[Performance Summary](index=3&type=section&id=%E6%A5%AD%E7%B8%BE%E6%91%98%E8%A6%81) The Group experienced a significant turnaround from profit to loss in H1 2020, primarily due to property impairments and revaluation losses [Group Overall Performance](index=3&type=section&id=%E9%9B%86%E5%9C%98%E6%95%B4%E9%AB%94%E6%A5%AD%E7%B8%BE) In H1 2020, the Group turned from profit to loss, recording a loss attributable to shareholders of HKD 1.741 billion, a stark contrast to the profit in the same period last year - The pandemic led to economic difficulties, with slowed port activity, delayed mainland development property sales, significant impairment provisions for Hong Kong development properties, stunted investment property growth, and a sharp drop in hotel occupancy rates being the main causes of the performance loss[5](index=5&type=chunk) Key Performance Indicators for H1 2020 | Metric | H1 2020 | H1 2019 | | :--- | :--- | :--- | | (Loss)/Profit Attributable to Shareholders | (HKD 1.741 billion) | HKD 2.450 billion | | Underlying Net (Loss)/Profit | (HKD 1.132 billion) | HKD 2.236 billion | | Basic (Loss)/Earnings Per Share | (HKD 0.57) | HKD 0.80 | [Interim Dividend](index=3&type=section&id=%E4%B8%AD%E6%9C%9F%E8%82%A1%E6%81%AF) The Board declared a first interim dividend of HKD 0.20 per share, a 20% decrease from the prior year, totaling approximately HKD 0.61 billion Interim Dividend Details | Item | 2020 | 2019 | | :--- | :--- | :--- | | First Interim Dividend (Per Share) | HKD 0.20 | HKD 0.25 | | Total Dividend Amount | HKD 0.61 billion | HKD 0.762 billion | [Business Review](index=4&type=section&id=%E6%A5%AD%E5%8B%99%E8%A9%95%E8%AD%B0) This section provides an overview of the Group's diverse business segments and their performance during the period [Hong Kong Properties](index=4&type=section&id=%E9%A6%99%E6%B8%AF%E7%89%A9%E6%A5%AD) The Hong Kong property portfolio performed steadily, with a high-value transaction for Mount Nicholson and multiple redevelopment projects progressing as planned - A stratified unit at Mount Nicholson, The Peak, was sold for **HKD 0.533 billion**, with a price per square foot reaching **HKD 0.116 million**[8](index=8&type=chunk) - Multiple redevelopment projects are progressing well, including 11 Plantation Road (7 houses), 77 Peak Road (8 houses), and 1 Plantation Road (20 houses)[8](index=8&type=chunk) - The Group also has significant layouts in Kowloon Tong and the former Kai Tak Airport runway in Kowloon East, advancing foundation works for residential projects and holding a **30% interest** in a large waterfront site, respectively[9](index=9&type=chunk)[10](index=10&type=chunk) [Mainland China Development Properties](index=4&type=section&id=%E4%B8%AD%E5%9C%8B%E5%85%A7%E5%9C%B0%E7%99%BC%E5%B1%95%E7%89%A9%E6%A5%AD) Affected by the pandemic, recognized revenue and operating profit declined significantly, yet contracted sales grew by 24% H1 2020 Mainland China Development Properties Performance (Attributable Share) | Metric | H1 2020 | H1 2019 | Change | | :--- | :--- | :--- | :--- | | Recognized Revenue | HKD 4.275 billion | HKD 5.232 billion | -18% | | Operating Profit | HKD 1.172 billion | HKD 1.828 billion | -36% | | Contracted Sales | RMB 8.1 billion | RMB 6.498 billion | +24% | | Unrecognized Sales (Period-end) | RMB 31.4 billion | RMB 27.4 billion | +14% | - The Group did not acquire additional land during the period, with land reserves remaining at **3.3 million square meters** as of end-June[13](index=13&type=chunk) [Mainland China Investment Properties](index=5&type=section&id=%E4%B8%AD%E5%9C%8B%E5%85%A7%E5%9C%B0%E6%8A%95%E8%B3%87%E7%89%A9%E6%A5%AD) Despite initial pandemic impact, retail demand rebounded in Q2, leading to a slight revenue decrease but an increase in operating profit, with Changsha IFS performing exceptionally well H1 2020 Mainland China Investment Properties Performance | Metric | Amount | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 1.851 billion | -5% | | Operating Profit | HKD 1.183 billion | +2% | - Changsha IFS showed strong performance, with revenue up **6%** and operating profit significantly up **51%**, and the mall was fully leased by end-June[15](index=15&type=chunk) - Chengdu IFS was less affected by the pandemic, with revenue down **8%** and operating profit up **4%**, and the mall's occupancy rate remained high at **98%**[16](index=16&type=chunk) - Wheelock Square, Shanghai, maintained a high occupancy rate of **91%**[17](index=17&type=chunk) [Wharf Hotels](index=6&type=section&id=%E4%B9%9D%E9%BE%8D%E5%80%89%E9%85%92%E5%BA%97) The hotel sector was severely impacted by global travel halts, leading to plummeting occupancy rates, with the Group focusing on health measures and cost control - The Group manages **17 hotels** across Mainland China, Hong Kong, and the Philippines, offering nearly **6,000 rooms**[17](index=17&type=chunk) - During the period, the Group focused on health and safety measures and cost control to navigate the unprecedented challenging market conditions[17](index=17&type=chunk) [Logistics](index=7&type=section&id=%E7%89%A9%E6%B5%81) The logistics business faced challenges in H1 due to global supply chain disruptions, geopolitical tensions, and economic slowdown, resulting in declining container throughput at major terminals H1 2020 Major Terminal Throughput | Terminal | Throughput (TEUs) | YoY Change | | :--- | :--- | :--- | | Modern Terminals (Hong Kong) | 2.4 million | -5% | | Shenzhen Da Chan Bay Terminal | 0.6 million | -11% | | Shekou Container Terminals | 2.5 million | -12% | - Hong Kong Air Cargo Terminals (the Group holds a **21% interest**) benefited from market opportunities arising from the pandemic, handling a total of **0.7 million tonnes** of cargo in H1[19](index=19&type=chunk) [Financial Review](index=8&type=section&id=%E8%B2%A1%E5%8B%99%E8%A9%95%E8%AD%B0) This section provides an in-depth analysis of the Group's financial