Annual Report 2018
Hongkong Land Holdings Limited
Hongkong Land’s retail portfolio located in
the heart of Hong Kong’s Central District
houses a wide array of prestigious international
brands (front cover).
Contents
Corporate Overview
Corporate Information
Highlights
Chairman’s Statement
Chief Executive’s Review
Financial Review
Directors’ Profiles
Financial Statements
Independent Auditors’ Report
Five Year Summary
Responsibility Statement
Corporate Governance
Principal Risks and Uncertainties
Shareholder Information
Offices
Report of the Valuers
Major Property Portfolio
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is a major listed property investment, management and
development group. Founded in 1889, Hongkong Land’s business is built on excellence,
integrity and partnership.
The Group owns and manages more than 850,000 sq. m. of prime office and luxury
retail property in key Asian cities, principally in Hong Kong, Singapore, Beijing and Jakarta.
Its properties attract the world’s foremost companies and luxury brands.
The Group’s Central Hong Kong portfolio represents some 450,000 sq. m. of prime property.
It has a further 165,000 sq. m. of prestigious office space in Singapore mainly held
through joint ventures, a luxury retail centre at Wangfujing in Beijing, and a 50% interest
in a leading office complex in Central Jakarta. The Group also has a number of high
quality residential, commercial and mixed-use projects under development in cities
across Greater China and Southeast Asia. In Singapore, its subsidiary, MCL Land,
is a well-established residential developer.
Hongkong Land Holdings Limited is incorporated in Bermuda and has a standard
listing on the London Stock Exchange, with 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.
Annual Report 2018
1
Corporate Information
Directors
Hongkong Land Limited
Ben Keswick Chairman and
Managing Director
Robert Wong Chief Executive
Charles Allen-Jones
Simon Dixon
Mark Greenberg
Adam Keswick
Simon Keswick
Anthony Nightingale
Christina Ong
Y.K. Pang
Lord Powell of Bayswater, KCMG
Lord Sassoon, Kt
James Watkins
Percy Weatherall
Michael Wei Kuo Wu
Directors
Ben Keswick Chairman
Robert Wong Chief Executive
Simon Dixon Chief Financial Officer
Raymond M.J. Chow
Kenneth Foo
Robert L. Garman
Mark Greenberg
David Hsu
David P. Lamb
Ling Chang Feng
Y.K. Pang
Jeremy Parr
John Witt
Raymond Wong
Company Secretary
Jonathan Lloyd
Corporate Secretary
Jonathan Lloyd
Registered Office
Jardine House
33-35 Reid Street
Hamilton
Bermuda
2
Hongkong Land
Highlights
• Underlying profit up 9% to a record US$1,036 million
• Full-year dividend increases 10%
• Stable asset values
• Twelve new projects secured
Results
Underlying profit attributable to shareholders*
Profit attributable to shareholders
Shareholders’ funds
Net debt
Underlying earnings per share*
Earnings per share
Dividends per share
Net asset value per share
2018
US$m
2017
US$m
restated†
Change
%
1,036
947
2,457
5,614
38,342
36,842
3,564
2,549
US¢
US¢
44.24
40.24
104.92
238.61
22.00
20.00
US$
US$
16.43
15.66
9
(56)
4
40
%
10
(56)
10
%
5
* 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 28 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 accounts have been restated due to change in accounting policies upon adoption of IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from
Contracts with Customers’, as set out in Note 1 to the financial statements.
Annual Report 2018
3
Chairman’s Statement
Overview
In 2018, Hongkong Land achieved a second consecutive
year of record underlying profit. The Group’s Investment
Properties portfolio benefited from higher overall average
rents. In the Development Properties business, the
contribution from mainland China was broadly in line
with the prior year, while higher profits were recognised
In Singapore, vacancy in the Group’s office portfolio was
2.5% at the end of 2018, compared with 0.3% at the end
of 2017, although this will decline as committed space
is taken up in 2019. Rental reversions in the second
half of the year were positive as the market continued
to improve, with average rents increasing slightly to
S$9.2 per sq. ft in 2018 from S$9.1 per sq. ft in 2017.
in Singapore. The Group continued to make good
In mainland China, the retail component of WF CENTRAL
progress in acquiring new sites during the year.
in Beijing is performing in line with expectations and
Performance
has attracted many of the world’s leading luxury brands.
The official opening of the hotel component of the
development, Mandarin Oriental Wangfujing, is scheduled
Underlying profit attributable to shareholders rose 9%
in March 2019.
to US$1,036 million.
Planning of the Group’s 49%-owned prime mixed-use
retail and Grade A office development in the central
business district of Bangkok in Thailand continues to be
in line with schedule. The development is expected to
complete in 2025.
Development Properties
The profit contribution from Development Properties in
mainland China remained largely unchanged compared
to the prior year despite fewer completions, while the
Group’s attributable interest in contracted sales was 42%
higher than 2017 at US$1,578 million due to a greater
number of sales launches. Sentiment in the Group’s key
markets remained stable. At 31st December 2018, the
Group had an attributable interest of US$1,358 million in
sold but unrecognised contracted sales, compared with
US$1,032 million at the end of 2017.
During the year, the Group secured four new residential
sites in mainland China, with a wholly-owned project in
Chongqing and joint ventures in each of Chongqing,
Nanjing and Chengdu. The Group also secured a 50%
interest in a commercial mixed-use site in the centre
of Nanjing, and a 26.7% interest in a predominantly
commercial mixed-use site in the Xuhui district of
Shanghai. The Group’s effective interest in these projects
equates to a developable area of 566,000 sq. m.
In Singapore, higher profits were recognised in 2018
compared to the prior year, primarily as a result of
the completion of the 1,327-unit Sol Acres executive
Including the net gains of US$1,421 million resulting
from higher valuations of the Group’s investment
properties, the profit attributable to shareholders was
US$2,457 million. This compares to US$5,614 million
in 2017, which included net gains of US$4,667 million
arising from revaluations.
The net asset value per share at 31st December 2018
was US$16.43, compared with US$15.66 at the end
of 2017.
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, compared with
US¢20.00 per share for 2017.
Group Review
Investment Properties
In Hong Kong, the office leasing market in Central
continues to benefit from high occupancy and limited
new supply. At the end of 2018, the Group’s Central
office vacancy was 1.4%, unchanged compared to the
end of 2017. Positive rental reversions continued, with
average office rents increasing to HK$113 per sq. ft
in 2018 from HK$108 per sq. ft in 2017. The Group’s
Central retail portfolio effectively remains fully occupied
with positive rental reversions. The average retail rent in
2018 increased to HK$233 per sq. ft from HK$224 per
sq. ft in 2017. The value of the Group’s Investment
Properties portfolio in Hong Kong increased by 4%,
due to higher rents.
4
Hongkong Land
condominium development. The 309-unit Margaret
Ville project and the 1,404-unit Parc Esta project both
experienced successful sales launches during the year,
despite moderating market demand due to additional
cooling measures introduced by the government. During
the year, the Group conditionally acquired a 50% interest
in a freehold residential site with a developable area of
47,000 sq. m. which will comprise 672 mid-rise apartments.
The transaction was completed in January 2019.
Outlook
The profit contribution from the Group’s Investment
Properties is expected to remain stable in 2019, while
anticipated higher profits from the Group’s Development
Properties in mainland China as a result of more
completions will be offset by lower contributions from
other markets.
The Group’s projects in the rest of Southeast Asia are
progressing on schedule with satisfactory contracted
Ben Keswick
Chairman
sales, as well as completions at Anandamaya Residences
28th February 2019
in Indonesia and The Nassim in Vietnam during 2018.
The Group entered into agreements to develop five
new projects during the year, with two in both Jakarta
and Bangkok, and one in Manila. The Group’s effective
interest in these projects equates to a developable area
of 398,000 sq. m.
Financing
The Group’s financial position remains strong with net
debt of US$3.6 billion at 31st December 2018, up from
US$2.5 billion at the end of 2017, due to land purchases
in respect of its new projects. Net gearing at the end of
the year was 9%, compared with 7% at the end of 2017.
Net debt will move modestly higher as payments are
made during the first half of 2019 for land purchases
that have already been committed.
People
I would like to express my appreciation on behalf of the
Board to all of our staff for their continued commitment
and professionalism, as well as for their hard work in
driving the growth of the Group during the year.
Dr Richard Lee stepped down as a Director on
9th May 2018 and Sir Henry Keswick retired from
the Board on 31st December 2018. We would like to
record our gratitude to both of them for the significant
contributions they have made over many years to the
Group. We were pleased to welcome Christina Ong
to the Board in May 2018.
Annual Report 2018
5
Chief Executive’s Review
Hongkong Land had another excellent year in 2018,
sheet strength that enables the Group to pursue new
with improved contributions from both its Investment
opportunities in both its Investment Properties and
Properties and Development Properties businesses.
Development Properties businesses in its key markets.
The Group continues to maintain a strong balance sheet
Capital allocation by both business and geographical
with ample financial liquidity.
segments will be opportunity driven. The pace of new
Strategy
Hongkong Land is a landlord and a developer in
Greater China and Southeast Asia. The Group operates
a well-diversified portfolio of prime investment properties
which it develops and holds as long-term investments, as
well as developing premium residential and commercial
properties for sale.
investments in the coming year may moderate when
compared to the prior two years, during which over
US$6 billion has been committed to new projects.
Hong Kong’s Central Portfolio
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.
The Group’s investment properties are predominantly
This integrated mixed-use development is positioned as
commercial in nature and located in the core central
the pre-eminent office, luxury retail, restaurant and hotel
business districts of Asian gateway cities, with a
accommodation in Hong Kong, and continues to attract
concentration in Hong Kong and Singapore. Returns
both prime office tenants and luxury retailers.
39% Banks and other financial services
31% Legal
6% Property
8% Accounting
2% Trading
1% Governments
13% Others
principally arise from rental income and long-term
capital appreciation. Investment Properties is the largest
contributor to the Group’s earnings given its relative size
and maturity. It accounted for 88% of the Group’s gross
assets at the end of 2018 (2017: 90%) and contributed
64% of the Group’s underlying operating profit before
corporate expenses in 2018 (2017: 66%).
The Group’s development properties are primarily
premium residential and mixed-use developments,
located in mainland China and Singapore, with a growing
presence in other Southeast Asian markets. Returns
2014
principally arise from trading profits for 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 after
rents have stabilised. Development Properties accounted
for 12% of the Group’s gross assets at the end of 2018
(2017: 10%) and 36% of the Group’s underlying operating
profit before corporate expenses in 2018 (2017: 34%).
Geographically, Greater China generates the bulk of
the Group’s earnings. Hong Kong, which comprises
predominantly investment properties, accounted for
54% of the Group’s underlying operating profit before
corporate expenses (2017: 56%), whilst mainland China,
which comprises predominantly development properties,
accounted for 26% (2017: 30%).
2018
40% Banks and other financial services
30% Legal
6% Property
8% Accounting
2% Trading
1% Governments
13% Others
The commercial portfolios in Hong Kong and Singapore
provide a stable stream of recurring earnings and balance
Central portfolio office tenant profile
by area occupied
6
Hongkong Land
Central portfolio top five office tenants
(in alphabetical order)
in 2018
JP Morgan
KPMG
Mayer Brown
PricewaterhouseCoopers
Stock Exchange of Hong Kong
Central portfolio top five retail tenants
(in alphabetical order)
in 2018
Armani Group
Dickson Concepts
Hermes
Kering
LVMH Group
Hong Kong’s positioning as one of Asia’s main financial
retail space, both of which are influenced by global and
and business hubs, combined with the scarcity of
regional macro-economic conditions. The Group is
supply of high quality space in Central and the unique
committed to maintaining excellence in product quality
advantages of the Group’s portfolio, continues to support
and service to retain and attract tenants and customers,
low vacancy and strong rents.
and will continue to seek new opportunities to develop
The Group’s 54,000 sq. m. retail portfolio is integrated
with the office buildings to create part of the Group’s
distinctive and successful mixed-use business model.
Its tenants include numerous luxury brand flagship stores,
as well as a number of leading restaurants. LANDMARK is
firmly established as the iconic shopping and fine dining
destination in Hong Kong.
Other Investment Properties
Outside Hong Kong, the Group has similarly established
itself as a leading provider of prime office and retail space.
prime investment properties in Asia.
Development Properties
The Group has established a strong and profitable
trading business focusing primarily on the premium
market segment in mainland China and Southeast Asia.
While the capital invested in this business is significantly
lower than in Investment Properties, the earnings
derived from Development Properties enhance
the Group’s overall profits and returns on capital.
The Group’s attributable interest in the developable area
of its projects at the end of 2018 totalled 9.3 million sq. m.,
In Singapore, Hongkong Land’s attributable interests of
compared to 8.2 million sq. m. at the end of 2017.
165,000 sq. m., principally concentrated in the Marina
Of this, construction of approximately 36% had been
Bay Area, include some of the finest Grade A office space
completed at the end of 2018, compared to 34% at
in the market. In mainland China, the 43,000 sq. m. retail
the end of 2017.
component of the Group’s WF CENTRAL development
in Beijing is positioned as a premium retail and lifestyle
destination 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 Group’s EXCHANGE SQUARE
complex comprises 25,000 sq. m. of office and retail
space in the heart of Phnom Penh.
Annual returns from Development Properties fluctuate
due to the nature of the projects and the Group’s
accounting policy of recognising profits on sold
properties on completion in a number of markets
including mainland 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
Our performance in these markets depends on the levels
are necessary to build and maintain a stable income
of demand for, and supply of, prime office and luxury
stream over the longer term.
Annual Report 2018
7
Review of Investment Properties
Profits from the Group’s investment properties were
higher in 2018 than in 2017, due primarily to positive
rental reversions and continuing low vacancy in
Hong Kong and Singapore.
Hong Kong
Demand in the Hong Kong office leasing market
remained buoyant during the first half of the year,
but there has been a slowdown in leasing momentum
in recent months, particularly in terms of demand
from mainland Chinese companies. As a result of high
occupancy and the continued scarcity of new Grade A
The value of the Group’s investment portfolio in
Hong Kong at 31st December 2018, based on
independent valuations, increased by 4% to
US$32.1 billion when compared to the prior year,
due to increased open market rents with no change
in capitalisation rates.
Central portfolio
at 31st December 2018
Capital value (US$m)
Gross revenue (US$m)
Office
Retail
26,863
4,921*
774
266*
office supply in Central, the Group’s vacancy at the end
Equivalent yield (%)
of 2018 was low at 1.4%, unchanged from the end of
2017. Vacancy for the overall Central Grade A market
– One and Two Exchange Square
3.00
– Landmark Atrium
4.50
was 1.8% at the end of 2018, compared to 1.7% at the
Average unexpired term
end of 2017. The Group’s average office rent in 2018
of leases (years)
4.0
2.4
was HK$113 per sq. ft, an increase from last year’s
Area subject to renewal/review
average of HK$108 per sq. ft. Financial institutions, legal
in 2019 (%)
26
44
firms and accounting firms occupy 78% of the Group’s
total leased office space.
* Includes hotel
The Group’s retail portfolio in Hong Kong benefited from
generally improved market sentiment throughout the
year, and was effectively fully let at 31st December 2018.
Base rental reversions were mildly positive during the
year, while the average rent of HK$233 per sq. ft was up
from the HK$224 per sq. ft achieved in the prior year.
10.84
10.85
11.18
11.64
12.70
13.14
13.03
13.26
13.82
14.39
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Central portfolio average office effective rent (US$/sq. ft per month)
8
Hongkong Land
Chief Executive’s Review
Singapore
the context of the continued surplus of city-wide office
The Singapore office leasing market continues to
supply. The average gross rent of all five towers in 2018
improve as new supply has gradually been absorbed by
was US$25.7 per sq. m., compared to US$25.1 per sq. m.
the market. The overall vacancy rate across the entire
in the prior year.
Grade A central business district was 7.2% as at the
end of 2018, compared to 10.8% at the end of 2017.
The Group’s office portfolio continued to perform well,
reflecting its high quality and unique positioning. The
Group’s average rent in 2018 was S$9.2 per sq. ft, a slight
increase from S$9.1 per sq. ft in the previous year, due to
In Phnom Penh, EXCHANGE SQUARE, the Group’s
25,000 sq. m. prime mixed-use complex in the heart
of the city’s emerging financial district, continues to be
taken up by tenants, and was 85% occupied at the end
of 2018, compared to 65% at the end of the prior year.
positive rental reversions. Vacancy was higher at 2.5%
In Bangkok, planning of the Group’s 49%-owned prime
at the year end, compared to 0.3% at the end of 2017,
commercial joint-venture development in the central
although this will decline as committed space is taken up
business district, secured in late 2017, continues in line
in 2019. Financial institutions, legal firms and accounting
with schedule. This development has a developable area
firms occupy 80% of the Group’s total leased office space.
of 440,000 sq. m. and is expected to complete in 2025.
Mainland China
In Beijing, the retail component of WF CENTRAL, the
Group’s unique lifestyle, luxury retail and hotel project in
Wangfujing, was formally launched in May 2018 and is
Performances at the Group’s other investment properties
were within expectations.
Review of Development Properties
performing within expectations, having attracted a large
Earnings from the Group’s development properties were
number of renowned international brands. The 73-room
higher in 2018 compared to 2017, primarily due to higher
Mandarin Oriental hotel component is scheduled to open
contributions from Singapore.
in March 2019. In the central business district of Beijing’s
Chaoyang District, the Group’s 30%-owned Grade A
Mainland China
office development of 120,000 sq. m. remains in the
The Group’s development properties in mainland China
planning phase, with expectations that construction
comprise 20 projects in seven cities, of which 10 projects
will commence in 2020. In Shanghai, the Group’s
are in Chongqing. The scale of the business has grown
joint venture in the Qiantan area of Pudong to develop
significantly, with interests in 11 projects secured over
a mixed-use project was terminated in December 2018
the past two years for a total committed investment of
as certain conditions precedent were not fulfilled.
over US$3 billion. During this period, the Group’s net
Other Investment Properties
investment in development properties in mainland China
has grown from US$1.6 billion at 31st December 2016
In One Central Macau, retail occupancy was 92%,
to US$3.4 billion at 31st December 2018.
unchanged from the end of 2017. Tenant sales were up
9% despite a cooling in retail market sentiment in recent
months. Rental reversions were negative during the year,
although the average rent of MOP213 per sq. ft was up
from the MOP200 per sq. ft achieved in the prior year
due to higher turnover rent.
During the year, the Group acquired a wholly-owned
project in Chongqing and five joint venture projects,
including two in Nanjing and one in each of Chongqing,
Shanghai and Chengdu. All projects are residential,
except for one project in Nanjing which is commercial
and one project in Shanghai which is predominantly
In Jakarta, the development of the fifth tower at the
commercial in nature.
Group’s 50%-owned joint venture, Jakarta Land, was
completed in early 2018. Its occupancy was 33% at the
end of 2018, with a further 24% of space now committed.
Excluding the new office tower, occupancy across the
portfolio was 91% at the end of 2018, compared to 92%
at the end of 2017, reflecting a resilient performance in
Market sentiment in the Group’s key markets remained
resilient despite government cooling measures. Total
contracted sales in 2018 were US$1,578 million, 42%
higher than the US$1,112 million achieved in the prior
year. The Group’s attributable interest in revenue
Annual Report 2018
9
recognised, including its share of revenue in joint
of the Nanjing central business district. The 50%-owned
ventures and associates, decreased by 10% to
project will comprise offices and retail space over a
US$1,207 million in 2018 from US$1,347 million
developable area of 255,000 sq. m. and will be developed
in 2017, due to the timing of completions.
in one phase with expected completion in 2023. The
At 31st December 2018, the Group’s attributable
interest in sold but not yet recognised contracted sales
amounted to US$1,358 million, an increase of 32%
from US$1,032 million at the end of 2017.
Chongqing, the largest city in western China, remains
the most significant market in the country for the Group’s
development properties, representing some 42% of its
mainland China exposure in this area of the business.
Including newly acquired projects during the year, the
Group has four wholly-owned projects – Yorkville South,
Yorkville North, Bamboo Grove Riverside which was
acquired in August 2017 and a project in Yuelai acquired
in December 2018 – and six 50%-owned joint ventures:
Bamboo Grove, New Bamboo Grove, Landmark Riverside,
Central Avenue, Lijia Landscape which was acquired
in August 2017 and a project in Lijia acquired in
December 2018.
The newly acquired 100%-owned site in Yuelai is primarily
residential, with a total developable area of 125,000 sq. m.
The newly acquired 50%-owned site located in Lijia is
also primarily residential, with a total developable area
of 61,000 sq. m. Both projects will be developed in two
phases through to 2021.
second newly acquired project is a pure residential site
located in Jiangbei New District in northwestern Nanjing.
The 50%-owned project has a developable area of
254,000 sq. m. and will be developed in two phases
with completion expected to take place in 2021.
In Shanghai, the Group will develop a prime mixed-use
site located in Xuhui District. The 26.7%-owned project
has a developable area of 392,000 sq. m., comprising
Grade A office and retail space as well as residential
apartments. The project will be developed in three
phases in the period to 2023.
Singapore
The Group completed one residential project during 2018,
the 1,327-unit Sol Acres executive condominium project,
which was fully sold. The 710-unit Lake Grande project, a
residential site located adjacent to the LakeVille project, is
fully pre-sold and is on schedule for completion in 2019.
The 309-unit Margaret Ville project, a residential site with
a developable area of 22,000 sq. m., is 42% pre-sold with
completion scheduled in 2021. At the Parc Esta project
(formerly Eunosville), a residential site at Sims Avenue near
the Eunos MRT station, construction commenced in 2018
and is expected to complete in 2021. Upon completion,
The Group’s attributable interest in revenue from property
the project will offer 1,404 units over a developable area
sales in Chongqing, including its share of revenue in
of approximately 98,000 sq. m. As at the end of 2018,
joint ventures and associates, increased by 26% to
18% of units had been pre-sold.
US$1,015 million in 2018 from US$806 million in 2017,
due to the timing of completions. The Group’s attributable
interest in the developable area of its Chongqing projects
at the end of 2018 totalled 4.5 million sq. m., compared to
4.3 million sq. m. at the end of 2017. Of this, construction
of approximately 57% had been completed at the end of
2018, compared to 48% at the end of 2017.
In Chengdu, the Group will develop a predominantly
In April 2018, the Group conditionally acquired
a freehold residential site on Farrer Road in District 10
for redevelopment. The transaction was completed
in January 2019. The 50%-owned project consists of
672 apartment units and has a developable area of
47,000 sq. m. Construction will be in one phase with
completion scheduled in 2022.
residential site located in the Huafu area of Shuangliu
Other Development Properties
District. The 33%-owned project has a developable area
In Indonesia, construction of the Group’s residential
of 155,000 sq. m., and will be developed in one phase
projects is progressing well. Nava Park, the Group’s
with completion expected in 2021.
49%-owned joint venture with Bumi Serpong Damai,
In Nanjing, the Group acquired two new projects during
the year. The first is JL CENTRAL, a prime mixed-use site in
Xinjiekou, a mature business and retail district in the heart
is a 68 hectare site in the southwest of central Jakarta.
Upon completion in 2033, Nava Park will comprise a mix
of landed houses, villas, mid-rise apartments and low-rise
10
Hongkong Land
Chief Executive’s Review commercial components. Of the 734 units which have
In Vietnam, Thu Thiem River Park, a 64% conditionally owned
been launched for sale, 84% had been pre-sold as at the
residential development in District 2 of Ho Chi Minh City,
end of 2018.
Anandamaya Residences, the 40%-owned joint venture
project with affiliate Astra International, is a 509-unit
luxury apartment development which was completed
in August 2018. As of the end of 2018, 95% of the units
had been sold.
is a luxury condominium development consisting of over
1,000 units, with a total developable area of 175,000 sq. m.
