H.k.land Regulatory News (HKLD)

7 Aug 2007 10:05

Hongkong Land Hldgs Ld07 August 2007 To: Business Editor 7th August 2007 For immediate release The following announcement was issued today to a Regulatory Information Serviceapproved by the Financial Services Authority in the United Kingdom. HONGKONG LAND HOLDINGS LIMITEDINTERIM REPORT 2007 Highlights• Positive rental reversions drive growth in earnings and assets• High levels of pre-sales in residential projects• Adjusted net assets per share# up 11% "The outlook for the remainder of the year is encouraging as the Group willcontinue to benefit from positive rental reversions in its key markets." Simon Keswick, Chairman7th August 2007 Results__________________________________________________________________________ (unaudited) Six months ended 30th June 2007 2006 Change US$m US$m %__________________________________________________________________________ Underlying profit attributable to shareholders 155 117 +32 Profit attributable to shareholders 1,202 923 +30 Shareholders' funds 10,209 9,197* +11Adjusted shareholders' funds# 12,150 10,922* +11Net debt 2,322 2,312* -__________________________________________________________________________ USc USc %__________________________________________________________________________Underlying earnings per share 6.73 5.26 +28Earnings per share 52.35 41.49 +26Cash flow per share 10.06 1.66 +506Interim dividend per share 4.00 3.00 +33__________________________________________________________________________ US$ US$ %__________________________________________________________________________Net asset value per share 4.45 4.01* +11Adjusted net asset value per share# 5.29 4.76* +11__________________________________________________________________________ * At 31st December 2006 # 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 open market value as determined by independent valuers. As there is no capital gains tax in territories where the Group has significant leasehold investment properties, no tax would be payable if those properties were to be sold at the amounts included in the financial statements. In relation to leasehold investment properties, however, IFRS require deferred tax on any revaluation amount to be calculated using income tax rates. This is in contrast to the treatment for the revaluation element of freehold properties where IFRS require capital gains tax rates to be used. As Management considers that the Group's long leasehold investment properties have very similar characteristics to freehold property, the adjusted shareholders' funds and adjusted net asset value per share information is presented on the basis that would be applicable if the leasehold properties were freeholds. The adjustments made add back the deferred tax provided in the financial statements as this would not havebeen provided if the properties were freeholds. See note 12. The interim dividend of USc4.00 per share will be payable on 24th October 2007to shareholders on the register of members at the close of business on 31stAugust 2007. The ex-dividend date will be on 29th August 2007, and the shareregisters will be closed from 3rd to 7th September 2007, inclusive. HONGKONG LAND HOLDINGS LIMITEDINTERIM REPORT 2007 OVERVIEW Robust commercial property markets in Hong Kong and Singapore in the first halfof 2007 enabled Hongkong Land to achieve good growth in underlying earnings andto record a further increase in capital values. Progress was also made in theGroup's development projects in key Asian centres. PERFORMANCE Underlying profit rose 32% to US$155 million in the first half of the year dueto higher net rental income and reduced financing charges. The contribution fromresidential property, however, was marginally lower than in the first half of2006. The independent valuation of the Group's commercial property investmentportfolio at the end of June produced a 10% increase in the value of theportfolio. The revaluation surplus net of deferred tax taken to the profit andloss account was US$955 million, compared with US$759 million in the first halfof 2006, leading to reported profit of US$1,202 million, up 30%. The Directors have declared an increased interim dividend of USc4.00 per share,up 33%. GROUP REVIEW Hong Kong_________ In Hong Kong, firm demand for prime Central