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(for the six months ended 30th June, 2001) |
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BUSINESS REVIEW
Market Overview
Group's Sales Performance
Prospect
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INTERIM RESULTS
The Board of Directors of Hopson Development Holdings Limited (the "Company") is pleased to announce the unaudited interim results of the Company and its subsidiaries (collectively the "Group") for the six months ended 30th June, 2001 (the "period") together with comparative figures for the corresponding previous period as follows:
Unaudited
For the six months ended 30th June
2001 2000
Notes HK$'000 HK$'000
Turnover 1&4 394,925 519,770
Cost of sales (233,124) (329,077)
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Gross profit 161,801 190,693
Selling and marketing expenses (46,272) (33,568)
General and administrative expenses (21,584) (15,264)
Depreciation (1,169) (973)
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Profit from operations 92,776 140,888
Interest income 2,080 4,729
Interest expense 5 (3,492) (31)
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Profit before taxation 91,364 145,586
Taxation 2 (39,192) (51,562)
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Profit after taxation but before
minority interests 52,172 94,024
Minority interests 585 (4,060)
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Profit attributable to shareholders 4 52,757 89,964
Retained profit, beginning of period
- As previously reported 635,133 519,560
- Prior period adjustment 30,000 50,000
- As restated 665,133 569,560
Transfer to general reserve fund (7,342) -
Dividends (30,000) (50,000)
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Retained profit, end of period 680,548 609,524
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Earnings per share 3
- Basic HK 5 cents HK 9 cents
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- Diluted HK 5 cents HK 9 cents
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Notes:
(1) Turnover
Turnover (net of applicable business tax) comprised (1) pre-sale of properties under development for sale, which is recognized by reference to the stage of completion of properties, the pre-sale activities and construction work of which have progressed to a stage when the completion of properties and the ultimate realization of profit can be reasonably determined. Revenue recognized is limited to properties sold under legally-binding sale and purchase agreements. On this basis, the profit so recognized is restricted to the amount of instalments received; (2) sale of completed properties held for sale which is recognized upon execution of a legally-binding sale and purchase agreement. The profit recognized is restricted to the amount of instalments received; (3) rental income which is recognized when rental is received or receivable; and (4) property management income which is recognized when services are rendered.
(2) Taxation
Taxation comprised (1) provision for Hong Kong profits tax at the rate of 16% (2000: 16%) and overseas taxation at the applicable rates prevailing in the countries in which the group companies operate; (2) provision 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; and (3) provision for Mainland China land appreciation tax at the rate of 1% on gross turnover.
(3) Earnings per share
The calculation of basic earnings per share was based on the unaudited consolidated profit attributable to shareholders of approximately HK$52,757,000 (2000: HK$89,964,000) and the weighted average number of 1,000,181,000 shares (2000: 1,000,000,000 shares) in issue during the period.
The calculation of diluted earnings per share was based on the unaudited consolidated profit attributable to shareholders of approximately HK$52,757,000 (2000: HK$89,964,000), and the diluted weighted average number of approximately 1,000,688,000 shares (2000: 1,000,630,000 shares) in issue after adjusting for the effect of all dilutive potential shares. The effect of the dilutive potential ordinary shares resulting from the outstanding employee share options on the diluted weighted average number of shares in issue during the period was approximately 507,000 shares (2000: 630,000 shares), which were deemed to be issued at no consideration if all outstanding share options have been exercised, on the date when the options were granted.
(4) Segmental information
The Group operates predominately in one geographical area, namely, Guangzhou, Mainland China and in two business segments, the property development segment and the property management segment. The property development segment derives revenue from pre-sale and sale of properties and leasing of completed properties. The property management segment derives revenue from provision of property management services. An analysis of the Group's results by business segment is as follows:
For the six months ended
30th June
2001 2000
HK$'000 HK$'000
Turnover
Property development
- Pre-sale and sale of properties 384,046 515,811
- Rental income 2,063 872
Property management
- Property management fees 8,816 3,087
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394,925 519,770
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Profit (loss) attributable to shareholders
Property development
- Pre-sale and sale of properties 54,694 91,258
- Rental income 873 340
Property management
- Property management fees (2,810) (1,634)
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52,757 89,964
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(5) Interest on borrowings
Analysis of interest paid/payable is as follows:
For the six months ended
30th June
2001 2000
HK$'000 HK$'000
Interest on bank loans
wholly repayable within five years 32,545 20,043
Less: Interest capitalised as part of the cost
of properties under development (29,053) (20,012)
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3,492 31
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(6) Changes in accounting policies
Effective from 1st January, 2001, the Group has adopted the following changes in accounting policies:
a. Goodwill
Goodwill represents the difference between the fair value of the consideration given and the Group's share of the aggregate fair values of the identifiable net assets acquired. Before 1st January, 2001, goodwill was eliminated against reserves in the year arose. With the introduction of SSAP 30 "Business combinations", the Group has adopted the transitional provisions prescribed therein. Positive goodwill incurred after 1st January, 2001 is capitalised as an asset and is amortised to the income statement on a straight-line basis over its estimated economic life. All goodwill arising from acquisitions before 1st January, 2001 will continue to be held in reserves and no restatement has been made. Any impairment in value of goodwill recognised before 1st January, 2001 is recognised in the income statement when there is an indication that an impairment loss exists.
b. Proposed dividends
In accordance with the revised SSAP 9 "Events after the balance sheet date", the Group no longer recognises dividends proposed after the balance sheet date as a liability at the balance sheet date. This change in accounting policy has been applied retrospectively as prior period adjustment and the effect on beginning retained profit is as follows:
For the six months ended
30th June
2001 2000
HK$'000 HK$'000
Retrospective effect of change in accounting
policy in respect of proposed dividends 30,000 50,000
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Dividends proposed after the balance sheet date were recorded as proposed dividends on the balance sheet as a separate component of shareholders' equity.
