TIDMHKLD TIDMJAR
RNS Number : 5213D
Hongkong Land Hldgs Ltd
03 March 2022
Announcement
3rd March 2022
The following announcement was issued today to a Regulatory
Information Service approved by the Financial Conduct Authority in
the United Kingdom.
HONGKONG LAND HOLDINGS LIMITED
2021 PRELIMINARY ANNOUNCEMENT OF RESULTS
Highlights
-- Stable underlying profit
-- Resilient Investment Properties performance
-- Higher residential profits in China
-- 12 new development projects secured
-- US$500m share buyback in progress
"The Group delivered a resilient performance in 2021, against
the backdrop of continued macroeconomic challenges in the Group's
key markets. While the profit contribution from the Group's prime
Investment Properties portfolio is expected to largely remain
stable in 2022, lower profits are anticipated from the Development
Properties business, primarily due to the timing of sales
completions in China."
Ben Keswick
Chairman
Results
Year ended 31st December
2021 2020 Change
US$m US$m %
Underlying profit attributable to
shareholders(*) 966 963 -
Loss attributable to shareholders (349) (2,647) -87
Shareholders' funds 34,584 35,709 -3
Net debt 5,104 4,568 +12
------------------------------------------ -------- --------- -------
USc USc %
------------------------------------------ -------- --------- -------
Underlying earnings per share(*) 41.49 41.27 +1
Earnings per share (15.00) (113.43) -87
Dividends per share 22.00 22.00 -
------------------------------------------ -------- --------- -------
US$ US$ %
------------------------------------------ -------- --------- -------
Net asset value per share 15.05 15.30 -2
------------------------------------------ -------- --------- -------
* The Group uses 'underlying profit attributable to shareholders'
in its internal financial reporting to distinguish between
ongoing business performance and non-trading items, as more
fully described in
Note 27 to the financial statements. Management considers
this to be a key measure which provides additional information
to enhance understanding of the Group's underlying business
performance.
The final dividend of USc16.00 per share will be payable on 11th
May 2022, subject to approval at the Annual General Meeting to be
held on 5th May 2022, to shareholders on the register of members at
the close of business on 18th March 2022.
HONGKONG LAND HOLDINGS LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEARED 31ST DECEMBER 2021
OVERVIEW
Hongkong Land's performance remained resilient in 2021 despite
the continued impact of the pandemic and related travel
restrictions. Profits from the Group's Investment Properties
business were in line with the prior year. Retail rental income
increased during the year, although this was offset by lower office
rents in Hong Kong. Increased residential sales completions in
China resulted in a higher contribution from the Development
Properties business. Good progress was made on replenishing the
Group's land bank, with nine new projects secured in China and
three in Singapore.
PERFORMANCE
Underlying profit attributable to shareholders remained broadly
in line with the prior year at US$966 million.
Including net losses of US$1,315 million resulting primarily
from lower valuations of the Group's investment properties, the
loss attributable to shareholders was US$349 million in 2021. This
compares to a loss of US$2,647 million in 2020, which included a
US$3,610 million reduction in property valuations.
The net asset value per share at 31st December 2021 was
US$15.05, compared with US$15.30 at the end of 2020.
The Directors are recommending a final dividend of USc16.00 per
share, providing a total dividend for the year of USc22.00 per
share, unchanged from last year.
GROUP REVIEW
Investment Properties
The Group's Central office portfolio in Hong Kong continued to
perform well overall. Despite the current market downturn, Central
rents declined to a lesser extent than the broader market. At the
end of 2021, physical vacancy was 5.2%, compared to 6.3% at the end
of 2020, and on a committed basis it was 4.9%, compared to 5.9% at
the end of 2020. Average office rents were HK$117 per sq. ft in
2021, decreasing from HK$120 per sq. ft in the prior year.
The Central LANDMARK retail portfolio remained effectively fully
occupied and saw improved tenant sales due to a modest recovery in
consumer sentiment. Average retail rents in 2021 increased to
HK$190 per sq. ft from HK$164 per sq. ft in 2020, primarily due to
the reduction of temporary rent relief provided to tenants, despite
negative base rental reversions for the year.
The value of the Group's Hong Kong Investment Properties
portfolio decreased by 5% compared to the prior year, due to lower
open market rents, with no change in capitalisation rates.
In Singapore, positive rental reversions continued, with average
office rents increasing to S$10.3 per sq. ft in 2021 from S$9.9 per
sq. ft in 2020. On a committed basis, vacancy in the Group's office
portfolio remained low at 2.9%, compared with 2.1% at the end of
2020. The value of the Group's Singapore Investment Properties
portfolio increased by 1% compared to the prior year.
In Beijing, trading performance at WF CENTRAL continued to
benefit from the strength of luxury retail sentiment in China, with
tenant sales and footfall in 2021 exceeding those in 2020.
In Shanghai, construction is proceeding on schedule at the
Group's 43%-owned prime 1.1 million sq. m. mixed-use development on
the West Bund, with completion expected in multiple phases from
2023 to 2027.
Development Properties
In China, the profit contribution from the Group's Development
Properties business increased compared to the prior year, due to
more residential sales completions. Despite market sentiment
weakening in the second half of the year amidst tightened credit
conditions for the sector, contracted sales performance at the
Group's projects remained satisfactory, reflecting the superior
locations of its developments in Tier 1 and 2 cities. The Group's
attributable interest in contracted sales in 2021 was US$2,648
million, compared to US$2,135 million in 2020. At 31st December
2021, the Group had an attributable interest of US$2,853 million in
sold but unrecognised contracted sales, compared with US$2,584
million at the end of 2020.
In April 2021, the Group launched a seven-level shopping mall in
Chongqing, with a net leasable area of 72,000 sq. m. under a new
lifestyle retail brand - The Ring. This property is the first in a
series of malls under development using the new brand.
In Singapore, Development Properties profits recognised in 2021
remained largely unchanged compared to the prior year. The fully
sold 1,404-unit Parc Esta project is expected to be completed in
2022, while pre-sales at the 638-unit Leedon Green project reached
45% at year-end, with completion expected in 2023. The Group's
attributable interest in contracted sales was US$328 million,
compared to US$632 million in the prior year, which benefited from
the sales launch of the Parc Esta project. It is too early to
assess the impact of the cooling measures introduced in late 2021,
after a strong recovery in the residential market.
In the rest of Southeast Asia, market sentiment has seen
moderate improvements with the gradual reopening of borders across
the region, while the recovery in construction activities
continues.
Business Development
In China, decreased competition in the primary land market
presented an opportunity for the Group to replenish its land bank
in its core markets. During the year, eight primarily residential
sites were acquired - all in cities where it already has a presence
- with two wholly-owned projects in Chengdu, one each in Chongqing,
Nanjing and Wuhan, as well as a joint venture in each of Chengdu,
Chongqing and Wuhan. The Group's effective interest in these
projects equates to a developable area of 977,000 sq. m.
The Group also secured a 50% interest in a mixed-use site in the
Guanyinqiao CBD of Chongqing, with an attributable developable area
of 131,000 sq. m. Completion is expected in 2025 and the
development will feature a luxury retail mall incorporating the
Group's CENTRAL brand name.
In addition to the new Chongqing project above, the Group has
two other luxury retail properties under development, in Shanghai
and Nanjing. It also has six premium lifestyle retail properties
under development, in Chengdu, Chongqing, Hangzhou, Nanjing,
Shanghai and Wuhan. The total estimated attributable net leasable
area of these new retail projects is 259,000 sq. m. with completion
expected from 2023 to 2026. Post completion, the Group's total
retail attributable net leasable area in China is expected to reach
425,000 sq. m.
The Group continues to be disciplined in the evaluation and
selection of Development Properties opportunities in China. Despite
the well-recognised evolution of the Chinese residential properties
market, we believe that consistent and careful execution of our
strategy will position the Group well to take advantage of
expansion opportunities.
In Singapore, the Group secured two joint venture projects
during the year, including an executive condominium site in the
Tengah area and a predominantly residential site at Northumberland
Road. The Group's effective interest in these projects equates to a
developable area of 529,000 sq. ft.
These land acquisitions increase the Group's attributable
developable area under development across all projects to 5.3
million sq. m., of which 3.3 million sq. m. are residential
properties and 2.0 million sq. m. are commercial properties.
