ANNUAL REPORT 2019 年報 Stock Code 股份代號: 34 Kowloon Development Company Limited 九龍建業有限公司 Kowloon Development Company Limited (Stock Code: 34) has been engaged in property investment and investment holding with the operation of its business mainly in Hong Kong since its establishment. It has substantially broadened the areas of its business activity since the Polytec group gained the control of it in 2002. The Group is principally engaged in investment holding, property development, property investment and pro ...

Financial Performance - The company's attributable net profit for the six months ended June 30, 2019, surged to HKD 18.51 billion, a 74.8% increase from HKD 10.59 billion in the same period of 2018[12]. - The basic net profit attributable to shareholders, excluding revaluation gains from investment properties and fair value gains from property development projects, rose to HKD 13.90 billion, up 215% from HKD 4.41 billion in 2018[14]. - The basic earnings per share for 2019 was HKD 1.57, compared to HKD 0.90 in 2018[14]. - The interim dividend for 2019 was declared at HKD 0.24 per share, an increase from HKD 0.22 per share in 2018[14]. - The company reported a revenue of HKD 5,664,767,000 for the six months ended June 30, 2019, compared to HKD 705,627,000 for the same period in 2018, representing a significant increase[34]. - Operating profit for the period was HKD 2,436,789,000, up from HKD 1,037,465,000 in the previous year, indicating a growth of approximately 134%[34]. - Net profit attributable to equity holders of the company was HKD 2,060,166,000, compared to HKD 1,232,961,000 in the prior year, reflecting an increase of about 67%[36]. - Total comprehensive income for the period was HKD 2,028,620,000, compared to HKD 1,163,989,000 in the previous year, showing a growth of around 74%[36]. - The reported profit for the same period was HKD 2,265,336,000, up from HKD 660,932,000 in 2018, reflecting a substantial growth in profitability[57]. Property Development and Investment - The company is engaged in property development and investment across Hong Kong, Mainland China, and Macau, with a focus on enhancing its competitive position[11]. - The company sold approximately 97% of residential units in its wholly-owned development project, enhancing revenue recognition[12]. - The group has significant property development projects in both Hong Kong and Mainland China, including major developments in Shenyang and Foshan[11]. - In Hong Kong, the group sold over 80% of residential units at the Lei Yue Mun project, achieving a cumulative pre-sale amount exceeding HKD 3 billion by the end of June 2019[16]. - The group confirmed revenue recognition from the Hung Hom Coastal East project in Hong Kong, with over 97% of residential units sold, contributing to a more than 200% increase in basic profit compared to the same period in 2018[25]. - The group expects to recognize sales from the fully owned development project, Lei Yue Mun Seaview Bay, with over 80% of residential units sold and a total pre-sale amount exceeding HKD 3 billion[26]. - The group is involved in various property development projects in mainland China, with significant areas under development including Jiangwan City in Shenyang, which has a total floor area of approximately 712,000 square meters[18]. Rental Income - The total rental income from the Hong Kong property investment portfolio was HKD 179 million in the first half of 2019, representing a 1.7% increase compared to the same period in 2018[20]. - The group recorded a slight decrease in total rental income from Macau properties to HKD 29.3 million, with the main contribution from the Macau Square, which generated HKD 27.1 million in rental income[21]. - The rental income for the six months ended June 30, 2019, was HKD 220,000,000, compared to HKD 180,000,000 in the same period of 2018, indicating growth in rental revenue[50]. - The total rental income for the six months ended June 30, 2019, was HKD 178,875,000, slightly up from HKD 175,815,000 in 2018, indicating a 1.2% growth[67]. Financial Position - The total bank loans as of June 30, 2019, amounted to HKD 11,895,000,000, down from HKD 15,281,000,000 as of December 31, 2018, with a net bank borrowing of HKD 10,797,000,000[29]. - The capital debt ratio as of June 30, 2019, was 51.9%, a decrease from 66.2% as of December 31, 2018[29]. - The company’s total assets decreased slightly to HKD 43,532,155,000 from HKD 43,303,801,000 as of December 31, 2018[38]. - The company’s total assets as of June 30, 2019, were HKD 31,155,846, an increase from HKD 29,825,374 as of December 31, 2018[40]. - The company’s inventory decreased to HKD 17,325,563,000 from HKD 20,015,325,000, indicating a reduction of approximately 13.4%[37]. - The company’s cash and bank balances increased to HKD 1,098,286,000 from HKD 1,068,348,000[37]. - The total equity attributable to equity holders as of June 30, 2019, was HKD 26,908,881, compared to HKD 25,390,789 as of December 31, 2018, reflecting an increase of approximately 5.98%[40]. Impairment and Provisions - The group made a provision for impairment of HKD 349 million related to the Cui Di Wan project in Shenyang due to a weak retail market[16]. - The company reported a significant other net expense of