Kowloon-Canton Railway Corporation • Annual Report 2006 MISSION and VISION
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Kowloon-Canton RailwayCorporation Kowloon-Canton Railway Corporation Annual Report 2006 MEETING Annual Report2006 CHALLENGES PREPARING FOR CHANGE Kowloon-Canton Railway Corporation KCRC House, 9 Lok King Street, Fo Tan, Hong Kong www.kcrc.com This annual report is printed on environmentally-friendly, totally chlorine-free paper KCRC: MEETING CHALLENGES, PREPARING FOR CONTENTS CHANGE Transport The year 2006 was one of both 28 challenge and change. During the year we faced the challenge of building ridership and met it by increasing patronage for all of our passenger services. We also met the crucial challenge of further expanding Property our rail network by completing the construction of the Lok Ma Chau 46 Development Spur Line for opening by mid-2007, and Other and starting works on the Kowloon Businesses Southern Link and the planning for the construction of the Northern Link and the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link. We dealt 2 Corporate Profile successfully with a technical problem 3 Mission and Vision that involved our East Rail trains but 4 About KCRC / KCR Network posed no risks to our passengers. To 6 KCR Mainland Connections 7 Key Figures and Credit Ratings retain passengers’ confidence in our 8 2006 Snapshots services, we adopted a policy of total 12 Managing Board transparency as regards what actions 14 Management Committee were being taken. 16 Senior Management 17 KCRC Services During the year we also enhanced our 18 Chairman’s Statement 22 Statement of the Chief Executive Officer services to ensure Hong Kong people can continue to enjoy a railway service 28 Transport that is consistently ranked among the 31 Domestic and Cross-boundary Services world’s best. 36 Light Rail and Bus 38 Mainland Links The year ahead could bring the most significant change in the Corporation’s 40 Network Expansion history, with the possibility of a merger 43 New Extensions of the rail systems of KCRC and the 45 Future Projects MTR Corporation. In anticipation of this possibility, we prepared our staff during the year for a smooth integration of the two systems should the merger be approved. Network 40 Expansion Human The Drive 54 Resource and 60 Towards Quality Sustainability Management 46 Property Development and Financial Statements and Notes Other Businesses 88 Independent Auditor’s Report 49 Property Development 89 Consolidated Income Statement 52 Other Businesses 90 Consolidated Balance Sheet 91 Corporation Balance Sheet 54 Human Resource and 92 Consolidated Statement of Changes in Equity 93 Consolidated Cash Flow Statement Quality Management 94 Notes to the Financial Statements 57 Human Resource 59 Quality Management Financial Statements in Foreign Currencies 159 Consolidated Income Statement 60 The Drive Towards Sustainability 160 Consolidated Balance Sheet 63 The Environment 161 Corporation Balance Sheet 64 Social Awareness 162 Consolidated Statement of Changes in Equity 64 Reaching out to the Community 163 Consolidated Cash Flow Statement 65 Caring for Staff 66 Health and Safety Corporate Information 164 Ten-year Statistics Finance and Board Reports 170 Banks and Financial Institutions 68 Investment and Financing Strategies 171 List of Consultants 70 Financial Review 172 Glossary of Financial Terms and 74 Corporate Governance Report Further Information 83 Report of the Members of the Managing Board CORPORATE PROFILE The Kowloon-Canton Railway came into service in 1910 and has since played a central role in the life of Hong Kong. In 1982 the Kowloon-Canton Railway Corporation (KCRC) was established through the enactment of the Kowloon-Canton Railway Ordinance. In addition to providing high quality mass transport services in the Hong Kong Special Administrative Region, the Corporation designs and develops new railways and is active in property development and related commercial activities. KCRC is one of the world’s most successful public transport operators, carrying about 1.6 million passengers each day. In recent years the Corporation has significantly expanded its network. West Rail, opened in 2003, extended rail services to the North West New Territories, and the completion of Ma On Shan Rail and the Tsim Sha Tsui Extension in 2004 further enhanced the network’s reach and connectivity. The Corporation’s 113-kilometre network now links much of the New Territories to Hong Kong’s urban areas. KCRC also contributes significantly to Hong Kong’s social and economic development by providing cross-boundary rail services, developing new railways, and extending rail services to growing areas of the New Territories. 