Announcement

 

3rd March 2022

         

The following announcement was issued today to a Regulatory Information Service approved by the Financial Conduct Authority in the United Kingdom.

 

HONGKONG LAND HOLDINGS LIMITED

2021 PRELIMINARY ANNOUNCEMENT OF RESULTS

 

Highlights

·   Stable underlying profit

·   Resilient Investment Properties performance

·   Higher residential profits in China

·   12 new development projects secured

·   US$500m share buyback in progress

 

"The Group delivered a resilient performance in 2021, against the backdrop of continued macroeconomic challenges in the Group's key markets.  While the profit contribution from the Group's prime Investment Properties portfolio is expected to largely remain stable in 2022, lower profits are anticipated from the Development Properties business, primarily due to the timing of sales completions in China."

 

Ben Keswick

Chairman

 

Results

 

Year ended 31st December
	2021 US$m	2020 US$m	Change %
Underlying profit attributable to shareholders*	966	963	-
Loss attributable to shareholders	(349)	(2,647)	-87
Shareholders' funds	34,584	35,709	-3
Net debt	5,104	4,568	+12
	US¢	US¢	%
Underlying earnings per share*	41.49	41.27	+1
Earnings per share	(15.00)	(113.43)	-87
Dividends per share	22.00	22.00	-
	US$	US$	%
Net asset value per share	15.05	15.30	-2
* 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 27 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¢16.00 per share will be payable on 11th May 2022, subject to approval at the Annual General Meeting to be held on 5th May 2022, to shareholders on the register of members at the close of business on 18th March 2022.

 

HONGKONG LAND HOLDINGS LIMITED

 

PRELIMINARY ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED 31ST DECEMBER 2021

 

OVERVIEW

Hongkong Land's performance remained resilient in 2021 despite the continued impact of the pandemic and related travel restrictions.  Profits from the Group's Investment Properties business were in line with the prior year.  Retail rental income increased during the year, although this was offset by lower office rents in Hong Kong.  Increased residential sales completions in China resulted in a higher contribution from the Development Properties business.  Good progress was made on replenishing the Group's land bank, with nine new projects secured in China and three in Singapore.

 

PERFORMANCE

Underlying profit attributable to shareholders remained broadly in line with the prior year at US$966 million.

 

Including net losses of US$1,315 million resulting primarily from lower valuations of the Group's investment properties, the loss attributable to shareholders was US$349 million in 2021.  This compares to a loss of US$2,647 million in 2020, which included a US$3,610 million reduction in property valuations.

 

The net asset value per share at 31st December 2021 was US$15.05, compared with US$15.30 at the end of 2020.

 

The Directors are recommending a final dividend of US¢16.00 per share, providing a total dividend for the year of US¢22.00 per share, unchanged from last year.

 

GROUP REVIEW

Investment Properties

The Group's Central office portfolio in Hong Kong continued to perform well overall.  Despite the current market downturn, Central rents declined to a lesser extent than the broader market.  At the end of 2021, physical vacancy was 5.2%, compared to 6.3% at the end of 2020, and on a committed basis it was 4.9%, compared to 5.9% at the end of 2020.  Average office rents were HK$117 per sq. ft in 2021, decreasing from HK$120 per sq. ft in the prior year.

 

The Central LANDMARK retail portfolio remained effectively fully occupied and saw improved tenant sales due to a modest recovery in consumer sentiment.  Average retail rents in 2021 increased to HK$190 per sq. ft from HK$164 per sq. ft in 2020, primarily due to the reduction of temporary rent relief provided to tenants, despite negative base rental reversions for the year.

 

The value of the Group's Hong Kong Investment Properties portfolio decreased by 5% compared to the prior year, due to lower open market rents, with no change in capitalisation rates.

 

In Singapore, positive rental reversions continued, with average office rents increasing to S$10.3 per sq. ft in 2021 from S$9.9 per sq. ft in 2020.  On a committed basis, vacancy in the Group's office portfolio remained low at 2.9%, compared with 2.1% at the end of 2020.  The value of the Group's Singapore Investment Properties portfolio increased by 1% compared to the prior year.

 

In Beijing, trading performance at WF CENTRAL continued to benefit from the strength of luxury retail sentiment in China, with tenant sales and footfall in 2021 exceeding those in 2020.

 

In Shanghai, construction is proceeding on schedule at the Group's 43%-owned prime 1.1 million sq. m. mixed-use development on the West Bund, with completion expected in multiple phases from 2023 to 2027.

