MTR says the impact of the coronavirus outbreak on its businesses is likely to continue for some time, but the precise timing and scale of the impact is difficult to predict and will depend on the development of the situation. "We have taken a number of cost control measures to mitigate the financial impact of this challenging situation,” MTR says.
This follows a 25% decrease in profit last year revealed in the company’s audited results for 2019 published on March 5, from $HK 16bn in 2018 to $HK 11.9bn in 2019.
Excluding the adverse impacts of public order events in Hong Kong along with provisions for the troubled Shatin to Central Link (SCL) project in Hong Kong and the poor performance of the South Western Railway franchise in Britain, MTR says recurrent and underlying business profits would have increased by 7.7% and 35.8% respectively.
MTR has recommended a final ordinary dividend of $HK 0.98 per share, with a total ordinary dividend for the year of $HK 1.23 per share, representing a 2.5% increase.
Total revenue increased by 1.1%, from $HK 53.93bn in 2018 to $HK 54.5bn in 2019. Revenue from transport operations increased by 2.3%, mainly due to the full year impact of the new high-speed line between Hong Kong and mainland China, which opened in September 2018. This offset the adverse impact from the civil unrest. Total passenger traffic dropped 6.4%, with a 2.5% increase in the first half of 2019 and a 14.8% decrease in the second half.
Revenue from station, commercial and property rental businesses increased by 5%, mainly due to the full year impact of HSR and rental growth, which more than offset the adverse impact from public order events mainly relating to rental concessions granted.
Property development generated a profit of $HK 5.5bn.
Punctuality of heavy rail services remained at 99.9%, excluding the effects of public disorder and external events.
Operation of the first phase of the Tuen Ma Line, part of the SCL project, was successfully launched on February 14. MTR submitted its SCL Cost to Complete estimate to the Hong Kong government on February 11 and is currently addressing the project management cost with the government.
Mainland China and International
MTR was awarded two new concessions in 2019: operation and maintenance of Beijing Metro Line 17, and an extension of the existing contract for Sydney Metro.
The financial performance of the South Western Railway franchise in Britain, a joint venture of First Group (70%) and MTR (30%), continued to suffer in 2019 and MTR has made a provision of £43m, representing its share of the maximum potential loss under the franchise agreement.
Britain’s secretary of state for transport, Mr Grant Shapps, told parliament on January 22 that while South Western Railway (SWR) was still meeting its financial commitments under its franchise agreement, contingency plans were being drawn up in case it fails.
MTR's associate, First MTR South Western Trains is in discussions with the Department for Transport regarding potential commercial and contractual remedies regarding the uncertainties affecting the performance of the franchise, including infrastructure reliability, timetabling delays and industrial action.
“Although these discussions are constructive, they remain ongoing,” MTR says. “The outcome and therefore the impact on the associate’s ability to continue operating the franchise is uncertain at this stage.”
MTR says the outlook for the global and local economy is expected to be challenging, with many uncertainties, such as slower growth in major economies, the global geopolitical situation, continuing local public order events in Hong Kong and the coronavirus outbreak.
“In the midst of these uncertainties, particularly the recent coronavirus outbreak, many of our businesses are being significantly affected,” MTR says.