Final Results

RNS Number : 3244Y

Hongkong Land Hldgs Ld

01 March 2012

 

To:	Business Editor	1st March 2012
		For immediate release
The following announcement was issued today to a Regulatory Information Service approved by the Financial Services Authority in the United Kingdom.

HONGKONG LAND HOLDINGS LIMITED

2011 PRELIMINARY ANNOUNCEMENT OF RESULTS

Highlights

·     Strong commercial leasing performance

·     Lower underlying profits due to fewer Singapore residential completions

·     Net assets per share up 22% on higher capital values

·     Prime commercial site secured in Beijing

"General economic uncertainty is likely to have a negative influence on the Group's businesses.  In addition, in 2012 the Group has only one residential project scheduled for completion in Singapore and residential sales, particularly in China, may be more challenging.  Nevertheless, the Hong Kong portfolio should continue to benefit from the limited supply of new commercial space and the Group's financial and market position is strong."

Simon Keswick, Chairman

1st March 2012

Results

	Year ended 31st December
	2011	2010	Change
	US$m	US$m	%
Underlying profit attributable to shareholders*	703	810	-13
Profit attributable to shareholders	5,306	4,739	+12
Shareholders' funds	24,739	19,457	+27
Net debt	2,359	2,358	-
	US¢	US¢	%
Underlying earnings per share	30.29	36.02	-16
Earnings per share	228.48	210.70	+8
Dividends per share	16.00	16.00	-
	US$	US$	%
Net asset value per share	10.58	8.64	+22
*   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 1 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 US¢10.00 per share will be payable on 16th May 2012, subject to approval at the Annual General Meeting to be held on 9th May 2012, to shareholders on the register of members at the close of business on 16th March 2012.  The ex-dividend date will be on 14th March 2012, and the share registers will be closed from 19th to 23rd March 2012, inclusive.

HONGKONG LAND HOLDINGS LIMITED

PRELIMINARY ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED 31ST DECEMBER 2011

OVERVIEW

The Group's office and retail portfolio in Hong Kong produced strong results, and its growing Singapore portfolio made an increased contribution.  This improvement was, however, more than offset by lower profits from its residential business with only one Singapore project completed during the year compared with three last year.  Several new development sites were secured in the year, including a prime commercial site in central Beijing and residential sites in Chongqing and Singapore. 

PERFORMANCE

Underlying profit attributable to shareholders for 2011 was US$703 million, 13% below the record result of 2010.  Underlying earnings per share decreased by 16%, which also reflected the larger number of issued shares due to the conversion of convertible bonds during the year.

Taking into account the net gains resulting from higher independent valuations of the Group's investment properties, including its share of properties in joint ventures, the profit attributable to shareholders for 2011 was US$5,306 million, compared with US$4,739 million for 2010.  Net asset value per share was US$10.58, a 22% increase from the end of 2010. 

The Directors are recommending a final dividend of US¢10.00 per share for 2011, providing a total dividend for the year of US¢16.00 per share, unchanged from 2010.

GROUP REVIEW

In Hong Kong, limited new supply of office space underpinned the market in 2011 against a background of increasing economic uncertainties.  Rental reversions were largely positive, particularly in the second half, and vacancy stood at only 2.0% at the year end compared with 2.9% at the end of 2010. The Group's luxury retail portfolio continued to enjoy full occupancy with increasing rents. 

In Singapore, where market conditions remained stable, the Group benefited from its first full year's rental income from the initial two towers of Marina Bay Financial Centre.  The third tower of this development, which will complete during 2012, is 65% pre-let.  At the Group's joint venture office development in Jakarta pre-letting of the fourth tower currently under construction is now some 80%.

In August, a prime site was secured in Wangfujing, Beijing which will be developed as a premier retail centre including a small luxury hotel.  The Group also acquired a property portfolio in Cambodia including two sites in Phnom Penh for future development.

On the residential side, a further 23 apartments in the Serenade development in Hong Kong were handed over to buyers in the year.  In Macau, at the One Central joint venture, 75 units of the project's final phase, The Residences and Apartments at Mandarin Oriental, were handed over to buyers.

In Singapore, only one residential project, Peak@Balmeg was completed, compared with three projects in 2010.  The three new projects launched for sale in 2011 were well received and there was a US$44 million reversal of writedowns previously made in respect of two of the projects.  A site for future development was acquired in May.

In mainland China, continuing development profits were earned from 50%-owned Bamboo Grove in Chongqing and 90%-owned Maple Place in Beijing.  Mid-year sales launches in Chongqing and Shenyang were well received despite difficult market conditions.  However, sales volumes across the market have now decreased significantly in response to various government measures.  In December, a 52 hectare site was secured in Chongqing for a premium residential development which is adjacent to the Group's existing Yorkville project. 

PEOPLE

The Group's excellent reputation for the quality of its commercial and residential projects and our ongoing performance reflects the high level of professionalism, commitment and diligence of our staff which is much appreciated.

R.C. Kwok retired from the Board on 12th May 2011.  Anthony Nightingale will step down as Managing Director at the end of March 2012, and will remain as a non-executive Director.    On behalf of the Board, I would like to thank them for their significant contributions to the Group.  We also welcome Ben Keswick, who will join the Board as Managing Director on 1st April 2012, and Adam Keswick, who will become a Director on the same date.

OUTLOOK

General economic uncertainty is likely to have a negative influence on the Group's businesses.  In addition, in 2012 the Group has only one residential project scheduled for completion in Singapore and residential sales, particularly in China, may be more challenging.  Nevertheless, the Hong Kong portfolio should continue to benefit from the limited supply of new commercial space and the Group's financial and market position is strong.

