REG - Hongkong Land Hldgs Jardine Matheson Hdg - 2023 Preliminary Results
07/03/2024 11:15
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RNS Number : 0138G Hongkong Land Hldgs Ltd 07 March 2024
Announcement
7th March 2024
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
2023 PRELIMINARY ANNOUNCEMENT OF RESULTS
Highlights
· Underlying profit down 5% to US$734 million
· Improved results from Investment Properties
· Lower development profits on the Chinese mainland
· Group financial position remains strong
· Dividend maintained, final dividend at US¢16 per share
"Market conditions in the Group's core markets of Hong Kong and the Chinese
mainland are expected to remain challenging in 2024. While the resilience of
our Investment Properties business provides the Group with a solid base of
recurring earnings, trading performance of the Hong Kong Central portfolio is
expected to be lower, due to negative office rental reversions. An
improvement in Development Properties earnings is anticipated, however, based
on planned project completions on the Chinese mainland and in South Asia.
The Group remains in a strong financial position, with a development pipeline
of income-producing assets.
I am delighted to welcome Michael Smith as Chief Executive and look forward to
the contribution his extensive expertise and experience will make to the
Group's future growth."
Ben Keswick
Chairman
Results
Year ended 31st December
2023 2022 Change
US$m US$m %
Underlying profit attributable to shareholders(*) 734 776 -5
(Loss)/profit attributable to shareholders (582) 203 N/A
Shareholders' funds 31,965 33,303 -4
Net debt 5,371 5,817 -8
US¢ US¢ %
Underlying earnings per share(*) 33.15 34.44 -4
(Loss)/earnings per share (26.29) 8.99 N/A
Dividends per share 22.00 22.00 -
US$ US$ %
Net asset value per share 14.49 14.95 -3
* 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.
A final dividend of US¢16 per share will be payable on 15th May 2024, subject
to approval at the Annual General Meeting to be held on 8th May 2024, to
shareholders on the register of members at the close of business on 22nd March
2024.
HONGKONG LAND HOLDINGS LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31ST DECEMBER 2023
OVERVIEW
The Group's performance during the year was impacted by lower profits from
Development Properties, despite improved results from Investment Properties
compared to 2022, as trading conditions in its key markets continue to be
impacted by economic uncertainties and subdued capital market activity.
The Group remains focussed on addressing changes in customer preferences and
behaviours, as well as market conditions, and is continuing to add to its
suite of digital services, introduce innovative concepts, deepen
collaborations with tenants, and reinvest in its core assets.
PERFORMANCE
Underlying profit attributable to shareholders fell by 5% to US$734 million.
Profits from the Group's Investment Properties business increased, mainly due
to improved performance from its luxury retail and Singapore office
portfolios, offsetting reduced contributions from the Hong Kong office
portfolio. Total contributions from Development Properties were impacted by
challenging market conditions on the Chinese mainland, which led to lower
sales and reduced profit margins. In addition, the decision was taken to
impair a small number of residential projects, although this was broadly
offset by net gains from the acquisition of two equity stakes in existing
joint-venture projects for considerations below development cost.
The loss attributable to shareholders was US$582 million, after including net
non-cash losses of US$1,317 million arising primarily from the revaluation of
the Group's Investment Properties portfolio. This compares to a profit of
US$203 million in 2022, which included net non-cash losses of US$573 million
from lower property revaluations. In both years, the net negative
revaluation movements principally arose in Hong Kong, where there was a
gradual decrease in valuations of the Group's prime office portfolio.
The net asset value per share at 31st December 2023 was US$14.49, compared
with US$14.95 at the end of 2022.
The Directors recommend a final dividend of US¢16 per share, resulting in a
total dividend for the year of US¢22 per share, unchanged from last year.
Business Development
The Group has 5.2 million sq. m. of assets under development, which include
West Bund and nine luxury and premium retail for lease assets on the Chinese
mainland. These retail assets are scheduled to complete in stages, mainly
between 2024 and 2028.
The Group continues to be disciplined in evaluating and selecting strategic
investment opportunities that are expected to improve capital performance,
while maintaining a strong balance sheet position. In 2023, US$1.3 billion
was invested in new land and property acquisitions across the Group.
During the year, two new acquisitions were made on the Chinese mainland, in
Chongqing and Beijing.
- The Chongqing site is adjacent to existing residential and luxury
retail projects that the Group has under development in the Guanyinqiao
area. The total developable area of the site is approximately 301,000 sq. m.
and will primarily consist of residential for sale.
- In September, the Group secured a 20% interest in the development of a
mixed-use site in the western side of Beijing, consisting of commercial and
residential components. The total developable area of the site is
approximately 199,000 sq. m.
In addition, the Group completed the acquisition of equity stakes in two
existing mixed-used projects in Nanjing and Wuhan from joint-venture partners
at attractive valuations.
In Singapore, the Group acquired two residential sites in the Outside Central
Region of Singapore. These sites will be developed in joint ventures with
other developers. The Group's effective interest in these projects equates
to a developable area of 584,000 sq. ft.
In Jakarta, two acquisitions were made, increasing the land bank of the
Group's 50% held joint-venture residential development business.
Financing
The Group's financial position remains strong, with net debt of US$5.4 billion
at 31st December 2023, down from US$5.8 billion at the end of 2022. Net
gearing at the end of the year was 17%, unchanged from the end of 2022. As
at 31st December 2023, the Group had committed liquidity of US$4.0 billion,
with an average tenor of debt of 6.3 years, compared to 5.8 years at the end
of 2022.
SUSTAINABILITY
The Group's growth and progress on sustainability initiatives continues to be
underpinned by its Sustainability Framework 2030, which addresses material
topics that are linked to measurable targets.
As part of the Group's commitment to decarbonise its operations in line with
its 2030 near-term targets, which were validated by the Science Based Targets
initiative in 2022, several initiatives were delivered during the year.
