Financial Performance - Revenue increased by 5.1% year-on-year to HKD 1,693 million, while recurring basic profit decreased by 0.7% to HKD 1,019 million[4] - Revenue for the six months ended June 30, 2024, increased by 5.1% to HKD 1,693 million compared to HKD 1,611 million in 2023[12] - The group reported a basic profit of HKD 427 million for the period, significantly up from HKD 190 million in the previous year[14] - The net profit for the six months ended June 30, 2024, was HKD 717 million, significantly higher than HKD 333 million in the prior year, representing a 115.6% increase[49] - Basic earnings per share increased to HKD 0.42 from HKD 0.19, marking a 121.1% rise year-over-year[48] - The company reported a total comprehensive income of HKD 668 million for the period, compared to a loss of HKD 129 million in the same period last year[49] - The company’s total assets as of June 30, 2024, were reported at HKD 79,691 million, compared to HKD 78,525 million at the end of the previous period, showing an increase of 1.5%[54] Revenue Breakdown - Retail business revenue rose by 10.8% to HKD 844 million, while office revenue slightly decreased by 0.1% to HKD 744 million[12][18] - Total revenue for the six months ended June 30, 2024, was HKD 1,693 million, with rental income from investment properties contributing HKD 1,486 million and property management service income contributing HKD 207 million[61] - The segment revenue breakdown includes HKD 844 million from retail shops, HKD 744 million from office spaces, and HKD 105 million from residential properties[61] Dividends and Equity - The company maintained an interim dividend of HKD 0.27 per share, unchanged from the previous year[4] - The company declared an interim dividend of HKD 0.27 per share, consistent with the previous year[13] - The company paid dividends amounting to HKD 832 million during the period, a decrease from HKD 1,202 million in the same period last year, representing a reduction of 30.8%[55] - The total equity attributable to shareholders decreased by 0.6% to HKD 66,779 million, with net asset value per share at HKD 65.0[4] Investment and Development - The new project at Gage Road is expected to be completed in the second half of 2026, expanding the area by nearly 30%[7] - The commercial property development project at Caroline Hill Road is progressing well and is expected to be completed by 2026, marking a significant milestone for the company's long-term development plan[23] - The company is committed to sustainable development, with several properties achieving green building certifications[10] - The healthcare investment project, New Wind Tianyu Group, showed steady performance and continued growth in the first half of 2024[7] Market Conditions - The office leasing market remains competitive, with high occupancy rates supported by quality building specifications and sustainable features[10] - The company continues to face challenges in the retail sector due to changing consumer behavior and competition from other regions[15][16] - The company is focusing on enhancing the shopping experience to adapt to changing consumer preferences post-pandemic[8] Financial Position - Total debt as of June 30, 2024, was HKD 26,737 million (December 31, 2023: HKD 25,717 million), with an average debt maturity of 3.9 years[36] - Debt-to-equity ratio as of June 30, 2024, was 29.9% (December 31, 2023: 27.2%), and the net interest coverage ratio was 10.8 times (2023: 10.3 times)[40] - Cash and bank deposits totaled approximately HKD 3,057 million as of June 30, 2024 (December 31, 2023: HKD 3,854 million), with an additional HKD 900 million invested in investment-grade debt securities[41] - The company’s financial expenses for the period were HKD 499 million, up from HKD 459 million in the previous year, indicating an increase of 8.7%[55] Governance and Compliance - The company has maintained compliance with the corporate governance code throughout the review period, ensuring high standards of governance[100] - The company adopted a hybrid format for its annual general meeting on June 5, 2024, enhancing shareholder participation and transparency[103] - The board's composition as of June 30, 2024, includes a mix of executive and independent non-executive directors, ensuring diverse perspectives[105] Employee and Remuneration - The company's employee costs, including directors' remuneration, were HKD 164 million for the six months ended June 30, 2024, slightly down from HKD 165 million in the same period of 2023[69] - The total remuneration for directors and senior management for the six months ended June 30, 2024, was HKD 27 million, a decrease from HKD 30 million in 2023, indicating a reduction of 10%[88] - The remuneration policy aims to attract and retain top executives while aligning rewards with company performance and shareholder interests[110] Share Options and Awards - The 2015 Share Option Scheme has an available share limit of 98,655,673 shares, approximately 9.61% of the total issued shares[121] - The 2024 Share Award Plan was adopted on January 19, 2024, with a maximum share limit of 20,540,164 shares, representing approximately 2% of the company's issued share capital as of the adoption date[130][131] - The maximum number of shares that can be awarded to any selected employee is capped at 0.5% of the company's issued share capital, equivalent to 5,135,041 shares[131]

Hysan Development Company (00014) H1 2024 Earnings Call August 23, 2024 05:00 AM ET Speaker0 Good afternoon. Thank you all for coming to HySun Development's twenty twenty four Interim Results Announcement Analyst Briefing Session. Let me introduce our panel for this afternoon. Our Chairman, Ms. Irene Li our Executive Director and COO, Mr. Rekhi Loy our CFO, Mr. Andy Choi. We will start with the presentation from Irene, Ricky and Andy, and we will follow that to take questions. Now I would invite Irene to st ...