district office space, generatedprimarily by the financial services sector, remains underpinned by continuingtight supply. Vacancy in the Group's office portfolio at the end of June hadfallen to 3%, and the Group's most recent development, York House, is being letprogressively at premium rents in a rising market. The sale of the Group'snon-core investment property at 1063 King's Road was completed in February. Demand for prime retail space in Hong Kong is being supported by new brandsentering the market and existing tenants seeking to expand. The Group'sportfolio in Central is a beneficiary of this trend and is fully leased. Construction of the Group's two residential development projects at VictoriaRoad and Tai Hang Road is progressing. Singapore__________The strength of the financial services sector is also driving demand for highquality office space in Singapore. One Raffles Quay, developed by a consortiumin which Hongkong Land holds a one-third interest, was fully let on completionin October last year and is now established as the leading office building inSingapore's prime business district. Construction is under way at Marina BayFinancial Centre, which is being developed by the same consortium, with phasedcompletion scheduled for 2010 and 2011 and some 45% of the Phase I office spacealready pre-committed. Foundation work has been completed for Phase I of Marina Bay Residences. All 428units have been pre-sold, and planning has started for the residential tower inPhase II. MCL Land launched three residential projects in Singapore during the first halfof 2007, and virtually all units have been pre-sold. It also secured threeadditional sites that have added some 522,000 sq. ft of developable gross floorarea to its portfolio. The level of MCL Land's profit recognition on developmentprojects in 2007 will depend on whether the 421-unit The Calrose completesbefore the year end or in early 2008. Mainland China______________ The third phase of Central Park, a 40%-owned joint venture residentialdevelopment in Beijing, has been completed. Pre-selling of the 490 units in thefinal phase, which is currently under construction, is under way. In Chongqing,site formation and foundation work for the first phase of the residentialdevelopment at Bamboo Grove, a 50%-owned joint venture, has been completed andthe pre-selling of the 650 units is due to begin in the second half of 2007. Macau_____ Construction of One Central Macau, a retail, residential and hotel developmentproject in which the Group has a 49% interest, is proceeding well. Pre-leasingof the retail space has met with an excellent response, and over 96% of the 796residential units have been pre-sold. The remaining units are being held forsale closer to project completion, which is due in 2009. FINANCE Net debt at 30th June 2007 was US$2.3 billion. Although the average net debtduring the period was little changed from the first half of 2006, financingcosts were lower due to higher interest income earned on US dollar cashdeposits. OUTLOOK In conclusion, the Chairman, Simon Keswick said, "The outlook for the remainderof the year is encouraging as the Group will continue to benefit from positiverental reversions in its key markets." _______________________________________________________________________________Hongkong Land Holdings Limited Consolidated Profit and Loss Account _______________________________________________________________________________ (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m _______________________________________________________________________________ Revenue (note 2) 392.9 208.0 555.9 Cost of sales (187.3) (48.4) (197.5) ________ ________ ________ Gross profit 205.6 159.6 358.4 Other income 0.8 21.1 23.0 Administrative and other expenses (20.3) (14.9) (33.7) ________ ________ ________ 186.1 165.8 347.7 Increase in fair value of investment properties 1,161.9 914.4 1,952.6 Asset impairment provisions, reversals and disposals (note 3) 1.3 (6.5) (5.8) ________ ________ ________ Operating profit (note 4) 1,349.3 1,073.7 2,294.5 Net financing charges (22.7) (37.4) (72.3) ________ ________ ________Share of results of joint ventures excluding change in fair value of investment properties 15.8 2.3 0.9 Share of change in fair value of investment properties of joint ventures 