performance, liquidity, and capital commitments [Interim Results Review](index=8&type=section&id=%E4%B8%AD%E6%9C%9F%E6%A5%AD%E7%B8%BE%E8%A9%95%E8%AD%B0) In H1 2020, the Group turned from profit to loss, recording a loss attributable to shareholders of HKD 1.741 billion, primarily due to a significant impairment provision for a Hong Kong development property project Overview of Revenue and Operating Profit by Business Segment (H1 2020) | Business Segment | Revenue (HKD million) | YoY Change | Operating (Loss)/Profit (HKD million) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Investment Properties | 1,932 | -5% | 1,227 | +0.6% | | Development Properties | 1,176 | -62% | 486 | -63% | | Hotels | 123 | -54% | (49) | Turned to loss | | Logistics | 1,202 | -4% | 196 | -13% | | Investments and Others | 1,118 | -21% | 888 | -28% | - Other net expenses amounted to **HKD 2.94 billion**, primarily including an impairment provision of **HKD 2.864 billion** for a Hong Kong development property project[24](index=24&type=chunk) - Finance costs increased by **39%** to **HKD 0.594 billion**, mainly due to increased unrealized losses on cross-currency and interest rate swap contracts[25](index=25&type=chunk) [Liquidity, Financial Resources, and Capital Commitments](index=11&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E3%80%81%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90%E8%88%87%E8%B3%87%E6%9C%AC%E6%89%BF%E6%93%94) Despite an increase in the net debt to total equity ratio to 16.7%, the Group maintains a strong financial position with ample credit facilities and liquid assets Financial Position Summary | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Shareholders' Equity | HKD 139.9 billion | HKD 142.9 billion | | Total Assets | HKD 217.4 billion | HKD 214.9 billion | | Net Debt to Total Equity Ratio | 16.7% | 13.0% | Credit Facilities Analysis (HKD billion) | Item | Available Credit | Drawn Credit | Undrawn Credit | | :--- | :--- | :--- | :--- | | Total Group | 75.5 | 42.2 | 33.3 | - The Group holds a liquid listed investment portfolio with a market value of **HKD 42.9 billion**, available for use when needed[37](index=37&type=chunk) - As of June 30, 2020, the Group's estimated major expenditure commitments for the coming years amounted to **HKD 20.6 billion**, of which **HKD 12.7 billion** was committed, primarily for mainland development property projects[41](index=41&type=chunk) [Human Resources](index=15&type=section&id=%E4%BA%BA%E5%8A%9B%E8%B3%87%E6%BA%90) As of June 30, 2020, the Group had approximately 7,700 employees, with remuneration policies linked to market trends and performance-based discretionary bonuses - As of June 30, 2020, the Group's total number of employees was approximately **7,700**[42](index=42&type=chunk) [Condensed Consolidated Financial Statements and Notes](index=16&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E5%8F%8A%E9%99%84%E8%A8%BB) This section presents the Group's condensed consolidated financial statements and detailed explanatory notes [Consolidated Income Statement](index=16&type=section&id=%E7%B6%9C%E5%90%88%E6%94%B6%E7%9B%8A%E8%A1%A8) For the six months ended June 30, 2020, the Group's revenue decreased by 31% to HKD 5.551 billion, resulting in a pre-tax loss of HKD 1.369 billion and a loss attributable to shareholders of HKD 1.741 billion due to significant property impairment Summary of Consolidated Income Statement (For the six months ended June 30) | Item (HKD million) | 2020 | 2019 | | :--- | :--- | :--- | | Revenue | 5,551 | 8,064 | | Operating Profit | 2,517 | 3,701 | | Other Net Expenses | (2,940) | (288) | | (Loss)/Profit Before Tax | (1,369) | 3,902 | | (Loss)/Profit for the Period | (1,721) | 2,473 | | (Loss)/Profit Attributable to Company Shareholders | (1,741) | 2,450 | [Consolidated Statement of Financial Position](index=18&type=section&id=%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of June 30, 2020, the Group's total assets were HKD 235.78 billion, with investment properties being the largest component of non-current assets, and total equity at HKD 143.305 billion Summary of Consolidated Statement of Financial Position (HKD million) | Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 173,097 | 168,794 | | Current Assets | 62,683 | 73,424 | | **Total Assets** | **235,780** | **242,218** | | **Liabilities and Equity** | | | | Total Liabilities | 92,475 | 95,875 | | Shareholders' Equity | 139,868 | 142,874 | | **Total Equity** | **143,305** | **146,343** | [Condensed Consolidated Cash Flow Statement](index=20&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) In H1 2020, the Group generated net cash inflow from operating activities but experienced significant net cash outflows from investing and financing activities, resulting in a net decrease in cash and cash equivalents Summary of Condensed Consolidated Cash Flow Statement (For the six months ended June 30) | Item (HKD million) | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 2,785 | 4,897 | | Net Cash Used in Investing Activities | (4,813) | (2,760) | | Net Cash Used in Financing Activities | (4,467) | (571) | | Net Decrease in Cash and Cash Equivalents | (6,495) | 1,566 | | Cash and Cash Equivalents at End of Period | 18,339 | 18,963 | [Notes to the Financial Statements](index=21&type=section&id=%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E9%99%84%E8%A8%BB) The notes provide detailed explanations of accounting policies, segment performance, significant items, and capital commitments, highlighting the impact of property impairment and future expenditure Segment Results Summary (H1 2020) | Segment | Revenue (HKD million) | Operating Profit/(Loss) (HKD million) | | :--- | :--- | :--- | | Investment Properties | 1,932 | 1,227 | | Development Properties | 1,176 | 486 | | Hotels | 123 | (49) | | Logistics | 1,202 | 196 | - Other net expenses of **HKD 2.94 billion** primarily include an