Revenue Performance - Revenue for the six months ended June 30, 2024, increased by 5.1% year-on-year to HKD 1,693 million, compared to HKD 1,611 million in 2023[3] - Revenue for the first half of 2024 increased by 5.1% to HKD 1,693 million compared to HKD 1,611 million in the same period of 2023[10] - Retail business revenue rose by 10.8% to HKD 844 million, driven by significant optimization works in the Lee Gardens area[10][13] - The office segment revenue slightly decreased by 0.1% to HKD 744 million, with Hong Kong office revenue down by 2.8%[16][17] - Revenue in Hong Kong decreased by 2.8% to HKD 720 million in the first half of 2024, compared to HKD 741 million in 2023[18] - Rental investment property revenue for the six months ended June 30, 2024, was HKD 759 million, up from HKD 635 million in the same period last year, representing a 19.5% increase[54] - Total segment revenue for the six months ended June 30, 2024, was HKD 844 million, an increase from HKD 744 million, marking a 13.4% growth[54] Profitability - Core recurring profit decreased by 0.7% year-on-year to HKD 1,019 million, down from HKD 1,026 million in 2023[3] - The net profit for the period was HKD 717 million, significantly up from HKD 333 million in 2023[41] - The company reported a profit of HKD 717 million for the six months ended June 30, 2024, compared to HKD 333 million in the same period of 2023, representing a significant increase[42] - Total comprehensive income for the period was HKD 668 million, a recovery from a loss of HKD 129 million in the previous year[43] - The group announced an interim dividend of HKD 0.27 per share, consistent with the previous year[11] - The company declared an interim dividend of HKD 0.81 per share for the first half of 2024, totaling HKD 832 million, compared to HKD 1.17 per share and HKD 1,202 million for the same period in 2023[64] Asset and Equity Management - The total equity attributable to shareholders decreased by 0.6% to HKD 66,779 million from HKD 67,182 million[4] - The company’s net assets amounted to HKD 78,525 million as of June 30, 2024, down from HKD 79,691 million at the end of 2023[46] - The company’s non-current assets increased to HKD 110,934 million as of June 30, 2024, up from HKD 110,274 million at the end of 2023[45] - The investment property valuation as of June 30, 2024, was HKD 96,535 million, a 0.6% increase from HKD 96,005 million at the end of 2023[28] - Total assets as of June 30, 2024, amounted to HKD 114,661 million, compared to HKD 114,526 million as of December 31, 2023, indicating a slight increase[58] Occupancy and Rental Performance - The occupancy rate for the Shanghai Lee Garden office reached 70% as of the end of the reporting period, reflecting significant success[2] - The occupancy rate for retail properties was 95% as of June 30, 2024, down from 97% at the end of 2023[13] - The occupancy rate in Hong Kong remained stable at 89% as of June 30, 2024, unchanged from December 31, 2023[18] - The average rental income from retail properties was HKD 72 million, down from HKD 87 million in 2023[13] - Residential rental revenue rose by 1.0% to HKD 105 million, with occupancy increasing to 68% from 60%[20] Investment and Development Projects - The new project at Caroline Hill Road is expected to be completed in the second half of 2026, expanding the Lee Garden area by nearly 30%[7] - The company is developing the Kadoorie Hill project, expected to be completed in 2026, enhancing its long-term growth strategy[21] - The company is optimistic about future developments in the Lee Gardens area, with major renovations expected to complete in the second half of 2024[13] - The company is optimistic about the growth of its shared workspace business in the Greater Bay Area, operating 36 centers in partnership with IWG plc[24] Financial Position and Debt Management - Total debt as of June 30, 2024, was HKD 26,737 million, an increase from HKD 25,717 million at the end of 2023[33] - The debt-to-equity ratio was 29.9% as of June 30, 2024, compared to 27.2% at the end of 2023[36] - The average debt maturity was 3.9 years as of June 30, 2024, down from 4.5 years at the end of 2023[33] - Financial expenses decreased to HKD 213 million from HKD 231 million in the first half of 2023, with a current effective interest rate of 4.4%[27] Challenges and Market Conditions - The company continues to face challenges in the retail sector due to changing consumer patterns and competition from other regions[13] - The company is focusing on enhancing its tenant mix and maintaining stable occupancy rates in the office sector despite rental pressure in the overall Hong Kong Grade A office market[2] Other Notable Developments - The company launched the URBANHOOD lifestyle space, further establishing its position as a cultural trendsetter among the younger generation[8] - The company launched a new membership app in Q2 2024, attracting over 60,000 new registrations within six weeks[15] - The company repurchased and canceled a total principal amount of USD 99,995,000 (approximately HKD 777 million) of its subordinated perpetual capital securities, representing about 11.76% of the initial issuance[69] - The company employed a total of 510 staff as of June 30, 2024, aligning its human resources policy with corporate goals for sustainable growth[70] - The company has maintained compliance with corporate governance standards throughout the reporting period[67]