These included:
- To reduce Scope 1 and 2 greenhouse gas emissions, the Group continues
to reinvest in and upgrade its existing portfolios across the region,
including prioritising the deployment or enhancement of artificial
intelligence solutions to drive energy efficiency. This includes the
piloting of Integrated Facilities Management Control Tower technology at the
Hong Kong Central Portfolio, which uses machine learning to optimise thermal
comfort and energy efficiency, as well as to enable predictive operations and
maintenance.
- To address Scope 3 emissions from tenants, the Group launched the
Tenant Sustainability Partnership Programme for its Central Portfolio, to
foster closer collaboration with tenants on sustainability, focussing in
particular on providing support to tenants in achieving green fit-outs and
operations.
- The Group also took a significant step forward in tackling its
embodied carbon footprint from development activities, by being one of the
first property companies in the region to build measurement tools bespoke to
its major construction supply chains. The Group expects the integration of
these tools across the design and planning, procurement, and construction
stages of its development projects to drive emissions reductions in the coming
years.
The Group's continued commitment and strong performance on sustainability
initiatives has been recognised in a number of ESG ratings, especially those
involving in-depth assessments requiring active participation. The Group was
pleased to receive the highest 5-star ratings from the Global Real Estate
Sustainability Benchmark (GRESB) under both the Standing Investments and
Development benchmarks for 2023. In addition, the Group was named Global
Sector Leader (Diversified Sector) for the first time under GRESB's
Development benchmark. Hongkong Land also qualified, for the second
consecutive year, as a constituent of the Dow Jones Sustainability Asia
Pacific Index, as a result of its strong performance in the 2023 S&P
Global Corporate Sustainability Assessment, and was included in the S&P
Global Sustainability Yearbook 2024, which recognises the top 15% of sector
participants globally.
PEOPLE
On behalf of the Board, I would like to express my gratitude to our people,
who continue to demonstrate unwavering commitment despite challenging market
conditions.
Robert Wong, who has been the Chief Executive of Hongkong Land since 2016,
will step down as Chief Executive and as a Director of the Board on 31st March
2024. He will be succeeded by Michael Smith, previously the Regional Chief
Executive Officer of Europe and the US at Mapletree Investments. We are
grateful to Robert for his leadership and significant contributions to the
Group over his close to four decades of service.
Prijono Sugiarto and Anthony Nightingale stepped down from the Board in May
2023 and January 2024, respectively. As previously announced, Yiu Kai Pang
will be stepping down from the Board, the Audit Committee and Remuneration
Committee in March 2024. We would like to record our gratitude to all of
them for the contributions they have made over many years to the Group. We
were pleased to welcome Stuart Grant to the Board as an Independent
Non-Executive Director in March 2023. Stuart has also become a member of the
Audit Committee since June 2023 and, as a result, the Audit Committee now
comprises a majority of Independent Non-Executive Directors.
OUTLOOK
Market conditions in the Group's core markets of Hong Kong and the Chinese
mainland are expected to remain challenging in 2024. While the resilience of
our Investment Properties business provides the Group with a solid base of
recurring earnings, trading performance of the Hong Kong Central portfolio is
expected to be lower, due to negative office rental reversions. An
improvement in Development Properties earnings is anticipated, however, based
on planned project completions on the Chinese mainland and in South Asia.
The Group remains in a strong financial position, with a development pipeline
of income-producing assets.
Ben Keswick
Chairman
CHIEF EXECUTIVE'S REVIEW
Hongkong Land delivered a respectable performance for the year, despite
economic uncertainties in a majority of key markets, with underlying profits
marginally lower than those achieved in 2022. Contributions from the Group's
Investment Properties were higher, due to its luxury retail portfolio
benefitting from a steady recovery of tenant sales and positive rental
reversions for the Singapore office portfolio. The contribution from
Development Properties decreased as expected due to less favourable market
conditions and the impairment of residential inventory in some projects.
STRATEGY
Hongkong Land is a landlord and a developer operating in China and South East
Asia. The Group's primary focus is to develop, grow and hold for long-term
investment a portfolio of prime commercial investment properties across the
region, while also developing premium residential and commercial properties
for sale on an opportunistic basis to enhance shareholder returns.
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 82% of the Group's gross assets at the end of
2023 (2022: 83%) and contributed 78% of the Group's underlying operating
profit before corporate expenses in 2023 (2022: 70%).
The Group's Development Properties are predominantly premium residential and
mixed-use developments located primarily in China, Singapore and Indonesia.
Returns principally arise from trading profits from 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 as Investment Properties, after rents have stabilised.
Development Properties accounted for 18% of the Group's gross assets at the
end of 2023 (2022: 17%) and 22% of the Group's underlying operating profit
before corporate expenses in 2023 (2022: 30%).
Geographically, China generates the bulk of the Group's earnings. Hong Kong,
which predominantly comprises Investment Properties, accounted for 61% of the
Group's underlying operating profit before corporate expenses in 2023 (2022:
57%), while the Chinese mainland, which predominantly comprises Development
Properties, accounted for 16% (2022: 23%).
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
totaled US$1.3 billion in 2023 (2022: US$1.0 billion).
This strategy has resulted in a significant development portfolio (summarised
below) which will provide the Group with enhanced earnings as construction
works complete in the coming few years.
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 position 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
relatively low vacancy and strong rents. Despite ongoing challenging
conditions, 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 56,000 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. The Group
works continuously to ensure that LANDMARK remains the clear market-leading
location 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 totaling 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 43,000 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.
The Group's 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 it will continue to seek new
opportunities to develop prime investment properties in key Asian gateway
cities. HKL's market leading occupancy levels within its Investment
Properties portfolios is testament to the quality and attractiveness of its
asset base.
Development Properties
The Group has established a strong and profitable Development Properties
business focussed primarily on the premium residential market segment in
China, Singapore and Indonesia. In China, the Group has a presence in seven
key markets: Beijing, Chengdu, Chongqing, Hangzhou, Nanjing, Shanghai and
Wuhan. These markets are expected to continue to benefit from the growth of
the middle class and long-term urbanisation trends on the Chinese mainland.
