Half Yearly Report

21 August 2014

Asian Growth Properties Limited

Immediate Release

Results for the period ended 30 June 2014

Asian Growth Properties Limited (the "Company") (AIM Stock Code: AGP), the Hong Kong based China property development and investment company, announces its unaudited condensed consolidated results for the period ended 30 June 2014 as follows:

Financial Highlights

n Profit attributable to the Company's shareholders of HK$297.5 million (£22.4 million) (2013: HK$277.3 million (£23.5 million))

n Profit attributable to the Company's shareholders (excluding revaluation surplus net of deferred tax) was HK$65.1 million (£4.9 million) (2013: HK$125.3 million (£10.6 million)) 

n Earnings per share for profit attributable to the Company's shareholders of HK33.6 cents (2.5 pence) (2013: HK31.3 cents (2.6 pence))

n Net asset value per share attributable to the Company's shareholders as at 30 June 2014 of HK$14.4 (108.4 pence) (31 December 2013: HK$14.1 (110.0 pence))

n Geographical location of the Group's property assets were as follow:

n Gearing ratio of 8.4% (31 December 2013: 8.9%)

Operational Highlights

n Increased gross rental income generated from Dah Sing Financial Centre in Hong Kong and its occupancy rate remains high.

n The hotel operation results of Crowne Plaza Hong Kong Causeway Bay were satisfactory.

n Major mixed use development projects in Chengdu and Kaifeng, Mainland China are progressing. Site formation works for Phase I of Chengdu project have been completed and superstructure works for Phase IA of Kaifeng project are in progress. 

Notes:

1. Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting periods. The relevant exchange rates adopted are stated as follows:

2. For Shareholders' information, the exchange rate on 20 August 2014 was £1 = HK$12.8950

Miscellaneous

The results included in this announcement are extracted from the unaudited condensed consolidated financial statements of the Company for the six months ended 30 June 2014, which have been approved by the Board of Directors on 21 August 2014.

The 2014 Interim Report is expected to be posted to shareholders and holders of depositary interests in late September 2014.

For further information, please contact:

Attached:-

1. Chairman's Review;

2. Executive Directors' Review;

3. Condensed Consolidated Statement of Profit or Loss;

4. Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income;

5. Condensed Consolidated Statement of Financial Position;

6. Condensed Consolidated Statement of Changes in Equity;

7. Condensed Consolidated Statement of Cash Flows; and

8. Notes to the Condensed Consolidated Financial Statements.

This announcement can also be viewed on the Company's website at:

http://www.asiangrowth.com/html/eng/news.asp

CHAIRMAN'S REVIEW

I am pleased to present the unaudited consolidated financial results of Asian Growth Properties Limited ("AGP" or the "Company", together with its subsidiaries, the "Group") for the first six months of 2014 to the shareholders of the Company.

Results

AGP reported a profit attributable to the Company's shareholders of HK$297.5 million (£22.4 million) for the six months ended 30 June 2014 (2013: HK$277.3 million (£23.5 million)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$232.4 million (£17.5 million) (2013: HK$152.0 million (£12.9 million)). By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$65.1 million (£4.9 million) (2013: HK$125.3 million (£10.6 million)). 

As at 30 June 2014, the Group's equity attributable to the Company's shareholders amounted to HK$12,715.5 million (£957.3 million) (31 December 2013: HK$12,458.7 million (£971.9 million)). The net asset value per share as at 30 June 2014 was HK$14.4 (108.4 pence) as compared with HK$14.1 (110.0 pence) as at 31 December 2013.

Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting periods.

Operations 

During the period ended 30 June 2014, the Group has continued the development of various property projects in Hong Kong and Mainland China.

The rental income from investment properties situated in both Hong Kong and Mainland China continue to provide stable returns to the Group. Crowne Plaza Hong Kong Causeway Bay has also performed satisfactorily with improvements in room rate as compared to last year.

For details of the Group's operations, please refer to the Executive Directors' Review.

Outlook

U.S. monetary policy will continue to affect the global economy which should contribute to the economic recovery in the near term. With the exception of the UK, many European economies are experiencing weakness in GDP growth and output and whilst the U.S. Government has started tapering quantitative easing and interest rates may begin to rise in the UK shortly, other major central banks continue to keep low or near zero interest rates which are a necessity to help to improve economic growth. Thus, interest rates are likely to stay at historically low levels for some time to come.

