Annual Report 2011 - Hysan Development Company Limited

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Management’s Discussion and Analysis Treasury Policy Market Highlight The global economic recovery remained slow and uncertain in 2011. Concerns about sovereign debt risks in the Euro zone and economic slowdown and high unemployment rates in the developed economies exerted pressure on the financial markets. Although the Asian economies maintained its growth trend in 2011, the pace slowed down as tight liquidity led to depressed financial assets prices and increased borrowing costs in the second half of the year. Against this uncertain backdrop, the Group will continue to focus on liquidity management in 2012. Objectives We adhere to a policy of financial prudence. Our objectives are to: • maintain a strong financial position by actively managing debt levels and cash flow; • secure diversified funding sources from both banks and capital markets; • minimise re-financing and liquidity risks by attaining a healthy debt repayment capacity, diversified maturity profile, and availability of banking facilities with minimum collateral on debt; • manage the exposures arising from adverse market movements in interest rates and foreign exchange through appropriate hedging strategies; • monitor credit risks by imposing proper counter-party limits; and • reduce financial investment risks by holding quality marketable securities. To achieve the objective of financial prudence, Hysan’s Treasury policy manual lays down the acceptable range of operational parameters and gives guidance on our key performance indicators as set out in the table. Reflecting our strong financial position, the Group maintained its investment-grade credit ratings of Baa1 as rated by Moody’s and BBB as rated by Standard and Poor’s in 2011. Treasury has an overall objective of optimising borrowing costs and the management of associated risks: that is, to minimise finance costs subject to the constraints of our operational parameters. The average cost of financing for 2011 was 2.7%, same as 2010. KEY PERFORMANCE INDICATORS Average Finance Costs Bank Facilities: Capital Market Issuance Average Debt Maturity Floating Rate Debt (% on Total Debt) Net Interest Coverage Net Debt to Equity 40 Hysan Annual Report 2011
How are they measured Interest expenses divided by average gross debt for the year Why are they significant Our treasury aims to manage and optimise finance costs Performance HIBOR in 2011 continued to hover at a level similar to 2010 Average Finance Costs 2.7% for 2011 (2.7% for 2010) Overview How is it measured The proportion of the borrowings from banks and from capital markets relative to gross debt Why is it significant As a measure of diversification of funding sources Performance More bank borrowings were utilised during the year to increase our financial flexibility Bank Facilities : Capital Market Issuance 43.1%:56.9% at year- end 2011 (29.7% : 70.3% at year-end 2010) How is it measured The weighted average of the remaining maturity period of the Group’s gross debt How is it measured Debt effectively in floating interest rates divided by gross debt How is it measured Gross profit less administrative expenses before depreciation divided by net interest expenses How is it measured Borrowings less time deposits, cash and bank balances divided by shareholders’ funds Why is it significant An indicator of the pressure for re-financing or repaying the existing borrowings in the near term Why is it significant A measure to calculate the percentage of borrowings subject to fluctuations in market interest rates Why is it significant It represents the Group’s financial ability from operating activities to meet its interest payment obligations Why is it significant A benchmark as to the healthy debt level as well as an indicator of the Group’s ability to raise further debt Performance The average maturity was about the same as at year-end 2010 Performance The ratio was kept around the same level as at year-end 2010 Performance Ratio reflects our stable profit against higher net interest expenses Performance The ratio remains low and the Group’s ability to raise further debt remains strong Average Debt Maturity 4.2 years at year- end 2011 (4.3 years at year-end 2010) Floating Rate Debt 54.8% at year-end 2011 (53.6% at year-end 2010) Net Interest Coverage 12.3times for 2011 (14.0 times for 2010) Net Debt to Equity 7.6% at year-end 2011 (6.4% at year-end 2010) Strategy in Action Corporate Governance Financial Statements and Valuation Hysan Annual Report 2011 41
Page 1 and 2: A BETTER FUTURE TODAY Annual Report
Page 3 and 4: A BETTER FUTURE TODAY 2011 was a pr
Page 6: Asset enhancements: Lee Theatre are
Page 10: Hysan Place at the northern gateway
Page 14: An energetic and unique district in
Page 17 and 18: Overview 16 18 20 Who We Are 16 16
