Corporate Information

Transcription

1 Corporate Information Board of Directors Mr. G. W. J. Li (Chairman) Mr. S. T. H. Ng (Vice Chairman) Mr. J. T. Hung, SBS, JP (Managing Director) Mr. K. H. Leung (Finance Director) Mr. B. M. Chang Sir S. Y. Chung, JP Mr. Q. Y. K. Law Ms. D. Y. F. Lee Mr. W. W. Y. Lee Mr. T. Y. Ng Mr. P. Y. C. Tsui Mr. H. S. S. Wong secretary Mr. W. W. S. Chan, FCIS Registrars Tengis Limited 4th Floor, Hutchison House 10 Harcourt Road Central, Hong Kong Registered Office 23rd Floor, Wheelock House 20 Pedder Street Hong Kong Website : Principal Banker The Hongkong and Shanghai Banking Corporation Limited Auditors PricewaterhouseCoopers 2

2 3

3 FINANCIAL HIGHLIGHTS Restated HK$ Million HK$ Million Results Turnover 3, ,551.0 Operating profit Group profit attributable to shareholders Earnings per share Dividends per share Financial Position Total assets 58, ,300.5 Net debts 15, ,081.7 Shareholders funds 28, ,242.4 Net assets per share HK$13.92 HK$13.41 Net debts to total assets (excluding cash) 27.4% 28.8% Group profit/(loss) Earnings attributable to Shareholders /(loss) Dividends Distribution Financial Year shareholders funds per share per share cover HK$ Million HK$ Million HK HK Times 1991/ , /1993 1, , /1994 2, , /1995 2, , /1996 2, , /1997 2, , /1998 (Restated) (958.0) 39,920.8 (47.3) 28.0 N/A 1998/1999 (Restated) , /2000 (Restated) , / ,

4 Turnover (HK$ Million) Retailing and trading 1,865.7 Sale of property 1,294.1 Property rental Treasury management, investment and others Total 3,761.5 Operating Profit before Borrowing Costs and Provision for Properties (HK$ Million) Retailing and trading 56.8 Sale of property Property rental Treasury management, investment and others Total 1,

5 Chairman s Statement Gonzaga W. J. Li Chairman 6

6 CHAIRMAN S STATEMENT Wheelock and Company Limited s consolidated profit attributable to shareholders for the year ended 31 March 2001 was HK$516.6 million, compared to HK$864.4 million for the previous year. GROUP FOCUS Wheelock and Company Limited and its subsidiaries/associates are engaged in property development/sales and quality retailing in Hong Kong, China Mainland, Singapore and Taiwan. Through its substantial associate Earnings per share were 25.4 cents, compared to 42.6 cents for the previous year. Wharf Holdings, Wheelock is also engaged in core investment businesses in property, CME (communications, Wheelock s investment properties were revalued at 31 March 2001, those owned by its associates were revalued at the respective year end dates. In accordance with the current established accounting standards, Wheelock s investments in listed securities were also stated at market value. On these bases, the consolidated net asset value of the Company as at 31 March 2001 was HK$13.92 per share, compared to HK$13.41 per share a year earlier. media and entertainment) and logistics (container and air cargo terminals). ECONOMIC REVIEW The perceived downturn of the US economy since the beginning of 2001 has slowed down Hong Kong s impressive economic recovery. Despite the strong momentum from last year s double digit GDP growth and a series of interest rate cuts, the major leading indicators of Hong Kong s economy such as GDP growth, unemployment rate, An interim dividend of 2.5 cents per share was paid in January 2001, and the Directors recommend a final dividend of 5.0 cents per share to be approved at the Annual General Meeting. The total dividend for the year will be 7.5 cents per share, the same as last year. deflationary pressure and limited property transactions all dictate an outlook of caution. The general view is that until the US economy comes off the bottom, there is little likelihood of revived robust economic activities. 7

7 CHAIRMAN S STATEMENT Nevertheless, we remain cautiously optimistic that the Hong Kong economy should improve within the next six to 12 months on the expectation of a US economic recovery and the effect of the interest rate cuts filtering through the real economy. Further, the stimulus of China s impending entry into the WTO continues to bring some optimism based on reports that since July 2000, at least one overseas company per week has set up a regional office in Hong Kong aggregating in more than 3,000 regional offices in Hong Kong the highest in Asian cities. China trade is also estimated to double within the five years following its entry into the WTO. Hong Kong has traditionally serviced close to 40 per cent of China trade and this speaks well for Hong Kong s macro economic prospects. PROPERTY Despite a slowdown of transaction activities, rental sentiments have improved and this augurs well for rental earnings improvements related to Wheelock s large investment property portfolio, particularly when all the excessive supply of offices has now been largely absorbed. The success of Wharf s Harbour City and Times Square projects offers great comfort to the Group as a whole, and the passage of time should only bring further improvements. The Gateway project within Harbour City is particularly Main Board Executives Harry S. S. Wong T. Y. Ng Paul Y. C. Tsui Stephen T. H. Ng 8