Completion is scheduled over two phases through to
2024. 29B NDC, a 70%-owned residential development
in District 1 of Ho Chi Minh City, is a 515-unit luxury
residential tower with a total developable area of
approximately 57,000 sq. m. Construction is progressing
Asya, a joint venture in which the Group has a 33.5%
on schedule, with completion expected in 2021.
attributable interest, is a 68 hectare site located east of
central Jakarta. The project will yield a total developable
area of approximately 1.1 million sq. m., comprising
landed houses, villas, apartments and low-rise commercial
shophouses. The project will be developed in multiple
In Thailand, the Esse Sukhumvit 36, a 49%-owned
338-unit luxury condominium tower in the Sukhumvit
area of Bangkok, is currently 59% pre-sold. Construction
remains on track for completion in 2020.
phases through to 2031. Of the 351 launched units,
During the year, the Group secured a 49% interest in two
32% had been pre-sold as at the end of 2018.
luxury landed housing sites in Bangkok. The first site is
In January 2018, the Group agreed to jointly develop on a
40-60 basis a luxury condominium project in South Jakarta
named Arumaya. The project will yield 262 luxury garden
villas over a developable area of 24,000 sq. m., and is
expected to complete in 2021. As at the end of 2018,
20% of the units had been reserved. During the year,
the Group jointly secured a 50% interest in a mixed-use
development situated on Jl. Jend. Gatot Subroto in
located in Nonthaburi in Western Bangkok. The project
has a total developable area of 433,000 sq. m., and will
consist of over 1,200 villas. It is expected to be developed
in four phases through to 2028. The second site, which
has a developable area of 164,000 sq. m., is located on
King Kaew Road close to Suvarnabhumi International
Airport. The project will comprise 438 villas and is
expected to complete in 2027.
central Jakarta, which will comprise of over 300 high-end
apartments and a Grade A office tower. The project has a
The Year Ahead
developable area of 77,000 sq. m. and will be developed
The Group’s Investment Properties portfolio is expected
in two phases through to 2023.
to continue generating stable returns in 2019 and will
In the Philippines, the 40%-owned Two Roxas Triangle is
a 182-unit luxury condominium tower located in Manila’s
central Makati area. The development is expected to
complete in the first half of 2019 and was 100% pre-sold
at the end of 2018.
At Mandani Bay, a 40%-owned 20 hectare development
comprising principally residential units with some
office and retail components in Cebu, construction is
progressing well. The project will be developed in multiple
phases through to 2035. Of the 3,115 units which have
been launched, 71% were pre-sold at the end of 2018.
remain the largest contributor to the Group’s earnings.
In the Development Properties business, higher profits are
expected from mainland China although these will be offset
by a lower contribution from projects in Southeast Asia.
The foundation of Hongkong Land’s success is in
satisfying its tenants’ and customers’ needs through
the delivery of world-class services and products. By
maintaining its focus on its core values, Hongkong Land
will continue to strengthen its market positions and
achieve long-term success. The Group intends to utilise
its strong balance sheet and disciplined investment
approach to achieve sustained growth and strong
In February 2018, the Group agreed to jointly develop
shareholder returns over the long-term.
a 2,048-unit luxury condominium project situated
in the Bridgetowne Township in Pasig City, Manila.
The 40%-owned project will be developed in three
phases through to 2026 and has a developable area
of 144,000 sq. m.
Robert Wong
Chief Executive
28th February 2019
Annual Report 2018 11
Financial Review
Results
Underlying business performance
Investment Properties
Development Properties
Corporate costs
2018
US$m
1,044
582
(72)
2017
US$m
restated*
988
513
(68)
Underlying operating profit
1,554
1,433
Net financing charges
Tax
Non-controlling interests
Underlying profit attributable
to shareholders
Non-trading items
(152)
(352)
(14)
(104)
(368)
(14)
1,036
1,421
947
4,667
Profit attributable to shareholders
2,457
5,614
In Hong Kong, average office rents increased by 5%,
supported by limited supply and high occupancy levels.
Average rents for the retail portfolio increased by 4%,
with retailers on the whole experiencing improved
trading conditions.
The Hong Kong Central Portfolio remains the Group’s
largest profit contributor, generating 84% of the
operating profit contributed by the Group’s Investment
Properties, down by 1% compared to the prior year.
In Singapore, the contribution to the Group’s Investment
Properties segment remained unchanged from
the prior year, with average Singapore dollar rents
marginally increasing due to positive rental reversions.
Contributions from Singapore amounted to 11% of the
Group’s operating profits from Investment Properties,
marginally lower than the previous year of 12%.
In mainland China, the retail component of WF CENTRAL
in Beijing has been performing within expectations since
US¢
US¢
its grand opening in May 2018.
Underlying earnings per share
44.24
40.24
Operating profit from Development Properties increased
by 13% to US$582 million, principally due to higher
* The accounts have been restated due to changes in accounting
contributions from Singapore and other parts of
policies upon adoption of IFRS 9 ‘Financial Instruments’ and IFRS 15
‘Revenue from Contracts with Customers’, as set out in Note 1 to the
financial statements.
Underlying operating profit by reportable segment is
summarised in the above table, including the Group’s
share of results from its associates and joint ventures.
Given the significance of the Group’s joint ventures, this
provides a clearer summary of the Group’s performance
during the year.
Southeast Asia.
The operating profit contribution from mainland China
Development Properties was down by 8% from the
previous year to US$431 million, mainly due to fewer
completions in the Group’s joint venture developments.
Including the impact of Land Appreciation Tax which is
accounted for within the tax line, the contribution from
the Group’s mainland China Development Properties
remained largely unchanged from the prior year.
Operating profit from Investment Properties increased by
The Group’s attributable interest in revenue, being
6% to US$1,044 million, benefiting from higher average
the Group’s share of completed units handed over to
rents and low vacancies.
customers, decreased by 10% compared to the prior year
to US$1,207 million due to the timing of completions,
whilst modestly higher gross profit margins were
recognised due to a change in product mix.
12
Hongkong Land
Revenue was recognised at the following projects in
Net financing charges of US$152 million were 45%
mainland China:
Project
City
Attributable
interest
Number of units
handed over
%
2018
2017
Maple Place
Beijing
WE City
Chengdu
Yorkville North
Chongqing
Yorkville South Chongqing
Bamboo Grove Chongqing
90
50
100
100
50
1
615
1,092
811
3
13
730
844
940
1,431
Chongqing
50
1,257
1,322
New Bamboo
Grove
Landmark
Riverside
Chongqing
Central Avenue Chongqing
Parkville
Shanghai
50
50
50
962
1,692
34
1,438
482
490
higher than the prior year primarily due to an increase in
average net borrowings as a result of the Group’s recent
investments, and interest no longer being capitalised on
the retail component at WF CENTRAL. Average borrowing
costs were 3.5%, broadly in line with the prior year at 3.6%.
The tax charge, which includes Land Appreciation
Tax at the Group’s Development Properties projects in
mainland China, decreased by 4% to US$352 million,
with a lower effective tax rate of 25.1% from the
prior year’s 27.7%, primarily because of higher Land
Appreciation Tax incurred in 2017 in relation to the
Parkville project in Shanghai.
In 2018, underlying profit attributable to shareholders
was US$1,036 million, 9% higher than the prior year.
This compares to a 10% increase in underlying profit
per share due to the repurchase and cancellation of
In Singapore, Development Properties operating profits
18,878,700 ordinary shares for an aggregate cost of
increased to US$122 million from US$39 million in 2017,
US$132 million during the year.
with revenue recognised of US$953 million compared to
US$271 million in 2017, primarily due to the completion
Non-Trading Items
of Sol Acres, a 1,327-unit executive condominium
In 2018, the Group had net non-trading gains of
project, and recognition on a percentage of completion
US$1,421 million compared with US$4,667 million in
basis of other projects being developed.
2017. These arose principally on revaluations of the
In other parts of Southeast Asia, the Group recorded
strong growth in recognised profits compared to
the prior year principally due to the completion of
Group’s investment properties, including its share of joint
ventures, which were performed at 31st December 2018
by independent valuers.
Anandamaya Residences in Indonesia, a 509-unit luxury
The gains on valuation came primarily from the Group’s
apartment development, and The Nassim in Vietnam,
Central office portfolio in Hong Kong due to an increase
a 238-unit premium condominium project.
in open market rents with no change in capitalisation
Other locations are predominantly under development
and are yet to make a meaningful contribution to
operating profit.
rates. The Central portfolio increased in value by 4% to
US$31.8 billion.
Annual Report 2018 13
Cash Flows
The Group’s consolidated cash flows are summarised as follows:
Operating activities
Operating profit, excluding non-trading items*
Net interest
Tax paid
Payments for Development Properties sites
Expenditure on Development Properties projects
Sale proceeds from Development Properties
Dividends received from joint ventures
Others
Investing activities
Major renovations capex
Investments in and advances to associates and joint ventures
Development expenditure
Acquisition of a subsidiary
Refund/(payment) of deposit for a joint venture
Financing activities
Dividends paid by the Company
Shares repurchase
Net drawdown of borrowings
Others
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1st January
Effect of exchange rate changes
2018
US$m
2017
US$m
1,089
(127)
(172)
(809)
(355)
1,328
139
(489)
604
(93)
(979)
(57)
–
73
(1,056)
(467)
(132)
838
(2)
237
(215)
1,617
(33)
876
(76)
(137)
(549)
(298)
1,018
94
(128)
800
(108)
(670)
(106)
(43)
(20)
(947)
(443)
-
239
11
(193)
(340 )
1,898
59
Cash and cash equivalents at 31st December
1,369
1,617
* Operating profit, excluding non-trading items, has been restated due to changes in accounting policies upon adoption of IFRS 15 ‘Revenue from
Contracts with Customers’, as set out in Note 1 to the financial statements.
The cash inflows from operating activities for the year
The Group’s operating profit from its subsidiaries
were US$604 million, compared with US$800 million
(excluding non-trading items) was US$1,089 million,
in the prior year. The decrease of US$196 million was
24% higher than the prior year, largely due to increased
principally due to higher land payments for wholly-owned
contributions from the Hong Kong Central portfolio and
Development Properties sites, higher interest payments
wholly-owned Development Properties in mainland China
and higher taxes, partially offset by higher sales proceeds
and Singapore. Net interest paid of US$127 million was
received from the Group’s wholly-owned Development
Properties projects.
14
Hongkong Land
Financial Review US$51 million higher than in 2017 due to higher average
Year-end debt summary*
net borrowings. In 2018, US$809 million was paid
by the Group to acquire wholly-owned Development
Property sites, predominantly attributable to the Parc
Esta project in Singapore (US$748 million), as compared
to US$549 million in 2017. Sale proceeds from
Development Properties were US$310 million higher
at US$1,328 million, principally due to higher sales
proceeds at Yorkville North and Yorkville South in
Chongqing. Dividends received from joint ventures
increased by US$45 million to US$139 million, mainly
due to receipts from Anandamaya Residences in
Indonesia and New Bamboo Grove in mainland China.
Cash outflows from investing activities were
US$1,056 million, compared to US$947 million
in the prior year. Net funding of the Group’s joint
venture projects totalled US$979 million, an increase
on US$670 million in the prior year primarily due to an
increase in new joint venture Development Properties
activity in China, as well as funding for the Group’s joint
2018
US$m
1,499
1,425
460
217
593
479
4
262
2017
US$m
1,504
1,238
555
112
364
393
–
5
4,939
1,375
4,171
1,622
3,564
2,549
US$ bonds/notes
HK$ bonds/notes
HK$ bank loans
S$ bonds/notes
S$ bank loans
RMB bank loans
PHP bank loans
THB bank loans
Gross debt
Cash
Net debt
* Before currency swaps
Capital Management
The Group’s capital management policies are set out on
venture Investment Properties development in central
page 68.
Bangkok. Development expenditure of US$57 million
was predominantly for the WF CENTRAL project in Beijing,
whilst capital expenditure of US$93 million for major
renovations principally relates to the Group’s Hong Kong
Central portfolio. The Group received a US$73 million
deposit refund following the termination of a joint venture
in the Qiantan area of Pudong District in Shanghai.
Under financing activities, the Company paid dividends
of US$467 million, being the 2017 final dividend of
US¢14.00 per share and the 2018 interim dividend of
New Investments
During the last two years, Hongkong Land has committed
over US$6 billion, being our equity contribution and our
share of project level debt, to new projects. The pace of
new investments in the coming year will likely moderate
compared to the last two years so as to maintain an
appropriate capital structure. These investments are
and will continue to be funded by a combination of
internal resources and external financing from banks
US¢6.00 per share, US¢1.00 per share higher compared
and capital markets.
to the prior year. The Group also spent US$132 million
in share repurchases during the year, whilst it had a net
drawdown of borrowings of US$838 million.
Dividends
Cash and cash equivalents were US$248 million lower
at the end of 2018. Taken together with an increase in
borrowings, this resulted in an increase in the Group’s
net debt at 31st December 2018, which has moved up
to US$3,564 million, from US$2,549 million at the
beginning of the year.
The Board is recommending a final dividend of US¢16.00
per share for 2018, providing a total annual dividend of
US¢22.00 per share, an increase of 10% over 2017. The
final dividend will be payable on 15th May 2019, subject
to approval at the Annual General Meeting to be held on
8th May 2019, to shareholders on the register of members
at the close of business on 15th March 2019. No scrip
alternative is being offered in respect of the dividend.
Annual Report 2018 15
Treasury Policy
The Group manages its treasury activities within
established risk management objectives and policies
using a variety of techniques and instruments. The main
objectives are to manage exchange, interest rate and
liquidity risks and to provide a degree of certainty in
respect of costs. The investment of the Group’s cash
balances is managed so as to minimise risk while seeking
to enhance yield. Appropriate credit guidelines are in
place to manage counterparty credit risk.
When economically sensible to do so, borrowings are
taken in local currencies to hedge foreign currency
exposures on investments. A portion of borrowings is
denominated in fixed rates. Adequate headroom in
10%
8%
6%
7%
9%
2014
2015
2016
2017
2018
Net debt
Equity (restated)
committed facilities is maintained to facilitate the Group’s
Net debt as a percentage of equity
capacity to pursue new investment opportunities and to
provide some protection against market uncertainties.
Overall, the Group’s funding arrangements are designed
to keep an appropriate balance between equity and debt
from banks and capital markets, both short and long
term, to give flexibility to develop the business.
The average tenor of the Group’s debt was 6.2 years at
31st December 2018, up from 5.9 years at the end of
2017. Approximately 49% of the Group’s borrowings
were at floating rates and the remaining 51% were either
fixed rate borrowings or covered by interest rate hedges
The Group’s Treasury operations are managed as cost
with major credit worthy financial institutions, broadly in
centres and are not permitted to undertake speculative
line with the end of 2017.
transactions unrelated to underlying financial exposures.
Funding
The Group is well financed with strong liquidity. Net
gearing was 9% at 31st December 2018, up from 7%
at the end of 2017. Interest cover, calculated as the
underlying operating profits, including the Group’s share
of associates and joint ventures’ operating profits, divided
by net financing charges including the Group’s share of
associates and joint ventures’ net financing charges, was
10.3 times, down from 13.7 times in 2017. The decrease
was mainly due to higher levels of debt during the year.
Both Moody’s and Standard & Poor’s have maintained
their credit ratings of Hongkong Land Holdings Limited at
A3 and A respectively.
16
Hongkong Land
Interest
rate
51% Fixed
49% Floating
Currency*
Maturity
66% HK$
19% S$
10% RMB
5% THB
38% >5 years
40% 2-5 years
6% 1-2 years
16% <1 year
Debt profile at 31st December 2018
* After currency swaps
Financial Review 88% Investment Properties
12% Development Properties
At 31st December 2018, the Group had total committed
lines of approximately US$7.2 billion. Of these lines, 56%
were sourced from banks with the remaining 44% from
the capital markets. At the end of 2018, the Group had
drawn US$4.9 billion of these lines leaving US$2.3 billion
of committed, but unused, facilities. Adding the Group’s
year end cash balances, the Group had overall liquidity at
31st December 2018 of US$3.6 billion, down from
US$4.3 billion at the end of 2017.
2,703
2,670
869
662
303
2019
2020
2021
2022
2023
& beyond
Committed facility maturity
at 31st December 2018 (US$m)
Gross Assets
76% Hong Kong
13% Southeast Asia
11% Mainland China and Macau
Gross assets by location
Principal Risks and Uncertainties
A review of the principal risks and uncertainties facing
the Group is set out on page 85.
Accounting Policies
The Directors continue to review the appropriateness
of the accounting policies adopted by the Group
with regard to developments in International Financial
Reporting Standards. There are no changes to the
accounting policies as described in the 2017 annual
financial statements except for the adoption of
IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue
The Group’s gross assets, including its share of joint
from Contracts with Customers’ from 1st January 2018.
ventures, (excluding cash balances) is analysed below,
Changes to accounting policies on the adoption of IFRS 9
by activity and by location.
and IFRS 15 have been applied retrospectively and the
comparative financial statements have been restated.
The new standard that has had the most significant
impact on the Group’s underlying profit is IFRS 15,
which has changed the Group’s revenue recognition
in Singapore (excluding executive condominiums,
which will continue to be recognised on completion),
and the Philippines, from completion to percentage of
completion, leading to the earlier recognition of revenue.
The effects of adopting these standards are presented in
Note 1 to the financial statements.
88% Investment Properties
12% Development Properties
Gross assets by activity
Simon Dixon
Chief Financial Officer
28th February 2019
Annual Report 2018 17
76% Hong Kong
13% Southeast Asia
11% Mainland China and Macau
Directors’ Profiles
Ben Keswick* Chairman and Managing Director
Mr Keswick joined the Board as Managing Director in
Mark Greenberg
Mr Greenberg joined the Board in 2006. He is group
2012 and became Chairman in 2013. He has held a
strategy director of Jardine Matheson. He previously
number of executive positions since joining the Jardine
spent 16 years in investment banking with Dresdner
Matheson group in 1998, including finance director and
Kleinwort Wasserstein in London. He is also a director of
then chief executive officer of Jardine Pacific between
Jardine Matheson Limited, Dairy Farm, Jardine Cycle &
2003 and 2007 and, thereafter, group managing director
Carriage and Mandarin Oriental, and a commissioner of
of Jardine Cycle & Carriage until 2012. He has an MBA
Astra and Permata Bank.
from INSEAD. Mr Keswick is chairman of Jardine Matheson
Limited, Jardine Cycle & Carriage and Yonghui Superstores
and a commissioner of Astra. He is also executive
chairman and managing director of Jardine Matheson
and Jardine Strategic, chairman and managing director
of Dairy Farm and Mandarin Oriental, and a director of
Jardine Pacific and Jardine Motors.
Robert Wong* Chief Executive
Mr Wong joined the Board as Chief Executive in 2016.
He joined the Group in 1985 and has extensive experience
in property management and development. As a director
of Hongkong Land Limited since 1996, he had prime
responsibility for the Group’s residential property business.
He is a member of both The Royal Institution of Chartered
Surveyors and The Hong Kong Institute of Surveyors.
Simon Dixon* Chief Financial Officer
Mr Dixon joined the Board as Chief Financial Officer
in 2016. A Chartered Accountant, he joined the Jardine
Matheson group in 2006 from PricewaterhouseCoopers.
He was previously finance director of Astra, prior to which
he was group treasurer of Jardine Matheson from 2006
to 2010.
Charles Allen-Jones
Mr Allen-Jones joined the Board in 2001. He was formerly
senior partner of Linklaters, where he had been a partner
for 33 years until 2001. Mr Allen-Jones is a non-executive
director of Jardine Strategic.
Adam Keswick
Mr Keswick joined the Board in 2012. Having joined
Jardine Matheson in 2001, he was appointed to the board
in 2007 and was deputy managing director from 2012
to 2016. Mr Keswick is also deputy chairman of Jardine
Lloyd Thompson and a director of Dairy Farm, Jardine
Strategic and Mandarin Oriental. He is also a director of
Ferrari, and vice chairman of the supervisory board of
Rothschild & Co.
Simon Keswick
Mr Keswick has been a Director of the Group’s holding
company since 1983. He was Chairman of the Company
from 1983 to 1988 and from 1989 to 2013. He joined
the Jardine Matheson group in 1962 and is a director
of Dairy Farm, Jardine Matheson, Jardine Strategic and
Mandarin Oriental.
Anthony Nightingale
Mr Nightingale joined the Board in 2006 and was
Managing Director of the Company from 2006 to 2012.
He is also a director of Dairy Farm, Jardine Cycle &
Carriage, Jardine Matheson, Jardine Strategic, Mandarin
Oriental, Prudential, Schindler, Shui On Land and Vitasoy,
and a commissioner of Astra. He is chairperson of The
Sailors Home and Missions to Seafarers in Hong Kong.
* Executive Director
18
Hongkong Land
Christina Ong
Mrs Ong joined the Board in May 2018. She is co-chairman
Lord Sassoon, Kt
Lord Sassoon joined the Board in 2013. He began his
and senior partner of Allen & Gledhill as well as co-head
career at KPMG, before joining SG Warburg (later UBS
of its financial services department. She is a director of
Warburg) in 1985. From 2002 to 2006 he served as
Oversea-Chinese Banking Corporation, SIA Engineering
a civil servant in the United Kingdom Treasury, where
Company, Singapore Telecommunications and Trailblazer
he had responsibility for financial services and enterprise
Foundation. She is also a member of the Catalist Advisory
policy. He subsequently chaired the Financial Action
Panel and a trustee of The Stephen A. Schwarzman
Task Force and conducted a review of the UK’s system
Scholars Trust.
Y.K. Pang
Mr Pang has been a Director of the Company since 2007.
He was Chief Executive of the Group from 2007 to 2016.
He is deputy managing director of Jardine Matheson,
chairman of Jardine Pacific, and chairman and chief
executive of Jardine Motors. He previously held a
number of senior executive positions in the Jardine
Matheson group, which he joined in 1984. Mr Pang
of financial regulation. From 2010 to 2013 Lord Sassoon
was the first Commercial Secretary to the Treasury
and acted as the Government’s Front Bench Treasury
spokesman in the House of Lords. He is a director of
Dairy Farm, Jardine Lloyd Thompson, Jardine Matheson
and Mandarin Oriental. He is also chairman of the
China-Britain Business Council.
James Watkins
Mr Watkins joined the Board in 2009. He was a director
is also deputy chairman of Jardine Matheson Limited,
and group general counsel of Jardine Matheson from
and a director of Dairy Farm, Jardine Matheson (China),
1997 to 2003. Mr Watkins qualified as a solicitor in 1969
Jardine Strategic, Mandarin Oriental and Zhongsheng.
and was formerly a partner of Linklaters. He is also a
He is chairman of the General Committee and Executive
director of IL&FS India Realty Fund II and Mandarin Oriental.
Committee of the Employers’ Federation of Hong Kong,
Deputy Chairman of the Hong Kong Management
Association and a past chairman of the Hong Kong
General Chamber of Commerce.
Lord Powell of Bayswater, KCMG
Lord Powell rejoined the Board in 2008, having first
Percy Weatherall
Mr Weatherall joined the Board in 1994 and was
Managing Director from 2000 to 2006. He first joined
the Jardine Matheson group in 1976 and retired from
executive office in 2006. He is also a director of Dairy
Farm, Jardine Matheson, Jardine Strategic and Mandarin
served as a Director between 1992 and 2000. He was
Oriental. He is chairman of Corney & Barrow and
previously Private Secretary and adviser on foreign affairs
the Nith District Salmon Fishery Board.
and defence to British Prime Ministers Baroness Thatcher
and Sir John Major. He is a director of Jardine Strategic,
LVMH Moët Hennessy Louis Vuitton, Matheson & Co,
and the Northern Trust Corporation. He was previously
president of the China-Britain Business Council and
chairman of the Singapore-British Business Council.