While the capital invested in the Development Properties business is
significantly lower than that invested in Investment Properties, the earnings
derived from this business 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 2023 totaled 11.2 million sq.
m., compared to 10.7 million sq. m. at the end of 2022. Of this,
construction of approximately 59% had been completed at the end of 2023,
compared to 54% at the end of 2022.
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.
REVIEW OF INVESTMENT PROPERTIES
Profits from Investment Properties in 2023 were 3% higher than the prior year,
primarily due to higher contributions from the Group's luxury retail and
Singapore office portfolios, which more than offset lower contributions from
the Hong Kong office portfolio. The value of the Group's Investment
Properties portfolio at 31st December 2023 declined by 5%, mainly from the
Hong Kong office portfolio.
Hong Kong
Overall demand in the office market remained weak in 2023, as a result of
subdued capital market activity, with a modest level of new leasing
enquiries. However, the Group's Central office portfolio continued to
outperform the broader market, driven largely by a flight to quality demand.
Physical vacancy was 7.4% at year-end. On a committed basis, vacancy was
6.8%, compared to 4.7% at the end of 2022. This compares to 9.9% in the
wider Central Grade A office market. The Group's average office rent in 2023
was HK$106 per sq. ft., down from last year's average of HK$111 per sq. ft.,
as rental reversions remained negative during the year. Financial
institutions and legal and accounting firms occupy 83% of the Group's total
leased office space. The weighted average lease expiry of the office
portfolio at the end of 2023 stood at 3.8 years, compared to 4.0 years at the
end of 2022.
The Group's luxury retail portfolio in Hong Kong benefitted from a steady
recovery in market sentiment following the lifting of travel restrictions in
late 2022. Average retail rent in 2023 increased to HK$203 per sq. ft. from
HK$177 per sq. ft. due to mildly positive rental reversions and temporary rent
relief provided to support tenants in the prior year. Vacancy, on both a
physical and committed basis, remained low at 1.5%.
In April 2023, the Group successfully debuted Forty-Five, occupying the 44th
floor and rooftop of Gloucester Tower. Spanning 20,000 sq. ft., Forty-Five
houses five restaurants and bars. Forty-Five demonstrates the Group's
commitment to deliver exceptional experiences to customers and to cement
Central's status as an attractive destination for affluent visitors.
In 2023, we were proud to celebrate the 50th anniversary of Jardine House, the
first skyscraper in Hong Kong and an iconic part of the city's skyline.
Completed in 1973, Jardine House quickly became the hub that attracted
influential business leaders and decision-makers as tenants. Today, Jardine
House exemplifies the Group's dedication to innovate and reinvest in existing
assets, as it remains one of the more sought after premium Grade A office
buildings in Hong Kong. In terms of sustainability, Jardine House is amongst
the best-in-class in Hong Kong, retaining the highest possible green building
ratings: BEAM Plus Certification for Existing Buildings - Platinum and "Super
Low" status in energy performance certification issued via the
Zero-Carbon-Ready Building Certification Scheme by the Hong Kong Green
Building Council.
The value of the Group's Investment Properties portfolio in Hong Kong at 31st
December 2023, based on independent valuations, declined by 5% to US$24.8
billion, primarily as a result of a decline in market rent for Hong Kong
office and a mild expansion of capitalisation rates.
Singapore
Sentiment in the office leasing market in Singapore moderated in 2023, due to
global economic uncertainties that have affected overall demand. Overall
vacancy across the entire Grade A central business district was 5.5% at the
end of 2023, unchanged from the end of 2022. Physical vacancy at the Group's
office portfolio was 1.9% at the year end, whilst on a committed basis vacancy
was 0.9% at the end of 2023, compared to 2.2% at the end of 2022. Average
rent increased to S$10.9 per sq. ft. in 2023, up from S$10.6 per sq. ft. in
the previous year, driven by positive rental reversions. Financial
institutions and legal and accounting firms occupy 72% of the Group's total
leased office space. The weighted average lease expiry of the office
portfolio at 2023 year-end stood at 3.1 years (2022: 3.4 years). The
valuation of the Investment Properties portfolio in Singapore was stable year
over year.
Chinese Mainland
In Beijing, contributions from the Group's luxury retail mall at WF CENTRAL
increased in 2023, driven by a good recovery in footfall and tenant sales
since anti-pandemic restrictions were lifted.
Good progress has been made on the development of the West Bund Financial Hub,
the Group's prime mixed-use development in Shanghai. The first component of
this 1.1 million sq. m. landmark development to be offered will be the luxury
residential component of the project, which is expected to launch in 2024.
Completion of other components is expected to occur in phases from 2024 to
2027.
Other Investment Properties
Contributions from ONE CENTRAL Macau increased by 62% in the year, driven by
strong leasing and positive rental reversions. Physical occupancy was 95%,
compared to 84% at the end of the prior year.
In Jakarta, occupancy across the office portfolio was 67% at the end of 2023,
a solid performance amidst a backdrop of surplus city-wide office supply. On
a committed basis, occupancy was 69% compared to 72% at the end of 2022. The
average net rent was US$14.5 per sq. m. in 2023, compared to US$15.0 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, is under
review in response to the changing market conditions, with a greater amount of
retail space to be created in response to increased demand from luxury retail
tenants. This development has a gross floor area of approximately 312,000
sq. m.
Performance at the Group's other investment properties was within
expectations.
REVIEW OF DEVELOPMENT PROPERTIES
Earnings from the Group's Development Properties business were lower in 2023
than in 2022, due to challenging market conditions on the Chinese mainland.
Following a review of development cost and market sales prices, the decision
was taken to recognise an impairment of US$90 million on a small number of
residential projects, notably in two projects in Wuhan.
Chinese Mainland
The Group's development properties on the Chinese mainland comprise 37
projects in seven cities, of which 15 are in Chongqing. As at 31st December
2023, the Group's net investment in development properties on the Chinese
mainland was US$6.6 billion, compared to US$6.5 billion at the end of 2022.