Simon Keswick

Chairman

1st March 2012

CHIEF EXECUTIVE'S REVIEW

The Group's well-positioned commercial property portfolio produced an increased contribution in 2011 and significant capital appreciation, but underlying profitability was lower than the previous two years following a reduction in earnings from residential developments which had made record results in both these years.  

BUSINESS MODEL AND STRATEGY

Hong Kong's Central Portfolio

The Group's most important investment is its prime portfolio in the heart of Hong Kong's Central district of some 450,000 sq. m. of Grade A office and luxury retail space.  The location of this portfolio and its significant size provides a strong competitive position to the Group.  Continued focus on the returns from this portfolio is fundamental to the ongoing success of the Group.  While demand for space depends on overall economic conditions, the tenor of the lease arrangements provides some protection against market volatility.

We continue to manage our 12 Grade A office and retail buildings as a large, integrated mixed-use development and look for opportunities to improve their value.  In December 2011, we announced that one of these buildings, The Forum in Exchange Square, which was previously retail space, will be redeveloped as a high quality office building.  At the same time, significant enhancements will be made to the surrounding Exchange Square Plaza.

Retail space in the Central portfolio totals 55,000 sq. m. and our objective is to ensure that this continues to be viewed as the most exclusive shopping and dining destination in Hong Kong.  In turn, this contributes significantly to the prestige and convenience of the office space, which increases its attraction for premium tenants.  The restaurants across the portfolio, several of which have been recognised with Michelin stars, are performing well and are attracting customers to Central throughout the day and in the evenings.    

Our intention is to continue to upgrade the office space throughout the portfolio, ensuring it remains the most prestigious within Hong Kong.  At the same time, we will seek to grow our rental yields over the long term, recognising the desirability of both the quality of space and of service which it is Hongkong Land's mandate to provide to each of our tenants.

Commercial Property Investments in Asia

Over the past few years, the Group has extended its commercial property interests outside of Hong Kong.  Expansion has been based both on the Group's strong financial position and its reputation for quality.  To date, the principal focus has been in Singapore where the Group now has attributable interests of 164,000 sq. m. (including its share of properties held through joint ventures).  This is principally premium Grade A office space and includes the third tower of Marina Bay Financial Centre which is due for completion in 2012.  The intention is also to develop further the Group's portfolio of prime office space in Jakarta which is held by a 50%-owned joint venture.  Construction of a fourth office tower of 61,000 sq. m. is on schedule for completion in 2012.  In general, our performance in each of these markets depends on the levels of demand for and supply of commercial space, both of which are influenced by the overall economic environment.

We continue to look for attractive high-quality commercial projects throughout Asia which will offer development profits as well as providing investments to be held for long-term returns including capital appreciation.  In 2011, we secured an iconic site in Wangfujing located in the heart of Beijing for approximately US$450 million, which we will develop and position as the most prestigious shopping and dining destination in the city.  This mixed-use project of some 131,000 sq. m. will also include a small luxury hotel and office component.  A property portfolio in Cambodia, principally in Phnom Penh, was also acquired in 2011.  Planning has already commenced for development of one of these prime sites as a high quality office and retail complex. 

Residential Developments

Based on the Group's experience throughout Asia, a strong and profitable residential business has been established, focusing on premium properties.  While our investment in this activity is significantly smaller than our commercial business, the residential projects enhance the Group's overall profits and returns on capital. 

Annual returns from residential developments fluctuate due to the nature of the projects and the accounting policy of only recognising profits on sales at completion.  Demand is also dependent on overall economic conditions, which can be significantly affected by government policies.  While the Group's residential contribution decreased in 2011 compared with the record levels achieved in 2010 and 2009, the residential business remains an important contributor to the Group's overall profits.  Ongoing land acquisitions are necessary to continue to build this income stream over the longer term, and in 2011 new sites were acquired in Singapore and in Chongqing, China. 

REVIEW OF COMMERCIAL PROPERTY

Hong Kong

While the overall level of demand for office space softened in the final months of 2011, rents rose for most of the year reflecting continuing demand and the limited supply of Grade A office space throughout Hong Kong and in the Central District specifically.  Rents reached record levels surpassing those achieved in the last cycle which peaked in mid-2008.  As a result, rental reversions were generally positive across the portfolio, particularly in the second half.  The average rent in 2011 was HK$87.0 per sq. ft compared with HK$84.3 per sq. ft in 2010, while the office vacancy at the end of 2011 was 2.0% compared with 2.9% a year earlier.  This vacancy level is unusually low having been achieved only three times before over the past 20 years.  Financial institutions, law firms and accounting firms continue to comprise approximately 75% of the office tenants in the Central portfolio.

Economic uncertainties may reduce demand for office space in 2012 which could affect market rents.  Nevertheless, the Group's objective of maintaining positive, or at least neutral, rental reversions is helped by the lower level of rents on existing leases which are expiring or are subject to rent review over the next year compared with current rents. 

The Group's retail portfolio in Hong Kong also performed well with strong retail sales creating continued demand for prime space.  At the end of 2011, the portfolio was fully occupied, similar to the end of last year.  The average retail rent was HK$148.3 per sq. ft, an 8% increase over the 2010 average of HK$137.1 per sq. ft. 

Long-term capital appreciation also has an important impact on the Group.  During the year, the value of the Group's Hong Kong portfolio increased by 26%, including 7% in the second half, based on independent valuations performed at 31st December 2011.  The total value of the portfolio is now US$21.7 billion compared with US$17.3 billion at the end of 2010.  This was due to rising rents as capitalisation rates or equivalent yields remained stable from a year earlier.

