WHEELOCK AND COMPANY LIMITED Interim Report 2001/02 • Unaudited Group profit of HK$460.8 million, an increase of 0.1% over last year. • With a well-diversified business portfolio, the Group demonstrated the resilient nature of its operations. • Wharf’s core office portfolio over 90% occupied, with retail at over 98% and serviced apartments over 85%. Tower 6 of Gateway II under active leasing. • Sorrento (Phase I), the MTRC Kowloon Station Package Two development on Union Square, launched with favourable response. • Pre-sale for two other developments – Bellagio and Palm Cove – targeted for first half of 2002. • i-CABLE’s strong earnings momentum continuing on the back of strong turnover growth. • Modern Terminals’ throughput growth outperformed industry average. • Group well-positioned to benefit from China’s entry into the WTO. GROUP RESULTS The unaudited Group profit attributable to Shareholders for the six months ended 30 September 2001 amounted to HK$460.8 million, compared to HK$460.5 million achieved in the same period last year. Earnings per share were 22.7 cents (2000 – 22.7 cents). 1 WHEELOCK AND COMPANY LIMITED Interim Report 2001/02 INTERIM DIVIDEND a total of more than 4% drop in The Board has declared an interim the average mortgage rate this year. dividend in respect of the half-year Together with the Government’s shift period ended 30 September 2001 of 2.5 towards a much more pro-market cents (2000 – 2.5 cents) per share, stance, Hong Kong’s residential payable on Thursday, 31 January 2002 property market now appears to be to Shareholders on record as at stabilized. 11 January 2002. On the macro front, most western BUSINESS REVIEW countries have come closer together With a well-diversified portfolio of to work on possible solutions or businesses in the areas of property precautionary actions in arresting any development, property investment, further world-wide recessionary slump, quality retail, CME (communications, as a result of the “911” tragedy in the media and entertainment) and logistics, United States. Moreover, this particular most of which have a substantial incident has also prompted central recurrent earnings base, the Wheelock banks around the world to relax their Group has explicitly demonstrated the monetary policy further. Given that the resilient character of its operations long-term fundamentals of Hong Kong under the prevailing volatile market have not changed, being strategically conditions. located at the doorstep of China which is widely anticipated to be the market Rising sales transactions for primary with the highest growth potential in the residential units recorded recently in coming decade, economic activities here Hong Kong are indicative signs of will pick up at some stage following interest rate cuts taking effect after the conclusion of the WTO deal. 2 WHEELOCK AND COMPANY LIMITED HEELOCK AND OMPANY IMITED W Interim ReportC 2001 L Interim Report 2001/02 PROPERTY Corporation, and two Wharf group’s During the period under review, the companies. The initial batch out of the Group continued its sales of various total 1,272 units under Phase I has property projects, including mainly The just been launched with extremely Primrose, The Astrid, Forest Hill and favourable response. Construction My Loft. works have been progressing according to schedule. Completion of Phase I is Bellagio, the Sham Tseng site, is a joint expected by the end of 2002. venture development equally owned by the Company, New Asia Realty and The residential development on Castle Wharf. The lease modification for the Peak Road known as Palm Cove will enlarged CDA site has recently been have a total of 228,000 square feet finalized with the Government. in GFA providing 260 units. Construction works for all four phases Superstructure works are in progress have been progressing according to and pre-sale is targeted to take place in schedule. Pre-sale for initial phases the first half of 2002. covering 1,704 units is targeted to take place during the first half of 2002. The King’s Park development is owned Completion of these phases of the by a five-member consortium development is scheduled for 2003. comprising Realty Development Corporation, New World Development, Sorrento, the MTRC Kowloon Station Sino Land, Chinese Estates and Package Two development, is equally Manhattan Garments. This residential owned by a five-member consortium site located in Homantin will be comprising the Company, New developed into eight towers consisting Asia Realty, Realty Development of 700 units with a total GFA of 3 WHEELOCK AND COMPANY LIMITED Interim Report 2001/02 904,200 square feet. Demolition works This redevelopment will proceed when have completed and the tendering for market conditions improve in foundation works is now in progress. Singapore. In Singapore, the physical hand-over of The office tower as well as podium units to purchasers marked the levels 3, 4 and 5 of the Wheelock Place successful completion of