For both Hong Kong as a whole and the KMB Group of Companies, 1997 was a year of definitive and historic change tempered with a strong underlying continuity.
Changing with the Times
For both Hong Kong as a whole and the KMB Group, 1997 was a year of definitive and historic change tempered with a strong underlying continuity. Hong Kong was reunified with mainland China but remains a free, capitalist society under the "one country, two systems" concept — its systems and lifestyle basically unchanged. Likewise, the KMB Group turned a new page with the grant of a new ten-year bus franchise and the establishment of a new, streamlined corporate structure, but retains its strong commitment to providing a world class public bus service to its customers, as well as its determination to achieve growth in business and earnings.
Results for the Year
The Group’s profit attributable to Shareholders for the year ended 31 December 1997 was HK$550.8 million (1996 - HK$527.7 million), representing an increase of 4.4 per cent over the previous year. The profit from franchised bus operations for the year, after the transfer of HK$0.2 million (1996 - HK$1.8 million) from the Development Fund amounted to HK$557.5 million (1996 - HK$525.5 million), representing an increase of 6 per cent over the previous year. Earnings per share for the year amounted to HK$1.36 (1996 - HK$1.31).
Dividends
At the forthcoming Annual General Meeting, the Directors will recommend the payment of a final dividend of 82 cents per share for the year ended 31 December 1997 (1996 - 80 cents per share). Together with the interim dividend of 26 cents per share paid on 9 October 1997 (1996 - 24 cents per share), dividends for the year ended 31 December 1997 will amount to HK$1.08 per share (1996 - HK$1.04 per share), totalling HK$435.9 million (1996 - HK$419.8 million).
The New KMB Group: Streamlined for Growth
We have taken a purposeful step to harness our resources for our future needs. We have restructured the KMB organisation to enable us to monitor closely the performance of our diversified operations and mobilise the combined talent, experience and resources toward expansion goals and new opportunities. The new corporate structure was ratified by our Shareholders on 3 November 1997 and came into effect on 18 November after receiving Court sanction. The Kowloon Motor Bus Holdings Limited ("KMB Holdings"), a new company incorporated in Bermuda, became the ultimate holding company for the Group which has been streamlined into five divisions: franchised public bus operations, property holdings, mainland PRC operations, non-franchised transport operations and internal financial services. The shares of KMB Holdings were listed on the Stock Exchange of Hong Kong by way of introduction, in place of those of The Kowloon Motor Bus Company (1933) Limited.
KMB is Still a Bus Company
The KMB Group is still first and foremost a bus transport provider. This is the heart of our business, and three of our five newly created divisions operate bus transport services. The restructuring makes clearer operational distinctions between the different markets and areas we serve. This helps us determine, when we do our goal-setting and performance evaluations, how the different operating entities are contributing to the Group, enabling us to better manage our finances and plan for future expansion.
Growth Areas On Track
Last year we identified three key areas of future growth for the Group’s bus services: the new international airport at Chek Lap Kok and the neighbouring North Lantau/Tung Chung area, the New Territories, and the boundary area between mainland China and the Hong Kong Special Administrative Region (SAR). The growth momentum in these areas continues to be strong.
Population Growth: New Challenges and Opportunities
The growth prospects for the KMB Group have been augmented by an important, more recent phenomenon.
Hong Kong’s population is growing at its highest rate in 20 years, spurred by an influx of immigrants from the mainland, new residents from abroad and former emigrants returning to the SAR. The years leading up to the 21st century will be years of intense activity for Hong Kong, driven by infrastructure projects and comprehensive property development to provide housing for the growing population. This trend poses unique logistical, management and technical challenges in bus transport that will call upon all our knowledge and acumen in order to accommodate the territory’s growth and the commuting public’s lifestyle needs. However, through foresight, prudent investment in operations and facilities, and ongoing efforts to enhance our capabilities, the Group stands well-positioned to offer much-needed bus transport solutions for this challenging and exciting future.
New Airport Brings North Lantau to Life
The siting of Hong Kong’s new international airport at Chek Lap Kok, and the consequent building of road and bridge links with the urban area, seeded the anticipated robust settlement of bedroom communities in North Lantau and the new town of Tung Chung. Additionally, the eagerly awaited opening of the new airport, scheduled for July 1998, will be attracting travellers and non-travellers alike to this modern complex of five-star accommodation, shopping malls and entertainment centres. We believe our 13 routes servicing Chek Lap Kok and its vicinity will benefit from high traffic to and from the site.
Development Booms in the New Territories
The New Territories will continue to be an area of high demand as Government earmarks more land for modern office and residential centres. Preferring more open space, reasonable property prices and a greener environment in the outer fringes of the SAR, increasing numbers of people are establishing households in the New Territories. According to the latest available statistics, about half of the Hong Kong population make the New Territories their home. As residential and commercial construction projects proceed and the annual growth of homeowners increases at a robust rate, we anticipate our routes and services in the New Territories to continue to enjoy high demand. We believe that KMB buses will be seen by commuters as an increasingly efficient, dependable and economical means of transportation to urban work areas and to various leisure and entertainment centres.