In February 2022, the Group acquired a 49% interest in a
residential site in the Tanjong Katong area in Singapore with a
developable area of 590,000 sq. ft., which is expected to yield a
total of 640 units.
In February 2022, the Group, in partnership with Astra
International, established a joint venture with LOGOS to manage and
develop modern logistics warehouses in Indonesia, with an initial
focus in the Greater Jakarta area.
Financing
The Group's financial position remains strong. Net debt at 31st
December 2021 was US$5.1 billion, up from US$4.6 billion at the end
of 2020, primarily due to the acquisition of new sites during the
year. Net gearing at the end of the year was 15%, compared with 13%
at the end of 2020. As at 31st December 2021, the Group had
committed liquidity of US$4.0 billion, compared to US$4.3 billion
at the end of 2020, with an average tenor of debt of 6.5 years,
compared to 6.6 years at the end of 2020.
In September, the Group announced a US$500 million share buyback
programme, of which US$272 million had been invested up to 28th
February 2022.
GOVERNANCE ENHANCEMENTS
The Group has an ongoing focus on enhancing its governance, and
in the past year it has made changes to the composition of its
Board, to increase its diversity and bring greater sector expertise
through the appointment of new independent non-executive directors.
The Group has also established formal Audit, Remuneration and
Nominations Committees.
PEOPLE
On behalf of the Board, I would like to extend my gratitude to
all of our colleagues for their continued commitment and dedication
in upholding our reputation of providing high quality and
innovative offerings to our tenants and customers, despite the
challenges brought about by the pandemic.
James Watkins and Simon Dixon stepped down from the Board in
July and August 2021, respectively, whilst Lord Powell of Bayswater
and Percy Weatherall retired from the Board on 3rd March 2022. We
are grateful to all of them for their contributions to the Group.
Craig Beattie joined the Board as Chief Financial Officer on 1st
September 2021. We are also pleased to welcome Lincoln K.K Leong
and Lily Jencks to the Board as Non-Executive Directors with effect
from 4th March and 28th July 2022, respectively.
OUTLOOK
The Group delivered a resilient performance in 2021, against the
backdrop of continued macroeconomic challenges in the Group's key
markets. While the profit contribution from the Group's prime
Investment Properties portfolio is expected to largely remain
stable in 2022, lower profits are anticipated from the Development
Properties business, primarily due to the timing of sales
completions in China.
Ben Keswick
Chairman
CHIEF EXECUTIVE'S REVIEW
Hongkong Land produced a satisfactory result for the year,
despite border restrictions and other challenges brought about by
the pandemic, with underlying earnings remaining broadly unchanged
from 2020. The stable contributions from the Group's Investment
Properties were the result of improved trading performance at its
luxury retail operations across Greater China, partially offset by
negative rental reversions in Hong Kong. Results from Development
Properties benefited from higher sales completions in China,
despite lower margins being achieved.
STRATEGY
Hongkong Land is a landlord and a developer in China and
Southeast Asia. The Group operates a portfolio of prime investment
properties, which it develops and holds as long-term investments,
and it also develops premium residential and commercial properties
for sale.
The Group's Investment Properties are predominantly commercial
and located in core business districts of key Asian gateway cities,
with a concentration in Hong Kong and Singapore. Returns
principally arise from rental income and long-term capital
appreciation. The Investment Properties segment is the largest
contributor to the Group's earnings given its relative size and
maturity. It accounted for 83% of the Group's gross assets at the
end of 2021 (2020: 86%) and contributed 60% of the Group's
underlying operating profit before corporate expenses in 2021
(2020: 65%).
The Group's Development Properties are primarily premium
residential and mixed-use developments located in China and in
Singapore, with a growing presence in other Southeast Asian
markets. Returns principally arise from trading profits in respect
of the immediate sale of the residential and office components; and
rental and trading profits for certain commercial elements of
mixed-use sites that are disposed of, or reclassified to Investment
Properties, after rents have stabilised. Development Properties
accounted for 17% of the Group's gross assets at the end of 2021
(2020: 14%) and 40% of the Group's underlying operating profit
before corporate expenses in 2021 (2020: 35%).
Geographically, China generates the bulk of the Group's
earnings. Hong Kong, which predominantly comprises Investment
Properties, accounted for 49% of the Group's underlying operating
profit before corporate expenses (2020: 54%), while China, which
predominantly comprises Development Properties, accounted for 33%
(2020: 28%).
The Investment Properties portfolios in Hong Kong and Singapore
provide a stable stream of recurring earnings and balance sheet
strength that enables the Group to selectively pursue new long-term
investment opportunities in key gateway cities across the region.
Earnings from the Development Properties business are largely
reinvested to replenish the Group's land bank where opportunities
arise. The Group's share of capital allocated to new investments
totalled US$3.0 billion in 2021 (2020: US$3.5 billion).
Hong Kong Investment Properties
In Hong Kong, the Group's Central Portfolio consists of 12
interconnected prime commercial buildings forming the heart of the
financial district in Central, providing over 450,000 sq. m. of
Grade A office and luxury retail space . This integrated mixed-use
development is positioned as the pre-eminent office, luxury retail,
restaurant, and hotel accommodation in Hong Kong. It continues to
attract both prime office tenants and luxury retailers, in addition
to housing the acclaimed Landmark Mandarin Oriental hotel.
Hong Kong's positioning as one of Asia's leading financial and
business hubs, combined with the scarcity of supply of
high-quality, well-managed space in Central and the unique
qualities of the Group's portfolio, continue to support low vacancy
and strong rents. Despite the challenging conditions resulting from
the pandemic and global uncertainties, Hong Kong continues to
possess unique advantages as a financial centre that are not easily
replicated. The Group remains confident that Hong Kong will
continue to thrive as the primary gateway for capital flows in and
out of the Chinese mainland and will remain an important finance
and commercial hub for decades to come.
The Group's 54,000 sq. m. retail portfolio is integrated with
its office buildings to create part of its distinctive and
successful mixed-use business model. Tenants include numerous
global luxury brand flagship stores, as well as a number of leading
restaurants. LANDMARK is firmly established as the iconic luxury
shopping and fine dining destination in Hong Kong. Its success
depends on the health of the broader Hong Kong economy, as well as
on Hong Kong remaining an attractive destination for affluent
visitors from across the region. The Group is working to ensure
that, despite the current challenging conditions, it remains the
clear market leader in the city in which global luxury brands are
represented.
Other Investment Properties
Outside Hong Kong, the Group has similarly established itself as
a leading provider of prime office and retail space.
In Singapore, Hongkong Land's attributable interests totalling
165,000 sq. m. - principally concentrated in the Marina Bay Area -
include some of the finest Grade A office space in the market. In
China, the Group's 49,000 sq. m. WF CENTRAL complex in Beijing is
positioned as a premium retail and lifestyle destination, which
includes a Mandarin Oriental hotel that has established itself as
one of the most exclusive hotels in the city. In Indonesia, the
Group has attributable interests of over 100,000 sq. m. of Grade A
office space through its 50%-owned joint venture, Jakarta Land. In
Cambodia, the EXCHANGE SQUARE complex comprises 26,000 sq. m. of
office and retail space in the heart of Phnom Penh.
Our performance in these markets depends on the levels of demand
for, and supply of, prime office and luxury retail space, both of
which are influenced by global and regional macroeconomic
conditions. The Group is committed to maintaining excellence in
product quality and service to retain and attract tenants and
customers and will continue to seek new opportunities to develop
prime investment properties in key Asian gateway cities.
Development Properties
The Group has established a strong and profitable Development
Properties business focused primarily on the premium residential
market segment in China and in Southeast Asia. In China, the Group
has a presence in seven key markets, namely Beijing, Chengdu,
Chongqing, Hangzhou, Nanjing, Shanghai, and Wuhan, which are
expected to continue benefiting from the growth of the middle class
and long-term urbanisation trends. While the capital invested in
this business is significantly lower than that invested in
Investment Properties, the earnings derived from Development
Properties enhance the Group's diversification, overall profits and
return on capital. The Group's attributable interest in the
developable area of its projects at the end of 2021 totalled 10.2
million sq. m., compared to 9.1 million sq. m. at the end of 2020.
Of this, construction of approximately 48% had been completed at
the end of 2021, compared to 43% at the end of 2020.