HKD 348,979,000 primarily due to inventory impairment[65]. Economic Outlook and Strategic Initiatives - The group is closely monitoring the impact of global economic slowdown and trade disputes on the property market and is prepared to take necessary measures[26]. - The group anticipates substantial growth in annual basic profit for 2019, barring unforeseen circumstances[26]. - The company is committed to expanding its business activities and enhancing its market presence through strategic investments and developments[11]. Corporate Governance and Shareholder Information - The company complied with all provisions of the Corporate Governance Code except for the provision A.2.1, where the Chairman also serves as CEO[99]. - As of June 30, 2019, the company’s Chairman held 831,047,624 shares, representing 70.63% of the total shares[104]. - The company’s shares are held by various stakeholders, with significant ownership by directors and their affiliates[109]. - The company did not purchase, sell, or redeem any of its listed securities during the six months ended June 30, 2019[103]. Employee Information - The total employee cost increased to HKD 125 million as of June 30, 2019, compared to HKD 123 million in the previous year[111]. - The group employed 828 staff members as of June 30, 2019, down from 858 employees at the end of 2018[111]. - The company’s employee compensation is competitive and includes discretionary bonuses based on performance[111].

Financial Performance - Kowloon Development Company Limited reported a net profit attributable to shareholders of HKD 2.193 billion for the year ended December 31, 2018, an increase of 34.1% compared to HKD 1.635 billion in 2017[15]. - The basic earnings per share for 2018 was HKD 1.45, up from HKD 1.31 in 2017, reflecting a 10.7% increase[15]. - Total revenue for 2018 was HKD 2.842 billion, a decrease from HKD 3.120 billion in 2017[19]. - The company's net profit attributable to shareholders for 2018 was HKD 2.193 billion, an increase of 34.1% compared to HKD 1.635 billion in 2017[23]. - Basic earnings per share for 2018 was HKD 1.45, up from HKD 1.31 in 2017, reflecting a growth of 10.7%[23]. - The total assets of the company increased to HKD 57.462 billion in 2018 from HKD 49.086 billion in 2017, representing a growth of 16.9%[20]. - The company's net asset value per share rose to HKD 21.82 in 2018, compared to HKD 21.17 in 2017, an increase of 3.1%[20]. - The company achieved over 97% sales of residential units at the Hung Hom Coastal East project by the end of 2018, with revenue recognition expected in the first half of 2019[25]. - The overall transaction prices in Hong Kong's property market dropped approximately 10% from the peak in July 2018[24]. - The company faced challenges in the market due to uncertainties from US-China trade negotiations and anticipated interest rate hikes, impacting sales performance[24]. Dividends - The company proposed a final cash dividend of HKD 0.50 per share, bringing the total cash dividend for the year to HKD 0.72 per share[15]. - The company proposed a final cash dividend of HKD 0.50 per share for 2018, compared to HKD 0.43 per share in 2017, marking a 16.3% increase[23]. - The company declared an interim dividend of HKD 0.22 per share, consistent with the previous year, and a special dividend in the form of one share of Polydata Asset Holdings for every ten shares held[149]. - The proposed final dividend for the year ending December 31, 2018, is HKD 0.50 per share, an increase from HKD 0.43 per share in 2017[149]. - The company has no preset dividend payout ratio and considers various factors before declaring dividends[141]. Landbank and Property Development - Kowloon Development has a competitive landbank of approximately 3.7 million square meters of attributable gross floor area across Hong Kong, Mainland China, and Macau[4]. - The group’s landbank in Mainland China amounts to 3.257 million square meters, with significant projects in Shenyang and Huizhou[13]. - The company is committed to enhancing its competitive position in the property development market, leveraging opportunities to replenish its landbank[4]. - The group has identified strategic opportunities for market expansion and is focused on property development in key regions[4]. - The company is actively pursuing new product and technology development to strengthen its market position[4]. - Kowloon Development is exploring potential mergers and acquisitions to enhance its growth strategy in the property sector[4]. - The group’s property development business achieved an operating profit of HKD 2.008 billion, primarily from projects in mainland China and Macau[38]. - The project at 35 Chui Shui Wan Road, Kowloon, has a total gross floor area of approximately 196,400 square meters, fully owned by the group[49]. - The Shenyang Phase 3A development has a total site area of approximately 1,100,000 square meters and a total gross floor area of about 2,000,000 square meters, with 389,775 square meters already recognized[56]. - The Jiangwan South Shore Garden project in Huizhou has a total gross floor area of approximately 519,900 square meters, with the group holding a 60% revenue interest[58]. - The Foshan Shanyu Lake project covers an area of approximately 