CHAIRMAN S STATEMENT. I announce that provisions of approximately HK$1,153. million has been made for the property development

Transcription

1 CHAIRMAN S STATEMENT I announce that provisions of approximately HK$1,153 million has been made for the property development projects in Hong Kong and the investments in Ryoden Development Limited acquired in 1997, resulting in an audited loss of the Group for the year ended 31 December 1999 of HK$472 million, which is HK$453 million less than the loss in the previous year. 9

2 DIVIDENDS The board of directors does not propose the payment of a final dividend for the year ended 31 December 1999 (1998: Nil). No interim dividend was paid during the year (1998: HK1 cent per share). REVIEW OF OPERATIONS As from the second quarter of 1999, the economy of Hong Kong is slowly recovering. With the increase in confidence and influx of funds, the volume of transactions in the stock market increased and reached historic new heights. However, the property market and the sentiments of consumers and investors are still weak. On the other hand, ample supplies also dampen the rise in property prices. In this market environment, the Group has adjusted its management strategy to maintain an appropriate property investment portfolio and geographical distribution. At present, the business of the Group is being steered towards a healthy direction. For the year ended 31 December 1999, properties sold by the Group amounted to 2,180,000 sq.ft. of attributable floor area and an aggregate of approximately HK$2.7 billion in revenue. Fairly satisfactory sales performance was recorded for our PRC properties projects, and turnover doubled from the last year. During the year, all units of Zhong Hai Ya Yuan (North District) in Beijing, which was completed in the year, and over 90% of the units of Glorious City Garden, Phase II B5 in Guangzhou (40% owned) had been sold. In addition, more than 60% of the units in Zhong Hai Ya Yuan (Central District) in Beijing and Dynasty Court in Shenzhen have been satisfactorily pre-sold. During the year, occupation permits were issued for 10 property development projects of the Group with an aggregate attributable gross floor area of approximately 1,650,000 sq.ft. During the year, the Group boosted its land bank by acquiring a development site in Beijing which provides 820,000 sq.ft. of additional gross floor area for future development. At present, the Group has a land bank of over 15,000,000 sq.ft. gross floor area. Most property projects are residential. The land bank in the major cities of Beijing, Shanghai, Guangzhou and Shenzhen in the PRC totalled 13,000,000 sq.ft. in gross floor area terms. The land bank should meet our development need in the next three years and provide a solid basis for the further development of the Group's real estate operation in the PRC. The Group expects that 10 property projects, which provide an aggregate attributable gross floor area of approximately 4,000,000 sq.ft., will be ready for occupation in During the year, the Group secured 37 different construction projects with an aggregate contract value of HK$9 billion. Among these projects, there was the superstructure project at Island Resort with a record contract value of HK$2.16 billion, and 3 other projects in relation to the KCR West Rail Works and the MTR Tseung Kwan O Extension Line. At the end of the year, there were 58 projects under construction and the contract amount attributable was HK$22.4 billion. Projects currently under construction are progressing smoothly. The Group continues to emphasise the diversification of its construction business in the highly-competitive construction market. In 1999, the business operations of Hong Kong Concrete Company Limited and Shenzhen Hailong Cement Co., Ltd., in which the Group has an interest, were making sound progress and started to generate satisfactory return. 10

3 FINANCIAL HIGHLIGHTS During the years, the Group recorded a turnover of HK$3,592 million, a decrease of HK$1,835 million or 34% over This was mainly attributable to a drop in the recorded turnover of property sales over In the light of the continually stagnant property market, the Group made, upon a revaluation on the properties held, an impairment loss of HK$1,109 million on its property interests. During the year, in view of the Statement of Standard Accounting Practice 24 ( SSAP 24 ) Accounting for investments in securities issued by the Hong Kong Society of Accountants ( HKSA ) becoming effective, the Group s accounting policy for investments in securities was changed to adopt this standard and the benchmark treatment was selected. According to SSAP 24, the Group s investments in Ryoden Development Limited ( Ryoden ) will be regarded as other investments, and stated at fair value basis, whereas valuation movement dealt with in the income statement. The accounting treatment specified by SSAP 24 has been applied retrospectively, such that the valuation of the Group s investments in Ryoden resulted in a decrease in the retained profits as at 31 December 1998, and losses in the previous and current years increased by HK$443 million and HK$44 million respectively. Infrastructure project investments generated stable income. In 1999, infrastructure projects that the Group invested all provided satisfactory returns as contracted, with total cash inflow amounting to approximately HK$160 million. During the year, rental income of the Group amounted to HK$148 million, more than half of which was derived from the PRC. As a result, overall impact was slight despite that demand in the property rental market remained sluggish. During the year, the Group actively implemented austerity measures, and at the same time increased income sources. Thus, the operating cost was significantly reduced. Management expenses before apportionment were reduced by nearly HK$44 million. At the year end, cash in hand of the Group amounted to HK$1,594 million, in addition to banking facilities available in excess of HK$2,400 million. On the capital recovery, the Group started pre-sales of unoccupied units during the year, while stable income from infrastructure project investments, rental properties as well as contractual constructions all provided the Group with considerable working capital. Therefore, the Group has sufficient financial resources to cope with the changes in the macro business environment. In the meantime, the Group s financial structure was also suitably flexible to get adapted to the new market environment after the Asian financial turmoil, and to continue to provide the Group with sufficient capital for new investments, creating profits. SHARE ISSUE During the year, following the exercise of the options, the Company issued in total 1,800,000 ordinary shares of HK$0.1 per share. STAFF As of 31 December 1999, the Group had a staff of 1, In consideration of the Group s results, Hong Kong s economic situation and the general practices of other major employers in Hong Kong, the management decided not to conduct annual general salary review for our employees in Only those holding key positions with significant contributions and outstanding performance were given special salary adjustment on individual basis. With the consent of our employees, contributions to the provident fund from both the Group and the employees were suspended with effect from June, 1999.