91.9 53.7 49.8 ________ ________ ________ Share of results of joint ventures (note 5) 107.7 56.0 50.7 ________ ________ ________ Profit before tax 1,434.3 1,092.3 2,272.9 Tax (note 6) (231.0) (167.5) (365.5) ________ ________ ________ Profit after tax 1,203.3 924.8 1,907.4 ________ ________ ________ Attributable to: Shareholders of the Company 1,201.6 923.4 1,900.9 Minority interests 1.7 1.4 6.5 ________ ________ ________ 1,203.3 924.8 1,907.4 ________ ________ ________ _______________________________________________________________________________ USc USc USc _______________________________________________________________________________ Earnings per share (note 7) - basic 52.35 41.49 85.31 - diluted 50.49 39.92 82.35 Underlying earnings per share (note 7) - basic 6.73 5.26 10.98 - diluted 6.73 5.26 10.98 _______________________________________________________________________________ _______________________________________________________________________________Hongkong Land Holdings Limited Consolidated Balance Sheet _______________________________________________________________________________ (unaudited) At 31st At 30th June December 2007 2006 2006 US$m US$m US$m _______________________________________________________________________________ Net operating assets Tangible assets (note 8) Investment properties 12,754.9 10,752.8 11,650.7 Others 13.5 13.0 13.1 ________ ________ ________ 12,768.4 10,765.8 11,663.8 Joint ventures 1,260.5 846.5 894.5 Other investments 16.1 13.4 16.1 Deferred tax assets 2.0 0.7 0.5 Pension assets 14.2 10.7 13.9 Other non-current assets 30.7 9.2 22.9 ________ ________ ________ Non-current assets 14,091.9 11,646.3 12,611.7 ________ ________ ________ Properties for sale 843.5 641.8 800.3 Debtors, prepayments and others 233.5 192.0 208.0 Bank balances 1,062.6 832.1 1,166.5 ________ ________ ________ 2,139.6 1,665.9 2,174.8 Non-current assets classified as held for sale (note 9) 11.3 - 188.8 ________ ________ ________ Current assets 2,150.9 1,665.9 2,363.6 ________ ________ ________ Creditors and accruals (535.5) (384.3) (403.4) Current borrowings (note 10) (113.1) (288.6) (116.8) Current tax liabilities (39.4) (19.2) (25.8) ________ ________ ________ (688.0) (692.1) (546.0) Liabilities directly associated with non-current assets classified as held for sale (note 9) (0.6) - (3.0) ________ ________ ________ Current liabilities (688.6) (692.1) (549.0) ________ ________ ________ Net current assets 1,462.3 973.8 1,814.6 Long-term borrowings (note 10) (3,271.6) (2,956.4) (3,361.9) Deferred tax liabilities (1,942.6) (1,555.6) (1,739.6) Other non-current liabilities (26.4) (5.3) (21.3) ________ ________ ________ 10,313.6 8,102.8 9,303.5 ________ ________ ________ Total equity Share capital 229.5 229.5 229.5 Revenue and other reserves 9,979.5 7,853.5 8,967.8 Own shares held - (77.7) - ________ ________ ________ Shareholders' funds (note 11) 10,209.0 8,005.3 9,197.3 Minority interests 104.6 97.5 106.2 ________ ________ ________ 10,313.6 8,102.8 9,303.5 ________ ________ _______________________________________________________________________________________ _______________________________________________________________________________ Hongkong Land Holdings Limited Consolidated Statement of Recognised Income and Expense _______________________________________________________________________________ (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m _______________________________________________________________________________Net exchange translation differences (32.2) 6.2 22.3 Actuarial gains on defined benefit pension plans - - 3.5 Revaluation of other investments - fair value gains - - 2.7 - reversal of loss on business combination - 0.6 0.6 Gains/(losses) on cash flow hedges 1.6 (13.4) (24.7) Tax on items taken directly to equity (1.0) 1.6 2.4 ________ ________ ________ Net (expense)/income recognised directly in equity (31.6) (5.0) 6.8 Transfer 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 2.4 5.1 9.1 Profit after tax 1,203.3 924.8 1,907.4 ________ ________ ________ Total recognised income and expense for the period 1,174.1 924.9 1,920.3 ________ ________ ________ Attributable to: Shareholders of the Company 1,172.4 923.5 1,913.8 Minority interests 1.7 1.4 6.5 ________ ________ ________ 1,174.1 924.9 1,920.3 ________ ________ _______________________________________________________________________________________ _______________________________________________________________________________Hongkong Land Holdings Limited Consolidated Cash Flow Statement _______________________________________________________________________________ (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m _______________________________________________________________________________Operating Activities ________ ________ ________ Operating profit 1,349.3 1,073.7 2,294.5 Depreciation 0.5 0.4 1.2 Negative goodwill on acquisition of a subsidiary - (14.1) (14.1) Increase in fair value of investment properties (1,161.9) (914.4) (1,952.6) Asset impairment provisions, reversals and disposals (1.3) 6.5 5.8 Decrease/(increase) in working capital 77.3 (81.1) (198.4) Interest received 49.5 35.5 66.2 Interest and other financing charges paid (65.3) (59.6) (121.8) Tax paid (5.8) (5.4) (12.5) Dividends received 0.4 6.3 15.0 ________ ________ ________ Cash flows from operating activities 242.7 47.8 83.3 Investing activities ________ ________ ________ Major renovations expenditure (11.8) (10.9) (33.5) Development capital expenditure (7.3) (26.5) (40.1) Purchase of a subsidiary (note 14) - (237.8) (237.8) Investments in and loans to joint ventures (255.2) (115.4) (167.3) Disposal of joint ventures and other investments 0.6 0.7 1.5 Disposal of an investment property 168.6 - 18.9 ________ ________ ________ Cash flows from investing activities (105.1) (389.9) (458.3) Financing activities ________ ________ ________Drawdown of bank loans 230.3 425.7 571.5 Repayment of bank loans/notes (309.2) (218.8) (193.1) Disposal of own shares held - - 268.5 Dividends paid by the Company (159.2) (125.5) (199.1) Dividends paid to minority shareholders (3.6) (2.7) (2.7) ________ ________ ________ Cash flows from financing activities (241.7) 78.7 445.1 Effect of exchange rate changes 1.8 2.5 3.7 ________ ________ ________ Net (decrease)/increase in cash and cash equivalents (102.3) (260.9) 73.8 Cash and cash equivalents at beginning of period 1,163.7 1,089.9 1,089.9 ________ ________ ________ Cash and cash equivalents at end of period 1,061.4 829.0 1,163.7 ________ ________ _______________________________________________________________________________________ ________________________________________________________________________________Hongkong Land Holdings Limited Notes ________________________________________________________________________________ 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information contained in this announcement has been based on the unaudited interim condensed financial statements, which have been prepared in accordance with IAS 34 - Interim Financial Reporting. In 2007, the Group adopted the following Standards and interpretations to existing Standards which are relevant to its operations: IFRS 7 Financial Instruments: Disclosures IAS 1 (amended 2005) Presentation of Financial Statements - Capital Disclosures IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment There have been no changes to the accounting policies described in the 2006 annual financial statements as a result of adoption of the above Standards and interpretations. 2. REVENUE Six months ended 30th June 2007 2006 US$m US$m _________________________ By business Commercial property ________ ________ Rental income 206.7 159.9 Service income 47.8 47.0 ________ ________ 254.5 206.9 Residential property ________ ________ Rental income 1.3 1.1 Sales of residential properties 137.1 - ________ ________ 138.4 1.1 ________ ________ 392.9 208.0 ________ ________ Service income in Commercial property includes service and management charges and hospitality service income. 3. ASSET IMPAIRMENT PROVISIONS, REVERSALS AND DISPOSALS Six months ended 30th June 2007 2006 US$m US$m _________________________ Other asset impairment provision - (7.2) Other asset impairment reversals 1.3 0.7 ________ ________ 1.3 (6.5) ________ ________ By business Commercial property 0.7 (7.2) Corporate 0.6 0.7 ________ ________ 1.3 (6.5) ________ ________ 4. OPERATING PROFIT Six months ended 30th June 2007 2006 US$m US$m _________________________ By business Commercial property 201.4 158.7 Residential property 0.1 17.6 Corporate (15.4) (10.5) ________ ________ 186.1 165.8 Increase in fair value of investment properties 1,161.9 914.4 Asset impairment provisions, reversals and disposals (note 3) 1.3 (6.5) ________ ________ 1,349.3 1,073.7 ________ ________ 5. SHARE OF RESULTS OF JOINT VENTURES Six months ended 30th June 2007 2006 US$m US$m _________________________ By business Commercial property 89.9 50.2 Residential property 17.8 5.8 ________ ________ 107.7 56.0 ________ ________ Results are shown after tax and minority interests. 