8 CHAIRMAN S STATEMENT successful in that all three sectors of retail, offices and luxury serviced apartments have leased extremely well. GFA MTRC Kowloon Station Two development Sorrento, and the 2.8-million-square-foot GFA Sham Tseng project Bellagio. Both these developments are As a major property owner and developer, the Wheelock group of companies through Wharf, New Asia Realty ( NART ) and Realty Development ( RDC ) holds some 7.5 million square feet GFA in developable properties in its portfolio. The Wheelock Group conducts its own property development and manages its own properties as well making good progress in construction and in time should yield high revenue potential. Wharf is also close to the launching of three attractive projects on The Peak, namely, Mountain Court, Chelsea Court and the substantial construction at Plantation Road where returns should be enhanced by the scarce supply in the top-end luxury market. as its subsidiaries as co-investor. Wheelock has a robust and successful presence in Wheelock has seen further progress in construction of two focus projects, namely, the 2.3-million-square-foot Singapore through Marco Polo Developments Limited ( MPDL ), a publicly listed Singapore John T. Hung Quinn Y. K. Law K. H. Leung Doreen Y. F. Lee 9

9 CHAIRMAN S STATEMENT vehicle held through NART. MPDL is a leading luxury residential developer in Singapore and recognized to be one of the best managed. It is also one of the largest Hong Kong-owned property companies in the Island Republic. With the successful Ardmore Park development generating approximately S$1 billion profit before tax and the current redevelopment of the now demolished Marco Polo Hotel, MPDL is now cash rich and on the lookout for good investment opportunities. RETAIL Wheelock s retail initiatives are led by the well-known Despite difficulties in the economic climate caused by relatively inactive financial and property markets, Lane Crawford continues to sustain its turnover and positive operating profit. However, the continuing deflationary syndrome has imposed restrictions for pricing flexibility resulting in margins being put under pressure. The company s efforts in customer-oriented promotion strategies, relationship marketing, and effective cost rationalization systems have brought stability to its operations, and the Board is pleased to see Lane Crawford maintaining its lead position in the market with a strong and loyal customer base. Lane Crawford brand which has performed with noticeable improvements in merchandizing and consumer attraction. Acquired last year, Joyce Boutique is focusing on consolidating its businesses and strengthening its core. These two, with the high-end supermarket and lifestyle brand of City Super, bring together a meaningful retail presence of the Wheelock Group with a geographical coverage of Hong Kong, China Mainland, Taiwan and Singapore on a scale that is unmatched in the region, with a high level of trust established with their customers. Lane Crawford s joint venture associate Maison Mode in Shanghai is now generating reasonable profits, and Lane Crawford has opened a store in Shanghai Times Square as a critical step towards Greater China retail coverage which will include Taipei towards the end of WHARF The Wharf group s corporate structure is anchored by property investment with Kowloon Point 10

10 Times Square, Hong Kong 11

11 CHAIRMAN S STATEMENT representing half of its assets. Other properties take up 25 per cent. The other core investments are completed by two other principal arms, namely, CME and logistics. This portfolio offers significant revenue growth and value creation through brands in the coming years. transport links to all parts of the territory. The Government s Dragon theme Beautification Project along the Tsimshatsui promenade currently promoted by the Hong Kong Tourism Board will further enhance the value of Harbour City. PROPERTY With the recovery of the Hong Kong s economy last year, and the absorption of the previous over-supply, the rental market in commercial space has significantly improved and gathering momentum. The new retail extension underneath the Gateway II Towers completed in 1998 has strengthened the prominent position of Harbour City, which enjoys heavy traffic flow and the presence of high brand name stores. Substantial asset value has therefore been added. Canton Road is substantially revitalized and will be further enhanced with time. Street front major deluxe retailers have added greatly to the look of the Canton Road promenade. Substantial premises improvements are being planned by adding value to Ocean Terminal and the revamping of The Marco Polo Hongkong Hotel arcade, including active planning to enhance the quality and look of the Times Square Hong Kong is another major property asset under active management. With a strong brand recognition, Times Square is one of the top ten tourist attractions nominated by the Hong Kong Tourism Board. Being a retail focus in the Causeway Bay hub, it is the most-sought-after exhibition venue for consumer products in Hong Kong. Ocean Terminal roof top as well as the praya from Ocean Terminal to the concourse of the Star Ferry. Kowloon Point dominates Tsimshatsui as the centre of gravity for commercial and leisure activities with The branding initiatives of China Times Squares are underway with Beijing and Shanghai successfully marketed, and Chongqing under construction. 12

12 CHAIRMAN S STATEMENT CME The year 2000 was a milestone growth year for Wharf s CME businesses. This division is growing strongly despite keen competition arising from what than its competitors. On consolidation, a net profit of HK$20 million was reported for the year, representing a huge improvement of HK$257 million over the previous year of is a regulatory-driven business. The tough entry barrier has been overcome and its high operating leverage will offer attractive incremental profit margin growth from the increase of revenue. NEW T&T New T&T has rapidly transformed its core business from IDD to high value fixed lines where entry barriers are higher. In doing so, New T&T has consolidated its position i-cable CABLE TV reported a healthy net profit in the second half of the year, at least a year earlier than expected. The Multimedia division launched a Broadband Internet access service in March 2000 as the fastest growing and most successful competitor to the former monopoly in fixed telecom network services. Where fixed lines represented only 10 per cent of total revenue in 1998, it grew to 27 per cent in 1999 and 50 per cent in and started to report a positive EBITDA before the end of the year. The bundling services to customers through the Triple Play strategy will bring three potentially high earnings streams from video, data and voice. Delivery of voice service is being successfully tested using the voice-over-ip technology revenue was 25 per cent higher than By managing costs at below the 1999 level, New T&T reported an improvement in EBITDA of over HK$200 million, and came close to breaking even at the bottom line. First and early mover advantage has enabled i-cable to roll out service and penetrate the market much faster, more successfully and profitably LOGISTICS Modern Terminals business should significantly benefit from China s impending entry into the WTO. 13

