H.k.land Regulatory News (HKLD)

Announcement

28th July 2022

The following announcement was issued today to a Regulatory Information Service approved by the Financial Conduct Authority in the United Kingdom.

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2022

Highlights

· Underlying profit up 8%

· Higher profits from Development Properties

· Investment Properties profits marginally lower

· Group's financial position remains strong

· Additional US$500 million share buyback announced

"Resilient financial performance at Hongkong Land in the first half of 2022 was pleasing to see, although contracted sales of China Development Properties were affected by weak market sentiment. The Group's full-year underlying profits are expected to be significantly lower than the prior year. This is primarily due to the planned timing of sales completions and the impact of pandemic-related restrictions on construction activities on the Chinese mainland, which will result in some completions being deferred from the second half of 2022 into 2023."

Ben Keswick

Chairman

Results

The interim dividend of US¢6.00 per share will be payable on 12th October 2022 to shareholders on the register of members at the close of business on 19th August 2022.

HONGKONG LAND HOLDINGS LIMITED

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2022

OVERVIEW

Anti-pandemic measures taken across China led to subdued consumer demand in the Group's retail and residential properties businesses in the period, although the impact on underlying profit in the first half of the year was modest. Profits from the Group's Investment Properties business were marginally lower than the same period last year, while a greater number of residential sales completions in China resulted in a higher contribution from the Development Properties business.

PERFORMANCE

Underlying profit attributable to shareholders was US$425 million, US$31 million higher than the prior year.

Profit attributable to shareholders was US$292 million in the first half of 2022, compared to a loss of US$865 million in the first half of 2021. This is after including losses mainly arising from Investment Property revaluations of US$133 million in 2022 and US$1,259 million in 2021.

The net asset value per share at 30th June 2022 was US$14.99, compared with US$15.05 at the end of 2021.

The Directors are recommending an interim dividend of US¢6.00 per share.

GROUP REVIEW

Investment Properties

In Hong Kong, anti-pandemic measures introduced in the early part of the year impacted the number of new office leasing enquiries and resulted in the Group providing rental support to a select number of retail tenants. Despite these challenges, the Group's Central office portfolio continued to benefit from a flight to quality, as a number of new tenants committed to long-term leases.

Physical vacancy was 5.4% at the end of June 2022, compared to 5.2% at the end of 2021 and, on a committed basis, it was 5.1%, compared to 4.9% at the end of 2021. Rental reversions were negative, reflecting lower market rents. Average office rents were HK$112 per sq. ft. in the first half of 2022, compared to HK$118 per sq. ft. and HK$115 per sq. ft. in the first and second halves of 2021, respectively.

Vacancy at the Group's LANDMARK retail portfolio was unchanged from the end of 2021, although base rental reversions remained negative. Tourism has not yet returned to Hong Kong, due to a combination of travel and quarantine restrictions, adversely impacting retail sales levels. Average retail rents were HK$168 per sq. ft. in the first half of 2022, compared with HK$180 per sq. ft. and HK$190 per sq. ft. in the first and second halves of 2021, respectively. These average rents included the impact of temporary rental support.

Footfall and tenant sales at the Group's retail operations in Beijing and Macau were also negatively impacted by pandemic-related restrictions, although a number of luxury brands opened new stores as planned despite the market challenges.

In Shanghai, city-wide lockdowns saw development activities at the multi-phase West Bund site suspended for over two months, although construction has since resumed. 

In Singapore, the Group's office portfolio continued to benefit from healthy leasing momentum, with average office rents increasing to S$10.5 per sq. ft. in the first half of 2022, compared to S$10.2 per sq. ft. and S$10.3 per sq. ft. in the first and second halves of 2021, respectively. On a committed basis, vacancy in the Group's office portfolio remained low at 3.0%, compared with 2.9% at the end of 2021.

Development Properties

On the Chinese mainland, there were more sales completions in the first half of 2022, resulting in higher profits than the same period last year. 

Pandemic-related shutdowns impacted construction progress at the Group's mixed-use Galaxy Midtown project in Shanghai, possibly delaying anticipated sales completions from the end of 2022 into early 2023.

Market sentiment was weak in a majority of the cities where the Group has a presence, impacting contracted sales despite the continued relaxation of cooling measures. The Group's attributable interest in contracted sales was US$419 million in the first half of 2022, compared to US$1,360 million and US$1,288 million in the first and second halves of 2021, respectively. At 30th June 2022, the Group had US$2,425 million in sold but unrecognised contracted sales, compared with US$2,853 million at the end of 2021.

Results from the Group's residential development activities in Singapore declined compared to the first half of 2021, primarily due to lower completion progress on projects. Pre-sales at the 407-unit Piccadilly Grand project commenced in May 2022 and it is 75% sold. The Group's attributable interest in contracted sales was US$270 million in the first half of 2022, compared to US$172 million and US$156 million in the first and second halves of 2021, respectively. 

Sales demand for the Group's projects in the rest of Southeast Asia was generally subdued.

Business Development

On the Chinese mainland, the Group secured a 34% interest in a primarily residential site in Xuhui District in Shanghai, adjacent to our 1.1 million sq. m. mixed-used project in West Bund. The site has an attributable developable area of 18,700 sq. m. and will feature six high-rise apartment blocks with over 470 premium residential units.

In Singapore, the Group acquired a 49% interest in a residential site in the Tanjong Katong area with a developable area of 599,000 sq. ft., which is expected to yield 638 units.

Financing

Net debt at 30th June 2022 was US$6.1 billion, up from US$5.1 billion at the end of 2021, primarily due to lower residential pre-sale proceeds, investments in recently acquired development sites and the buyback of Group shares. 

Net gearing was 18%, compared with 15% at the end of last year. As at 30th June 2022, the Group had committed liquidity of US$2.6 billion, compared to US$4.0 billion at the end of 2021, with an average debt tenor of 6.4 years, compared to 6.5 years at the end of 2021. 55% of the Group's interest rate on debt is at fixed rates, with an average hedge tenor of 7.3 years.

In September 2021, the Group announced a US$500 million share buyback programme, of which US$491 million had been invested up to 22nd July 2022, reducing issued share capital by 4%. An additional US$500 million has been allocated to buy back shares until the end of 2023.

OUTLOOK

Resilient financial performance at Hongkong Land in the first half of 2022 was pleasing to see, although contracted sales of China Development Properties were affected by weak market sentiment. The Group's full-year underlying profits are expected to be significantly lower than the prior year. This is primarily due to the planned timing of sales completions and the impact of pandemic-related restrictions on construction activities on the Chinese mainland, which will result in some completions being deferred from the second half of 2022 into 2023.

Ben Keswick

Chairman