Singapore

Following an active 2010, overall leasing activity in the Singapore market was significantly lower in 2011 while rents were relatively stable.  Nevertheless, Hongkong Land's improved performance benefited from a full year's rental contribution from its one-third share in the first two towers of Marina Bay Financial Centre which were completed in 2010.  There is no significant vacancy across the existing portfolio, including the wholly-owned One Raffles Link and the one-third owned One Raffles Quay.

In 2012, the final office tower of Marina Bay Financial Centre will be completed.  This 122,000 sq. m. tower has been 65% pre-let with DBS Bank as the largest tenant. 

Market conditions are expected to be challenging given the relative weakness in demand for Grade A office space, particularly from the financial services sector, combined with the overall availability of office space in the market.  However, there are no significant leases expiring in 2012 across the Group's existing portfolio, and its quality will enable it to maintain a strong competitive position.

Other Commercial Property Investments

In Macau, the retail centre at our 47%-owned joint venture project, One Central, had a strong year benefiting from growing retail sales.  The retail mall of some 20,000 sq. m. features the world's leading luxury brands and is considered the preeminent shopping venue in the city.  Overall occupancy at the end of 2011 was 93%, including 7% of the space for which contracts are signed but operations have yet to begin.   The hotel component of One Central, Mandarin Oriental, Macau, is now firmly established as the most exclusive hotel in the market.

In Jakarta, the Group's 50%-owned joint venture currently owns and manages some 80,000 sq. m. of space in three buildings located prominently in the city's Central Business District.  These are 99.7% let.  A fourth tower, which is under construction and expected to complete in 2012, is nearly 80% pre-let.  Market conditions are generally encouraging, although rental levels remain low compared with other major Asian markets. 

The Group has other commercial investment properties in Hanoi, Bangkok and Bermuda, the overall results of which continue to be satisfactory.  The two buildings in Hanoi, which are approximately 70% owned, remain fully let at premium rates to the market.  In Bangkok, at the Group's 49%-owned luxury retail and office complex, Gaysorn Plaza, trading conditions for the retailers remained challenging.  In Bermuda, Jardine Gibbons Property, in which Hongkong Land has a 40% interest, owns four commercial buildings in the centre of Hamilton.

REVIEW OF RESIDENTIAL PROPERTY

In 2011, residential markets across the region were affected by both softening buyer sentiment and various government measures to dampen markets after a period of strong growth.  The contribution from Hongkong Land's residential business was significantly lower than the record years of 2010 and 2009 which had benefited from the completion of a number of major projects.  Despite this, the year was active with eight new projects or phases being launched, comprising three in Singapore and five in China.  Two significant site acquisitions were also made to expand the business further.

Hong Kong

At the Group's 97-unit Serenade project, 23 additional units were handed over to buyers in 2011.  At the end of the year, there were 41 units remaining which will be released for sale depending on market conditions. 

Macau

In Macau, 75 units of the last residential phase of One Central were handed over to buyers.  This phase, The Residences and Apartments at Mandarin Oriental, consists of 92 apartments of which 89% have been sold.    

Singapore

In 2011, only one project was completed in Singapore, the 180 units of the fully pre-sold Peak@Balmeg.  In the previous year, three projects were completed, including the Group's one-third owned project, Marina Bay Residences, which consisted of 428 luxury apartments. 

During the year, three new projects were launched for sale by MCL Land, the Group's wholly-owned Singapore-based residential developer.  In May, Terrasse was launched and 80% of the 414 units had been sold by the end of the year.   Uber 388 was launched at the end of July and 58% of the 95 units were sold in 2011.  Both of these projects are scheduled for completion in 2014.  In October, the 121 freehold townhouses of Este Villa were released for sale and 120 units had been sold by the end of the year.  This project is scheduled for completion in 2013.  In addition, construction continued at three other projects which have been fully pre-sold. 

The only project which is due for completion in 2012 is Parvis, a 248-unit development held through a 50%-owned joint venture.  In 2013, four projects are scheduled for completion.  Three are MCL Land projects totaling 794 units, almost all of which have been pre-sold. The fourth is Marina Bay Suites, a one-third owned joint venture which consists of 221 luxury apartments which were 70% pre-sold at the end of 2011. 

Planning continues at three other projects which have yet to be launched.  This includes a residential site in Pasir Ris which was acquired in May 2011.  In total, these projects will provide some 82,000 sq. m. of residential space.    

Mainland China

The Group is active in four cities across mainland China and continues to look for opportunities to expand further.  Most of the current projects are in what are referred to as second tier cities, which we view as providing attractive long-term opportunities.   However, current conditions throughout China are difficult, particularly due to various government measures to cool the residential property market.

In Chongqing, the largest city in western China, the Group now has four projects including a new site which was acquired in December 2011. 

At the Group's first project in the city, Bamboo Grove, a 50%-owned joint venture with Longfor Properties, three additional residential phases were completed during the year.  Phase 3B consists of 143 townhouses which were 100% pre-sold.  Phase 4A is 667 high-rise apartment units in four towers which were all sold and mostly handed over to buyers by the end of 2011.  Phase 4B is 1,363 high-rise apartment units in eight towers.  Of these, 579 units were handed over to buyers by the end of 2011, and of the remaining units which will be completed in the first quarter of 2012, 53% have been sold.  These are the only units which are scheduled for completion in 2012.   

Construction of the next phases is progressing well.  Phase 5A consists of 624 garden apartments, while Phase 5B is 1,167 high-rise apartment units. 

