Hotel Online Special Report
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Mixed Results for 
The Hongkong and Shanghai Hotels, Limited
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Hongkong, February 19, 1998 - Set against a steep decline in regional tourism in the second half of 1997, The Hongkong and Shanghai Hotels, Limited today announced a drop of 7% in group operating profit of HK$1,049 million for the year to 31st December, 1997, compared to HK$1,132 million in 1996. 

Group profit after taxation and minority interests amounted to HK$114 million in 1997 compared to HK$861 million in 1996, the difference being due to a combination of factors principally driven by the financial and economic turmoil in Asia. 

Basic earnings per share were 10 cents compared to 79 cents in 1996, a decrease of 87 per cent. An interim dividend of 15 cents per share was paid in September 1997 and directors recommend a final dividend of 23 cents per share, a total distribution against 1997 profit of 38 cents per share (38 cents in 1996). 

Commenting on the results, Deputy Chairman William Mocatta said, "Like most of Hong Kong businesses, the group has been seriously affected by region-wide economic volatility. 

"In terms of the results, we had already factored into our performance a reversion to a normal level of tax charge in 1997, but we have also had to take up the group's share of the losses of its associated companies. Furthermore, in the present economic climate we have deemed it advisable to make substantial provisions against the carrying value of existing investments and continuing projects, the total of which we are treating as an exceptional item." 

Reviewing the group's operations, Pierre Boppe, Chief Executive Officer, said, "1997 was a year of mixed fortunes. Whilst our residential and commercial properties performed above our expectations, our hotels in Hong Kong had a disappointing second half due to the abrupt drop in tourism." 

Regarding the hotels' performance, occupancy levels in both The Peninsula and The Kowloon Hotel had dropped below those of 1996, although The Peninsula had recorded the highest room yield in Hong Kong. In the United States, The Peninsula New York, The Peninsula Beverly Hills and Quail Lodge Resort in California had enjoyed a strong year with average room yield across the three US properties increasing 12% over 1996. The Peninsula New York has now been closed for a ten-month major upgrade in order to maximise its potential in a highly competitive market. When it re-opens in November 1998, it is expected to achieve significantly increased room rates. 

Across the board, the group's residential and commercial property achieved satisfactory results. Occupancy levels at The Repulse Bay complex reached 95% compared to 84% in 1996, with an overall rental yield increasing 10% over the previous year. The remaining 25% of the Repulse Bay Apartments will be renovated in 1998, while a soft furnishing upgrade for 68 serviced apartments and repainting of the main building will also be undertaken this year. Despite an increasingly crowded marketplace, The Landmark in Ho Chi Minh City, The Sutton in New York and the office tower at 208 Wireless Road in Bangkok continued to turn in creditable performances, achieving high occupancy and rental levels. 

Turning to projects, Mr Boppe reported that the construction of The Peninsula Bangkok was proceeding apace, with the opening date set for 1st November 1998. After critically assessing the viability of including an hotel on the Bennelong site in Sydney, the group announced its decision to proceed with the existing approved plan for an all-apartment complex. The first block is almost 90% complete. 

Economic woes in Indonesia and a change in market dynamics in Vietnam have resulted in the decision by the group and its partners to suspend all activity for the time being on the Kota Ciputra project in Jakarta and the Giang Vo Lake project in Hanoi. 

"No-one underestimates the nature and impact of the regional upheavals of the last six months. However, we believe it is a time for consolidating existing activities and developing imaginative marketing initiatives in as yet untapped markets, while readying ourselves to capitalise on opportunities which make sense in the group's overall strategy of selective expansion," Mr Boppe concluded. 

Incorporated in 1866, The Hongkong and Shanghai Hotels, Limited, formerly The Hongkong Hotel Company, Limited, was one of the first stocks to be listed on the Hong Kong stock exchange. Its principal business comprises the ownership and management of prestigious hotel, commercial and residential properties in key destinations in Asia, Australia and the USA; its hotel management arm is The Peninsula Group. 

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Contact:
Mr Douglas Webster, 
Director, Finance and Corporate Services, 
The Hongkong and Shanghai Hotels, Limited, 
Tel: 2840-7873 Fax: 2868-4770 
Email: [email protected] 
 
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