The MTR Corporation is in the business of building and managing mass transit railway systems and providing related rail services. Operating under the business model of rail+property we have secured the rights to develop and own properties adjacent to our rail network. This business model positions us for actively participating in and positively influencing sustainable development in the communities in which we operate.
Our core business, the MTR rail network, operates seven railway lines (including the dedicated Airport Express) comprising 91 kilometres of rail lines connecting 53 stations, including those that link the MTR to Hong Kong's other major rail network, the Kowloon Canton Railway (KCR). In 2005, we commenced services for the Disneyland Resort Line and extended the Airport Express Line to the recently opened AsiaWorld-Expo, Hong Kong's largest exhibition and convention centre adjacent to the Hong Kong International Airport. In progress for completion in mid-2006 is Ngong Ping 360 (NP360), a themed tourist project in which a cable car system links the Po Lin (Precious Lotus) Monastery and Giant Buddha statue at Ngong Ping to the Tung Chung town centre and MTR network. We are also on schedule to deliver in early 2009 the extension of the Tseung Kwan O Line (TKL) to capture district growth. Proposed rail projects currently in various stages of Government approval are the West Island Line (WIL), the South Island Line (East), South Island Line (West) and the Kwun Tong Line Extension, which will serve growing regional centres around the territory.
Our rail related services cater to the increasing opportunities for business arising from our experience and expertise in building mass transit railway systems. These include in-station retail and telecommunication services, rail systems consultancy and building and rail product sourcing. The Octopus card system, developed by the MTR Corporation has introduced ground-breaking technological advances for mass transit ticketing systems and now leverages its capabilities to retail services and public transport fares payment outside our system. Most recent applications of the card technology operate secure access systems for our developed and managed residential estates and for commercial offices and properties throughout Hong Kong.
The rail business spearheads our global expansion into the Asia region and Europe. In mainland China we are undertaking two major railway projects, in Beijing (Beijing Metro Line 4) as a joint venture and in Shenzhen (Shenzhen Metro Line 4). We are also project-managing the Shanghai Metro Line 9 and conducting several consultancy contracts for training and management in major urban centres around the PRC. In Europe, specifically in the UK, we are actively seeking operating franchise opportunities emerging after rail privatisation. Through our London office we are able to closely monitor such developments for future potential.
The 2005 year was a banner year for our rail services performance. We exceeded our previous record in average passenger trips per week day to about 2.5 million passengers and substantially completed our programme to retrofit the platform screen doors in all 74 underground platforms. We opened the Disneyland Resort Line and added a new station to the Airport Express Line to serve the growing commercial interests of the area. We bettered our Customer Service Pledges and safety targets
and again ranked as a top performer amongst
the 12 worldwide metros included in the 2004 CoMET survey.
Our financial performance improved as well. Our reported net profit attributable to equity shareholders was HK$ 6,140 million excluding investment properties revaluation gains and net deferred tax. This demonstrates a 36.7% increase in profits for our underlying business over the previous year. For the 2005 year, total revenue rose 9.6% and property development profits increased by 34.5%. Despite the increased scale of business, the addition of operating network assets along with growth costs related to our overseas expansion, we successfully contained cost increases to 6%, a level below revenue growth. Further key statistics on our financial performance for the year appear on pages 53-54 of this Report and are discussed in detail in our 2005 Annual Report and in the Sustainability section of our website.
Sustainable business model ĦE The rail+property business model provides us with the maximum opportunity for low risk/high return on our assets and stewardship of sustainable best practice for the life-cycle of our properties. Underlying this model are the negotiated rights to develop and own properties adjacent to and along our rail lines providing the means for long-term profitability while investing in and building new rail projects. Our current portfolio of properties includes primarily shopping centres and commercial properties with a land bank for future development of 27.4 million square feet, mainly located along the Tseung Kwan O Line. It is our practice to tender out under joint venture arrangements the construction and delivery of properties from our land bank. We develop the master planning for the urban design and set the environmental criteria and quality standards for the properties. Under a three-phased 'through train' strategy of planning, development and management we are able to influence and achieve our sustainability goals. In 2005, we successfully tendered the first of our development packages of Dream City at Tseung Kwan O Area 86.
Corporate structure ĦE The MTR Corporation Limited (MTRCL) is a public company listed in Hong Kong. At year-end 2005, approximately 76%(1) of our shares were held by The Financial Secretary Incorporated, in trust on behalf of the Hong Kong SAR Government. The balance free float is held by retail investors and global professional investment interests. As a listed entity we are subject to The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. We operate under The Mass Transit Railway Ordinance (MTR Ordinance) which oversees the framework for our business and operations. The Operating Agreement with Government grants our license to operate under stringent terms and conditions that require us to meet annual targets and performance standards which influence the structure of our internal management systems and governance practices.
Mapping our future ĦE Of significant interest to our future operations, corporate structure and management is the announcement by Government in early 2004 of a proposed merger between the MTR and KCR rail networks. This merger proposes management of the two networks under a single operator. As we approach the final stages of negotiations with the Government, our strategy is to achieve the key parameters set by Government while responsibly balancing our stakeholder interests and assuming best practice for long-term sustainability of the new entity. However, it should be noted that no decision was announced as of year-end 2005. The Governance section of this Report further discusses this issue.
Full details of our organisational structure, scope of business and our 2005 year operational and financial performances are available in our 2005 Annual Report.
Further reading
What Guides Us
China and International Business
Health and Safety