4,020,743 square meters, with a total gross floor area of about 1,600,000 square meters, and 844,414 square meters already recognized[61]. - The Wuxi project has a total site area of approximately 68,833 square meters and a total gross floor area of 365,000 square meters, with 107,320 square meters already recognized[66]. - The Tianjin Urban Plaza project has a total gross floor area of approximately 850,000 square meters, with an additional underground commercial area of about 35,000 square meters, and the group holds a 49% interest[68]. - The Shanghai project has a total gross floor area of approximately 113,600 square meters, including an underground area of about 39,035 square meters, fully owned by the group[72]. - The Zhongshan project is expected to develop into 38 high-rise residential buildings and 150 villas, with a total gross floor area of approximately 587,000 square meters, and the group holds a 35.4% interest[75]. - The Zhuhai project will develop into four hotel-style office buildings with a total gross floor area of approximately 179,000 square meters, with the group holding a 42.5% interest[79]. Financial Position and Debt - The capital debt ratio for 2018 was 66.24%, up from 46.76% in 2017, indicating a significant increase in leverage[20]. - As of December 31, 2018, the total bank loans of the group amounted to HKD 15,281,000,000, an increase from HKD 13,660,000,000 as of December 31, 2017[87]. - The net bank borrowings of the group were HKD 14,213,000,000 after accounting for cash and cash equivalents of HKD 1,068,000,000[87]. - The capital debt ratio as of December 31, 2018, was 66.2%, up from 46.8% as of December 31, 2017[87]. - The group recorded cash inflows of approximately HKD 1,536,000,000 from sales and pre-sales of projects in Hong Kong during the year[87]. - The group completed acquisitions of property development projects in Shanghai, Zhongshan, and Zhuhai for a total payment of approximately HKD 3,471,000,000[87]. - The group invested approximately HKD 1,852,000,000 in project development in Hong Kong and mainland China during the year[87]. - The group provided guarantees for bank loans amounting to HKD 907,000,000 for a joint venture in mainland China, equivalent to 50% of the HKD 1,815,000,000 loan amount[90]. - As of December 31, 2018, properties valued at HKD 16,864,000,000 and bank deposits of HKD 1,042,000,000 were mortgaged to financial institutions[89]. - The group is actively monitoring foreign exchange and interest rate risks, particularly related to its operations in Kazakhstan and mainland China[88]. - The group has sufficient financial resources to meet its obligations and future funding needs, supported by existing credit facilities and pre-sale proceeds[88]. Corporate Governance - The board of directors consists of ten members, including four executive directors and four independent non-executive directors, ensuring over one-third of the board is independent[101]. - The company has adhered to the corporate governance code throughout the year, with the exception of the separation of the roles of chairman and CEO[98]. - The chairman and CEO, Mr. Ko Wai Cheung, holds both positions, which aids in making prompt and effective decisions[103]. - The company has established a nomination committee responsible for developing director nomination policies and making recommendations to the board[104]. - Independent non-executive directors have provided annual confirmations of their independence, ensuring compliance with independence requirements[101]. - The company has a legal liability insurance plan for its directors, which is reviewed annually to ensure adequate protection against potential liabilities[102]. - The board is responsible for setting the overall strategic direction and providing leadership and oversight to management[101]. - The company will consider the independence of independent non-executive directors who have served for over nine years during their re-election[104]. - The company emphasizes the importance of good corporate governance as a key factor for long-term sustainable success[98]. - The board meets regularly and has held additional meetings with independent non-executive directors to discuss general matters of the group[103]. - The company has adopted a board diversity policy to enhance decision-making capabilities and effectively manage organizational changes[105]. - The board diversity considerations include gender, age, cultural and educational background, race, professional experience, skills, knowledge, and tenure[105]. - The nomination committee monitors the implementation of the board diversity policy and the progress towards measurable targets[107]. - The nomination committee evaluates potential board members based on various parameters, including commitment, skills, reputation, and compliance with regulatory requirements[107]. - The board holds regular meetings, with a total of four meetings conducted in the year, ensuring timely distribution of meeting materials[110]. - The executive committee is authorized to exercise all general powers of the board, except for reserved matters[115]. - The executive committee has reviewed governance matters, including insider information policies and risk management systems[116]. - The