Financial Performance - Revenue for 2023 was HKD 3,210 million, a decrease of 7.2% compared to 2022[65]. - Recurring basic profit for 2023 was HKD 1,832 million, reflecting a decline of 11.2% from the previous year[67]. - The company reported a net loss attributable to shareholders of HKD 872 million for the year[84]. - Total revenue for 2023 was HKD 3,210 million, a decrease of 7.2% compared to HKD 3,460 million in 2022[79]. - The recurring basic profit fell by 11.2% to HKD 1,832 million in 2023, down from HKD 2,063 million in 2022[102]. - The group's operating expenses increased to 29% of revenue in 2023, up from 26% in 2022, primarily due to rising electricity costs and the impact of the Lee Garden optimization project[139]. - Financial expenses rose to HKD 478 million in 2023 from HKD 423 million in 2022, attributed to a higher market interest rate environment, with an effective interest rate of 4.2% compared to 2.8% in 2022[140]. - Cash generated from operating activities was HKD 2,431 million in 2023, a decrease of HKD 160 million from HKD 2,591 million in 2022[151]. - The group paid dividends totaling HKD 1,479 million in 2023, slightly down from HKD 1,486 million in 2022[153]. - The group's net cash flow was HKD 21 million in 2023, a significant improvement from a net outflow of HKD 4,049 million in 2022[151]. Asset and Investment Management - Total assets (excluding cash and debt securities) amounted to HKD 109,678 million, showing a slight increase of 0.7%[69]. - The total value of investment properties as of December 31, 2023, was HKD 96,005 million, down 0.8% from HKD 96,787 million in 2022[90]. - The fair value loss of investment properties for the year was HKD 2,763 million, compared to HKD 3,213 million in 2022[90]. - The group's share of joint ventures' performance remained stable at HKD 270 million in 2023, compared to HKD 274 million in 2022[93]. - The group's share of results from joint ventures decreased to HKD 270 million in 2023 from HKD 274 million in 2022[145]. - Other financial investments totaled HKD 1,557 million as of December 31, 2023, down from HKD 2,035 million in 2022, mainly due to a fair value loss of HKD 525 million[146]. - The investment in New Wind Tianyu Group represents a strategic opportunity in the rapidly growing healthcare sector in mainland China[146]. Market and Operational Challenges - The office rental market continues to face challenges due to structural changes post-pandemic, with increased supply leading to more flexible leasing terms and rental incentives[10]. - The office market in Hong Kong is expected to face continued downward pressure due to increased supply of new projects in 2023 and 2024[107]. - The occupancy rate for office spaces was 89% in 2023, down from 90% in 2022[81]. - The rental income from retail spaces showed a decline, with a 6.7% decrease in revenue from HKD 1,643 million in 2022 to HKD 1,533 million in 2023[79]. - The retail business revenue showed a decrease of 6.7% to HKD 1,533 million, despite a stable occupancy rate and some improvement in retail sales due to increased tourist arrivals[115]. Strategic Initiatives and Developments - The first phase of the Lee Gardens optimization project was completed and will be unveiled by the end of 2023, with flagship stores of major high-end brands undergoing renovations to be completed in stages in 2024 and 2025[12]. - The new URBANHOOD lifestyle space, opening in December 2023, will feature nearly 40 lifestyle, entertainment, and dining brands, some of which are debuting in Hong Kong[11]. - The company is investing in a new pedestrian passage system to enhance connectivity in the Lee Garden area, expected to become a premier business hotspot in Hong Kong[26]. - The optimization project for the Lee Garden area commenced in 2023 and is anticipated to be completed by 2024[32]. - The flagship stores of major luxury brands in Lee Gardens are undergoing renovations, expected to be completed in phases by 2024 and 2025, further solidifying Lee Gardens as a top luxury brand destination[116]. - The joint venture project at Carrian Mountain Road is on schedule for completion by the end of 2026, marking a significant milestone in Hysan's long-term development plan[125]. - A joint venture with IWG was established to tap into the economic growth potential of the Greater Bay Area's workspace ecosystem[190]. Community Engagement and Sustainability - Hysan's community business model is crucial for the long-term development of Lee Gardens, focusing on inclusivity, social welfare, and strict environmental management standards[14]. - The company has received multiple awards for its commitment to sustainable development, including the 2023 Hong Kong Sustainable Development Award[14]. - The company aims to strengthen its connection with different age groups through various activities and programs, enhancing community