CMB_1986 — Page 8

CHAIRMAN'S STATEMENT

Group Results and Dividend

The Board of Directors announces that the audited consolidated profit for the year ended 30th June 1986 after transfer from Development Fund in accordance with the Profit Control Scheme amounted to $47.84 million compared with $50.66 million for the previous year.

The Directors will recommend to shareholders at the forthcoming ordinary yearly meeting to be held on 30th December 1986 the payment of a final dividend of 30 cents per share. This, together with the first interim dividend of 18 cents per share, a special dividend of 5 cents per share and a second interim dividend of 18 cents per share already paid, makes a total dividend for the year of 71 cents per share compared with 73 cents per share for the previous year.

Result of Bus Operation

Bus operating profit fell sharply from $68.56 million in 1985 to $20.52 million in 1986, despite the increase in revenue derived from the fare revision effective from 1st April 1986. As a result, virtually the whole of the balance of the Development Fund had to be transferred back in order to achieve the permitted return. The financial result would have been significantly worse if stringent cost control measures and rationalisation of services had not been implemented.

Two principal factors were responsible for the sharp decrease in profit: the continuing effect on patronage and revenue levels of the opening of the Chai Wan to Admiralty section of the MTR Island Line on 31st May 1985, aggravated by the further effect of the extension of the Island Line to Sheung Wan on 23rd May 1986, and the additional maintenance expenditure incurred as a result of implementing the recommendations of the Transport Advisory Committee's Working Group on CMB Maintenance.

Traffic Activities

The number of passengers carried during the year under review fell from 364.0 million to 327.1 million, a decrease of 10.14 per cent whilst kilometres operated fell by 1.26 per cent from 55.6 million to 54.9 million.

The loss of revenue caused by the decrease in patronage gave rise to grave concern. In order to restore the financial viability of the bus operations several routes were withdrawn, and service levels on certain other routes, principally along the northern shore of Hong Kong Island, were reduced.

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In contrast, demand in the South of the Island showed an upward trend and a package of service improvements was implemented. Two new cross-harbour routes, 107 (Aberdeen Kai Yip Estate) and 109 (Central Ho Man Tin) were introduced with the aim of improving travelling conditions and assisting the dispersal of passengers arriving at the KCR's Kowloon Station, Hung Hom.

Bus Fleet

A further thirty-six double-deck buses were withdrawn during the year under review, leaving the Company's total fleet standing at 1,018 buses at 30th June 1986 with a total carrying capacity of 116,716.

Depot Facilities

The new multi-storey depot building at Wong Chuk Hang became fully operational during the year and has considerably improved maintenance facilities in the South of the Island.

Following discussions with the Government, an additional piece of land will be acquired in Chai Wan under a short- term tenancy agreement for the parking of buses to improve the overnight parking situation. Negotiations are still proceeding for the extension of tenure of the existing parking sites in various parts of Hong Kong Island.

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