Annual returns from Development Properties fluctuate due to the
nature of projects and the Group's accounting policy of recognising
profits for sold properties on completion in a number of markets,
including China. Demand is also dependent on overall economic
conditions, which can be significantly affected by government
policies and the availability of credit. Ongoing land acquisitions
are necessary to build and maintain a stable income stream over the
longer term.
REVIEW OF INVESTMENT PROPERTIES
Profits from Investment Properties in 2021 were broadly
unchanged from 2020, as higher contributions from the Group's
retail portfolio were offset by negative rental reversions in Hong
Kong. The value of the Group's Investment Properties portfolio at
31st December 2021 declined by 5%, primarily due to lower market
rents for the Hong Kong Central Portfolio, partially offset by
higher valuations for its prime assets in Singapore and China.
Hong Kong
The Group's Central office portfolio, underpinned by its high
quality and unique positioning, performed well despite rising
office vacancies across Hong Kong. New leasing activity saw modest
improvements throughout the year as a result of improved sentiment
and a narrowing rental gap between Central and other parts of the
city. Physical vacancy was 5.2% at the year-end, compared to 6.3%
at the end of 2020. On a committed basis, vacancy was 4.9%. Vacancy
for the overall Central Grade A office market was 8.0% at the end
of 2021, compared to 7.3% at the end of 2020. Rental reversions
during the year were negative, reflecting the decrease in rents
since the onset of the pandemic. The Group's average office rent in
2021 was HK$117 per sq. ft, down from last year's average of HK$120
per sq. ft. Financial institutions, legal firms and accounting
firms occupy 82% of the Group's total leased office space. The
weighted average lease expiry of the office portfolio at the end of
2021 stood at 4.2 years, compared to 4.6 years at the end of
2020.
The Group's luxury retail portfolio in Hong Kong benefited from
improved market sentiment compared to the prior year, despite the
city's borders remaining largely closed to visitors. Vacancy, on
both a physical and committed basis, remained low at 0.3%,
unchanged from the end of 2020. Average retail rent in 2021
increased to HK$190 per sq. ft from HK$164 per sq. ft in 2020,
predominantly due to a decrease in temporary rent relief provided
to tenants, despite negative base rental reversions for the
year.
In June 2021, the Group successfully launched Centricity Flex, a
25,000 sq. ft. premium flexible office solution, at Edinburgh Tower
in Central. Catering to the needs of the business community in
Central that values efficiency, connectivity, and lifestyle
experiences, the facility offers tenants access to private office
suites, meeting rooms, an open work area, private work pods, event
spaces, and a café.
The value of the Group's Investment Properties portfolio in Hong
Kong at 31st December 2021, based on independent valuations,
declined by 5% to US$26.6 billion due to lower open market rents,
with no change in capitalisation rates.
Singapore
New leasing activity at the Group's Singapore Portfolio showed
signs of recovery in 2021. The Group's office portfolio continued
to perform well, with positive rental reversions achieved during
the year. Average office rent increased to S$10.3 per sq. ft in
2021, up from S$9.9 per sq. ft in the previous year. Vacancy was
low at 2.9% on a committed basis, at the year end, compared to 2.1%
at the end of 2020. Physical vacancy was 6.5% at the year-end,
compared to 2.1% at the end of 2020. Overall vacancy across the
entire Grade A central business district was 8.6% at the end of
2021, compared to 6.8% at the end of 2020. Financial institutions,
legal firms and accounting firms occupy 76% of the Group's total
leased office space. The weighted average lease expiry of the
office portfolio at 2021 year-end stood at 3.4 years (2020: 3.8
years).
China
In Beijing, contributions from WF CENTRAL increased due to the
strength of luxury retail sentiment in China and the Group's tenant
repositioning efforts. Footfall and tenant sales in 2021 exceeded
those from the prior year.
In Shanghai, planning and development of the Group's prime
mixed-use development on the West Bund is proceeding on schedule.
Completion is expected in phases from 2023 to 2027.
Other Investment Properties
Contributions from One Central Macau increased largely due to
the relaxation of border restrictions with the Chinese mainland and
the Group's tenant repositioning efforts. Occupancy was 91%,
compared to 92% at the end of the prior year. Tenant sales
rebounded strongly in 2021 compared to the prior year.
In Jakarta, the office portfolio remains resilient, despite the
continued surplus of city-wide office supply and ongoing impact of
the pandemic. Occupancy was 72% at the end of 2021, unchanged from
2020. On a committed basis, occupancy was 73%. The average net rent
was US$15.2 per sq. m. in 2021, compared to US$15.8 per sq. m. in
the prior year.
In Bangkok, planning of the Group's 49%-owned prime commercial
joint-venture development in the central business district, secured
in late 2017, continues to progress. This development has a gross
floor area of 290,000 sq. m. and is expected to complete in
2027.
Performances at the Group's other investment properties were
within expectations.
REVIEW OF DEVELOPMENT PROPERTIES
Earnings from the Group's Development Properties segment were
higher in 2021 than in 2020, primarily due to higher sales
completions in China.
China
The Group's development properties in China comprise 36 projects
in seven cities, of which 15 projects are in Chongqing. As at 31st
December 2021, the Group's net investment in development properties
in China was US$6.3 billion, compared to US$4.8 billion at the end
of 2020.
While the Development Properties business is predominantly
focused on the sale of residential properties, the Group is also
developing luxury and premium lifestyle retail properties in China,
and currently has a total of four such properties in operation,
with a total attributable net leasable area of 166,000 sq. m. A
further nine projects, with an estimated attributable net leasable
area of 259,000 sq. m are expected to be launched from 2023 to
2026, as follows:
Project City Type Attributable net leasable
area
(sq. m.)
JL Central Nanjing Luxury 23,000
----------- ------------------- --------------------------
Galaxy Midtown Shanghai Premium lifestyle 8,500
----------- ------------------- --------------------------
Yue City Nanjing Premium lifestyle 16,400
----------- ------------------- --------------------------
WE City Chengdu Premium lifestyle 25,800
----------- ------------------- --------------------------
Dream Land Wuhan Premium lifestyle 26,700
----------- ------------------- --------------------------
Central Avenue Chongqing Premium lifestyle 39,700
----------- ------------------- --------------------------
Guanyinqiao Chongqing Luxury 34,200
----------- ------------------- --------------------------
West Bund* Shanghai Luxury 59,800
----------- ------------------- --------------------------
Hangzhou Bay Hangzhou Premium lifestyle 24,900
----------- ------------------- --------------------------
*The West Bund luxury retail project is recognised under
Investment Properties.
As a result of tightened credit conditions for the property
sector, competition in the primary land market has reduced in the
second half of the year. This provided an opportunity for the Group
and other well capitalised developers to replenish their land bank.
During the year, the Group secured five wholly-owned residential
projects including two in Chengdu and one in each of Chongqing,
Nanjing and Wuhan, as well as three joint-venture residential
projects in Chengdu, Chongqing and Wuhan.
Market sentiment became more cautious in the second half of the
year, although government support measures were introduced in
recent weeks. The Group's share of t otal contracted sales in 2021
was US$2,648 million, 24% higher than the US$2,135 million achieved
in the prior year. The Group's attributable interest in revenue
recognised in 2021, including its share of revenue in joint
ventures and associates, increased by 60% to US$2,426 million from
US$1,518 million in 2020.
At 31st December 2021, the Group's attributable interest in sold
but not yet recognised contracted sales amounted to US$2,853
million, an increase of 10% from US$2,584 million at the end of
2020.
Chongqing
Chongqing, the largest city in western China, remains the most
significant market for the Group, representing some 33% of its
Chinese Development Properties exposure. The Group has seven
wholly-owned projects and eight 50%-owned joint ventures in the
city.
The Group's attributable interest in 2021 revenue from property
sales in Chongqing, including its share of revenue in joint
ventures and associates, increased by 48% to US$1,480 million, from
US$1,000 million in 2020. The Group's attributable interest in the
developable area of its Chongqing projects at the end of 2021
totalled 4.9 million sq. m., compared to 4.3 million sq. m. at the
end of 2020. Of this, construction of approximately 75% had been
completed at the end of 2021, compared to 66% at the end of
2020.
During the year, the Group launched a seven-level shopping mall
with a net leasable area of 72,000 sq. m in Chongqing, under its
new lifestyle retail series brand - The Ring. This represents the
Group's first wholly-owned commercial development project in
China.