 

Development Properties

In China, the profit contribution from the Group's Development Properties business increased compared to the prior year, due to more residential sales completions.  Despite market sentiment weakening in the second half of the year amidst tightened credit conditions for the sector, contracted sales performance at the Group's projects remained satisfactory, reflecting the superior locations of its developments in Tier 1 and 2 cities.  The Group's attributable interest in contracted sales in 2021 was US$2,648 million, compared to US$2,135 million in 2020.  At 31st December 2021, the Group had an attributable interest of US$2,853 million in sold but unrecognised contracted sales, compared with US$2,584 million at the end of 2020. 

 

In April 2021, the Group launched a seven-level shopping mall in Chongqing, with a net leasable area of 72,000 sq. m. under a new lifestyle retail brand - The Ring.  This property is the first in a series of malls under development using the new brand.

 

In Singapore, Development Properties profits recognised in 2021 remained largely unchanged compared to the prior year.  The fully sold 1,404-unit Parc Esta project is expected to be completed in 2022, while pre-sales at the 638-unit Leedon Green project reached 45% at year-end, with completion expected in 2023.  The Group's attributable interest in contracted sales was US$328 million, compared to US$632 million in the prior year, which benefited from the sales launch of the Parc Esta project.  It is too early to assess the impact of the cooling measures introduced in late 2021, after a strong recovery in the residential market. 

 

In the rest of Southeast Asia, market sentiment has seen moderate improvements with the gradual reopening of borders across the region, while the recovery in construction activities continues.

 

Business Development

In China, decreased competition in the primary land market presented an opportunity for the Group to replenish its land bank in its core markets.  During the year, eight primarily residential sites were acquired - all in cities where it already has a presence - with two wholly-owned projects in Chengdu, one each in Chongqing, Nanjing and Wuhan, as well as a joint venture in each of Chengdu, Chongqing and Wuhan.  The Group's effective interest in these projects equates to a developable area of 977,000 sq. m. 

 

The Group also secured a 50% interest in a mixed-use site in the Guanyinqiao CBD of Chongqing, with an attributable developable area of 131,000 sq. m.  Completion is expected in 2025 and the development will feature a luxury retail mall incorporating the Group's CENTRAL brand name.

 

In addition to the new Chongqing project above, the Group has two other luxury retail properties under development, in Shanghai and Nanjing.  It also has six premium lifestyle retail properties under development, in Chengdu, Chongqing, Hangzhou, Nanjing, Shanghai and Wuhan.  The total estimated attributable net leasable area of these new retail projects is 259,000 sq. m. with completion expected from 2023 to 2026.  Post completion, the Group's total retail attributable net leasable area in China is expected to reach 425,000 sq. m. 

 

The Group continues to be disciplined in the evaluation and selection of Development Properties opportunities in China.  Despite the well-recognised evolution of the Chinese residential properties market, we believe that consistent and careful execution of our strategy will position the Group well to take advantage of expansion opportunities.

 

In Singapore, the Group secured two joint venture projects during the year, including an executive condominium site in the Tengah area and a predominantly residential site at Northumberland Road.  The Group's effective interest in these projects equates to a developable area of 529,000 sq. ft.

 

These land acquisitions increase the Group's attributable developable area under development across all projects to 5.3 million sq. m., of which 3.3 million sq. m. are residential properties and 2.0 million sq. m. are commercial properties.

 

In February 2022, the Group acquired a 49% interest in a residential site in the Tanjong Katong area in Singapore with a developable area of 590,000 sq. ft., which is expected to yield a total of 640 units.

 

In February 2022, the Group, in partnership with Astra International, established a joint venture with LOGOS to manage and develop modern logistics warehouses in Indonesia, with an initial focus in the Greater Jakarta area.

 

Financing

The Group's financial position remains strong.  Net debt at 31st December 2021 was US$5.1 billion, up from US$4.6 billion at the end of 2020, primarily due to the acquisition of new sites during the year.  Net gearing at the end of the year was 15%, compared with 13% at the end of 2020.  As at 31st December 2021, the Group had committed liquidity of US$4.0 billion, compared to US$4.3 billion at the end of 2020, with an average tenor of debt of 6.5 years, compared to 6.6 years at the end of 2020.

 

In September, the Group announced a US$500 million share buyback programme, of which US$272 million had been invested up to 28th February 2022.