13 CHAIRMAN S STATEMENT As suggested in my Economic Review, China trade is estimated to double within the five years following its entry into the WTO, and Hong Kong has traditionally serviced close to 40 per cent of China trade and this will directly improve the potential at profit and New T&T is on positive EBITDA. The retail brands of Lane Crawford, Joyce and City Super are all doing reasonably well within a highly competitive market, and this improvement of our retail platform is encouraging. Modern Terminals, now a 55 per cent subsidiary of Wharf with stable growth in earnings. The Group refinanced the majority of its secured debts by unsecured loan facilities Container Terminal No. 9 will generate extra capacity from 3.4 million TEUs to 4.5 million TEUs, and the aggregate terminals within this company will occupy some with longer maturity periods and substantial reduction in interest charges. With the gradual reduction of interest rates, borrowing cost could further reduce in the future. 9.5 million square feet of land. Looking forward, we shall continue to build on the Modern Terminals is conservatively leveraged and all financing is non-recourse to the shareholders. This solid financial position will enable Modern Terminals success. Encouraged by the imminence of China s entry into the WTO, we look at the future with a good degree of confidence. to also expand into other areas particularly at the Western Shenzhen ports in Southern China. PROSPECTS AND OUTLOOK On behalf of Shareholders and Directors, I wish to record my heartfelt thanks to the Group s management and staff for their contribution. The Wheelock Group will continue to build assets and value, and we have achieved visible improvements. The completed property projects are now reaping returns. Wharf s investment in i-cable is now in Gonzaga W. J. Li, Chairman Hong Kong, 26 June

14 Network Operation Centre, New T&T 15

15 BUSINESS REVIEW Gateway, Hong Kong 16

16 KEY TO SUCCESS Being an actively-managed conglomerate with a welldiversified portfolio of businesses in the areas of property development, property investment, quality retail, CME(communications, media and entertainment) and logistics, the Wheelock Group has explicitly demonstrated the resilient character of its operations against the wild fluctuations of the global economy and financial markets in the past 12 months. 17

17 BUSINESS REVIEW WHEELOCK PROPERTIES HONG KONG In December 2000, Wheelock Properties launched with good market response the Rose Street project, known as The in Homantin will be developed into eight towers consisting of 700 units with a total GFA of 904,200 square feet. Demolition was completed recently in accordance with the work schedule. Primrose. Out of the 16 completed residential units, over half were sold after the launch at over HK$7,000 per square foot. Apart from The Primrose, the Group also maintained its programme of property sales for the remaining units in various other developments including The Astrid, Forest Hill and My Loft. Bellagio, the Sham Tseng site, is a joint venture development equally owned by Wheelock, New Asia Realty, and the Wharf group. Approval has been received from the Government to increase the total residential area from 2.5 million to 2.8 million square feet, a 12 per cent gain arising from the decking over of the canals adjacent to the site. The number of residential units During the year under review, the Group took an interest of 20 per cent through Realty Development in a joint venture with New World Development, Sino Land, Chinese Estates and Manhattan Garments to bid for and successfully secured the King s Park development. This residential site located to be built has accordingly been increased from 2,756 to 3,354. Foundation works for the whole development and pile caps works for Towers 1 to 9 were completed. Superstructure works are now in progress. Pre-sale for Phases I and II consisting of 1,704 units is targeted to take place in early

18 BUSINESS REVIEW WHEELOCK PROPERTIES Completion of Phases I and II of the development is scheduled for as China s entry into the WTO is likely to be able to revive the residential property market in Hong Kong. Given the Group s sizable property Sorrento, the MTRC Kowloon Station Package Two development, is equally owned by a five-member consortium comprising Wheelock, New Asia Realty, Realty Development and two Wharf group companies. Superstructure works are now in progress and that for Phase I covering 1.2 million square feet GFA commenced in May Pre-sale for Phase I consisting of 1,272 units is planned to take place in the second half of Completion of Phase I of the development is now scheduled for the first quarter of portfolio, mainly represented by its interest in the Sham Tseng site, the Kowloon Station Package Two development and the King s Park Homantin project, the Group is wellpositioned to take advantage of the gradual recovery of the economy in the next several years. SINGAPORE In Singapore, the residential market is expected to stay soft for the rest of The outlook for office rental market remains stable with limited supply of prime office space in the near future. While many With the falling interest rates leading to rising disposable income, improving affordability, and attractive rental yield, a potential catalyst such companies are imposing tighter cost-control measures in anticipation of an economic slowdown, Marco Polo Developments Limited, the Wheelock 19