While the Development Properties business is predominantly focussed on selling
residential properties, the Group is also developing luxury and premium
lifestyle retail properties on the Chinese mainland. It currently has four
such properties in operation, with a total attributable net leasable area of
175,000 sq. m. In addition, a further ten projects, with an estimated
attributable net leasable area of 358,000 sq. m. are expected to be launched
from 2024 to 2028. The Group's share of net investment in its luxury retail
pipeline amounts to US$1.4 billion, and its share of net investment in its
lifestyle retail pipeline amounts to US$1.0 billion. The majority of these
commitments had already been funded at the point of land acquisition.
Set out below is a summary of the Group's luxury and premium lifestyle retail
properties pipeline on the Chinese mainland, by geographical location.
Luxury Retail Properties Pipeline
Project City Attributable net leasable area
(sq. m.)
JL CENTRAL Nanjing 23,300
Eternal Land Chongqing 44,400
West Bund* Shanghai 56,600
Suzhou CENTRAL* Suzhou 38,100
* The West Bund luxury retail segment and Suzhou CENTRAL are recognised under
Investment Properties.
Premium Lifestyle Retail Properties Pipeline
Project City Attributable net leasable area
(sq. m.)
Galaxy Midtown Shanghai 8,800
WE City Chengdu 50,600
Yue City Nanjing 23,600
Central Avenue Chongqing 38,700
Hangzhou Bay Hangzhou 22,800
Dream Land Wuhan 53,400
The Group maintained its disciplined approach to evaluating new development
opportunities during 2023, amidst uncertain market conditions. During the
year, the Group secured two new joint venture projects on the Chinese
mainland, one in Chongqing and the other in Beijing. Both sites are
mixed-used developments.
During the year, the Group acquired additional equity stakes in two existing
projects, in Nanjing (Yue City) and Wuhan (Dream Land), at considerations
below net asset value. The projects are mixed-used in nature, with
residential and commercial components.
Despite uncertainties across the broader China property market, pre-sales
performance at the Group's new residential developments remained solid. The
Group's share of total contracted sales in 2023 was US$1,530 million, 18%
higher than the US$1,300 million achieved in the prior year, due to the
resilient demand for high-quality, well-located residential space. The
Group's attributable interest in revenue recognised in 2023, including its
share of revenue in joint ventures and associates, was US$1,621 million,
compared to US$1,873 million in 2022.
At 31st December 2023, the Group's attributable interest in sold but not yet
recognised contracted sales amounted to US$2,031 million, compared to US$2,087
million at the end of 2022.
Set out below is a summary of the Group's Development Properties pipeline on
the Chinese mainland, by geographical location.
Development Properties Pipeline (Chinese Mainland)
City Number of projects Developable area* Revenue from property sales* (US$m) % of construction completed % of Development Properties exposure((^)) on the Chinese mainland
('000 sq. m.)
2023 2022
Chongqing 15 5,045 510 1,113 80% 32%
Shanghai 5 396 144 59 45% 20%
Nanjing 4 472 291 100 53% 18%
Wuhan 4 888 122 56 57% 14%
Chengdu 5 1,211 550 27 85% 8%
Beijing 2 78 - - - 7%
Hangzhou 2 309 4 518 53% 1%
Total 37 8,399 1,621 1,873 74% 100%
*Includes HKL's share in joint ventures and associates
^Exposure represents residual land cost plus committed construction cost, less
secured pre-sales proceeds
Singapore
Residential market sentiment remained healthy in 2023, with solid sales
performance at the Group's existing projects, including the 638-unit Leedon
Green and 407-unit Piccadilly Grand and Galleria developments, which are both
effectively sold out. During the year, the Group launched sales for one
project - 638-unit Tembusu Grand - in which 59% was sold or reserved as at the
end of the year.
The Group's attributable interest in contracted sales was US$587 million in
2023, compared to US$615 million in the prior year. The Group's attributable
interest in revenue recognised in 2023 was US$443 million, compared to US$379
million in the prior year.
At 31st December 2023, the Group's attributable interest in sold but not yet
recognised contracted sales amounted to US$736 million, compared to US$589
million at the end of 2022.
During the year, the Group secured two residential sites in Singapore,
including a 51% interest in a site on Clementi Avenue and a 50% interest in
Pine Grove Parcel B, both located in the Outside Central Region of
southwestern Singapore. Total developable area of the two sites is
approximately 1.1 million sq. ft. and is expected to yield over 1,000 units.
Set out below is a summary of the Group's Development Properties pipeline in
Singapore.
Development Properties Pipeline (Singapore)
Project Developable area* Revenue from property sales* (US$m) Expected Completion % of Development Properties exposure((^)) in South East Asia
('000 sq. m.)
2023 2022
Leedon Green 27 273 190 Completed -
Piccadilly Grand and Galleria 20 97 25 2025 -
Copen Grand 34 - - 2025 -
Tembusu Grand 29 73 - 2025 9%
Clementi 26 - - 2027 18%
Avenue 1
Pine Grove 29 - - 2027 20%
Parcel B
*Includes HKL's share in joint ventures and associates
^Exposure represents residual land cost plus committed construction cost, less
secured pre-sales proceeds
Indonesia and Other Development Properties
In Indonesia, construction of the Group's residential projects is progressing
well. Nava Park is the Group's 49% joint venture comprising a mix of landed
houses, villas, mid-rise apartments and low-rise commercial components. Of
the 949 units which have been launched for sale, 92% had been sold as at the
end of 2023.
In the rest of South East Asia, construction activities continue to progress
well, with pre-sales performance in line with expectations.
Set out below is a summary of the Group's Development Properties pipeline in
South East Asia, other than Singapore.
Development Properties Pipeline (South East Asia Ex. Singapore)
Country Number of projects Developable area* Revenue from property sales* (US$m) % of Construction completed % of Development Properties exposure((^)) in South East Asia
('000 sq. m.)