The Group also secured a 50%-owned, predominantly commercial
project in the Guanyinqiao CBD in Chongqing, with an attributable
GFA of 131,000 sq. m. and expected completion in 2025.
Shanghai
Shanghai is the second largest market for the Group,
representing some 18% of its Chinese Development Properties
exposure. The Group has four joint venture projects in the city,
including the trading component of the West Bund project.
The Group's attributable interest in the developable area of its
Shanghai projects at the end of 2021 totalled 378,000 sq. m.,
compared to 383,000 sq. m. at the end of 2020. Of this,
construction of approximately 40% had been completed at the end of
2021, compared to 31% at the end of 2020.
Nanjing
Nanjing is the third most significant market for the Group,
representing some 17% of its Chinese Development Properties
exposure. The Group has one wholly-owned project and three joint
venture projects in the city.
The Group's attributable interest in the developable area of its
Nanjing projects at the end of 2021 totalled 429,000 sq. m.,
compared to 336,000 from the prior year. Construction of
approximately 33% of this had been completed at the end of 2021,
compared to 39% at the end of 2020.
Singapore
Despite ongoing impact from the pandemic, residential market
sentiment remained robust during the year, resulting in the
introduction of cooling measures in late 2021 to moderate
demand.
The wholly-owned 309-unit Margaret Ville residential project,
with a developable area of 22,000 sq. m., was 100% pre-sold and
completed during the year.
Construction of the wholly-owned 1,404-unit Parc Esta
residential project, with a developable area of 98,000 sq. m., is
on schedule and is expected to complete in 2022. As at January
2022, the project was fully pre-sold.
Development of the 50%-owned 638-unit Leedon Green residential
project, with a developable area of 49,000 sq. m., is on schedule
for completion in 2023. At the end of 2021, 45% of the units had
been pre-sold.
The Group's attributable interest in contracted sales was US$328
million in 2021, compared to US$632 million in the prior year. The
Group's attributable interest in revenue recognised in 2021 was
US$631 million, compared to US$522 million in the prior year.
At 31st December 2021, the Group's attributable interest in sold
but not yet recognised contracted sales amounted to US$362 million,
a decrease of 46% from US$676 million at the end of 2020.
During the year, the Group secured two joint venture projects in
Singapore, including an executive condominium site in the Tengah
area and a predominantly residential site at Northumberland Road.
The Group's effective interest in these projects equates to a
developable area of 529,000 sq. ft.
In February 2022, the Group acquired a 49% interest in a
residential site in the Tanjong Katong area with a developable area
of 590,000 sq. ft. and is expected to yield a total of 640
units.
Indonesia and other Development Properties
In Indonesia, development activities have largely resumed, with
market sentiment improving modestly towards the second half of the
year. Nava Park, the Group's 49%-owned joint venture, is a
77-hectare site in the southwest of Jakarta. Upon completion in
2029, Nava Park will comprise a mix of landed houses, villas,
mid-rise apartments, and low-rise commercial components. Of the
1,104 units that have been launched for sale, 92% had been pre-sold
at the end of 2021.
Asya, a joint venture with Astra International, in which the
Group now has a 50% attributable interest, is a 67-hectare site
located in the east of Jakarta. The project will yield a
developable area of approximately 481,000 sq. m., comprising landed
houses, villas, apartments and low-rise commercial shophouses. It
will be developed in multiple phases through to 2030. Of the 805
launched units, 57% had been pre-sold at the end of 2021.
Arumaya, the Group's 40%-owned joint venture with Astra
International, is a 297-unit luxury condominium project located in
South Jakarta. The project has a developable area of 24,000 sq. m.,
and is expected to complete in 2025. All of the units had been
launched as at the end of 2021, with 10% of the units pre-sold.
Avania, the 50%-owned mixed-use development with Astra
International situated in central Jakarta, will consist of over 650
high-end apartments and a Grade A office tower. The project has a
developable area of 121,000 sq. m. and will be developed in two
phases through to 2027. The sales launch for the first phase of the
project is expected to commence in 2022.
In February 2022, the Group, in partnership with Astra
International, established a joint venture with LOGOS to manage and
develop modern logistics warehouses in Indonesia, with an initial
focus in the Greater Jakarta area.
In the rest of Southeast Asia, construction activities continue
to progress despite pandemic-related disruptions. With borders
gradually reopening, market sentiment has moderately improved and
pre-sales performance is in line with expectations.
SUSTAINABILITY
Hongkong Land has been a landlord and developer of premium
properties for more than 130 years. We strive to set an example of
good corporate citizenship by having a well-designed sustainability
strategy and governance structure and adopting global best
practices. Our continued growth and progress on sustainability
initiatives are guided and monitored by the Group's Sustainability
Committee, which reports to the Board. We are in a strong position
to continue integrating sustainability initiatives into our
operational and financing activities, investment analysis and risk
assessments.
Climate Action
Over the past year, the Group focused much of its efforts on
climate change and related risks. To mitigate the potential impact
of climate change, a region-wide comprehensive climate risk
assessment was conducted on the Group's commercial properties
portfolio in order to improve business resilience and readiness for
extreme weather events. The study considered the best and worst
case scenarios developed by the Intergovernmental Panel on Climate
Change, which assume global temperatures will rise by below 2degC
or below 5degC by 2100 relative to pre-industrial levels,
respectively. Physical and transition risks identified, as well as
a preliminary adaptation action plan, were disclosed in line with
the recommendations of the Task Force on Climate-related Financial
Disclosures in the Group's 2020 Sustainability Report.
As part of Hongkong Land's commitment to accelerate its
contributions on climate action, the Group announced in February
2022 its pledge to setting Science-Based Targets that are aligned
with the 1.5degC pathway. We are leading the net zero transition by
setting ambitious emission reduction targets. The targets, which
remain subject to validation by the Science-Based Target
initiative, will result in the Group committing to a 46% reduction
of Scope 1 and 2 emissions by 2030 from 2019 levels and a 22%
reduction in carbon intensity for Scope 3 emissions over the same
period.
Green Buildings
Hongkong Land has a long history of reinvesting in existing
assets and undertaking a robust green building certification
programme. At the end of 2021, 93% of our commercial properties by
floor area, including those held in joint ventures, achieved green
building certification, with all of our buildings in Hong Kong and
Singapore achieving the highest possible ratings of BEAM Plus
Platinum and Green Mark Platinum certifications respectively.
In recognition of our efforts to adhere to the highest health
and safety standards, the Group was awarded the Facilities
Management Team Award and COVID-19 Achievement Award at the CIBSE
Hong Kong Awards 2021 in relation to the outstanding operational
performance of the Hong Kong Central Portfolio.
Green Finance
In July 2021, the Group successfully issued its inaugural
10-year green bond, raising US$500 million to fund its green
buildings and related initiatives. The Group also had
sustainability-linked loans with an aggregate facility amount of
US$1.9 billion at the end of 2021. The facilities index tiered
discounts to interest rates against ESG targets, which incentivise
the Group to demonstrate continuous improvements in energy
efficiency, reducing food waste, and renewable energy generation,
while maintaining green building certifications for the Group's
Central Portfolio.
Corporate Social Responsibility
The Hongkong Land HOME FUND, which was established to focus on
creating initiatives which benefit younger generations and our
aspiration to foster a more inclusive society, celebrated its first
anniversary in November 2021. The fund and related CSR initiatives
achieved a number of milestones during the year: including
increasing the number of NGO partnerships from three initially to
more than 60 across the region; the establishment of the HERE2HELP
volunteering team which contributed over 850 hours to serve 12,000
people in just six months; and the launch of a matching gift
programme for tenants and employees in Hong Kong to support causes
aligned to the vision of the HOME FUND.
Further details on the Group's approach to sustainability and
related policies can be found on the Group's website at
www.hkland.com/en/sustainability. The Group's sustainability
performance for the financial year ended 31st December 2021 will be
included in a standalone Sustainability Report to be published on
the Group's website in the second quarter of 2022.
THE YEAR AHEAD
The Group continues to operate in an uncertain macroeconomic
environment. Looking ahead to 2022, the Group's Investment
Properties portfolio is expected to continue generating stable
returns, subject to the pace of relaxation of pandemic
restrictions. In the Development Properties business, despite the
well-recognised evolution of the Chinese development properties
market, we believe that consistent and careful execution of our
strategy will position the Group well to take advantage of
expansion opportunities. Contributions from China are, however,
expected to be lower in 2022 due to the timing of sales
completions, while contributions from Southeast Asia are expected
to be broadly stable.