6. TAX Six months ended 30th June 2007 2006 US$m US$m _________________________ Current tax 20.6 9.8 Deferred tax - changes in fair value of investment properties 206.9 155.6 - other temporary differences 3.5 2.1 ________ ________ 231.0 167.5 ________ ________ 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$1,201.6 million (2006: US$923.4 million) and on the weighted average number of 2,295.2 million (2006: 2,225.6 million which excluded 69.6 million shares in the Company held by a wholly-owned subsidiary) shares in issue during the period. Diluted earnings per share are calculated on profit attributable to shareholders of US$1,211.4 million (2006: US$930.0 million),which is after adjusting for the effects of the conversion of convertible bonds, and on the weighted average number of 2,399.1 million (2006: 2,329.5 million) shares in issue during the period. Earnings per share are additionally calculated based on underlying profit attributable to shareholders. A reconciliation of profit is set out below: Six months ended 30th June 2007 2006 US$m US$m _________________________ Underlying profit attributable to shareholders 154.5 117.1 Revaluation surpluses of investment properties 1,161.9 914.4 Deferred tax charges on revaluation surpluses of investment properties (206.9) (155.6) Share of revaluation surpluses of investment properties of joint ventures (net of deferred tax) 91.9 53.7 Asset impairment provisions, reversals and disposals 1.3 (6.5) Share of asset disposals of joint ventures 0.4 0.5 Minority interests (1.5) (0.2) ________ ________ Profit attributable to shareholders 1,201.6 923.4 Interest expense on convertible bonds (net of tax) 9.8 6.6 ________ ________ Profit for calculation of diluted earnings per share 1,211.4 930.0 ________ ________ 8. TANGIBLE ASSETS Year ended 31st Six months ended 30th June December 2007 2006 2006 US$m US$m US$m _______________________________________________ Net book value at beginning of period 11,663.8 9,791.0 9,791.0 Exchange rate adjustments (61.7) (4.1) (0.5) New subsidiary - 25.9 25.9 Additions 15.9 39.3 85.2 Depreciation (0.5) (0.4) (1.2) Disposals (1.2) (0.3) (0.3) Net revaluation surplus 1,161.9 914.4 1,952.6 Classified as non-current assets held for sale (9.8) - (187.8) Transfer to properties for sale - - (1.1) ________ ________ _________ Net book value at end of period 12,768.4 10,765.8 11,663.8 ________ ________ _________ 9. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE The non-current assets classified as held for sale at 30th June 2007 were related to an investment property situated in Malaysia, which is expected to be sold during the year. 10. BORROWINGS At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ______________________________________________ Current ________ ________ _________ Bank overdrafts 1.2 3.1 2.8 Short-term borrowings 38.4 57.9 103.2 Current portion of long-term borrowings 73.5 227.6 10.8 ________ ________ _________ 113.1 288.6 116.8 Long-term borrowings ________ ________ _________ Bank loans 1,385.3 1,108.6 1,467.7 7% United States Dollar bonds due 2011 614.0 617.1 617.2 5.5% United States Dollar bonds due 2014 474.7 467.1 487.5 3.01% Singapore Dollar notes due 2010 209.5 195.8 206.7 3.65% Singapore Dollar notes due 2015 243.2 231.4 242.2 2.75% United States Dollar convertible bonds due 2012 344.9 336.4 340.6 ________ ________ _________ 3,271.6 2,956.4 3,361.9 ________ ________ _________ 3,384.7 3,245.0 3,478.7 ________ ________ _________ At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ______________________________________________ Secured 221.2 134.9 242.1 Unsecured 3,163.5 3,110.1 3,236.6 ________ ________ _________ 3,384.7 3,245.0 3,478.7 ________ ________ _________ 11. SHAREHOLDERS' FUNDS Year ended 31st Six months ended 30th June December 2007 2006 2006 US$m