Cross-boundary Transport Comes of Age
Of particular benefit to our cross-boundary bus transport services is the increasing demand fostered by rapidly accelerating commercial ties between Hong Kong and its closest economic partner — the South China region, and in particular, Shenzhen. The trend of a middle management work force from Hong Kong commuting to jobs in factories and production facilities across the boundary is a strong one. A large proportion of people living in new townships along the boundary actually work on the mainland. Proximity to jobs is also contributing to the burgeoning population in the outer fringes of the New Territories. In view of this workstyle phenomenon, we continue to see strong growth opportunities in our cross-boundary services.
New Ventures for an Expanding Market
The Group’s strong track record in bus transport and management is a formidable one, and we will continue to leverage this important and unique resource towards more future consultancy opportunities and business associations consistent with our considerable experience. The Group’s reputation for high-quality and efficient service in one of the most demanding environments in the world makes us a strong candidate for many such business opportunities.
The KMB Team: One of Our Greatest Assets
With the bus transport market already beginning a period of what is expected to be very substantial growth, the talent, skill and dedication of our employees is one of the Group’s greatest assets in optimising future opportunities. Our aim to be a world class bus transport company is supported by the daily efforts and dedication of our team of employees. We fully appreciate their contribution and loyalty, without which our continued successes and future achievements could not be realised. The KMB Group acknowledges employees’ efforts and pledges to continue investing in team-building and professional development, and providing recognition in ways that reflect our emphasis on high customer satisfaction, respect for regulations, job expertise and ongoing enhancement of skills. From our attainment of ISO 9002 certification, to our community outreach programmes, the Group provides an environment where our employees can excel and are rewarded for their professionalism.
Directors
Government officials holding the positions of Commissioner for Transport and Deputy Secretary for Transport (Transport Services) are appointed by the Chief Executive of the Hong Kong SAR to sit on the boards of The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited under the Public Bus Services Ordinance. On 10 March 1997, Mrs. Dorothy Chan Yuen Tak Fai, JP, Acting Commissioner for Transport, was appointed to the board of The Kowloon Motor Bus Company (1933) Limited in place of Mrs. Lily Teresa Yam Kwan Pui Ying, JP. On 4 August 1997, Mrs. Fanny Law Fan Chiu Fun, JP, Commissioner for Transport, was appointed to the board of The Kowloon Motor Bus Company (1933) Limited in place of Mrs. Dorothy Chan. Mr. Isaac Chow Yiu Nam, JP, Deputy Secretary for Transport (Transport Services), continued to be a Director of The Kowloon Motor Bus Company (1933) Limited throughout the year 1997.
On 1 June 1997, Mrs. Dorothy Chan and Mr. Isaac Chow were appointed to the board of Long Win Bus Company Limited. On 4 August 1997, Mrs. Fanny Law was appointed to the board of Long Win Bus Company Limited in place of Mrs. Dorothy Chan.
Except for Mrs. Fanny Law and Mr. Isaac Chow, the existing Directors of The Kowloon Motor Bus Company (1933) Limited, namely, Dr. the Hon Woo Pak Chuen, JP, Mr. Walter Kwok Ping Sheung, JP, Mr. Yu Shu Chuen, Mr. Raymond Kwok Ping Luen, Mr. Ng Siu Chan, Mr. William Louey Lai Kuen, Mr. John Chan Cho Chak, JP, Mr. Charles Lui Chung Yuen, Dr. Lee Quo Wei , JP, GBM and Miss Winnie J Ng have also been appointed to the board of The Kowloon Motor Bus Holdings Limited. In addition, Dr. the Hon Woo Pak Chuen, Mr. Walter Kwok Ping Sheung and Mr. Raymond Kwok Ping Luen have respectively appointed Miss Lana Woo, Mr. George Chien Yuan Hwei and Mr. Tsim Tak Po as their alternates.
On behalf of the Group, I would like to express my appreciation for the valuable contributions that Mrs. Yam, Mrs. Law, Mrs. Chan and Mr. Chow have made throughout their terms of directorship to The Kowloon Motor Bus Company (1933) Limited and Long Win Bus Company Limited.
The Driving Force of 65 Years of Vision and Excellence and Beyond
1998 will mark KMB’s 65th year of transport service to the Hong Kong community. Our history attests to many accomplishments and strengths. Among these is the ability to look at challenges with a fresh perspective and offer effective bus transport solutions. Although we have introduced many "firsts" in our field, we have never rested on our laurels but have continued to apply our skills and expertise to surpass our own achievements. It is this spirit of embracing innovation and "doing things better" that has enabled KMB, established in 1933, to maintain its leadership over 65 years, continuing to the present day.
With the advantages of our new corporate structure and the new vistas of opportunity brought about by the dynamic SAR environment, we enthusiastically look forward to the future, and to our role as a bus transport provider of uncompromising high caliber. We affirm those characteristics that have kept us on the leading edge of our industry and continue on our path of prudent planning — keeping a discerning eye on trends that affect customer needs, and making the necessary long-term commitments and investments to meet those needs. Moreover, our energy and expertise will continue to be focused on providing value for all our stakeholders: our customers, our employees, the community at large and our Shareholders.
In the face of an exciting and pivotal growth trend for the SAR into the 21st century, KMB’s strengths and unique characteristics position us favourably for the future and will be the driving force in our endeavors to provide Hong Kong’s growing population with first-rate, world class bus transport services.
P C Woo
Chairman
16 April 1998
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