The foundation of Hongkong Land's success is in addressing the
needs of its tenants and customers through the delivery of
world-class and innovative offerings. These values are critical to
the prolonged success of the Group and will remain our priority in
order to maintain strong shareholder returns over the
long-term.
Robert Wong
Chief Executive
Hongkong Land Holdings Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2021
2021 2020
Underlying Non - Underlying Non-
business trading business trading
performance items Total performance items Total
US$m US$m US$m US$m US$m US$m
Revenue (note 2) 2,384.3 - 2,384.3 2,094.2 - 2,094.2
Net operating costs
(note 3) (1,440.9) 2.6 (1,438.3) (1,135.2) 1.0 (1,134.2)
Change in fair value
of
investment properties
(note 7) - (1,375.5) (1,375.5) - (3,443.4) (3,443.4)
Operating (loss)/profit
(note 4) 943.4 (1,372.9) (429.5) 959.0 (3,442.4) (2,483.4)
Net financing charges
- financing charges (222.2) - (222.2) (194.9) - (194.9)
- financing income 67.0 - 67.0 79.0 - 79.0
(155.2) - (155.2) (115.9) - (115.9)
Share of results of
associates
and joint ventures
(note 5)
- before change in
fair value
of investment properties 355.9 - 355.9 267.5 - 267.5
* change in fair value of
investment properties - 80.6 80.6 - (175.4) (175.4)
355.9 80.6 436.5 267.5 (175.4) 92.1
--------- --------- --------- ----------- --------- ---------
(Loss)/profit before
tax 1,144.1 (1,292.3) (148.2) 1,110.6 (3,617.8) (2,507.2)
Tax (note 6) (178.7) (16.9) (195.6) (149.5) 4.9 (144.6)
--------- --------- --------- ----------- --------- ---------
( Loss)/ profit after
tax 965.4 (1,309.2) (343.8) 961.1 (3,612.9) (2,651.8)
--------- --------- --------- ----------- --------- ---------
Attributable to:
Shareholders of the
Company 966.0 (1,315.2) (349.2) 963.3 (3,610.7) (2,647.4)
Non-controlling interests (0.6) 6.0 5.4 (2.2) (2.2) (4.4)
--------- --------- --------- ----------- --------- ---------
965.4 (1,309.2) (343.8) 961.1 (3,612.9) (2,651.8)
--------- --------- --------- ----------- --------- ---------
USc USc USc USc
Earnings/(loss) per
share (basic and diluted)
(note 8) 41.49 (15.00) 41.27 (113.43)
Hongkong Land Holdings Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2021
2021 2020
US$m US$m
Loss for the year (343.8) (2,651.8)
Other comprehensive income/( expense)
Items that will not be reclassified
to profit
or loss:
Remeasurements of defined benefit
plans 3.3 1.7
Tax on items that will not be
reclassified (0.5) (0.3)
2.8 1.4
Items that may be reclassified
subsequently
to profit or loss:
Net exchange translation differences
- net (loss)/gain arising during
the year (148.1) 400.9
Cash flow hedges
- net loss arising during the
year (11.7) (20.8)
- transfer to profit and loss (0.1) (0.4)
(11.8) (21.2)
Tax relating to items that may
be
reclassified 1.9 3.5
Share of other comprehensive income
of associates and joint ventures 87.1 242.4
(70.9) 625.6
Other comprehensive (expense)/income
for
the year, net of tax (68.1) 627.0
------- ---------
Total comprehensive expense for
the year (411.9) (2,024.8)
------- ---------
Attributable to:
Shareholders of the Company (419.4) (2,025.1)
Non-controlling interests 7.5 0.3
------- ---------
(411.9) (2,024.8)
------- ---------
Hongkong Land Holdings Limited
Consolidated Balance Sheet
at 31st December 2021
2021 2020
US$m US$m
Net operating assets
F ixed assets 127.8 125.2
Right-of-use assets 12.4 12.4
Investment properties (note
10) 28,600.2 30,083.3
Associates and joint ventures 9,515.3 8,921.2
Non-current debtors 29.7 42.0
Deferred tax assets 67.7 35.5
Pension assets 1.8 0.7
Non-current assets 38,354.9 39,220.3
Properties for sale 2,970.5 1,948.8
Current debtors 1,029.4 1,081.7
Current tax assets 28.3 14.4
Bank balances 1,479.5 1,996.6
----------- ---------
Current assets 5,507.7 5,041.5
Current creditors (2,194.6) (1,572.0)
Current borrowings (note 11) (865.3) (689.5)
Current tax liabilities (202.9) (153.0)
Current liabilities (3,262.8) (2,414.5)
Net current assets 2,244.9 2,627.0
Long-term borrowings (note
11) (5,717.9) (5,875.4)
Deferred tax liabilities (227.9) (195.8)
Pension liabilities - (1.3)
Non-current creditors (35.8) (36.3)
----------- ---------
34,618.2 35,738.5
----------- ---------
Total equity
Share capital 229.8 233.4
Share premium 67.4 257.3
Revenue and other reserves 34,286.6 35,218.4
----------- ---------
Shareholders' funds 34,583.8 35,709.1
Non-controlling interests 34.4 29.4
----------- ---------
34,618.2 35,738.5
----------- ---------
Hongkong Land Holdings Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2021
Attributable to Attributable
shareholders to non-
Share Share Revenue Hedging Exchange of the controlling Total
capital premium reserves reserves reserves Company interests equity
US$m US$m US$m US$m US$m US$m US$m US$m
2021
At 1st January 233.4 257.3 34,881.2 (21.6) 358.8 35,709.1 29.4 35,738.5
Total comprehensive
(expense)/income - - (346.4) 1.4 (74.4) (419.4) 7.5 (411.9)
Dividends paid by the Company - - (513.4) - - (513.4) - (513.4)
Dividends paid to non-controlling
shareholders - - - - - - (0.9) (0.9)
Unclaimed dividends forfeited - - 1.0 - - 1.0 - 1.0
Disposal of subsidiaries - - - - - - (1.6) (1.6)
Repurchase of shares (3.6) (189.9) - - - (193.5) - (193.5)
At 31st December 229.8 67.4 34,022.4 (20.2) 284.4 34,583.8 34.4 34,618.2
------- ------- --------- -------- -------- ------------ ----------- -----------
2020
At 1st January 233.4 257.3 38,039.8 8.3 (292.0) 38,246.8 43.0 38,289.8
Total comprehensive
(expense)/income - - (2,646.0) (29.9) 650.8 (2,025.1) 0.3 (2,024.8)
Dividends paid by the Company - - (513.4) - - (513.4) - (513.4)
Dividends paid to non-controlling
shareholders - - - - - - (0.9) (0.9)
Unclaimed dividends forfeited - - 0.8 - - 0.8 - 0.8
Disposal of subsidiaries - - - - - - (13.0) (13.0)
At 31st December 233.4 257.3 34,881.2 (21.6) 358.8 35,709.1 29.4 35,738.5
------- ------- --------- -------- -------- ------------ ----------- -----------
Hongkong Land Holdings Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2021
2021 2020
US$m US$m
Operating activities
Operating loss (429.5) (2,483.4)
Depreciation and amortisation 16.3 15.3
Change in fair value of investment properties 1,375.5 3,443.4
Gain on disposal of subsidiaries and joint
ventures (37.6) (7.2)
(Increase)/decrease in properties for
sale (991.6) 164.2
Decrease in debtors 52.4 19.1
Increase in creditors 633.3 162.5
Interest received 43.2 42.3
Interest and other financing charges paid (215.8) (220.1)
Tax paid (156.7) (267.9)
Dividends from associates and joint ventures 239.1 112.9
Cash flows from operating activities 528.6 981.1
Investing activities
Major renovations expenditure (98.9) (129.1)
Developments capital expenditure (1.5) (4,499.1)
(Investments in and advances to)/repayments
from
associates and joint ventures (397.1) 599.0
Proceeds received for disposal of subsidiaries 5.7 4,619.0
Deposits refunded for disposal of subsidiaries - (2,005.7)
Proceeds on disposal of joint ventures 59.6 -
Cash flows from investing activities (432.2) (1,415.9)
Financing activities
Drawdown of borrowings 1,840.0 3,726.9
Repayment of borrowings (1,764.1) (2,268.8)
Principal elements of lease payments (3.3) (4.6)
Repurchase of shares (191.9) -
Dividends paid by the Company (509.1) (509.6)
Dividends paid to non-controlling shareholders (0.9) (0.9)
Cash flows from financing activities (629.3) 943.0
--------- ---------
Net cash (outflow)/inflow (532.9) 508.2
Cash and cash equivalents at 1st January 1,990.4 1,418.0
Effect of exchange rate changes 18.6 64.2
--------- ---------
Cash and cash equivalents at 31st December 1,476.1 1,990.4
--------- ---------
Hongkong Land Holdings Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information contained in this announcement has
been based on the audited results for the year ended 31st December
2021 which have been prepared in conformity with International
Financial Reporting Standards, including International Accounting
Standards and Interpretations adopted by the International
Accounting Standards Board.