2023 2022
Indonesia 8 951 84 67 25% 33%
Thailand 3 215 29 22 16% 13%
Philippines 3 713 55 20 12% 6%
Vietnam 1 40 12 90 Completed 1%
*Includes HKL's share in joint ventures and associates
^Exposure represents residual land cost plus committed construction cost, less
secured pre-sales proceeds
THE YEAR AHEAD
Operating conditions across the Group's key markets are likely to remain
uncertain in 2024, due to geopolitical and macroeconomic headwinds. The
Group's Investment Properties portfolio is expected to continue generating
stable returns, although contributions from the Hong Kong Central portfolio
are expected to be lower due to negative office rental reversions. In the
Development Properties business, higher contributions are expected, due to
more planned sales completions in the coming year.
We pride ourselves on delivering world-class services and offerings to our
tenants and customers, as well as on maintaining a disciplined approach to
evaluating new opportunities. These values are fundamental to our long-term
success, as they enable us to withstand the test of challenging market
conditions and competition, thus maintaining and strengthening our market
positions.
I will retire from the position of Chief Executive on 31st March 2024 and I
would like to thank colleagues, partners and investors for their support
during my close to 40 years' service to Hongkong Land. While current market
conditions are challenging, the quality of the Hongkong Land brand, its prime
asset base and dedicated people will ensure that the Group will continue to
grow and prosper.
Robert Wong
Chief Executive
Hongkong Land Holdings Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2023
2023 2022
Underlying Non- Total Underlying Non- Total
business trading US$m business trading US$m
performance items performance items
US$m US$m US$m US$m
Revenue 1,844.3 - 1,844.3 2,244.4 - 2,244.4
(note 2)
Net operating costs
(note 3) (1,050.0) 16.6 (1,033.4) (1,398.4) - (1,398.4)
Change in fair value of
investment properties
(note 7) - (1,323.5) (1,323.5) - (559.3) (559.3)
Operating (loss)/profit
(note 4) 794.3 (1,306.9) (512.6) 846.0 (559.3) 286.7
Net financing charges
- financing charges (265.9) - (265.9) (234.9) - (234.9)
- financing income 81.5 - 81.5 66.8 - 66.8
(184.4) - (184.4) (168.1) - (168.1)
Share of results of associates
and joint
ventures
(note 5)
- before change in fair
value of investment
properties 234.7 - 234.7 229.3 - 229.3
- change in fair value of
investment properties - 18.0 18.0 - (24.5) (24.5)
234.7 18.0 252.7 229.3 (24.5) 204.8
(Loss)/profit before tax 844.6 (1,288.9) (444.3) 907.2 (583.8) 323.4
Tax (note 6) (107.2) (25.6) (132.8) (131.7) 7.9 (123.8)
(Loss)/profit after tax 737.4 (1,314.5) (577.1) 775.5 (575.9) 199.6
Attributable to:
Shareholders of the
Company 734.2 (1,316.5) (582.3) 776.1 (573.4) 202.7
Non-controlling interests 3.2 2.0 5.2 (0.6) (2.5) (3.1)
737.4 (1,314.5) (577.1) 775.5 (575.9) 199.6
US¢ US¢ US¢ US¢
(Loss)/earnings per share (basic and diluted) 33.15 (26.29) 34.44 8.99
(note 8)
Hongkong Land Holdings Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2023
2023 2022
US$m US$m
(Loss)/profit for the year (577.1) 199.6
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss:
Remeasurements of defined benefit plans 0.7 (1.6)
Tax on items that will not be reclassified (0.1) 0.3
0.6 (1.3)
Items that may be reclassified subsequently
to profit or loss:
Net exchange translation differences
- net loss arising during the year (82.2) (116.8)
- transfer to profit and loss 0.6 -
(81.6) (116.8)
Cash flow hedges
- net (loss)/gain arising during the year (53.1) 2.4
- transfer to profit and loss (2.2) (2.4)
(55.3) -
Tax relating to items that may be
reclassified 9.1 -
Share of other comprehensive expense
of associates and joint ventures (59.1) (523.6)
(186.9) (640.4)
Other comprehensive expense for the
year, net of tax (186.3) (641.7)
Total comprehensive expense for the year (763.4) (442.1)
Attributable to:
Shareholders of the Company (767.4) (431.9)
Non-controlling interests 4.0 (10.2)
(763.4) (442.1)
Hongkong Land Holdings Limited
Consolidated Balance Sheet
at 31st December 2023
2023 2022
US$m US$m
Net operating assets
Fixed assets 99.7 111.8
Right-of-use assets 12.1 13.0
Investment properties (note 10) 26,687.2 28,054.1
Associates and joint ventures 9,284.2 9,616.0
Non-current debtors 14.2 16.8
Deferred tax assets 113.3 98.2
Pension assets 1.0 0.9
Non-current assets 36,211.7 37,910.8
Properties for sale 2,926.1 2,910.7
Current debtors 374.1 539.4
Current tax assets 60.4 62.5
Bank balances 1,195.6 1,173.4
Current assets 4,556.2 4,686.0
Current creditors (1,705.9) (1,667.0)
Current borrowings (note 11) (781.6) (419.1)
Current tax liabilities (189.8) (328.9)
Current liabilities (2,677.3) (2,415.0)
Net current assets 1,878.9 2,271.0
Long-term borrowings (note 11) (5,785.3) (6,571.4)
Deferred tax liabilities (249.1) (257.1)
Pension liabilities (0.1) (1.8)
Non-current creditors (68.8) (24.4)
31,987.3 33,327.1
Total equity
Share capital 220.7 222.7
Revenue and other reserves 31,744.7 33,080.7
Shareholders' funds 31,965.4 33,303.4
Non-controlling interests 21.9 23.7
31,987.3 33,327.1
Hongkong Land Holdings Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2023
Attributable to Attributable to non-
shareholders
Share Share Revenue Hedging Exchange of the Company US$m controlling interests US$m Total
capital premium reserves US$m reserves reserves equity
US$m US$m US$m US$m US$m
2023
At 1st January 222.7 - 33,449.8 (3.0) (366.1) 33,303.4 23.7 33,327.1
Total comprehensive expense - - (581.7) (54.7) (131.0) (767.4) 4.0 (763.4)
Dividends paid by the Company (note 9) - - (488.7) - - (488.7) - (488.7)
Dividends paid to non-controlling shareholders - - - - - - (0.6) (0.6)
Unclaimed dividends forfeited - - 1.3 - - 1.3 - 1.3
Repurchase of shares (2.0) - (81.2) - - (83.2) - (83.2)