The Chinese President, Mr. Xi Jin Ping, has been consolidating his hold on power with a massive anti-corruption drive. With a slowdown of property pricing growth in many of the regions in Mainland China, economic growth has been slowing down this year. In the past month, there has been some easing of property ownership restrictions and the cost of borrowing money in the bond market has reduced which has relieved the largest and best run property companies from the tight liquidity in the capital markets. In the absence of any major upset within the ruling politburo with retirees, the Group believes that the market in Mainland China will remain relatively steady.

The Group continues to press on with its development projects but will be cautious about the phasing of the development. Our investment properties continue to perform well and are providing stable income to the Group.

Interim Dividend

The Board does not propose the payment of an interim dividend for the period ended 30 June 2014 (2013: Nil).

Change of Directors

On 19 March 2014, Messrs. Lincoln Lu and Sing Tai Lam were appointed as Executive and Non-Executive Directors of the Company and on 30 July 2014, Mr. John David Orchard Fulton was appointed as Independent Non-Executive Director of the Company. The Board would like to extend its warmest welcome to them to join the Board.

On 28 May 2014, Mr. Donald Ian Fletcher resigned as Non-Executive Director of the Company. The Board would like to express its gratitude for his valuable contribution to the Company since 2004.

Acknowledgement

The Board would like to take this opportunity to thank the executive and management team for the execution of the Board's strategy and their ongoing support.

Richard Prickett

Non-Executive Chairman

Hong Kong, 21 August 2014

EXECUTIVE DIRECTORS' REVIEW

FINANCIAL SUMMARY

Turnover for the six months ended 30 June 2014 amounted to HK$327.3 million (£24.6 million) (2013: HK$485.7 million (£41.1 million)). The turnover was principally attributable to the recognition of rental income from investment properties and revenue from hotel operation.

Profit attributable to the Company's shareholders for the period amounted to HK$297.5 million (£22.4 million) (2013: HK$277.3 million (£23.5 million)), equivalent to a basic earnings per share of HK33.6 cents (2.5 pence) (2013: HK31.3 cents (2.6 pence)). The reported profit included a revaluation surplus on investment properties net of deferred taxation of HK$232.4 million (£17.5 million) (2013: HK$152.0 million (£12.9 million)). By excluding the effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$65.1 million (£4.9 million) (2013: HK$125.3 million (£10.6 million)), equivalent to HK7.3 cents (0.5 pence) (2013: HK14.1 cents (1.2 pence)) per share. 

As at 30 June 2014, the Group's equity attributable to the Company's shareholders amounted to HK$12,715.5 million (£957.3 million) (31 December 2013: HK$12,458.7 million (£971.9 million)). The net asset value per share attributable to the Company's shareholders as at 30 June 2014 was HK$14.4 (108.4 pence) as compared with HK$14.1 (110.0 pence) as at 31 December 2013.

For Shareholders' information, figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years and the relevant exchange rates adopted are stated as follows:

For 30 June 2014: £1 = HK$13.2822; and

For 31 December 2013: £1 = HK$12.8184; and

For 30 June 2013: £1 = HK$11.8152

BUSINESS REVIEW

Property Investment and Development

The Group continues to focus on its development and investment projects in Hong Kong and Mainland China. It is the Group's approach to review and optimise the project portfolios from time to time. The Group's core projects located in Hong Kong and Mainland China are listed below.

Hong Kong

The office leasing market was stable during the period. With several tenancies of Dah Sing Financial Centre, a 39-storey commercial building, being renewed at market rates, rental income received during the period increased. The occupancy rate of Dah Sing Financial Centre remains at a high level of approximately 90% as at 30 June 2014.

The negotiation of land premium with the Government for the development project at Fo Tan is in progress. This development project has a site area of approximately 20,000 square metres and envisages, among other facilities, residential units, car parks, educational facilities and a bus terminus. The foundation work of the project has been completed and advanced pile cap work is in progress.

Mainland China

Chengdu, Sichuan Province

During the period, the occupancy rate for the two 30-storey office towers of Plaza Central remained at a high level and its retail podium with a gross floor area of about 29,000 square metres is fully let principally to Chengdu New World Department Store on a long-term lease. As at 30 June 2014, the aggregate occupancy rate for the two office towers and the retail podium was approximately 93%. Leasing activities for the remaining areas of Plaza Central continue.

The shopping arcade of New Century Plaza with a gross floor area of about 16,300 square metres is fully let to a furniture retailer on a medium-term lease.