The Group has adopted the Interest Rate Benchmark Reform - Phase
2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(effective 1st January 2021). The amendments provide practical
expedient from certain requirements under the IFRSs as a result of
the reform which affect the measurement of financial assets,
financial liabilities and lease liabilities, and a number of
reliefs for hedging relationships. The Group applied the amendments
from 1st January 2021 and there is no significant impact on the
Group's consolidated financial statements.
Apart from the above, there are no other amendments which are
effective in 2021 and relevant to the Group's operations that have
a significant impact on the Group's results, financial position and
accounting policies.
The Group has not early adopted any standard, interpretation or
amendment that has been issued but not yet effective.
2. REVENUE
2021 2020
US$m US$m
Rental income 946.7 937.6
Service income 182.3 147.5
Sales of properties
- recognised at a point in time 687.6 484.3
- recognised over time 567.7 524.8
1,255.3 1,009.1
2,384.3 2,094.2
------- -------
Total variable rents included in rental income amounted to
US$29.2 million (2020: US$19.9 million).
3. NET OPERATING COSTS
2021 2020
US$m US$m
Cost of sales (1,283.9) (982.6)
Other income 16.0 31.2
Administrative expenses (208.5) (190.0)
Gain on disposal of subsidiaries and
joint ventures 37.6 7.2
Asset impairment reversal 0.5 -
(1,438.3) (1,134.2)
--------- ---------
4. OPERATING (LOSS)/PROFIT
2021 2020
US$m US$m
By business
Investment Properties 836.0 835.5
Development Properties 196.5 198.3
Corporate (89.1) (74.8)
--------- ---------
943.4 959.0
Change in fair value of investment properties (1,375.5) (3,443.4)
Gain on disposal of subsidiaries 2.1 1.0
Asset impairment reversal 0.5 -
(429.5) (2,483.4)
--------- ---------
5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
2021 2020
US$m US$m
By business
Investment Properties
- operating profit 136.8 127.8
- net financing charges (31.8) (36.1)
- tax (16.6) (16.5)
- net profit 88.4 75.2
Development Properties
- operating profit 447.8 325.9
- net financing charges (8.7) (8.1)
- tax (169.9) (121.7)
- non-controlling interests (1.7) (3.8)
- net profit 267.5 192.3
------- -------
Underlying business performance 355.9 267.5
Change in fair value of investment properties
(net of tax) 80.6 (175.4)
436.5 92.1
------- -------
6. TAX
2021 2020
US$m US$m
Tax charged to profit and loss is analysed
as follows:
Current tax (191.1) (164.5)
Deferred tax (4.5) 19.9
(195.6) (144.6)
------- -------
Tax relating to components of other comprehensive income is
analysed as follows:
2021 2020
US$m US$m
Remeasurements of defined benefit plans (0.5) (0.3)
Cash flow hedges 1.9 3.5
----- -----
1.4 3.2
----- -----
Tax on profits has been calculated at the rates of taxation
prevailing in the territories in which the Group operates.
Share of tax charge of associates and joint ventures of US$198.2
million (2020: US$125.9 million) is included in share of results of
associates and joint ventures.
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include fair value gains or losses
on revaluation of investment properties; gains and losses arising
from the sale of businesses and investment properties; impairment
of non-depreciable intangible assets; provisions for the closure of
businesses; acquisition-related costs in business combinations; and
other credits and charges of a non-recurring nature that require
inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2021 2020
US$m US$m
Change in fair value of investment properties (1,375.5) (3,443.4)
Tax on change in fair value of investment
properties (16.9) 4.9
Gain on disposal of subsidiaries 2.1 1.0
Asset impairment reversal 0.5 -
Share of change in fair value of investment
properties in
associates and joint ventures (net of tax) 80.6 (175.4)
Non-controlling interests (6.0) 2.2
(1,315.2) (3,610.7)
--------- ---------
8. EARNINGS PER SHARE
Earnings per share are calculated on loss attributable to
shareholders of US$349.2 million (2020: US$2,647.4 million) and on
the weighted average number of 2,328.3 million (2020: 2,333.9
million) shares in issue during the year.
Earnings per share are additionally calculated based on
underlying profit attributable to shareholders. A reconciliation of
earnings is set out below:
2021 2020
--------------------- ---------------------
Earnings Earnings
per share per share
US$m USc US$m USc
Underlying profit attributable
to
shareholders 966.0 41.49 963.3 41.27
Non-trading items (note 7) (1,315.2) (3,610.7)
--------- ---------
Loss attributable to shareholders (349.2) (15.00) (2,647.4) (113.43)
--------- ---------
9. DIVIDS
2021 2020
US$m US$m
Final dividend in respect of 2020 of USc16.00
(2019: USc16.00) per share 373.4 373.4
Interim dividend in respect of 2021 of
USc6.00
(2020: USc6.00) per share 140.0 140.0
513.4 513.4
----- -----
A final dividend in respect of 2021 of USc16.00 (2020: USc16.00)
per share amounting to a total of US$367.6 million (2020: US$373.4
million) is proposed by the Board. The dividend proposed will not
be accounted for until it has been approved at the 2022 Annual
General Meeting. The amount will be accounted for as an
appropriation of revenue reserves in the year ending 31st December
2022.
10. INVESTMENT PROPERTIES
2021 2020
US$m US$m
At 1st January 30,083.3 33,191.2
Exchange differences (155.7) 635.8
Additions 56.4 4,621.3
Disposal of subsidiaries (8.3) (4,921.6)
Decrease in fair value (1,375.5) (3,443.4)
At 31st December 28,600.2 30,083.3
--------- ---------
11. BORROWINGS
2021 2020
US$m US$m
Current
Bank overdrafts 3.4 6.2
Bank loans 86.0 100.3
Current portion of long-term borrowings
- bank loans 155.5 516.8
- medium term notes 620.4 66.2
865.3 689.5
Long-term
Bank loans 1,882.2 1,939.1
Medium term notes
------- -------
- due 2022 - 622.7
- due 2023 179.2 180.1
- due 2024 406.8 414.3
- due 2025 644.5 646.2
- due 2026 38.6 38.8
- due 2027 186.0 186.8
- due 2028 182.5 183.5
- due 2029 121.2 121.9
- due 2030 697.7 697.9
- due 2031 568.6 25.5
- due 2032 140.0 140.8
- due 2033 89.1 89.6
- due 2034 77.1 77.5
- due 2035 253.6 254.9
- due 2038 109.0 111.3
- due 20 39 109.9 112.4
- due 2040 31.9 32.1
3,835.7 3,936.3
5,717.9 5,875.4
6,583.2 6,564.9
------- -------
12. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
Total capital commitments at 31st December 2021 amounted to
US$1,183.5 million (2020: US$828.8 million).
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.
13. RELATED PARTY TRANSACTIONS
Jardine Strategic Limited ('JSL') became the parent company of
the Group following the completion of the simplification of the
Group's parent company structure in April 2021. Jardine Strategic
Holdings Limited and JMH Bermuda Limited, a wholly-owned subsidiary
of the Group's ultimate parent company, Jardine Matheson Holdings
Limited ('JMH'), amalgamated under the Bermuda Companies Act to
form JSL, a wholly-owned subsidiary of JMH. Both JMH and JSL are
incorporated in Bermuda.