4 I. Property Development 1. Properties occupied during the year Percentage Name of property of interest District occupied Location attributable Hong Kong (a) Brighton Place 23 Shiu Wo Street, Tsuen Wan, New Territories 100% (b) Graces Court 298 Un Chau Street, Cheung Sha Wan, Kowloon 100% (c) Dynasty Heights New Kowloon Inland Lot No. 5924, 10% Lung Ping Road, Beacon Hill, Kowloon (d) Belair Monte Fanling Sheung Shui Town Lot No. 126, 8% Fanling, New Territories (e) Greenfields Yuen Long Town Lot No. 463, Yuen Long, 7% New Territories Beijing (f) Zhong Hai Ya Yuan 22 Bei Wa Road West, Hai Dian District 100% (North District) Shanghai (g) Hai Tian Garden, Lot No. 1481, Hu Qing Ping Road, 100% Phase I B6-B8 Qingpu County (h) Hai Li Building Lot No. 88, Da Pu Road, Luwan District 55% Shenzhen (i) Graces Gardens In junction of Nanshan Road East, 100% Chuang Ye Road South and Dengliang Road North, Nan Shan Development District Guangzhou (j) Glorious City Garden, 858 Dongfong Dong Road, Dongshan District 40% Phase II B5 12

5 I. Property Development (Cont d) 2. Land bank acquired during the year Unit: sq.ft. Percentage Gross floor Name of project of interest area District and location Intended use attributable attributable Beijing Zhong Hai Zijin Yuan Residential 100% 824,899 The Purple Bamboo Park Northwest, Hai Dian District Total 824, Projects expected to be ready for occupation in 2000 District Name of property Intended use Percentage of interest attributable Hong Kong (a) Ellery Terrace Residential 70% (b) Nerine Cove Residential 60% (c) Island Harbourview Commercial/Residential 10% Beijing (d) Zhong Hai Ya Yuan (Central District) Residential 100% (e) Tuan Jie Hu Garden Residential 35% Shanghai (f) China Overseas Building Commercial & Office 100% (g) Hai Tian Garden, Phase II Residential 100% Guangzhou (h) Zhong Hai Glorious Garden Residential 100% (i) Glorious City Garden, Phase II B1-B4 Residential 40% Shenzhen (j) Dynasty Court Commercial/Residential 100% 13

6 II. Construction and Contracting Business Unit: HK$ million Type of projects Contract amount for new construction projects Contract amount for projects under construction Management 5,812 14,523 Construction 3,221 7,849 Total 9,033 22,372 III. Infrastructure Investments The Group has made investments in various infrastructure projects in the PRC, all of which are operating satisfactorily and continued to generate stable and attractive return for the Group. IV. Property Investments Currently, the Group owns a total of 680,000 sq.ft. of investment properties. During the year, China Overseas Building, which is wholly owned by the Group, and the Horae Place Shopping Mall recorded an occupancy rate of approximately 96% and nearly 80% respectively. V. Investment in the Satellite Digital Network Project The Group established a joint venture with a subsidiary of Xinhua News Agency, an associate of China Aero-space Science & Technology Corporation, SINO Satellite Communications Company Ltd. and First Excel Management Limited to develop the satellite broadband digital network communication business. The aggregate contribution of the Group to the joint venture amounts to HK$50,000,000. This project investment represents the initial step of the Group's investment in information technology business. 14