19 Wheelock Place, Singapore 20

20 BUSINESS REVIEW WHEELOCK PROPERTIES Group s Singapore property arm, will focus on retaining tenants of good standing and continue to uphold a high standard of maintenance for Wheelock Place. planning permission for the redevelopment of this property to 110,200 square feet GFA was obtained in February This redevelopment will only proceed when market conditions improve. The topping-out ceremony of Ardmore Park was held on 5 May 2000 with the construction of this luxury condominium project being ahead of schedule. Out of the total 330 units, 316 have been sold. Staged billings representing 85 per cent of the total sale price of these units sold have been billed and a substantial percentage of those have been collected. The Plans are underway to redevelop the former Marco Polo Hotel into a freehold, luxury high-rise condominium complex with 467,600 square feet in GFA, known as Grange Residences. Foundation works for the new development are progressing according to schedule. Temporary Occupation Permit for the whole development was obtained in May The office tower, levels 3, 4 and 5 of the Wheelock Place podium in Singapore are currently 96 The average occupancy level of Ardmore View is currently at 97 per cent with duration of leases ranging from 12 to 24 months. Provisional per cent let to quality tenants of multinational stature such as Philip Morris, Boeing, Cisco and Colgate-Palmolive. 21

21 Shanghai Times Square, Shanghai 22

22 REGIONAL EXPANSION With its remarkably sizable landbank in Hong Kong, China Mainland and Singapore, the Wheelock Group remains a committed participant in the long-term growth of the property markets in Asia. On the retail front, following the opening of the first Lane Crawford store in China at the new Shanghai Times Square with resounding success in June 2000, the presence of the brand will be extended to Taipei at the end of 2001, marking another milestone in its continued expansion. 23

23 BUSINESS REVIEW RETAIL LANE CRAWFORD INTERNATIONAL Despite the economic climate of Hong Kong being difficult and dragged by the weak financial and property markets, Lane Crawford continued to report a turnover growth and most significantly a floors. The strategy to attract and retain customer through Privilege Card Frequent Purchase Programme proved to be successful in Hong Kong and the China Mainland. With its focused commitment and marketing strategies, Lane Crawford has maintained a leading position in the market with a strong and loyal customer base. positive operating profit. However, the prolonged deflationary scenario has restricted the room for pricing flexibility. Together with the rising cost associated with merchandise sourcing and rent, the profit margin has been under pressure. Overall, it was an extremely challenging year for retailers as consumer spending remained cautious and operating environment became increasingly competitive. With respect to merchandise planning and management, the strategy is to strengthen the management over existing brands as well as to exploit new quality brands and merchandise which match the company s image and market position. On Pedder has been a successful story established both in Hong Kong and Singapore. The fourth On Pedder boutique in Hong Kong was opened in April The company s persistent performance has been mainly attributable to its customer-oriented promotion strategies, The company will continue to focus on maintaining and extending this brand across the region. relationship marketing efforts, effective cost-control systems and enhancement in productivity of selling In China Mainland, Maison Mode continues its 24

24 BUSINESS REVIEW RETAIL leading position in Shanghai by maintaining an upscale image and balanced brand mix. With the high growth in disposable income and living standard in gateway cities such as Shanghai, exceptional performance is achieved. Continued promoting effort has been put into various VIP programmes, bonus plans and VIP special promotional activities to stimulate sales while operating expenses and office overhead were under strict control resulting in cost savings. opportunities in the region as well as to capitalize the Lane Crawford brands, the Group s retail arm is betterpositioned to deliver fairly decent growth in the longer term through both local and regional expansion. The next upcoming exciting event is the opening of Lane Crawford Taipei targeted at the end of JOYCE The Joyce group had managed to turn around and reported a small profit for the first time after the Asian financial crisis. During the year under review, Lane Crawford Shanghai located in the Shanghai Times Square shopping complex started operating with favourable feedback received from numerous valuable customers. The newly-opened store has definitely attracted all high-end shoppers attention in Shanghai. This was attributable partly to higher turnover achieved and partly to the successful cost rationalization programmes, which led to an improvement in operating margin in the 15-month period to 31 March The rebuilding and fine-tuning of the group s business platform continued. During the period, the group opened its first free-standing Joyce Beauty store, four With principal objectives to broaden customer base, enlarge market share, and exploit potential business new Ad Hoc stores and three Hugo Boss outlets. The group is also looking for other expansion opportunities. 25

25 Cable TV Tower, Hong Kong 26

26 STEERING AHEAD Driven by strong recurrent earnings and value creation opportunities originating from its investment flagship property at Kowloon Point, Wharf Holdings, Wheelock s principal associate, is supported by major investments in CME (communications, media and entertainment) and logistics. This portfolio is set to offer significant revenue growth and value creation through brands in the coming years. 27

27 BUSINESS REVIEW WHARF HOLDINGS Wharf is a group driven by strong recurrent earnings and value creation opportunities originating from its investment flagship property at Kowloon Point. Further supported by other major investments in communications, media and entertainment, and logistics businesses, the group is strategically focused on Hong Kong and China Mainland. importers, exporters and manufacturers, the investment property portfolio benefited largely from an influx of fresh foreign capital and the expansion of existing local operators, both eyeing on the soon-toopen China domestic market because of the potential WTO agreement. Tower 6 of Gateway II comprising 780,000 square feet of office space has been released to the market. The great Wharf reported a profit attributable to shareholders of HK$2,480 million for the year ended 31 December Its profit response received is totally unanticipated by many under the recent lacklustre market conditions. before exceptionals grew by 10 per cent when compared to the 1999 figure. PROPERTY Prime properties including Harbour City and Times Square which are virtually freehold with 999-year leases, altogether maintained an average occupancy The two towers of Gateway Apartments provide about 500 serviced apartments. More than 50 per cent of the tenants are multinational corporate tenants and over half of the committed tenancies are for periods of 12 months or more. Comments from the occupants on quality and service have been excellent. of over 90 per cent in year Because of limited availability, shops in Harbour City With typical clientele at Harbour City being mostly China business operators such as trading firms, are under keen demand. Following the opening of the 14,000-square-foot Louis Vuitton shop at Ocean Centre, 28