US$m US$m ______________________________________________ At beginning of period 9,197.3 7,215.3 7,215.3 Recognised income and expense attributable to shareholders of the Company 1,172.4 923.5 2,104.6 Dividends (note 13) (160.7) (133.5) (200.3) Disposal of own shares held - - 77.7 ________ ________ _________ At end of period 10,209.0 8,005.3 9,197.3 ________ ________ _________ 12. NET ASSET VALUE PER SHARE Net asset value per share is calculated on shareholders' funds of US$10,209.0million (2006: US$8,005.3 million) and on 2,295.2 million (2006: 2,225.6 millionwhich excluded 69.6 million shares in the Company held by a wholly-ownedsubsidiary) shares issued at the period end. Net asset value per share is additionally calculated based on adjustedshareholders' funds. The difference between shareholders' funds and adjustedshareholders' funds is reconciled as follows: At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ______________________________________________ Shareholders' funds 10,209.0 8,005.3 9,197.3 Deferred tax on revaluation surpluses of investment properties 1,904.9 1,524.7 1,708.1 Share of deferred tax on revaluation surpluses of investment properties of joint ventures 35.8 17.3 16.7 ________ __________ ________ Adjusted shareholders' funds 12,149.7 9,547.3 10,922.1 ________ __________ ________ 13. DIVIDENDS Six months ended 30th June 2007 2006 US$m US$m _________________________ Final dividend in respect of 2006 of USc7.00 (2005: USc6.00) per share 160.7 137.7 Less dividends paid on the shares held by a wholly-owned subsidiary - (4.2) ________ ________ 160.7 133.5 ________ ________ An interim dividend in respect of 2007 of USc4.00 (2006: USc3.00) per share amounting to a total of US$91.8 million (2006: US$68.9 million) is declared by the Board and will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2007. 14. PURCHASE OF A SUBSIDIARY Net cash outflow in 2006 was related to the acquisition of 77.4% interest in MCL Land Limited. 15. CASH FLOW PER SHARE Cash flow per share is based on cash flows from operating activities less major renovations expenditure amounting to US$230.9 million (2006: US$36.9 million) and is calculated on the weighted average of 2,295.2 million (2006: 2,225.6 million which excluded 69.6 million shares in the Company held by a wholly-owned subsidiary) shares in issue during the period. 16. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ______________________________________________ Capital commitments 99.1 117.2 64.6 ________ ________ _________ Contribution to joint ventures 761.2 717.7 1,060.3 ________ ________ _________ Various Group companies are involved in litigation arising in the ordinary course of their respective businesses. Having reviewed outstanding claims and taking into account legal advice received, the Directors are of the opinion that adequate provisions have been made in the financial statements. The interim dividend of USc4.00 per share will be payable on 24th October 2007 to shareholders on the register of members at the close of business on 31st August 2007. The ex-dividend date will be on 29th August 2007, and the share registers will be closed from 3rd to 7th September 2007, inclusive. Shareholders will receive their dividends in United States Dollars, unless they are registered on the Jersey branch register where they will have the option to elect for Sterling. These shareholders may make new currency elections by notifying the United Kingdom transfer agent in writing by 5th October 2007. The Sterling equivalent of dividends declared in United States Dollars will be calculated by reference to a rate prevailing on 10th October 2007. Shareholders holding their shares through The Central Depository (Pte) Limited ('CDP') in Singapore will receive United States Dollars unless they elect, through CDP, to receive Singapore Dollars. -end- For further information, please contact: Hongkong Land Limited Y K Pang (852) 2842 8428G M Brown (852) 2842 8138 Matheson & Co., Limited Philip Hawkins (020) 7816 8136 GolinHarris C T Hew (852) 2522 7928 Weber Shandwick Financial Richard Hews / Georgia Dempsey (020) 7067 0700 This and other Group announcements can be accessed through the Internet at'www.hkland.com'. This information is provided by RNS The company news service from the London Stock Exchange