DIVIDEND
The Board of Directors has declared an interim dividend of HK$0.01 (2000: HK$0.01) per share to shareholders whose names appear on the register of members at the close of business on Monday, 29th October, 2001. The dividend will be paid on Friday, 30th November, 2001.
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Analysis
The slowdown of the global economic environment, coupled with intensive market competition, in the first half of 2001 had an impact on property sales. In addition, none of the results for the new development project, namely, Gallopade Park South Court initially marketed towards June, 2001, was recognized in the income statement. Also, approximately HK$63.8 million of rental income received from certain long-term leases, the economic benefit of which related to periods beyond 2001, was recorded as deferred income in the balance sheet in accordance with standard accounting practice. Such income will be recognized as profit of the Group at the appropriate time. As a result, turnover decreased by 24% to approximately HK$394,925,000 (2000: HK$519,770,000). The profit attributable to shareholders of approximately HK$52,757,000 represented a 41% drop as compared to the 2000 results of approximately HK$89,964,000.
The Group's continued focus on sales promotions brought the selling and marketing expenses upward to approximately HK$46,272,000 (2000: HK$33,568,000). The increase in staff numbers raised the general and administrative expenses up by 41% to approximately HK$21,584,000 (2000: HK$15,264,000). The fall in interest income by 56% to approximately HK$2,080,000 (2000: HK$4,729,000) was due to the reduction in interest rates and less funds placed on term deposits. The rise in interest expense, on the other hand, reflected mainly the cessation of capitalization of borrowing costs as most of the existing development projects were substantially completed.
Borrowings increased from approximately HK$993 million at the last year-end to approximately HK$1,290 million and were used mainly to finance the development of projects and investments. Approximately 94% of total borrowings were secured and denominated in Renminbi. The net debt to equity ratio was 45%, representing an increase of 14% over the end of 2000. Nonetheless, at 30th June, 2001 the Group's financial position remains strong with shareholders' equity increasing to approximately HK$2,185 million and cash and bank deposits amounting to approximately HK$306 million.
CHARGES ON ASSETS
As at 30th June, 2001, certain assets of the Group with aggregate carrying value of HK$1,585 million (at 31st December, 2000: HK$1,261million) were pledged to secure banking facilities.
CONTINGENT LIABILITIES
As at 30th June, 2001 the Group provided:
a) guarantees to banks for mortgage facilities granted to the buyers of the Group's properties amounting to HK$1,516 million (at 31st December, 2000: HK$1,315 million); and
b) a guarantee to a bank for a bank loan borrowed by an associate amounting to HK$10 million (at 31st December, 2000: HK$11 million).
FOREIGN EXCHANGE FLUCTUATIONS
The Group earns revenue and incurs costs and expenses mainly in Renminbi. The Group experienced no significant foreign exchange movement and the directors do not anticipate any significant foreign exchange loss as a result of changes in the exchange rate between Hong Kong dollars and Renminbi in the foreseeable future.
EMPLOYEES
At the end of the first half of 2001, the Group had approximately 1,199 (2000: 827) employees whose remunerations (excluding directors' emoluments) amounted to approximately HK$16.21 million (2000: HK$8.149 million) for the period. Employees are generally awarded on a performance related basis within the framework of the Group's laid down salary and bonus system.
CODE OF BEST PRACTICE
In the opinion of the directors, the Company has 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 of Hong Kong Limited ("the Listing Rules") throughout the period under review, except that the independent non-executive directors of the Company are not appointed for specific terms. However, directors other than the Chairman and the Managing Director are subject to retirement by rotation at Annual General Meeting of the Company in accordance with the Company's Bye-laws.
PURCHASE, REDEMPTION AND SALE OF THE COMPANY'S LISTED SECURITIES
Neither the Company nor any of its subsidiaries has purchased, redeemed or sold any of the Company's listed securities during the period.
AUDIT COMMITTEE
The Audit Committee has reviewed the unaudited interim financial statements and discussed financial related matters with the management.
CLOSURE OF REGISTER OF MEMBERS
The register of members of the Company will be closed from Thursday, 18th October, 2001 to Monday, 29th October, 2001, both days inclusive, during which period no transfer of shares will be registered. In order to qualify for the interim dividend, all transfers of shares accompanied by the relevant share certificates must be lodged with the Company's Share Registrars 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 Wednesday, 17th October, 2001.
PUBLICATION OF DETAILED RESULTS ANNOUNCEMENT ON THE STOCK EXCHANGE OF HONG KONG LIMITED'S WEBSITE
A detailed results announcement of the Group for the six months ended 30th June, 2001 containing all information required by paragraphs 46(1) to 46(6) of Appendix 16 to the Listing Rules will be published on the website of the Stock Exchange of Hong Kong Limited in due course.
By Order of the Board
Chu Mang Yee
Chairman
Hong Kong, 17th September, 2001
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