28 BUSINESS REVIEW WHARF HOLDINGS Gucci has also leased a 9,200-square-foot ground floor shop at Canton Road as its flagship store in Kowloon. of Zou Rong Road and Min Zu Road, the two major pedestrian-only streets in Chongqing. Since the inception of Wharf s programmes on the Mainland s property investment, capital expenditure has been controlled, with around HK$3.7 billion being invested so far. The group aims to roll out the successful brand of Times Square in various key cities. Both Beijing Capital Times Square and Shanghai Times Square started operating in 2000 and average occupancy improved consistently from 30 odd per cent at the beginning to as high as 70 per cent by COMMUNICATIONS, MEDIA AND ENTERTAINMENT ( CME ) Due to visionary investments in brand position, subscriber base, network and servicing infrastructure and content development, together with management s dedicated efforts over the last seven years, Wharf now owns a remarkably sizable and respectable portfolio of CME businesses in Hong Kong. the year end. The commencement of the Chongqing Times Square project coincided nicely with the announcement of the Beijing Central Government s Go West master plan. This project is a mixed development of retail, office and residential with a GFA of 1.6 million square feet, located at the city s prime shopping area, the Liberation Statue Square, which is at the junction Following its successful listing at the end of 1999, i-cable started to report a net profit for fiscal year 2000, one year ahead of market expectations. Having become the first local television operator other than the dominant broadcaster to report a profit in Hong Kong s television history, the company would continue with its Triple Play strategy in Pay TV, 29

29 BUSINESS REVIEW WHARF HOLDINGS Broadband Internet, and Telephony to take advantage of its bundling capability whenever possible. considerations, Galaxy is reported to be still searching for investor funding and was late in meeting the performance bond obligation under its license. In 2000, the Pay TV subscriber base grew by 15 per cent to 520,000, representing a 29 per cent penetration of total homes passed. ARPU went up by five per cent to HK$250 whereas churn rate remained low at 1.5 per cent per month on average. Being the preferred partner for most programmers and content providers, the company managed to conclude a number of renewals and also brand new carriage agreements with major players including HBO, Cinemax, CNN, AXN and Sun TV. Backed by the company s early mover advantage and its highly recognized brandname, Broadband Internet access subscribers grew from a standing start in late March 2000 to over 50,000 before the end of the year. This represented an approximate 25 per cent share of the residential market. Due to the high operating leverage structure, EBITDA breakeven was rapidly achieved within the first nine months of operation on an incremental basis. By year end of 2000, over 900,000 homes in Although several new licenses were awarded in late 2000, the company is confident that its first mover advantage would continue to enable its services to prevail over the competition. In fact, the competitive environment of the sector has changed drastically in the past six months. After the withdrawal of both Star TV and HK Network TV due to various commercial about 4,600 buildings throughout Hong Kong, Kowloon and the New Territories had been covered. The milestone of 1,000,000 was reached two months later, doubling the license commitment to the Government. This represents one of the fastest, if not the fastest, rollouts of Cable Broadband services in any major city in the world. 30

30 BUSINESS REVIEW WHARF HOLDINGS The company commenced its commercial trial for VoIP (Voice-Over-Internet-Protocol) telephony in December, and plans to launch commercial service sometime in 2002 to generate a third major recurring revenue stream. The company s distribution infrastructure will make it one of the only two operators with city-wide coverage. interconnect with all three licensed Mainland operators namely China Telecom, China Unicom, and China Netcom. Together with its earlier investment in the submarine cable linking Japan-US and the alliance with FLAG Telecom and Level-3, New T&T is now well-positioned to become a leading international bandwidth and Being the most competitive and fastest growing fixed line operator in Hong Kong, New T&T had quite an eventful year during It accomplished significant IP backbone player in the market. New cable landing stations were also interconnected with New T&T s fibre network to provide backhaul services. growth in the areas of network coverage, number of customers, number of fixed lines, IDD volume and financial performance, as well as improvement in the company s position along the value chain. Apart from the remarkable 38 per cent growth in total business customers, New T&T also became an important player in providing service for the e- commerce market place. At 31 December 2000, the Having expanded significantly, the company s advanced network now covers almost the entire North Shore of Hong Kong Island, Kowloon Peninsula, and key data & voice locations in the New Territories. For the company s international bandwidth capacity, New T&T became the first operator in Hong Kong to number of total installed fixed lines reached 140,000, representing the second consecutive year with an 80 per cent plus growth rate. Total IDD volume increased by 140 per cent to over 650 million minutes. By managing various cost items below the 1999 level, New T&T reported an impressive improvement in 31

