout the year, net rental income improved by 25%compared with 2005. The Group's residential property business also saw a strongincrease in earnings; largely due to the first contribution from MCL Land, theSingapore developer in which the Group acquired a 77% interest in February 2006.Partially offsetting revenue growth, the financing charge rose because ofincreasing interest rates and higher debt levels, the latter largely reflectingthe cost of acquisition of MCL Land. Overall, underlying profit rose 31% toUS$245 million. Capital values in the portfolio continued to rise, although at a slightly slowerpace than in the prior year. The independent valuation of the Group's investmentassets ended the year at US$11,651 million, a 21% increase over the end of 2005,resulting in an increase in adjusted net asset value per share of 23% toUS$4.76. Net profit, including the revaluation, was US$1,901 million, areduction of 8% on the prior year because of the larger valuation surplus inthat year. Following an increase in the interim dividend to USc3.00 per share, theDirectors are recommending a final dividend of USc7.00 per share, providing atotal dividend for the year of USc10.00 per share, an increase of 25% on 2005. GROUP REVIEW2006 represented the third year of rising rents since the recovery in HongKong's Central district's office market began towards the end of 2003. Rents andoccupancy are now approaching levels last seen in the strong market of a decadeago. Demand for high quality commercial space is both broad-based by sector andfounded on good business performance in a tenant base that is placing anincreasing premium on being located in Central. The luxury sector of the retail market had a good year as well, with theworld-class quality of the new stores in Central attracting increasingattention. The Singapore office market also experienced rapidly rising rents, as demandfrom the financial sector quickly absorbed supply. This included the stockprovided by the Group's new joint venture development at One Raffles Quay, whichwas fully let on completion in October. The Group's residential business had a quiet year for completions in both itsexisting business and the newly acquired MCL Land portfolio. In terms of sales,however, the year was highly successful. The Group's developments at One Centralin Macau (where the Group is joint venturing with Shun Tak) and Marina BayResidences in Singapore (with partners Cheung Kong and Keppel Land) weresubstantially sold within days of being launched. The Group's joint venture atCentral Park in Beijing experienced a quieter launch of the final phase of thatdevelopment in October. OUTLOOKIn conclusion, the Chairman, Simon Keswick said, "The prospects for HongkongLand are encouraging on a number of fronts. The office leasing reversion cyclein Hong Kong will continue to benefit income in the period ahead, at the sametime as the retail element of our portfolio is performing strongly. Thispositive trend in our commercial portfolio will be complemented in the comingyears by the recognition of profits on residential sales already achieved." CHIEF EXECUTIVE'S REVIEW STRATEGIC FOCUSThe overriding strategic requirement for the Group is to maximise the value ofits core Hong Kong investment portfolio. As we move towards the completion ofour programme of work in The Landmark complex, our portfolio leads the market inunderlining Central's position as the undisputed luxury retail destination inHong Kong, complementing its historic role as the city's centre forinternational business. The work we are undertaking to upgrade the streetenvironment outside our buildings in Central also plays an important part inraising the value of the Central District, not only for Hongkong Land but thecommunity at large. Our strategy of broadening our commercial business regionally is gainingmomentum. One Raffles Quay in Singapore is now complete and fully let, andtogether with the Marina Bay Financial Centre ('MBFC') will provide the Groupwith critical mass in a second key Asian market. This will enable us tocontribute to, and participate in, the growth of value in Singapore, as thatcity continues to upgrade its position in the region. Our third strategic aim has been to grow our residential business so that it canbegin to make a significant, yet capital-efficient, contribution to profit. Thesuccessful launches of our joint venture developments in Macau, Singapore andBeijing have demonstrated that the value of the Hongkong Land brand can beextended beyond our reputation in the commercial sector into the residentialmarket. Our new 77%-owned subsidiary, MCL Land, gives us critical mass in thismarket in South East Asia and will contribute its own profit stream in the yearsahead. COMMERCIAL