On completion, the Bamboo Grove development will comprise some 1.4 million sq. m. of mainly residential space, including villas, townhouses and apartments. Of this, 570,000 sq. m. have already been developed and sold while 320,000 sq. m. are now under construction.

The Group's second project in Chongqing is Landmark Riverside at Dan Zishi, a 50%-owned joint venture with China Merchants Group established in late 2009.  This project will consist of approximately 1.5 million sq. m. residential and some prime retail space built over the 34 hectare site in phases.  During 2011, construction of Phase 1 commenced which consists of 1,253 high-rise apartments.  Presale of a minor portion of Phase 1 began at the end of December 2011.

The Group's third project is Yorkville at Zhaomushan, near the core area of the new Two-River New Area, which is in the vicinity of the Bamboo Grove development.   This wholly-owned project consists of a site of almost 386,000 sq. m. for mainly residential development with a small portion of retail.  The total developable area is approximately 880,000 sq. m., which is also being developed in a number of phases.  During 2011, construction of the first phase commenced consisting of 324 townhouses.

In December 2011, the Group acquired a 52 hectare site adjacent to the Yorkville project at a cost of approximately US$600 million.  The new site is to be developed in phases as a premium residential development, with a total gross floor area of some one million sq. m.

In Chengdu, at the 50%-owned joint venture with KWG Property Holding Group set-up in late 2010, planning is progressing well.  The project consists of a site of approximately 190,000 sq. m. which will be used for the development of residential and commercial properties.  The total developable area is approximately 900,000 sq. m. with 65% residential, including serviced apartments for strata-sale, and 35% commercial, including office and retail components and a hotel. 

In Shenyang, construction continued at two of our 50%-owned residential projects in the city, which are located to the north and south of the Central Business District.  At One Capitol, Phase 1A is under construction which consists of 236 townhouses and low-rise apartments of which approximately 51% had been pre-sold by the end of 2011.  At Park Life, Phases 2A and 2B are under construction.  These consist of 140 townhouses and 234 low-rise apartments, respectively.  These have been 53% pre-sold following their launch in mid-2011.    Planning at our third project is underway with construction targeted to commence in 2012.

In Beijing, at the Group's 90%-owned project, Maple Place, 20 additional units were handed over to buyers.  A further 110 units are available for future sale.  These consist of villas, townhouses and apartments with a total area of 26,000 sq. m.  Most of the units are currently leased but our intention remains to refurbish and sell these units. 

At Central Park, our 40%-owned joint venture with the Vantone Group continues to hold 72 apartments which are being operated as serviced apartments.

CONCLUSION

The Group is in a strong financial position to deal with the challenging economic conditions which are expected to continue in the foreseeable future.  At the same time, given this strength, our extensive network throughout the region and our long experience, there may be significant opportunities for both our commercial and residential businesses. 

The results in 2012 will continue to be affected by lower residential profits due to the scheduled timing of project completions.  In 2013, however, the Group should see a rebound in residential profits as four projects in Singapore are due to complete.  Beyond 2013, we also expect to see growing profits from our residential business in China resulting from the significant investments we have made over the past three years.  In the meantime, we continue to monitor market conditions and anticipate that this year will be challenging, particularly in the China residential sector.

Finally, we will continue to ensure that our existing investment properties, in particular the prime portfolio in Hong Kong's Central District, are maintained at the highest standard both in terms of product and service quality for our tenants and customers alike.  This is what will protect our strong competitive position over the long term.

Y.K. Pang

Chief Executive

1st March 2012

Hongkong Land Holdings Limited Consolidated Profit and Loss Account for the year ended 31st December 2011
		2011												2010
Underlying business performance US$m						Non- trading items US$m				Total US$m		Underlying business performance US$m						Non- trading items US$m				Total US$m
Revenue (note 2)		1,223.7				-				1,223.7				1,340.6				-				1,340.6
Net operating costs (note 3)		(392.0)				-				(392.0)				(459.2)				-				(459.2)
		831.7				-				831.7				881.4				-				881.4
Change in fair value of investment properties (note 7)		-				4,382.7				4,382.7				-				3,197.6				3,197.6
Asset impairment provisions, reversals and disposals (note 7)		-				-				-				-				0.1				0.1
Operating profit (note 4)		831.7				4,382.7				5,214.4				881.4				3,197.7				4,079.1
Financing charges		(99.7)				-				(99.7)				(112.3)				-				(112.3)
Financing income		33.2				-				33.2				35.2				-				35.2
Net financing charges		(66.5)				-				(66.5)				(77.1)				-				(77.1)
Share of results of associates and joint ventures (note 5)		76.3				221.7				298.0				173.9				731.4				905.3
Profit before tax		841.5				4,604.4				5,445.9				978.2				3,929.1				4,907.3
Tax (note 6)		(133.6)				(0.9)				(134.5)				(122.8)				0.7				(122.1)
Profit after tax		707.9				4,603.5				5,311.4				855.4				3,929.8				4,785.2
Attributable to:
Shareholders of the Company		703.4				4,603.0				5,306.4				810.2				3,929.2				4,739.4
Non-controlling interests		4.5				0.5				5.0				45.2				0.6				45.8
		707.9				4,603.5				5,311.4				855.4				3,929.8				4,785.2
		US¢								US¢				US¢								US¢
Earnings per share (note 8)
- basic		30.29								228.48				36.02								210.70
- diluted		30.22								227.13				35.33								202.30