Disposal of subsidiaries - - - - - - (5.2) (5.2)
At 31st December 220.7 - 32,299.5 (57.7) (497.1) 31,965.4 21.9 31,987.3
2022
At 1st January 229.8 67.4 34,022.4 (20.2) 284.4 34,583.8 34.4 34,618.2
Total comprehensive expense - - 201.4 17.2 (650.5) (431.9) (10.2) (442.1)
Dividends paid by the Company (note 9) - - (498.8) - - (498.8) - (498.8)
Dividends paid to non-controlling shareholders - - - - - - (0.5) (0.5)
Unclaimed dividends forfeited - - 1.0 - - 1.0 - 1.0
Repurchase of shares (7.1) (67.4) (276.2) - - (350.7) - (350.7)
At 31st December 222.7 - 33,449.8 (3.0) (366.1) 33,303.4 23.7 33,327.1
Hongkong Land Holdings Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2023
2023 2022
US$m US$m
Operating activities
Operating (loss)/profit (512.6) 286.7
Depreciation 16.5 17.5
Change in fair value of investment properties 1,323.5 559.3
Loss on disposal of fixed assets - 2.8
Gain on acquisition of subsidiaries (31.6) (1.3)
Net gain on disposal of subsidiaries and joint ventures (15.9) -
Decrease in properties for sale 187.5 88.9
Decrease in debtors 83.0 487.4
Increase/(decrease) in creditors 8.2 (498.0)
Interest received 46.4 45.6
Interest and other financing charges paid (251.2) (228.2)
Tax paid (287.3) (124.7)
Dividends from associates and joint ventures 135.1 222.3
Cash flows from operating activities 701.6 858.3
Investing activities
Major renovations expenditure (85.3) (94.6)
Repayments from associates and joint ventures 1,183.3 435.3
Investments in associates and joint ventures (401.4) (254.3)
Advances to associates and joint ventures (434.3) (798.6)
Disposal of subsidiaries 29.3 -
Disposal of joint ventures 8.5 -
Acquisition of subsidiaries (30.9) (14.5)
Cash flows from investing activities 269.2 (726.7)
Financing activities
Drawdown of borrowings 2,121.9 2,399.6
Repayment of borrowings (2,569.5) (1,954.7)
Principal elements of lease payments (3.4) (4.1)
Repurchase of shares (83.2) (352.3)
Dividends paid by the Company (486.2) (503.7)
Dividends paid to non-controlling shareholders (0.6) (0.5)
Cash flows from financing activities (1,021.0) (415.7)
Net cash outflow (50.2) (284.1)
Cash and cash equivalents at 1st January 1,171.5 1,476.1
Effect of exchange rate changes (9.1) (20.5)
Cash and cash equivalents at 31st December 1,112.2 1,171.5
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 2023 which have been prepared
in accordance with International Financial Reporting Standards, including
International Accounting Standards ('IAS') and Interpretations as issued by
the International Accounting Standards Board ('IASB').
The Group has adopted the following amendments for the annual reporting period
commencing 1st January 2023.
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting
Policies (effective from 1st January 2023)
The amendments require entities to disclose material rather than significant
accounting policies. The amendments define what is 'material accounting policy
information' and explain how to identify when accounting policy information is
material. Material accounting policy information is information that, when
considered together with other information included in an entity's financial
statements, can reasonably be expected to influence decisions that the primary
users of general purpose financial statements make on the basis of those
financial statements. IASB further clarifies that immaterial accounting policy
information does not need to be disclosed. If it is disclosed, it should not
obscure material accounting information. To support this amendment, the IASB
also amended IFRS Practice Statement 2 Making Materiality Judgements to
provide guidance on how to apply the concept of materiality to accounting
policy disclosures.
Amendment to IAS 12 - Deferred Tax related to Assets and Liabilities arising
from a Single Transaction (effective from 1st January 2023)
The amendment requires deferred tax to be recognised on transactions that, on
initial recognition, give rise to equal amounts of taxable and deductible
temporary differences. They typically apply to transactions such as leases of
lessees and decommissioning obligations and require the recognition of
additional deferred tax assets and liabilities. The Group applied the
amendment from 1st January 2023 and there is no material impact on the Group's
consolidated financial statements.
Amendment to IAS 12 - International Tax Reform - Pillar Two Model Rules
(effective for annual reporting period commencing on or after 1st January
2023)
The amendment provides a temporary mandatory exception from deferred tax
accounting in respect of Pillar Two income taxes and certain additional
disclosure requirements. The Group is within the scope of the OECD Pillar Two
model rules, and has applied the amendment from 1st January 2023.
Pillar Two legislation has been enacted or substantially enacted in certain
jurisdictions in which the Group operates. The legislation will be effective
for the Group's annual reporting period commencing 1st January 2024. Since the
Pillar Two legislation was not effective at 31st December 2023, the Group has
no related current tax exposure.
The Group is in scope of the enacted or substantively enacted legislation and
has performed an assessment of the Group's potential exposure to Pillar Two
income taxes when the legislation comes into effect. The assessment of the
potential exposure to Pillar Two income taxes is based on the latest financial
information for the year ended 31st December 2023 of the constituent entities
in the Group. Based on the assessment, the effective tax rates in most of the
jurisdictions in which the Group operates are above 15%. However, there are
a limited number of jurisdictions where the effective tax rate is slightly
below or close to 15%. The Group does not expect a material exposure to Pillar
Two income taxes in those jurisdictions.