company has established four board committees, each with formal terms of reference to ensure compliance with corporate governance codes[111]. - The remuneration committee assists the board in planning and reviewing the implementation of remuneration policies[114]. - The nomination committee is responsible for reviewing the composition of the board and making recommendations for appointments or reappointments[113]. - The Audit Committee held three meetings in 2018, reviewing the semi-annual and annual performance, and assessing the effectiveness of risk management and internal control systems[117]. - The Remuneration Committee conducted three meetings in 2018, reviewing the remuneration policies and conducting annual reviews of executive directors and senior management compensation[118]. - Independent non-executive directors played a significant role in monitoring corporate transactions, including the acquisition of 100% of the issued share capital of Wei An Limited from Polydata Holdings International Limited[122]. - The company acquired 50% of the issued share capital of Jun Yang Limited and 60% of Allround Holdings Limited, both from Polydata Holdings, enhancing its property development portfolio in China[122]. - The average attendance rate for board meetings in 2018 was 100%, indicating strong engagement from board members[120]. - The Nomination Committee held one meeting in 2018, reviewing the board's composition and assessing the independence of non-executive directors[118]. - The company provided regular training sessions for directors to enhance their knowledge and skills regarding corporate governance and compliance with listing rules[123]. - The Audit Committee met with external auditors twice during the year to discuss issues related to the annual financial statement audit[117]. - The company established a whistleblowing policy to allow employees and independent third parties to report suspected misconduct or fraud[117]. - The board reviewed the diversity policy and its measurable targets, ensuring progress towards achieving these goals[118]. - The company has adopted a standard code of conduct for securities trading, ensuring all directors have confirmed compliance throughout the year[127]. - The remuneration policy is designed to reflect performance and contributions, aiming to attract, motivate, and retain high performers[129]. - The internal audit department has conducted three meetings with senior staff to discuss the role, objectives, and progress of internal audit functions[133]. - The board believes the risk management and internal control systems are effective and adequate based on the review conducted for the year ending December 31, 2018[134]. - The company has established a whistleblowing policy to allow employees and stakeholders to report concerns effectively[133]. - The board is responsible for maintaining effective oversight of the group's activities, with management providing monthly updates on performance and outlook[130]. - The company emphasizes high ethical standards and compliance with insider trading regulations to avoid conflicts of interest[127]. - The risk management framework follows the "three lines of defense" model, ensuring comprehensive oversight and control[130]. - The company secretary has completed over 15 hours of relevant professional training to update skills and knowledge[126]. - The board has a commitment to fostering a culture of risk awareness and accountability within the organization[133]. Acquisitions and Investments - Future Star International Limited agreed to acquire all issued share capital and sales loans of Wei An Limited for HKD 2,110,242,000[1]. - Noble Prime International Limited agreed to acquire 50% of the issued share capital and sales loans of Jun Yang Limited for an initial price of HKD 1,200,111,000, with an adjustment cap of HKD 311,912,000[1]. - Noble Prime International Limited agreed to acquire 60% of the issued share capital and sales loans of Allround Holdings Limited for HKD 644,378,000[1]. - The transactions were approved by independent shareholders at a special general meeting held on November 21, 2018[3]. - The independent board committee confirmed that the transactions were conducted on normal commercial terms and were fair and reasonable[3]. - The company completed the acquisition of 100% equity in a subsidiary for a total consideration of HKD 2,110,242,000, which included HKD 1,367,692,000 for inter-company loan transfers[194]. Social Responsibility and Environmental Commitment - The group has been recognized for its corporate social responsibility efforts, including donations to local charities and participation in community activities[86]. - The group aims to maintain good relationships and close communication with business partners, banks, contractors, and suppliers to achieve its goals[86]. - The group has established a systematic assessment to address stakeholder concerns regarding environmental and social issues[86]. - The group is committed to environmental protection and continuous improvement in environmental aspects, promoting electronic communication and waste recycling systems in its offices[86]. - The group made charitable donations totaling HKD 1,267,000 during the year, up from HKD 989,000 in 2017[151].