Henderson Land Development : Highlights of 2018 Final Results

CHAIRMAN'S STATEMENT HIGHLIGHTS

For the year ended 31 December 2018, the Group's reported profit attributable to equity shareholders increased by 1% year-on-year to HK$31,157 million. Excluding the fair value change of investment properties and investment properties under development, the Group's underlying profit (Note 4) attributable to equity shareholders increased by 1% year-on-year to HK$19,765 million.

The Group made use of multiple channels to replenish its development land bank in Hong Kong and encouraging progress was achieved: (1) Three residential sites in Kai Tak Development Area and a development project in Sham Shui Po were secured, adding an aggregate gross floor area of over 1.3 million square feet in attributable terms to its land bank; (2) As regards urban redevelopment projects, other than a total of approximately 0.2 million square feet in attributable gross floor areas has been earmarked for sales launch in 2019, at 31 December 2018, projects with 80% to 100% ownerships acquired still managed to increase by 0.4 million square feet to 4.4 million square feet in total attributable gross floor area; (3) The Group acquired further New Territories land lots of about 0.7 million square feet, increasing its land reserves in the New Territories to approximately 45.6 million square feet, which represents the largest holding among all property developers in Hong Kong.

The following three major income pillars of the Group have been progressing well:

As regards "property sales", following the successful launch of "The Vantage" in Hung Hom in this month, the Group plans to embark on the sale launches of six development projects in 2019. Together with unsold stocks, a total of over 3,000 residential units and over 250,000 square feet of quality industrial/office space in Hong Kong will be available for sale in 2019. As at the end of December 2018, cumulative proceeds from the sales of Hong Kong properties, but not yet accounted for, amounted to approximately HK$19,000 million in attributable terms.

As regards "rental business", the Group's portfolio of completed investment properties comprised an attributable gross floor area of 8.8 million square feet in Hong Kong and 6.4 million square feet in mainland China, providing the Group with a steady rental income stream. The new development at 15 Middle Road, the "Citygate" extension and the office redevelopment project at Electric Road, all in Hong Kong, as well as "Lumina Guangzhou" at Haizhu Square in mainland China are scheduled for completion in 2019. Together with other landmark projects in the pipeline, namely, the office development at Murray Road in Hong Kong as well as "Lumina Shanghai" at Xu Hui Riverside Area in mainland China, the Group's rental income is poised to increase further.

The "associates", namely, Hong Kong and China Gas, Miramar and Hong Kong Ferry, serve as another steady recurrent income stream to the Group. Hong Kong and China Gas, in particular, has a total of nearly 30 million piped-gas customers in both Hong Kong and mainland China, and such number is expected to rise further. This sizeable customer base provides a promising platform for its expansion into new businesses.

With the Group's ample financial resources and astute management of three major businesses (namely, "property sales", "rental business" and "associates") by its seasoned professional team, it is well-placed to pursue sustainable growth, thereby creating ever improving value for the shareholders. Barring unforeseen circumstances, the Group's results for the coming financial year are expected to be satisfactory.

Finally, I, being advanced in age, am considering to step down from the positions of Chairman and Managing Director after the conclusion of the forthcoming annual general meeting and to propose to the Board to appoint Dr Lee Ka Kit and Mr Lee Ka Shing as Joint Chairmen and Managing Directors, and I shall remain as a Director of the Company to continue my service. Details of my decision and future arrangements will be announced on the date of the annual general meeting, 28 May 2019. I would like to express my heart-felt gratitude to our shareholders for their confidence and unfailing support to me as Chairman over the past decades.

Lee Shau Kee

Chairman

Hong Kong, 20 March 2019

Note 1: The comparative figures are restated under the adoption of Hong Kong Financial Reporting Standard 15 "Revenue from contracts with customers", which was effective on 1 January 2018.

Note 2: This amount includes the Group's attributable share of contributions from subsidiaries, associates and joint ventures ("JVs").

Note 3: If the fair value change of the related properties is excluded, the pre-tax underlying profit contribution for the year ended 31 December 2018 should be HK$6,830 million (2017: HK$6,538 million).

Note 4: Excluding the Group's attributable share of fair value change (net of tax) of the investment properties held by subsidiaries, associates and JVs.

Note 5: The earnings per share were calculated based on the weighted average number of shares as adjusted for the effect of the bonus issues under Hong Kong Accounting Standard 33, "Earnings

Per Share". The net asset value per share at 31 December 2018 was calculated based on the number of issued shares outstanding at 31 December 2018, whilst the net asset value per share at 31 December 2017 was calculated based on the number of issued shares outstanding at 31 December 2017 and as adjusted for the bonus issue effected in 2018.

Note 6: Including the total attributable developable area of about 4.4 million square feet from the projects in Fanling North and Wo Shang Wai, which are subject to finalisation of land premium.