engagement[8]. - The UrbanPark and Playdot initiatives have been launched to enhance customer experiences, including the first covered skate park in Hong Kong and a dedicated indoor play space[121]. - Carbon intensity was reduced by 38% compared to the baseline year of 2005[193]. - The company completed energy audits for 100% of its property portfolio[193]. - The company maintained a 4-star corporate governance award and achieved an AA rating in ESG benchmarks[196]. Financial Health and Debt Management - The debt-to-equity ratio increased to 27.2% in 2023 from 23.4% in 2022[77]. - The net interest coverage ratio (after capitalized interest) decreased to 9.6 times in 2023 from 13.1 times in 2022[77]. - As of December 31, 2023, the total debt of the group decreased to HKD 25,717 million from HKD 27,487 million as of December 31, 2022, primarily due to debt repayments during the year[158]. - Bank loans accounted for approximately 39% of the total debt, with the remaining 61% raised from the capital markets as of December 31, 2023[159]. - The average repayment period of the debt portfolio was approximately 4.5 years as of December 31, 2023, down from 4.8 years in 2022, with about HKD 158 million of debt maturing in 2024[161]. - The fixed-rate debt ratio (after considering interest rate swaps) was 62% as of December 31, 2023, compared to 61% at the end of 2022, with the effective interest rate rising from 2.8% to 4.2%[167]. - The total amount of sustainable financing transactions reached approximately HKD 19,300 million, representing about 49% of the total debt[171]. - Moody's and Fitch maintained the group's credit ratings at Baa1 and BBB+, respectively, reflecting strong financial strength and prudent capital management strategies[165].

Core Viewpoint - Bank of America Securities has issued a research report recommending a "buy" rating for Hysan Development (00014), while lowering the target price from HKD 17.2 to HKD 16.5, reflecting a downward revision of the per-share NAV forecast [1] Financial Performance - The company's performance last year slightly missed expectations, with the per-share dividend reduced to HKD 1.08, resulting in a payout ratio of 61% [1] - Management has reiterated a commitment to stable dividend growth, and the firm believes that earnings have bottomed out [1] Future Projections - Retail revenue is expected to grow by 6% this year, which is anticipated to offset the decline in office rental income [1] - The current stock price represents a 74% discount to the per-share NAV, with a dividend yield of 8.2%, indicating an attractive investment level [1]

Financial Data and Key Metrics Changes - The company's revenue for 2023 is $3.2 billion, representing a 7% decrease from the previous year [7] - Retail occupancy stands at 97%, office occupancy at 89%, and residential occupancy at 60% [7] - The net gearing ratio is 27.2% with an effective interest rate of 4.2% [17] - The dividend per share for the year is $1.08 [16] Business Line Data and Key Metrics Changes - Retail turnover increased slightly despite 10% of retail space being closed for renovations [5] - The turnover rent grew by 45%, indicating a positive trend in retail performance [10] - The office sector remains under pressure, with occupancy stabilizing at 89% amidst a slow economic recovery [8] Market Data and Key Metrics Changes - The retail sector is experiencing a transformation, with a shift in tourist focus from shopping to experience-based tourism [9] - The demand for high-end retail and medical services has increased, now comprising over 12% of the portfolio [9] Company Strategy and Development Direction - The company is focusing on strategic rejuvenation and diversification of its tenant mix, particularly in high-end retail and service trades [5] - Investments in flexible workspaces are being made to complement the office portfolio [5] - The company is committed to sustainability, achieving a 38% reduction in carbon intensity and maintaining a significant portion of its buildings as green stratified [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing challenges in the external environment but remains optimistic about retail recovery and tenant demand [4][22] - The luxury retail segment is showing resilience, with increased inquiries from high-end brands for office space [23] - The company aims to reset its dividend policy to conserve cash for future growth opportunities [36][38] Other Important Information - The company has a minimal level of debt maturing in the next year, reducing refinancing pressure [17] - The Lee Garden renovations are expected to enhance rental income significantly, with anticipated increases in rental rates post-renovation [29] Q&A Session Summary Question: What is the retail sales recovery rate in the second half of the year compared to pre-COVID levels? - Management indicated that retail sales growth is positive but not yet back to 2018 levels, with expectations for continued improvement as renovations are completed [21][22] Question: What are the plans regarding a tenant moving out from the office side? - Management noted an increase in inquiries from high-end brands for office