 

GOVERNANCE ENHANCEMENTS

The Group has an ongoing focus on enhancing its governance, and in the past year it has made changes to the composition of its Board, to increase its diversity and bring greater sector expertise through the appointment of new independent non-executive directors.  The Group has also established formal Audit, Remuneration and Nominations Committees.

 

PEOPLE

On behalf of the Board, I would like to extend my gratitude to all of our colleagues for their continued commitment and dedication in upholding our reputation of providing high quality and innovative offerings to our tenants and customers, despite the challenges brought about by the pandemic.

 

James Watkins and Simon Dixon stepped down from the Board in July and August 2021, respectively, whilst Lord Powell of Bayswater and Percy Weatherall retired from the Board on 3rd March 2022.  We are grateful to all of them for their contributions to the Group.  Craig Beattie joined the Board as Chief Financial Officer on 1st September 2021.  We are also pleased to welcome Lincoln K.K Leong and Lily Jencks to the Board as Non-Executive Directors with effect from 4th March and 28th July 2022, respectively.

 

OUTLOOK

The Group delivered a resilient performance in 2021, against the backdrop of continued macroeconomic challenges in the Group's key markets.  While the profit contribution from the Group's prime Investment Properties portfolio is expected to largely remain stable in 2022, lower profits are anticipated from the Development Properties business, primarily due to the timing of sales completions in China.

 

Ben Keswick

Chairman

 

CHIEF EXECUTIVE'S REVIEW

 

Hongkong Land produced a satisfactory result for the year, despite border restrictions and other challenges brought about by the pandemic, with underlying earnings remaining broadly unchanged from 2020.  The stable contributions from the Group's Investment Properties were the result of improved trading performance at its luxury retail operations across Greater China, partially offset by negative rental reversions in Hong Kong.  Results from Development Properties benefited from higher sales completions in China, despite lower margins being achieved.

 

STRATEGY

Hongkong Land is a landlord and a developer in China and Southeast Asia.  The Group operates a portfolio of prime investment properties, which it develops and holds as long-term investments, and it also develops premium residential and commercial properties for sale.

 

The Group's Investment Properties are predominantly commercial and located in core business districts of key Asian gateway cities, with a concentration in Hong Kong and Singapore.  Returns principally arise from rental income and long-term capital appreciation.  The Investment Properties segment is the largest contributor to the Group's earnings given its relative size and maturity.  It accounted for 83% of the Group's gross assets at the end of 2021 (2020: 86%) and contributed 60% of the Group's underlying operating profit before corporate expenses in 2021 (2020: 65%).

 

The Group's Development Properties are primarily premium residential and mixed-use developments located in China and in Singapore, with a growing presence in other Southeast Asian markets.  Returns principally arise from trading profits in respect of the immediate sale of the residential and office components; and rental and trading profits for certain commercial elements of mixed-use sites that are disposed of, or reclassified to Investment Properties, after rents have stabilised.  Development Properties accounted for 17% of the Group's gross assets at the end of 2021 (2020: 14%) and 40% of the Group's underlying operating profit before corporate expenses in 2021 (2020: 35%).

 

Geographically, China generates the bulk of the Group's earnings.  Hong Kong, which predominantly comprises Investment Properties, accounted for 49% of the Group's underlying operating profit before corporate expenses (2020: 54%), while China, which predominantly comprises Development Properties, accounted for 33% (2020: 28%).

 

The Investment Properties portfolios in Hong Kong and Singapore provide a stable stream of recurring earnings and balance sheet strength that enables the Group to selectively pursue new long-term investment opportunities in key gateway cities across the region.  Earnings from the Development Properties business are largely reinvested to replenish the Group's land bank where opportunities arise.  The Group's share of capital allocated to new investments totalled US$3.0 billion in 2021 (2020: US$3.5 billion). 

 

Hong Kong Investment Properties

In Hong Kong, the Group's Central Portfolio consists of 12 interconnected prime commercial buildings forming the heart of the financial district in Central, providing over 450,000 sq. m. of Grade A office and luxury retail space.  This integrated mixed-use development is positioned as the pre-eminent office, luxury retail, restaurant, and hotel accommodation in Hong Kong.  It continues to attract both prime office tenants and luxury retailers, in addition to housing the acclaimed Landmark Mandarin Oriental hotel.