the Ardmore in Singapore are currently 93 per cent Park project undertaken by Marco Polo let to quality multinational tenants. Developments Limited, a subsidiary of the Company. Following the grant of The former Marco Polo Hotel the Temporary Occupation Permit in Singapore site is now being redeveloped May 2001, the Certificate of Statutory into a freehold, luxury high-rise Completion was also obtained on condominium complex with 467,600 18 October 2001. To-date stage billings square feet in GFA, known as “Grange representing 98 per cent of the total Residences”. Foundation works have sale price of all units sold have been now completed and other construction billed and 85 per cent of those have works have been progressing according been collected. to schedule. Completion is expected by the second half of 2003. The average occupancy of Ardmore View is currently 96 per cent with RETAIL duration of leases ranging from 12 to In the first half of this financial year, 24 months. Provisional planning the weak economy and consumer permission for the redevelopment of sentiments had put pressure on the this property to 110,200 square feet Group’s retail business. In spite of the GFA was obtained in February 2000. positive turnover growth, the need to 4 WHEELOCK AND COMPANY LIMITED HEELOCK AND OMPANY IMITED W Interim ReportC 2001 L Interim Report 2001/02 offer deeper discounts to stimulate sales renovation in August and re-opened a has caused Lane Crawford to suffer a month later with its retail area doubled decline in operating margin. To restore and a Joyce Beauty outlet appended. the position, tighter cost control and One Hugo shop was added in Causeway merchandizing control programmes Bay and two Boss concession counters have been implemented. were also opened in Times Square Lane Crawford and Central Lane Crawford. The fourth On Pedder boutique in Hong Kong opened in April 2001 has WHARF achieved a satisfactory result. The The Group’s principal associate Wharf company will continue to focus on Holdings recorded an unaudited profit maintaining and extending this brand of HK$1,145 million for the half-year across the region. period ended 30 June 2001. Driven by stable recurrent earnings and value Joyce Boutique’s turnover showed a creation opportunities originating from significant drop during the period under its flagship investment property at review due mainly to the closure of four Kowloon Point, Wharf has successfully Armani Shops in January 2001. built up significant presence in all three Sluggish sales and deeper promotional core business areas of property, CME discounts were again the main reasons and logistics. for a narrowing profit margin. The company’s cost rationalization exercise Bucking the trend of the lacklustre continued. market conditions, the occupancy rate of Harbour City office excluding Tower In terms of expansionary movements, 6 of Gateway II had improved steadily Joyce at Pacific Place was closed for to over 90 per cent in the first six 5 WHEELOCK AND COMPANY LIMITED Interim Report 2001/02 months of this year. By securing high of Causeway Bay. During the first quality tenants such as Japan six months, Times Square office Airlines, Singapore Telecom and maintained a 92 per cent occupancy GlaxoSmithKline at the newly launched while the retail portion remained Tower 6, Harbour City office has virtually full at more than 98 per cent. explicitly demonstrated its exceptional ability in attracting multinationals in Nelson Court on Waterloo Road was addition to trading houses. Apart from launched during early 2001. The pre- the office portion, other segments sale was extremely well received to an also did fairly well. Persistently high extent that majority of the units were average occupancy at 98 per cent has sold within hours. Following the shown that shops in Harbour City successful completion of various are under keen demand. With its development projects including Galaxia, outstanding quality and services, Serenade Cove and Nelson Court which Gateway Apartments achieved an totalled 1.1 million square feet, Wharf occupancy rate of 85 per cent at the made a move in July to buy over end of June. Extensive studies are being Wheelock’s 15.6 per cent interest in the carried out for Ocean Terminal’s Yau Tong Consortium in order to renovation plan as well as the building replenish its land reserve. plan for the approved Ferris wheel. Despite a slow-down in the global Being a widely accepted successful case economy as well as intense competition in the Hong Kong retail property during the first six months, the three sector, Times Square continues its role Marco Polo Hotels in Hong Kong as the centre of gravity for both business managed to maintain an overall and leisure activities within the district occupancy of over 84 per cent. 6 WHEELOCK AND COMPANY LIMITED HEELOCK AND OMPANY IMITED W Interim ReportC 2001 L Interim Report 2001/02 After achieving a net profit of HK$20 from 25 per cent to 33 per cent.