He is an independent member of the House of Lords.
Michael Wei Kuo Wu
Mr Wu joined the Board in 2012. He is chairman and
managing director of Maxim’s Caterers in Hong Kong.
He is also a non-executive director of Hang Seng Bank
and Jardine Matheson.
Annual Report 2018 19
Consolidated Profit and Loss Account
for the year ended 31st December 2018
Underlying
business
performance
US$m
2018
Non-
trading
items
US$m
Underlying
business
performance
US$m
Total
US$m
2017
Non-
trading
items
US$m
Total
US$m
Note
restated
restated
restated
Revenue
Net operating costs
Change in fair value of investment properties
Gain on acquisition of a subsidiary
Operating profit
Net financing charges
– financing charges
– financing income
Share of results of associates and joint ventures
– before change in fair value of
investment properties
– change in fair value of investment properties
Profit before tax
Tax
Profit after tax
Attributable to:
3
4
9
9
5
6
9
7
2,665.4
(1,576.1)
–
2,665.4
20.1
(1,556.0)
1,616.1
(740.2)
–
1,616.1
51.4
(688.8)
–
–
1,222.4
1,222.4
–
–
–
–
4,677.9
4,677.9
3.0
3.0
1,089.3
1,242.5
2,331.8
875.9
4,732.3
5,608.2
(170.7)
56.4
(114.3)
265.1
–
–
–
–
–
188.6
(170.7)
56.4
(121.3)
43.1
(114.3)
(78.2)
265.1
188.6
301.8
–
(53.1)
–
–
–
–
(121.3)
43.1
(78.2)
301.8
(53.1)
265.1
188.6
453.7
301.8
(53.1)
248.7
1,240.1
1,431.1
2,671.2
1,099.5
4,679.2
5,778.7
(206.3)
(7.8)
(214.1)
(151.3)
(1.8)
(153.1)
1,033.8
1,423.3
2,457.1
948.2
4,677.4
5,625.6
Shareholders of the Company
Non-controlling interests
1,036.1
1,421.0
2,457.1
946.8
4,667.1
5,613.9
(2.3)
2.3
–
1.4
10.3
11.7
1,033.8
1,423.3
2,457.1
948.2
4,677.4
5,625.6
US¢
US¢
US¢
US¢
Earnings per share (basic and diluted)
8
44.24
104.92
40.24
238.61
20
Hongkong Land
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2018
Profit for the year
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans
Tax on items that will not be reclassified
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
– net (loss)/gain arising during the year
– transfer to profit and loss
Cash flow hedges
– net loss arising during the year
– transfer to profit and loss
Tax relating to items that may be reclassified
Share of other comprehensive (expense)/income of associates
and joint ventures
Other comprehensive (expense)/income for the year, net of tax
Note
7
7
2018
US$m
2017
US$m
restated
2,457.1
5,625.6
(2.6)
0.4
(2.2)
(197.7)
0.3
(197.4)
(2.8)
(2.6)
(5.4)
0.9
(156.7)
(358.6)
(360.8)
2.3
(0.4)
1.9
72.2
11.2
83.4
(27.8)
(2.8)
(30.6)
5.1
237.2
295.1
297.0
Total comprehensive income for the year
2,096.3
5,922.6
Attributable to:
Shareholders of the Company
Non-controlling interests
2,100.4
(4.1)
5,905.7
16.9
2,096.3
5,922.6
Annual Report 2018 21
Note
10
11
12
13
14
15
13
16
17
18
18
14
17
19
At 31st December
At 1st January
2018
US$m
133.7
33,712.1
6,694.7
122.8
24.0
13.9
–
2017
US$m
restated
106.9
32,481.0
5,578.8
103.0
28.5
15.5
0.1
2017
US$m
restated
44.9
27,712.3
4,485.4
52.2
60.1
8.7
–
40,701.2
38,313.8
32,363.6
1,983.0
892.2
11.4
1,375.2
2,181.0
712.5
10.6
1,622.1
1,522.3
826.1
9.2
1,908.9
4,261.8
4,526.2
4,266.5
(1,337.3)
(793.8)
(119.4)
(2,250.5)
2,011.3
(4,145.2)
(167.4)
(3.3)
(27.1)
(1,507.1)
(190.6)
(113.5)
(1,811.2)
2,715.0
(3,980.3)
(135.1)
–
(36.9)
(1,064.4)
(220.7)
(80.0)
(1,365.1)
2,901.4
(3,695.7)
(134.6)
(1.8)
(30.3)
38,369.5
36,876.5
31,402.6
233.4
257.3
235.3
386.9
235.3
386.9
37,850.8
36,219.6
30,760.4
38,341.5
28.0
36,841.8
34.7
31,382.6
20.0
38,369.5
36,876.5
31,402.6
Consolidated Balance Sheet
at 31st December 2018
Net operating assets
Fixed assets
Investment properties
Associates and joint ventures
Other investments
Non-current debtors
Deferred tax assets
Pension assets
Non-current assets
Properties for sale
Current debtors
Current tax assets
Bank balances
Current assets
Current creditors
Current borrowings
Current tax liabilities
Current liabilities
Net current assets
Long-term borrowings
Deferred tax liabilities
Pension liabilities
Non-current creditors
Total equity
Share capital
Share premium
Revenue and other reserves
Shareholders' funds
Non-controlling interests
Approved by the Board of Directors on 28th February 2019
Ben Keswick
Robert Wong
Directors
22
Hongkong Land
Consolidated Statement of Changes in Equity
for the year ended 31st December 2018
Share
capital
US$m
Share
premium
US$m
Revenue
reserves
US$m
Hedging
reserves
US$m
Exchange
reserves
US$m
Note
Attributable to
shareholders
of the
Company
Attributable
to non-
controlling
interests
US$m
US$m
Total
equity
US$m
2018
At 1st January
– as previously reported
235.3
386.9
36,285.8
(7.7)
(126.6)
36,773.7
34.7
36,808.4
– change in accounting policies
–
–
81.2
–
(13.1)
68.1
–
68.1
– as restated
Total comprehensive income
Dividends paid by
the Company
Dividends paid to
non-controlling
shareholders
Unclaimed dividends forfeited
Share repurchase
20
235.3
386.9
36,367.0
–
–
–
–
–
–
–
–
(1.9)
(129.6)
2,454.9
(469.8)
–
0.6
–
(7.7)
(1.1)
(139.7)
(353.4)
36,841.8
2,100.4
34.7
36,876.5
(4.1)
2,096.3
–
–
–
–
–
–
–
–
(469.8)
–
(469.8)
–
0.6
(131.5)
(2.6)
–
–
(2.6)
0.6
(131.5)
At 31st December
233.4
257.3
38,352.7
(8.8)
(493.1)
38,341.5
28.0
38,369.5
2017
At 1st January
– as previously reported
235.3
386.9
31,093.6
– change in accounting policies
–
–
104.1
18.6
–
(440.0)
31,294.4
20.0
31,314.4
(15.9)
88.2
–
88.2
– as restated
Total comprehensive income
Dividends paid by
the Company
Dividends paid to
non-controlling
shareholders
Unclaimed dividends forfeited
20
235.3
386.9
31,197.7
–
–
–
–
–
–
–
–
5,615.8
(447.0)
–
0.5
18.6
(26.3)
(455.9)
31,382.6
316.2
5,905.7
20.0
16.9
31,402.6
5,922.6
–
–
–
–
–
–
(447.0)
–
(447.0)
–
0.5
(2.2)
–
(2.2)
0.5
At 31st December
235.3
386.9
36,367.0
(7.7)
(139.7)
36,841.8
34.7
36,876.5
Annual Report 2018 23
Consolidated Cash Flow Statement
for the year ended 31st December 2018
Operating activities
Operating profit
Depreciation
Change in fair value of investment properties
Change in fair value of other investments
Gain on acquisition of a subsidiary
Decrease/(increase) in properties for sale
(Increase)/decrease in debtors
(Decrease)/increase in creditors
Interest received
Interest and other financing charges paid
Tax paid
Dividends from associates and joint ventures
Cash flows from operating activities
Investing activities
Major renovations expenditure
Developments capital expenditure
Acquisition of a subsidiary
Investments in and advances to associates and joint ventures
Refund/(payment) of deposit for a joint venture
Cash flows from investing activities
Financing activities
Drawdown of borrowings
Repayment of borrowings
Dividends paid by the Company
Dividends paid to non-controlling shareholders
Change in interests in subsidiaries
Share repurchase
Cash flows from financing activities
Net cash outflow
Cash and cash equivalents at 1st January
Effect of exchange rate changes
Note
4
10
4
2018
US$m
2,331.8
4.2
(1,222.4)
(20.1)
–
105.9
(250.0)
(185.2)
44.8
(171.7)
(172.1)
139.2
604.4
(93.0)
(57.4)
–
(978.4)
72.9
(1,055.9)
2,721.5
(1,883.9)
(466.6)
(2.5)
–
(131.5)
237.0
(214.5)
1,616.6
(33.2)
2017
US$m
restated
5,608.2
3.0
(4,677.9)
(51.4)
(3.0)
(424.1)
155.9
308.2
41.9
(117.8)
(137.2)
94.4
800.2
(108.2)
(105.5)
(42.6)
(670.5)
(20.1)
(946.9)
825.1
(586.1)
(443.4)
(3.8)
15.0
–
(193.2)
(339.9)
1,898.4
58.1
Cash and cash equivalents at 31st December
21
1,368.9
1,616.6
24
Hongkong Land
Notes to the Financial Statements
1
Basis of Preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’), including
International Accounting Standards (‘IAS’) and Interpretations adopted by the International Accounting Standards Board. The
financial statements have been prepared on a going concern basis and under the historical cost convention except as disclosed
in the accounting policies.
Details of the Group’s principal accounting policies are included in Note 28.
This is the first set of the Group’s annual financial statements in which IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue
from Contracts with Customers’ have been applied. Changes to principal accounting policies are described below. There are
no other amendments, which are effective in 2018 and relevant to the Group’s operations, that have a significant effect on the
Group’s accounting policies. The Group has not early adopted any standard, interpretation or amendment that have been
issued but not yet effective.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line with the economic
environments of the locations in which they operate. The functional currency of the Company is United States dollars. The
consolidated financial statements are presented in United States dollars.
The Group’s reportable segments are set out in Note 2.
Changes in principal accounting policies
The Group has adopted the following new accounting standards from 1st January 2018:
IFRS 9 Financial Instruments
Under IFRS 9, the gains and losses arising from changes in fair value of the Group’s investments in equity securities, previously
classified as available-for-sale, have been recognised in profit and loss, instead of through other comprehensive income. Such
fair value gains or losses on revaluation of these investments are classified as non-trading items, and do not have any impact on
the Group’s underlying profit attributable to shareholders and shareholders’ funds.
The new hedge accounting rules, which align the accounting for hedging instruments closely with the Group’s risk
management practices, has no significant impact to the Group.
IFRS 9 also requires the Group to consider expected credit losses on all financial assets and amended disclosures are required
in the financial statements. No provision has been recognised by the Group as at 31st December 2018.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for the recognition of revenue. It replaces IAS 11 ‘Construction Contracts’
and IAS 18 ‘Revenue’ which covers contracts for goods and services. The core principle in the framework is that revenue is
recognised when control of a good or service transfers to a customer. The new standard mainly changes the Group’s revenue
recognition on certain property sales, from the completion method to the percentage of completion method. This will lead to
earlier recognition of revenue when compared to the current completion method.
Changes to accounting policies on adoption of IFRS 9 and 15 have been applied retrospectively, and the comparative financial
statements have been restated.
Annual Report 2018 25
1
Basis of Preparation continued
Changes in principal accounting policies continued
The effects of adopting IFRS 9 and IFRS 15 were as follows:
(i) On the consolidated profit and loss account for the year ended 31st December 2017:
Revenue
Net operating costs
Share of results of associates and joint ventures
Tax
Profit attributable to shareholders of the Company*
*
Further analysed as:
Underlying profit attributable to shareholders
Non-trading items
Profit attributable to shareholders
Underlying earnings per share (US¢)
Earnings per share (US¢)
Increase/(decrease) in
profit upon adopting
IFRS 9
US$m
–
51.4
–
–
51.4
–
51.4
51.4
–
2.19
(ii) On the consolidated statement of comprehensive income for the year ended 31st December 2017:
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
– net gain arising during the year
Revaluation of other investments at fair value through
other comprehensive income
Other comprehensive income for the year, net of tax
Total attributable to shareholders of the Company
Increase/(decrease) in
total comprehensive
income upon adopting
IFRS 9
US$m
51.4
–
(51.4)
(51.4)
–
IFRS 15
US$m
(343.7)
312.0
3.3
5.5
(22.9)
(22.9)
–
(22.9)
(0.97)
(0.97)
IFRS 15
US$m
(22.9)
2.8
–
2.8
(20.1)
26
Hongkong Land
Notes to the Financial Statements 1
Basis of Preparation continued
Changes in principal accounting policies continued
(iii) On the balance sheet at 1st January:
Assets
Associates and joint ventures
Properties for sale
Current debtors
Total assets
Equity
Revenue and other reserves
Liabilities
Deferred tax liabilities
Current creditors
Total liabilities
Total equity and liabilities
Increase/(decrease) upon adopting
IFRS 9
IFRS 15
Total
2018
US$m
2017
US$m
2018
US$m
2017
US$m
2018
US$m
2017
US$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28.0
(353.6)
214.1
24.7
(695.1)
345.8
28.0
(353.6)
214.1
24.7
(695.1)
345.8
(111.5)
(324.6)
(111.5)
(324.6)
68.1
88.2
68.1
88.2
8.2
(187.8)
13.1
(425.9)
8.2
(187.8)
13.1
(425.9)
(179.6)
(412.8)
(179.6)
(412.8)
(111.5)
(324.6)
(111.5)
(324.6)
Annual Report 2018 27
2
Segmental Information
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed
by the executive directors of the Company for the purpose of resource allocation and performance assessment. The Group
has two operating segments, namely Investment Properties and Development Properties. No operating segments have been
aggregated to form the reportable segments. Set out below is an analysis of the Group's underlying profit and total equity by
reportable segment.
2018
2017
Investment
Properties
US$m
Development
Properties
US$m
Corporate
US$m
Total
US$m
Investment
Properties
US$m
Development
Properties
US$m
Corporate
US$m
Total
US$m
Revenue
1,124.4
1,541.0
–
2,665.4
1,049.0
Net operating costs
(221.5)
(1,283.1)
(71.5)
(1,576.1)
(197.5)
567.1
(474.9)
–
1,616.1
(67.8)
(740.2)
Share of operating profit of
associates and joint ventures
141.0
323.9
–
464.9
136.4
421.1
–
557.5
Underlying operating profit
1,043.9
581.8
(71.5)
1,554.2
987.9
513.3
(67.8)
1,433.4
(114.3)
(37.3)
(151.6)
(206.3)
(145.5)
(351.8)
2.3
(17.0)
(14.7)
1,036.1
1,400.9
20.1
–
1,421.0
2,457.1
(78.2)
(26.2)
(104.4)
(151.3)
(216.2)
(367.5)
(1.4)
(13.3)
(14.7)
946.8
4,612.7
51.4
3.0
4,667.1
5,613.9
Net financing charges
– subsidiaries
– share of associates and
joint ventures
Tax
– subsidiaries
– share of associates and
joint ventures
Non-controlling interests
– subsidiaries
– share of associates and
joint ventures
Underlying profit attributable
to shareholders
Non-trading items:
– change in fair value of
investment properties
– change in fair value of
other investments
– gain on acquisition of
a subsidiary
Profit attributable to shareholders
28
Hongkong Land
Notes to the Financial Statements
2
Segmental Information continued
By geographical location
Hong Kong and Macau
Mainland China
Southeast Asia and others
Corporate, net financing charges and tax
By business
2018
Investment Properties
Development Properties
Unallocated assets and liabilities
2017
Investment Properties
Development Properties
Unallocated assets and liabilities
By geographical location
2018
Hong Kong and Macau
Mainland China
Southeast Asia and others
Unallocated assets and liabilities
2017
Hong Kong and Macau
Mainland China
Southeast Asia and others
Unallocated assets and liabilities
Revenue
Underlying
operating profit
Underlying profit
attributable to
shareholders
2018
US$m
2017
US$m
2018
US$m
2017
US$m
2018
US$m
2017
US$m
1,042.6
620.6
1,002.2
–
1,001.5
301.0
313.6
–
902.0
424.4
299.3
(71.5)
860.3
455.1
185.8
(67.8)
902.0
396.8
298.6
860.3
433.4
184.7
(561.3)
(531.6)
2,665.4
1,616.1
1,554.2
1,433.4
1,036.1
946.8
Segment assets
Properties
for sale and
contracts
assets
US$m
Investment
properties
US$m
Segment
liabilities
US$m
Unallocated
assets and
liabilities
US$m
Others
US$m
Total
assets
and
liabilities
US$m
38,515.4
–
–
–
6,210.3
–
367.3
731.9
–
(716.0)
(1,743.3)
–
–
–
(4,996.1)
38,166.7
5,198.9
(4,996.1)
38,515.4
6,210.3
1,099.2
(2,459.3)
(4,996.1)
38,369.5
36,813.0
–
–
–
5,343.2
–
478.3
519.4
–
(695.7)
(1,851.0)
–
–
–
(3,730.7)
36,595.6
4,011.6
(3,730.7)
36,813.0
5,343.2
997.7
(2,546.7)
(3,730.7)
36,876.5
32,740.9
1,132.2
4,642.3
–
30.1
4,420.4
1,759.8
–
285.9
506.5
306.8
–
(494.6)
(1,633.0)
(331.7)
–
–
–
32,562.3
4,426.1
6,377.2
–
(4,996.1)
(4,996.1)
38,515.4
6,210.3
1,099.2
(2,459.3)
(4,996.1)
38,369.5
31,488.0
1,014.8
4,310.2
–
30.1
3,807.3
1,505.8
–
274.3
277.1
446.3
–
(434.8)
(1,454.6)
(657.3)
–
–
–
31,357.6
3,644.6
5,605.0
–
(3,730.7)
(3,730.7)
36,813.0
5,343.2
997.7
(2,546.7)
(3,730.7)
36,876.5
Unallocated assets and liabilities include tax assets and liabilities, bank balances and borrowings.
Annual Report 2018 29
3
Revenue
Rental income
Service income
Sales of properties
– recognised at a point in time
– recognised over time
2018
US$m
982.7
149.6
1,318.6
214.5
1,533.1
2,665.4
Total contingent rents included in rental income amounted to US$15.5 million (2017: US$8.8 million).
The future minimum rental payments receivable under non-cancellable leases are as follows:
Within one year
Between one and two years
Between two and five years
Beyond five years
2018
US$m
887.9
646.8
815.1
303.6
2017
US$m
911.7
140.3
292.5
271.6
564.1
1,616.1
2017
US$m
821.8
618.2
727.9
321.6
2,653.4
2,489.5
Generally the Group's operating leases are for terms of three years or more.
Contract balances
Contract assets primarily relate to the Group’s rights to consideration for work completed but not billed and costs recognised
to fulfil future performance obligations on existing contracts that have not yet been satisfied. Costs to fulfil are recognised in
profit and loss when the related revenue is recognised. Contract assets are transferred to receivables when the rights become
unconditional which usually occurs when the customers are billed.
Costs to obtain contracts include costs such as sale commissions and stamp duty paid, as a result of obtaining contracts.
The Group has capitalised these costs and recognised in the profit and loss when the related revenue is recognised.
Contract liabilities primarily relate to the advance consideration received from customers relating to properties for sale for
which revenue is recognised over time.
30
Hongkong Land
Notes to the Financial Statements 3
Revenue continued
Contract balances continued
Contract assets and contract liabilities relating to properties for sale are further analysed as follows:
Contract assets (see Note 13)
2018
US$m
316.1
2017
US$m
214.1
Contract liabilities (see Note 17)
(312.2)
(584.2)
Increases in contract assets and liabilities during the year were in line with the growth of the Group's contracted sales.
Contract assets include costs to fulfil of US$239.6 million (2017: US$155.6 million). Costs to fulfil of US$173.8 million
(2017: US$228.9 million) have been recognised in profit and loss during the year.
Costs to obtain contracts of US$23.2 million (2017: US$6.2 million) have been recognised in profit and loss during the year.
Revenue recognised in relation to contract liabilities
Revenue recognised in the current year relating to carried forward contract liabilities:
Properties for sale
2018
US$m
549.6
Revenue expected to be recognised on unsatified contracts with customers
The timing of revenue to be recognised on unsatified performance obligations relating to properties for sale at
31st December 2018:
Within one year
Between one and two years
Between two and three years
2017
US$m
155.2
US$m
700.8
98.3
100.0
899.1
As permitted under the transitional provisions in IFRS 15, the transaction price allocated to unsatisfied performance obligations
at 31st December 2017 is not disclosed.
Annual Report 2018 31
4 Net Operating Costs
Cost of sales
Other income
Administrative expenses
Change in fair value of other investments
The following credits/(charges) are included in net operating costs:
Cost of properties for sale recognised as expense
Operating expenses arising from investment properties
Depreciation of tangible fixed assets
Employee benefit expense
– salaries and benefits in kind
– defined contribution pension plans
– defined benefit pension plans
Auditors' remuneration
– audit
– non-audit services
The number of employees at 31st December 2018 was 2,090 (2017: 1,883).
2018
US$m
(1,429.4)
27.6
(174.3)
20.1
(1,556.0)
(1,231.5)
(197.9)
(4.2)
(153.6)
(1.6)
(1.8)
(157.0)
(1.8)
(0.3)
(2.1)
2017
US$m
(621.5)
17.0
(135.7)
51.4
(688.8)
(442.4)
(179.1)
(3.0)
(122.1)
(1.6)
(1.6)
(125.3)
(1.6)
(0.5)
(2.1)
32
Hongkong Land
Notes to the Financial Statements 5 Net Financing Charges
Interest expense
– bank loans and overdrafts
– other borrowings
Total interest expense
Interest capitalised
Commitment and other fees and exchange differences
Financing charges
Financing income
2018
US$m
(58.8)
(117.5)
(176.3)
10.4
(165.9)
(4.8)
(170.7)
56.4
(114.3)
Financing charges and financing income are stated after taking into account hedging gains or losses.
6
Share of Results of Associates and Joint Ventures
By business
Investment Properties
Development Properties
Underlying business performance
Non-trading items:
Change in fair value of investment properties
2018
US$m
77.8
187.3
265.1
188.6
453.7
Results are shown after tax and non-controlling interests in the associates and joint ventures.
The Group's share of revenue of associates and joint ventures was US$1,083.8 million (2017: US$1,337.5 million).
2017
US$m
(28.3)
(107.7)
(136.0)
32.1
(103.9)
(17.4)
(121.3)
43.1
(78.2)
2017
US$m
82.1
219.7
301.8
(53.1)
248.7
Annual Report 2018 33
7
Tax
Tax charged to profit and loss is analysed as follows:
Current tax
Deferred tax
– changes in fair value of investment properties
– other temporary differences
Reconciliation between tax expense and tax at applicable tax rate:
Tax at applicable tax rate
Change in fair value of investment properties not taxable
in determining taxable profit
Income not subject to tax
Expenses not deductible in determining taxable profit
Withholding tax
Land appreciation tax in mainland China
Tax losses arising in the year not recognised
Others
Tax relating to components of other comprehensive income is analysed as follows:
Remeasurements of defined benefit plans
Cash flow hedges
2018
US$m
(177.0)
(7.8)
(29.3)
(37.1)
2017
US$m
(168.0)
(1.8)
16.7
14.9
(214.1)
(153.1)
(385.4)
(927.1)
195.6
26.7
(17.2)
(13.4)
(14.6)
(7.2)
1.4
773.4
31.0
(7.3)
(4.6)
(19.6)
(4.1)
5.2
(214.1)
(153.1)
0.4
0.9
1.3
(0.4)
5.1
4.7
The applicable tax rate for the year of 17.4% (2017: 16.8%) represents the weighted average of the rates of taxation prevailing
in the territories in which the Group operates.
