九龙仓集团(00004) - 2019 - 年度财报

Company Overview Company Overview 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] - 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] - 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] - Wharf Hotels manages 17 Niccolo and Marco Polo hotels in Asia[3] Chairman's Statement Economic Overview 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] - Mainland China implemented housing price control policies, impacting the market and developers. Meanwhile, the growing middle class drove sustained growth in domestic consumption[16] - 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] Business Performance 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] - Full-year attributable contracted sales reached RMB 19.9 billion, exceeding the target by 11%[17] - Four houses and three apartment units were sold at the Mount Nicholson project on The Peak in Hong Kong during the year[17] Financial Results 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] Outlook 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] - 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] - Business in Q1 2020 is largely lost, and significant improvement in Q2 is unlikely, with conditions not expected to stabilize before year-end[20] Financial Summary Financial Summary 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 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] - 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] - 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] Mainland China Development Properties 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] Mainland China Investment Properties 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] Hotels 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] - Brands include 13 Marco Polo Hotels and 4 Niccolo Hotels[75] - Niccolo Suzhou hotel is planned to open in 2021[75] Logistics 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] - Hong Kong Air Cargo Terminals (Group holds 20.8% stake): Handled a total of 1.6 million tonnes of cargo in 2019[83] Financial Review 2019 Performance Review 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][108] | 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] Liquidity, Financial Resources and Capital Commitments 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] - 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] Dividend Policy 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] Corporate Governance Report Board of Directors 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] - 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] Board Committees 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] - The Remuneration Committee held two meetings, reviewing remuneration policies and levels for directors and senior management[158] - The Nomination Committee recommended the re-election of retiring directors to the Board via written resolution[159] Risk Management and Internal Control Systems 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] - 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][172] - The Board confirmed that the risk management and internal control systems as of end-2019 were effective and adequate[172] Directors' Report Disclosure of Connected Transactions 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] - Entered into an agreement with Wharf Real Estate Investment Company Limited for hotel management services, with receivables totaling HKD 62 million in 2019[228] - 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] Principal Risks and Uncertainties 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] - 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] - Logistics segment risks: Faces challenges from declining global economic growth, US-China trade tensions, and slowing growth in mainland China[237] - Financial risks: The Group's daily operations face interest rate risk, foreign currency risk, equity price risk, and credit risk[241] Independent Auditor's Report Opinion 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] Key Audit Matters 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] - 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] -