space, indicating a positive outlook for tenant demand [23] Question: What is the rationale behind the dividend cut and future dividend policy? - Management explained the need for a conservative approach to conserve cash for future growth opportunities while maintaining a stable and progressive dividend policy [34][36] Question: What is the occupancy cost and rental recovery for Lee Gardens 1 and 5? - The overall occupancy cost is around mid-teens, and management expects a mid-single-digit increase in revenue from the newly renovated areas [52][53] Question: Update on Shanghai's occupancy and future prospects? - Management reported a current occupancy of 30% in Shanghai, with ongoing discussions for an additional 30% to 40% of space, indicating potential for increased occupancy [60][61]

Financial Performance - For the year ended December 31, 2023, the company's revenue was HKD 3,210 million, a decrease of 7.2% compared to HKD 3,460 million in 2022[3]. - The recurring basic profit for 2023 was HKD 1,832 million, down 11.2% from HKD 2,063 million in the previous year[3]. - The reported loss attributable to the company's owners was HKD 872 million, an improvement of 24.6% from a loss of HKD 1,157 million in 2022[3]. - The basic loss per share improved to HKD (85) from HKD (112), reflecting a 24.1% increase[3]. - The annual dividend per share was reduced to HKD 108, down 25.0% from HKD 144 in the previous year[3]. - The net loss for the year was HKD 1,026 million, compared to a net loss of HKD 949 million in 2022, indicating an increase in losses of approximately 8.1%[52]. - The gross profit for the year was HKD 2,589 million, down from HKD 2,893 million in the previous year, reflecting a decline of 10.5%[51]. - The group reported a pre-tax loss of HKD 731 million, with significant fair value changes in investment properties amounting to HKD 2,763 million[57]. Occupancy and Rental Trends - The office occupancy rate was 89%, while the retail occupancy rate was 97%, with rental levels for renewals showing a downward trend for offices and a stable upward trend for retail[2]. - The occupancy rate for office properties at year-end was 89%, down from 90% in 2022, while retail properties had a 97% occupancy rate, down from 99%[11]. - The rental income from retail sales grew by 45% year-on-year, outperforming the overall retail market in Hong Kong[6]. - The retail occupancy rate remained stable at 97% as of December 31, 2023 (2022: 99%) despite external challenges[15]. - The average rental levels for renewals and new leases in the office sector continued to trend downward, with a rental rate of 89% as of December 31, 2023 (2022: 90%) for the office portfolio[12]. Capital Expenditure and Investments - The total capital expenditure for the year decreased to HKD 1,669 million in 2023 from HKD 3,081 million in 2022, mainly from construction projects at the Kadoorie Hill and Lee Gardens[36]. - The investment in the healthcare sector through a minority stake in New Wind Tianyu Group continues to grow, with total other financial investments amounting to HKD 1,557 million as of December 31, 2023, down from HKD 2,035 million in 2022[31]. - The group is strategically developing the Carrian Mountain Road project in partnership with the Wah Lee Group, expected to be completed by the end of 2026[20]. Debt and Financial Ratios - The total debt of the group decreased to HKD 25,717 million as of December 31, 2023, down from HKD 27,487 million as of December 31, 2022, primarily due to debt repayments during the year[38]. - The debt-to-equity ratio at the end of 2023 was 27.2%, an increase from 23.4% at the end of 2022[41]. - Financial expenses rose to HKD 478 million in 2023 from HKD 423 million in 2022, attributed to the rising interest rate environment, with an effective interest rate of 4.2% compared to 2.8% in 2022[27]. Operational Challenges and Strategic Initiatives - The company faces challenges from geopolitical tensions, macroeconomic uncertainties, and structural changes in the office and retail markets post-pandemic[5]. - The company aims to continue expanding and optimizing its operations in the vibrant community of Lee Gardens as it moves into its 101st year[2]. - The group launched various marketing initiatives to enhance core business and maintain sales flow, resulting in a recovery of high-end member retention rates to pre-pandemic levels[17]. - The company is undergoing significant optimization works in the Lee Gardens area, with major renovations for flagship stores expected to complete in phases between 2024 and 2025[6]. Sustainability and Community Engagement - The company received multiple awards for its commitment to sustainable development, including the 2023 Hong Kong Sustainable Development Award[6]. - The company emphasizes its unique business model and community engagement as key factors for long-term development[5]. Employee and Administrative Costs - Employee costs, including directors' remuneration, rose to HKD 331 million in 2023 from HKD 310 million in 2022, marking a 6.8% increase[67]. - The total number of employees increased to 516 in 2023 from 486 in 2022, reflecting a growth of 6.2%[77].

