长实集团(01113) - 2020 - 中期财报

Company Information and Key Dates This section provides essential company details and important dates for the reporting period Company Information The report provides basic company information, including the composition of the Board of Directors, Executive Committee, Audit Committee, Remuneration Committee, Nomination Committee, as well as key contact details for the Company Secretary, Authorized Representatives, General Manager of the Accounting Department, principal bankers, auditors, legal advisors, registered office, principal place of business, and share registrar - The Board of Directors comprises 13 directors, including 8 executive directors and 5 independent non-executive directors[11] - Principal bankers include Bank of China (Hong Kong), MUFG Bank, Mizuho Bank, and The Hongkong and Shanghai Banking Corporation Limited[11] Key Dates This section lists important timelines for the 2020 interim results announcement, interim dividend record, and payment dates - The 2020 interim results were announced on August 6, with the interim dividend record date on September 8 and payment date on September 17[11] Chairman's Business Report This report provides an overview of the group's performance, dividend declaration, business review, and future outlook Performance Highlights In the first half of 2020, the Group's underlying profit decreased by 35.5% to HKD 8.367 billion, with underlying earnings per share of HKD 2.27, while reported profit significantly decreased by 58.0% to HKD 6.360 billion, with reported earnings per share of HKD 1.72, primarily due to fair value reductions in REITs and investment properties 2020 First Half Performance Summary | Metric | 2020 (HKD million) | 2019 (HKD million) | Change | | :--- | :--- | :--- | :--- | | Underlying Profit | 8,367 | 12,989 | -35.5% | | REITs Fair Value Change | (1,318) | 1,056 | - | | Investment Property Fair Value Change | (689) | 1,083 | - | | Reported Profit | 6,360 | 15,128 | -58.0% | | Interim Dividend (HKD per share) | 0.34 | 0.52 | -34.6% | - The profit decline was primarily due to the negative impact of the COVID-19 pandemic on the Group's businesses, coupled with fair value reductions of HKD 1.318 billion for REITs and HKD 689 million for investment properties, respectively[15] Interim Dividend The Board announced an interim dividend of HKD 34 cents per share for 2020, a 34.6% decrease from HKD 52 cents per share in 2019 - The 2020 interim dividend is HKD 34 cents per share, a 34.6% decrease compared to HKD 52 cents per share in 2019[14][16] - The dividend will be paid on September 17, 2020, with a record date of September 8, 2020[16] Business Review The Group's various business segments showed mixed performance under the pandemic's impact, with property sales in Hong Kong affected but offset by mainland sales, overall property rental income down 11%, hotel and serviced suite businesses incurring losses, aircraft leasing severely hit but profiting from aircraft sales, UK pub business recording operating losses due to mandatory closures, and infrastructure and utility assets contributing stable profits with less impact - The pandemic continues to impact global industries, particularly aviation, tourism, retail, and real estate, with several of the Group's businesses experiencing varying degrees of disruption[17] - Property Sales: Hong Kong property sales revenue decreased due to the pandemic but was offset by higher sales revenue from mainland China, with the Group successfully bidding for the Kwun Tong Anderson Road site and completing the sale of residential and commercial units in Chengdu's South City Metropolis[18] - UK Pub Business: Mandatory closures by the UK government led to Greene King recording an operating loss of HKD 1.938 billion, with phased reopening underway but full recovery expected to take time[22] Future Outlook Looking ahead, the global economy still faces multiple uncertainties including the pandemic, Sino-US trade tensions, Brexit, and strained international relations, while mainland China's economy achieved positive growth in Q2 and Hong Kong faces significant downward pressure, yet the Group remains optimistic about future business recovery and growth due to its robust financial position and low gearing ratio, continuing to seek quality projects globally - Global economic uncertainties include the COVID-19 pandemic, Sino-US trade agreements, Brexit, the US election, and escalating international tensions, introducing more variables to the global political and economic landscape[24] - Mainland China's economic recovery: The mainland economy experienced negative growth in Q1 but turned to positive growth of 3.2% in Q2, with its post-pandemic recovery expected to be faster than other major countries[24] - Group financial strengths: The Group has ample cash flow, a net debt-to-total capital ratio of approximately 4.7%, and credit ratings of "A/Stable" and "A2 Stable", positioning it to withstand risks and seize opportunities[25] Management Discussion and Analysis This section provides a detailed review of the Group's business activities and financial performance, including property projects, land acquisitions, major disposals, and financial overview Business Review This section provides a detailed review of the Group's major business activities in the