Share of tax charge of associates and joint ventures of US$214.0 million (2017: US$194.8 million) is included in share of results
of associates and joint ventures.
34
Hongkong Land
Notes to the Financial Statements
8
Earnings per Share
Earnings per share are calculated on profit attributable to shareholders of US$2,457.1 million (2017: US$5,613.9 million) and
on the weighted average number of 2,341.8 million (2017: 2,352.8 million) shares in issue during the year.
Earnings per share are additionally calculated based on underlying profit attributable to shareholders. A reconciliation of
earnings is set out below:
Underlying profit attributable to shareholders
Non-trading items (see Note 9)
2018
2017
US$m
1,036.1
1,421.0
Earnings
per share
US¢
44.24
Earnings per
share
US¢
40.24
US$m
946.8
4,667.1
Profit attributable to shareholders
2,457.1
104.92
5,613.9
238.61
9 Non-trading Items
An analysis of non-trading items after interest, tax and non-controlling interests is set out below:
Change in fair value of investment properties
Deferred tax on change in fair value of investment properties
Change in fair value of other investments
Gain on acquisition of a subsidiary
Share of results of associates and joint ventures
– change in fair value of investment properties
– deferred tax
Non-controlling interests
2018
US$m
2017
US$m
1,222.4
4,677.9
(7.8)
20.1
–
257.1
(68.5)
188.6
(2.3)
(1.8)
51.4
3.0
(74.5)
21.4
(53.1)
(10.3)
1,421.0
4,667.1
Annual Report 2018 35
10
Investment Properties
2018
At 1st January
Exchange differences
Additions
Increase/(decrease) in fair value
At 31st December
Freehold properties
Leasehold properties
2017
At 1st January
Exchange differences
Additions
Transfer
Increase in fair value
At 31st December
Freehold properties
Leasehold properties
Completed
commercial
properties
US$m
Under
development
commercial
properties
US$m
Completed
residential
properties
US$m
Total
US$m
32,174.1
(108.6)
115.4
1,204.6
46.9
–
2.3
(1.8)
260.0
32,481.0
(0.7)
0.3
19.6
(109.3)
118.0
1,222.4
33,385.5
47.4
279.2
33,712.1
166.1
33,546.0
33,712.1
26,665.6
(170.9)
68.3
990.7
4,620.4
804.2
48.4
145.6
(990.7)
39.4
242.5
(0.6)
–
–
27,712.3
(123.1)
213.9
–
18.1
4,677.9
32,174.1
46.9
260.0
32,481.0
170.1
32,310.9
32,481.0
The Group measures its investment properties at fair value. The fair values of the Group's investment properties at
31st December 2018 and 2017 have been determined on the basis of valuations carried out by independent valuers who
hold a recognised relevant professional qualification and have recent experience in the locations and segments of the
investment properties valued. The Group employed Jones Lang LaSalle to value its commercial investment properties in
Hong Kong, mainland China, Singapore, Vietnam and Cambodia which are either freehold or held under leases with unexpired
lease terms of more than 20 years. The valuations, which conform to the International Valuation Standards issued by the
International Valuation Standards Council and the HKIS Valuation Standards issued by the Hong Kong Institute of Surveyors,
were arrived at by reference to the net income, allowing for reversionary potential, of each property. The Report of the Valuers
is set out on page 89. The valuations are comprehensively reviewed by the Group.
At 31st December 2018, investment properties of US$880.9 million (2017: US$898.7 million) were pledged as security for
borrowings (see Note 18).
36
Hongkong Land
Notes to the Financial Statements
10
Investment Properties continued
Fair value measurements of residential properties using no significant unobservable inputs
Fair values of completed residential properties are generally derived using the direct comparison method. This valuation
method is based on comparing the property to be valued directly with other comparable properties, which have recently
transacted. However, given the heterogeneous nature of real estate properties, appropriate adjustments are usually required
to allow for any qualitative differences that may affect the price likely to be achieved by the property under consideration.
Fair value measurements of commercial properties using significant unobservable inputs
Fair values of completed commercial properties in Hong Kong and Singapore are generally derived using the income
capitalisation method. This valuation method is based on the capitalisation of the net income and reversionary income potential
by adopting appropriate capitalisation rates, which are derived from analysis of sale transactions and valuers' interpretation of
prevailing investor requirements or expectations. The prevailing market rents adopted in the valuation have reference to
valuers' view of recent lettings, within the subject properties and other comparable properties.
Fair values of completed commercial properties in Vietnam and Cambodia are generally derived using the discounted cash flow
method. The net present value of the income stream is estimated by applying an appropriate discount rate which reflects the
risk profile.
Fair values of under development commercial properties are generally derived using the residual method. This valuation
method is essentially a means of valuing the land by reference to its development potential by deducting development costs
together with developer's profit and risk from the estimated capital value of the proposed development assuming completion
as at the date of valuation.
The Group's policy is to recognise transfers between fair value measurements as of the date of the event or change in
circumstances that caused the transfer.
Information about fair value measurements using significant unobservable inputs at 31st December 2018:
Fair value
US$m
Valuation method
Range of significant unobservable inputs
Prevailing market
rent per month
US$
Capitalisation/
discount rate
%
Completed properties
Hong Kong
Mainland China
Singapore
Vietnam and Cambodia
Total
31,784.0
Income capitalisation
5.6 to 37.1 per square foot
2.75 to 5.00
Income capitalisation
93.8 per square metre
3.75
Income capitalisation
7.5 to 8.6 per square foot
3.50 to 4.80
Discounted cash flow
21.0 to 44.5 per square metre
12.50 to 15.00
880.9
583.4
137.2
33,385.5
Prevailing market rents are estimated based on independent valuers' view of recent lettings, within the subject properties and
other comparable properties. The higher the rents, the higher the fair value.
Capitalisation and discount rates are estimated by independent valuers based on the risk profile of the properties being valued.
The lower the rates, the higher the fair value.
Annual Report 2018 37
11 Associates and Joint Ventures
Unlisted associates
Unlisted joint ventures
Share of attributable net assets
By business
Investment Properties
Development Properties
Movements of associates and joint ventures during the year:
At 1st January
– as previously reported
– change in accounting policies (see Note 1)
– as restated
Exchange differences
Share of results after tax and non-controlling interests
Share of other comprehensive (expense)/income
after tax and non-controlling interests
Dividends received and receivable
Investments in and advances to/(repayments from)
associates and joint ventures
Acquisition of a subsidiary
Transfer to subsidiary on further acquisiton of interest
Others
At 31st December
2018
US$m
199.9
6,494.8
6,694.7
3,908.4
2,786.3
6,694.7
2017
US$m
306.2
5,272.6
5,578.8
3,517.4
2,033.4
5,550.8
Associates
Joint ventures
2018
US$m
2017
US$m
2018
US$m
2017
US$m
306.2
–
306.2
10.1
16.7
(30.2)
(1.5)
123.9
–
123.9
0.6
84.7
24.3
(0.9)
5,244.6
28.0
4,336.8
24.7
5,272.6
4,361.5
(48.3)
437.0
(126.5)
(139.8)
(101.4)
73.6
1,099.8
–
–
–
–
–
–
–
–
–
199.9
306.2
6,494.8
5,272.6
25.9
164.0
212.9
(94.3)
627.2
15.9
(41.2)
0.7
The material joint ventures of the Group are listed below. These joint ventures have share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investments in material joint ventures in 2018 and 2017:
Name of entity
Nature of business
Properties Sub F, Ltd
BFC Development LLP
Central Boulevard Development Pte Ltd
One Raffles Quay Pte Ltd
Property investment
Property investment
Property investment
Property investment
Country of
incorporation/
principal place
of business
Macau
Singapore
Singapore
Singapore
% of
ownership
interest
2018
2017
49.0
33.3
33.3
33.3
49.0
33.3
33.3
33.3
38
Hongkong Land
Notes to the Financial Statements 11 Associates and Joint Ventures continued
Summarised financial information for material joint ventures
Set out below are the summarised financial information for the Group's material joint ventures.
Summarised balance sheet at 31st December:
Financial liabilities (excluding trade payables)
–
(1,247.9)
(1,180.6)
Other non-current liabilities (including trade payables)
(147.0)
–
(20.2)
2018
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Total non-current liabilities
Current liabilities
Financial liabilities (excluding trade payables)
Other current liabilities (including trade payables)
Total current liabilities
Net assets
2017
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
BFC
Development
LLP
Central
Boulevard
Development
Pte Ltd
One Raffles
Quay
Pte Ltd
US$m
US$m
US$m
Properties
Sub F, Ltd
US$m
1,379.9
3,682.6
2,848.0
2,804.0
64.7
35.7
100.4
13.7
1.1
14.8
18.8
1.4
20.2
(147.0)
(1,247.9)
(1,200.8)
(969.1)
–
(47.4)
(47.4)
(0.4)
(60.5)
(60.9)
(4.4)
(35.1)
(39.5)
(1.3)
(41.0)
(42.3)
1,285.9
2,388.6
1,627.9
1,802.9
1,373.2
3,627.6
2,797.3
2,767.4
25.2
29.5
54.7
12.9
1.9
14.8
16.9
5.4
22.3
6.8
3.5
10.3
(763.7)
(205.4)
11.8
2.1
13.9
(777.5)
(200.4)
Financial liabilities (excluding trade payables)
–
(1,274.9)
(1,211.1)
Other non-current liabilities (including trade payables)
(145.5)
–
(20.9)
Total non-current liabilities
Current liabilities
Financial liabilities (excluding trade payables)
Other current liabilities (including trade payables)
Total current liabilities
Net assets
(145.5)
(1,274.9)
(1,232.0)
(977.9)
–
(47.2)
(47.2)
(0.7)
(62.1)
(62.8)
(6.3)
(35.3)
(41.6)
(3.6)
(48.6)
(52.2)
1,235.2
2,304.7
1,546.0
1,751.2
Annual Report 2018 39
11 Associates and Joint Ventures continued
Summarised statement of comprehensive income for the year ended 31st December:
2018
Revenue
Depreciation and amortisation
Interest income
Interest expense
Profit from underlying business performance
Income tax expense
Profit after tax from underlying business performance
Profit after tax from non-trading items
Profit after tax
Other comprehensive expense
BFC
Development
LLP
Central
Boulevard
Development
Pte Ltd
One Raffles
Quay
Pte Ltd
US$m
US$m
US$m
Properties
Sub F, Ltd
US$m
87.1
(8.0)
0.1
(0.5)
44.1
(5.2)
38.9
13.1
52.0
(2.2)
157.8
–
0.2
(46.5)
72.6
(12.3)
60.3
131.5
191.8
(35.7)
109.8
–
0.2
(31.8)
49.6
(8.2)
41.4
109.7
151.1
(26.6)
111.6
–
0.2
(24.6)
60.7
(10.4)
50.3
85.1
135.4
(33.9)
Total comprehensive income
49.8
156.1
124.5
101.5
Group's share of dividends received and receivable
from joint ventures
18.4
24.1
14.2
16.6
2017
Revenue
Depreciation and amortisation
Interest income
Interest expense
Profit from underlying business performance
Income tax expense
Profit after tax from underlying business performance
Profit after tax from non-trading items
Profit after tax
Other comprehensive income/(expense)
81.3
(7.6)
–
(0.4)
40.7
(4.8)
35.9
13.2
49.1
(10.1)
150.7
–
0.1
(38.5)
78.4
(13.2)
65.2
57.7
122.9
169.7
109.4
–
0.2
(28.2)
54.5
(8.7)
45.8
43.5
89.3
114.5
118.2
–
0.1
(21.6)
70.3
(11.9)
58.4
33.3
91.7
128.2
Total comprehensive income
39.0
292.6
203.8
219.9
Group's share of dividends received and receivable
from joint ventures
9.7
21.4
23.5
19.6
The information contained in the summarised balance sheets and statements of comprehensive income reflect the amounts
presented in the financial statements of the joint ventures adjusted for differences in accounting policies between the Group
and the joint ventures, and fair value of the joint ventures at the time of acquisition.
40
Hongkong Land
Notes to the Financial Statements
11 Associates and Joint Ventures continued
Reconciliation of summarised financial information
Reconciliation of the summarised financial information presented to the carrying amount of the Group's interest in the material
joint ventures for the year ended 31st December:
2018
Net assets
Shareholders' loans
Adjusted net assets
BFC
Development
LLP
Central
Boulevard
Development
Pte Ltd
One Raffles
Quay
Pte Ltd
US$m
US$m
US$m
Properties
Sub F, Ltd
US$m
1,285.9
–
2,388.6
1,247.9
1,627.9
–
1,802.9
104.2
1,285.9
3,636.5
1,627.9
1,907.1
Interest in joint ventures (%)
49.0
33.3
33.3
33.3
Group's share of net assets in joint ventures
630.1
1,212.2
542.6
635.7
2017
Net assets
Shareholders' loans
Adjusted net assets
1,235.2
–
2,304.7
1,274.9
1,546.0
–
1,751.2
100.8
1,235.2
3,579.6
1,546.0
1,852.0
Interest in joint ventures (%)
49.0
33.3
33.3
33.3
Group's share of net assets in joint ventures
605.4
1,193.2
515.3
617.4
The Group has interests in a number of individually immaterial joint ventures. The following table analyses, in aggregate,
the share of profit and other comprehensive income and carrying amount of these joint ventures.
Share of profit
Share of other comprehensive income/(expense)
Share of total comprehensive income
2018
US$m
252.0
(93.6)
158.4
2017
US$m
38.6
80.3
118.9
Carrying amount of interests in these joint ventures
3,474.2
2,313.3
At 31st December 2018, the Group's commitments to provide funding to its joint ventures, if called, amounted to
US$1,314.7 million (2017: US$1,293.6 million).
There were no contingent liabilities relating to the Group's interest in the joint ventures at 31st December 2018 and 2017.
Annual Report 2018 41
12 Other Investments
Listed securities measured at fair value through profit and loss
13 Debtors
Trade debtors
Contract assets (see Note 3)
Other debtors
– third parties
– associates and joint ventures
Non-current
Current
By geographical area of operation
Hong Kong and Macau
Mainland China
Southeast Asia and others
2018
US$m
122.8
2018
US$m
86.3
316.1
468.7
45.1
916.2
24.0
892.2
916.2
111.2
336.5
468.5
916.2
2017
US$m
103.0
2017
US$m
84.8
214.1
400.5
41.6
741.0
28.5
712.5
741.0
117.1
144.8
479.1
741.0
The fair value of trade debtors, contract assets and other debtors approximates their carrying amounts, as the impact of
discounting is not significant. Derivative financial instruments are stated at fair value.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and
default or delinquency in payment are considered indicators that the debt is impaired and an allowance for impairment is made
based on the estimated irrecoverable amount determined by reference to past default experience.
The Group applied the simplified approach to measure expected credit loss, that is a lifetime expected loss allowance for
trade debtors and contract assets. To measure the expected credit losses, trade receivables and contract assets have been
grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in
progress and have substantially the same risk characteristics as the trade debtors for the same types of contracts. The Group
has therefore concluded that the expected loss rates for trade debtors are a reasonable approximation of the loss rates for
the contract assets.
The expected loss rates are based on the historical payment profiles of sales and the corresponding historical credit losses.
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors and industry
trends affecting the ability of the customers to settle the receivables.
42
Hongkong Land
Notes to the Financial Statements 13 Debtors continued
On that basis, the loss allowance as at 31st December 2018 and 2017 based on the ageing of trade debtors and
contract assets:
2018
Expected loss rate (%)
Gross carrying amount – trade debtors
Gross carrying amount – contract assets
Loss allowance
2017
Expected loss rate (%)
Gross carrying amount – trade debtors
Gross carrying amount – contract assets
Loss allowance
Below 30
days
US$m
Between 31
and 60 days
Between 61
and 120 days
US$m
US$m
More than
120 days
US$m
–
85.1
316.1
–
–
82.4
214.1
–
–
0.9
–
–
–
0.6
–
–
–
0.3
–
–
–
0.4
–
–
–
–
–
–
–
1.4
–
–
Total
US$m
–
86.3
316.1
–
–
84.8
214.1
–
Trade debtors, contract assets and other debtors are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage
in a repayment plan with the Group.
Other debtors are further analysed as follows:
Costs to obtain contracts (see Note 3)
Prepayments
Derivative financial instruments
Amounts due from associates and joint ventures
Others
2018
US$m
6.8
326.5
8.1
45.1
127.3
513.8
2017
US$m
23.9
270.6
14.5
41.6
91.5
442.1
Annual Report 2018 43
14 Deferred Tax Assets and Liabilities
Accelerated
capital
allowances
US$m
Revaluation
surpluses of
investment
properties
US$m
Other
temporary
differences
US$m
Tax losses
US$m
2018
At 1st January
– as previous reported
– change in accounting policies (see Note 1)
– as restated
Exchange differences
Credited/(charged) to profit and loss
Credited to other comprehensive income
At 31st December
Deferred tax assets
Deferred tax liabilities
2017
At 1st January
– as previous reported
– change in accounting policies (see Note 1)
– as restated
Exchange differences
Credited/(charged) to profit and loss
Credited to other comprehensive income
Acquisition of a subsidiary
At 31st December
Deferred tax assets
Deferred tax liabilities
0.5
–
0.5
–
0.8
–
1.3
1.3
–
1.3
0.1
–
0.1
–
0.4
–
–
0.5
0.5
–
0.5
Total
US$m
(111.4)
(8.2)
(119.6)
1.9
(37.1)
1.3
(80.2)
–
(80.2)
0.1
(8.1)
–
(3.6)
–
(3.6)
0.2
(7.8)
–
(28.1)
(8.2)
(36.3)
1.6
(22.0)
1.3
(88.2)
(11.2)
(55.4)
(153.5)
–
(88.2)
–
(11.2)
12.6
(68.0)
13.9
(167.4)
(88.2)
(11.2)
(55.4)
(153.5)
(75.4)
–
(75.4)
0.6
(5.4)
–
–
(80.2)
–
(80.2)
(80.2)
(1.7)
–
(1.7)
(0.1)
(1.8)
–
–
(3.6)
–
(3.6)
(3.6)
(35.8)
(13.1)
(48.9)
(3.3)
21.7
4.7
(10.5)
(112.8)
(13.1)
(125.9)
(2.8)
14.9
4.7
(10.5)
(36.3)
(119.6)
15.0
(51.3)
15.5
(135.1)
(36.3)
(119.6)
Deferred tax balances predominantly comprise non-current items. Deferred tax assets and liabilities are netted when
the taxes relate to the same taxation authority and where offsetting is allowed.
Deferred tax assets of US$10.9 million (2017: US$5.0 million) arising from unused tax losses of US$48.6 million
(2017: US$17.9 million) have not been recognised in the financial statements. Included in the unused tax losses,
US$9.4 million (2017: US$6.6 million) have no expiry date and the balance will expire at various dates up to and
including 2023.
44
Hongkong Land
Notes to the Financial Statements 15 Properties for Sale
Properties under development
Completed properties
Provision for impairment
2018
US$m
1,839.1
157.2
1,996.3
(13.3)
2017
US$m
2,020.8
173.5
2,194.3
(13.3)
1,983.0
2,181.0
At 31st December 2018, properties under development which were not scheduled for completion within the next 12 months
amounted to US$1,420.3 million (2017: US$1,032.2 million).
16 Bank Balances
Deposits with banks and financial institutions
Bank balances
By currency
Chinese renminbi
Hong Kong dollar
Malaysian ringgit
Singapore dollar
United States dollar
Others
2018
US$m
1,244.6
130.6
1,375.2
552.3
15.8
29.9
288.9
486.1
2.2
2017
US$m
1,345.1
277.0
1,622.1
182.7
38.5
25.8
620.0
753.3
1.8
1,375.2
1,622.1
Deposits and bank balances of certain subsidiaries amounting to US$88.4 million (2017: US$45.6 million) are held under the
Housing Developers (Project Account) Rules in Singapore, withdrawals from which are subject to the provision of these Rules.
The weighted average interest rate on deposits with banks and financial institutions is 2.5% (2017: 1.4%) per annum.
Annual Report 2018 45
17 Creditors
Trade creditors
Other creditors
Tenants' deposits
Derivative financial instruments
Rent received in advance
Contract liabilities – properties for sale (see Note 3)
Non-current
Current
By geographical area of operation
Hong Kong and Macau
Mainland China
Southeast Asia and others
2018
US$m
511.0
235.0
266.5
17.7
22.0
312.2
1,364.4
27.1
1,337.3
1,364.4
524.6
693.9
145.9
2017
US$m
482.0
185.9
253.5
16.3
22.1
584.2
1,544.0
36.9
1,507.1
1,544.0
462.0
680.1
401.9
Derivative financial instruments are stated at fair value. Other creditors are stated at amortised cost. The fair value of these
creditors approximates their carrying amounts.
1,364.4
1,544.0
18 Borrowings
Current
Bank overdrafts
Bank loans
Current portion of long-term borrowings
– bank loans
– notes
Long-term
Bank loans
Notes
Secured
Unsecured
46
Hongkong Land
2018
2017
Carrying
amount
US$m
Fair value
US$m
Carrying
amount
US$m
Fair value
US$m
6.3
154.8
530.6
102.1
793.8
6.3
154.8
530.6
103.4
795.1
5.5
5.0
180.1
–
190.6
5.5
5.0
180.1
–
190.6
1,106.4
3,038.8
1,106.4
3,117.9
1,127.0
2,853.3
1,127.0
2,975.1
4,145.2
4,224.3
3,980.3
4,102.1
4,939.0
5,019.4
4,170.9
4,292.7
822.4
4,116.6
4,939.0
392.9
3,778.0
4,170.9
Notes to the Financial Statements
18 Borrowings continued
The fair values are based on market prices or are estimated using the expected future payments discounted at market interest
rates ranging from 1.8% to 7.7% (2017: 1.5% to 6.5%) per annum. This is in line with the definition of 'observable current
market transactions' under the fair value measurement hierarchy. The fair value of current borrowings approximates their
carrying amounts, as the impact of discounting is not significant.
Secured borrowings at 31st December 2018 and 2017 were certain subsidiaries' bank borrowings which were secured against
their investment properties.
The movements in borrowings are as follows:
Bank
overdrafts
US$m
Long-term
borrowings
US$m
Short-term
borrowings
US$m
Total
US$m
2018
At 1st January
Exchange differences
Transfer
Change in fair value
Change in bank overdrafts
Drawdown of borrowings
Repayment of borrowings
At 31st December
2017
At 1st January
Exchange differences
Transfer
Change in fair value
Change in bank overdrafts
Drawdown of borrowings
Repayment of borrowings
At 31st December
5.5
3,980.3
–
–
–
0.8
–
–
6.3
(55.0)
(514.0)
(6.4)
–
2,397.1
(1,656.8)
185.1
(8.9)
514.0
–
–
324.4
(227.1)
4,170.9
(63.9)
–
(6.4)
0.8
2,721.5
(1,883.9)
4,145.2
787.5
4,939.0
10.5
3,695.7
–
–
–
(5.0)
–
–
22.6
(180.3)
(2.9)
–
817.7
(372.5)
210.2
1.3
180.3
(0.5)
–
7.4
(213.6)
3,916.4
23.9
–
(3.4)
(5.0)
825.1
(586.1)
5.5
3,980.3
185.1
4,170.9
Annual Report 2018 47
18 Borrowings continued
The borrowings are further summarised as follows:
By currency
2018
Hong Kong dollar
Singapore dollar
Chinese renminbi
Thai baht
Others
2017
Hong Kong dollar
Singapore dollar
Chinese renminbi
Others
Fixed rate borrowings
Weighted
average
interest rates
%
Weighted
average period
outstanding
Years
4.0
2.9
4.9
2.3
6.0
3.6
2.5
4.9
2.4
7.1
7.3
–
–
–
7.6
2.2
–
–
Floating
rate
borrowings
US$m
Total
US$m
1,065.3
3,242.1
592.3
479.0
261.5
4.3
952.1
479.0
261.5
4.3
US$m
2,176.8
359.8
–
–
–
2,536.6
2,402.4
4,939.0
1,987.8
188.8
–
–
1,165.4
3,153.2
430.6
392.9
5.4
619.4
392.9
5.4
2,176.6
1,994.3
4,170.9
The weighted average interest rates and period of fixed rate borrowings are stated after taking into account hedging transactions.
