the year ended December 31, 1999, Group profit attributable to shareholders
was HK$3,216.5 million, an increase of 72 per cent. Earnings per share
were HK$1.39 compared with HK$0.82 for the preceding year, an increase
of 70 per cent.
An interim dividend of 28 cents per share was paid in November 1999 and the Directors recommend a final dividend of 50 cents per share to be approved at the forthcoming Annual General Meeting.
the recovery of the Hong Kong economy, the rental market has been improving
visibly. Vacancy rates in Hong Kong have dropped significantly overall,
with the huge supply since 1998 largely absorbed. There will be very limited
new supply of Grade A office space in the next several years and a recovery
of office rental levels is expected to take place in the second half of
2000. The success of the Group's investment property portfolio is expected
to be enhanced by this improving market.
third tower of Gateway II will be put in the market later this year to
capitalise on the cyclical turnaround. By adding 2.7 million square feet
to Harbour City, Gateway II reflects a 36 per cent growth in Wharf's core
investment property portfolio. When optimum occupancy is achieved, total
rental billings of Wharf should amount to about HK$4.25 billion per annum.
At present, the retail
podium of Gateway II is virtually fully let, and the office space in the
first two towers of Gateway II is more than 80 per cent leased.
Demand for luxury
serviced apartments at Gateway II is strong, particularly from US corporations
coming to Hong Kong in the wake of China's impending entry into the WTO,
and from large international insurance companies wishing to tap the Mandatory
Provident Fund market. Of the 190 serviced apartments at Gateway II launched
since late 1999, more than 150 units have been let.
The Wharf Group has
one of the strongest property management teams in the market and its ability
to achieve substantial leasing in an extremely difficult market is testimony
of management effectiveness. The third tower of Gateway II will come into
a much stronger market in 2000 and we are confident that this team will
capitalise on the more favourable conditions.
The Group has significant interest in a developable residential landbank that should generate solid earnings in the next five to six years. Acquired in 1995 at a cost below market, the Peak luxury portfolio may provide substantial income when launched for sale in mid 2000. The Sham Tseng and MTRC Kowloon Station Package II developments will be released progressively to the market in due course. Negotiations with the Government in fixing the land use conversion premium have led to significant cost reductions and the sale of the landbank will probably turn in a profit with the gradual upturn of the residential property market, expected soon.
tandem with the economic recovery of the Asian region, tourist arrivals
have been increasing steadily, with most of the tourists coming from the
Mainland, Southeast Asia and Taiwan. Tourism-related activities have also
been picking up and the operating margins of Marco Polo Hotels have been
improving because of effective cost saving measures and the hotels?ability
to raise average room rates at healthy occupancy levels.
The financial turmoil, which started in late 1997, forced the curtailment of certain initiatives to secure more management contracts in the Asian region. The management has, however, been on the look out for opportunities throughout this period, and believes that as the economy revives, it will be able to tap opportunities as they arise.
Over the past years, the Wharf Communications group has assembled a strong management and technical team to exploit new technology opportunities in the areas of cable television, high speed Internet and telephony. Such expertise has enabled us to actively develop these dynamic businesses and meet the challenges of changing trends.
becoming a subsidiary of the Group, Modern Terminals has been sustaining
good growth while actively engaging in strategic development to enhance
Modern Terminals?position as a leading terminal operator in Hong Kong.
Modern Terminals?commitment in the development of the Container Terminal
9 project and the acquisition of a strategic stake in the container terminals
operations in Western Shenzhen are both strategically compatible with
the impending entry of China into the WTO.
In line with its enterprising corporate culture and outlook, Modern Terminals launched a new company logo to fully reflect its management initiatives in the development of the Group one step ahead of the challenges offered by the new millennium.
in the banking market have led to a more favourable climate for financing.
The majority of the Group's financial requirements has been covered not
only for the current year, but well into 2001. Average borrowing maturity
within the portfolio has been lengthened at an average borrowing cost
of under eight per cent per annum.
Total net debt has
decreased from HK$29 billion to approximately HK$22 billion with diversified
sources funding. Debt to asset ratio at 24 per cent is well below the
Group's policy of not exceeding 30 per cent gearing.
Given the progressive sale through of its residential property landbank, the leasing of Gateway II, and the strong cashflow generated by both the telecommunications and terminal operations in the coming years, the Group has ample liquidity to seize future opportunities.
Wharf Group is on a firmer footing than at any time during the past five
the next five years, we see property forming 55 per cent of our business,
telecommunications, 35 per cent, and terminals, 10 per cent. Whilst not
forgetting the strength of our roots in core businesses, we continue to
be alert in the pursuit of modern trends. Broadband access and Internet
content businesses are obvious opportunities, but other new business lines
will not be ignored.