Financial Performance - For the six months ended June 30, 2023, the company's revenue decreased by 9.3% year-on-year to HKD 1,611 million[4]. - The company's recurring basic profit fell by 12.2% year-on-year to HKD 1,026 million[4]. - The basic profit attributable to shareholders was HKD 1,026 million, down 16.9% from the previous year[4]. - The group reported a profit attributable to shareholders of HKD 190 million for the six months ended June 30, 2023, compared to HKD 71 million in the same period of 2022[65]. - The company reported a profit for the period of HKD 333 million, slightly down from HKD 335 million in the previous year, representing a decrease of 0.6%[43]. - Gross profit for the same period was HKD 1,347 million, down 11.9% from HKD 1,529 million year-over-year[43]. - The consolidated profit before tax for the six months ended June 30, 2023, was HKD 486 million, compared to HKD 517 million for the same period in 2022[57]. - The total comprehensive income for the period was not specified, but the company recognized share-based payments of HKD 2 million in the first half of 2023[47]. - The company reported a total comprehensive income of HKD 1,202 million for the period, reflecting a significant change in financial performance[50]. Revenue Breakdown - For the six months ended June 30, 2023, the total revenue from rental investment properties was HKD 1,419 million, with contributions from office (HKD 645 million), retail (HKD 682 million), and residential (HKD 92 million) segments[56]. - The office segment revenue fell by 7.5% to HKD 745 million, while the retail segment revenue decreased by 9.9% to HKD 762 million[11]. - The group's retail revenue decreased by 9.9% to HKD 762 million (2022: HKD 846 million), while rental income based on revenue increased by 67% year-on-year to HKD 87 million (2022: HKD 52 million) due to a recovery in consumer spending[14]. - The segment profit for the office division was HKD 630 million, while the retail and residential divisions reported profits of HKD 641 million and HKD 76 million respectively[56]. Dividend and Equity - The company maintained an interim dividend of HKD 0.27 per share, unchanged from the previous year[4]. - The group declared an interim dividend of HKD 0.27 per share, amounting to HKD 277 million, for the six months ended June 30, 2023[68]. - The company's total equity attributable to owners was HKD 70,200 million as of June 30, 2023, compared to HKD 68,729 million at the end of 2022[48]. - The company's equity attributable to owners was HKD 7,723 million, an increase from HKD 7,723 million as of January 1, 2023[47]. - The total equity attributable to owners, including revaluation and other reserves, was HKD 83,411 million as of June 30, 2023[47]. Market Conditions - The unemployment rate in Hong Kong decreased to 2.9%, indicating an improvement in the local labor market[6]. - The global economic outlook remains uncertain, with the IMF lowering its growth forecast for 2023 to 2.8%[6]. - Retail sales recovery outperformed the overall Hong Kong retail market, driven by promotional activities and government consumption voucher schemes[16]. Operational Highlights - The overall occupancy rates for the office and retail segments were 89% and 98%, respectively[3]. - Approximately 11% of retail space was temporarily closed due to significant optimization works in the Lee Garden area, impacting retail revenue[11]. - The occupancy rate of the retail business remained stable at 98% as of June 30, 2023 (December 31, 2022: 99%) despite a challenging market[14]. - The high-end residential project, Linhai Mountain City, received satisfactory approval in Q1 2023, achieving record transaction prices and unit prices despite market uncertainties[10]. - The company has established a joint venture with IWG plc to operate shared workspace brands in Hong Kong and the Greater Bay Area, currently managing 36 locations with plans for further expansion[21]. Financial Position - The company's total equity decreased by 2.1% to HKD 68,729 million as of June 30, 2023[4]. - Total debt decreased to HKD 25,730 million as of June 30, 2023, from HKD 27,487 million on December 31, 2022, with less than 5% of total debt maturing in the next 18 months[30]. - The debt-to-equity ratio as of June 30, 2023, was 25.9%, up from 23.4% on December 31, 2022, while the net interest coverage ratio fell to 10.3 times from 13.1 times[34]. - Cash and bank deposits totaled approximately HKD 4,361 million as of June 30, 2023, down from HKD 7,771 million on December 31, 2022[35]. - The company's cash and cash equivalents decreased to HKD 666 million from HKD 2,560 million at the end of 2022, a decline of 74%[45]. Investment and Development - The group plans to open the Caroline Hill Road project by the end of 2026, which is a key part of the overall planning for the Lee Garden area[10]. - The commercial property development project at Caroline Hill Road is on schedule, with foundation work ongoing and superstructure work expected to commence in Q3 2023, aiming for completion by the end of 2026[18]. - The company reported an investment income of HKD 138 million and other losses of HKD 32 million during the reporting period[56]. - The company invested in New Wind Tianyu Group, a leading private healthcare service provider in mainland China, allowing the company to tap into the growing demand for quality healthcare services[22]. Corporate Governance and Compliance - The company continues to comply with the corporate governance code as per the Hong Kong Stock Exchange regulations[94]. - The company held a hybrid annual general meeting on May 16, 2023, allowing shareholders to attend either in person or via an online streaming system, enhancing participation opportunities[96]. - The proportion of independent non-executive directors increased from 46% to 54.5% following the appointment of new directors, improving board independence[97]. - The percentage of female directors on the board rose from 27% to 36.4%, surpassing the target of 33% for gender diversity[97]. Employee and Remuneration - The total number of employees as of June 30, 2023, was 468, aligning with the company's human resources policy aimed at sustainable growth[123]. - The total remuneration for directors and senior management for the six months ended June 30, 2023, was HKD 30 million, an increase from HKD 28 million in the same period of 2022, representing a 7.14% growth[82]. - The company’s remuneration policy emphasizes fair and performance-based compensation aligned with long-term strategies and shareholder interests[103].