The exposure of the Group's borrowings to interest rate changes and the contractual repricing dates at 31st December after
taking into account hedging transactions are as follows:
2018
US$m
2017
US$m
2,402.4
1,994.3
102.1
237.3
–
265.5
243.9
1,687.8
2,536.6
4,939.0
–
102.3
239.8
–
265.3
1,569.2
2,176.6
4,170.9
Floating rate borrowings
Fixed rate borrowings
– within one year
– between one and two years
– between two and three years
– between three and four years
– between four and five years
– beyond five years
48
Hongkong Land
Notes to the Financial Statements
18 Borrowings continued
An analysis of the carrying amount of notes at 31st December is as follows:
Maturity
2018
Current
US$m
Non-current
US$m
2017
Non-current
US$m
Medium term notes
HK$200m 10-year notes at 4.135%
HK$300m 10-year notes at 4.1875%
HK$300m 10-year notes at 4.25%
HK$500m 10-year notes at 4.22%
HK$500m 10-year notes at 4.24%
S$150m 10-year notes at 3.43%
HK$500m 10-year notes at 3.95%
HK$500m 12-year notes at 4.28%
HK$410m 10-year notes at 3.86%
US$500m 10-year notes at 4.50%*
HK$305m 10-year notes at 3.00%
HK$200m 10-year notes at 2.90%
HK$1,100m 10-year notes at 3.95%
HK$300m 10-year notes at 3.95%
US$400m 10-year notes at 4.625%*
HK$300m 15-year notes at 4.10%
US$600m 15-year notes at 4.50%*
HK$302m 15-year notes at 3.75%
HK$785m 15-year notes at 4.00%
HK$473m 15-year notes at 4.04%
HK$200m 15-year notes at 3.95%
HK$300m 15-year notes at 3.15%
HK$325m 15-year notes at 4.22%
HK$450m 10-year notes at 3.83%
HK$355m 10-year notes at 3.75%
HK$400m 15-year notes at 4.40%
HK$800m 20-year notes at 4.11%
HK$200m 20-year notes at 4.125%
HK$240m 20-year notes at 4.00%
HK$700m 15-year notes at 4.12%
S$150m 20-year notes at 3.95%
HK$250m 30-year notes at 5.25%
* Listed on the Singapore Exchange.
2019
2019
2019
2020
2020
2020
2020
2021
2022
2022
2022
2022
2023
2023
2024
2025
2025
2026
2027
2027
2027
2028
2028
2028
2028
2029
2030
2031
2032
2033
2038
2040
25.5
38.3
38.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
64.8
63.8
109.7
63.8
65.3
52.1
488.3
38.8
25.5
139.9
38.1
399.6
38.2
610.5
38.3
98.9
60.3
25.5
37.8
41.2
57.3
45.1
50.5
102.2
25.2
30.1
88.6
107.6
31.8
25.5
38.4
38.4
66.2
63.9
112.0
63.9
66.4
52.2
488.7
38.8
25.5
140.0
38.2
402.7
38.3
611.9
38.3
99.0
60.4
25.5
37.9
41.3
–
–
50.5
102.3
25.2
30.1
–
–
31.8
102.1
3,038.8
2,853.3
Annual Report 2018 49
19 Share Capital
Authorised
Shares of US$0.10 each
Issued and fully paid
At 1st January
Repurchased
At 31st December
20 Dividends
Ordinary shares in millions
2018
2017
2018
US$m
2017
US$m
4,000.0
4,000.0
400.0
400.0
2,352.8
(18.9)
2,352.8
–
235.3
(1.9)
235.3
–
2,333.9
2,352.8
233.4
235.3
Final dividend in respect of 2017 of US¢14.00 (2016: US¢13.00) per share
Interim dividend in respect of 2018 of US¢6.00 (2017: US¢6.00) per share
2018
US$m
329.4
140.4
469.8
2017
US$m
305.8
141.2
447.0
A final dividend in respect of 2018 of US¢16.00 (2017: US¢14.00) per share amounting to a total of US$373.4 million
(2017: US$329.4 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved
at the 2019 Annual General Meeting. The amount will be accounted for as an appropriation of revenue reserves in the year
ending 31st December 2019.
21 Cash and Cash Equivalents
Bank balances (see Note 16)
Bank overdrafts (see Note 18)
2018
US$m
1,375.2
(6.3)
2017
US$m
1,622.1
(5.5)
1,368.9
1,616.6
50
Hongkong Land
Notes to the Financial Statements 22 Derivative Financial Instruments
The fair values of derivative financial instruments at 31st December are as follows:
Designated as cash flow hedges
– interest rate swaps
– cross currency swaps
Designated as fair value hedges
– interest rate swaps
– cross currency swaps
2018
2017
Positive
fair value
US$m
Negative
fair value
US$m
Positive
fair value
US$m
Negative
fair value
US$m
–
2.6
1.5
4.0
1.2
6.7
–
9.8
–
4.8
2.5
7.2
–
7.7
–
8.6
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts designated as fair value hedges at
31st December 2018 were US$63.9 million (2017: US$64.0 million).
The notional principal amounts of the outstanding interest rate swap contracts designated as cash flow hedges at
31st December 2018 were US$65.9 million (2017: Nil).
The fair values of interest rate swaps are based on the estimated cash flows discounted at market rates ranging from 1.9%
to 2.3% (2017: 1.3% to 2.0%) per annum.
Cross currency swaps
The contract amounts of the outstanding cross currency swap contracts at 31st December 2018 were US$1,644.8 million
(2017: US$1,647.9 million).
23 Commitments
Capital commitments
Authorised not contracted
Contracted not provided
– contributions to joint ventures
– others
Operating lease commitments
Due within one year
Due between one and two years
Due between two and five years
2018
US$m
2017
US$m
4.5
23.4
1,314.7
75.3
1,390.0
1,394.5
5.3
3.7
2.6
11.6
1,293.6
48.6
1,342.2
1,365.6
3.5
2.5
3.8
9.8
Annual Report 2018 51
24 Contingent Liabilities
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.
25 Related Party Transactions
The parent company of the Group is Jardine Strategic Holdings Limited and the ultimate holding company is Jardine Matheson
Holdings Limited ('JMH'). 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 JMH ('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 ('JML')
in 2018 was US$5.2 million (2017: US$4.9 million), being 0.5% per annum of the Group's underlying profit in consideration
for management consultancy services provided by JML, a wholly-owned subsidiary of JMH.
Property and other services
The Group rented properties to Jardine Matheson group members. Gross rents on such properties in 2018 amounted to
US$24.9 million (2017: US$21.2 million).
Jardine Matheson group members provided property maintenance and other services to the Group in 2018 in aggregate
amounting to US$55.8 million (2017: US$63.9 million).
Hotel management services
Jardine Matheson group members provided hotel management services to the Group in 2018 amounting to US$3.6 million
(2017: US$3.4 million).
Outstanding balances with associates and joint ventures
Amounts of outstanding balances with associates and joint ventures are included in debtors and creditors as appropriate
(see Notes 13 and 17). The amounts are not material.
Directors' emoluments
Details of Directors' emoluments (being the key management personnel compensation) are shown on page 81 under
the heading of 'Directors' Appointment, Retirement, Remuneration and Service Contracts'.
52
Hongkong Land
Notes to the Financial Statements 26 Summarised Balance Sheet of the Company
Included below is certain summarised balance sheet information of the Company disclosed in accordance with Bermuda law.
Net operating assets
Investments at cost
Unlisted shares in subsidiaries
Amounts due from subsidiaries
Creditors and other accruals
Total equity
Share capital (see Note 19)
Revenue and other reserves
Contributed surplus
Share premium
Revenue reserves
Shareholders' funds
2018
US$m
2017
US$m
4,481.7
969.7
5,451.4
(29.4)
4,481.7
1,473.8
5,955.5
(26.8)
5,422.0
5,928.7
233.4
235.3
2,249.6
257.3
2,681.7
5,188.6
5,422.0
2,249.6
386.9
3,056.9
5,693.4
5,928.7
Subsidiaries are shown at cost less amounts provided.
The contributed surplus was set up on the formation of the Company in 1989 and, under the Bye-laws of the Company,
is distributable.
Annual Report 2018 53
27 Principal Subsidiaries, Associates and Joint Ventures
The principal subsidiaries, associates and joint ventures of the Group at 31st December 2018 are set out below.
Ownership
interest
2018 2017
%
%
Issued share capital
Main activities
Place of
incorporation
Subsidiaries
Hongkong Land China Holdings Ltd*
100
100
USD
200,000,000
Investment holding
Bermuda
Hongkong Land International
100
100
USD
200,000,000
Investment holding
Bermuda
Holdings Ltd*
Hongkong Land Ltd*
100
100
USD
12,000 Group management
Bermuda
The Hongkong Land Company, Ltd
100
100
HKD
1,293,180,006
Investment holding
Hong Kong
The Hongkong Land Property
100
100
HKD
200
Property investment
Hong Kong
Company, Ltd
HKL (Chater House) Ltd
100
100
HKD
1,500,000
Property investment
Hong Kong
HKL (Landmark Hotel) Ltd
100
100
HKD
2 Hotel investment
Hong Kong
HKL (Prince's Building) Ltd
100
100
HKD
200
Property investment
Hong Kong
Hongkong Land (HK) Investments Ltd
100
100
HKD
3,981,407,003
Investment holding
Hong Kong
Mulberry Land Company Ltd
100
100
HKD
200
Property investment
Hong Kong
Hongkong Land (Chongqing)
100
100
USD
479,990,000
Property development Mainland China
Development Co Ltd
Hongkong Land (Chongqing North)
100
100
HKD
3,980,000,000
Property development Mainland China
Development Co Ltd
Hongkong Land (Chongqing)
100
100
USD
1,409,990,000
Investment holding
Mainland China
Investment and Holding Co Ltd
Hongkong Land (Chonqqing)
100
100
RMB
640,000,000
Property development Mainland China
Xinchen Development Co Ltd
Wangfu Central Real Estate
84
84
RMB
3,500,000,000
Property investment
Mainland China
Development Co Ltd
HKL (Esplanade) Pte Ltd
100
100
SGD
150,000,000
Property investment
Singapore
HKL Treasury (Singapore) Pte Ltd
100
100
SGD
The Hongkong Land Treasury
100
100
SGD
Services (Singapore) Pte Ltd
2
2
Finance
Finance
Singapore
Singapore
MCL Land Limited
100
100
SGD
511,736,041
Investment holding
Singapore
MCL Land (Brighton) Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
MCL Land (Everbright) Pte Ltd
100
100
SGD
4,000,000
Property development
Singapore
MCL Land (Regency) Pte Ltd
100
100
SGD
3,000,000
Property development
Singapore
MCL Land (Vantage) Pte Ltd
100
100
SGD
1,000,000
Property development
Singapore
* Owned directly
54
Hongkong Land
Notes to the Financial Statements
27 Principal Subsidiaries, Associates and Joint Ventures continued
Ownership
interest
2018 2017
%
%
Issued share capital
Main activities
Place of
incorporation
Subsidiaries continued
Hongkong Land
100
100
Riels
4,000,000
Property investment
Cambodia
(Premium Development) Ltd
Golden Quantum Acres Sdn Bhd
100
100
MYR
2,764,210
Property development Malaysia
MCL Land (Century Gardens) Sdn Bhd
100
100
MYR
29,117,145
Property development Malaysia
MCL Land (Pantai View) Sdn Bhd
100
100
MYR
28,000,000
Property investment
Malaysia
MCL Land (Malaysia) Sdn Bhd
100
100
MYR
4,010,000
Property development Malaysia
Central Building Ltd
65
65
USD
1,991,547
Property investment
Vietnam
Doan Ket International Co Ltd
73.9
73.9
USD
7,292,000
Property investment
Vietnam
HKL (Treasury Services) Ltd
100
100
USD
1
Finance
The Hongkong Land Notes Co Ltd
100
100
USD
2
Finance
British Virgin
Islands
British Virgin
Islands
The Hongkong Land Finance
100
100
USD
2
Finance
Cayman Islands
(Cayman Islands) Co Ltd
Associates and joint ventures
Normelle Estates Ltd
Properties Sub F, Ltd
Beijing Landmark Trinity Real
Estate Development Co Ltd
Beijing Premium Real Estate Ltd
Chongqing Central Park Co Ltd
Chongqing Lijia Development Co Ltd
Chengdu Premium Property
Development Co Ltd
50
49
30
40
50
50
50
50
49
30
40
50
50
50
HKD
MOP
10,000
Property investment
Hong Kong
1,000,000
Property investment
Macau
RMB
2,800,000,000
Property development Mainland China
USD
12,000,000
Property development Mainland China
HKD
4,640,000,000
Property development Mainland China
RMB
USD
20,000,000
Property development Mainland China
699,980,000
Property development Mainland China
China West Premier Housing
50
50
USD
569,960,000
Property development Mainland China
Development Co Ltd
Hangzhou Kesheng Property
30
30
RMB
50,000,000
Property development Mainland China
Development Co Ltd
Hangzhou Keyi Property
Development Co Ltd
30
30
RMB
50,000,000
Property development Mainland China
Longfor Hongkong Land (Chongqing)
50
50
RMB
1,275,920,000
Property development Mainland China
Development Co Ltd
Longhu Land Ltd
50
50
USD
27,000,000
Property development Mainland China
Annual Report 2018 55
27 Principal Subsidiaries, Associates and Joint Ventures continued
Ownership
interest
2018 2017
%
%
Issued share capital
Main activities
Place of
incorporation
Associates and joint ventures continued
Nanjing Shengxiangyuan Property
33
33
RMB
30,000,000
Property development Mainland China
Development Co Ltd
Shanghai Xinqiaogao
Development Co Ltd
26.7
–
RMB
50,000,000
Property development Mainland China
Shanghai Xujing Property Co Ltd
Wuhan Dream Land Investment
and Development Co Ltd
50
50
50
50
RMB
4,200,000,000
Property development Mainland China
RMB
1,200,000,000
Property development Mainland China
BFC Development LLP
33.3
33.3
SGD
N/A
Property investment
Singapore
Central Boulevard Development
33.3
33.3
SGD
6
Property investment
Singapore
Pte Ltd
One Raffles Quay Pte Ltd
33.3
33.3
SGD
Asia Radiant Pte Ltd
50.0
–
SGD
6
1
Property investment
Singapore
Property development
Singapore
PT Astra Modern Land
33.5
33.5
IDR 3,870,000,000,000
Property development
Indonesia
PT Award Global Infinity
50.0
–
IDR
27,241,940
Property development
Indonesia
PT Brahmayasa Bahtera
PT Bumi Parama Wisesa
PT Jakarta Land
Sunrise MCL Land Sdn Bhd
Roxas Land Corporation
Central and Hongkong Land Co Ltd
PFHKL 1 Co Ltd
PFHKL 2 Co Ltd
PFHKL 3 Co Ltd
Gaysorn Land Co Ltd
S36 Property Co Ltd
Nassim JV Co Ltd
Ndc An Khang Joint Stock Co
Thu Thiem River Park Real Estate
Investment Joint Stock Co
40
49
50
50
40
49
49
49
49
49
49
50
70
64
40
49
50
50
40
–
–
–
–
49
49
50
–
–
IDR
166,000,000,000
Property development
Indonesia
IDR 1,950,000,000,000
Property development
Indonesia
IDR
3,320,000,000
Property investment
Indonesia
MYR
2,000,000
Property development Malaysia
Peso
3,133,000,000
Property development
The Philippines
THB
THB
THB
THB
THB
THB
199,450,000
Property development
Thailand
5,000,000
Property development
Thailand
5,000,000
Property development
Thailand
5,000,000
Property development
Thailand
61,250,000
Property investment
Thailand
800,000,000
Property development
Thailand
VND 286,200,000,000
Property development Vietnam
VND 2,861,000,000,000
Property development Vietnam
VND 510,514,500,000
Property development Vietnam
Jardine Gibbons Properties Ltd
40
40
BD
600,000 'A'
Property investment
Bermuda
400,000 'B'
56
Hongkong Land
Notes to the Financial Statements
28 Principal Accounting Policies
Basis of consolidation
i) The consolidated financial statements include the financial statements of the Company, its subsidiaries, and the Group’s
interests in associates and joint ventures.
ii) A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of
an acquisition includes the fair value at the acquisition date of any contingent consideration. The Group recognises
the non-controlling interest’s proportionate share of the recognised identifiable net assets of the acquired subsidiary.
In a business combination achieved in stages, the Group remeasures its previously held interest in the acquiree at its
acquisition-date fair value and recognises the resulting gain or loss in profit and loss. Changes in a parent’s ownership
interest in a subsidiary that do not result in the loss of control are accounted for as equity transactions. When control over
a previous subsidiary is lost, any remaining interest in the entity is remeasured at fair value and the resulting gain or loss is
recognised in profit and loss.
All material intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group
companies have been eliminated.
iii) An associate is an entity, not being a subsidiary or joint venture, over which the Group exercises significant influence.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Associates and joint ventures are included on the equity basis of accounting.
Profits and losses resulting from upstream and downstream transactions between the Group and its associates and joint
ventures are recognised in the consolidated financial statements only to the extent of unrelated investor’s interests in
the associates and joint ventures.
iv) Non-controlling interests represent the proportion of the results and net assets of subsidiaries and their associates and
joint ventures not attributable to the Group.
v) The results of subsidiaries, associates and joint ventures are included or excluded from their effective dates of acquisition
or disposal respectively. The results of entities other than subsidiaries, associates and joint ventures are included to the
extent of dividends received when the right to receive such dividend is established.
Annual Report 2018 57
28 Principal Accounting Policies continued
Foreign currencies
Transactions in foreign currencies are accounted for at the exchange rates ruling at the transaction dates.
Assets and liabilities of subsidiaries, associates and joint ventures, together with all other monetary assets and liabilities
expressed in foreign currencies, are translated into United States dollars at the rates of exchange ruling at the year end.
Results expressed in foreign currencies are translated into United States dollars at the average rates of exchange ruling
during the year, which approximate the exchange rates at the dates of the transactions.
Exchange differences arising from the retranslation of the net investment in foreign subsidiaries, associates and joint ventures,
and of financial instruments which are designated as hedges of such investments, are recognised in other comprehensive
income and accumulated in equity under exchange reserves. On the disposal of these investments, such exchange
differences are recognised in profit and loss. Exchange differences on other investments measured at fair value through
other comprehensive income are recognised in other comprehensive income as part of the gains and losses arising from
changes in their fair value. All other exchange differences are recognised in profit and loss.
Goodwill and fair value adjustments arising on acquisition of a foreign entity after 1st January 2003 are treated as assets and
liabilities of the foreign entity and translated into United States dollars at the rate of exchange ruling at the year end.
Impairment of non-financial assets
Assets that have indefinite useful lives are not subject to amortisation and are tested for impairment annually and whenever there
is an indication that the assets may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of assessing
impairment, assets are grouped at the lowest level for which there is separately identifiable cash flows. Cash-generating units
or groups of cash-generating units to which goodwill has been allocated are tested for impairment annually and whenever
there is an indication that the units may be impaired. An impairment loss is recognised for the amount by which the carrying
amount of the asset exceeds its recoverable amount, which is the higher of an asset’s fair value less costs to sell and value in use.
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment annually.
Goodwill
Goodwill represents the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the acquisition-date fair value of any previously held equity interest in the acquiree over the acquisition-date fair
value of the Group’s share of the net identifiable assets acquired. Non-controlling interests are measured at their proportionate
share of the net identifiable assets at the acquisition date. If the cost of acquisition is less than the fair value of the net assets
acquired, the difference is recognised directly in profit and loss. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates and joint ventures is included in investment in associates and joint ventures.
Goodwill is allocated to cash-generating units or groups of cash-generating units for the purpose of impairment testing and
is carried at cost less accumulated impairment loss.
The profit or loss on disposal of subsidiaries, associates and joint ventures is stated after deducting the carrying amount of
goodwill relating to the entity sold.
Leasehold land
Leasehold land represents payments to third parties to acquire short-term interests in property. These payments are stated
at cost and are amortised over the useful life of the lease which includes the renewal period if the lease can be renewed by
the Group without significant cost.
58
Hongkong Land
Notes to the Financial Statements 28 Principal Accounting Policies continued
Tangible fixed assets and depreciation
Long-term interests in leasehold land are classified as finance leases and grouped under tangible fixed assets if substantially
all risks and rewards relating to the land have been transferred to the Group, and are amortised over the useful life of the lease.
Grants related to tangible assets are deducted in arriving at the carrying amount of the assets. The building component of
owner-occupied leasehold properties are stated at cost less accumulated depreciation and impairment. Other tangible fixed
assets are stated at cost less amounts provided for depreciation.
Depreciation of tangible fixed assets is calculated on the straight line basis to allocate the cost or valuation of each asset to
its residual value over its estimated useful life. The residual values and useful lives are reviewed at each balance sheet date.
The estimated useful lives are as follows:
Furniture, equipment and motor vehicles
Leasehold land
3 – 10 years
period of the lease
Where the carrying amount of a tangible fixed asset is greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount.
The profit or loss on disposal of tangible fixed assets is recognised by reference to their carrying amount.
Investment properties
Properties including those under operating leases which are held for long-term rental yields or capital gains are classified and
accounted for as investment properties, but the business model does not necessarily envisage that the properties will be held
for their entire useful life. Investment properties are carried at fair value, representing estimated open market value determined
annually by independent qualified valuers who have recent experience in the location and category of the investment property
being valued. The market value of commercial properties are calculated on the discounted net rental income allowing for
reversionary potential. The market value of residential properties are arrived at by reference to market evidence of transaction
prices for similar properties. Changes in fair value are recognised in profit and loss.
Investments
The Group classifies its investments into the following measurement categories:
(i) Those to be measured subsequently at fair value, either through other comprehensive income or through profit and
loss; and
(ii) Those to be measured at amortised cost.
The classification is based on the management’s business model and their contractual cash flows characteristics.
Equity investments are measured at fair value with fair value gains and losses recognised in profit and loss, unless management
has elected to recognise the fair value gains and losses through other comprehensive income. For equity investments
measured at fair value through other comprehensive income, gains or losses realised upon disposal are not reclassified to profit
and loss.
At initial recognition, the Group measures an investment at its fair value plus, in the case of the investment not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition of the investment. Transaction costs of
financial assets carried at fair value through profit and loss are expensed in profit and loss.
All purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase
or sell the investments.
Investments are classified as non-current assets, unless in the case of debt investments with maturities less than 12 months
after the balance sheet date, are classified as current assets.
Annual Report 2018 59
28 Principal Accounting Policies continued
Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss on a
straight line basis over the period of the lease. When a lease is terminated before the lease period has expired, any payment
required to be made to the lessor by way of penalty is recognised as an expense in the year in which termination takes place.
