1998 Annual Results Announcement
FINANCIAL HIGHLIGHTS
Year ended 31st December, 1998
BUSINESS REVIEW
PROSPECTS
RESULTS
The board of directors of Hopson Development Holdings Limited (the "Company") is pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively the "Group") for the year ended 31st December, 1998 with comparative figures for the previous year as set out below:
1998 1997
Notes HK$'000 HK$'000
Turnover (1) 1,303,332 482,465
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Profit before taxation and minority
interests 485,196 198,181
Taxation (2) (158,138) (65,291)
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Profit after taxation 327,058 132,890
Minority interests (16,380) (13,336)
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Profit attributable to shareholders 310,678 119,554
========= ========
Earnings per share (3)
- Basic 35 cents 16 cents
- Diluted 34 cents N/A
Notes:
(1) Turnover
Turnover comprised (1) pre-sale of properties under development for sale, which is recognised over the entire period of construction in respect of properties under development for sale, the pre-sale activities and construction work of which has progressed to a stage when the ultimate realisation of profit can be reasonably determined. Business taxes are levied at 5% of gross turnover and the turnover figure shown on the consolidated profit and loss account is presented net of business taxes. The total estimated profit is apportioned over the entire period of construction to reflect the progress of the development. On this basis, profit recognised on the pre-sold portion of the properties is calculated by reference to the proportion of construction costs incurred at the end of the period to the estimated total construction costs on completion with due allowance for contingencies. The profit so recognised is restricted to the amount of instalments received; (2) sale of completed properties held for sale which is recognised upon completion of sale and purchase agreement. (The profit recognised is restricted to the amount of instalments received.)
(2) Taxation
Taxation comprised (i) provisions for Hong Kong profits tax at the rate of 16% (1997- 16.5%) and overseas taxation at the applicable rates prevailing in the countries of operations on the profits of companies within the Group for financial reporting purposes, adjusted for income and expenses items which are not assessable or deductible for taxation purposes and (ii) provisions for deferred taxation at the current tax rate, in respect of significant timing differences arising from the use of different bases of recognition of revenues and expenses for financial reporting and tax purposes, (iii) land appreciation tax is levied at progressive rates ranging from 30% to 60% on the balance of the proceeds received on transfer of real properties after deducting certain deductible items including consideration paid for acquisition of land use rights, land development costs incurred, construction costs spent for new buildings and facilities on the land or the assessed value of old buildings and facilities on the land and taxes paid in relation to the transfer of real properties.
(3) Earnings per share
The calculation of earnings per share was based on the consolidated profit attributable to shareholders of approximately $310,678,000 (1997 - $119,554,000) and the weighted average number of approximately 895,833,333 shares (1997 - 750,000,000 deemed shares) in issue during the year.
The calculation of diluted earnings per share was based on the consolidated profit attributable to shareholders of approximately $310,678,000 and the diluted weighted average number of approximately 896,750,000 shares in issue during the year. It has been calculated after taking into account of outstanding share options as of 31st December, 1998. The effect of the dilutive potential ordinary shares resulting from the outstanding share options on the weighted average number of shares in issue during the year was 916,667 shares, which were deemed to be issued at no consideration if all outstanding share options have been exercised, on the date when the options were granted. The diluted earnings per share for the year ended 31st December, 1997 was not shown as there was no outstanding share options.
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The Group's Sales Performance and Landbank The breakdown of property sales for the period under review is as follows:
Sales/
Contracted Sales Pre-sale GFA
(RMB million) ('000 sq. m.)
Huajing New City Phase 5 246 41
Huajing New City Phase 6 116 22
Jinan Garden Phase 2 135 21
Gallopade Park 366 78
Fairview Garden 331 66
Grandview Place 316 46
Regal Court 97 11
Total 1,607 285
predominantly located in the popular and fast-growing areas in Guangzhou City.
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FINAL DIVIDEND
The board of directors has recommended the payment of a final dividend of HK$0.12 per share in respect of the year ended 31st December, 1998 at the forthcoming annual general meeting to be held on Thursday, 6th May, 1999. This final dividend, if approved, will be paid on 26th May, 1999 in cash to shareholders whose names appear on the register of members on 6th May, 1999.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from Friday, 30th April, 1999 to Thursday, 6th May, 1999, both days inclusive, for the purpose establishing shareholders' entitlements to the proposed final dividend and to vote at the Annual General Meeting. During this period, no transfer of shares will be effected. All transfers accompanied by the relevant share certificates must be lodged with the Company's Share Registrar in Hong Kong, Central Registration Hong Kong Limited, Shops 1712-1716, Hopewell Centre, 183 Queen's Road East, Hong Kong not later than 4:00 p.m. on 29th April, 1999.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with existing computer systems as the new millennium approaches. The Year 2000 Problem arises from the inability of some computer systems to make proper transition from the year 1999 to the year 2000 resulting in inaccurate data processing and information recording. To be Year 2000 compliant, systems must be able to properly recognise date information and do not produce erroneous data when the year changes to 2000 and beyond. The computer systems of the Group are primarily used for office automation and are not complex. Given the nature of the operations of the Group, the Directors consider that the millennium issue will not have any material adverse effect on the Group's operations at and after the turn of the year 2000. Nevertheless, the Company has carried out a review of the impact of the Year 2000 Problem on the Group's entire systems and relevant products provided by third parties to ensure that all computer systems, applications, software and hardware systems used by the Group are or will be Year 2000 compliant. Following the review, the Company has established a project team and compiled a detailed inventory list of computer hardware and software systems, and products with electronic devices in the Group. Resources are being utilised to test the systems of the Group and to identify and, where necessary, correct or replace the systems that are not Year 2000 compliant. The Company believes that with modifications to existing software and conversion to new software, the millennium issue will not disrupt proper business operations or create uncertainties unless unforeseeable situation outside the control of the Group emerge.
In addition, confirmations are being obtained from suppliers of computer services and relevant products that their services and products are Year 2000 compliant. Contingency plans are also being put in place to minimise the impact of potential disruptions to business and operations in the unlikely event that any of the Group's critical systems should fail.
The total costs of the Year 2000 compliance project are estimated to be in the region of $300,000. The costs will be charged in the financial year in which they are incurred and the amount expended in 1998 was considered immaterial. The aggregate amount of commitments authorised by the Directors and contracted for at the end of the financial period under review has been fully provided for in the financial statements while the amount not yet contracted for is approximately $140,000. The Year 2000 compliance project is on schedule as of 31st December, 1998 with 20% of the project completed and the Directors anticipate that all modifications and upgrades for the project to be completed by the end of June 1999.
CODE OF BEST PRACTICE
In the opinion of the Directors, the Company had complied with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange throughout the accounting period except that the independent non-executive Directors of the Company are not appointed for a specific term. Non-executive Directors are subject to retirement by rotation at Annual General Meetings of the Company in accordance with the Company's Bye-laws.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES
Other than in connection with the Company's initial public offering, neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company's listed securities during the year.
By Order of the Board
Chu Mang Yee
Chairman
22nd March, 1999, Hong Kong
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