In the normal course of business, the Group has entered into a
variety of transactions with the subsidiaries, associates and joint
ventures of JMH ('Jardine Matheson group members'). The more
significant of these transactions are described below:
Management fee
The management fee payable by the Group, under an agreement
entered into in 1995, to Jardine Matheson Limited ('JML') in 2021
was US$4.8 million (2020: US$4.8 million), being 0.5% per annum of
the Group's underlying profit in consideration for management
consultancy services provided by JML, a wholly-owned subsidiary of
JMH.
Property and other services
The Group rented properties to Jardine Matheson group members.
Gross rents on such properties in 2021 amounted to US$19.5 million
(2020: US$19.3 million).
The Group provided project management services and property
management services to Jardine Matheson group members in 2021
amounting to US$3.4 million (2020: US$3.7 million).
Jardine Matheson group members provided property maintenance and
other services to the Group in 2021 in aggregate amounting to
US$48.7 million (2020: US$63.1 million).
Hotel management services
Jardine Matheson group members provided hotel management
services to the Group in 2021 amounting to US$3.6 million (2020:
US$1.6 million).
Outstanding balances with associates and joint ventures
Amounts of outstanding balances with associates and joint
ventures are included in associates and joint ventures, debtors and
creditors as appropriate.
Hongkong Land Holdings Limited
Principal Risks and Uncertainties
The following are the principal risks and uncertainties facing
the Company as required to be disclosed pursuant to the Disclosure
Guidance and Transparency Rules issued by the Financial Conduct
Authority in the United Kingdom and are in addition to the matters
referred to in the Chairman's Statement, Chief Executive's Review
and other parts of the Company's 2021 Annual Report (the
'Report').
Economic Risk
The Group is exposed to the risk of negative developments in
global and regional economies and financial and property markets,
either directly or through the impact such developments might have
on the Group's joint venture partners, associates, bankers,
suppliers, customers or tenants. These developments could include
recession, inflation, deflation and currency fluctuations,
restrictions in the availability of credit, increases in financing
and construction costs and business failures, and reductions in
office and retail rents, office and retail occupancy, and sales
prices of, and demand for, residential and mixed-use
developments.
Such developments might increase costs of sales and operating
costs, reduce revenues, increase net financing charges, or result
in reduced valuations of the Group's investment properties or in
the Group being unable to meet its strategic objectives.
Mitigation Measures
-- Monitor the volatile macroeconomic environment and consider economic factors in strategic
and financial planning processes
-- Make agile adjustments to existing business plans and explore new business streams and
new markets
-- Review pricing strategies
Commercial Risk
Risks are an integral part of normal commercial activities and
where practicable steps are taken to mitigate them. Risks can be
more pronounced when businesses are operating in volatile
markets.
The Group makes significant investment decisions regarding
commercial and residential development projects, and these are
subject to market risks. This is especially the case where projects
are longer-term in nature and take more time to deliver
returns.
The Group operates in regions that are highly competitive, and
failure to compete effectively, whether in terms of price, tender
terms, product specification or levels of service, and failure to
manage change in a timely manner, can have an adverse effect on
earnings or market share, as can construction risks in relation to
new developments. Significant competitive pressure may also lead to
reduced margins.
It is essential for the products and services provided by the
Group's businesses to meet the appropriate quality and safety
standards, and there is an associated risk if they do not,
including the risk of damage to brand equity or reputation, which
might adversely impact the ability to achieve acceptable revenues
and profit margins.
The potential impact of disruption to IT systems or
infrastructure, whether due to cyber-crime or other factors, could
be significant. There is also an increasing risk to our businesses
from adverse social media commentary, which could influence
customer and other stakeholder behaviours and impact operations or
profitability or lead to reputational damage.
Mitigation Measures
-- Utilise market intelligence and deploy digital strategies for business-to-consumer
businesses
-- Establish customer relationship management programme and digital
commerce capabilities
-- Engage in longer-term contracts and proactively approach suppliers
for contract renewals
-- Re-engineer existing business processes
Financial and Treasury Risk
The Group's activities expose it to a variety of financial
risks, including market risk, credit risk and liquidity risk.
The market risk the Group faces includes i) foreign exchange
risk from future commercial transactions, net investments in
foreign operations and net monetary assets and liabilities that are
denominated in a currency that is not the entity's functional
currency; ii) interest rate risk through the impact of rate changes
on interest bearing liabilities and assets; and iii) securities
price risk as a result of its equity investments and limited
partnership investment funds which are measured at fair value
through profit and loss, and debt investments which are measured at
fair value through other comprehensive income.
The Group's credit risk is primarily attributable to deposits
with banks, contractual cash flows of debt investments carried at
amortised cost and those measured at fair value through other
comprehensive income, credit exposures to customers and derivative
financial instruments with a positive fair value.
The Group may face liquidity risk if its credit rating
deteriorates or if it is unable to meet its financing
commitments.
Mitigation Measures
-- Limiting foreign exchange and interest rate risks to provide a degree of certainty about costs
-- Management of the investment of the Group's cash resources so as to minimise risk, while seeking to enhance
yield
-- Adopting appropriate credit guidelines to manage counterparty risk
-- When economically sensible to do so, taking borrowings in local currency to hedge foreign exchange
exposures on investments
-- A portion of borrowings is denominated in fixed rates. Adequate headroom in committed facilities is
maintained to facilitate the Group's capacity to pursue new investment opportunities
and to provide some protection against market uncertainties
-- The Group's funding arrangements are designed to keep an appropriate balance between equity and debt from
banks and capital markets, both short and long term in tenor, to give
flexibility to develop the business. The Company also maintains sufficient cash and marketable securities,
and ensures the availability of funding from an adequate amount of committed
credit facilities and the ability to close out market positions
-- The Group's treasury operations are managed as cost centres and are not permitted to undertake speculative
transactions unrelated to underlying financial exposures
The detailed steps taken by the Group to manage its exposure to
financial risk will be set out in the Financial Review and in a
note to the Financial Statements in the Report.
Regulatory and Political Risk
The Group is subject to a number of regulatory regimes in the
territories it operates. Changes in such regimes, in relation to
matters such as foreign ownership of assets and businesses,
exchange controls, planning controls, tax rules, climate-related
regulation and employment legislation, could have the potential to
impact the operations and profitability of the Group.
Changes in the political environment, including political or
social unrest, in the territories where the Group operates, could
adversely affect the Group.
Mitigation Measures
-- Stay connected and informed of relevant new and draft regulations
-- Engage external consultants and legal experts where necessary
-- Raise awareness via principal's brand conference with an annual update on new regulations that may
have been implemented in other markets
Key Contracts Risk
Many of the Group's businesses and projects rely on concessions,
management, outsourcing or other vital contracts. Accordingly,
cancellation, expiry or termination, or the renegotiation of any
such concession, management, outsourcing or other third-party key
contracts could adversely affect the financial condition and
results of operations of certain subsidiaries, associates and joint
ventures of the Group.
Mitigation Measures
-- Monitor materials and services providers' performance and compliance with standards set out in contracts
to ensure quality
-- Engage experts to manage the key contracts
-- Diversify suppliers/contractors portfolio to avoid over-reliance on specific suppliers/contractors
for key operations
Pandemic, Terrorism and Natural Disasters Risk
A global or regional pandemic would impact the Group's business,
affecting travel patterns, demand for the Group's products and
services, and possibly the Group's ability to operate effectively.
The Group's properties and/or project sites are also vulnerable to
the effects of terrorism, either directly through the impact of an
act of terrorism or indirectly through generally reduced economic
activity in response to the threat of or an actual act of
terrorism. In addition, a number of the territories in which the
Group operates can experience from time to time natural disasters
such as typhoons, floods, earthquakes and tsunamis.
Mitigation Measures
-- Flexible work arrangements and compliance with hygiene protocols
-- Supply chain stabilisation includes sourcing backup suppliers and better coordination with logistics
partners
-- Insurance programmes that provide robust cover for natural disasters including property damage and
business interruption
Cybersecurity Risk
The Group's businesses are ever more reliant on technology in
their operations and face increasing numbers of cyberattacks from
groups targeting both individuals and businesses. As a result, the
privacy and security of customer, tenant and corporate information
are at risk of being compromised through a breach of our or our
suppliers' IT systems or the unauthorised or accidental release of
information, resulting in brand damage, impaired competitiveness or
regulatory action. Cyberattacks may also adversely affect our
ability to manage our business operations or operate information
technology and business systems, resulting in business
interruption, lost revenues, repair or other costs.