 

Hong Kong's positioning as one of Asia's leading financial and business hubs, combined with the scarcity of supply of high-quality, well-managed space in Central and the unique qualities of the Group's portfolio, continue to support low vacancy and strong rents.  Despite the challenging conditions resulting from the pandemic and global uncertainties, Hong Kong continues to possess unique advantages as a financial centre that are not easily replicated. The Group remains confident that Hong Kong will continue to thrive as the primary gateway for capital flows in and out of the Chinese mainland and will remain an important finance and commercial hub for decades to come.

 

The Group's 54,000 sq. m. retail portfolio is integrated with its office buildings to create part of its distinctive and successful mixed-use business model.  Tenants include numerous global luxury brand flagship stores, as well as a number of leading restaurants.  LANDMARK is firmly established as the iconic luxury shopping and fine dining destination in Hong Kong.  Its success depends on the health of the broader Hong Kong economy, as well as on Hong Kong remaining an attractive destination for affluent visitors from across the region.  The Group is working to ensure that, despite the current challenging conditions, it remains the clear market leader in the city in which global luxury brands are represented.

 

Other Investment Properties

Outside Hong Kong, the Group has similarly established itself as a leading provider of prime office and retail space.  

 

In Singapore, Hongkong Land's attributable interests totalling 165,000 sq. m. - principally concentrated in the Marina Bay Area - include some of the finest Grade A office space in the market.  In China, the Group's 49,000 sq. m. WF CENTRAL complex in Beijing is positioned as a premium retail and lifestyle destination, which includes a Mandarin Oriental hotel that has established itself as one of the most exclusive hotels in the city.  In Indonesia, the Group has attributable interests of over 100,000 sq. m. of Grade A office space through its 50%-owned joint venture, Jakarta Land.  In Cambodia, the EXCHANGE SQUARE complex comprises 26,000 sq. m. of office and retail space in the heart of Phnom Penh.

 

Our performance in these markets depends on the levels of demand for, and supply of, prime office and luxury retail space, both of which are influenced by global and regional macroeconomic conditions.  The Group is committed to maintaining excellence in product quality and service to retain and attract tenants and customers and will continue to seek new opportunities to develop prime investment properties in key Asian gateway cities.

 

Development Properties

The Group has established a strong and profitable Development Properties business focused primarily on the premium residential market segment in China and in Southeast Asia.  In China, the Group has a presence in seven key markets, namely Beijing, Chengdu, Chongqing, Hangzhou, Nanjing, Shanghai, and Wuhan, which are expected to continue benefiting from the growth of the middle class and long-term urbanisation trends.  While the capital invested in this business is significantly lower than that invested in Investment Properties, the earnings derived from Development Properties enhance the Group's diversification, overall profits and return on capital.  The Group's attributable interest in the developable area of its projects at the end of 2021 totalled 10.2 million sq. m., compared to 9.1 million sq. m. at the end of 2020.  Of this, construction of approximately 48% had been completed at the end of 2021, compared to 43% at the end of 2020.

 

Annual returns from Development Properties fluctuate due to the nature of projects and the Group's accounting policy of recognising profits for sold properties on completion in a number of markets, including China.  Demand is also dependent on overall economic conditions, which can be significantly affected by government policies and the availability of credit.  Ongoing land acquisitions are necessary to build and maintain a stable income stream over the longer term.

 

REVIEW OF INVESTMENT PROPERTIES

Profits from Investment Properties in 2021 were broadly unchanged from 2020, as higher contributions from the Group's retail portfolio were offset by negative rental reversions in Hong Kong.  The value of the Group's Investment Properties portfolio at 31st December 2021 declined by 5%, primarily due to lower market rents for the Hong Kong Central Portfolio, partially offset by higher valuations for its prime assets in Singapore and China.

 

Hong Kong

The Group's Central office portfolio, underpinned by its high quality and unique positioning, performed well despite rising office vacancies across Hong Kong.  New leasing activity saw modest improvements throughout the year as a result of improved sentiment and a narrowing rental gap between Central and other parts of the city.  Physical vacancy was 5.2% at the year-end, compared to 6.3% at the end of 2020.  On a committed basis, vacancy was 4.9%.  Vacancy for the overall Central Grade A office market was 8.0% at the end of 2021, compared to 7.3% at the end of 2020.  Rental reversions during the year were negative, reflecting the decrease in rents since the onset of the pandemic.  The Group's average office rent in 2021 was HK$117 per sq. ft, down from last year's average of HK$120 per sq. ft.  Financial institutions, legal firms and accounting firms occupy 82% of the Group's total leased office space.  The weighted average lease expiry of the office portfolio at the end of 2021 stood at 4.2 years, compared to 4.6 years at the end of 2020.