impairment provision of **HKD 2.864 billion** for Hong Kong development property assets[58](index=58&type=chunk) - As of June 30, 2020, the Group's total capital expenditure commitments amounted to **HKD 20.57 billion**, of which **HKD 12.662 billion** was committed, primarily for property development[78](index=78&type=chunk) [Corporate Governance and Other Information](index=34&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%8F%8A%E5%85%B6%E4%BB%96%E8%B3%87%E6%96%99) This section outlines the Company's adherence to corporate governance principles and details regarding director and shareholder interests [Corporate Governance Code](index=34&type=section&id=%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%AE%88%E5%89%87) The Company complied with the Corporate Governance Code, with the exception of the Chairman and CEO roles being held by the same individual, deemed effective for strategic planning - The Company deviated from Code Provision A.2.1 of the Corporate Governance Code, which states that the roles of Chairman and Chief Executive Officer should be performed by different individuals, an arrangement the Board believes is more effective for planning and executing long-term strategies[80](index=80&type=chunk) [Directors' and Major Shareholders' Interests](index=35&type=section&id=%E8%91%A3%E4%BA%8B%E5%8F%8A%E4%B8%BB%E8%A6%81%E8%82%A1%E6%9D%B1%E6%AC%8A%E7%9B%8A) The report details the securities interests of directors and major shareholders, with Wheelock and Company Limited holding 72.99% of the total issued shares as the primary controlling shareholder Major Shareholders' Interests (June 30, 2020) | Shareholder Name | Number of Ordinary Shares Held | Percentage of Total Issued Shares | | :--- | :--- | :--- | | Wheelock and Company Limited | 2,225,691,608 | 72.99% | | HSBC Trustee (C.I.) Limited | 2,225,691,608 | 72.99% | - The report also details the share and option interests of directors such as Stephen Ng and Paul Chow in associated companies including the Company, Wheelock, Wharf REIC, and Greentown China[84](index=84&type=chunk)[85](index=85&type=chunk)[88](index=88&type=chunk) [Share Option Scheme](index=40&type=section&id=%E8%82%A1%E4%BB%BD%E8%AA%8D%E8%B3%BC%E6%AC%8A%E8%A8%88%E5%8A%83) The report discloses changes in share options granted to directors and employees, with 6.6 million unexercised options at an exercise price of HKD 15.92 per share as of June 30, 2020 Share Option Movements (Granted to Employees) | Item | Number of Shares | | :--- | :--- | | As at January 1, 2020 | 6,800,000 | | Exercised during the period | (200,000) | | As at June 30, 2020 | 6,600,000 |

Company Overview [Company Overview](index=2&type=section&id=%E5%85%AC%E5%8F%B8%E7%B0%A1%E4%BB%8B) Wharf Holdings, established in 1886, is a diversified property and logistics group with core assets in Hong Kong luxury residential, mainland China IFS properties, and Asian hotels - The Group's core businesses are property-related, including investment properties, hotels, and development properties in Hong Kong and mainland China, with other businesses including logistics[3](index=3&type=chunk) - Hong Kong property business focuses on luxury residential properties on The Peak and development projects in Kowloon East, with a land bank of **3.3 million sq ft**[3](index=3&type=chunk) - Mainland investment properties are centered around the International Finance Centre (IFS) series, establishing market leadership in cities like Chengdu, Changsha, and Chongqing; development property land bank is **3.5 million sq m**[3](index=3&type=chunk) - Wharf Hotels manages **17 Niccolo and Marco Polo hotels** in Asia[3](index=3&type=chunk) Chairman's Statement [Economic Overview](index=9&type=section&id=%E7%B6%93%E6%BF%9F%E6%A6%82%E6%B3%81) In 2019, global economic growth stagnated due to trade and geopolitical uncertainties, impacting China and causing Hong Kong's GDP to decline for the first time since 2009 - Global economic growth stagnated, the weakest since the financial crisis. Major Asian economies were dragged by China's slowdown and US-China trade talks[16](index=16&type=chunk) - Mainland China implemented housing price control policies, impacting the market and developers. Meanwhile, the growing middle class drove sustained growth in domestic consumption[16](index=16&type=chunk) - Hong Kong's economy was hit by both macro factors and social unrest, with GDP declining for the first time since 2009 and unemployment rising[16](index=16&type=chunk) [Business Performance](index=10&type=section&id=%E6%A5%AD%E5%8B%99%E8%A1%A8%E7%8F%BE) In 2019, the Group's mainland investment properties performed exceptionally, while development properties faced significant unrealized provisions due to government price controls, impacting overall revenue and profit | Business Segment | Revenue | Operating Profit | | :--- | :--- | :--- | | Mainland Investment Properties | HKD 3.924 billion (+14%) | HKD 2.311 billion (+23%) | | Mainland Development Properties | HKD 14.806 billion (-33%) | HKD 4.927 billion (-38%) | - Mainland development properties made unrealized provisions totaling **HKD 3.79 billion** due to strict government price controls[17](index=17&type=chunk) - Full-year attributable contracted sales reached **RMB 19.9 billion**, exceeding the target by **11%**[17](index=17&type=chunk) - Four houses and three apartment units were sold at the Mount Nicholson project on The Peak in Hong Kong during the year[17](index=17&type=chunk) [Financial Results](index=11&type=section&id=%E8%B2%A1%E5%8B%99%E6%A5%AD%E7%B8%BE) In 2019, the Group's profit attributable to shareholders decreased by 49% to HKD 3.386 billion, and underlying net profit by 58% to HKD 2.71 billion, primarily due to mainland development property provisions | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Profit Attributable to Shareholders | HKD 3.386 billion | HKD 6.623 billion | -49% | | Underlying Net Profit | HKD 2.71 billion | HKD 6.511 billion | -58% | | Earnings Per Share | HKD 1.11 | HKD 2.18 | -49% | | Full-Year Dividend | HKD 0.325 | HKD 0.65 | -50% | | Gearing Ratio | 13% | 18.5% | -5.5 percentage points | - Profit decline was primarily due to provisions for potential impairment losses in the mainland development properties segment[18](index=18&type=chunk) [Outlook](index=12&type=section&id=%E5%B1%95%E6%9C%9B) Looking ahead to 2020, the COVID-19 pandemic will severely impact the global economy and the Group's mainland China businesses, with first-quarter results expected to be extremely dismal - The COVID-19 pandemic will be the global focus for the first half of 2020, impacting the global economy[20](index=20&type=chunk) - All industries, especially in mainland China, are severely affected. Hotel revenue fell below **5%** of the same period last year, and construction and sales of development properties came to a halt[20](index=20&type=chunk) - Business in Q1 2020 is largely lost, and significant improvement in Q2 is unlikely, with conditions not expected to stabilize before year-end[20](index=20&type=chunk) Financial Summary [Financial Summary](index=12&type=section&id=%E8%B2%A1%E5%8B%99%E6%94%9D%E8%A6%81) In FY2019, the Group experienced significant declines in key financial metrics, including a 58% drop in underlying net profit, though its financial position improved with reduced net debt | Metric (HKD million) | 2019 | 2018 | Change % | | :--- | :--- | :--- | :--- | | **Performance** | | | | | Revenue | 16,874 | 21,055 | -20% | | Operating Profit | 7,869 | 8,752 | -10% | | Underlying Net Profit | 2,710 | 6,511 | -58% | | Profit Attributable to Shareholders | 3,386 | 6,623 | -49% | | **Per Share Data (HKD)** | | | | | Underlying Net Profit | 0.89 | 2.14 | -58% | | Profit Attributable to Shareholders | 1.11 | 2.18 | -49% | | Full-Year Dividend | 0.325 | 0.650 | -50% | | **Financial Position** | | | | | Total Assets | 242,218 | 227,349 | +7% | | Net Debt | 19,044 | 25,638 | -26% | | Shareholders' Equity | 142,874 | 135,424 | +6% | | Net Asset Value Per Share (HKD) | 46.86 | 44.45 | +5% | | Net Debt to Total Equity Ratio | 13.0% | 18.5% | -5.5 percentage points | Business Review [Hong Kong Properties](index=18&type=section&id=%E9%A6%99%E6%B8%AF%E7%89%A9%E6%A5%AD) The Hong Kong property portfolio focuses on prime luxury residential properties on The Peak and strategic developments in Kowloon East, with strong sales and ongoing project advancements - The Mount Nicholson project on The Peak signed sales for **4 houses and 3 apartment units** during the year, totaling **HKD 4.2 billion**, with an average price of **HKD 96,000 per sq ft**[30](index=30&type=chunk) - Kowloon Tong residential project: Located at the junction of Lion Rock Tunnel Road and Lung Cheung Road, positioned as a prestigious luxury residential development, with a total developable floor area of **0.436 million sq ft**, currently undergoing foundation work[40](index=40&type=chunk) - Kowloon East property portfolio: The Group, in consortium, successfully bid for a waterfront site on the former Kai Tak Airport runway, with a total developable floor area of **1.2 million sq ft**[43](index=43&type=chunk) [Mainland China Development Properties](index=24&type=section&id=%E4%B8%AD%E5%9C%8B%E5%85%A7%E5%9C%B0%E7%99%BC%E5%B1%95%E7%89%A9%E6%A5%AD) The Group's mainland development property business faced profitability challenges due to strict price control policies, despite exceeding contracted sales targets and maintaining a substantial land bank | Metric | 2019 | Change | | :--- | :--- | :--- | | Recognized Revenue (Attributable) | HKD 14.806 billion | -33% (vs HKD 22.236 billion in 2018) | | Operating Profit (Attributable) | HKD 4.927 billion | -38% (vs HKD 7.949 billion in 2018) | | Attributable Contracted Sales | RMB 19.9 billion | Exceeded target by 11% | | Unrecognized Sales at Year-End | RMB 27.4 billion | Increased | | Land Bank at Year-End | 3.5 million sq m | - | - The Group adopted a very cautious approach to acquiring land bank, only acquiring one project in Hangzhou during the year[46](index=46&type=chunk) [Mainland China Investment Properties](index=29&type=section&id=%E4%B8%AD%E5%9C%8B%E5%85%A7%E5%9C%B0%E6%8A%95%E8%B3%87%E7%89%A9%E6%A5%AD) Mainland investment properties were a key growth driver in 2019, with strong revenue and operating profit increases, and high occupancy rates at core IFS projects in Chengdu and Changsha | Project | 2019 Revenue | 2019 Operating Profit | Retail Sales | Year-End Occupancy Rate | | :--- | :--- | :--- | :--- | :--- | | **Overall** | HKD 3.924 billion (+14%) | HKD 2.311 billion (+23%) | - | - | | **Changsha IFS** | HKD 0.81 billion | HKD 0.325 billion | Nearly RMB 5 billion | 99% | | **Chengdu IFS** | HKD 1.747 billion (+11%) | HKD 0.947 billion (+21%) | Nearly RMB 7 billion (+14%) | 97% | | **Chongqing IFS** | - | - | - | 98% | - Wheelock Square in Shanghai, a landmark office building in Puxi, had a high occupancy rate of **96%** at year-end[59](index=59&type=chunk) [Hotels](index=40&type=section&id=%E9%85%92%E5%BA%97) The Group manages 17 hotels in Asia under Marco Polo and Niccolo brands, with a network covering mainland China, Hong Kong, and the Philippines, and plans for further expansion - The Group manages **17 hotels** with **5,750 rooms**, located in mainland China (**10**), Hong Kong (**4**), and the Philippines (**3**)[75](index=75&type=chunk) - Brands include **13 Marco Polo Hotels** and **4 Niccolo Hotels**[75](index=75&type=chunk) - Niccolo Suzhou hotel is planned to open in **2021**[75](index=75&type=chunk) [Logistics](index=43&type=section&id=%E7%89%A9%E6%B5%81) In 2019, the logistics business performance suffered due to US-China trade tensions and weak global demand, leading to decreased revenue and operating profit, despite strategic alliances | Metric | 2019 | Change | | :--- | :--- | :--- | | Segment Revenue | HKD 