31 BUSINESS REVIEW WHARF HOLDINGS EBITDA and came close to breaking even on the EBIT level. Moreover, contribution from fixed lines, as a percentage of the total revenue, had jumped from 1998 s 10 per cent to end of 2000 s 50 per cent. This underlined the rapid and successful transformation of the company s business in only two years from low value IDD to high value fixed lines, where the entry barriers are much higher and customers are much more loyal, but discerning. LOGISTICS Wharf s interest in Modern Terminals was raised from 50.8 per cent to 55.3 per cent in early Propelled by strong export growth during 2000, South China throughput grew by 2.2 million TEUs, of which Hong Kong s terminals absorbed 55 per cent and Shenzhen 45 per cent. Modern Terminals handled in total 3,073,436 TEUs last year, representing an 18.4 per cent growth against The company s growth compared favourably with the overall growth in Kwai Chung of 12.5 per cent and South China of 17.4 per cent. In anticipation of the potential opportunities brought by WTO, the company continued to invest in various projects in order to solidify its leading position in the sector under the rapidly changing business environment. ModernPorts.com, aimed to improve the overall operating efficiency of both customers and Modern Terminals, was introduced towards the end of Phase 2 has just been launched recently to enhance the number of performable functions provided by this portal. With its eight per cent effective investment in Kaifeng Container Terminals in Western Shenzhen already making a positive contribution to the company s bottomline, a new berth which increases handling capacity by about 400,000 TEUs, became operational in late While continuing with its involvement in the operational management of Shekou Container Terminal 1, the company obtained in-principle approval in early 2001 from the Central Government in Beijing to hold a 20 per cent interest in Shekou Container Terminal 2. 32

32 Disclosure of Further Corporate Information Set out below is information disclosed pursuant to the Rules Governing the Listing of Securities (the Listing Rules ) of The Stock Exchange of Hong Kong Limited (the Stock Exchange ): (A) (I) COMMENTARY ON ANNUAL RESULTS Review of 2000/2001 Results Group profit attributable to Shareholders for the year under review was HK$516.6 million, a decrease of 40.2 per cent from HK$864.4 million. Earnings per share were 25.4 cents compared to 42.6 cents for the previous year. The Group s turnover for the year was HK$3,761.5 million, compared to HK$4,551.0 million for 1999/2000, a decrease of 17.3 per cent, which was principally due to lower property sales revenue recognised by Marco Polo Developments group ( MPDL ) in respect of its sales of Ardmore Park units in Singapore. On retailing and trading side, turnover increased by 34.4 per cent to HK$1,865.7 million resulting from an increase in turnover of Lane Crawford and the acquisition of Joyce Boutique Holdings Limited, a non wholly-owned listed subsidiary, in mid-august The Group s operating profit before borrowing costs decreased by 81.6 per cent to HK$132.3 million from HK$720.1 million achieved in the previous year, mainly as a result of lower contribution derived from MPDL and the increase in provision for impairment in value of properties. MPDL s profit was mainly derived from recognition of a proportion of the pre-sale profit of Ardmore Park of which 15 per cent was recognised in 2000/2001 against 25 per cent for the previous year. As at 31 March 2001, stage billings representing 60 per cent of the total sales price of all the units sold have been billed and fully collected. Temporary Occupation Permit for the whole development of Ardmore Park was obtained in May 2001 and to-date stage billings representing 85 per cent of the total sales price of the 316 units sold have been billed and substantially collected. Despite the difficult retailing environment in Hong Kong, Lane Crawford managed to maintain a satisfactory positive operating profit while the newly acquired Joyce Boutique Holdings Limited turned around from loss and reported a net profit of HK$7.2 million. Provision for impairment in value of properties of HK$1,221.2 million in 2000/2001 included provision of HK$338.7 million made by Realty Development group ( RDC ) for its residential development project in Tuen Mun, industrial/office development project in Kwai Chung and certain land reserved for development. The remaining provision is mainly related to the development project in Sham Tseng. Provision for 1999/2000 is mainly related to property development projects in China Mainland and certain projects in Hong Kong. Included in the operating profit for the year is other net income of HK$442.2 million against HK$327.6 million for 1999/2000, mainly due to increase in profits on disposal of certain securities and the write-back of certain other provisions. 33

33 Disclosure of Further Corporate Information Borrowing costs charged to the consolidated profit and loss account for the year were HK$897.7 million, a decrease of 3.8 per cent as compared with HK$933.5 million for 1999/2000. The share of profits in associates of HK$1,580.4 million decreased by 16.0 per cent from HK$1,882.2 million for 1999/2000, mainly as a result of the decrease in profit contribution from The Wharf (Holdings) Limited ( Wharf ). Wharf reported a profit attributable to shareholders of HK$2,480.0 million for its financial year ended 31 December 2000, compared to HK$3,511.0 million achieved in Wharf s profit for 1999 included a non-recurring gain of HK$3,762.0 million arising from the spin off of i-cable Communications Limited and provisions made for contingencies from litigation case of HK$1,000.0 million and also for certain properties under development of HK$1,508.0 million. Taxation charge for 2000/2001 was HK$253.2 million, against HK$467.0 million in 1999/2000. Lower taxation charge was recorded mainly due to decreased sales revenue recognised by MPDL, and included in 1999/2000 taxation was an additional tax provision of HK$157.4 million made by RDC. The profits shared by minority interests for the year were HK$45.2 million, a decrease of 86.6 per cent from HK$337.4 million in 1999/2000. The decrease was mainly due to decrease in profits of the Group s nonwholly owned subsidiaries. (II) Liquidity and Financial Resources a) At 31 March 2001, the ratio of the Group s net debt to total assets was 27.4 per cent, compared to 28.8 per cent at 31 March At 31 March 2001, the Group s net debt amounted to HK$15,664.5 million, made up of HK$16,963.6 million in debts and HK$1,299.1 million in deposits and cash, a decrease of 2.6 per cent as compared with HK$16,081.7 million at 31 March The debt maturity profile of the Group at 31 March 2001 is analysed as follows: HK$ Million HK$ Million Repayable within 1 year 4, ,806.8 Repayable after 1 year, but within 2 years 7, ,615.0 Repayable after 2 years, but within 5 years 4, , , ,

