Review of 1999 Results and Segmental Performance
The Group reported a profit attributable to shareholders of HK$3,216.5 million for the year ended December 31, 1999, an increase of 72 per cent from the HK$1,871.0 million achieved in 1998. The profit for the year included an exceptional gain of HK$3,593.5 million arising from spin off of i-CABLE Communications Limited and provisions made for contingencies from litigation case of HK$1.0 billion and for certain properties under development of HK$1,508.0 million. Earnings per share were HK$1.39 compared to HK$0.82 for the previous year.
Turnover for the year was HK$10,520.5 million, as compared with HK$10,839.7 recorded in 1998. Lower turnover was reported from the Group's telecommunication business as a result of market competition while Cable Television and Modern Terminals reported a growth in turnover. During the year, there was net income of HK$1,088 million from disposal of certain long term investments.
before borrowing costs and provision for properties for the year was HK$4,951.6
million, increased by 10 percent from the HK$4,519.6 million in 1998.
Net borrowing costs charged for the year was HK$1,939.2 million. This compared to HK$1,295.1 million in 1998. The charge was after capitalisation of HK$722.2 million, compared to HK$821.7 million in 1998. The costs for the year also included an amount of HK$365.8 million in respect of deferred borrowing costs written off on early repayment of loans.
The share of profit
in associates was HK$64.6 million. The amount recorded in 1998 was HK$722.5
million, including substantially the Share of profit from the sale of
Galaxia's residential units.
Taxation charge for
1999 was HK$263.7 million. The amount for 1998 was HK$740.0 million. The
decrease for the year mainly resulted from the availability of capital
allowances after certain investment properties were completed during the
year. The charge for 1998 included also the share of tax attributable
to the sale of Galaxia's residential units.
In accordance with established accounting policies, the Group's investment and hotel property interests were revalued at December 31, 1999. On that basis, the consolidated net asset value of the Group at that date was HK$22.84 per share, compared to HK$23.38 per share at the end of 1998 (as restated).
As at December 31, 1999, the ratio of net debt to total assets decreased to 24 per cent. The ratio at the end of 1998 was 30 per cent. The Group's net debt decreased from HK$28.5 billion at the end of 1998 to HK$21.6 billion at December 31, 1999. The amount was made up of HK$29.8 billion in debts and HK$8.2 billion in deposits and cash.
During 1999, net cash generated from the Group's operating activities amounted to HK$7.2 billion. Other investment activities included HK$2.5 billion in expenditure on purchase of fixed assets and a net receipt of HK$4.1 billion from disposal of long-term investments.
In November 1999, the Group completed the spin off of i-CABLE raising proceeds of HK$4.1 billion. As at December 30, 1999, nearly 90 per cent of the bonus warrants were exercised to subscribe for ordinary shares of the Company. As a result, 102.6 million ordinary shares were issued during the year and the proceeds received thereof totalled HK$1.8 billion.
The debt maturity profile of the Group at the end of 1999 is analysed as follows:
During the year,
the Group completed a US$575.2 million asset-backed notes issue in international
capital markets. The Group concluded a HK$4.0 billion syndicated loan
facility for refinancing its Times Square project.
As at December 31, 1999, the Group maintained a portfolio of long term investments, primarily in blue-chip securities, with a market value of HK$5.2 billion. There is no significant change in the mix of this portfolio during the year.
The Year 2000 Issue
The Group had completed all Year 2000 compliance activities by September 30, 1999 and had a successful transition to the year 2000. There have been no reported incidents on the issue as all systems and equipment functioned as normal throughout the monitoring period up to and including February 29, 2000.
The Group has so far spent about HK$60.8 million to resolve the Year 2000 problem. All these costs are recognised as expenses when incurred except those incurred for the replacement of hardware and software for enhancing the capacity and capability of major systems, which are capitalised and amortised according to general accounting principles.
The Company has submitted a petition for rehearing by the entire Tenth Circuit Court in Denver, Colorado, USA.
For other details, please refer to previous annual reports and Note 25 to the Accounts in respect of the Group's Contingent Liabilities.
ADS Litigation Case
On March 9, 2000, the Hong Kong Court of Final Appeal unanimously dismissed the actions brought against Wheelock Marden & Company Limited and certain directors of its former shipping subsidiary, Wheelock Maritime International, by ADS, a Danish state owned corporation. The proceedings against Wheelock Marden & Company Limited arose out of events which occurred prior to March 1985 when the Wheelock Marden Group was acquired, following a contested takeover by the Wharf Group. This long drawn out litigation, which has lasted for some twelve years, is now at an end.
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The Corporate Affairs
unit continued its efforts to keep the investment community fully informed
of the latest developments within the Group. To ensure that Wharf's business
philosophy and strategies were fully understood, the unit maintained an
active campaign of financial presentations and regular mailings. This
campaign was supported by on-going media and community relations programmes.
To reach a wider investor audience, Wharf participated in the Investor and Financial Communications Seminar organised by Asian PR News, the Financial Intelligence Agency Conference and Paribas-sponsored European Investor Conference held in Hong Kong. Executive Director John Hung gave a series of presentations at roadshows in Europe, the United States and Canada throughout the year.