2.597 billion | -1% | | Operating Profit | HKD 0.513 billion | -14% | - Modern Terminals: Container throughput in South China fell by **3%**. To enhance Hong Kong port's competitiveness, it joined the Hong Kong Seaport Alliance at the beginning of the year[82](index=82&type=chunk) - Hong Kong Air Cargo Terminals (Group holds **20.8%** stake): Handled a total of **1.6 million tonnes** of cargo in 2019[83](index=83&type=chunk) Financial Review [2019 Performance Review](index=53&type=section&id=%E4%BA%8C%E2%97%8B%E4%B8%80%E4%B9%9D%E5%B9%B4%E5%BA%A6%E6%A5%AD%E7%B8%BE%E8%A9%95%E8%AD%B0) In 2019, the Group's underlying net profit sharply decreased by 58% to HKD 2.71 billion, primarily due to a HKD 3.79 billion impairment provision for mainland development properties, impacting most segments - The Group's underlying net profit decreased by **58%** to **HKD 2.71 billion**, mainly due to a **HKD 3.79 billion** impairment provision for mainland development properties[104](index=104&type=chunk)[108](index=108&type=chunk) | Business Segment | Revenue Change | Operating Profit Change | | :--- | :--- | :--- | | Investment Properties | +14% | +22% | | Development Properties (Subsidiaries) | -45% | -43% | | Hotels | +14% | -41% | | Logistics | -1% | -14% | - Mainland contracted sales decreased by **13%** to **RMB 19.9 billion**, but unrecognized sales increased by **26%** to **RMB 27.4 billion**[106](index=106&type=chunk) [Liquidity, Financial Resources and Capital Commitments](index=55&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E3%80%81%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90%E8%88%87%E8%B3%87%E6%9C%AC%E6%89%BF%E6%93%94) As of end-2019, the Group's financial position remained robust with increased shareholders' equity, significantly reduced net debt, ample liquidity, and manageable capital commitments for future years | Metric | End 2019 | End 2018 | | :--- | :--- | :--- | | Shareholders' Equity | HKD 142.9 billion | HKD 135.5 billion | | Net Asset Value Per Share | HKD 46.86 | HKD 44.45 | | Net Debt | HKD 19 billion | HKD 25.6 billion | | Net Debt to Total Equity Ratio | 13.0% | 18.5% | - The Group holds a liquid listed investment portfolio valued at **HKD 34.2 billion**, available for use if needed[123](index=123&type=chunk) - Estimated major capital commitments for the coming years are **HKD 22.3 billion**, of which **HKD 13.2 billion** has been committed, primarily for mainland development properties[126](index=126&type=chunk) [Dividend Policy](index=58&type=section&id=%E8%82%A1%E6%81%AF%E6%94%BF%E7%AD%96) The company's dividend policy aims to provide regular dividends to shareholders, targeting a payout of no less than 30% of the Group's underlying net profit, determined by the Board's discretion - The dividend policy targets a payout of no less than **30%** of the Group's underlying net profit[128](index=128&type=chunk) Corporate Governance Report [Board of Directors](index=61&type=section&id=%E8%91%A3%E4%BA%8B%E6%9C%83) The Board of Directors comprises ten directors, including five executive and five independent non-executive directors, responsible for strategy, risk management, and oversight, with all members participating in professional development - The Board of Directors consists of **10 directors**, including **5 independent non-executive directors**, complying with the diversity policy[137](index=137&type=chunk) - Mr. Stephen Ng Tin Hoi serves concurrently as Chairman and Managing Director; the Board believes this facilitates efficient execution of long-term strategies, with power balanced by the entire Board[134](index=134&type=chunk) [Board Committees](index=69&type=section&id=%E8%91%A3%E4%BA%8B%E5%A7%94%E5%93%A1%E6%9C%83) The company has established an Audit Committee, Remuneration Committee, and Nomination Committee to assist the Board in fulfilling its responsibilities, overseeing financial reporting, compensation, and director appointments - The Audit Committee held **four meetings** in 2019, reviewing financial statements, internal control systems, and the work of external auditors[157](index=157&type=chunk) - The Remuneration Committee held **two meetings**, reviewing remuneration policies and levels for directors and senior management[158](index=158&type=chunk) - The Nomination Committee recommended the re-election of retiring directors to the Board via written resolution[159](index=159&type=chunk) [Risk Management and Internal Control Systems](index=72&type=section&id=%E9%A2%A8%E9%9A%AA%E7%AE%A1%E7%90%86%E5%8F%8A%E5%85%A7%E9%83%A8%E7%9B%A3%E6%8E%A7%E7%B3%BB%E7%B5%B1) The Group has established comprehensive risk management and internal control systems, with the Board bearing ultimate responsibility, conducting annual reviews based on the COSO framework, and confirming system effectiveness - The Board bears full responsibility for the Group's risk management and internal control systems, aiming to provide reasonable assurance rather than eliminate all risks[163](index=163&type=chunk) - The Group conducts an annual comprehensive review of the system based on the COSO framework, with confirmations submitted by heads of each business unit[169](index=169&type=chunk)[172](index=172&type=chunk) - The Board confirmed that the risk management and internal control systems as of end-2019 were effective and adequate[172](index=172&type=chunk) Directors' Report [Disclosure of Connected Transactions](index=92&type=section&id=%E9%97%9C%E9%80%A3%E4%BA%A4%E6%98%93%E7%9A%84%E6%8A%AB%E9%9C%B2) During the reporting period, the Group entered into several disclosable connected transactions, including property acquisitions and framework agreements for services, all complying with Listing Rules and confirmed by independent directors and auditors - Acquired the Hangzhou "Yongjingshan" residential development project from a subsidiary of Wheelock, the controlling company, for **HKD 1.3621 billion**[227](index=227&type=chunk) - Entered