Hongkong Land Holdings Limited Consolidated Statement of Comprehensive Income for the year ended 31st December 2011
				2011 US$m						2010 US$m
Profit for the year				5,311.4						4,785.2
Revaluation of other investments				(10.7)						11.0
Net actuarial (loss)/gain on employee benefit plans				(4.6)						0.2
Net exchange translation differences				36.9						59.1
Cash flow hedges
- net loss arising during the year				(1.2)						(17.1)
- transfer to profit and loss				5.8						7.2
				4.6						(9.9)
Share of other comprehensive income of associates and joint ventures				2.8						80.8
Tax relating to components of other comprehensive income (note 6)				(0.2)						1.1
Other comprehensive income for the year				28.8						142.3
Total comprehensive income for the year				5,340.2						4,927.5
Attributable to:
Shareholders of the Company				5,335.2						4,870.4
Non-controlling interests				5.0						57.1
				5,340.2						4,927.5

Hongkong Land Holdings Limited Consolidated Balance Sheet at 31st December 2011
			At 31st December
			2011 US$m				2010 US$m
Net operating assets
Tangible assets (note 9)
Investment properties			22,529.9				18,036.0
Others			5.3				4.2
			22,535.2				18,040.2
Associates and joint ventures			3,551.8				3,177.7
Other investments			48.6				59.2
Deferred tax assets			5.5				7.1
Pension assets			6.4				10.6
Non-current debtors			72.0				51.5
Non-current assets			26,219.5				21,346.3
Properties for sale			1,521.2				1,184.4
Current debtors			313.5				245.1
Current tax assets			1.5				-
Bank balances			967.9				1,366.7
Current assets			2,804.1				2,796.2
Current creditors			(746.3)				(723.4)
Current borrowings (note 10)			(58.0)				(859.7)
Current tax liabilities			(82.5)				(69.2)
Current liabilities			(886.8)				(1,652.3)
Net current assets			1,917.3				1,143.9
Long-term borrowings (note 10)			(3,269.2)				(2,864.8)
Deferred tax liabilities			(59.4)				(54.8)
Non-current liabilities			(44.4)				(93.1)
			24,763.8				19,477.5
Total equity
Share capital			233.8				225.1
Revenue and other reserves			24,504.7				19,231.5
Shareholders' funds			24,738.5				19,456.6
Non-controlling interests			25.3				20.9
			24,763.8				19,477.5

Hongkong Land Holdings Limited Consolidated Statement of Changes in Equity for the year ended 31st December 2011
	Attributable to shareholders of the Company
		Share capital US$m		Share premium US$m		Revenue reserves US$m	Capital reserves US$m			Hedging reserves US$m		Exchange reserves US$m		Total US$m	Attributable to non- controlling interests US$m			Total equity US$m
2011
At 1st January		225.1		5.3		18,900.7		62.5		(16.2)		279.2		19,456.6		20.9		19,477.5
Total comprehensive income		-		-		5,291.9		-		2.5		40.8		5,335.2		5.0		5,340.2
Dividends paid by the Company		-		-		(372.5)		-		-		-		(372.5)		-		(372.5)
Dividends paid to non-controlling shareholders		-		-		-		-		-		-		-		(0.6)		(0.6)
Issue of shares		8.7		310.5		-		-		-		-		319.2		-		319.2
Transfer		-		-		61.0		(61.0)		-		-		-		-		-
At 31st December		233.8		315.8		23,881.1		1.5		(13.7)		320.0		24,738.5		25.3		24,763.8
2010
At 1st January		224.9		-		14,504.6		63.4		(7.4)		150.6		14,936.1		135.4		15,071.5
Total comprehensive income		-		-		4,750.6		-		(8.8)		128.6		4,870.4		57.1		4,927.5
Dividends paid by the Company		-		-		(359.9)		-		-		-		(359.9)		-		(359.9)
Dividends paid to non-controlling shareholders		-		-		-		-		-		-		-		(8.1)		(8.1)
Issue of shares		0.2		5.3		-		-		-		-		5.5		-		5.5
Change in interests in subsidiaries		-		-		4.5		-		-		-		4.5		(163.5)		(159.0)
Transfer		-		-		0.9		(0.9)		-		-		-		-		-
At 31st December		225.1		5.3		18,900.7		62.5		(16.2)		279.2		19,456.6		20.9		19,477.5
The comprehensive income included in revenue reserves comprises profit attributable to shareholders of US$5,306.4 million (2010: US$4,739.4 million), net fair value loss on other investments of US$10.7 million (2010: gain of US$11.0 million) and net actuarial loss on employee benefit plans of US$3.8 million (2010: gain of US$0.2 million).   Cumulative net fair value gain on other investments and net actuarial loss on employee benefit plans amounted to US$8.8 million (2010: US$19.5 million) and US$3.0 million (2010: gain of US$0.8 million), respectively.

Hongkong Land Holdings Limited Consolidated Cash Flow Statement for the year ended 31st December 2011
			2011 US$m				2010 US$m
Operating activities
Operating profit			5,214.4				4,079.1
Depreciation			1.7				1.1
Reversal of writedowns on development properties held for sale (note 3)			(44.2)				(50.9)
Change in fair value of investment properties			(4,382.7)				(3,197.6)
Asset impairment provisions, reversals and disposals			-				(0.1)
Increase in properties for sale			(298.8)				(296.6)
(Increase)/decrease in debtors, prepayments and others			(70.7)				79.3
Increase in creditors and accruals			33.2				26.1
Interest received			35.8				38.2
Interest and other financing charges paid			(93.0)				(90.2)
Tax paid			(117.4)				(169.7)
Dividends from associates and joint ventures			58.0				271.7
Cash flows from operating activities			336.3				690.4
Investing activities
Major renovations expenditure			(50.8)				(34.6)
Developments capital expenditure			(38.3)				(0.2)
Investments in and loans to associates and joint ventures			(146.2)				(17.9)
Purchase of other investments			-				(2.0)
Cash flows from investing activities			(235.3)				(54.7)
Financing activities
Drawdown of borrowings			1,068.1				1,404.2
Repayment of borrowings			(1,193.4)				(1,380.6)
Change in interests in subsidiaries			-				(159.9)
Repayment to non-controlling shareholders			(6.1)				(11.1)
Dividends paid by the Company			(370.9)				(358.2)
Dividends paid to non-controlling shareholders			(0.6)				(7.8)
Cash flows from financing activities			(502.9)				(513.4)
Effect of exchange rate changes			2.9				18.4
Net (decrease)/increase in cash and cash equivalents			(399.0)				140.7
Cash and cash equivalents at 1st January			1,365.7				1,225.0
Cash and cash equivalents at 31st December			966.7				1,365.7