Properties for sale
Properties for sale, which comprise land and buildings held for resale, are stated at the lower of cost and net realisable value.
The cost of properties for sale comprises land cost, and construction and other development costs.
Debtors
Debtors are recognised initially at the amount of consideration that is unconditional and measured subsequently at amortised
cost using the effective interest method. A contract asset arises if the Group has a right to consideration in exchange for goods
or services the Group has transferred to a customer, that is conditional on something other than the passage of time. All other
debtors, excluding derivative financial instruments, are measured at amortised cost except where the effect of discounting
would be immaterial. For trade debtors and contract assets, the Group applied the simplified approach as permitted by IFRS 9,
which requires expected lifetime losses to be recognised from initial recognition of the debtors. Provision for impairment is
established by considering potential financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation, and default or delinquency in payments. The carrying amount of the asset is reduced through the use
of an allowance account and the amount of the loss is recognised in arriving at operating profit. When a debtor is uncollectible,
it is written off against the allowance account. Subsequent recoveries of amount previously written off are credited to profit
and loss.
Debtors with maturities greater than 12 months after the balance sheet date are classified under non-current assets.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and financial institutions,
and bank and cash balances, net of bank overdrafts. In the balance sheet, bank overdrafts are included in current borrowings.
Provisions
Provisions are recognised when the Group has present legal or constructive obligations as a result of past events, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligations, and a reliable estimate of
the amount of the obligations can be made.
Borrowings and borrowing costs
Borrowings are initially recognised at fair value, net of transaction costs incurred. In subsequent periods, borrowings are stated
at amortised cost using the effective interest method.
Borrowing costs relating to major development projects are capitalised until the asset is substantially completed. Capitalised
borrowing costs are included as part of the cost of the asset. All other borrowing costs are expensed as incurred.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.
60
Hongkong Land
Notes to the Financial Statements 28 Principal Accounting Policies continued
Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in profit and loss, except to the extent that
it relates to items recognised in other comprehensive income or direct in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet
date in the countries where the Group operates and generates taxable income. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets and
liabilities and their carrying values. Deferred tax is determined using tax rates and laws that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax
liability is settled.
Provision for deferred tax is made on the revaluation of certain non-current assets and, in relation to acquisitions, on the
difference between the fair value of the net assets acquired and their tax base. Deferred tax is provided on temporary
differences associated with investments in subsidiaries, associates and joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that
it is probable that future taxable profit will be available against which the unused tax losses can be utilised.
Pension obligations
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in trustee
administered funds.
Pension accounting costs for defined benefit plans are assessed using the projected unit credit method. Under this method,
the costs of providing pensions are charged to profit and loss spreading the regular cost over the service lives of employees
in accordance with the advice of qualified actuaries, who carry out a full valuation of major plans every year. The pension
obligations are measured as the present value of the estimated future cash outflows by reference to market yields on high
quality corporate bonds which have terms to maturity approximating the terms of the related liability. Plan assets are measured
at fair value.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in other
comprehensive income in the year in which they occur. Past service costs are recognised immediately in profit and loss.
The Group’s total contributions relating to the defined contribution plans are charged to profit and loss in the year to which
they relate.
Derivative financial instruments
The Group only enters into derivative financial instruments in order to hedge underlying exposures and not as speculative
investments. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss is dependent
on the nature of the item being hedged. The Group designates certain derivatives as a hedge of the fair value of a recognised
asset or liability (fair value hedge), or a hedge of a forecast transaction or of the foreign currency risk on a firm commitment
(cash flow hedge), or a hedge of a net investment in a foreign entity.
At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments
and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes
in the cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its
hedge transactions.
Annual Report 2018 61
28 Principal Accounting Policies continued
Derivative financial instruments continued
Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective,
are recognised in profit and loss, along with any changes in the fair value of the hedged asset or liability that is attributable
to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate borrowings is
recognised in profit and loss within finance costs, together with changes in the fair value of the hedged fixed rate borrowings
attributable to interest rate risk. The gain or loss relating to the ineffective portion is recognised in profit and loss. When a
hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, the cumulative
adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit
and loss over the residual period to maturity.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective, are
recognised in other comprehensive income and accumulated in equity under hedging reserves. Changes in the fair value
relating to the ineffective portion is recognised immediately in profit and loss. Where the hedged item results in the recognition
of a non-financial asset or of a non-financial liability, the deferred gains and losses are included in the initial measurement of the
cost of the asset or liability. The deferred amounts are ultimately recognised in profit and loss as the hedged item affects profit
and loss. Otherwise, amounts deferred in hedging reserves are transferred to profit and loss in the same periods during which
the hedged firm commitment or forecast transaction affects profit and loss. The gain or loss relating to the effective portion
of the interest rate swaps hedging variable rate borrowings is recognised in profit and loss within finance cost at the same time
as the interest expense on the hedged borrowings. When a hedging instrument expires or is sold, or when a hedge no longer
meets the criteria for hedge accounting, any cumulative gain or loss existing in hedging reserves at that time remains in the
hedging reserves and is recognised when the committed or forecast transaction ultimately is recognised in profit and loss.
When a committed or forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in
hedging reserves is immediately transferred to profit and loss.
Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies, do not
qualify for hedge accounting under the specific rules in IFRS 9. Changes in the fair value of any derivative instruments that do
not qualify for hedge accounting under IFRS 9 are recognised immediately in profit and loss.
Hedges of net investments in foreign entities are accounted for on a similar basis to that used for cash flow hedges. Any gain
or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income
and accumulated in exchange reserves; the gain or loss relating to the ineffective portion is recognised immediately in profit
and loss.
The fair value of derivatives which are designated and qualify as effective hedges are classified as non-current assets
or liabilities if the remaining maturities of the hedged assets or liabilities are greater than 12 months after the balance
sheet date.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal
course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
Non-trading items
Non-trading items are separately identified to provide greater understanding of the Group’s underlying business performance.
Items classified as non-trading items include fair value gains or losses on revaluation of investment properties and equity
investments which are measured at fair value through profit and loss; gains and losses arising from the sale of businesses,
investments and investment properties; impairment of non-depreciable intangible assets and other investments; provisions for
the closure of businesses; acquisition-related costs in business combinations; and other credits and charges of a non-recurring
nature that require inclusion in order to provide additional insight into underlying business performance.
Earnings per share
Earnings per share are calculated on profit attributable to shareholders and on the weighted average number of shares in issue
during the year.
62
Hongkong Land
Notes to the Financial Statements 28 Principal Accounting Policies continued
Dividends
Dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date.
Revenue recognition
i) Properties for sale
Revenue from properties for sale is recognised when or as the control of the property is transferred to the customer.
Revenue consists of the fair value of the consideration received and receivable, net of value added tax, rebates and
discounts. Proceeds received in advance for pre-sale are recorded as contract liabilities. Depending on the terms of
the contract and the laws that apply to the contract, control of the property may transfer over time or at a point in time.
If control of the property transfers over time, revenue is recognised over the period of the contract by reference to the
progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in
time when the customer obtains control of the property.
The progress towards complete satisfaction of the performance obligation is measured based on the Group’s efforts
or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of
reporting period as a percentage of total estimated costs for each contract.
For properties for sale under development and sales contract for which the control of the property is transferred at a
point in time, revenue is recognised when the customer obtains the physical possession or the legal title of the completed
property and the Group has present right to payment and the collection of the consideration is probable.
ii)
Investment properties
Rental income from investment properties are accounted for on an accrual basis over the lease terms.
iii) Service income
Revenue from property management service and hospitality service are recognised when services are performed provided
that the amount can be measured reliably.
Pre-operating costs
Pre-operating costs are expensed as they are incurred.
29 Standards and Amendments Issued but Not Yet Effective
A number of new standards and amendments, which are effective for accounting periods beginning after 2018, have been
published and will be adopted by the Group from their effective dates. An assessment of the impact of the standards and
amendments, that are relevant and have a material impact to the Group, is set out below.
IFRS 16 Leases (effective from 1st January 2019)
The standard replaces IAS 17 Leases and related interpretations and introduces a comprehensive model for the identification
of lease arrangements and accounting treatments for both lessors and lessees. The distinction between operating and
finance leases is removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding
lease liability have to be recognised on the balance sheet for all leases by lessees, except for leases with a term of less than
12 months or with low-value. The accounting for lessors will not change significantly.
IFRS 16 will affect primarily the accounting for the Group’s operating leases. The Group will apply IFRS 16 based on a full
retrospective approach from 1st January 2019.
The Group is in the final stage of its implementation projects. Based on the current assessment, it is estimated that the change
in accounting for the Group’s operating leases will result in the recognition of right-of-use assets of US$11 million and lease
liabilities of US$11 million as at 31st December 2018. The impact to the Group’s underlying profit attributable to shareholders
for the year ended 31st December 2018, shareholders’ funds and gearing as at 31st December 2018 are insignificant.
Annual Report 2018 63
30 Financial Risk Management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and
price risk), credit risk and liquidity risk.
The Group’s treasury function co-ordinates, under the directions of the board of Hongkong Land Limited, financial risk
management policies and their implementation on a group-wide basis. The Group’s treasury policies are designed to manage
the financial impact of fluctuations in interest rates and foreign exchange rates and to minimise the Group’s financial risks.
The Group uses derivative financial instruments, principally interest rate swaps, cross-currency swaps and forward foreign
exchange contracts as appropriate for hedging transactions and managing the Group’s assets and liabilities in accordance
with the Group’s financial risk management policies. Financial derivative contracts are executed between third party banks
and the Group entity that is directly exposed to the risk being hedged. Hedge accounting is applied to remove the accounting
mismatch between the hedging instrument and the hedged item. The effective portion of the change in the fair value of the
hedging instrument is deferred into the cash flow hedge reserve through other comprehensive income and will be recognised
in profit and loss when the hedged item affects profit and loss. This will effectively result in recognising interest expense at
a fixed interest rate for the hedged loans.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the
hedging instrument match exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment
of effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer
match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to
assess effectiveness.
In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what
was originally estimated, or if there are changes in the credit risk of the Group or the derivative counterparty.
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, reset dates,
payment dates, maturities and notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is
identified as a proportion of the outstanding loans up to the notional amount of the swaps. As all critical terms matched during
the year, the economic relationship was approximately 100% effective.
Hedge ineffectiveness for interest rate swaps is assessed using the same principles as for hedges of foreign currency
purchases. It may occur due to: (i) the credit value/debit value adjustment on the interest rate swaps which is not matched
by the loan; and (ii) differences in critical terms between the interest rate swaps and loans.
i) Market risk
Foreign exchange risk
Entities within the Group are exposed to foreign exchange risk from future commercial transactions, net investments
in foreign operations and net monetary assets and liabilities that are denominated in a currency that is not the entity’s
functional currency.
Entities in the Group use cross-currency swaps and forward foreign exchange contracts in a consistent manner to
hedge firm and anticipated foreign exchange commitments and manage their foreign exchange risk arising from
future commercial transactions. The Group does not usually hedge its net investments in foreign operations except in
circumstances where there is a material exposure arising from a currency that is anticipated to be volatile and the hedging
is cost effective. Group entities are required to manage their foreign exchange risk against their functional currency.
Foreign currency borrowings are swapped into the entity’s functional currency using cross-currency swaps except where
the foreign currency borrowings are repaid with cash flows generated in the same foreign currency. The purpose of these
hedges is to mitigate the impact of movements in foreign exchange rates on assets and liabilities and the profit and loss
account of the Group.
64
Hongkong Land
Notes to the Financial Statements
30 Financial Risk Management continued
Financial risk factors continued
i) Market risk continued
Foreign exchange risk continued
Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency
that is not the functional currency. At 31st December 2018, there are no significant monetary balances held by group
companies that are denominated in a non-functional currency other than the cross-currency swap contracts with contract
amounts of US$1,645 million (2017: US$1,648 million). Differences resulting from the translation of financial statements
into the Group’s presentation currency are not taken into consideration.
Since the Group manages the interdependencies between foreign exchange risk and interest rate risk of foreign currency
borrowings using cross-currency swaps, the sensitivity analysis on financial impacts arising from cross-currency swaps is
included in the sensitivity assessment on interest rates under the interest rate risk section.
Interest rate risk
The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets.
These exposures are managed partly by using natural hedges that arise from offsetting interest rate sensitive assets
and liabilities, and partly through fixed rate borrowings and the use of derivative financial instruments such as interest
rate swaps. The Group monitors interest rate exposure on a monthly basis by currency and business unit, taking into
consideration proposed financing and hedging arrangements. The Group’s guideline is to maintain 40% to 60% of its
gross borrowings in fixed rate instruments. At 31st December 2018, the Group’s interest rate hedge was 51% (2017: 52%)
with an average tenor of seven years (2017: seven years). The interest rate profile of the Group’s borrowings after taking
into account hedging transactions are set out in Note 18.
Cash flow interest rate risk is the risk that changes in market interest rates will impact cash flows arising from variable rate
financial instruments. Borrowings at floating rates therefore expose the Group to cash flow interest rate risk. The Group
manages this risk by using forward rate agreements to a maturity of one year, and by entering into interest rate swaps for
a maturity of up to five years. Forward rate agreements and interest rate swaps have the economic effect of converting
borrowings from floating rates to fixed rates.
Fair value interest rate risk is the risk that the value of a financial asset or liability and derivative financial instrument will
fluctuate because of changes in market interest rates. The Group manages its fair value interest rate risk by entering into
interest rate swaps which have the economic effect of converting borrowings from fixed rates to floating rates, to maintain
the Group’s fixed rate instruments within the Group’s guideline.
At 31st December 2018, if interest rates had been 100 basis points higher/lower with all other variables held constant, the
Group’s profit after tax would have been US$2 million (2017: US$3 million) higher/lower and hedging reserve would have
been US$49 million (2017: US$55 million) higher/lower, as a result of fair value changes to cash flow hedges. The sensitivity
analysis has been determined assuming that the change in interest rates had occurred at the balance sheet date and had
been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence
at that date. The 100 basis point increase or decrease represents management’s assessment of a reasonably possible
change in those interest rates which have the most impact on the Group, specifically the United States, Hong Kong,
mainland China and Singapore rates, over the period until the next annual balance sheet date. In the case of effective
fair value hedges, changes in fair value of the hedged item caused by interest rate movements balance out in profit and
loss account against changes in the fair value of the hedging instruments. Changes in market interest rates affect the
interest income or expense of non-derivative variable-interest financial instruments, the interest payments of which are
not designated as hedged items of cash flow hedges against interest rate risks. As a consequence, they are included in the
calculation of profit after tax sensitivities. Changes in the market interest rate of financial instruments that were designated
as hedging instruments in a cash flow hedge to hedge payment fluctuations resulting from interest rate movements affect
the hedging reserves and are therefore taken into consideration in the equity-related sensitivity calculations.
Annual Report 2018 65
30 Financial Risk Management continued
Financial risk factors continued
i) Market risk continued
Price risk
The Group is exposed to securities price risk because of its equity investments which are measured at fair value through
profit and loss. Gains and losses arising from changes in the fair value of these investments are recognised in profit and
loss. The performance of these investments are monitored regularly, together with an assessment of their relevance to
the Group’s long term strategic plans. Details of these investments are contained in Note 12.
The Group’s interest in these investments are unhedged. At 31st December 2018, if the price of these investments
had been 25% higher/lower with all other variables held constant, total equity would have been US$31 million (2017:
US$26 million) higher/lower and would be reflected in operating profit as non-trading items. The sensitivity analysis has
been determined based on a reasonable expectation of possible valuation volatility over the next 12 months.
ii) Credit risk
The Group’s credit risk is primarily attributable to deposits with banks, credit exposures to customers and derivative financial
instruments with a positive fair value. The Group has credit policies in place and the exposures to these credit risks are
monitored on an ongoing basis.
The Group manages its deposits with banks and financial institutions and transactions involving derivative financial
instruments by monitoring credit ratings and capital adequacy ratios of counterparties, and limiting the aggregate risk to
any individual counterparty. The utilisation of credit limits is regularly monitored. Similarly transactions involving derivative
financial instruments are with banks with sound credit ratings and capital adequacy ratios. In developing countries it may
be necessary to deposit money with banks that have a lower credit rating, however the Group only enters into derivative
transactions with counterparties which have credit ratings of at least investment grade. Management does not expect any
counterparty to fail to meet its obligations.
In respect of credit exposures to customers, the Group has policies in place to ensure that investment properties are
leased principally to corporate companies with appropriate credit history, and rental deposits in the form of cash or bank
guarantee are usually received from tenants. The Group receives progress payments from sales of residential properties
to individual customers prior to the completion of transactions. In the event of default by customers, the Group undertakes
legal proceedings to recover the property. Amounts due from associates and joint ventures are generally supported by
the underlying assets.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet
after deducting any impairment allowance.
66
Hongkong Land
Notes to the Financial Statements
30 Financial Risk Management continued
Financial risk factors continued
iii) Liquidity risk
Prudent liquidity risk management includes managing the profile of debt maturities and funding sources, maintaining
sufficient cash and marketable securities, and ensuring the availability of funding from an adequate amount of committed
credit facilities and the ability to close out market positions. The Group's ability to fund its existing and prospective debt
requirements is managed by maintaining diversified funding sources with adequate committed funding lines from high
quality lenders, and by monitoring rolling short-term forecasts of the Group’s cash and gross debt on the basis of expected
cash flows. In addition long-term cash flows are projected to assist with the Group’s long-term debt financing plans.
At 31st December 2018, total committed and uncommitted borrowing facilities amounted to US$7,759 million
(2017: US$7,040 million) of which US$4,939 million (2017: US$4,171 million) was drawn down. Undrawn committed
facilities, in the form of revolving credit and term loan facilities, totalled US$2,532 million (2017: US$2,668 million).
Undrawn uncommitted facilities in the form of revolving credit and term loan facilities, amounted to US$288 million
(2017: US$201 million).
The following table analyses the Group’s non-derivative financial liabilities, net-settled derivative financial liabilities and
gross-settled financial instruments into relevant maturity groupings based on the remaining period at the balance sheet
date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities
are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual
undiscounted cash flows.
Within
one year
US$m
Between
one and
two years
US$m
Between
two and
three years
US$m
Between
three and
four years
US$m
Between
four and
five years
US$m
Beyond
five years
US$m
Total
undiscounted
cash flows
US$m
847.5
732.2
566.1
8.5
461.1
1,537.0
332.6
2,184.3
5,928.6
0.2
2.0
0.2
2.9
746.0
150.1
149.1
395.4
645.8
132.3
132.3
452.6
12.2
68.0
66.0
556.0
547.4
45.5
41.6
1,051.9
1,052.9
2,003.8
1,989.3
518.1
6.5
546.4
1,149.2
2,160.2
5,221.9
0.2
0.2
3.0
667.9
73.9
65.0
150.2
145.0
132.4
128.2
68.0
60.5
556.3
544.8
1,097.9
1,088.5
2,078.7
2,032.0
2018
Borrowings
Creditors
Gross settled derivative
financial instruments
– inflow
– outflow
2017
Borrowings
Creditors
Gross settled derivative
financial instruments
– inflow
– outflow
Annual Report 2018 67
30 Financial Risk Management continued
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern whilst
seeking to maximise benefits to shareholders and other stakeholders. Capital is equity as shown in the consolidated balance
sheet plus net debt.
The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder
returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected
profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
purchase Group shares, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group does
not have a defined dividend policy or share repurchase plan.
The Group monitors capital on the basis of the Group’s consolidated gearing ratio and consolidated interest cover. The gearing
ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings less bank balances. Interest
cover is calculated as underlying operating profit and the Group’s share of underlying operating profit of associates and joint
ventures divided by net financing charges including the Group’s share of net financing charges within associates and joint
ventures. The Group does not have a defined gearing or interest cover benchmark or range.
The ratios at 31st December 2018 and 2017 are as follows:
Gearing ratio (%)
Interest cover (times)
Fair value estimation
2018
9
10
2017
7
14
i) Financial instruments that are measured at fair value
For financial instruments that are measured at fair value in the balance sheet, the corresponding fair value measurements
are disclosed by level of the following fair value measurement hierarchy:
a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (‘quoted prices in active markets’)
The fair value of listed securities is based on quoted prices in active markets at the balance sheet date. The quoted
market price used for listed investments held by the Group is the current bid price.
b)
Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly
(‘observable current market transactions’)
The fair values of derivative financial instruments are determined using rates quoted by the Group’s bankers at the
balance sheet date. The rates for interest rate swaps and forward foreign exchange contracts are calculated by
reference to market interest rates and foreign exchange rates.
There were no changes in valuation techniques during the year.
68
Hongkong Land
Notes to the Financial Statements
30 Financial Risk Management continued
Fair value estimation continued
i) Financial instruments that are measured at fair value continued
The table below analyses financial instruments carried at fair value, by the levels in the fair value measurement hierarchy.
2018
Assets
Other investments
– equity investments
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Liabilities
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
2017
Assets
Other investments
– equity investments
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Liabilities
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Quoted
prices in
active
markets
US$m
Observable
current
market
transactions
US$m
Total
US$m
122.8
2.6
5.5
130.9
–
2.6
5.5
8.1
(7.9)
(9.8)
(7.9)
(9.8)
(17.7)
(17.7)
–
4.8
9.7
103.0
4.8
9.7
122.8
–
–
122.8
–
–
–
103.0
–
–
103.0
14.5
117.5
–
–
–
(7.7)
(8.6)
(7.7)
(8.6)
(16.3)
(16.3)
There were no transfers among the two categories during the year ended 31st December 2018 and 2017.
Annual Report 2018 69
30 Financial Risk Management continued
Fair value estimation continued
ii) Financial instruments that are not measured at fair value
The fair values of current debtors, bank balances, current creditors and current borrowings are assumed to approximate
their carrying amounts due to the short-term maturities of these assets and liabilities.
The fair values of long-term borrowings are based on market prices or are estimated using the expected future payments
discounted at market interest rates.
Financial instruments by category
The fair values of financial assets and financial liabilities, together with carrying amounts at 31st December 2018 and 2017
are as follows:
Fair value
of hedging
instruments
US$m
Fair value
through
profit
and loss
US$m
Financial
assets at
amortised
costs
US$m
Other
financial
liabilities
US$m
Total
carrying
amount
US$m
Fair value
US$m
2018
Financial assets measured
at fair value
Other investments
– equity investments
Derivative financial instruments
Financial assets not measured
at fair value
Debtors
Bank balances
–
8.1
8.1
–
–
–
Financial liabilities measured
at fair value
Derivative financial instruments
(17.7)
Financial liabilities not measured
at fair value
Borrowings
Trade and other payable excluding
non-financial liabilities
–
–
–
122.8
–
122.8
–
–
–
–
–
–
–
–
–
–
258.7
1,375.2
1,633.9
–
–
–
–
–
–
–
–
–
–
–
122.8
8.1
122.8
8.1
130.9
130.9
258.7
1,375.2
258.7
1,375.2
1,633.9
1,633.9
(17.7)
(17.7)
(4,939.0)
(4,939.0)
(5,019.4)
(746.0)
(746.0)
(746.0)
(5,685.0)
(5,685.0)
(5,765.4)
70
Hongkong Land
Notes to the Financial Statements
30 Financial Risk Management continued
Fair value estimation continued
Financial instruments by category continued
Fair value of
hedging
instruments
US$m
Fair value
through
profit
and loss
US$m
Financial
assets at
amortised
costs
US$m
Other
financial
liabilities
US$m
Total
carrying
amount
US$m
Fair value
US$m
2017
Financial assets measured
at fair value
Other investments
– equity investments
Derivative financial instruments
Financial assets not measured
at fair value
Debtors
Bank balances
–
14.5
14.5
–
–
–
Financial liabilities measured
at fair value
Derivative financial instruments
(16.3)
Financial liabilities not measured
at fair value
Borrowings
Trade and other payable excluding
non-financial liabilities
–
–
–
103.0
–
103.0
–
–
–
–
–
–
–
–
–
–
217.9
1,622.1
1,840.0
–
–
–
–
–
–
–
–
–
–
–
103.0
14.5
103.0
14.5
117.5
117.5
217.9
1,622.1
217.9
1,622.1
1,840.0
1,840.0
(16.3)
(16.3)
(4,170.9)
(4,170.9)
(4,292.7)
(667.9)
(667.9)
(667.9)
(4,838.8)
(4,838.8)
(4,960.6)
Annual Report 2018 71
31 Critical Accounting Estimates and Judgements
Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have
a significant effect on the carrying amounts of assets and liabilities are discussed below.
