Sun Hung Kai Properties has been building ‘Homes with Heart’ for over three decades. The Group has already built dream homes for hundreds of thousands of Hong Kong people, and it is dedicated to creating the finest residences for the next generation of homebuyers. Cover Photos: 1 Two IFC, Central 2 YOHO Town, Yuen Long 1234 3 Kelletteria, The Peak 4 Airport Railway Kowloon Station Package 3 Development SUN HUNG KAI PROPERTIES LIMITED Annual Report 2002/03 2 SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2002/03 Contents 3 Financial Highlights 4 Corporate and Shareholders’ Information 5 Corporate Structure 6 Chairman’s Statement 18 Review of Operations 72 Financial Review 76 Group Financial Summary 77 Directors’ Report 93 Directors and Organization 104 Financial Contents SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2002/03 3 FINANCIAL HIGHLIGHTS For the year ended 30th June 2003 2002 Change (%) Turnover (HK$ million) 22,945 25,373 -9.6 Profit attributable to shareholders (HK$ million) 6,584 8,519 -22.7 Earnings per share (HK$) 2.74 3.55 -22.8 Dividends per share (HK$) 1.60 1.55 +3.2 Special cash dividends per share (HK$) – 0.60 – Shareholders’ funds per share (HK$) 50.70 53.56 -5.3 Gross rental income 1 (HK$ million) 5,628 5,844 -3.7 Net rental income 1 (HK$ million) 4,100 4,432 -7.5 Net debt to shareholders’ funds ratio (%) 10.9 15.6 -4.7 2 Land bank (million square feet) 45.3 50.4 -10.1 Turnover Earnings and Dividends Net Asset Value per Share per Share* HK$ million HK$ HK$ 30,000 5 60 4.51 25,826 53.48 53.56 25,373 51.56 50.70 25,000 23,404 50 22,945 4 3.87 45.45 3.47 3.55 20,000 40 17,701 3 2.74 15,000 30 2.153 2 1.75 1.60 10,000 1.55 1.55 20 1 5,000 10 0 0 0 1999 2000 2001 20022003 1999 2000 2001 20022003 1999 2000 2001 2002 2003 Earnings * Except for completed investment Dividends properties, hotels and marketable securities, which are stated at market Special cash dividends value, all assets are at historical cost 1 Including contributions from jointly-controlled entities and associates 2 Change in percentage points 3 Including special cash dividends of HK$0.60 per share for the Group’s 30th anniversary 4 SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2002/03 CORPORATE AND SHAREHOLDERS’ INFORMATION CORPORATE INFORMATION Directors Company Secretary Principal Bankers Kwok Ping-sheung, Walter Lai Ho-kai, Ernest Bank of China (Hong Kong) Limited Chairman & Chief Executive The Hongkong & Shanghai Banking # Lee Shau-kee Registered Office Corporation Limited Vice Chairman Hang Seng Bank Limited Kwok Ping-kwong, Thomas 45th Floor, Sun Hung Kai Centre Industrial and Commercial Bank of China Vice Chairman & Managing Director 30 Harbour Road The Bank of Toyko-Mitsubishi, Ltd. Kwok Ping-luen, Raymond Hong Kong Sumitomo Mitsui Banking Corporation Vice Chairman & Managing Director Telephone: (852) 2827 8111 Standard Chartered Bank * Chung Sze-yuen Facsimile: (852) 2827 2862 Mizuho Corporate Bank, Ltd. * Woo Po-shing Web site: www.shkp.com UFJ Bank Limited * Fung Kwok-king, Victor E-mail: [email protected] The Bank of East Asia, Limited * Kwan Cheuk-yin, William # Lo Chiu-chun, Clement Solicitors # Law King-wan Auditors Chan Kai-ming Deloitte Touche Tohmatsu Woo, Kwan, Lee & Lo Chan Kui-yuen, Thomas Johnson, Stokes & Master Kwong Chun Winston Chu & Company Wong Yick-kam, Michael Registrars Wong Chik-wing, Mike Computershare Hong Kong Investor So Hing-woh, Victor Services Limited * Woo Ka-biu, Jackson (Alternate Rooms 1712-6, Hopewell Centre Director to Woo Po-shing) 183 Queen’s Road East Hong Kong # Non-Executive Director * Independent Non-Executive Director SHAREHOLDERS’ CALENDAR Register of Shareholders Dividends (per share) Close of Register (both days inclusive) Interim Dividend HK$0.60 11th November 2003 – 18th November 2003 Paid on 8th April 2003 Final Dividend HK$1.00 Annual General Meeting Payable on 19th November 2003 18th November 2003 LISTING INFORMATION INVESTOR RELATIONS CONTACT Share Listing The Company’s shares are listed on The Stock Exchange of Please direct enquiries to: Hong Kong and are traded over the counter in the United States in General Manager – Corporate Planning the form of American Depositary Receipts. Telephone: (852) 2828 7786 Facsimile: (852) 2827 0676 Stock Code E-mail: [email protected] The Stock Exchange of Hong Kong: 16 Bloomberg: 16 HK Equity Reuters: 0016.HK Trading Symbol for ADR: SUHJY CUSIP Number: 86676H302 SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2002/03 5 CORPORATE STRUCTURE Sun Hung Kai Properties* As at 30th June 2003 Hong Kong Mainland China Property Telecoms & Transportation, Property