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 2011 which have been prepared in conformity with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board. In 2011, the Group adopted the following standards, and amendments and interpretations to existing standards which are effective in the current accounting year and relevant to its operations:
	Revised IAS 24	Related Party Disclosures
	Amendment to IAS 32	Classification of Rights Issues
	Amendments to IFRIC 14	Prepayments of a Minimum Funding Requirement
	IFRIC 19	Extinguishing Financial Liabilities with Equity Instruments
	Improvements to IFRSs (2010)
	The adoption of these standards, amendments and interpretations does not have a material impact on the Group's accounting policies. Revised IAS 24 'Related Party Disclosures' supersedes IAS 24 (as revised in 2003).  It simplifies the disclosure requirements for government-related entities and clarifies the definition of a related party. Amendment to IAS 32 'Classification of Rights Issues' clarifies that rights issues are equity instruments when they are denominated in a currency other than the issuer's functional currency and are issued pro-rata to an entity's existing shareholders for a fixed amount of currency. Amendments to IFRIC 14 'Prepayments of a Minimum Funding Requirement' require an entity to recognise an asset for a prepayment that will reduce future minimum funding contributions required by the entity. IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments' provides guidance on the application of IAS 39 and IAS 32 when an entity issues its own equity instruments to extinguish all or part of a financial liability. The Improvements to IFRSs (2010) comprise a number of non-urgent but necessary amendments to IFRSs.  The amendments which are relevant to the Group's operations include IFRS 3 (amendments) 'Business Combinations', IFRS 7 (amendments) 'Financial Instruments: Disclosures', IAS 1 (amendments) 'Presentation of Financial Statements', IAS 34 (amendments) 'Interim Financial Reporting' and IFRIC 13 (amendment) 'Customer Loyalty Programmes'.
	IFRS 3 (amendments) 'Business Combinations' clarify the transition requirements for contingent consideration from business combination that occurred before the effective date of the revised IFRS, the measurement of non-controlling interests and un-replaced and voluntarily replaced share-based payment awards. IFRS 7 (amendments) 'Financial Instruments: Disclosures' emphasise the interaction between qualitative and quantitative disclosures and the nature and extent of risks associated with financial instruments. IAS 1 (amendments) 'Presentation of Financial Statements' clarify that entities may present the required reconciliations for each component of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. IAS 34 (amendments) 'Interim Financial Reporting' provide guidance to illustrate how to apply disclosure principles in IAS 34 and add disclosure requirements around the circumstances likely to affect fair values of financial instruments and their classification, transfers of financial instruments between different levels of fair value hierarchy, changes in classification of financial assets and changes in contingent liabilities and assets. IFRIC 13 (amendment) 'Customer Loyalty Programmes' clarifies that when the fair value of award credits is measured on the basis of the value of the awards for which they could be redeemed, the fair value of the award credits should take account of expected forfeitures as well as the discounts or incentives that would otherwise be offered to customers who have not earned award credits from an initial sale.
2.	REVENUE
				2011 US$m		2010 US$m
	Rental income			700.3		681.8
	Service income			110.9		102.2
	Sales of properties			412.5		556.6
				1,223.7		1,340.6
	Service income includes service and management charges and hospitality service income. Total contingent rents included in rental income amounted to US$12.5 million (2010: US$9.9 million).

3.	NET OPERATING COSTS
			2011 US$m		2010 US$m
	Cost of sales		(320.2)		(382.6)
	Other income		4.0		5.0
	Administrative expenses		(75.8)		(81.6)
			(392.0)		(459.2)
	The following credits/(charges) are included in net operating costs:
	Cost of properties for sale recognised as expense		(229.3)		(309.4)
	Operating expenses arising from investment properties		(135.1)		(124.1)
	Reversal of writedowns on development properties held for sale		44.2		50.9
4.	OPERATING PROFIT
			2011 US$m		2010 US$m
	By business
	Commercial property		673.1		649.0
	Residential property		209.1		287.1
	Corporate		(50.5)		(54.7)
			831.7		881.4
	Change in fair value of investment properties		4,382.7		3,197.6
	Asset impairment provisions, reversals and disposals		-		0.1
			5,214.4		4,079.1

5.	SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
				2011 US$m				2010 US$m
	By business
	Commercial property
	- Operating profit			85.0				37.2
	- Net financing charges			(27.8)				(14.0)
	- Tax			(10.7)				(2.6)
	- Net profit			46.5				20.6
	Residential property
	- Operating profit			79.6				196.1
	- Net financing charges			(2.6)				(4.2)
	- Tax			(45.8)				(37.8)
	- Non-controlling interests			(1.4)				(0.8)
	- Net profit			29.8				153.3
	Underlying business performance			76.3				173.9
	Non-trading items:
	Change in fair value of investment properties (net of deferred tax)
	- Commercial property			235.8				722.4
	- Residential property			2.9				9.0
				238.7				731.4
	Asset impairment provisions, reversals and disposals			(17.0)				-
				221.7				731.4
				298.0				905.3

