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HOPSON DEVELOPMENT HOLDINGS LIMITED
(incorporated in Bermuda with limited liability)
website: http://www.irasia.com/listco/hk/hopson

2001 INTERIM RESULTS ANNOUNCEMENT

FINANCIAL HIGHLIGHTS
(for the six months ended 30th June, 2001)

  • Turnover was HK$394,925,000
  • Profit attributable to shareholders amounted to HK$52,757,000
  • Earnings per share were HK 5 cents
  • An interim dividend of HK 1 cent per share was declared

BUSINESS REVIEW

Market Overview

  • During the first half of year 2001, GDP of Guangzhou attained a growth of 12.5%.
  • The enlargement of the municipality of Guangzhou by adding districts of Panyu and Huadu has affirmed the city's status as one of the most prominent metropolis in the fast-growing southern China.
  • As a whole, Guangzhou's pre-sales and sales of completed properties exhibited an increase of 5.9% and 69.8%, respectively.
  • Panyu, Tianhe and Haizhu, where the majority of the Group's existing landbank are located, are the three most popular districts of Guangzhou.
  • The local government has implemented a series of measures to further regulate the market including an increase of requirements for pre-sale and more stringent payment terms for land premium.

Group's Sales Performance

  • During the period under review, the Group put most of its efforts in marketing existing projects, namely Regal Court, Huajing New City, Gallopade Park and Fairview Garden, and also preparing for new projects actively.
  • The new Huajing New City Phase 6C ("Triannon"), launched by the Group in March 2001, was well received in the marketplace and achieved satisfactory results.
  • With competition in local property market remaining intense, coupled with the government's action to increase pre-sale requirements, the pre-sale schedule of some of the Group's projects has been adjusted.
  • In the first half of the year, the Group completed sales of 617 residential units, representing approximately 71,580 sq.m..

Prospect

  • While the strong economic fundamentals should further propel the local housing demand, the tightened entry barrier to the property industry as formed by the government's implemented measures, albeit with short-term impact, will facilitate the elimination of incompetent players in the market.
  • The Group will launch new projects into the market, namely Gallopade Park South Court, Fairview South Court, Pleasant View Garden, Riverside New City and Huanan New City. The Group is optimistic of the sales performance of these new projects.
  • The Group has taken a step further to actively consider expanding its business scope to other major cities.

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)
                                              ------------    ------------
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)
                                              ------------    ------------
Profit from operations                              92,776         140,888
Interest income                                      2,080           4,729
Interest expense                      5             (3,492)            (31)
                                              ------------    ------------
Profit before taxation                              91,364         145,586
Taxation                              2            (39,192)        (51,562)
                                              ------------    ------------
Profit after taxation but before
  minority interests                                52,172          94,024
Minority interests                                     585          (4,060)
                                              ------------    ------------
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)
                                              ------------    ------------
Retained profit, end of period                     680,548         609,524
                                              ============    ============
Earnings per share                    3
  -  Basic                                      HK 5 cents      HK 9 cents
                                              ============    ============
  -  Diluted                                    HK 5 cents      HK 9 cents
                                              ============    ============

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
                                                ----------    ----------
                                                   394,925       519,770
                                                ==========    ==========
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)
                                                ----------    ----------
                                                    52,757        89,964
                                                ==========    ==========

(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)
                                                ----------    ----------
                                                     3,492            31
                                                ==========    ==========

(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
                                                ==========    ==========

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


Source: Hopson Development Holdings Limited
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