 

The Group's luxury retail portfolio in Hong Kong benefited from improved market sentiment compared to the prior year, despite the city's borders remaining largely closed to visitors. Vacancy, on both a physical and committed basis, remained low at 0.3%, unchanged from the end of 2020.  Average retail rent in 2021 increased to HK$190 per sq. ft from HK$164 per sq. ft in 2020, predominantly due to a decrease in temporary rent relief provided to tenants, despite negative base rental reversions for the year. 

 

In June 2021, the Group successfully launched Centricity Flex, a 25,000 sq. ft. premium flexible office solution, at Edinburgh Tower in Central.  Catering to the needs of the business community in Central that values efficiency, connectivity, and lifestyle experiences, the facility offers tenants access to private office suites, meeting rooms, an open work area, private work pods, event spaces, and a café.

 

The value of the Group's Investment Properties portfolio in Hong Kong at 31st December 2021, based on independent valuations, declined by 5% to US$26.6 billion due to lower open market rents, with no change in capitalisation rates.

 

Singapore

New leasing activity at the Group's Singapore Portfolio showed signs of recovery in 2021.  The Group's office portfolio continued to perform well, with positive rental reversions achieved during the year.  Average office rent increased to S$10.3 per sq. ft in 2021, up from S$9.9 per sq. ft in the previous year.  Vacancy was low at 2.9% on a committed basis, at the year end, compared to 2.1% at the end of 2020.  Physical vacancy was 6.5% at the year-end, compared to 2.1% at the end of 2020.  Overall vacancy across the entire Grade A central business district was 8.6% at the end of 2021, compared to 6.8% at the end of 2020.  Financial institutions, legal firms and accounting firms occupy 76% of the Group's total leased office space. The weighted average lease expiry of the office portfolio at 2021 year-end stood at 3.4 years (2020: 3.8 years).

 

China

In Beijing, contributions from WF CENTRAL increased due to the strength of luxury retail sentiment in China and the Group's tenant repositioning efforts.  Footfall and tenant sales in 2021 exceeded those from the prior year.

 

In Shanghai, planning and development of the Group's prime mixed-use development on the West Bund is proceeding on schedule.  Completion is expected in phases from 2023 to 2027. 

 

Other Investment Properties

Contributions from One Central Macau increased largely due to the relaxation of border restrictions with the Chinese mainland and the Group's tenant repositioning efforts.  Occupancy was 91%, compared to 92% at the end of the prior year.  Tenant sales rebounded strongly in 2021 compared to the prior year.

 

In Jakarta, the office portfolio remains resilient, despite the continued surplus of city-wide office supply and ongoing impact of the pandemic.  Occupancy was 72% at the end of 2021, unchanged from 2020.  On a committed basis, occupancy was 73%.  The average net rent was US$15.2 per sq. m. in 2021, compared to US$15.8 per sq. m. in the prior year.

 

In Bangkok, planning of the Group's 49%-owned prime commercial joint-venture development in the central business district, secured in late 2017, continues to progress.  This development has a gross floor area of 290,000 sq. m. and is expected to complete in 2027.

 

Performances at the Group's other investment properties were within expectations.

 

REVIEW OF DEVELOPMENT PROPERTIES

Earnings from the Group's Development Properties segment were higher in 2021 than in 2020, primarily due to higher sales completions in China.

 

China

The Group's development properties in China comprise 36 projects in seven cities, of which 15 projects are in Chongqing.  As at 31st December 2021, the Group's net investment in development properties in China was US$6.3 billion, compared to US$4.8 billion at the end of 2020.

 

While the Development Properties business is predominantly focused on the sale of residential properties, the Group is also developing luxury and premium lifestyle retail properties in China, and currently has a total of four such properties in operation, with a total attributable net leasable area of 166,000 sq. m.  A further nine projects, with an estimated attributable net leasable area of 259,000 sq. m are expected to be launched from 2023 to 2026, as follows:

 

Project	City	Type	Attributable net leasable area (sq. m.)
JL Central	Nanjing	Luxury	23,000
Galaxy Midtown	Shanghai	Premium lifestyle	8,500
Yue City	Nanjing	Premium lifestyle	16,400
WE City	Chengdu	Premium lifestyle	25,800
Dream Land	Wuhan	Premium lifestyle	26,700
Central Avenue	Chongqing	Premium lifestyle	39,700
Guanyinqiao	Chongqing	Luxury	34,200
West Bund*	Shanghai	Luxury	59,800
Hangzhou Bay	Hangzhou	Premium lifestyle	24,900

*The West Bund luxury retail project is recognised under Investment Properties.