Financial Data and Key Metrics Changes - For the first half of 2023, total revenue reached $611 million, with a year-on-year increase in retail turnover rent of 67% [4][5] - Shareholders' fund decreased by approximately 2% to $4.3 billion, and NAV per share also dropped by about 2% to $67 [13][14] - Interim dividend remained stable at $0.27, consistent with the previous interim period [14] Business Line Data and Key Metrics Changes - Retail occupancy was reported at 98%, office occupancy at 89%, and residential occupancy at 61% [4] - The retail sector showed a recovery with a 20.7% year-on-year increase in Hong Kong retail sales, while the office and residential sectors continued to face pressure [4][5] - Approximately 11% of retail area was under major enhancement, impacting retail revenue [5] Market Data and Key Metrics Changes - Hong Kong's GDP growth resumed year-on-year, with the employment rate dropping to 2.9% [4] - The recovery of tourist arrivals and spending is expected to further boost the retail sector [5] Company Strategy and Development Direction - The company is focusing on rejuvenating Lee Garden to cater to diverse customer needs, including luxury and family-oriented segments [6][10] - A dual engine business model is being employed to balance retail and office performance, with ongoing renovations aimed at enhancing customer experience [9][10] - Sustainability initiatives are being prioritized, with a board-level sustainability committee established to address climate change and social well-being [11][12] Management's Comments on Operating Environment and Future Outlook - Management highlighted ongoing global economic uncertainties, including geopolitical tensions and high inflation, but noted signs of improvement in Hong Kong's economy [3][4] - The company remains optimistic about the retail sector's recovery, driven by inbound tourism and enhanced customer experiences [5][6] - The office market continues to face challenges, with negative rental reversions expected to persist [40][41] Other Important Information - The company has a strong liquidity position with approximately $4.3 billion in cash, sufficient to cover maturing debt over the next three years [15][16] - The effective interest rate for the debt portfolio is 3.9%, with a net gearing ratio of about 26% [16][17] Q&A Session Summary Question: How does tenant sales recovery compare to pre-COVID levels? - Tenant sales have shown a year-on-year increase, with luxury tenants experiencing a nearly 30% increase compared to the first half of 2019, while F&B sales have returned to pre-COVID levels [20][22] Question: What is the current occupancy cost and its outlook? - The overall occupancy cost for the retail portfolio is 15%, with discussions ongoing with luxury tenants regarding their bargaining power [29][30] Question: How does the company view the competitive landscape in Hong Kong retail? - The company emphasizes its strong local customer base and unique community offerings to differentiate itself from competitors [35][36] Question: Will there be any impact on the payout policy due to AEI and office market headwinds? - The company aims to maintain a stable dividend policy, considering operating performance, CapEx requirements, and economic outlook [38][39] Question: What is the outlook for rental reversion in retail and co-working spaces? - Overall rental reversion is negative, but there are signs of improvement, particularly in areas undergoing renovations, while co-working space demand remains strong [50][53]

Financial Performance - For the six months ended June 30, 2023, the company's revenue was HKD 1,611 million, a decrease of 9.3% compared to HKD 1,777 million in 2022[4] - The company's recurring core profit for the same period was HKD 1,026 million, down 12.2% from HKD 1,169 million in the previous year[4] - The group's revenue for the first half of 2023 decreased by 9.3% to HKD 1,611 million compared to HKD 1,777 million in 2022[13] - The recurring basic profit fell by 12.2% to HKD 1,026 million from HKD 1,169 million year-on-year[13] - The group's profit for the period was HKD 333 million, slightly down from HKD 335 million in the previous year, representing a decrease of 0.6%[42] - Basic earnings per share increased to HKD 0.19 from HKD 0.07, reflecting a significant growth of 171.4%[42] - Investment income rose to HKD 138 million, up from HKD 135 million, indicating a growth of 2.2%[42] - The group reported a pre-tax profit of HKD 486 million for the six months ended June 30, 2023, compared to HKD 517 million in the same period of 2022[62] Dividend and Shareholder Returns - The company maintained an interim dividend of HKD 0.27 per share, unchanged from the previous year[4] - The group announced an interim dividend of HKD 0.27 per share, consistent with the previous year[14] - The company declared an interim dividend of HKD 0.27 per share for the first half of 2023, totaling HKD 277 million, consistent with the previous year's interim dividend of HKD 0.27 per share[64] - The first interim dividend will be distributed on September 5, 2023, to shareholders registered as of August 25, 2023[69] Market and Economic Conditions - The unemployment rate in