MTR unaudited results for the six months ended 30 June 2015

Analysis, Slider 14 Aug 2015

MTR ANNOUNCEMENT OF UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015

MTR Corporation Limited (0066) yesterday said interim net profit beat estimates to rise 3.5 percent to HK$8.19 billion from a year back thanks to contribution from property sales.

Including property development profit, net profit from underlying businesses surged by 55.5 percent to HK$6.83 billion in the first six months, beating estimates.

An interim dividend of 25 HK cents was declared, up 2.94 percent from a year ago.

Revenue rose 3.8 percent to HK$20.21 billion, among which revenue from Hong Kong transport operations rose 5.4 percent to HK$8.15 billion.

Booking in the sales from the third phase of Lohas Park in Tseung Kwan O, Hemera, helped the company gain HK$2.31 billion from property development, up more than 10 times from last year.

Financial

Total revenue increased 3.8% to HK$20,210 million; Revenue excluding Mainland of China and international subsidiaries increased 6.9% to HK$14,029 million-Post-tax underlying profit Recurrent business profit HK$ 4,516 million up 7.9% Property development profit HK$ 2,311 million up HK$2,108 million HK$ 6,827 million up 55.5%- Property development profit comprised mainly prof it from LOHAS Park Package 3 (“Hemera”) with all 1,648 residential units sold- Earnings per share on underlying profit was HK$1.17- Profit after investment property revaluation increased 3.5% to HK$8,189 million-Net assets increased 2.4% to HK$167,355 million; Net debt-to-equity ratio at 9.1%- Interim dividend of HK$0.25 per share declared (with scrip dividend alternative)

Hong Kong Railway Network

-On-time performance maintained at 99.9%

– Patronage from Hong Kong transport operations increased 4.4% to 949.4 million

– Sai Ying Pun Station on the Island Line Extension commenced service in March 2015

– HK$3.3 billion contract awarded to replace the signalling system and HK$6 billion contract awarded to replace all of the 93 first-generation 8-car trains operating in the urban areas.

Hong Kong New Railway Projects

– For Express Rail Link, as project manager, the Company had notified Government at the end of June 2015 of a revised estimated target completion timetable of the 3rd quarter 2018 (including programme contingency) together with a revised estimated project cost of HK$85.3 billion (including contingency, based on the revised timetable). Government is in the process of reviewing these estimates

-South Island Line (East) is targeted to commence passenger service at the end of 2016. Construction cost escalations and other challenges have further increased the estimated project cost to HK$16.9 billion (before capitalised interest)

-For Kwun Tong Line Extension, the revised estimated completion timetable is now the 3rd or 4th quarter of 2016 and the revised estimated project cost is HK$7.2 billion (before capitalised interest)

China & International Railway Businesses

– MTR Express commenced passenger services in Sweden in March 2015

– MTR Crossrail started to operate the first stage of the London Crossrail services in May 2015

– Beijing MTR Corporation Limited initialled Concession Agreement for Beijing Line 16

Property Development

-Tenders for Tin Wing Stop and LOHAS Park Pack ages 6 & 7 and Yuen Long Station site (where the Company acts as agent) were awarded- Pre-sale of “Tiara” in Shenzhen was well received with over 99% of 708 units sold in the first two batches launched.

RAILWAY CONSTRUCTION IN PROGRESS

ISLAND LINE EXTENSION PROJECT

On 13 July 2009, the Company entered into a Project Agreement with the HKSAR Government for the financing, design, construction and operation of the extension of Island Line to the Western District and related services and facilities.

The HKSAR Government provided a grant of HK$12.3 billion to the Company in March 2010 (having already made HK$0.4 billion available in February 2008 under a preliminary project agreement).

This grant is subject to a repayment mechanism whereby, within 24 months of commercial operations of the extension of Island Line to the Western District, the Company has to pay to the HKSAR Government amounts to reflect the excess of the original estimation over actual costs incurred on certain capital expenditure, price escalation costs, land costs and the amount of contingency in relation to the railway and related works (together with interest).

During the half year ended 30 June 2015, the Company recognised and prepaid an amount with a principal of HK$91 million and interest of HK$27 million to the HKSAR Government under the repayment mechanism (year ended 31 December 2014: principal of HK$187 million and interest of HK$51 million).

During the period ended 30 June 2015, HK$1,024 million had been transferred out from Railway Construction in Progress to Other Property, Plant and Equipment upon the opening of the Sai Ying Pun Station on 29 March 2015, with Sai Ying Pun Station’s Ki Ling Lane Entrance expected to commence service by the first quarter of 2016. As at 30 June 2015, the Company has authorised outstanding commitments on contracts of HK$0.1 billion (31 December 2014:HK$0.5 billion) for this project.

B. SOUTH ISLAND LINE (EAST) (“SIL(E)”) PROJECT On 17 May 2011, the Company entered into a Project Agreement with the HKSAR Government for the financing, design, construction and operation of the SIL(E). Subsequent to 30 June 2015, the project cost estimate was increased from the August 2014

estimate of HK$15.2 billion (before capitalised interest expense estimate of HK$1.5 billion) to approximately HK$16.9 billion (before capitalisedinterest expense of HK$1.2 billion) due to the

complexity of works and continued labour shortages.

The Company continues to monitor and review the project cost estimate. As at 30 June 2015, the Company has incurred cumulative expenditure of HK$13.0 billion (31 December 2014: HK$12.0 billion) and has authorised outstanding commitments on contracts totalling HK$0.7 billion (31 December 2014: HK$0.5billion) for this project.

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MTR unaudited results for the six months ended 30 June 2015