 

As a result of tightened credit conditions for the property sector, competition in the primary land market has reduced in the second half of the year.  This provided an opportunity for the Group and other well capitalised developers to replenish their land bank.  During the year, the Group secured five wholly-owned residential projects including two in Chengdu and one in each of Chongqing, Nanjing and Wuhan, as well as three joint-venture residential projects in Chengdu, Chongqing and Wuhan.

 

Market sentiment became more cautious in the second half of the year, although government support measures were introduced in recent weeks.  The Group's share of total contracted sales in 2021 was US$2,648 million, 24% higher than the US$2,135 million achieved in the prior year.  The Group's attributable interest in revenue recognised in 2021, including its share of revenue in joint ventures and associates, increased by 60% to US$2,426 million from US$1,518 million in 2020.

 

At 31st December 2021, the Group's attributable interest in sold but not yet recognised contracted sales amounted to US$2,853 million, an increase of 10% from US$2,584 million at the end of 2020.

 

Chongqing

Chongqing, the largest city in western China, remains the most significant market for the Group, representing some 33% of its Chinese Development Properties exposure.  The Group has seven wholly-owned projects and eight 50%-owned joint ventures in the city.

 

The Group's attributable interest in 2021 revenue from property sales in Chongqing, including its share of revenue in joint ventures and associates, increased by 48% to US$1,480 million, from US$1,000 million in 2020.  The Group's attributable interest in the developable area of its Chongqing projects at the end of 2021 totalled 4.9 million sq. m., compared to 4.3 million sq. m. at the end of 2020.  Of this, construction of approximately 75% had been completed at the end of 2021, compared to 66% at the end of 2020.

 

During the year, the Group launched a seven-level shopping mall with a net leasable area of 72,000 sq. m in Chongqing, under its new lifestyle retail series brand - The Ring.  This represents the Group's first wholly-owned commercial development project in China.

 

The Group also secured a 50%-owned, predominantly commercial project in the Guanyinqiao CBD in Chongqing, with an attributable GFA of 131,000 sq. m. and expected completion in 2025.

 

Shanghai

Shanghai is the second largest market for the Group, representing some 18% of its Chinese Development Properties exposure.  The Group has four joint venture projects in the city, including the trading component of the West Bund project. 

 

The Group's attributable interest in the developable area of its Shanghai projects at the end of 2021 totalled 378,000 sq. m., compared to 383,000 sq. m. at the end of 2020.  Of this, construction of approximately 40% had been completed at the end of 2021, compared to 31% at the end of 2020.

 

Nanjing

Nanjing is the third most significant market for the Group, representing some 17% of its Chinese Development Properties exposure.  The Group has one wholly-owned project and three joint venture projects in the city.

 

The Group's attributable interest in the developable area of its Nanjing projects at the end of 2021 totalled 429,000 sq. m., compared to 336,000 from the prior year.  Construction of approximately 33% of this had been completed at the end of 2021, compared to 39% at the end of 2020.

 

Singapore

Despite ongoing impact from the pandemic, residential market sentiment remained robust during the year, resulting in the introduction of cooling measures in late 2021 to moderate demand.

 

The wholly-owned 309-unit Margaret Ville residential project, with a developable area of 22,000 sq. m., was 100% pre-sold and completed during the year.

 

Construction of the wholly-owned 1,404-unit Parc Esta residential project, with a developable area of 98,000 sq. m., is on schedule and is expected to complete in 2022.  As at January 2022, the project was fully pre-sold.

 

Development of the 50%-owned 638-unit Leedon Green residential project, with a developable area of 49,000 sq. m., is on schedule for completion in 2023.  At the end of 2021, 45% of the units had been pre-sold.

 

The Group's attributable interest in contracted sales was US$328 million in 2021, compared to US$632 million in the prior year.  The Group's attributable interest in revenue recognised in 2021 was US$631 million, compared to US$522 million in the prior year.