PROPERTY Central PortfolioThe up-cycle in office rents in the Central market in Hong Kong has entered itsthird year. This has enabled us to drive average rents up 28% in the course of2006, while holding vacancy, 4.5% at the year end, at broadly the same level asthe end of 2005, despite adding 2.8% by area to our portfolio with thecompletion of York House. The strength of demand for high quality centrally-located offices in the currentperiod of limited supply continues to support rents in the District. Withsignificant supply expected to be completed over the next 18 months in a numberof decentralised locations, tenants can anticipate having a broader range ofoptions. However, the size of the rental premium Central is commanding overdecentralised areas indicates the strength of the preference of many tenants fora Central location where this is available. The reversion pattern in our portfolio has been strongly positive sincemid-2005, and is expected to continue so for some time, with market rents nowexceeding HK$100 psf per month in premium buildings. York House received its full Occupation Permit in November. By the end of theyear, the office portion of the building was 30% committed, while the retailpodium was fully let, enabling the building to increase its contribution torevenue in 2007. At the close of the year, we agreed a sale of 1063 King's Road, the developmentin Island East which was completed in 1999. This transaction closed in February2007. The sale of this non-core asset leaves our commercial portfolio in HongKong focused exclusively in Central. The luxury retail sector generated increased sales in 2006, enjoying aparticularly buoyant close to the year, with an exceptional Christmas season.The extensive renovation of The Landmark over the last two years was completedin time for this crucial retail sales period, and helped our tenant base to takeadvantage of it. The quality of the retail environment we are now able to provide, supported bythe improved streetscape around our Central portfolio, has been complemented bythe creation of a generation of new flagship stores for the leading luxurybrands. The success of The Landmark Mandarin Oriental which opened in EdinburghTower in September 2005 has added another luxury component to the district, nowfurther supported by the re-opening of the original Mandarin Oriental, Hong Kongafter an extensive renovation. Commercial Properties Outside Hong KongThe Singapore market is of growing significance to the Group. One Raffles Link,our wholly owned development in the city, remains fully let and has now beenjoined in our investment portfolio by our interest in One Raffles Quay, a jointventure development with Cheung Kong and Keppel Land. This gateway developmentto the new Marina Bay district received its full Occupation Permit in Octoberand was 100% pre-let. A number of tenants were already operating by the yearend, while the remainder are currently fitting out their premises. Amid strongdemand for high quality office space in Singapore, the Group, together with thesame consortium of partners, has begun construction of the first phase of theMBFC, which was formally launched by the Minister for National Development, MahBow Tan, in October. The office portion of this phase comprises 180,000 sq. m ofGFA and will be completed in 2010. The option to acquire the second phase of theMBFC, which can accommodate up to a further 194,000 sq. m of GFA, was exercisedby the consortium in February 2007. Our prime retail portfolio in Hong Kong will be joined in 2009 by 37,000 sq. mof luxury retail which we are building in Macau at One Central, our jointventure development with Shun Tak in the heart of the Macau peninsula. Thedevelopment will also include a Mandarin Oriental hotel and serviced apartments. Our commercial portfolio elsewhere in the region is located in Hanoi, Bangkokand Jakarta. Our two buildings in Hanoi were 100% let at the year end in amarket of firming rents. In Bangkok our 49% interest in Gaysorn, a luxury retailcentre, is experiencing weaker footfall amid the negative factors in the Thaimarket. Jakarta Land's portfolio saw an improvement in both occupancy and rents,and during the year we increased our interest to 50%. RESIDENTIAL PROPERTYThe profit contributed by our residential business in 2006 more than doubled toUS$43 million compared with the prior year. This was entirely due to the firstcontribution from our newly acquired Singapore subsidiary, MCL Land. Within ourdirectly held developments, there were no completions during the year, limitingprofit generation to the disposal of a further four residential and two shopunits in our Hong Kong development at Ivy on Belcher's. From a salesperspective, however, we