into an agreement with Wharf Real Estate Investment Company Limited for hotel management services, with receivables totaling **HKD 62 million** in 2019[228](index=228&type=chunk) - Entered into an agreement with Wharf Real Estate Investment Company Limited for property leasing, with total rent payable of **HKD 40 million** in 2019[230](index=230&type=chunk) [Principal Risks and Uncertainties](index=94&type=section&id=%E4%B8%BB%E8%A6%81%E9%A2%A8%E9%9A%AA%E5%8F%8A%E4%B8%8D%E6%98%8E%E6%9C%97%E5%9B%A0%E7%B4%A0) The Group faces multiple risks, including macro uncertainties from global slowdowns and the pandemic, business-level risks in property and logistics from policy and market factors, and various financial risks - Development property risks: Primarily affected by economic, political, and legal developments in mainland China, especially real estate market control measures, pre-sale permits, and price control policies[234](index=234&type=chunk) - Investment property risks: Rental income may be pressured by oversupply in retail and office sectors, and fair value changes of properties could significantly impact performance[236](index=236&type=chunk) - Logistics segment risks: Faces challenges from declining global economic growth, US-China trade tensions, and slowing growth in mainland China[237](index=237&type=chunk) - Financial risks: The Group's daily operations face interest rate risk, foreign currency risk, equity price risk, and credit risk[241](index=241&type=chunk) Independent Auditor's Report [Opinion](index=97&type=section&id=%E6%84%8F%E8%A6%8B) The auditor issued an unmodified opinion, confirming the consolidated financial statements truly and fairly reflect the Group's financial position, performance, and cash flows as of December 31, 2019 - The auditor issued an unmodified opinion on the financial statements[245](index=245&type=chunk) [Key Audit Matters](index=98&type=section&id=%E9%97%9C%E9%8D%B5%E5%AF%A9%E8%A8%88%E4%BA%8B%E9%A0%85) The auditor identified three key audit matters: valuation of investment properties, assessment of net realizable value for mainland development properties, and revenue recognition for both property types, due to their materiality and judgment involved - Key Audit Matter One: Valuation of investment properties and investment properties under development. These assets account for **31%** of the Group's total assets, and their valuation involves significant judgment and estimation[248](index=248&type=chunk) - Key Audit Matter Two: Assessment of the net realizable value of properties under development for sale in mainland China. Its calculation requires significant management judgment regarding expected selling prices and completion costs[249](index=249&type=chunk) -

[Executive Summary](index=3&type=section&id=I.%20Executive%20Summary) The Group's profit attributable to shareholders and underlying net profit declined in H1 2019 due to trade tensions, economic slowdown, and currency fluctuations [Group Performance Overview](index=3&type=section&id=I.A.%20Group%20Performance%20Overview) Wharf Holdings Limited's profit attributable to shareholders decreased by 14% to HKD 2.45 billion, with underlying net profit down 12% to HKD 2.236 billion, primarily due to adverse factors such as US-China trade friction, Hong Kong's economic slowdown, and RMB exchange rate fluctuations, leading to an uncertain full-year outlook - Mainland China assets exceeded **RMB 100 billion**, accounting for over **70% of the Group's total assets** and contributing approximately **80% to the Group's profit**[5](index=5&type=chunk) - Unpredictable US-China trade friction has a profound impact on both economies and Hong Kong's economy[5](index=5&type=chunk) - In Hong Kong, travel warnings, economic slowdown, shrinking exports and re-exports, declining retail sales, stock market volatility, and employment concerns further dampened already weak demand[5](index=5&type=chunk) Group Profit Performance H1 2019 | Metric | H1 2019 (HKD million) | H1 2018 (HKD million) | Change (%) | | :--- | :--- | :--- | :--- | | Underlying Net Profit | 2,236 | 2,527 | -12% | | Profit Attributable to Shareholders | 2,450 | 2,860 | -14% | - The first interim dividend was **HKD 0.25 per share**, consistent with the prior year, totaling **HKD 762 million**[7](index=7&type=chunk) [Business Review](index=4&type=section&id=II.%20Business%20Review) [Overall Business Composition](index=4&type=section&id=II.A.%20Overall%20Business%20Composition) The Group's business primarily focuses on property-related sectors, including investment properties, hotels, and development properties in Hong Kong and Mainland China, with property businesses contributing 67% of revenue and 84% of underlying net profit during the period, alongside logistics operations - Property businesses contributed **67% of the Group's revenue** and **84% of the Group's underlying net profit**[8](index=8&type=chunk) - The investment property portfolio forms a recurring income base, while the development property portfolio drives asset turnover[8](index=8&type=chunk) - Other businesses include Modern Terminals and Hong Kong Air Cargo Terminals, which operate logistics businesses[8](index=8&type=chunk) [Hong Kong Properties](index=4&type=section&id=II.B.%20Hong%20Kong%20Properties) Hong Kong development properties primarily rely on the Mount Nicholson project, which contributed HKD 3.6 billion in contracted sales in H1 2019, with other redevelopment and development projects in Kowloon Tong and Kowloon East addressing luxury residential and core business district expansion needs - The Mount Nicholson project is the primary source of **contracted sales for Hong Kong development properties**[9](index=9&type=chunk) - Demand for luxury homes remains stable, differing from mass-market sales cycles[9](index=9&type=chunk) [Peak Property Portfolio](index=4&type=section&id=II.B.1.