 

At 31st December 2021, the Group's attributable interest in sold but not yet recognised contracted sales amounted to US$362 million, a decrease of 46% from US$676 million at the end of 2020.

 

During the year, the Group secured two joint venture projects in Singapore, including an executive condominium site in the Tengah area and a predominantly residential site at Northumberland Road. The Group's effective interest in these projects equates to a developable area of 529,000 sq. ft.

 

In February 2022, the Group acquired a 49% interest in a residential site in the Tanjong Katong area with a developable area of 590,000 sq. ft. and is expected to yield a total of 640 units.

 

Indonesia and other Development Properties

In Indonesia, development activities have largely resumed, with market sentiment improving modestly towards the second half of the year.  Nava Park, the Group's 49%-owned joint venture, is a 77-hectare site in the southwest of Jakarta.  Upon completion in 2029, Nava Park will comprise a mix of landed houses, villas, mid-rise apartments, and low-rise commercial components.  Of the 1,104 units that have been launched for sale, 92% had been pre-sold at the end of 2021.

 

Asya, a joint venture with Astra International, in which the Group now has a 50% attributable interest, is a 67-hectare site located in the east of Jakarta.  The project will yield a developable area of approximately 481,000 sq. m., comprising landed houses, villas, apartments and low-rise commercial shophouses.  It will be developed in multiple phases through to 2030.  Of the 805 launched units, 57% had been pre-sold at the end of 2021.

 

Arumaya, the Group's 40%-owned joint venture with Astra International, is a 297-unit luxury condominium project located in South Jakarta.  The project has a developable area of 24,000 sq. m., and is expected to complete in 2025.  All of the units had been launched as at the end of 2021, with 10% of the units pre-sold.

 

Avania, the 50%-owned mixed-use development with Astra International situated in central Jakarta, will consist of over 650 high-end apartments and a Grade A office tower.  The project has a developable area of 121,000 sq. m. and will be developed in two phases through to 2027.  The sales launch for the first phase of the project is expected to commence in 2022.

 

In February 2022, the Group, in partnership with Astra International, established a joint venture with LOGOS to manage and develop modern logistics warehouses in Indonesia, with an initial focus in the Greater Jakarta area.

 

In the rest of Southeast Asia, construction activities continue to progress despite pandemic-related disruptions.  With borders gradually reopening, market sentiment has moderately improved and pre-sales performance is in line with expectations.

 

SUSTAINABILITY

Hongkong Land has been a landlord and developer of premium properties for more than 130 years.  We strive to set an example of good corporate citizenship by having a well-designed sustainability strategy and governance structure and adopting global best practices.  Our continued growth and progress on sustainability initiatives are guided and monitored by the Group's Sustainability Committee, which reports to the Board.  We are in a strong position to continue integrating sustainability initiatives into our operational and financing activities, investment analysis and risk assessments.

 

Climate Action

Over the past year, the Group focused much of its efforts on climate change and related risks.  To mitigate the potential impact of climate change, a region-wide comprehensive climate risk assessment was conducted on the Group's commercial properties portfolio in order to improve business resilience and readiness for extreme weather events.  The study considered the best and worst case scenarios developed by the Intergovernmental Panel on Climate Change, which assume global temperatures will rise by below 2°C or below 5°C by 2100 relative to pre-industrial levels, respectively.  Physical and transition risks identified, as well as a preliminary adaptation action plan, were disclosed in line with the recommendations of the Task Force on Climate-related Financial Disclosures in the Group's 2020 Sustainability Report.

 

As part of Hongkong Land's commitment to accelerate its contributions on climate action, the Group announced in February 2022 its pledge to setting Science-Based Targets that are aligned with the 1.5°C pathway.  We are leading the net zero transition by setting ambitious emission reduction targets.  The targets, which remain subject to validation by the Science-Based Target initiative, will result in the Group committing to a 46% reduction of Scope 1 and 2 emissions by 2030 from 2019 levels and a 22% reduction in carbon intensity for Scope 3 emissions over the same period.

 

Green Buildings

Hongkong Land has a long history of reinvesting in existing assets and undertaking a robust green building certification programme.  At the end of 2021, 93% of our commercial properties by floor area, including those held in joint ventures, achieved green building certification, with all of our buildings in Hong Kong and Singapore achieving the highest possible ratings of BEAM Plus Platinum and Green Mark Platinum certifications respectively.