Page 19 and 20: OUR VALUES We foster the highest bu
Page 21 and 22: NON-FINANCIAL PERFORMANCE 789 700 4
Page 23 and 24: Further Transformation of Hysan’s
Page 25 and 26: 24 28 30 45 48 Our Marketplace and
Page 27 and 28: 6% 4% Real Gross Domestic Product*
Page 29 and 30: Index 140 130 120 110 100 90 80 Q1
Page 31 and 32: THE LEE GARDENS 33 Hysan Avenue, Ca
Page 33 and 34: Recurring Underlying Profit, arrive
Page 35 and 36: Overview Our office has a balanced
Page 37 and 38: Overview Residential Sector Our res
Page 39 and 40: Financial Review A review of the Gr
Page 41: Cash Flows Cash flow of the Group d
Page 45 and 46: The following graph shows the perce
Page 47 and 48: Internal Controls and Risk Manageme
Page 49 and 50: Our Approach to Risk Management We
Page 51 and 52: Talent Management Our people manage
Page 53 and 54: 52 56 73 81 89 Board of Directors a
Page 55 and 56: Non-executive Deputy Chairman (S) S
Page 57 and 58: Overview Senior management team (fr
Page 59 and 60: Exceeded Code Provisions ✓ ✓
Page 61 and 62: Governance Framework The Group oper
Page 63 and 64: Board and Management At the core of
Page 65 and 66: Board Effectiveness Skills and Bala
Page 67 and 68: Independent Advice The Board recogn
Page 69 and 70: Audit Committee Composition and Mee
Page 71 and 72: Shareholders The Board and manageme
Page 73 and 74: Shareholder Rights Self-funded Prog
Page 75 and 76: Directors’ Report The Directors s
Page 77 and 78: THE BOARD continued According to Ar
Page 79 and 80: CONTINUING CONNECTED TRANSACTIONS c
Page 81 and 82: CONTINUING CONNECTED TRANSACTIONS c
Page 83 and 84: Directors’ Remuneration and Inter
Page 85 and 86: DIRECTOR COMPENSATION continued Lon
Page 87 and 88: DIRECTOR COMPENSATION continued Lon
Page 89 and 90: DIRECTORS’ INTERESTS IN SHARES As
Page 91 and 92: Audit Committee Report The Audit Co
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Overview 4 Financial Statements and
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Independent Auditor’s Report Over
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Consolidated Statement of Comprehen
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Statement of Financial Position At
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Attributable to owners of the Compa
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2011 2010 Note HK$ million HK$ mill
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4. Investment Properties Investment
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7. FINANCIAL INSTRUMENTS continued
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13. TAXATION continued Deferred tax
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2. APPLICATION OF NEW AND REVISED H
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5. SEGMENT INFORMATION continued Se
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6. INVESTMENT INCOME Investment inc
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9. TAXATION continued The taxation
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12. DIRECTORS’ EMOLUMENTS continu
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12. DIRECTORS’ EMOLUMENTS continu
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15. EARNINGS PER SHARE (a) Basic an
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17. PROPERTY, PLANT AND EQUIPMENT L
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18. Investments in Subsidiaries Inv
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19. Investments in Associates conti
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22. Equity Investments/Available-fo
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23. Other Financial Assets/Liabilit
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27. TIME DEPOSITS/CASH AND BANK BAL
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30. BORROWINGS continued (c) Fixed
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32. SHARE CAPITAL Number of shares
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36. CONTINGENT LIABILITIES At the e
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39. RELATED PARTY TRANSACTIONS AND
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40. SHARE-BASED PAYMENT TRANSACTION
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1. Financial Risk Management Object
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3. FAIR VALUE continued The followi
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4. CAPITAL RISK MANAGEMENT The Grou
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At 31 December As restated As resta
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Schedule of Principal Properties At
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Shareholding Analysis Share Capital
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It is not just our quality assets t
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