Apart from the above, there are no other amendments which are effective in
2023 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
2023 2022
US$m US$m
Rental income 934.7 927.5
Service income and others
- recognised at a point in time 33.7 28.0
- recognised over time 175.5 162.9
209.2 190.9
Sales of properties
- recognised at a point in time 671.7 953.4
- recognised over time 28.7 172.6
700.4 1,126.0
1,844.3 2,244.4
Total variable rents included in rental income amounted to US$41.0 million
(2022: US$30.9 million).
3. NET OPERATING COSTS
2023 2022
US$m US$m
Cost of sales (913.6) (1,223.7)
Other income 54.3 40.8
Administrative expenses (221.6) (214.0)
Loss on disposal of fixed assets - (2.8)
Gain on acquisition of subsidiaries 31.6 1.3
Net gain on disposal of subsidiaries and joint ventures 15.9 -
(1,033.4) (1,398.4)
4. OPERATING (LOSS)/PROFIT
2023 2022
US$m US$m
By business
Investment Properties 833.7 820.7
Development Properties 54.3 114.1
Corporate (93.7) (88.8)
794.3 846.0
Change in fair value of investment properties (1,323.5) (559.3)
Gain on disposal of subsidiaries 16.6 -
(512.6) 286.7
5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
2023 2022
US$m US$m
By business
Investment Properties
- operating profit 150.4 130.7
- net financing charges (51.7) (43.4)
- tax (16.2) (15.0)
- net profit 82.5 72.3
Development Properties
- operating profit 218.2 289.5
- net financing charges (32.4) (16.8)
- tax (33.6) (113.9)
- non-controlling interests - (1.8)
- net profit 152.2 157.0
Underlying business performance 234.7 229.3
Change in fair value of investment properties
(net of tax) 18.0 (24.5)
252.7 204.8
6. TAX
2023 2022
US$m US$m
Tax charged to profit and loss is analysed as follows:
Current tax (155.1) (128.3)
Deferred tax 22.3 4.5
(132.8) (123.8)
Tax relating to components of other comprehensive income is analysed as
follows:
2023 2022
US$m US$m
Remeasurements of defined benefit plans (0.1) 0.3
Cash flow hedges 9.1 -
9.0 0.3
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$51.7 million (2022:
US$127.0 million) is included in share of results of associates and joint
ventures.
7. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater understanding
of the Group's underlying business performance. Items classified as
non-trading items include fair value gains or losses on revaluation of
investment properties; gains and losses arising from the sale of businesses
and investment properties; impairment of non-depreciable intangible assets;
provisions for the closure of businesses; acquisition-related costs in
business combinations; and other credits and charges of a non-recurring nature
that require inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items after interest, tax and non-controlling
interests is set out below:
2023 2022
US$m US$m
Change in fair value of investment properties (1,323.5) (559.3)
Tax on change in fair value of investment properties (25.6) 7.9
Gain on disposal of subsidiaries 16.6 -
Share of change in fair value of investment properties in
associates and joint ventures (net of tax) 18.0 (24.5)
Non-controlling interests (2.0) 2.5
(1,316.5) (573.4)
8. EARNINGS PER SHARE
Earnings per share are calculated on loss attributable to shareholders of
US$582.3 million (2022: profit of US$202.7 million) and on the weighted
average number of 2,215.1 million (2022: 2,253.7 million) shares in issue
during the year.
Earnings per share are additionally calculated based on underlying profit
attributable to shareholders. A reconciliation of earnings is set out below:
2023 2022
US$m Earnings Earnings per share
per share US$m US¢
US¢
Underlying profit attributable to
shareholders 734.2 33.15 776.1 34.44
Non-trading items (note 7) (1,316.5) (573.4)
(Loss)/profit attributable to shareholders (582.3) (26.29) 202.7 8.99
9. DIVIDENDS
2023 2022
US$m US$m
Final dividend in respect of 2022 of US¢16.00
(2021: US¢16.00) per share 355.9 364.5
Interim dividend in respect of 2023 of US¢6.00
(2022: US¢6.00) per share 132.8 134.3
488.7 498.8
A final dividend in respect of 2023 of US¢16.00 (2022: US¢16.00) per share
amounting to a total of US$353.1 million (2022: US$356.3 million) is proposed
by the Board. The dividend proposed will not be accounted for until it has
been approved at the 2024 Annual General Meeting. The amount will be
accounted for as an appropriation of revenue reserves in the year ending 31st
December 2024.
10. INVESTMENT PROPERTIES
2023 2022
US$m US$m
At 1st January 28,054.1 28,600.2
Exchange differences (69.7) (77.3)
Additions 49.6 95.4
Transfer to fixed assets - (4.9)
Disposal of subsidiaries (23.3) -
Decrease in fair value (1,323.5) (559.3)
At 31st December 26,687.2 28,054.1
11. BORROWINGS
2023 2022
US$m US$m
Current
Bank overdrafts 1.2 1.9
Bank loans 74.2 87.4
Current portion of long-term borrowings
- bank loans 306.5 150.4
- medium term notes 399.7 179.4
781.6 419.1
Long-term
Bank loans 1,909.7 2,924.9
Medium term notes
- due 2024 - 394.9
- due 2025 641.3 642.9
- due 2026 225.3 38.6
- due 2027 186.0 186.2
- due 2028 182.3 182.7
- due 2029 121.1 121.3
- due 2030 698.6 698.3
- due 2031 569.5 569.2
- due 2032 139.9 140.2
- due 2033 524.7 89.2
- due 2034 77.0 77.1
- due 2035 253.3 253.8
- due 2038 111.9 109.6
- due 2039 112.8 110.6
- due 2040 31.9 31.9
3,875.6 3,646.5
5,785.3 6,571.4
6,566.9 6,990.5
12. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
Total capital commitments at 31st December 2023 amounted to US$813.8 million
(2022: US$1,016.9 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
The parent company of the Group is Jardine Strategic Limited ('JSL') and the
ultimate parent company of the Group is Jardine Matheson Holdings Limited
('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 2023 was US$3.7 million (2022:
US$3.8 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 2023 amounted to US$19.8 million (2022: US$16.9
million).