34 Disclosure of Further Corporate Information b) The following assets of the Group have been pledged for securing bank loan facilities: HK$ Million HK$ Million Fixed assets 3, ,176.1 Long-term investments ,712.7 Properties under development 6, , , ,657.9 c) To minimise exposure on foreign exchange fluctuations, the Group s borrowings are primarily denominated in Hong Kong dollars except that the borrowings for financing Singapore assets are denominated in Singapore dollars. The Group has no significant exposure to foreign exchange fluctuation. d) At 31 March 2001, the Group maintained a portfolio of long-term listed investments with market value of HK$3,324.0 million (2000: HK$3,600.9 million) which primarily comprised blue chip securities. (III) Finance During the financial year, the Group secured and renewed committed banking facilities at lower margins in a total amount of approximately HK$11 billion, of which HK$3.4 billion relates to the refinancing of the MTRC Kowloon Station Package Two development project at favourable terms to replace a previous facility of HK$2.2 billion. In addition, various short-term banking facilities were also secured or renewed. Grace Sign Limited, in which RDC has a 20 per cent interest, has also completed a project finance facility of HK$2.5 billion to finance the development of KIL King s Park site. (IV) Acquisition of Subsidiaries and Associates During the financial year, the Group acquired a controlling interest of 52 per cent in Joyce Boutique Holdings Limited and a 39 per cent interest in City Super Limited. Besides, RDC has participated in a joint venture of which RDC owns 20 per cent to acquire the King s Park site at HK$2,508.0 million. (V) Employee The Group had approximately 2,300 employees as at 31 March Employees are remunerated according to nature of the job and market trend, with built-in merit component incorporated in the annual increment to reward and motivate individual performance. The Group also sponsors external training programmes that are complementary to certain job functions. Total staff costs for the year ended 31 March 2001 was HK$370.1 million. 35

35 Disclosure of Further Corporate Information (B) (I) BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGERS Directors Mr. Gonzaga W. J. Li, Chairman (Age: 72) Mr. Li has been a Director of the Company since He became Chairman of the Company in He is also the chairman of The Wharf (Holdings) Limited ( Wharf ), Harbour Centre Development Limited ( HCDL ), i-cable Communications Limited ( i-cable ), New Asia Realty and Trust Company, Limited ( NART ), Realty Development Corporation Limited ( RDC ) and Marco Polo Developments Limited ( MPDL ) in Singapore and a director of Joyce Boutique Holdings Limited ( Joyce ). Mr. Stephen T. H. Ng, Vice Chairman (Age: 48) Mr. Ng has been a Director of the Company since He became Vice Chairman of the Company in He is also the deputy chairman and managing director of Wharf, the deputy chairman, president and chief executive officer of i-cable, the chairman, president and chief executive officer of both Hong Kong Cable Television Limited ( HKC ) and New T&T Hong Kong Limited ( New T&T ). He led the successful bid for and subsequent implementation of Hong Kong s first cable TV licence. Mr. Ng is also a director of Joyce and he serves as a member of the Hong Kong United States Business Council. Mr. John T. Hung, SBS, JP, Managing Director (Age: 62) Mr. Hung was appointed Executive Director of the Company in He became the Managing Director of the Company in He is also an executive director of Wharf, the vice chairman of HKC, a director of i-cable, Joyce and MPDL. He serves as the Government appointed chairman of the Hong Kong Sports Development Board. Mr. K. H. Leung, Finance Director (Age: 56) Mr. Leung was appointed the Finance Director of the Company in He is also a director of Wharf and NART. Mr. B. M. Chang, Director (Age: 72) Mr. Chang became a Director of the Company in He is also a director of World-Wide Shipping Agency Limited. Sir S. Y. Chung, JP, Director (Age: 83) Sir Sze-Yuen Chung became a Director of the Company in He is also the chairman of The Kowloon Motor Bus Holdings Limited. On 1 July 1997, he was awarded the Grand Bauhinia Medal ( GBM ) of the Government of the Hong Kong Special Administration Region. Mr. Quinn Y. K. Law, Director (Age: 48) Mr. Law became a Director of the Company in He is also a director of Wharf. 36

