19 February 2001
Robust financial results for KCRC
 
The Kowloon-Canton Railway Corporation (KCRC) reported another year of robust financial results in 2000, said KCRC Chairman and Chief Executive Mr K Y Yeung in announcing the Corporation’s 2000 audited results.
He said fare revenue grew 7.4% to $3,906 million. Freight, rental, advertising and other revenue went up by 4.7% to $825 million. Net profit after tax was $2,288 million, representing a growth rate of 20.2% over that in 1999. For the first time since KCRC became profitable, net recurrent profit surpassed the $2,000 million mark, leaving aside property development profit.
Mr Yeung noted that KCRC’s patronage also increased on all fronts. Average daily passenger trips on East Rail’s domestic line edged up 2% to 558,900 and that for Light Rail grew 2.7% to 322,700. At an average of 229,100 passenger trips a day, East Rail’s cross-boundary service continued to record double-digit growth of 10.9%.
He said the Government, as sole shareholder, had once again decided to forego a dividend in line with its declared policy of allowing accumulated profit to be deployed as a means of funding West Rail, Phase I, and the East Rail Extensions.
 

Kowloon-Canton Railway Corporation
2000 Audited Results

Consolidated Profit and Loss Account (HK$ million) for the year ended 31 December 2000

2000

1999

Fare revenue

Freight, rental, advertising and other revenue

3,906

825

3,638

788

Total revenue

Less: Operating costs before depreciation

4,731

2,160

4,426

2,177

Operating profit before depreciation

Depreciation

2,571

670

2,249

698

Operating profit before net investment income

Net investment income

1,901

302

1,551

222

Profit after net investment income

Profit on property development

Share of loss of associate

2,203

87

( 1)

1,773

71

-

Profit before taxation

Taxation

2,289

1

1,844

( 59)

Profit after taxation

Transfer to development reserve

2,288

87

1,903

71

Retained profit for the year

2,201

1,832

 
Consolidated Balance Sheet (HK$ million) as at 31 December 2000

2000

1999

Fixed assets

13,236

13,301

Construction in progress

-  West Rail, Phase I

16,491

8,817

-  Others

909

634

Deferred expenditure – East Rail Extensions

1,104

326

Property under development

91

87

Investment in associate

16

-

Investments in securities

27,789

22,270

Other non-current assets

602

114

Cash and cash equivalents

8,597

11,589

Other current assets

1,584

1,153

Current liabilities

( 4,454)

( 2,885)

Non-current liabilities

( 17,064)

( 8,818)

Net assets

48,901

46,588

Share capital

31,120

31,120

Development reserve

6,417

6,330

Investment property revaluation reserve

242

231

Investment revaluation reserve

16

2

Retained profits

11,106

8,905

Capital and reserves

48,901

46,588

Key Statistics for the year ended 31 December 2000

2000

1999

East Rail

Total number of passengers (million)

288

275

Average number of weekday passengers (thousands)

789

749

Proportion of total franchised public transport

8.8%

8.6%

boarding in Hong Kong

HK$ per passenger carried

Fare revenue

11.65

11.29

Operating costs excluding depreciation

4.55

4.74

Operating result

7.10

6.55

 
Light Rail

Total number of passengers (million)

118

115

Average number of weekday passengers (thousands)

329

320

Proportion of total franchised public transport

3.6%

3.6%

Boarding in Hong Kong

HK$ per passenger carried

Fare revenue

3.59

3.58

Operating costs excluding depreciation

3.86

3.99

Operating result

( 0.27)

( 0.41)

Note: 

The financial information set out above does not constitute the Corporation’s statutory financial statements for the years ended 31 December 2000 or 1999 but is derived from those financial statements. The full report and statutory financial statements for the year ended 31 December 2000 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 19 February 2001.

Certain comparative statistical figures have been restated to conform to current year’s presentation.
 