2 Kowloon-Canton Railway Corporation • Annual Report 2006 MISSION AND VISION The Corporation’s mission is to provide a safe, reliable, profitable and integrated railway network that meets the increasing demand for domestic, cross-boundary and intercity railway services. KCRC is dedicated to finding better ways to • Serve customers and meet performance pledges • Fulfil both Government and corporate objectives • Maintain financial strength • Develop sound business partnerships • Build teamwork and commitment in staff • Encourage initiative and reward success The Corporation’s vision is to be a world leader in providing quality transport services on the basis of prudent commercial principles. Kowloon-Canton Railway Corporation • Annual Report 2006 3 SHENZHEN ABOUT KCRC KCR Network Lo Wu Lok Ma Chau 1 Sheung Shui Fanling KCR came into service in 1910 3 Long Ping Tai Wo Tin Shui Wai Tai Po Market Incorporated in Yuen Long Kam Sheung Road 1982 Wu Kai Sha University NEW TERRITORIES Ma On Shan Heng On Racecourse Total route length Siu Hong Tai Shui Hang Fo Tan Shek Mun 113 KM Tuen Mun Sha Tin City One Sha Tin Wai 1.6 MILLION Tsuen Wan West Tai Wai Che Kung Temple passengers daily Mei Foo Kowloon Tong Mong Nam Cheong Kok 6,049 4 KOWLOON employees 2 West Kowloon Hung Hom $5,622 MILLION East Tsim Sha Tsui revenue in 2006 4 LANTAU ISLAND HONG KONG ISLAND East Rail West Rail Ma On Shan Rail Light Rail 1 Lok Ma Chau Spur Line (opens in 2007) 2 Kowloon Southern Link (opens in 2009) 3 The Northern Link (under planning) 4 Shatin to Central Link (under planning) 4 Kowloon-Canton Railway Corporation • Annual Report 2006 Kowloon-Canton Railway Corporation • Annual Report 2006 5 ABOUT KCRC KCR Mainland Connections Hong Kong’s ONLY RAIL Harbin LINK with the Mainland 8,970 Huhhot Beijing PASSENGERS Tianjin a day on through trains Yinchuan Taiyuan Shijiazhuang Urumqi Jinan Direct through train service to 6 MAINLAND Lanzhou Zhengzhou Xi´an CITIES Nanjing Hefei Shanghai Hangzhou 12 ROUND Chengdu CHINA Wuhan Chongqing Nanchang TRIPS Changsha a day for Guangzhou-Kowloon Guiyang Through Train Hengyang Guilin Kunming e-TICKETING Guangzhou website for booking of through Zhaoqing Dongguan train tickets Foshan Nanning Hong Kong Through Train Routes Beijing Line Shanghai Line Guangdong Line Mainland Major Rail Network 6 Kowloon-Canton Railway Corporation • Annual Report 2006 KEY FIGURES AND CREDIT RATINGS 2006 2005 FINANCIAL HIGHLIGHTS (HK$ million) (HK$ million) Revenue from operations 5,622 5,383 Operating profit before depreciation and amortisation 2,580 2,356 Operating profit after depreciation and amortisation 292 98 Net profit after tax 278 317 Capital expenditure 3,317 3,835 Interest-bearing borrowings (HK$ million) 19,212 19,474 Debt/equity ratio 1:3.1 1:3.1 Interest cover (times) 2.2 1.9 CREDIT RATINGS 2006 2005 Standard & Poor’s Short-term local currency corporate credit rating A-1+ A-1+ Short-term foreign currency corporate credit rating A-1+ A-1+ Long-term local currency corporate credit rating AA AA- Long-term foreign currency corporate credit rating AA AA- Moody’s Short-term issuer rating P-1 P-1 Long-term local currency issuer rating Aa3 Aa3 Long-term foreign currency issuer rating Aa3 A1 Senior unsecured local currency debt rating Aa3 Aa3 Senior unsecured foreign currency debt rating Aa3 Aa3 OPERATING HIGHLIGHTS 2006 2005 Number of passengers (millions) East Rail (including Ma On Shan Rail) 335 325 Through Train 3.3 3.1 West Rail 73 65 Light Rail 136 136 Bus (excluding East Rail buses) 30 27 Freight volume (thousands) Southbound goods (tonnes) 352 375 Northbound goods (tonnes) 228 234 Livestock (heads) 18 129 Employees at year end (number) 6,049 5,879 2006 2005 SERVICE PUNCTUALITY* (%) (%) East Rail Main Line 99.82 99.82 Ma On Shan Rail 99.94 99.92 West Rail 99.88 99.76 Light Rail 99.92 99.94 * trains arriving at their destinations within three minutes of the scheduled time. Kowloon-Canton Railway Corporation • Annual Report 2006 7 2006 SNAPSHOTS Visit by Minister of Railways China’s Minister of Railways Mr Liu Zhijun led a delegation to Hong Kong between 26 and 28 February Cracks investigation to study the development of Hong Kong’s passenger and freight rail The Corporation began transport, infrastructure and facilities. investigating the cause of the cracks found in the Planning go-ahead for NOL welded supports of the and ERL underframe components The Executive Council gave the of some East Rail trains. green light to commence further Short-term mitigation planning for the Northern Link and measures were put in the Hong Kong section of the place to ensure the safe Guangzhou-Shenzhen-Hong Kong operation of trains. Express Rail Link. JANUARY FEBRUARY MARCH Sheung Shui KCRC named a Caring Station Organisation improvement After receiving the Caring Company award A new Sheung Shui for three consecutive years, KCRC was Station southern named a Caring Organisation by the Hong concourse was opened Kong Council of Social Services, in preparation for the acknowledging the Corporation’s increase in patronage contributions to the community. when the Lok Ma Chau Spur Line comes into service. Visit by Chief Executive On 4 February the Chief Executive of the Hong Kong SAR Government, Mr Donald Tsang, visited Ho Tung Lau Maintenance Centre.