27 January 2000
KCRC ended the century on a successful note
 
The Kowloon-Canton Railway Corporation (KCRC) has clearly weathered the recession brought about by the Asian financial crisis and ended the century on a successful note, said KCRC Chairman and Chief Executive Mr K Y Yeung in announcing the Corporation's 1999 audited results.
Mr Yeung said while the number of passenger trips on the East Rail domestic line (i.e. from Hung Hom to Sheung Shui) declined marginally from 204 million in 1998 to 200 million in 1999, the total number of passengers carried by East Rail, including those crossing over to or returning from Shenzhen, grew from 269 million in 1998 by 2.2 % to 275 million in 1999.
The number of passenger trips taken on Light Rail also grew modestly from 114 million in 1998 to 114.7 million in 1999, he said.
As a result, total recurrent revenue in 1999 rose to $4,426 million, reflecting a growth rate of 7%.Operating profit went up by 5.9% to $1,551 million. Net profit for 1999, at $1,903 million, reflected an increase of 16% over 1998's $1,639 million.As in 1998, the Government, which is KCRC's sole shareholder, has decided to forego a dividend in 1999, electing instead to allow KCRC's net profits to be deployed towards meeting the cost of building West Rail, Phase I, and the East Rail Extensions.
Mr Yeung said, "Thus the Corporation has clearly weathered the recession brought about by the Asian financial crisis. The fact that it was able to do so without having to resort to retrenchment was due in part to the multi-modal nature of its transport business, which enabled it to exploit the markets for inter-city travel.More importantly, the Corporation's success can be traced to its willingness to invest in productivity enhancement."
The East Rail Automatic Train Protection signalling system, commissioned in 1998, augmented East Rail's line capacity by 20% and last year's completion of an ambitious three-year programme for the refurbishment of East Rail trains enabled each train to carry 15% more passengers.
"The value of such ongoing investment in productivity enhancement is readily illustrated by the fact that the cost (at 1999 prices) per passenger kilometre along East Rail, that is to say the cost of carrying one passenger for one kilometre, has declined from 62 cents in 1990 to 43 cents in 1999," he said.
Mr Yeung pointed out that West Rail, Phase I also made rapid progress last year.By the end of 1999, 16 out of 17 major construction contracts and all major railway systems contracts had been awarded.Almost all of the land that had to be acquired had been handed over to KCRC's contractors.
Similarly, rapid progress was being made in the design of the Tsim Sha Tsui Extension, Ma On Shan Rail and the Sheung Shui to Lok Ma Chau Spur Line, which together make up the East Rail Extensions.All detailed design contracts in these projects had been awarded.
"In the process of carrying out all of this work, the Corporation has acquired a growing and highly skilled project management capability," he said.
Mr Yeung said KCRC launched itself into serious and significant borrowing for the first time in 1999.It had appointed the Hong Kong Monetary Authority as sole arranger for the HK$10,000 million Note Issuance Programme.In July, a US$338 million export credit loan facility was arranged with the Japan Bank for International Cooperation in the lead, to facilitate the purchase of new rolling stock.
Also in July, the KCRC launched an inaugural Eurodollar bond under its Medium Term Note Programme.This debut issue, originally set at US$500 million, was over-subscribed by two and a half times and was extended to US$1,000 million. The bond attracted over 100 investors and was at that time the largest to come out of Asia since the Asian financial crisis without U.S. distribution.
"So the Corporation ended the century on a successful note in at least three respects. As a railway operator, it has successfully withstood the stresses and strains of recession.In addition, it has become a planner, designer and builder of major new railway networks.And it has made a name for itself in the world's capital markets as a serious borrower," he said.
 

CONSOLIDATED PROFIT AND LOSS ACCOUNT - HK$ MILLION FIR TGE YEAR ENDED 31 DECEMBER 1999

 

1999

1998

Fare revenue

3,638

3,404

Freight, rental, advertising and other revenue

788

733

Total revenue

4,426

4,137

Less: Operating costs before depreciation

2,177

2,105

Operating profit before depreciation

2,249

2,032

Depreciation

698

567

Operating profit before net investment income

1,551

1,465

Net investment income

222

164

Profit after net investment income

1,773

1,629

Profit on property development

71

88

Profit before taxation

1,844

1,717

Taxation

( 59)

78

Profit after taxtion

1,903

1,639

Transfer to development reserve

71

74

Retained profit for the year

1,832

1,565

 

CONSOLIDATED BALANCE SHEET - HK$ MILLION AS AT 31 DECEMBER 1999

1999

1998

Fixed assets

13,301

12,336

Construction in progress

- West Rail, Phase I

8,817

3,181

- Others

634

655

Deferred expenditure - East Rail Extensions

326

234

Property under development

87

482

Investments in securities

22,270

5,027

Other non-current assets

114

44

Cash and cash equivalents

11,589

9,510

Other current assets

1,153

476

Current liabilities

( 2,885 )

( 1,323 )

Non-current liabilities

( 8,818 )

( 369 )

Net Assets

46,588

30,253

Share capital

31,120

16,620

Development reserve

6,330

6,259

Investment property revaluation reserve

231

278

Investment revaluation reserve

2

23

Retained profit

8,905

7,073

Capital and reserves

46,588

30,253

 
KEY STATISTICS FOR THE YEAR ENDED 31 DECEMBER 1999

1999

1998

East Rail

Total number of passengers (million)

275

269

Average number of weekday passengers (thousand)