6.	TAX
				2011 US$m				2010 US$m
	Current tax			(128.6)				(115.4)
	Deferred tax
	- changes in fair value of investment properties			(0.9)				0.7
	- other temporary differences			(5.0)				(7.4)
				(5.9)				(6.7)
				(134.5)				(122.1)
	Tax relating to components of other comprehensive income is analysed as follows:
	Pension assets			0.8				-
	Cash flow hedges			(1.0)				1.1
				(0.2)				1.1
	Tax on profits has been calculated at the rates of taxation prevailing in the territories in which the Group operates.  The Group has no tax payable in the United Kingdom (2010: nil). Share of tax of associates and joint ventures of US$61.8 million (2010: US$62.0 million) is included in share of results of associates and joint ventures.
7.	NON-TRADING ITEMS
	An analysis of non-trading items after interest, tax and non-controlling interests attributable to shareholders of the Company is set out below:
				2011 US$m				2010 US$m
	Change in fair value of investment properties			4,382.7				3,197.6
	Deferred tax on change in fair value of investment properties			(0.9)				0.7
	Share of change in fair value of investment properties of associates and joint ventures (net of deferred tax)			238.7				731.4
	Asset impairment provisions, reversals and disposals			-				0.1
	Share of asset impairment provisions, reversals and disposals of associates and joint ventures			(17.0)				-
	Non-controlling interests			(0.5)				(0.5)
				4,603.0				3,929.2

8.	EARNINGS PER SHARE
	Basic  earnings  per  share is calculated on profit attributable to shareholders of US$5,306.4 million (2010: US$4,739.4 million) and on the weighted average number of 2,322.5 million (2010: 2,249.4 million) shares in issue during the year. Diluted earnings per share is calculated on profit attributable to shareholders of US$5,309.5 million (2010: US$4,760.6 million), which is after adjusting for the effects of  the conversion of convertible bonds, and on the weighted average number of 2,337.6 million (2010: 2,353.2 million) shares in issue during the year.  The weighted average number of shares for basic and diluted earnings per share is reconciled as follows:
	Ordinary shares in millions
											2011				2010
	Weighted average number of shares in issue										2,322.5				2,249.4
	Adjustment for shares to be issued on conversion of convertible bonds										15.1				103.8
	Weighted average number of shares for diluted earnings per share calculation										2,337.6				2,353.2
	Earnings per share is additionally calculated based on underlying profit attributable to shareholders.  The difference between underlying profit attributable to shareholders and profit attributable to shareholders is reconciled as follows:
		2011						2010
		US$m	Basic earnings per share US¢			Diluted earnings per share US¢		US$m				Basic earnings per share US¢				Diluted earnings per share US¢
	Underlying profit attributable to shareholders	703.4		30.29		30.22		810.2				36.02				35.33
	Non-trading items (note 7)	4,603.0						3,929.2
	Profit attributable to shareholders	5,306.4		228.48				4,739.4				210.70
	Interest expense on convertible bonds (net of tax)	3.1						21.2
	Profit for calculation of diluted earnings per share	5,309.5				227.13		4,760.6								202.30

9.	TANGIBLE ASSETS
						2011 US$m				2010 US$m
	Net book value at 1st January					18,040.2				14,821.6
	Exchange differences					28.1				(6.8)
	Additions					85.9				28.9
	Depreciation					(1.7)				(1.1)
	Net revaluation surplus					4,382.7				3,197.6
	Net book value at 31st December					22,535.2				18,040.2
10.	BORROWINGS
					2011 US$m					2010 US$m
	Current
	Bank overdrafts				1.2					1.0
	Current portion of long-term borrowings
	- Bank loans				0.3					253.8
	- 7% United States dollar bonds due 2011				-					604.9
	- 2.75% United States dollar convertible bonds due 2012					56.5				-
						58.0				859.7
	Long-term
	Bank loans					1,062.7				410.7
	5.5% United States dollar bonds due 2014					544.8				548.3
	3.65% Singapore dollar notes due 2015					290.3				293.3
	2.75% United States dollar convertible bonds due 2012					-				372.8
	Medium term notes
	- due 2017					41.0				39.4
	- due 2019					102.8				102.6
	- due 2020					312.7				307.9
	- due 2021					71.6				62.4
	- due 2025					644.6				592.6
	- due 2026					38.4				-
	- due 2030					103.0				102.8
	- due 2031					25.3				-
	- due 2040					32.0				32.0
						1,371.4				1,239.7
						3,269.2				2,864.8
						3,327.2				3,724.5
	Secured					-				41.2
	Unsecured					3,327.2				3,683.3
						3,327.2				3,724.5