The master layout plan of the Longquan project (known as "Chengdu Nova City"), which has a site area of 506,000 square metres, was approved by the local government in January 2014. Preliminary site works and site formation works for Phase I of the project have been completed. Superstructure works for Phase I are scheduled to commence in the fourth quarter of 2014.

Kaifeng, Henan Province

The Kaifeng project, known as "Kaifeng Nova City", is situated in Zheng-Kai District, a new town in Kaifeng and envisages shopping mall, premium offices, exhibition hall, hotel, serviced apartments and residential towers. This project has a site area of 735,000 square metres and for providing better living environment, the gross floor area of the development will vary from 2,000,000 to 2,500,000 square metres only. The master layout plan has been approved by the local government and foundation work for Phase I of the residential has been completed. The superstructure works for Phase IA of the residential are in progress and scheduled to be completed in the first quarter of 2015. Pre-sale consent for Phase IA was issued and the sales program has commenced.

Guangzhou, Guangdong Province

As at 30 June 2014, the occupancy rate of the 14-storey office tower of Westmin Plaza Phase II of about 16,100 square metres was approximately 91% with more than one-third of the total office space being leased to AIA. Leasing activities for the 3-storey shopping arcade of Westmin Plaza Phase II with a total gross floor area of about 26,400 square metres are in progress.

Huangshan, Anhui Province

The project in Huangshan has a site area of about 337,000 square metres comprising of development land of about 117,000 square metres and landscape land of 220,000 square metres. The master layout plan for the development of the project comprising a hotel, serviced apartments and resort villas in the integrated resort site has been approved by the local government and site formation work for phase I of the project is planned to commence in the fourth quarter of 2014.

Chi Shan, Nanjing, Jiangsu Province

The Group has established two 51%-owned joint venture companies to participate in the tenant relocation arrangements and excavation and infrastructure works on certain pieces of land in Chi Shan. The Group intends to acquire such lands through land auctions by different stages.

Hotel Operation

Crowne Plaza Hong Kong Causeway Bay is a 29-storey five-star hotel comprising 263 guest rooms with ancillary facilities and is managed by the InterContinental Hotels Group. It has achieved satisfactory occupancy and room rates for the period under review.

AGREEMENT FOR COST-SHARING ARRANGEMENT WITH RELATED PARTY

The Company and South-East Asia Investment And Agency Company, Limited ("SEAI"), a wholly-owned subsidiary of S E A Holdings Limited (the holding company of the Company), had entered into a Management Agreement on 18th September 2006 (the "Management Agreement") for the appointment of SEAI as manager for the provision of corporate, project and property management services to the Group. The Management Agreement was terminated with effect from 1st January 2014.

Subsequent to the termination of the Management Agreement and the consideration of alternative structures to provide the necessary resources to the Group, the Company and various subsidiaries of the Company (together, the "AGP Service Recipients") entered into an agreement with SEAI on 29 July 2014 whereby in consideration of SEAI making available its personnel and facilities to the Group, the AGP Service Recipients agreed to pay their proportionate share of the costs incurred by SEAI (the "Net Costs") for the use of SEAI's personnel and facilities from 1 January 2014.

The Net Costs is the proportion of staff costs and indirect costs to be borne by the AGP Service Recipients and will be calculated by reference to the time spent by SEAI's personnel on the services to each of the AGP Service Recipients (with a mark-up of 5%), plus the reimbursable costs incurred by SEAI on behalf of the AGP Service Recipients (on a dollar-for-dollar basis). Each of the AGP Service Recipients should bear and pay its proportion of the Net Costs.

WORKING CAPITAL AND LOAN FACILITIES

As at 30 June 2014, the Group's total cash balance was HK$2,273.0 million (£171.1 million) (31 December 2013: HK$1,766.4 million (£137.8 million)) and unutilised facilities were HK$1,452.5 million (£109.4 million) (31 December 2013: HK$855.0 million (£66.7 million)).

The gearing ratio as at 30 June 2014, calculated on the basis of net interest bearing debts minus cash and restricted and pledged deposits as a percentage of total property assets, was 8.4% (31 December 2013: 8.9%). 

As at 30 June 2014, the maturity of the Group's outstanding borrowings was as follows:

Pledge of Assets

For the Company's subsidiaries operating in Hong Kong and Mainland China, the total bank loans drawn as at 30 June 2014 amounted to HK$3,465.8 million (31 December 2013: HK$3,012.8 million) which comprise secured bank loans of HK$3,315.8 million (31 December 2013: HK$2,894.8 million) and unsecured bank loans of HK$150.0 million (31 December 2013: HK$118.0 million). The secured bank loans were secured by properties valued at HK$11,715.3 million (31 December 2013: HK$11,343.7 million) and note receivables of HK$54.3 million (31 December 2013: HK$54.3 million). 