had an exceptional year. Three developments werelaunched in the last quarter. Our joint venture with Shun Tak Holdings at One Central Macau pre-sold over 95%of its 796 residential units. Two towers in the seven-tower development weresold, en bloc, in separate transactions to European investment funds in theperiod prior to public launch. The balance of the units were then sold veryrapidly after the public launch in November. The construction is on plan andexpected to be completed in 2009. In Singapore, the residential component of the first phase of the MBFC, to benamed Marina Bay Residences and comprising 428 units, was substantially pre-soldwithin days of launch at record prices. Completion and handover of theseapartments is projected for 2010. The final phase of Central Park, our joint venture development in Beijing, waslaunched for pre-sale in the last quarter of the year. The 490 units will bereleased for sale in small batches due to the much less active market in thecity following the range of measures announced by the Government designed tocool off the previously rapid growth of some sectors of the market. This fourthphase of Central Park is projected to complete in 2008, while construction ofPhase III is on programme for completion in 2007 and is largely pre-sold. Elsewhere in Mainland China, construction began on Phase I of Bamboo Grove, ourjoint venture with the Longhu Group in Chongqing. This phase comprises some 650units and will be the first of a number of phases on this large site with atotal land area of some 780,000 sq. m. In the Philippines, sales at Roxas Triangle in Manila are now nearingcompletion, with only five of the 182 units remaining. Our other Philippinesinterest is our 40% holding in NorthPine Land, previously trading as JardineLand. This business booked a small profit for the year. The final element of ourresidential business, our joint venture property fund, Grosvenor Land, realisedthree further investments during 2006, and now holds three properties, which areplanned to be sold during 2007. MCL LANDMCL Land experienced an excellent year for sales, though a modest year forprofit. The only developments completed during 2006 were MeraPrime in Singaporeand the Desa Putra/Desa Villas complex in Malaysia. The Group's profit booked inrelation to MCL Land was in part due to these developments and in part due tothe negative goodwill arising on acquisition of our 77% interest in February. From a sales perspective, by the end of the year MCL Land had completed thepre-sale of almost all units in the six developments it has launched inSingapore. The profit from these developments will benefit the Group's earningsover the period 2007 to 2009. Further projects, relating to land bank secured in2006, will be launched during 2007. FINANCETwo major syndicated loan facility commitments were signed during the year; a7-year HK$7.5 billion transaction in Hong Kong and a 5-year S$800 millionfacility in Singapore. The proceeds from both will largely be used for therefinancing of existing lines at lower margins, but will also provide facilitiesto finance further capital commitments, particularly at the MBFC in Singapore. In December, a wholly-owned subsidiary of Hongkong Land sold some 3% of HongkongLand's existing share capital to Jardine Strategic Holdings at the prevailingmarket price to raise US$269 million. The funds will help broaden the Group'sfinance base and enhance its ability to invest in attractive emergingopportunities. OUTLOOKWith Hong Kong Central commanding premium rents at a time of limited supply inthe district beyond 2010, the outlook for investment income is very positive.New developments will complete in Hong Kong, Singapore and Macau over the mediumterm, further supporting our commercial revenues. Our success in residentialsales in Macau, Singapore and Mainland China will add an additional stream ofprofits in the later years of the decade. Nicholas Sallnow-SmithChief Executive6th March 2007 __________________________________________________________________________________________________Hongkong Land Holdings LimitedConsolidated Profit and Loss Accountfor the year ended 31st December 2006__________________________________________________________________________________________________ 2006 2005 US$m US$m__________________________________________________________________________________________________ Revenue (note 2) 555.9 367.6Cost of sales (197.5) (95.7) _________ _________ Gross profit 358.4 271.9Other income 23.0 -Administrative and other expenses (33.7) (28.2) _________ _________ 347.7 243.7Increase in fair value of investment properties 1,952.6 2,367.9Asset impairment provisions, reversals and disposals (note 3) (5.8) 11.1 _________ _________ Operating profit (note 4) 2,294.5 2,622.7Net financing charges (72.3) (39.3) _________ _________ Share of results of joint ventures excluding change in fair value of investment properties 0.9 9.1Share of change in fair value of investment properties of joint ventures 49.8 0.9 Share of results of joint ventures (note 5) 50.7 10.0 _________ _________ Profit before tax 2,272.9 2,593.4Tax (note 6) (365.5) (532.6) _________ _________ Profit for the year 1,907.4 2,060.8 _________ _________ Attributable to: Shareholders of the Company 1,900.9 2,060.5Minority interests 6.5 0.3 _________ _________ 1,907.4 2,060.8 _________ ___________________________________________________________________________________________________________ USc USc__________________________________________________________________________________________________ Earnings per share (note 7) - basic 85.31 92.58 - diluted 82.35 92.48Underlying earnings per share (note 7) 10.98 8.42__________________________________________________________________________________________________ __________________________________________________________________________________________________Hongkong Land Holdings LimitedConsolidated Balance Sheetat 31st December 2006__________________________________________________________________________________________________ 2006 2005 US$m US$m__________________________________________________________________________________________________ Net operating assetsInvestment properties 11,650.7 9,778.7Others 13.1 12.3 _________ _________ Tangible assets (note 8) 11,663.8 9,791.0Joint ventures 894.5 638.8Other investments 16.1 49.5Deferred tax assets 0.5 1.6Pension assets 13.9 10.8Other non-current assets 22.9 47.7 _________ _________ Non-current assets 12,611.7 10,539.4 Properties for sale 800.3 87.2Debtors, prepayments and others 208.0 97.2Bank balances 1,166.5 1,092.8 2,174.8 1,277.2Non-current assets classified as held for sale (note 9) 188.8 - _________ _________ Current assets 2,363.6 1,277.2 _________ _________ Creditors and accruals (403.4) (232.7)Current borrowings (note 10) (116.8) (379.0)Current tax liabilities (25.8) (8.6) _________ _________ (546.0) (620.3)Liabilities directly associated with non-current assets classified as held for sale (note 9) (3.0) - _________ _________ Current liabilities (549.0) (620.3) Net current assets 1,814.6 656.9Long-term borrowings (note 10) (3,361.9) (2,568.6)Deferred tax liabilities (1,739.6) (1,400.6)Other non-current liabilities (21.3) (10.4) _________ _________ 9,303.5 7,216.7 _________ _________ Total equityShare capital 229.5 229.5Revenue and other reserves 8,967.8 7,063.5Own shares held - (77.7) _________ _________ Shareholders' funds 9,197.3 7,215.3Minority interests 106.2 1.4 _________ _________ 9,303.5 7,216.7 _________ ___________________________________________________________________________________________________________ __________________________________________________________________________________________________Hongkong Land Holdings LimitedConsolidated Statement of Recognised Income and Expensefor the year ended 31st December 2006__________________________________________________________________________________________________ 2006 2005 US$m US$m__________________________________________________________________________________________________ Net exchange translation differences 22.3 11.0Actuarial gains on defined benefit pension plans 3.5 1.4Revaluation of other investments - fair value gains 2.7 4.6 - reversal of loss on business combination 0.6 -Gain on sale of own shares held 190.8 -(Losses)/gains on cash flow hedges (24.7) 28.7Tax on items taken directly to equity 2.4 (1.6) _________ _________ Net income recognised directly in equity 197.6 44.1Transfer to consolidated profit and loss account on disposal of other investments (3.0) -Transfer to consolidated profit and loss account in respect of cash flow hedges 9.1 (1.7)Profit for the year 1,907.4 2,060.8 _________ _________ Total recognised income and expense for the year 2,111.1 2,103.2 _________ _________ Attributable to: Shareholders of the Company 2,104.6 2,102.9Minority interests 6.5 0.3 _________ _________ 2,111.1 2,103.2 _________ ___________________________________________________________________________________________________________ __________________________________________________________________________________________________Hongkong Land Holdings LimitedConsolidated Cash Flow Statementfor the year ended 31st December 2006__________________________________________________________________________________________________ 2006 2005 US$m US$m__________________________________________________________________________________________________ Operating activities