%20Peak%20Property%20Portfolio) Mount Nicholson, a joint venture development, recorded contracted sales of four houses and two apartment units totaling HKD 3.6 billion in H1, with an average selling price of HKD 94,000 per sq ft, while other Peak projects are under redevelopment Mount Nicholson H1 2019 Sales Data | Metric | Data | | :--- | :--- | | Contracted Sales Units | 4 houses and 2 apartment units | | Total Sales Value | HKD 3.6 billion | | Average Selling Price | HKD 94,000 per sq ft | - Superstructure works for 11 Plantation Road and 77 Peak Road redevelopment projects are complete, providing a total of **15 houses**[10](index=10&type=chunk) [Kowloon Tong Residential Project](index=4&type=section&id=II.B.2.%20Kowloon%20Tong%20Residential%20Project) Located at a prime junction of Lion Rock Tunnel Road and Lung Cheung Road, adjacent to the Beacon Hill luxury residential area, this project has a total developable gross floor area of 436,000 sq ft and has been approved for four 13-story residential towers, with foundation work currently underway - The project is located at the junction of Lion Rock Tunnel Road and Lung Cheung Road, adjacent to the traditional luxury residential area of Beacon Hill[11](index=11&type=chunk) - It has a total developable gross floor area of **436,000 sq ft**, approved for four 13-story residential towers, with foundation work currently in progress[11](index=11&type=chunk) [Kowloon East Projects](index=4&type=section&id=II.B.3.%20Kowloon%20East%20Projects) Driven by the government's "Energizing Kowloon East" initiative, the Group's Kowloon East projects, including Kowloon Godown and the Yau Tong Bay waterfront joint venture, will benefit from the area's transformation into a core business district, with Kowloon Godown having multiple redevelopment options and Yau Tong Bay providing over 6,300 residential units - Kowloon East projects will benefit from the government's "Energizing Kowloon East" initiative, aiming to create another core business district in Hong Kong[12](index=12&type=chunk) - Kowloon Godown has multiple redevelopment options, currently under study[13](index=13&type=chunk) - The Yau Tong Bay residential project has a total gross floor area of **4 million sq ft**, will provide over **6,300 residential units**, and its overall building plans have been approved[13](index=13&type=chunk) [Mainland China Development Properties](index=5&type=section&id=II.C.%20Mainland%20China%20Development%20Properties) Mainland China development property revenue recognized decreased by 10% to HKD 5.232 billion in H1, with operating profit down 1% to HKD 1.828 billion, but operating profit margin improved by 3 percentage points to 35%; contracted sales decreased by 10% to RMB 6.5 billion, mainly from Hangzhou, Beijing, Shanghai, and Suzhou, and the Group remains cautious about future project profitability, having acquired no new land parcels in the past year - Basic demand for quality properties in Mainland China's tier-one cities remains solid, but government controls on new residential sales prices impact future project profitability[14](index=14&type=chunk) - The Group remains cautious, having acquired no new land parcels in the past year[14](index=14&type=chunk) Mainland China Development Properties H1 2019 Performance | Metric | H1 2019 | H1 2018 | Change (%) | | :--- | :--- | :--- | :--- | | Recognized Revenue | HKD 5.232 billion | HKD 5.792 billion | -10% | | Operating Profit | HKD 1.828 billion | HKD 1.838 billion | -1% | | Operating Profit Margin | 35% | 32% | +3 percentage points | | Contracted Sales | RMB 6.5 billion | RMB 7.24 billion | -10% | | Unrecognized Sales | RMB 23.5 billion | RMB 21.766 billion | +8% | | Land Bank | 3.6 million sq m | - | - | [Mainland China Investment Properties](index=5&type=section&id=II.D.%20Mainland%20China%20Investment%20Properties) Mainland China investment property revenue grew 22% to HKD 1.958 billion, and operating profit increased 30% to HKD 1.162 billion, primarily driven by the opening of Changsha IFS; however, most cities may face an oversupply of office space in the coming years Mainland China Investment Properties H1 2019 Performance | Metric | H1 2019 (HKD) | Change (%) | | :--- | :--- | :--- | | Revenue | 1.958 billion | +22% | | Operating Profit | 1.162 billion | +30% | - An oversupply of office space in most cities may intensify in the coming years[15](index=15&type=chunk) [Changsha IFS](index=5&type=section&id=II.D.1.%20Changsha%20IFS) Changsha IFS has rapidly become a new landmark in Central China, with overall revenue of HKD 378 million and operating profit of HKD 130 million in H1; the mall achieved 98% occupancy and 97% opening rate, with tenant sales reaching RMB 2.138 billion, and has received multiple international awards - Changsha IFS has rapidly emerged as a new landmark in Central China, integrating entertainment, fashion, shopping, culture, and dining[16](index=16&type=chunk) Changsha IFS H1 2019 Performance | Metric | Amount (HKD) | | :--- | :--- | | Overall Revenue | 378 million | | Operating Profit | 130 million | [Mall](index=5&type=section&id=II.D.1.a.%20Mall) Changsha IFS Mall, covering 246,000 sq m, achieved 98% occupancy and 97% opening rate, with H1 tenant sales reaching RMB 2.138 billion, and has received multiple international awards including "RLI International Shopping Centre 2019" - The mall received multiple international awards, including "RLI International Shopping Centre 2019", solidifying its status as a retail hotspot[17](index=17&type=chunk) - The tenant mix includes over **70 brands** making their debut in Hunan Province, with an occupancy rate of **98%** and an opening rate of **97%**[18](index=18&type=chunk) - Tenant sales maintained strong momentum in H1 2019, reaching **RMB 2.138 billion**[18](index=18&type=chunk) [Offices & Hotel](index=6&type=section&id=II.D.1.b.%20Offices%20%26%20Hotel) Changsha IFS features premium offices and a hotel in its two towers, with Tower 1 being the tallest building in Hunan Province