The Group provided project management services and property management
services to Jardine Matheson group members in 2023 amounting to US$3.9 million
(2022: US$4.7 million).
Jardine Matheson group members provided property maintenance and other
services to the Group in 2023 in aggregate amounting to US$58.8 million (2022:
US$65.3 million).
Hotel management services
Jardine Matheson group members provided hotel management services to the Group
in 2023 amounting to US$3.6 million (2022: US$2.2 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 2023 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, safety and sustainability
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.
· Adopt best practices with respect to sustainability and
transition to net zero, including executing on green building initiatives and
collaborating with our tenants to jointly achieve sustainability goals.
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 include 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 risks 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 exposure 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 exposure.
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.
Pandemic, War, 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 war and terrorism, either
directly through the impact of an act of war and terrorism or indirectly
through generally reduced economic activity in response to the threat of or an
actual act of war and 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.
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.
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.
Governance and Misconduct Risk
Effective management of the Group's risks depends on the existence of an
appropriate governance structure, tone from top leadership, and functioning
system of internal controls. Ethical breaches, management override of
controls, employee fraud and misconduct, or other deficiencies in governance
and three lines of internal controls may result in financial loss and
reputational damage for the Group.
Inadequate capability and diversity in management or the board may also lead
to sub-optimal deliberations and decisions.
The Group holds minority stakes in various companies. Lack of control or
significant influence over these companies may lead to losses on the Group's
investment if the companies are mismanaged.
Mitigation Measures
· Established Groupwide mandatory code of conduct that applies to
all Group businesses and new joiners.
· Maintain a robust Corporate Governance Framework which includes a
whistleblowing channel.
· Compliance department reviews internal controls.
· Maintain functionally independent internal audit function that
reports to the Group Audit Committee on risk management, the control
environment and significant non-compliance matters.
· Maintain Crime and General Liability insurance policies with
adequate coverage.
Health and Safety Risk
The Group's businesses engage in construction, renovation or other physical
activities that may lead to serious injury or fatal incidents if work
conditions are unsafe or workers do not take due care to observe safety
procedures.
Mitigation Measures
· Establish safe working environments and regular safety training
for all employees and subcontractors.
· Establish contractual requirements for contractors to comply with
high expected levels of safety standards.
· Incorporate site safety plans in tenders and contracts.
· Conduct occupational health and safety awareness campaigns.
· Purchase sufficient insurance coverage including employee
compensation and construction of all risks.
· Establish proper contractor selection process.
· Ensure contractors follow the Group's guidelines, requirements
and local regulations.
· Conduct regular audits on operating buildings and construction
sites.
· Conduct periodic drills and crisis management procedures for
safety incidents.
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, and talent development plan.
· Implement strategy to promote Inclusion, Equity and Diversity
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 1.5°C.
· Perform and update climate risk assessments and adaptation action
plans based on the recommendations of the Task Force on Climate-related
Financial Disclosure, 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 minimize 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 Statements
The Directors of the Company confirm to the best of their knowledge that:
(a) the consolidated financial statements prepared in accordance with
International Financial Reporting Standards, including International
Accounting Standards and Interpretations as issued by the International
Accounting Standards Board, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group; and
(b) the Chairman's Statement, Chief Executive's Review, Financial Review and
the description of Principal Risks and Uncertainties facing the Group as set
out in the Company's 2023 Annual Report, which constitute the management
report required by the Disclosure Guidance and Transparency Rule 4.1.8,
include a fair review of all information required to be disclosed under Rules
4.1.8 to 4.1.11 of the Disclosure Guidance and Transparency Rules 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 US¢16.00 per share will be payable on 15th May 2024,
subject to approval at the Annual General Meeting to be held on 8th May 2024,
to shareholders on the register of members at the close of business on 22nd
March 2024. The shares will be quoted ex-dividend on 21st March 2024, and
the share registers will be closed from 25th to 29th March 2024, inclusive.
Shareholders will receive 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 can elect for their
dividends to be paid in Sterling. These shareholders may make new currency
elections for the 2023 final dividend by notifying the United Kingdom transfer
agent in writing by 26th April 2024. The Sterling equivalent of dividends
declared in United States Dollars will be calculated by reference to a rate
prevailing on 2nd May 2024.
Shareholders holding their shares through CREST in the United Kingdom will
receive cash dividends in Sterling only, as calculated above.
Shareholders on the Singapore branch register who hold their shares through
The Central Depository (Pte) Limited ('CDP')
Shareholders who are on CDP's Direct Crediting Service ('DCS')
Those shareholders 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 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 22nd March 2024, must
submit the relevant documents to Boardroom Corporate & Advisory Services
Pte. Ltd., the Singapore branch registrar, by no later than 5.00 p.m. (local
time) on 21st March 2024.
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 assets in key Asian cities, principally Hong Kong, Singapore, Beijing
and Jakarta. Its properties hold industry leading green building
certifications and 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, five 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 South East Asia,
including a 43% interest in a 1.1 million sq. m. mixed-use project in West
Bund, Shanghai. Its subsidiary, MCL Land, is a well-established residential
developer in Singapore.
Hongkong Land Holdings Limited is incorporated in Bermuda and has a primary
listing in the standard segment of 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
Mark Lam (852) 2842 8211
Gary Leung (852) 2842 0601
Brunswick Group Limited
Kay Lau (852) 6021 7009
Full text of the Preliminary Announcement of Results and the Preliminary
Financial Statements for the year ended 31st December 2023 can be accessed via
the Hongkong Land corporate website at 'www.hkland.com'.
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