Operating profit 2,294.5 2,622.7Depreciation 1.2 0.7Negative goodwill on acquisition of a subsidiary (14.1) -Increase in fair value of investment properties (1,952.6) (2,367.9)Asset impairment provisions, reversals and disposals (note 3) 5.8 (11.1)Increase in properties for sale (262.5) (16.7)Increase in debtors, prepayments and others (13.0) (16.3)Increase in creditors and accruals 77.1 6.7Interest received 66.2 34.3Interest and other financing charges paid (121.8) (76.4)Tax paid (12.5) (22.6)Dividends received 15.0 2.8 Cash flows from operating activities 83.3 156.2 Investing activities Major renovations expenditure (33.5) (14.5)Developments capital expenditure (40.1) (78.5)Purchase of a subsidiary (note 13) (237.8) -Investments in and loans to joint ventures (167.3) (335.9)Purchase of other investments - (47.4)Disposal of joint ventures and other investments 1.5 10.1Deposit received for sale of an investment property 18.9 - Cash flows from investing activities (458.3) (466.2) Financing activities Net proceeds from issue of bonds - 411.7Net proceeds from issue of convertible bonds - 395.2Drawdown of bank loans 571.5 223.4Repayment of bank loans/notes (193.1) (224.4)Disposal of own shares held 268.5 -Dividends paid by the Company (199.1) (155.5)Dividends paid to minority shareholders (2.7) - Cash flows from financing activities 445.1 650.4Effect of exchange rate changes 3.7 1.8 _________ _________ Net increase in cash and cash equivalents 73.8 342.2Cash and cash equivalents at 1st January 1,089.9 747.7 _________ _________ Cash and cash equivalents at 31st December 1,163.7 1,089.9 _________ ___________________________________________________________________________________________________________ ________________________________________________________________________________Hongkong Land Holdings LimitedNotes________________________________________________________________________________ 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information contained in this announcement has been based on the audited results for the year ended 31st December 2006 which have been prepared in conformity with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board. In 2006, the Group adopted the following amendments and interpretation to existing Standards which are relevant to its operations: IAS 21 (amended 2005), Net Investment in a Foreign Operation IAS 39 (amended 2005), Cash Flow Hedge Accounting of Forecast Intragroup Transactions IAS 39 (amended 2005), The Fair Value Option IAS 39 and IFRS 4 (amended 2005), Financial Guarantee Contracts IFRIC 4, Determining whether an Arrangement contains a Lease There have been no changes to the accounting policies as a result of adoption of the above amendments and interpretation. 2. REVENUE 2006 2005 US$m US$m _________________________ By business Commercial property Rental income 346.4 279.4 Service income 95.3 68.4 441.7 347.8 Residential property Rental income 2.3 1.3 Service and management charges 0.1 0.4 Sales of trading properties 111.8 18.1 114.2 19.8 _________ _________ 555.9 367.6 _________ _________ By geographical area Hong Kong 427.0 349.2 Southeast Asia 128.9 18.4 _________ _________ 555.9 367.6 _________ _________ Service income in Commercial Property includes service and management charges and hospitality service income. 3. ASSET IMPAIRMENT PROVISIONS, REVERSALS AND DISPOSALS 2006 2005 Gross Net Gross Net US$m US$m US$m US$m ________________________ _______________________ Asset impairment provisions (7.2) (7.2) - - Asset impairment reversals 1.4 1.4 11.1 11.1 _________ _________ _________ _______ (5.8) (5.8) 11.1 11.1 _________ _________ _________ _______ By business Commercial property (7.2) (7.2) - - Residential property - - 1.0 1.0 Corporate 1.4 1.4 10.1 10.1 _________ _________ _________ _______ (5.8) (5.8) 11.1 11.1 _________ _________ _________ _______ Gross asset impairment provisions, reversals and disposals are shown before net financing charges and tax. Net asset impairment provisions, reversals and disposals are shown after net financing charges, tax and minority interests. 4. OPERATING PROFIT 2006 2005 US$m US$m _____________________________ By business Commercial property 332.4 255.5 Residential property 41.3 8.7 Corporate (26.0) (20.5) _______ ________ 347.7 243.7 Increase in fair value of investment properties - Commercial property 1,953.1 2,367.9 - Residential property (0.5) - 1,952.6 2,367.9 Asset impairment provisions, reversals and disposals (note 3) (5.8) 11.1 _______ ________ 2,294.5 2,622.7 _______ ________ 5. SHARE OF RESULTS OF JOINT VENTURES 2006 2005 US$m US$m ___________________________ By business Commercial property (0.9) 2.0 Residential property 1.8 7.1 _______ _______ 0.9 9.1 Increase in fair value of investment properties - Commercial property 46.7 0.7 - Residential property 3.1 0.2 49.8 0.9 _______ _______ 50.7 10.0 _______ _______ Results are shown after tax and minority interests. 