Acquisition of subsidiaries, associates and joint ventures
The initial accounting on the acquisition of subsidiaries, associates and joint ventures involves identifying and determining the
fair values to be assigned to the identifiable assets, liabilities and contingent liabilities of the acquired entities. The fair values
of leasehold land, tangible assets and investment properties are determined by independent valuers by reference to market
prices or present value of expected net cash flows from the assets. Any changes in the assumptions used and estimates made
in determining the fair values, and management’s ability to measure reliably the contingent liabilities of the acquired entity will
impact the carrying amount of these assets and liabilities.
On initial acquisition or acquisition of further interests in an entity, an assessment of the level of control or influence exercised
by the Group is required. For entities where the Group has a shareholding of less than 50%, an assessment of the Group’s
level of voting rights, board representation and other indicators of influence is performed to consider whether the Group
has de facto control, requiring consolidation of that entity, or significant influence, requiring classification as an associate,
or joint control, requiring classification as a joint venture.
Investment properties
The fair values of investment properties are determined by independent valuers on an open market for existing use basis
calculated on the discounted net income allowing for reversionary potential. For investment properties in Hong Kong,
mainland China and Singapore, capitalisation rates in the range of 2.75% to 3.50% for office (2017: 2.75% to 3.50%) and
3.75% to 5.00% for retail (2017: 3.75% to 5.00%) are used in the fair value determination.
Considerations have been given to assumptions that are mainly based on market conditions existing at the balance sheet date
and appropriate capitalisation rates. These estimates are regularly compared to actual market data and actual transactions
entered into by the Group.
Impairment of assets
The Group tests annually whether goodwill and other assets that have indefinite useful lives suffered any impairment. Other
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the
asset exceeds its recoverable amount. The recoverable amount of an asset or a cash generating unit is determined based
on the higher of its fair value less costs to sell and its value-in-use, calculated on the basis of management’s assumptions
and estimates. Changing the key assumptions, including the discount rates or the growth rate assumptions in the cash flow
projections, could materially affect the value-in-use calculations.
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group
uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s
past history, existing market conditions as well as forward looking estimates at the balance sheet date (see Note 13).
72
Hongkong Land
Notes to the Financial Statements 31 Critical Accounting Estimates and Judgements continued
Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide
provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain
during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
Provision of deferred tax follows the way management expects to recover or settle the carrying amount of the related assets
or liabilities, which the management may expect to recover through use, sale or combination of both. Accordingly, deferred
tax will be calculated at income tax rate, capital gains tax rate or combination of both. There is a rebuttable presumption
in International Financial Reporting Standards that investment properties measured at fair value are recovered through sale.
Thus deferred tax on revaluation of investment properties held by the Group are calculated at the capital gain tax rate.
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management’s expectation of
future taxable profit that will be available against which the tax losses can be utilised. The outcome of their actual utilisation
may be different.
Revenue recognition
The Group uses the percentage of completion method to account for its contract revenue of certain development properties
sales. The stage of completion is measured by reference to the contract costs incurred to date compared to the estimated total
costs for the contract. Significant assumptions are required to estimate the total contract costs and the recoverable variation
works that affect the stage of completion and the contract revenue respectively. In making these estimates, management has
relied on past experience and the work of specialists.
For other contracts with customers which include multiple deliverables, the separate performance obligations are identified.
The transaction price is then allocated to each performance obligation based on their stand-alone selling prices. From time to
time, when a stand-alone selling price may not be directly observable, the Group estimated the selling price using expected
costs of rendering such services and adding an appropriate margin.
Non-trading items
The Group uses underlying business performance in its internal financial reporting to distinguish between the underlying profits
and non-trading items. The identification of non-trading items requires judgement by management, but follows the consistent
methodology as set out in the Group’s accounting policies.
Annual Report 2018 73
Independent Auditors’ Report
To the members of Hongkong Land Holdings Limited
Report on the audit of the financial statements
Opinion
In our opinion, Hongkong Land Holdings Limited’s Group (‘the Group’) financial statements (the ‘financial statements’):
• give a true and fair view of the state of the Group’s affairs as at 31st December 2018 and of its profit and cash flows for the year
then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) as issued by the International
Accounting Standards Board (IASB); and
• have been prepared in accordance with the requirements of the Companies Act 1981 (Bermuda).
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated Balance Sheet as
at 31st December 2018; the Consolidated Profit and Loss Account, the Consolidated Statement of Comprehensive Income, the
Consolidated Cash Flow Statement, and the Consolidated Statement of Changes in Equity for the year then ended; and the Notes
to the Financial Statements, which include the Principal Accounting Policies.
Certain required disclosures have been presented in the Corporate Governance section on page 81, rather than in the notes to
the financial statements. These disclosures are cross-referenced from the financial statements and are identified as audited.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the Financial Reporting Council’s (‘FRC’s’) Ethical Standard as applicable to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Materiality
• Overall Group materiality: US$407.0 million (2017: US$383.0 million), which represents 1% of total non-current assets.
• Specific Group materiality: US$62.0 million (2017: US$56.0 million) which represents 5% of underlying profit before tax.
Audit scope
• A full scope audit was performed on seven subsidiaries. These subsidiaries, together with procedures performed on central
functions and at the Group level, accounted for 95% of the Group’s revenue, 86% of the Group’s profit before tax, 92% of the
Group’s underlying profit before tax and 79% of the Group’s total non-current assets.
• Full scope audits of three joint ventures were also performed which accounted for a further 5% of the Group’s profit before tax,
5% of the Group’s underlying profit before tax and 6% of the Group’s total non-current assets.
• Specified procedures were performed over selected material financial statement line items for 26 other entities.
Key audit matter
• Valuation of investment properties.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed
the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that
represented a risk of material misstatement due to fraud.
74
Hongkong Land
Our audit approach continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties
Refer to Note 31 (Critical Accounting Estimates and Judgements)
and Note 10 (Investment Properties) to the consolidated
financial statements.
The fair value of the Group’s investment properties amounted to
US$33,712 million at 31st December 2018, with a revaluation
gain of US$1,222 million recognised as a non-trading item in
the consolidated profit and loss account for the year. The Group’s
property portfolio principally consists of commercial properties.
The valuation of the Group’s investment property portfolio is
inherently subjective due to, among other factors, the individual
nature of each property, its location, prevailing market returns
and the expected future rentals for that particular property.
The valuations were carried out by third party valuers (the
‘valuers’). In determining a property’s valuation, the valuers
make assumptions, judgements and estimates in key areas.
Valuations are principally derived using the income capitalisation
method. Judgements are made in respect of capitalisation
rates and market rents.
We focused on the valuation of investment properties due
to the significant judgements and estimates involved in
determining the valuations.
We assessed the valuers’ qualifications and their expertise,
considering whether there were any matters that might
have affected their objectivity or may have imposed scope
limitations upon their work. We found no evidence to suggest
that the objectivity of the valuers in their performance of the
valuations was compromised.
Our work focused on the highest value properties in the
portfolio, namely the buildings in the financial district of
Central, Hong Kong.
We read the valuation reports for the Hong Kong properties
covering the majority of the total investment property portfolio
to consider whether the valuation approach used was appropriate
for each property and suitable for use in determining the
carrying value. We performed testing, on a sample basis, on
the input data used in the valuation process to satisfy ourselves
of the accuracy of the property information supplied to the
valuers by management, for example agreement of lease terms
to tenancy agreements and other supporting documents.
We understood and assessed the Group's controls over data
used in the valuation of the investment property portfolio and
management's review of the valuations.
The audit team, including our valuation specialists, attended
meetings with the valuers at which the valuations and the
key assumptions therein were discussed. We compared
the capitalisation rates used by the valuers with an estimated
range of expected yields, determined via reference to
published benchmarks and market information. We evaluated
year-on-year movements in capital value and rentals with
reference to publicly available information and market rents.
We evaluated whether assumptions were appropriate in light
of the evidence provided by significant transactions which
had taken place in local markets during the year.
We concluded that the assumptions used in the valuations were
supportable in light of available evidence.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which it operates.
The Group’s accounting processes are structured around finance functions, which are responsible for their own accounting records
and controls, which in turn, report financial information to the Group’s finance function in Hong Kong to enable them to prepare
consolidated financial statements.
Annual Report 2018 75
Independent Auditors’ Report
Our audit approach continued
How we tailored the audit scope continued
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed by members
of the Group engagement team or by component auditors from within the PwC Network and other auditors operating under our
instruction. Where the work was performed by component auditors, we determined the level of involvement we needed to have in
the audit work at those components to be able to conclude whether sufficient appropriate audit evidence had been obtained as a
basis for our opinion on the financial statements as a whole. The Group engagement team was involved in the significant reporting
entities in scope for Group reporting during the audit cycle through a combination of meetings, visits and conference calls. The lead
Group audit partner and other senior team members undertook multiple visits to Hong Kong during the audit and were involved
throughout the year in regular conference calls and other forms of communication to direct and oversee the audit. Senior team
members visited a number of countries, including Singapore and mainland China during the audit to review the work of component
teams with regular communication throughout the year.
A full scope audit of the complete financial information was performed for seven subsidiaries. These subsidiaries, together with
procedures performed on central functions and at the Group level (on the consolidation and other areas of significant judgement),
which accounted for 95% of the Group’s revenue, 86% of the Group’s profit before tax, 92% of the Group’s underlying profit before
tax and 79% of the Group’s total non-current assets. Full scope audits of the complete financial information were also performed
for three principal joint ventures which accounted for a further 5% of the Group’s profit before tax, 5% of the Group’s underlying profit
before tax and 6% of the Group’s total non-current assets. Specified procedures were performed over selected material financial
statement line items for 26 other entities. This gave us the evidence we needed for our opinion on the financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
How we determined it
Rationale for benchmark applied
US$407.0 million, (2017: US$383.0 million)
1% of total non-current assets
A key determinant of the Group’s value is investment property. As non-current assets
primarily comprise investment properties, we set an overall Group materiality level based
on total non-current assets
We set a specific materiality level of US$62.0 million (2017: US$56.0 million) for items not related to the carrying value of investment
properties and their related fair value changes (either wholly owned or held within joint ventures). This equates to 5% of underlying
profit before tax.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was US$2.1 million to US$23.3 million.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit of investment property
related items above US$20.0 million (2017: US$19.0 million) as well as misstatements below that amount that in our view, warranted
reporting for qualitative reasons. For all other account balances, we agreed with the Audit Committee that we would report to them
misstatements identified during our audit above US$3.1 million (2017: US$2.8 million) as well as misstatements below that amount
that in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is not appropriate; or the Directors have not disclosed in the financial statements any identified material
uncertainties that may cast significant doubt about the Group’s ability to continue to adopt the going concern basis of accounting
for a period of at least 12 months from the date when the financial statements are authorised for issue. We have nothing to report
in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to
continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union or the
outcome of ongoing US and China trade relationships, are not clear, and it is therefore difficult to evaluate potential implications.
76
Hongkong Land
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Responsibility Statement set out on page 79, the Directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view.
The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Section 90 of the Companies Act 1981 (Bermuda) and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
The engagement partner responsible for this independent auditors’ report is John Baker.
PricewaterhouseCoopers LLP
Chartered Accountants
London
28th February 2019
(a) The maintenance and integrity of the Hongkong Land Holdings Limited website is the responsibility of the Directors; the work
carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility
for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in Bermuda governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
Annual Report 2018 77
Five Year Summary
2014
US$m
2015
US$m
2016
US$m
2017
US$m
2018
US$m
Profit attributable to shareholders
1,373
2,046
3,311
5,614
2,457
Underlying profit attributable to shareholders
980
930
822
947
1,036
Investment properties
23,697
24,957
27,712
32,481
33,712
Net debt
2,657
2,341
2,008
2,549
3,564
Shareholders’ funds
27,649
28,803
31,383
36,842
38,342
Net asset value per share
11.75
12.24
13.34
15.66
16.43
US$
US$
US$
US$
US$
41.64
39.53
40.24
34.92
44.24
19.00
19.00
19.00
20.00
22.00
15.66
16.43
11.75
12.24
13.34
2014
2015
2016
2017
2018
Underlying earnings
Dividends
2014
2015
2016
2017
2018
Underlying earnings/dividends
per share (US¢)
Net asset value per share (US$)
78
Hongkong Land
Responsibility Statement
The Directors of the Company confirm to the best of their knowledge that:
a.
b.
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
the sections of this Report, including the Chairman’s Statement, Chief Executive’s Review and the Principal Risks and Uncertainties,
which constitute the management report, include a fair review of all information required to be disclosed by the Disclosure
Guidance and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Conduct Authority in the United Kingdom.
For and on behalf of the Board
Robert Wong
Simon Dixon
Directors
28th February 2019
Annual Report 2018 79
Corporate Governance
Hongkong Land Holdings Limited is incorporated in Bermuda. The Company’s property interests are held almost entirely in Asia.
The Company’s equity shares have a standard listing on the Main Market of the London Stock Exchange, and secondary listings in
Bermuda and Singapore. The Disclosure Guidance and Transparency Rules (the ‘DTRs’) issued by the Financial Conduct Authority
in the United Kingdom (the ‘FCA’) require that this Report address all relevant information about the corporate governance practices
applied beyond the requirements under Bermuda law.
The Company attaches importance to the corporate stability and opportunities that result from it being part of the Jardine Matheson
group, which is considered to be fundamental to the Company’s ability to pursue a long-term strategy in Asian markets. By coordinating
objectives, establishing common values and standards, and sharing experience, contacts and business relationships, Jardine Matheson
helps the Group to optimise its opportunities in the countries in which it operates.
The Hongkong Land Group is committed to high standards of governance. The system of governance it has adopted is based
on a well-tried approach to oversight and management that has been developed over many years by the members of the Jardine
Matheson group. It enables the Group to benefit from Jardine Matheson’s strategic guidance and professional expertise, while at the
same time ensuring that the independence of the Board is respected and clear operational accountability rests with the Company’s
executive management team.
The Management of the Group
The Company has a dedicated executive management team led by the Chief Executive. The Memorandum of Association of the
Company, however, provides for the chairman of Jardine Matheson to be, or to appoint, the Managing Director of the Company.
Reflecting this, and the Jardine Matheson group’s 50% interest in the Company’s share capital, the Chief Executive and the Managing
Director meet regularly. Similarly, the board of the Hong Kong-based Group management company, Hongkong Land Limited (‘HKL’),
and its finance committee are chaired by the Managing Director and include Hongkong Land Group executives as well as Jardine
Matheson’s deputy managing director, group finance director, group strategy director and group general counsel.
The presence of Jardine Matheson representatives on the Board of the Company and on the board of HKL, as well as on its audit
and finance committees, provides an added element of stability to the Company’s financial planning and supervision, enhancing its
ability to raise finance and take a long-term view of business development. It also eases the ability of management to work effectively
together in exploiting the full range of the Jardine Matheson group’s commercial strengths.
The Directors of the Company retain full power to manage the business affairs of the Company, other than matters reserved to be
exercised by the Company in general meeting under Bermuda legislation or the Company’s Bye-laws. Among the matters on which
the Board decides are the Group’s business strategy, its annual budget, dividends and major corporate activities.
The Board
The Company currently has a Board of 15 Directors. Their names and brief biographies appear on pages 18 and 19 of this Report.
The Chairman has been appointed in accordance with the provisions of the Bye-laws of the Company, which provide that the
chairman of Jardine Matheson, or any Director nominated by him, shall be the Chairman of the Company. The Board composition
and operation helps to provide the Company with the necessary stability as it seeks to grow its business.
The role of the Chairman is to lead the Board as it oversees the Group’s strategic and financial direction, while the principal role
of the Managing Director is to act as chairman of HKL and of its finance committee. Ben Keswick is currently appointed to both
positions. The responsibility for running the Group’s business and all the executive matters affecting the Group rests with the
Chief Executive, Robert Wong. The implementation of the Group’s strategy is delegated to the Company’s executive management,
with decision-making authority within designated financial parameters delegated to the HKL finance committee.
The Board is scheduled to hold four meetings in 2019 and ad hoc procedures are adopted to deal with urgent matters which arise
between scheduled meetings. In 2018 one meeting was held in Bermuda and three were held in Asia. The Board receives high
quality, up to date information for each of its meetings. In addition, certain Directors of the Company who do not serve on the board
of HKL and who are based outside Asia regularly visit Asia and Bermuda to discuss the Group’s business, as well as to participate
in the four strategic reviews that precede the regular Board meetings. These Directors are not directly involved in the operational
management of the Group’s business activities, but their knowledge and close oversight of the Group’s affairs, as well as their
knowledge and experience of the wider Jardine Matheson group, reinforces the process by which business is reviewed before
consideration at Board meetings.
80
Hongkong Land
Directors’ Appointment, Retirement, Remuneration and Service Contracts
Candidates for appointment as executive Directors of the Company, as executive directors of HKL or as senior executives elsewhere
in the Group may be sourced internally, or from the wider Jardine Matheson group or externally, including by using the services of
specialist executive search firms. The aim is to appoint individuals who combine international best practice with familiarity with, or
adaptability to, Asian markets. When appointing non-executive Directors, the Board pays particular attention to the Asian business
experience and relationships that they can bring.
Each new Director is appointed by the Board and, in accordance with the Company’s Bye-laws, each new Director so appointed is
subject to retirement and re-appointment at the first annual general meeting after appointment. Thereafter, Directors are subject
to retirement by rotation under the Bye-laws whereby one-third of the Directors retire at the annual general meeting each year.
These provisions apply to both executive and non-executive Directors, but the requirement to retire by rotation does not extend
to the Chairman or Managing Director.
Dr Richard Lee stepped down from the Board of the Company at the Annual General Meeting held on 9th May 2018, and Christina Ong
joined the Board on the same day. Sir Henry Keswick retired from the Board with effect from 31st December 2018.
In accordance with Bye-law 85, Adam Keswick, Anthony Nightingale, Lord Sassoon and Michael Wu retire by rotation at this year’s
Annual General Meeting and, being eligible, offer themselves for re-election. In accordance with Bye-law 92, Christina Ong will also
retire and, being eligible, offers herself for re-election. None of the Directors proposed for re-election has a service contract with the
Company or its subsidiaries.
The Company’s policy is to offer competitive remuneration packages to its senior executives. It is recognised that, due to the nature
of the Group and its diverse geographic base, a number of its senior executives are required to be offered international terms and the
nature of the remuneration packages is designed to reflect this. Executive Directors joining from outside the Group may be offered
an initial fixed-term service contract to reflect any requirement for them to relocate.
Recommendations and decisions on remuneration and other benefits payable or made available to executive Directors result from
consultations between the Chairman and other Directors as he considers appropriate. Directors’ fees, which are payable to all
Directors other than the Chief Executive and the Chief Financial Officer, are decided upon by shareholders in general meeting as
provided for by the Company’s Bye-laws. A motion to increase the Directors’ fees to US$65,000 each per annum and the fee for the
Chairman and Managing Director to US$90,000 per annum with effect from 1st January 2019 will be proposed at the forthcoming
Annual General Meeting.
For the year ended 31st December 2018, the Directors received from the Group US$8.1 million (2017: US$8.2 million) in Directors’
fees and employee benefits, being US$0.9 million (2017: US$0.9 million) in Directors’ fees, US$7.0 million (2017: US$7.0 million)
in short-term employee benefits including salary, bonuses, accommodation and deemed benefits in kind and US$0.2 million (2017:
US$0.3 million) in post-employment benefits. The information set out in this paragraph forms part of the audited financial statements.
The Company has in place notional share option plan under which cash bonuses are paid based on the performance of the
Company’s share price over a period. The notional plan was established to provide longer-term incentives for executive Directors
and senior managers. Notional share options are granted after consultation between the Chairman and the Chief Executive as well
as other Directors as they consider appropriate.
The Company purchases insurance to cover its Directors against their costs in defending themselves in civil proceedings taken
against them in that capacity and in respect of damages resulting from the unsuccessful defence of any proceedings. To the extent
permitted by law, the Company also indemnifies its Directors. Neither the insurance nor the indemnity provides cover where the
Director has acted fraudulently or dishonestly.
Annual Report 2018 81
Corporate Governance
Audit Committee
The Board has established within HKL an audit committee (the ‘Audit Committee’), the current members of which are Y.K. Pang,
Mark Greenberg, Jeremy Parr and John Witt; they have extensive knowledge of the Group while at the same time not being directly
involved in operational management. The chairman, chief executive and chief financial officer of HKL, together with representatives
of the internal and external auditors, also attend the Audit Committee meetings by invitation. The Audit Committee meets and reports
to the Board semi-annually.
Prior to completion and announcement of the half-year and year-end results, a review of the financial information and of any issues
raised in connection with the preparation of the results, including the adoption of new accounting policies, is undertaken by the
Audit Committee with the executive management and a report is received from the external auditors. The external auditors also
have access to the full Board when necessary, in addition to the Chief Executive, Chief Financial Officer and other senior executives.
The Audit Committee keeps under review the nature, scope and results of the audits conducted by the internal audit function.
The Audit Committee’s responsibilities extend to reviewing the effectiveness of both the internal and external audit functions;
considering the independence and objectivity of the external auditors; and reviewing and approving the level and nature of
non-audit work performed by the external auditors.
The terms of reference of the Audit Committee can be found on the Company’s website at www.hkland.com.
Risk Management and Internal Control
The Board has overall responsibility for the Group’s systems of risk management and internal control. The Board has delegated to the
Audit Committee responsibility for providing oversight in respect of risk management activities. The Audit Committee considers the
Group’s principal risks and uncertainties and potential changes to the risk profile, and reviews the operation and effectiveness of the
Group’s systems of internal control and the procedures by which these risks are monitored and mitigated. The Audit Committee
considers the systems and procedures on a regular basis, and reports to the Board semi-annually. The systems of internal control are
designed to manage, rather than eliminate, business risk; to help safeguard the Group’s assets against fraud and other irregularities;
and to give reasonable, but not absolute, assurance against material financial misstatement or loss.
Executive management is responsible for the implementation of the systems of internal control throughout the Group. The internal
audit function also monitors the effectiveness of the systems of internal control and the approach taken by the business units to
risk. The internal audit function is independent of the operating businesses and reports its findings, and recommendations for any
corrective action required, to the Audit Committee.
The Group has in place an organisational structure with defined lines of responsibility and delegation of authority. There are
established policies and procedures for financial planning and budgeting; for information and reporting systems; for assessment
of risk; and for monitoring the Group’s operations and performance. The information systems in place are designed to ensure that
the financial information reported is reliable and up to date.
The Company’s policy on commercial conduct underpins the Group’s internal control process, particularly in the area of compliance.
The policy is set out in the Group’s Code of Conduct, which is a set of guidelines to which every employee must adhere, and is
reinforced and monitored by an annual compliance certification process.