Treasury Policies

The Group adheres to prudent treasury policies. As at 30 June 2014, all of the Group's borrowings were raised through its wholly-owned or substantially controlled subsidiaries on a non-recourse basis.

International Financial Reporting Standards ("IFRSs")

The Group has adopted IFRSs and the unaudited condensed consolidated financial statements accompanying this Review have been prepared in accordance with IFRSs.

OUTLOOK

Mainland China's economy is expected to maintain steady growth in this year. With the actual achieved GDP growth of 7.4% for the first half of year 2014, China is on track to achieve its target of doubling the GDP from year 2010 to year 2020. Amending certain policies such as relaxing the one-child policy and abolition of dual-household registration system will boost the domestic housing demand in the long run.

In Hong Kong, the property market has remained relatively stable with some diminution in land values but ever increasing development construction costs. Interest rates remain low and sales of newly built flats are attracting the best take up in the past six months. However, it remains to be seen what impact the "Occupy Central Movement" will have on Hong Kong's business confidence. The polarization of the democrat camp and that of the "Anti-occupy Central Movement" with their differing stance on the appointment of new Hong Kong Chief Executive could impact the property market adversely in the latter part of the year.

Negotiation of the land premium of our Fo Tan project is still in progress. This is a lengthy process with the Government and the Group is expecting a more realistic land premium to be offered. For the Kaifeng project, the pre-sales for Phase IA of the residential development has commenced and will continue during the year.

On behalf of the Executive Directors

Lu Wing Chi

Executive Director

Hong Kong, 21 August 2014CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 30 JUNE 2014

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2014

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2014

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - continued

AT 30 JUNE 2014

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2014

Other reserves comprise (i) a discount on acquisition/assumption of certain assets and liabilities from the intermediate holding company, S E A Holdings Limited ("SEA") and the excess of the consideration over the market closing price of the shares issued for the acquisition. The amounts attributable to those assets and liabilities derecognised in subsequent years will be recognised in profit or loss; and (ii) the excess of the consideration paid for acquisition of an additional interest in a subsidiary from a non-controlling shareholder over the carrying amount of the non-controlling interests acquired.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2014

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2014

1. GENERAL

The Company is a public company incorporated in the British Virgin Islands with limited liability and its shares are admitted for trading on the AIM Market of London Stock Exchange plc.

The Company acts as an investment holding company. The principal subsidiaries of the Company are engaged in property investment, property development and the operation of a hotel.

2. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting" issued by the International Accounting Standards Board (the "IASB").

3. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for investment properties, which are measured at fair values, as appropriate.

Except as described below, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2014 are the same as those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2013.

In the current interim period, the Group has applied, for the first time, the following interpretation and amendments to International Financial Reporting Standards ("IFRSs") issued by the IASB and the IFRS Interpretations Committee of IASB that are relevant for the preparation of the Group's condensed consolidated financial statements.

The application of the above interpretation and amendments to IFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosures set out in these condensed consolidated financial statements.

4. SEGMENT INFORMATION

Information reported to the executive directors of the Company, being the chief operating decision makers, for the purposes of resource allocation and assessment of segment performance is mainly focused on the property development, property investment and hotel operation. No operating segments identified by the chief operating decision makers have been aggregated in arriving at the reportable segments of the Group.

Property investment and development activities are in Hong Kong and the People's Republic of China (the "PRC") whereas the hotel operation is in Hong Kong.

The following is an analysis of the Group's revenue and results by reportable segment:

Six months ended 30 June 2014

Six months ended 30 June 2013

Inter-segment sales are at mutually agreed terms.

4. SEGMENT INFORMATION - continued

The Group does not allocate interest income, corporate income less expenses and finance costs to individual reportable segment profit or loss for the purposes of resource allocation and performance assessment by the chief operating decision makers.

The accounting policies adopted in preparing the reportable segment information are the same as the Group's accounting policies.

No segment assets and liabilities are presented as the information is not reportable to the chief operating decision makers in the resource allocation and assessment of performance.

5. PROPERTY AND RELATED COSTS

6. OTHER EXPENSES

7. FINANCE COSTS