6. TAX 2006 2005 US$m US$m ___________________________ Current tax (21.8) (21.3) Deferred tax - increase in fair value of investment properties (340.2) (507.6) - other temporary differences (3.5) (3.7) (343.7) (511.3) _______ _______ (365.5) (532.6) _______ _______ Tax on profits is provided at the rates of taxation prevailing in the territories in which the Group operates. The Group has no tax payable in the United Kingdom. 7. EARNINGS PER SHARE Basic earnings per share are calculated on profit attributable to shareholders of US$1,900.9 million (2005: US$2,060.5 million) and on the weighted average number of 2,228.1 million (2005: 2,225.6 million which excluded 69.6 million shares in the Company held by a wholly-owned subsidiary) shares in issue during the year. Diluted earnings per share are calculated on profit attributable to shareholders of US$1,920.4 million (2005: US$2,061.1 million), which is after adjusting for the effects of the conversion of convertible bonds, and on the weighted average number of 2,332.0 million (2005: 2,228.8 million) shares in issue during the year. The number of shares for basic and diluted earnings per share is reconciled as follows: Ordinary shares in millions 2006 2005 ___________________________ Weighted average number of shares in issue 2,228.1 2,225.6 Adjustment for shares to be issued on conversion of convertible bonds 103.9 3.2 _______ _______ Weighted average number of shares for diluted earnings per share 2,332.0 2,228.8 _______ _______ Earnings per share are additionally calculated based on underlying profit attributable to shareholders. The difference between underlying profit attributable to shareholders and profit attributable to shareholders is reconciled as follows: 2006 2005 US$m US$m __________________________ Underlying profit attributable to shareholders 244.7 187.5 Revaluation surpluses of investment properties 1,952.6 2,367.9 Deferred tax charges on revaluation surpluses of investment properties (340.2) (507.6) Share of revaluation surpluses of investment properties of joint ventures (net of deferred tax) 49.8 0.9 Asset impairment provisions, reversals and disposals (5.8) 11.1 Share of asset disposals of joint ventures 1.1 0.8 Minority interests (1.3) (0.1) _______ _______ Profit attributable to shareholders 1,900.9 2,060.5 Interest expense on convertible bonds (net of tax) 19.5 0.6 _______ _______ Profit for calculation of diluted earnings per share 1,920.4 2,061.1 _______ _______ 8. TANGIBLE ASSETS 2006 2005 US$m US$m ___________________________ Net book value at 1st January 9,791.0 7,300.7 Exchange rate adjustments (0.5) 20.4 New subsidiary 25.9 - Additions 85.2 102.7 Depreciation (1.2) (0.7) Disposal (0.3) - Net revaluation surplus 1,952.6 2,367.9 Classified as non-current assets held for sale (187.8) - Transfer to properties for sale (1.1) - _______ ________ Net book value at 31st December 11,663.8 9,791.0 _______ ________9. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE The major classes of assets and liabilities classified as held for sale are set out below: 2006 2005 US$m US$m __________________________ Investment property 187.8 - Current assets 1.0 - ________ _______ Total assets 188.8 - Current liabilities (3.0) - ________ _______ 185.8 - ________ _______ The non-current assets classified as held for sale at 31st December 2006 were related to the Group's investment property situated at 1063 King's Road, Hong Kong. The sale was completed on 9th February 2007 for a consideration of US$189.4 million. Gain on disposal is estimated at US$0.3 million net of transaction costs. 10. BORROWINGS 2006 2005 US$m US$m ___________________________ Current Bank overdrafts 2.8 2.9 Short-term borrowings 103.2 77.4 Current portion of long-term borrowings 10.8 298.7 116.8 379.0 Long-term borrowings Bank loans 1,467.7 705.1 7% United States Dollar bonds due 2011 617.2 625.0 5.5% United States Dollar bonds due 2014 487.5 493.1 3.01% Singapore Dollar notes due 2010 206.7 190.4 3.65% Singapore Dollar notes due 2015 242.2 222.9 2.75% United States Dollar convertible bonds due 2012 340.6 332.1 3,361.9 2,568.6 _______ _______ 3,478.7 2,947.6 _______ _______ Secured 242.1 - Unsecured 3,236.6 2,947.6 _______ _______ 3,478.7 2,947.6 _______ _______ 11. NET ASSET VALUE PER SHARE Net asset value per share is calculated on shareholders' funds of US$9,197.3 million (2005: US$7,215.3 million)and on 2,295.2 million (2005: 2,225.6 million which excluded 69.6 million shares in the Company held by a wholly-owned subsidiary) shares