The Audit Committee has also been given the responsibility to oversee the effectiveness of the formal procedures for employees to
raise any matters of serious concern, and is required to review any reports made under those procedures that are referred to it by the
internal audit function.
The principal risks and uncertainties facing the Company are set out on page 85.
82
Hongkong Land
Directors’ Responsibilities in respect of the Financial Statements
The Directors are required under the Bermuda Companies Act to prepare financial statements for each financial year and to present
them annually to the Company’s shareholders at the annual general meeting. The financial statements are required to present fairly,
in accordance with International Financial Reporting Standards (‘IFRS’), the financial position of the Group at the end of the year and
the results of its operations and its cash flows for the year then ended. The Directors consider that applicable accounting policies
under IFRS, applied on a consistent basis and supported by prudent and reasonable judgements and estimates, have been followed
in preparing the financial statements. The financial statements have been prepared on a going concern basis.
Code of Conduct
The Group conducts business in a professional, ethical and even-handed manner. Its ethical standards are clearly set out in its Code
of Conduct, which is modelled on the Jardine Matheson group’s code of conduct. The Code of Conduct requires that all Group
companies comply with all laws of general application, all rules and regulations that are industry specific and proper standards of
business conduct. The Code of Conduct prohibits the giving or receiving of illicit payments, and requires that all managers must
be fully aware of their obligations under the Code of Conduct and establish procedures to ensure compliance at all levels within
their organisations.
The Code of Conduct also encourages inclusion and diversity, and requires all employees to be treated fairly, impartially and with
dignity and respect. As a multinational Group with a broad range of businesses operating across Asia, the Group believes in promoting
equal opportunities in recruiting, developing and rewarding its people regardless of race, gender, nationality, religion, sexual orientation,
disability, age or background. The scale and breadth of the Group’s businesses necessitate that they seek the best people from the
communities in which they operate most suited to their needs.
The Group has in place procedures by which employees can raise, in confidence, matters of serious concern in areas such as financial
reporting or compliance.
Directors’ Share Interests
The Directors of the Company in office on 28th February 2019 had interests (within the meaning of the EU Market Abuse Regulation
(‘MAR’), which applies to the Company as it is listed on the London Stock Exchange) as set out below in the ordinary share capital of
the Company. These interests include those notified to the Company in respect of the Directors’ closely associated persons (as that
term is used under MAR).
Charles Allen-Jones
Anthony Nightingale
Y.K. Pang
60,000
2,184
38,000
In addition, Robert Wong held share options in respect of 1,200,000 ordinary shares issued pursuant to the Company’s notional share
option plan.
Substantial Shareholders
As a non-UK issuer, the Company is subject to the DTRs pursuant to which a person must in certain circumstances notify the
Company of the percentage of voting rights attaching to the share capital of the Company that he holds. The obligation to notify
arises if that person acquires or disposes of shares in the Company which results in the percentage of voting rights which he holds
reaching, exceeding, or falling below, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
The Company has been informed of the holding of voting rights of 5% or more attaching to the Company’s issued ordinary share
capital by Jardine Strategic Holdings Limited (‘Jardine Strategic’), which is directly interested in 1,176,616,646 ordinary shares
carrying 50.41% of the voting rights. By virtue of its interest in Jardine Strategic, Jardine Matheson is also interested in the same
ordinary shares. Apart from this shareholding, the Company is not aware of any holders of voting rights of 5% or more attaching
to the issued ordinary share capital of the Company as at 28th February 2019.
There were no contracts of significance with corporate substantial shareholders during the year under review.
Annual Report 2018 83
Corporate Governance
Governance Principles
The Company’s primary listing on the London Stock Exchange is a standard listing on the Main Market. Under a standard listing,
the Company is subject to the UK Listing Rules (other than those which apply only to companies with a premium listing), the DTRs,
the UK Prospectus Rules and MAR. The Company, therefore, is bound by the rules in relation to continuous disclosure, periodic
financial reporting, disclosure of interests in shares and market abuse, including the rules governing insider dealing, market
manipulation and the disclosure of inside information. The Company is also subject to regulatory oversight from the FCA, as the
Company’s principal securities regulator, and is required to comply with the Admission and Disclosure Standards of the Main Market
of the London Stock Exchange.
When shareholders approved the Company’s move to a standard listing from a premium listing in 2014, the Company stated that
it intended to maintain certain governance principles on the same basis as was then applicable to the Company’s premium listing,
as follows:
1. When assessing a significant transaction, being a larger transaction which would be classified as a class 1 transaction under the
provisions of the UK Listing Rules, the Company will engage an independent financial adviser to provide a fairness opinion on the
terms of the transaction.
2.
In the event of a related party transaction, being a transaction with a related party which would require a sponsor to provide a fair
and reasonable opinion under the provisions of the UK Listing Rules, the Company will engage an independent financial adviser
to confirm that the terms of the transaction are fair and reasonable as far as the shareholders of the Company are concerned.
3. Further, as soon as the terms of a significant transaction or a related party transaction are agreed, an announcement will be issued
by the Company providing such details of the transaction as are necessary for investors to evaluate the effect of the transaction
on the Company.
4. At each annual general meeting, the Company will seek shareholder approval to issue new shares on a non-pre-emptive basis for
up to 33% of the Company’s issued share capital, of which up to 5% can be issued for cash consideration.
5. The Company will continue to adhere to its Securities Dealing Rules. These rules, which were based on the UK Model Code, have
since been revised to follow the provisions of MAR with respect to market abuse and disclosure of interests in shares.
6. The Company will continue its policies and practices in respect of risk management and internal controls.
Related Party Transactions
Details of transactions with related parties entered into by the Company during the course of the year are included in Note 25 to
the financial statements on page 52.
Securities Purchase Arrangements
The Directors have the power under the Bermuda Companies Act and the Company’s Memorandum of Association to purchase
the Company’s shares. Any shares so purchased shall be treated as cancelled and, therefore, reduce the issued share capital of
the Company. When the Board reviews the possibility for share repurchases, it will take into consideration the potential for the
enhancement of earnings or asset values per share. When purchasing such shares, the Company is subject to the provisions of MAR.
During the year the Company repurchased and cancelled a total of 18,878,700 of its ordinary shares for an aggregate cost of
US$132 million. The ordinary shares, which were repurchased in the market, represented some 0.8% of the Company’s issued
ordinary share capital.
Takeover Code
The Company is subject to a Takeover Code, based on London’s City Code on Takeovers and Mergers. The Takeover Code provides
an orderly framework within which takeovers can be conducted and the interests of shareholders protected. The Takeover Code has
statutory backing, being established under the Acts of incorporation of the Company in Bermuda.
Annual General Meeting
The 2019 Annual General Meeting will be held at Rosewood Bermuda, Bermuda on 8th May 2019. The full text of the resolutions
and explanatory notes in respect of the meeting are contained in the Notice of Meeting which accompanies this Report. A corporate
website is maintained containing a wide range of information of interest to investors at www.hkland.com.
Power to Amend Bye-laws
The Bye-laws of the Company can be amended by the shareholders by way of a special resolution at a general meeting of
the Company.
84
Hongkong Land
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 is set out in more detail on page 82 of the Corporate Governance section of this Report. The following are the principal
risks and uncertainties facing the Company as required to be disclosed pursuant to the Disclosure Guidance and Transparency Rules
issued by the Financial Conduct 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 and Financial 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 such developments might have on the Group’s joint venture partners, associates, bankers,
suppliers or tenants. These developments could include 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 and mixed-use developments.
Such developments might increase costs of sales and operating costs, reduce revenues, increase net financing charges, or result in
reduced valuations of the Group’s investment properties or in the Group being unable to meet its strategic objectives.
The steps taken by the Group to manage its exposure to financial risk are set out in the Financial Review on page 16 and Note 30 to
the financial statements on pages 64 to 71.
Commercial Risk
Risks are an integral part of normal commercial practices, and where practicable steps are taken to mitigate them. Risks can be
further pronounced when operating in volatile markets.
The Group makes significant investment decisions in respect of commercial and residential development projects and these are
subject to market risks. This is especially the case where projects take time to come to fruition and achieve the desired returns.
The Group operates in regions which are highly competitive, and failure to compete effectively, whether in terms of price, tender
terms, product specification or levels of service can have an adverse effect on earnings or market share, as can construction risks
in relation to new developments. Significant pressure from such competition may also lead to reduced margins.
It is essential for the products and services provided by the Group’s businesses to meet appropriate quality and safety standards and
there is an associated risk if they do not, including the risk of damage to brand equity or reputation, which might adversely impact
the ability to achieve acceptable revenues and profit margins.
The potential impact of disruption to IT systems or infrastructure, whether as a result of cyber-crime or other factors, could be significant.
Regulatory and Political Risk
The Group is subject to a number of regulatory regimes in the territories in which it operates. Changes in such regimes, in relation
to matters such as foreign ownership of assets and businesses, exchange controls, planning controls, tax rules and employment
legislation, could have the potential to impact the operations and profitability of the Group.
Changes in the political environment in the territories where the Group operates could adversely affect the Group.
Terrorism, Pandemic and Natural Disasters
The Group’s operations are vulnerable to the effects of terrorism, either directly through the impact of an act of terrorism or indirectly
through the effect on the Group’s businesses of generally reduced economic activity in response to the threat of, or an actual act
of, terrorism.
The Group could be impacted by a global or regional pandemic which seriously affects economic activity or the ability of businesses
to operate smoothly. In addition, many of the territories in which the Group operates can experience from time to time natural
disasters such as earthquakes and typhoons.
Annual Report 2018 85
Shareholder Information
Financial Calendar
2018 full-year results announced
Shares quoted ex-dividend
Share registers closed
Annual General Meeting to be held
2018 final dividend payable
2019 half-year results to be announced
Shares quoted ex-dividend
Share registers to be closed
2019 interim dividend payable
* Subject to change
Dividends
28th February 2019
14th March 2019
18th to 22nd March 2019
8th May 2019
15th May 2019
1st August 2019 *
22nd August 2019 *
26th to 30th August 2019 *
17th October 2019 *
Shareholders will receive their cash dividends in United States Dollars, unless they are registered on the Jersey branch register, in which
case they will have the option to elect for their dividends to be paid in Sterling. These shareholders may make new currency elections
for the 2018 final dividend by notifying the United Kingdom transfer agent in writing by 18th April 2019. The Sterling equivalent of
dividends declared in United States Dollars will be calculated by reference to a rate prevailing on 2nd May 2019. Shareholders holding
their shares through CREST in the United Kingdom will receive their cash dividends in Sterling only. Shareholders holding their shares
through The Central Depository (Pte) Limited (‘CDP’) in Singapore will receive their cash dividends in United States Dollars unless they
elect, through CDP, to receive Singapore Dollars.
Registrars and Transfer Agent
Shareholders should address all correspondence with regard to their shareholdings or dividends to the appropriate registrar or
transfer agent.
Principal Registrar
Jardine Matheson International Services Limited
P.O. Box HM 1068
Hamilton HM EX
Bermuda
Jersey Branch Registrar
Link Market Services (Jersey) Limited
12 Castle Street
St Helier, Jersey JE2 3RT
Channel Islands
United Kingdom Transfer Agent
Link Asset Services
The Registry
34 Beckenham Road
Beckenham, Kent BR3 4TU
United Kingdom
Singapore Branch Registrar
M & C Services Private Limited
112 Robinson Road #05-01
Singapore 068902
Press releases and other financial information can be accessed through the internet at www.hkland.com.
86
Hongkong Land
Offices
Hongkong Land Holdings Limited
Jardine House
33-35 Reid Street
Hamilton HM EX
Bermuda
Tel +1441 292 0515
E-mail: gpobox@hkland.com
Philip A. Barnes
Hongkong Land Limited
8th Floor, One Exchange Square
Hong Kong
Tel +852 2842 8428
E-mail: gpobox@hkland.com
Robert Wong
Hongkong Land (Beijing) Management
Company Limited
Room 303, Block 26, Central Park
No. 6 Chaoyangmenwai Avenue
Chaoyang District
Beijing 100020
China
Tel +8610 6597 0921
E-mail: gpobox.bj@hkland.com
James Zhang
Hongkong Land (Chongqing) Investment
and Holding Co. Ltd.
3/F, Zone D, Neptune Building
No. 62 Star Light Road
New North Zone
Chongqing 401147
China
Tel +8623 6703 3016-8
E-mail: gpobox.cq@hkland.com
Ling Chang Feng
Hongkong Land (Hangzhou) Shengyue
Management Co. Ltd.
Unit 3001-1, Building One
Ping An Finance Centre
No. 280 Mingxin Road
Jianggan District
Hangzhou 310016
Zhejiang Province
China
Tel +86 571 87013930
E-mail: gpobox.hz@hkland.com
Shi Guangyu
Hongkong Land (Nanjing) Puzhi Management
Co., Ltd.
Unit B, 55/F, Nanjing Center
No. 1 Zhongshan South Road
Qinhuai District
Nanjing 210001
Jiangsu Province
China
Tel +86 25 8333 8388
E-mail: gpobox.nj@hkland.com
Wesley Wu
Hongkong Land (Philippines) Consultancy, Inc.
1803 The Taipan Place
F. Ortigas Jr. Road
Ortigas Center
Pasig City 1605
Philippines
Tel +632 625 6880
E-mail: gpobox.ph@hkland.com
Lee Chee Hoe
Hongkong Land (Premium Investments) Limited
Unit 702, 7th Floor, EXCHANGE SQUARE
No. 19 & 20
Street 106, Village 2
Sangkat Wat Phnom
Khan Daun Penh, Phnom Penh
Cambodia
Tel +855 2399 2063
E-mail: gpobox.cambodia@hkland.com
Dawn Shu
Hongkong Land (Shanghai) Management
Company Limited
11/F, Tower A, LCM
No. 2389 Zhangyang Road
Pudong New District
Shanghai 200135
China
Tel +8621 2020 0086
E-mail: gpobox.sh@hkland.com
Calvin Tong
Annual Report 2018 87
Offices
Hongkong Land (Singapore) Pte. Ltd.
Beijing Yee Zhi Real Estate Consultancy Co., Ltd.
Room 1123A, 11/F
Office Tower 3 Beijing APM
No. 138 Wangfujing Street
Dongcheng District
Beijing 100006
China
Tel +8610 6520 4800
E-mail: gpobox.bj@hkland.com
Shirley Lam
MCL Land Limited
One Raffles Quay
#22-10 South Tower
Singapore 048583
Tel +65 6238 1121
E-mail: gpobox.mcl@hkland.com
Tan Wee Hsien
PT Hongkong Land Consultancy
and Management
World Trade Centre 1, 17th Floor
Jl. Jend. Sudirman Kav. 29–31
Jakarta 12920
Indonesia
Tel +6221 521 1125
E-mail: gpobox.indonesia@hkland.com
Theodore Chuang
One Raffles Quay
#22-10 South Tower
Singapore 048583
Tel +65 6238 1121
E-mail: gpobox.sg@hkland.com
Robert Garman
Hongkong Land (Wuhan) Investment and
Development Company Limited
Room 1208, CITIC PACIFIC MANSION
No. 1627 Zhongshan Avenue
Jiang An District
Wuhan 430014
Hubei Province
China
Tel +86 27 8289 1566
E-mail: gpobox.wh@hkland.com
Wang Yi Bin
HKL (Thai Developments) Limited
Unit B, 20th Floor, Gaysorn Tower
No. 127 Rajdamri Road
Lumpini Sub-District
Pathumwan District
Bangkok 10330
Thailand
Tel +662 033 0160 ext. 30168
Email: gpobox.thailand@hkland.com
William Bright
HKL (Vietnam) Consultancy and Management
Company Limited
Suite 704, The Metropolitan
235 Dong Khoi
Ben Nghe Ward, District 1
Ho Chi Minh City
Vietnam
Tel +8428 3827 9006
E-mail: gpobox.hcmc@hkland.com
Cosimo Jencks
88
Hongkong Land
Report of the Valuers
To Hongkong Land Holdings Limited
Dear Sirs
Revaluation of Investment Properties Held under Freehold and Leasehold
Further to your instructions, we have valued in our capacity as external valuers the investment properties held under freehold and
leasehold as described in the consolidated financial statements of Hongkong Land Holdings Limited. We are of the opinion that
the market value of the investment properties held under freehold in Cambodia and leasehold in China, Hong Kong, Singapore and
Vietnam as at 31st December 2018, totalled US$33,699,200,000 (United States Dollars Thirty Three Billion Six Hundred Ninety Nine
Million and Two Hundred Thousand).
Our valuations were prepared in accordance with the International Valuation Standards by the International Valuation Standards
Council and The HKIS Valuation Standards by The Hong Kong Institute of Surveyors.
We have inspected the properties without either making structural surveys or testing the services. We have been supplied with details
of tenure, tenancies and other relevant information.
In arriving at our opinion, each property was valued individually, on market value basis, calculated on the net income allowing for
reversionary potential, however no allowance has been made for expenses of realisation or for taxation which might arise in the event
of disposal.
Yours faithfully
Jones Lang LaSalle Limited
Hong Kong, 31st January 2019
Annual Report 2018 89
Lettable area of the property
Location
Total
Office
Retail
(in thousands of square metres)
34
43
139
63
44
24
44
10
52
42
20
29
123
286
42
60
74
15
19
25
17
4
7
30
39
53
47
30
–
4
59
44
–
31
10
38
–
–
23
71
52
57
95
117
37
56
69
14
17
17
5
3
6
4
4
–
–
–
5
–
4
–
24
13
–
14
42
20
6
–
–
2
7
8
5
4
5
1
2
8
12
1
1
Major Property Portfolio
at 31st December 2018
Investment Properties
Ownership
interest
Alexandra House
Chater House
Exchange Square
One Exchange Square
Two Exchange Square
Three Exchange Square
Podium
The Forum
Jardine House
Gloucester Tower
Landmark Atrium
Edinburgh Tower
York House
Prince’s Building
WF CENTRAL
One Central
One Raffles Link
One Raffles Quay
North Tower
South Tower
%
100
100
100
100
100
100
100
100
100
84
49
100
33.3
Marina Bay Financial Centre
33.3
Tower 1
Tower 2
Tower 3
World Trade Centre 1
World Trade Centre 2
World Trade Centre 3
World Trade Centre 5
World Trade Centre 6
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Beijing, mainland China
Macau
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
50
50
50
50
50
Jakarta, Indonesia
Jakarta, Indonesia
Jakarta, Indonesia
Jakarta, Indonesia
Jakarta, Indonesia
EXCHANGE SQUARE
100
Phnom Penh, Cambodia
Gaysorn
Central Building
63 Ly Thai To
49
65
73.9
Bangkok, Thailand
Hanoi, Vietnam
Hanoi, Vietnam
90
Hongkong Land
Development Properties
interest
Location
Total
completed
developed
Ownership
Construction
to be
Developable area of the property
Under
construction/
WE City
Central Avenue
Landmark Riverside
%
50
50
50
Chengdu, mainland China
Chongqing, mainland China
Chongqing, mainland China
Bamboo Grove Riverside
100
Chongqing, mainland China
Lijia Landscape
New Bamboo Grove
Yorkville North
Yorkville South
Hangzhou Bay
Yue City
Caohejing Project
Wuhan Dream Land
Lake Grande
Margaret Ville
Parc Esta
Arumaya
Asya
Gatot Subroto
Nava Park
50
50
100
100
30
33
26.7
50
100
100
100
40
33.5
50
49
Chongqing, mainland China
Chongqing, mainland China
Chongqing, mainland China
Chongqing, mainland China
Hangzhou, mainland China
Nanjing, mainland China
Shanghai, mainland China
Wuhan, mainland China
Singapore
Singapore
Singapore
Jakarta, Indonesia
Jakarta, Indonesia
Jakarta, Indonesia
Serpong, Greater Jakarta,
Indonesia
Broadhill
50
Seremban Forest Heights,
Two Roxas Triangle
King Kaew
The ESSE Sukhumvit 36
29B NDC
Malaysia
Manila, The Philippines
Bangkok, Thailand
Bangkok, Thailand
Ho Chi Minh City, Vietnam
40
49
49
70
(in thousands of square metres)
480
326
518
–
–
378
531
678
–
–
–
–
–
–
–
–
–
–
71
–
–
–
–
–
437
775
486
161
114
262
585
203
776
260
392
493
50
22
98
24
1,085
77
670
43
98
164
38
57
917
1,101
1,004
161
114
640
1,116
881
776
260
392
493
50
22
98
24
1,085
77
741
43
98
164
38
57
Annual Report 2018 91
Major Property Portfolio
Hong Kong – Central District
R A L
E N ’ S R O A D C E N T
Q U E
P
E
D
D
E
R
S
T
R
E
E
T
R A L
S V O E U X R O A D C E N T
D E
I
C
E
H
O
U
S
E
9a
10
9
8
S
T
R
E
E
T
11
R O A D C E N T
L
A
R
3
C O N N A U G H T
Hongkong Land properties
Public car park
Pedestrian bridges
Mass Transit Railway access
L
A
R
T
N
E
C
Standard
Chartered
Bank
D
A
O
R
S
’
N
E
E
U
Q
Bank of
China
L
A
R
T
N
E
D C
HSBC
A
O
X R
U
E
O
S V
E
D
7
IC
E H
6
O
U
S
E S
T
R
E
E
T
12
1
2
Stock
Exchange
O
A R B
H
4
U R V IE W S T R E E T
Airport E xpress Station
G S T R E E T
N
Statue
Square
D
A
O
R
R
E
T
A
H
C
Statue
Square
N R
O
A
D
N
O
C
Mandarin
Oriental
L
A
R
T
N
E
C
D
A
O
R
T
H
G
U
A
N
J
A
C
K
S
O
5
General
Post Office
H E U
N C
A
M
M
A
N
Y
I
U
S
T
R
E
E
T
D
A
O R O
G W
N
L U
9a
10
9
7
8
11
6
1
2
5
3
4
12
1 One Exchange Square
2 Two Exchange Square
3 Three Exchange Square
4 The Forum
Jardine House
5
6 Chater House
7 Alexandra House
8 Gloucester Tower
9 Edinburgh Tower
9a The Landmark Mandarin Oriental
10 York House
11 Landmark Atrium
12 Prince’s Building
92
Hongkong Land
Beijing, China
Chengdu, China
WF CENTRAL
CBD Z3 Site*
Central Park
WE City*
Yixinhu Project*
Chongqing, China
Bamboo Grove
New Bamboo Grove
Bamboo Grove Riverside*
Lijia Landscape*
Central Avenue
Landmark Riverside
Yorkville South
Yorkville North
Liangjiang New Project
Yuelai Project*
Hangzhou, China
Nanjing, China
Hangzhou Bay*
JL CENTRAL*
Yue City*
Jiangbei Project*
* This rendering is for reference only, subject to change and government approval.
Thailand
Gaysorn
The ESSE Sukhumvit 36*
British Embassy compound
Nonthaburi Site*
King Kaew Site
Indonesia
WTC
Anandamaya Residences*
Nava Park*
Indonesia
Malaysia
Asya*
Macau
Gatot Subroto*
Arumaya*
Wangsa Walk Mall
One Central
Vietnam
Central Building
63 Ly Thai To
The Nassim*
29B NDC*
Thu Thiem River Park Project*
Cambodia
Philippines
Central Mansions
EXCHANGE SQUARE
Roxas Triangle Towers*
Mandani Bay*
Bridgetowne*
Singapore
Marina Bay Financial Centre
One Raffles Quay
One Raffles Link
Parc Esta*
Sol Acres
Lake Grande*
Margaret Ville*
Tulip Garden
Shanghai, China
Wuhan, China
Parkville
Caohejing Project*
Wuhan Dream Land*
* This rendering is for reference only, subject to change and government approval.
Hongkong Land Holdings Limited
Jardine House Hamilton Bermuda
www.hkland.com