Hong Kong decreased to 2.9%, indicating an improvement in the local labor market[7] - The number of visitors to Hong Kong reached 13 million in the first half of 2023, recovering to 37% of pre-pandemic levels[7] - The company anticipates that the economic recovery in Hong Kong will continue to be influenced by the global economic environment, but visitor numbers and economic activities are expected to improve[12] Property and Rental Performance - The overall occupancy rates for the office and retail segments were 89% and 98%, respectively, as of June 30, 2023[4] - The retail segment's revenue declined by 9.9% to HKD 762 million, while the residential segment saw a 17.5% drop to HKD 104 million[13] - Approximately 11% of retail space was closed due to significant optimization works in the Lee Garden area, impacting retail revenue[13] - The occupancy rate for the office portfolio remained stable at 89% as of June 30, 2023, compared to 90% at the end of 2022[15] - The occupancy rate of the retail portfolio remained stable at 98% as of June 30, 2023 (December 31, 2022: 99%) [16] - The high-end residential leasing revenue fell by 17.5% to HKD 104 million (2022: HKD 126 million) due to global economic uncertainty and decreased demand from expatriates [18] - The occupancy rate for the residential portfolio was maintained at 61% as of June 30, 2023 (December 31, 2022: 61%) [18] Strategic Developments - The company is undertaking strategic upgrades to its retail property portfolio to accommodate the expansion of international high-end brands[9] - The group plans to open the Galleria project in the Lee Garden area by the end of 2026, which is a key part of its long-term development strategy[12] - The commercial property development project at Caroline Hill Road is progressing on schedule, with foundation work ongoing and superstructure work expected to commence in Q3 2023, aiming for completion by the end of 2026 [19] - The luxury residential project Linhai Shancheng in Tai Po has achieved record transaction prices and unit prices, reflecting strong buyer interest despite market uncertainties [20] Financial Position and Assets - The company's total equity as of June 30, 2023, was HKD 68,729 million, a decrease of 2.1% from HKD 70,200 million at the end of 2022[5] - Total cash capital expenditure decreased significantly to HKD 624 million from HKD 2,621 million in 2022, mainly due to construction projects at the Kadoorie Hill and Lee Garden[31] - Total debt decreased to HKD 25,730 million as of June 30, 2023, from HKD 27,487 million at the end of 2022, with less than 5% of total debt maturing in the next 18 months[32] - The debt-to-equity ratio increased to 25.9% from 23.4% at the end of 2022, while the net interest coverage ratio fell to 10.3 times from 13.1 times[37] - Cash and bank deposits totaled approximately HKD 4,361 million, down from HKD 7,771 million at the end of 2022, with investments in investment-grade debt securities amounting to HKD 997 million[38] - The valuation of the investment property portfolio as of June 30, 2023, was HKD 96,732 million, a slight decrease of 0.1% from HKD 96,787 million at the end of 2022, with a fair value loss of HKD 754 million recognized during the period[27] - The net asset value decreased to HKD 81,807 million from HKD 83,411 million, reflecting a decline of 1.9%[47] Operational Efficiency - Operating expenses as a percentage of revenue increased to 25.4% from 22.1% in 2022, primarily due to rising electricity costs and the impact of the Lee Garden optimization project[25] - Financial expenses rose to HKD 231 million, up from HKD 172 million in the first half of 2022, attributed to the rising interest rate environment with an effective interest rate of 3.9% compared to 2.4% in the same period last year[26] - The group’s administrative expenses for the period were HKD 145 million, compared to HKD 145 million in the previous year, indicating no change[55] Investments and Joint Ventures - The company holds a 26% stake in the resilient investment property Hong Kong Plaza, which has shown strong performance despite pandemic-related challenges in Shanghai [22] - The joint venture with IWG plc operates 36 shared workspace locations in the Greater Bay Area, with plans for further expansion in the growing market [23] - The investment in New Wind Tianyu Group, a leading private healthcare provider in mainland China, continues to grow rapidly, capitalizing on the demand for quality healthcare services [24] Other Financial Metrics - The fair value change of investment properties resulted in a loss of HKD 754 million, compared to a loss of HKD 985 million in the previous year, showing an improvement of 23.4%[42] - Share of profits from associates was HKD 146 million, slightly down from HKD 147 million in 2022, while losses from joint ventures increased to HKD 17 million from HKD 8 million due to the launch of the Tai Po residential project[28] - The total segment revenue for the group was HKD 745 million, down from HKD 762 million, reflecting a decrease of 2.2%[55] - The total segment profit attributable to the group was HKD 630 million, compared to HKD 641 million in the prior year, indicating a decline of 1.7%[55]