11.	DIVIDENDS
			2011 US$m		2010 US$m
	Final dividend in respect of 2010 of US¢10.00 (2009: US¢10.00) per share		232.3		224.9
	Interim dividend in respect of 2011 of US¢6.00 (2010: US¢6.00) per share		140.2		135.0
			372.5		359.9
	A final dividend in respect of 2011 of US¢10.00 (2010: US¢10.00) per share amounting to a total of US$233.8 million (2010: US$232.3 million) is proposed by the Board.  The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting.  The amount will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2012.
12.	CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
			2011 US$m		2010 US$m
	Capital commitments		891.1		182.9
	Contribution to associates and joint ventures		480.2		845.0
	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 Holdings Limited and the ultimate holding company is Jardine Matheson Holdings Limited.  Both companies 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 Jardine Matheson Holdings Limited ('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 in 2011 was US$3.5 million (2010: US$4.0 million), being 0.5% per annum of the Group's underlying profit in consideration for management consultancy services provided by Jardine Matheson Limited, a wholly-owned subsidiary of Jardine Matheson Holdings Limited. Property and other services The Group rented properties to Jardine Matheson group members.  Gross rents on such properties in 2011 amounted to US$20.6 million (2010: US$19.3 million). Jardine Matheson group members provided property construction, maintenance and other services to the Group in 2011 in aggregate amounting to US$30.0 million (2010: US$30.5 million). The outstanding balances arising from the above services at 31st December 2011 are not material. Hotel management services Jardine Matheson group members provided hotel management services to the Group in 2011 amounting to US$1.9 million (2010: US$1.4 million). The outstanding balances arising from the above services at 31st December 2011 are not material. Outstanding balances with associates and joint ventures Amounts of outstanding balances with associates and joint ventures are included in debtors and creditors as appropriate.

Hongkong Land Holdings Limited Principal Risks and Uncertainties
The Board has overall responsibility for risk management and internal control. The process by which the Group identifies and manages risk will be set out in more detail in the Corporate Governance section of the Company’s 2011 Annual Report (the ‘Report’). The following are the principal risks and uncertainties facing the Company as required to be disclosed pursuant to the Disclosure and Transparency Rules issued by the Financial Services Authority in the United Kingdom and are in addition to the matters referred to in the Chairman’s Statement and Chief Executive’s Review.
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 on the Group’s joint venture partners, bankers, suppliers or tenants. These developments can result in:
·           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 developments.
Such developments might increase costs of sales and operating costs, reduce revenues, or result in reduced valuations of the Group’s investment properties or in the Group being unable to meet in full its strategic objectives.
Commercial Risk and Financial Risk   Risks are an integral part of normal commercial practices, and where practicable steps are taken to mitigate such risks. These risks are further pronounced when operating in volatile markets.   The Group makes significant investment decisions in respect of commercial and residential development projects that take time to come to fruition and achieve the desired returns and are, therefore, subject to market risks. These risks are further pronounced when operating in volatile markets.    The Group operates in areas that are highly competitive, and failure to compete effectively in terms of price, product specification or levels of service can have an adverse effect on earnings as can construction risks in relation to new developments. Significant pressure from such competition may lead to reduced margins. The quality and safety of the products and services provided by the Group are also important and there is an associated risk if they are below standard.   The 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 environments in the territories in which it operates.  Changes in the regulatory approach to such matters as foreign ownership of assets and businesses, exchange controls, planning controls, tax rules and employment legislation have the potential to impact the operations and profitability of the Group.  Changes in the political environment in such territories can also affect the Group.

Terrorism, Pandemic and Natural Disasters A number of the Group's interests are vulnerable to the effects of terrorism, either directly through the impact of an act of terrorism or indirectly through the impact of generally reduced economic activity in response to the threat of or an actual act of terrorism. The Group would be impacted by a global or regional pandemic which could be expected to seriously affect economic activity and the ability of our business to operate smoothly.  In addition, many of the territories in which the Group is active can experience from time to time natural disasters such as earthquakes and typhoons.

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 2011 Annual Report, including the Chairman's Statement, Chief Executive's Review and Principal Risks and Uncertainties, which constitute the management report include a fair review of all information required to be disclosed by the Disclosure and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Services Authority of the United Kingdom.
For and on behalf of the Board Y.K. Pang John R. Witt Directors 1st March 2012

	The final dividend of US¢10.00 per share will be payable on 16th May 2012, subject to approval at the Annual General Meeting to be held on 9th May 2012, to shareholders on the register of members at the close of business on 16th March 2012.  The ex-dividend date will be on 14th March 2012, and the share registers will be closed from 19th to 23rd March 2012, inclusive.  Shareholders will receive their dividends in United States dollars, unless they are registered on the Jersey branch register where they will have the option to elect for sterling.  These shareholders may make new currency elections for the 2011 final dividend by notifying the United Kingdom transfer agent in writing by 20th April 2012.  The sterling equivalent of dividends declared in United States dollars will be calculated by reference to a rate prevailing on 2nd May 2012.  Shareholders holding their shares through The Central Depository (Pte) Limited ('CDP') in Singapore will receive United States dollars unless they elect, through CDP, to receive Singapore dollars.
Hongkong Land Group Hongkong Land is one of Asia's leading property investment, management and development groups.  Founded in Hong Kong in 1889, Hongkong Land's business is built on partnership, integrity and excellence. In Hong Kong, the Group owns and manages some 450,000 sq. m. (five million sq. ft) of prime commercial space that defines the heart of the Central Business District.  In Singapore, it has been instrumental in the creation of the city-state's new Central Business District at Marina Bay with the expansion of its joint venture portfolio of new developments.  Hongkong Land's properties in these and other Asian centres are recognised as market leaders and house the world's foremost financial, business and luxury retail names. Hongkong Land develops premium residential properties in a number of cities in the region, principally in China and Singapore where its subsidiary, MCL Land, is a significant developer. Hongkong Land Holdings Limited is incorporated in Bermuda.  It has a premium listing on the London Stock Exchange, and 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
Y.K. Pang		(852) 2842 8428
John R. Witt		(852) 2842 8101
GolinHarris
Sue So		(852) 2501 7984
Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 2011 can be accessed through the Internet at 'www.hkland.com'.

 

END

 

 

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