Land and Property Development - The group maintains a land reserve of 3.7 million square meters for its mainland development properties, focusing on first and second-tier cities[2] - The group’s land reserve for Hong Kong properties is approximately 3 million square feet, with a focus on luxury residential developments in Kowloon Tong[2] - The group has a total land reserve of 3.7 million square feet, with significant projects in Kowloon East and various residential developments[62] - The current land bank includes 3 million square feet in Hong Kong and 3.7 million square meters in mainland China[173] - The group has acquired 12 land parcels in Suzhou, Hangzhou, Foshan, and Guangzhou, with a total consideration of RMB 18.1 billion, covering a total floor area of 810,000 square meters[63] Financial Performance - Adjusted net profit decreased by 11% to HKD 6.51 billion, while total assets amounted to HKD 227.3 billion, and the asset-to-liability ratio stood at 18.5%[30] - The group's total assets (excluding cash) reached HKD 210 billion, with real estate, logistics, CME2, and other assets accounting for 80%, 8%, 8%, and 4% respectively[25] - The group's revenue for 2018 was HKD 21,055 million, a decrease of 13% compared to HKD 24,321 million in 2017[34] - Operating profit fell to HKD 8,752 million, down 36% from HKD 6,458 million in the previous year[34] - Shareholders' profit attributable to the company dropped by 50% to HKD 6,623 million, compared to HKD 13,119 million in 2017[34] - The total assets of the group increased by 2% to HKD 227,349 million from HKD 222,647 million in 2017[34] - The total equity decreased by 5% to HKD 138,760 million from HKD 145,471 million in 2017[34] - The group's revenue decreased by 13% to HKD 21.055 billion, compared to HKD 24.321 billion in 2017, reflecting a 28% increase in investment property income and a 24% decline in development property income[140] Investment Properties - The group’s investment properties in mainland China are primarily located in key cities such as Changsha, Chengdu, Chongqing, Suzhou, and Wuxi, with the Changsha International Financial Center and Chengdu International Financial Center being comparable in scale and importance to Hong Kong's Harbour City[2] - The fair value of the investment property portfolio was HKD 74.7 billion as of December 31, 2018, down from HKD 82.1 billion in 2017, with revaluation gains netting HKD 4.465 billion[142] - Investment property income rose by 28% to HKD 3.586 billion, with operating profit increasing by 26% to HKD 1.984 billion, benefiting from contributions from Chengdu International Financial Center and the newly opened Changsha International Finance Center[140] Hotel Operations - The hotel network managed by the group has expanded to 17 hotels, including 4 modern Niccolo hotels and 13 Marco Polo hotels, with a new Niccolo hotel in Suzhou expected to open in 2020[3] - The average revenue per available room (RevPAR) for the Chengdu Niccolo Hotel increased by 28% with an occupancy rate of 85%[84] - Kowloon Warehouse Group operates 17 hotels in the Asia-Pacific region, totaling 5,750 rooms, with hotel revenue increasing by 22% year-on-year[102] - The company’s hotel, The Murray, Hong Kong, was recognized as one of the World's Greatest Places 2018 by Time Magazine[122] Logistics Operations - The group’s logistics operations are supported by modern container terminals and air cargo stations, which are crucial for maintaining Hong Kong's status as an international trade and transport hub[3] - The logistics operations continue to be a leading global player, although the port business performance is slowing down due to competition[28] - Modern Container Terminal's revenue decreased by 4% to HKD 2.616 billion, with operating profit declining by 9% to HKD 597 million[111] - The throughput at Modern Container Terminal in Hong Kong grew moderately by 2% to 530,000 TEUs, while Shenzhen's throughput decreased by 7%[112] Community and Corporate Social Responsibility - The group actively supports various community initiatives, promoting the concept of "corporate social responsibility" through projects like the "School Activation" program[3] - The company supported 76 secondary schools through its "School Activation" initiative, benefiting over 66,000 students[131] - The company has implemented a clear corporate social responsibility governance framework to manage environmental, social, and governance issues[129] Awards and Recognition - The group received multiple awards in 2018, including recognition in the top 100 commercial real estate performance awards in China[3] - Kowloon Warehouse Group was ranked fourth in the 2018 China Commercial Real Estate TOP100 by the media outlet "Guandian" and received the Annual Responsibility Brand Award at the 7th China Public Welfare Festival[117] - The company received the International Real Estate Award for Comprehensive Development Project from Forbes[120] Strategic Investments and Future Plans - The group’s long-term strategic investment in CME2 aims to reinvest capital and profits released from CME1 into larger market opportunities[3] - The group is exploring investment opportunities in emerging economies to enhance asset performance and generate direct returns[175] - Future capital commitments are estimated at HKD 27.182 billion, with HKD 13.804 billion already committed as of December 31, 2018[168] Corporate Governance - The board is committed to maintaining high corporate governance standards, ensuring accountability and sustainable development[176] - The board consists of ten members, equally divided between executive and independent non-executive directors, promoting diversity in skills and experience[181] - The company has adopted a formal nomination policy since January 2019 to ensure a balanced skill set and diversity among board members[186]