 

In recognition of our efforts to adhere to the highest health and safety standards, the Group was awarded the Facilities Management Team Award and COVID-19 Achievement Award at the CIBSE Hong Kong Awards 2021 in relation to the outstanding operational performance of the Hong Kong Central Portfolio.

 

Green Finance

In July 2021, the Group successfully issued its inaugural 10-year green bond, raising US$500 million to fund its green buildings and related initiatives.  The Group also had sustainability-linked loans with an aggregate facility amount of US$1.9 billion at the end of 2021.  The facilities index tiered discounts to interest rates against ESG targets, which incentivise the Group to demonstrate continuous improvements in energy efficiency, reducing food waste, and renewable energy generation, while maintaining green building certifications for the Group's Central Portfolio.

 

Corporate Social Responsibility

The Hongkong Land HOME FUND, which was established to focus on creating initiatives which benefit younger generations and our aspiration to foster a more inclusive society, celebrated its first anniversary in November 2021.  The fund and related CSR initiatives achieved a number of milestones during the year: including increasing the number of NGO partnerships from three initially to more than 60 across the region; the establishment of the HERE2HELP volunteering team which contributed over 850 hours to serve 12,000 people in just six months; and the launch of a matching gift programme for tenants and employees in Hong Kong to support causes aligned to the vision of the HOME FUND. 

 

Further details on the Group's approach to sustainability and related policies can be found on the Group's website at www.hkland.com/en/sustainability. The Group's sustainability performance for the financial year ended 31st December 2021 will be included in a standalone Sustainability Report to be published on the Group's website in the second quarter of 2022.

 

THE YEAR AHEAD

The Group continues to operate in an uncertain macroeconomic environment.  Looking ahead to 2022, the Group's Investment Properties portfolio is expected to continue generating stable returns, subject to the pace of relaxation of pandemic restrictions.  In the Development Properties business, despite the well-recognised evolution of the Chinese development properties market, we believe that consistent and careful execution of our strategy will position the Group well to take advantage of expansion opportunities.  Contributions from China are, however, expected to be lower in 2022 due to the timing of sales completions, while contributions from Southeast Asia are expected to be broadly stable. 

 

The foundation of Hongkong Land's success is in addressing the needs of its tenants and customers through the delivery of world-class and innovative offerings.  These values are critical to the prolonged success of the Group and will remain our priority in order to maintain strong shareholder returns over the long-term.

 

 

Robert Wong

Chief Executive

 

Hongkong Land Holdings Limited Consolidated Profit and Loss Account for the year ended 31st December 2021
				2021																								2020
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)			2,384.3								-								2,384.3								2,094.2								-								2,094.2
Net operating costs (note 3)			(1,440.9)								2.6								(1,438.3)								(1,135.2)								1.0								(1,134.2)
Change in fair value of
investment properties (note 7)			-								(1,375.5)								(1,375.5)								-								(3,443.4)								(3,443.4)
Operating (loss)/profit (note 4)			943.4								(1,372.9)								(429.5)								959.0								(3,442.4)								(2,483.4)
Net financing charges
- financing charges			(222.2)								-								(222.2)								(194.9)								-								(194.9)
- financing income			67.0								-								67.0								79.0								-								79.0
			(155.2)								-								(155.2)								(115.9)								-								(115.9)
Share of results of associates
and joint ventures (note 5)
- before change in fair value
of investment properties			355.9								-								355.9								267.5								-								267.5
- change in fair value of
investment properties			-								80.6								80.6								-								(175.4)								(175.4)
			355.9								80.6								436.5								267.5								(175.4)								92.1
(Loss)/profit before tax			1,144.1								(1,292.3)								(148.2)								1,110.6								(3,617.8)								(2,507.2)
Tax (note 6)			(178.7)								(16.9)								(195.6)								(149.5)								4.9								(144.6)
(Loss)/profit after tax			965.4								(1,309.2)								(343.8)								961.1								(3,612.9)								(2,651.8)
Attributable to:
Shareholders of the Company			966.0								(1,315.2)								(349.2)								963.3								(3,610.7)								(2,647.4)
Non-controlling interests			(0.6)								6.0								5.4								(2.2)								(2.2)								(4.4)
			965.4								(1,309.2)								(343.8)								961.1								(3,612.9)								(2,651.8)
			US¢																US¢								US¢																US¢
Earnings/(loss) per share (basic and diluted) (note 8)			41.49																(15.00)								41.27																(113.43)