36 Disclosure of Further Corporate Information Ms. Doreen Y. F. Lee, Director (Age: 45) Ms. Lee became a Director of the Company in She is also a director and the general manager of Harriman Leasing Limited, the managing director of Wharf Estates Management Company Limited, an executive director of Wharf Properties Limited and a director of Harriman Realty Company, Limited. Mr. William W. Y. Lee, Director (Age: 74) Mr. Lee became a Director of the Company in Mr. T. Y. Ng, Director (Age: 53) Mr. Ng became a Director of the Company in He is also a director of Wharf, HCDL, Joyce, NART, RDC and MPDL. Mr. Paul Y. C. Tsui, Director (Age: 54) Mr. Tsui became a Director of the Company in He is also the senior deputy managing director of Wheelock Properties Limited, the senior managing director of Harriman Realty Company, Limited, an executive director of Wharf, a director of HCDL, i-cable, Joyce and MPDL, as well as the group financial controller of the Company and Wharf. Mr. Harry S. S. Wong, Director (Age: 45) Mr. Wong became a Director of the Company in He is also the managing director of Wharf China Limited. Note: Mr. William W. Y. Lee is a brother of Mr. Gonzaga W. J. Li. (II) Senior Managers Various businesses of the Group are respectively under the direct responsibility of the two Directors holding executive offices of the Company as named under (B)(I) above. Only those two Directors are regarded as members of the Group s senior management. (C) PENSION SCHEMES The Group operates a number of pension schemes. Set out below are certain particulars regarding the principal pension scheme (the Scheme ) operated by the Group: (I) Nature of the Scheme The Scheme is a defined contribution scheme. The assets of the Scheme are held separately by an independently administered fund. 37

37 Disclosure of Further Corporate Information (II) Funding of the Scheme The Scheme is funded by contributions from employees and employers. The employees and employers contribute respectively to the Scheme sums which represent percentages of their salaries as defined under the relevant trust deed. Forfeited employers contributions can be used to reduce the existing level of contributions. (III) Cost of the Scheme The employers cost charged to profit and loss account during the year ended 31 March 2001 in respect of the Scheme amounted to HK$11.8 million. During the year, no forfeiture of employers contributions was used to reduce current year s contribution. NOTE: The total employers pension cost in respect of all pension schemes of the Group, including the cost related to the Mandatory Provident Fund which is not operated by the Group, charged to profit and loss account during the year ended 31 March 2001 amounted to HK$18.5 million. (D) MAJOR CUSTOMERS & SUPPLIERS For the financial year ended 31 March 2001: a) the aggregate amount of purchases (not including the purchases of items which are of a capital nature) attributable to the Group s five largest suppliers represented 48 per cent of the Group s total purchases; b) the largest supplier accounted for 23 per cent of the Group s total purchases; c) none of the Directors of the Company or their associates holds, nor does any shareholder owning (to the knowledge of the Directors) more than 5 per cent of the Company s equity capital hold, any interests in any of the Group s five largest suppliers; and d) the aggregate amount of turnover attributable to the Group s five largest customers represented less than 30 per cent of the Group s total turnover. (E) COMPLIANCE WITH CODE OF BEST PRACTICE The Company has complied throughout the year with the Code of Best Practice as set out in Appendix 14 of the Listing Rules on the Stock Exchange. 38

38 Disclosure of Further Corporate Information (F) CONNECTED/RELATED PARTY TRANSACTIONS During the financial year, the Company and/or its subsidiaries (other than such subsidiaries of the Company as are themselves publicly-listed in Hong Kong or their subsidiaries) did not enter into any transaction which was regarded as connected transaction discloseable by the Company under the Listing Rules. Transactions constituting connected transaction(s) for those publicly-listed subsidiaries, which were not subject to any public disclosure by the Company itself, were duly disclosed by the relevant subsidiaries under the Listing Rules. Furthermore, with regard to the Related Party Transactions as disclosed under Note 28 to the Accounts on page 77, none of those transactions constitute connected transactions discloseable by the Company under the Listing Rules. 39

39 Report of the Directors The Directors have pleasure in submitting their Report and the Audited Statement of Accounts for the financial year ended 31 March PRINCIPAL ACTIVITIES AND TRADING OPERATIONS The principal activity of the Company is investment holding and those of its principal subsidiaries are set out on pages 78 and 79. An analysis of the principal activities and geographical locations of trading operations of the Company and its subsidiaries during the financial year is set out in Note 2 to the Accounts on page 60. SUBSIDIARIES Particulars of the Company s principal subsidiaries at 31 March 2001 are set out on pages 78 and 79. RESULTS, APPROPRIATIONS AND RESERVES The results of the Group and appropriations of profits for the financial year ended 31 March 2001 are set out in the Consolidated Profit and Loss Account on page 45. Movements in reserves during the financial year are set out in Note 23 to the Accounts on pages 72 to 74. DIVIDENDS An interim dividend of 2.5 cents per share was paid on 18 January The Directors now recommend the payment of a final dividend of 5.0 cents per share in respect of the financial year ended 31 March 2001, payable on 21 September 2001 to Shareholders on record as at 31 August This recommendation has been incorporated in the Accounts. SHARE CAPITAL During the year, as a result of exercises by certain grantees of options granted under the Company s Executive Share Incentive Scheme, the Company allotted and issued a total of 96,000 ordinary shares of HK$0.50 each, of which 56,000 shares were issued at a price of HK$5.50 per share and 40,000 shares at HK$5.20 per share. FIXED ASSETS Movements in fixed assets during the financial year are set out in Note 12 to the Accounts on pages 66 and 67. BANK LOANS, OVERDRAFTS AND OTHER BORROWINGS Particulars of all bank loans, overdrafts and/or other borrowings of the Company and of the Group as at 31 March 2001 repayable on demand or within a period not exceeding one year are set out in Note 20 to the Accounts on page 70. Those which would fall due for repayment after a period of one year are set out in Note 24 to the Accounts on page