Mitigation measures
-- Engage external consultants to perform assessments on the business units with industry benchmarks
-- Define cybersecurity programme and centralised function to provide oversight, manage cybersecurity matters,
and strengthen
cyber defences and security measures
-- Perform regular vulnerability assessment and/or penetration testing to identify weaknesses
-- Maintain disaster recovery plans and backup for data restoration
-- Arrange regular security awareness training at least annually and phishing testing to raise users'
cybersecurity awareness
People Risk
The competitiveness of the Group's businesses depends on the
quality of the people that it attracts and retains. Unavailability
of needed human resources may impact the ability of the Group's
businesses to operate at capacity, implement initiatives and pursue
opportunities.
The pandemic has accelerated corporate investments in digital
projects and stimulated global consumer demand for e-commerce. This
has created heightened demand and competition across industries for
various skillsets, particularly in IT and logistics.
Pandemic-related travel restrictions and a more stringent approach
to issuing work visas to non-locals in some of the key markets have
also disrupted the availability of labour across borders,
exacerbating labour shortages as economies rebound.
Mitigation Measures
-- Ensure proactive manpower planning and succession planning are in place
-- Enhance modern employer branding, training for staff members, compensation and benefits, talent
development plan
-- Implement strategy to promote diversity and inclusion across the Group
-- Provide employee retention programmes
-- Establish employee assistance programmes
Investment, Strategic Transactions and Partnerships Risk
Competition for attractive investment opportunities has
increased with the rise of global investment funds and deep pools
of low-cost capital, supporting a greater appetite by investors
across sectors for strategic transactions and partnerships to
optimise the business portfolio and enhance growth. As the Group's
businesses pursue projects and investments against keen
competitors, they face pressure on the terms they are willing to
secure and accept prized assets and relationships.
In addition, conflicts with strategic partners may arise due to
various reasons such as different corporate cultures and management
styles.
Mitigation Measures
-- Conduct sufficient research, due diligence and evaluation of investment opportunities and potential
business partners
-- Develop clear frameworks and levels of authority for investment or partnership decisions
-- Regular performance monitoring and strategic reviews of new businesses and projects
Environmental and Climate Risk
Global climate change has led to a trend of increased frequency
and intensity of potentially damaging natural events for the
Group's assets and operations. With interest in sustainability
surging in recent years from investors, governments and other
interested parties, expectations by regulators and other
stakeholders for accurate corporate sustainability reporting and
commitments towards carbon neutrality and other sustainability
related goals are also growing. This brings increasing challenges
to the Group and its businesses to meet key stakeholders'
expectations.
Mitigation Measures
In addition to being addressed under the Group's Risk Management
Framework and processes, mitigation measures are reviewed and
approved by the Group's Sustainability Committee as part of a
broader sustainability framework already in place to execute on
initiatives over the long-term.
Mitigation measures in respect of environmental and climate
risks:
-- A commitment to the Science-Based Targets initiative's campaign to set decarbonisation targets in line with
climate science, to meet the goals of the Paris Agreement, aimed at
limiting global warming to 1.5degC
-- Perform and update climate risk assessments and adaptation action plans based on the recommendations of the
Task Force on Climate-related Financial Disclosure ('TCFD'), including
implementing measures to address physical risks posed by climate change and identifying opportunities in
the global transition to a low carbon economy
-- Consistent retrofitting of existing assets, as well as identification and deployment of emerging PropTech
solutions to drive energy efficiency
-- Increase the procurement of renewable energy, including expanding onsite renewable energy generation
capacity, to reduce emissions
-- Continue implementing the Group's robust and long-standing green building certification programme to
minimise environmental impact of existing assets
-- Establish performance-based targets on embodied carbon emissions targeting concrete, rebar and structural
steel used for new developments
-- Support the financial sector's green transition via increased participation in the sustainable financing
markets
-- Test and audit periodically the Group's Business Continuity Plans
-- Assess emerging ESG reporting standards and requirements, and align the Group's disclosures to best market
practice
Hongkong Land Holdings Limited
Responsibility Statement
The Directors of the Company confirm to the best of their
knowledge that:
(a) the consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards,
including International Accounting Standards and Interpretations
adopted by the International Accounting Standards Board; and
(b) the sections of the Company's 2021 Annual Report, including
the Chairman's Statement, Chief Executive's Review and the
Principal Risks and Uncertainties, which constitute the management
report, include a fair review of all information required to be
disclosed by the Disclosure Guidance and Transparency Rules 4.1.8
to 4.1.11 issued by the Financial Conduct Authority in the United
Kingdom.
For and on behalf of the Board
Robert Wong
Craig Beattie
Directors
Dividend Information for Shareholders
The final dividend of USc16.00 per share will be payable on 11th
May 2022, subject to approval at the Annual General Meeting to be
held on 5th May 2022, to shareholders on the register of members at
the close of business on 18th March 2022. The shares will be quoted
ex-dividend on 17th March 2022, and the share registers will be
closed from 21st to 25th March 2022, inclusive.
Shareholders will receive their cash dividends in United States
Dollars, except when elections are made for alternate currencies in
the following circumstances.
Shareholders on the Jersey branch register
Shareholders registered on the Jersey branch register will have
the option to elect for their dividends to be paid in Sterling.
These shareholders may make new currency elections for the 2021
final dividend by notifying the United Kingdom transfer agent in
writing by 22nd April 2022. The Sterling equivalent of dividends
declared in United States Dollars will be calculated by reference
to a rate prevailing on 27th April 2022.
Shareholders holding their shares through CREST in the United
Kingdom will receive their cash dividends in Sterling only as
calculated above.
Shareholders on the Singapore branch register who hold their
shares through T he Central Depository (Pte) Limited ('CDP')
Shareholders who are on CDP's Direct Crediting Service
('DCS')
Those shareholders who are on CDP's DCS will receive their cash
dividends in Singapore Dollars unless they opt out of CDP Currency
Conversion Service, through CDP, to receive United States
Dollars.
Shareholders who are not on CDP's DCS
Those shareholders who are not on CDP's DCS will receive their
cash dividends in United States Dollars unless they elect, through
CDP, to receive Singapore Dollars.
Shareholders on the Singapore branch register who wish to
deposit their shares into the CDP system by the dividend record
date, being 18th March 2022, must submit the relevant documents to
M & C Services Private Limited, the Singapore branch registrar,
by no later than 5.00 p.m. (local time) on 17th March 2022.
About Hongkong Land Group
Hongkong Land is a major listed property investment, management
and development group. Founded in 1889, Hongkong Land's business is
built on excellence, integrity and partnership.
The Group owns and manages more than 850,000 sq. m. of prime
office and luxury retail property in key Asian cities, principally
Hong Kong, Singapore, Beijing and Jakarta . Its properties attract
the world's foremost companies and luxury brands.
The Group's Central Hong Kong portfolio represents some 450,000
sq. m. of prime property. It has a further 165,000 sq. m. of
prestigious office space in Singapore mainly held through joint
ventures, four retail centres on the Chinese mainland, including a
luxury retail centre at Wangfujing in Beijing, and a 50% interest
in a leading office complex in Central Jakarta. The Group also has
a number of high quality residential, commercial and mixed-use
projects under development in cities across China and Southeast
Asia, including a 43% interest in a 1.1 million sq. m. mixed-use
project in West Bund, Shanghai. In Singapore, its subsidiary, MCL
Land, is a well-established residential developer.
Hongkong Land Holdings Limited is incorporated in Bermuda and
has a primary listing on the London Stock Exchange, with secondary
listings in Bermuda and Singapore. The Group's assets and
investments are managed from Hong Kong by Hongkong Land Limited.
Hongkong Land is a member of the Jardine Matheson Group.
- end -
For further information, please contact:
Hongkong Land Limited
Robert Wong (852) 2842 8428
Craig Beattie (852) 2842 8101
Brunswick Group Limited
Andrea Ngai (852) 3512 5093
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2021 can be accessed through the Internet at 'www.hkland.com'.
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END
FR EAPDDEDPAEEA
(END) Dow Jones Newswires
March 03, 2022 04:30 ET (09:30 GMT)
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