749

739

Proportion of total franchised public transport boarding
in Hong Kong

8.6%

8.5%

 

HK$ per passenger carried

Fare revenue

11.29

10.74

Operating costs excluding depreciation

4.55

4.62

Operating result

6.74

6.12

 

Light Rail

Total number of passengers (million)

115

114

Average number of weekday passengers (thousand)

320

319

Proportion of total franchised public transport boarding
in Hong Kong

3.6%

3.6%

 

HK$ per passenger carried

Fare revenue

3.58

3.56

Operating costs excluding depreciation

3.99

3.96

Operating result

( 0.41 )

( 0.40 )

Note: The financial information set out above does not constitute the Corporation's statutory financial statements for the years ended 31 December 1999 or 1998 but is derived from those financial statements.The full report and statutory financial statements for the year ended 31 December 1999 will be available following their tabling in the Legislative Council.The auditors have expressed an unqualified opinion on those financial statements in their report dated 17 January 2000.
 
Chairman's Statement
While Hong Kong's economy continued to contract in the first half of 1999, growth resumed in the second half, resulting in a small real growth for the year as a whole.Not surprisingly, therefore, the purely domestic rail passenger services provided by the Corporation registered a small decline.The number of passenger trips on the East Rail domestic line (i.e. from Hung Hom to Sheung Shui) declined marginally from 204 million in 1998 to 200 million in 1999, while the number of passenger trips taken on Light Rail grew modestly from 114 million in 1998 to 114.7 million in 1999.
However, due to the attraction of cities on the Mainland as destinations for business, shopping and recreation, cross-boundary ridership continued to grow rapidly from 65 million in 1998 by 15.4% to 75 million in 1999. As a result, the total number of passengers carried by East Rail, including those crossing over to or returning from Shenzhen, grew from 269 million in 1998 by 2.2 % to 275 million in 1999.Thus, the slight decline in domestic ridership was more than offset by the healthy growth in cross-boundary ridership.The decision, taken in June 1999, to expand the frequency of the Kowloon/Guangzhou through train service from four to seven trains per day in each direction was also consistent with the Corporation's exploitation of the inter-city market.Annual through train ridership grew from 1.38 million in 1998 by 24% to 1.71 million in 1999.
As a result, total recurrent revenue rose in 1999 to $4,426 million, reflecting a growth rate of 7%, which was faster than the growth rate of 3.4% in operating costs excluding depreciation.At $1,551 million, operating profit registered a growth rate of 5.9% over that in 1998.Net profit for 1999, at $1,903 million, reflects an increase of 16% over net profit for 1998, when it was $1,639 million.As in 1998, the Government, which is the Corporation's sole shareholder, has decided to forego a dividend in 1999, electing instead to allow the Corporation's net profits to be deployed towards meeting the cost of building West Rail, Phase I, and the East Rail Extensions.
Thus, the Corporation has clearly weathered the recession brought about by the Asian financial crisis.The fact that it was able to do so without having to resort to retrenchment was due in part to the multi-modal nature of its transport business, which enabled it to exploit the markets for inter-city travel.More importantly, the Corporation's success can be traced to its willingness to invest in productivity enhancement. In 1998 East Rail's line capacity was augmented by 20% following the commissioning of the Automatic Train Protection signalling system.1999 saw the completion of an ambitious three-year programme of refurbishment of the East Rail fleet of trains, to improve passenger comfort and convenience whilst at the same time enabling each train to carry 15% more passengers. The value of such ongoing investment in productivity enhancement is readily illustrated by the fact that the cost (at 1999 prices) per passenger kilometre along East Rail, that is to say the cost of carrying one passenger for one kilometre, has declined from 62 cents in 1990 to 43 cents in 1999.
1999 also saw rapid progress being made on West Rail, Phase I. By the end of the year, 16 out of 17 major construction contracts, accounting for 98.5 % of the estimated total value of all such contracts, had been awarded. In addition, all major railway systems contracts, including those for the supply of rolling stock, track work, power supply, signalling and telecommunications, had been awarded. Almost all of the land that had to be acquired has been handed over to the Corporation's contractors. Similarly rapid progress was made in the design of the Tsim Sha Tsui Extension, Ma On Shan Rail and the Sheung Shui to Lok Ma Chau Spur Line, which together make up the East Rail Extensions, with all detailed design contracts in respect of these projects being awarded.In the process of carrying out all of this work, the Corporation has acquired a growing and highly skilled project management capability.
In tandem with the design and construction of new railway projects, the Corporation launched itself into serious and significant borrowing for the first time in 1999.It has appointed the Hong Kong Monetary Authority as sole arranger for the HK$ 10,000 million Note Issuance Programme.In July 1999, a US$ 338 million export credit loan facility was arranged, with the Japan Bank for International Cooperation in the lead, to facilitate the purchase of new rolling stock.In the same month, the Corporation launched an inaugural Eurodollar bond under its Medium Term Note Programme.This debut issue, originally set at US$ 500 million, was over-subscribed by two and a half times and was extended to US$ 1,000 million. The bond attracted over 100 investors from 15 countries in Europe and Asia and was at that time the largest to come out of Asia since the Asian financial crisis without U.S. distribution.
So the Corporation ended the century on a successful note in at least three respects.As a railway operator, it has successfully withstood the stresses and strains of recession.In addition, it has become a planner, designer and builder of major new railway networks.And it has made a name for itself in the world's capital markets as a serious borrower.
 
28 January 2000