Chairman’s Statement
The year 2000 was another year of steady growth in KCRC’s patronage. Average daily passenger trips on East Rail’s domestic line edged up 2% to 558,900 and that for Light Rail grew 2.7% to 322,700. At an average of 229,100 passenger trips a day, East Rail’s cross-boundary service continued to record double-digit growth of 10.9%. Inter-city service’s average daily ridership went up by 12.8% to 5,300 passenger trips.
These growth rates reflect, overall, the continuing recovery of the economy. The fact that cross-boundary and inter-city services grew at a much faster pace is a clear indication that Shenzhen and Guangzhou in particular continue to be highly attractive destinations for Hong Kong residents.
As a result, I can report another year of robust financial results in 2000, the sixteenth consecutive year of profitability since corporatisation. Fare revenue grew 7.4% to $3,906 million. Freight, rental, advertising and other revenue went up by 4.7% to $825 million. Operating profit increased by 22.6% to $1,901 million. Net profit after tax was $2,288 million, representing a growth rate of 20.2% over that in 1999. For the first time since the Corporation became profitable, net recurrent profit surpassed the $2,000 million mark, leaving aside property development profit.
The Government, as sole shareholder, has once again decided to forego a dividend, in line with its declared policy of allowing accumulated profit to be deployed as a means of funding West Rail, Phase I, and the East Rail Extensions.
To meet part of the cost of building West Rail, Phase I, and East Rail Extensions, the Corporation issued a US$1,000 million Eurodollar bond in July 1999, followed by a further US$1,000 million global bond in March 2000. This was the largest fixed income issue to come out of Hong Kong during 2000 and it was well received, having been over-subscribed by 25%. With these two bonds the Corporation has successfully met its financing obligations through timely pre-funding, and the Corporation’s gearing at the end of 2000 stood at some 33%.
Despite the recovery of the economy, the Corporation has not raised its fare levels since 1997. As a result, losses were sustained by four service centres for the past three years. East Rail’s domestic service registered a loss after depreciation of $122 million during this period, Light Rail service $418 million, bus service $33 million and freight $74 million. In reality, therefore, what has been carrying the Corporation in terms of profitability lies partly in rapid growth of its cross-boundary market and partly in the earnings of its non-transport business.
Looking ahead, therefore, there is no room for complacency. Fare levels and structures will have to be reviewed. Other sources of income – for example, the extension of leveraged leasing operations to include buildings and land, and the extension of advertising to include railway structures other than stations – must be explored. The scope of KCR Freight must be expanded beyond pure cargo haulage to include freight forwarding on an extensive scale. On the expenditure side, economies of scale should continue to be pursued vigorously. For example, there is no reason why West Rail could not incorporate Light Rail as a future feeder service.
Good progress was made during the year on West Rail, Phase I. In overall terms, civil construction of West Rail, Phase I, was 33% finished and I look forward to substantial completion at the end of 2001. Tunnels were 60% complete. Of the viaducts, 44% of deck erection had been achieved. One of the nine stations, the Kam Sheung Road Station was topped out in December. At the present time I am confident that West Rail, Phase I, can be completed for a revised total cost of $46,427 million, in time for it to become operational as scheduled by December 2003.
Ma On Shan Rail and the Tsim Sha Tsui Extension were authorized by the Government in October. Contracts have been awarded and construction has just started. The Lok Ma Chau Spur Line is now on hold, pending the Corporation’s appeal against the Director of Environmental Protection’s refusal to issue a permit under the Environmental Impact Assessment Ordinance.
The Government's Railway Development Strategy 2000 proposes the development of six new railway corridors targeted to go into service between 2008 and 2016. Three of these – the Kowloon Southern Link, the Northern Link and the Port Rail Line – are regarded as natural extensions of the KCR system. Two others – The Regional Express Line and the Shatin to Central Link – are open for competition.
Early in 2001 the Government invited the Corporation and MTRC to make proposals for the Shatin to Central Link, and the Corporation to make proposals for the Kowloon Southern Link, for submission in July 2001. In anticipation of this the Corporation created a New Railway Projects Division in October 2000, headed by a Director whose task will be to supervise the feasibility studies of these projects.

K Y Yeung
Chairman
20 February 2001