issued at year end. Net asset value per share is additionally calculated based on adjusted shareholders' funds. The difference between adjusted shareholders' funds and shareholders' funds is reconciled as follows: 2006 2005 US$m US$m ____________________________ Shareholders' funds 9,197.3 7,215.3 Deferred tax on revaluation surpluses of investment properties 1,708.1 1,371.7 Share of deferred tax on revaluation surpluses of investment properties of joint ventures 16.7 5.2 _______ _______ Adjusted shareholders' funds 10,922.1 8,592.2 _______ _______ 12. DIVIDENDS 2006 2005 US$m US$m ___________________________ Final dividend in respect of 2005 of USc6.00 (2004: USc5.00) per share 133.5 111.3 Interim dividend in respect of 2006 of USc3.00 (2005: USc2.00) per share 66.8 44.5 ________ _______ 200.3 155.8 ________ _______ A final dividend in respect of 2006 of USc7.00 (2005: USc6.00) per share amounting to a total of US$160.7 million (2005: US$133.5 million) is proposed by the Board. The dividend proposed is not accounted for until it has been approved at the Annual General Meeting. The amount will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2007. 13. PURCHASE OF A SUBSIDIARY Fair value Book value adjustments Fair value US$m US$m US$m _______________________________________ Investment properties 24.3 - 24.3 Other tangible assets 1.6 - 1.6 Joint ventures 34.8 1.8 36.6 Current assets 568.8 13.7 582.5 Current liabilities (129.5) - (129.5) Long-term borrowings (88.9) - (88.9) Deferred tax liabilities (1.0) (1.4) (2.4) Other non-current liabilities (2.0) - (2.0) _______ _________ _______ Net assets 408.1 14.1 422.2 _______ _________ Adjustment for minority interests (95.4) _______ Net assets acquired 326.8 Excess of net assets acquired over consideration (14.1) _______ Total consideration 312.7 Adjustment for carrying value of other investments (40.6) Cash and cash equivalents acquired (34.3) _______ Net cash outflow 237.8 _______ 14. CASH FLOW PER SHARE Cash flow per share is based on cash flows from operating activities less major renovations expenditure amounting to US$49.8 million (2005: US$141.7 million) and is calculated on the weighted average number of 2,228.1 million (2005: 2,225.6 million which excluded 69.6 million shares in the Company held by a wholly-owned subsidiary) shares in issue during the year. 15. CAPITAL COMMITMENTS 2006 2005 US$m US$m ___________________________ Capital commitments 64.6 153.0 _______ _______ Contribution to joint ventures 1,060.3 479.1 _______ _______ 16. CONTINGENT LIABILITIES 2006 2005 US$m US$m ___________________________ Guarantees in respect of facilities made available to joint ventures 4.9 8.0 _______ _______ Guarantees in respect of facilities made available to joint ventures are statedat their total respective contracted amounts. It is probable that the Group hasno obligations under these guarantees. Various Group companies are involved in litigation arising in the ordinarycourse of their respective businesses. Having reviewed outstanding claims andtaking into account legal advice received, the Directors are of the opinion thatadequate provisions have been made in the financial statements. The final dividend of USc7.00 per share will be payable on 16th May 2007,subject to approval at the Annual General Meeting to be held on 9th May 2007, toshareholders on the register of members at the close of business on 23rd March2007. The ex-dividend date will be on 21st March 2007, and the share registerswill be closed from 26th to 30th March 2007, inclusive. Shareholders willreceive their dividends in United States Dollars, unless they are registered onthe Jersey branch register where they will have the option to elect forSterling. These shareholders may make new currency elections by notifying theUnited Kingdom transfer agent in writing by 27th April 2007. The Sterlingequivalent of dividends declared in United States Dollars will be calculated byreference to a rate prevailing on 2nd May 2007. Shareholders holding theirshares through The Central Depository (Pte) Limited ('CDP') in Singapore willreceive United States Dollars unless they elect, through CDP, to receiveSingapore Dollars. -end- For further information, please contact: Hongkong Land LimitedN R Sallnow-Smith (852) 2842 8300G M Brown (852) 2842 8138 Matheson & Co., LimitedPhilip Hawkins (020) 7816 8136 GolinHarrisC T Hew (852) 2522 7928 Weber Shandwick FinancialRichard Hews/ Helen Thomas (020) 7067 0700 Full text of the Preliminary Announcement of Results and the PreliminaryFinancial Statements for the year ended 31st December 2006 can be accessedthrough the Internet at 'www.hkland.com'. This information is provided by RNS The company news service from the London Stock Exchange