Property Property Related Information Infrastructure Development Development Investment Businesses Technology & Logistics & Investment Kowloon River Trade 18.1 million sq.ft. 20.5 million sq.ft. SmarTone* 5.8 million sq.ft. Hotels Motor Bus* Terminal under development completed 51.1% under development 33.3% 43% investment properties Asia Container SUNeVision* Over 21 million sq.ft. 6.7 million sq.ft. RoadShow* Terminals 1.8 million sq.ft. Construction 84.9% of agriculture land under development 25.6% 28.5% completed investment (site area) properties Mid-Stream Property Route 3 (CPS) Operation Management 50% 50% Financial Wilson Group Logistics Services 100% Airport Freight Waste Insurance Forwarding Centre Management 100% Business Aviation Centre 35% * Listed in Hong Kong 6 SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2002/03 CHAIRMAN’S STATEMENT I am pleased to present my report to the shareholders. RESULTS The Group’s profit after taxation and minority interests for the year ended 30th June 2003 was HK$6,584 million, a decrease of 23 per cent compared with last year’s profit of HK$8,519 million. Earnings per share for the year were HK$2.74, representing a 23 per cent decrease compared with HK$3.55 per share for the previous year. The earnings for the year reflect a provision for the diminution in value of property development projects and provisions made by SUNeVision Holdings, which together amounted to HK$1,481 million. DIVIDENDS The Directors have recommended the payment of a final dividend of HK$1.00 per share for the year ended 30th June 2003. Together with the interim dividend of HK$0.60 per share, the dividend for the year will be HK$1.60 per share, compared with HK$1.55 per share for the previous year (excluding last year’s special 30th anniversary bonus dividend of HK$0.60 per share). BUSINESS REVIEW Property Sales Property sales turnover for the year as recorded in the accounts was HK$12,543 million, as compared with last year’s sales of HK$16,164 million. During the year, the Group sold and pre-sold an attributable HK$12,157 million worth of properties in Hong Kong, as compared with HK$15,151 million for the previous year. Sales were temporarily affected by the outbreak of SARS during the second quarter of 2003, but picked up quickly after the disease was brought under control. Major residential projects sold during the year included Park Island Phase 1 on Ma Wan, 1 Po Shan Road in Mid-Levels, 1 Ho Man Tin Hill, Park Central in Tseung Kwan O and Aegean Coast in Tuen Mun. Since the beginning of July 2003, the Group has sold over HK$3,600 million worth of properties. The public sale of YOHO Town in Yuen Long set a one-day record for the year. SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2002/03 7 A prime location, luxury and elegant style make 1 Ho Man Tin Hill in Kowloon a local landmark. During the year under review, the Group completed the following ten projects, comprising 6.2 million square feet of attributable gross floor area: Group’s Attributable Project Location Usage Interest Gross Floor Area (%) (square feet) Park Island Phase 1 8 Pak Lai Road, Ma Wan Residential/ Joint venture 1,851,000 Shopping centre Park Central Phases 1 & 2 Tseung Kwan O Town Residential/ 57.52 / 25 1,592,000 Lots 57 & 66 Shopping centre Ocean Shores Phase 3A 88 O King Road, Tseung Kwan O Residential/ Shops 49 512,500 Villa by the Park 139 Castle Peak Road, Yuen Long Residential 100 439,000 Aegean Coast Tuen Mun Town Lot 374 Residential/ Shops 25 312,000 1 Ho Man Tin Hill 1 Ho Man Tin Hill Road Residential Joint venture 158,000 1 Po Shan Road 1 Po Shan Road, Mid-Levels Residential 60 72,000 Kelletteria 71 Mt. Kellett Road, The Peak Residential 100 14,000 Two IFC 8 Finance Street, Central Office/ 47.5 1,169,000 Shopping centre Millennium City Phase 3 370 Kwun Tong Road Office 70 108,000 Total 6,227,500 Over 92 per cent of the residential projects completed during the year have been sold. Millennium City Phase 3 and the shopping centre in Park Central are being kept as long-term investments. Likewise, Two IFC is being retained for rental except for the highest office space zone, which was sold to one owner-occupier. 8 SUN HUNG KAI PROPERTIES LIMITED ANNUAL REPORT 2002/03 CHAIRMAN’S STATEMENT Land Bank The Group did not acquire any land during the year, due mainly to the moratorium on government land sales. The sale of residential properties completed during the year and of some office space in Two IFC reduced the Group’s Hong Kong land bank to 45.3 million square feet. Negotiations with the government on land premiums are continuing.