first half of 2020, including completed and expected property projects, newly acquired land, and significant disposals, with detailed revenue and contribution data for each business segment, along with an analysis of the pandemic's specific impact and the Group's responses - As of June 30, 2020, the Group held approximately 92 million sq ft of developable land bank, with 5 million sq ft in Hong Kong, 83 million sq ft in mainland China, and 4 million sq ft overseas[32] - As of June 30, 2020, the Group held an investment property portfolio of approximately 16.4 million sq ft, comprising retail, office, and industrial properties[37] - Greene King operates approximately 2,700 pubs, restaurants, and hotels across England, Wales, and Scotland[45] Principal Business Activities In the first half of 2020, the Group completed several property projects, successfully acquired the Kwun Tong Anderson Road site in Hong Kong for residential development, and completed the disposal of the South City Metropolis project in Chengdu, China - Completed and Expected Property Projects: During 2020, the Group had multiple property projects completed or expected to be completed in Hong Kong, Guangzhou, Shanghai, Beijing, Chengdu, Chongqing, Dongguan, and Huizhou, with a total gross floor area exceeding 10 million sq ft[27] - New Land Acquisition: In May 2020, the Group successfully bid for the Kwun Tong Anderson Road site in Kowloon, covering approximately 217,076 sq ft, to be developed into residential properties, requiring the provision of no less than 1,000 first-time buyer units[28] - Major Disposal: On July 23, 2020, the Group completed the disposal of its entire equity interest in the "South City Metropolis residential and commercial project" in Chengdu, China, for a total consideration of approximately USD 1.012 billion[28] Property Sales Property sales revenue (including share of joint ventures) for the first half of the year was HKD 19.484 billion, largely consistent with the same period last year, with a significant increase in mainland China sales offsetting a decline in Hong Kong sales, and recognized sales revenue totaling HKD 9.004 billion, primarily from mainland projects Property Sales Revenue | Region | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Hong Kong | 6,116 | 15,674 | | Mainland China | 10,929 | 3,428 | | Overseas | 2,439 | 130 | | Total | 19,484 | 19,232 | Property Sales Contribution | Region | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Hong Kong | 1,768 | 6,653 | | Mainland China | 6,638 | 830 | | Overseas | 598 | 47 | | Total | 9,004 | 7,530 | - As of June 30, 2020, the total contracted but unrecognized property sales amounted to HKD 27.934 billion, with HKD 14.962 billion from Hong Kong and HKD 12.890 billion from mainland China[32] Property Rental Property rental income (including share of joint ventures) for the first half of the year was HKD 3.453 billion, an 8.1% year-on-year decrease, with rental contribution at HKD 3.169 billion, down 11.2% year-on-year, and overseas rental contribution reduced due to some UK retail properties being reclassified under the UK pub business Property Rental Income | Property Use | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Retail | 1,441 | 1,695 | | Office | 1,439 | 1,471 | | Industrial | 365 | 371 | | Others | 208 | 219 | | Total | 3,453 | 3,756 | Property Rental Contribution | Region | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Hong Kong | 2,634 | 2,819 | | Mainland China | 281 | 340 | | Overseas | 254 | 408 | | Total | 3,169 | 3,567 | - Investment property fair value change: As of June 30, 2020, the fair value of investment properties decreased by HKD 809 million (compared to an increase of HKD 1.002 billion in the same period of 2019)[37] Hotel and Serviced Suite Business Hotel and serviced suite business revenue for the first half of the year was HKD 992 million, a significant 58.2% year-on-year decrease, with business contribution at only HKD 33 million, down 96.2% year-on-year, primarily due to the pandemic's impact leading to an average hotel occupancy rate of 23% - Hotel and serviced suite business revenue for the first half of 2020 was HKD 992 million, a decrease of HKD 1.382 billion from HKD 2.374 billion in the same period of 2019[38] Hotel and Serviced Suite Business Contribution | Region | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Hong Kong | 90 | 897 | | Mainland China | (57) | (21) | | Total | 33 | 876 | - The average occupancy rates for hotel and serviced suite properties were 23% and 86%, respectively[38] Property and Project Management Property and project management revenue for the first half of the year was HKD 403 million, with a contribution of HKD 173 million, a slight year-on-year decrease, and the Group managed a total gross floor area of approximately 269 million sq ft of completed properties - Property and project management revenue for the first half of 2020 was HKD 403 million (compared to HKD 432 million in the same period of 2019)[41] Property and Project Management Contribution | Region | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Hong Kong | 138 | 130 | | Mainland China | 23 | 40 | | Overseas | 12 | 13 | | Total | 173 | 183 | - As of the interim reporting date, the Group managed a total gross floor area of approximately 269 million sq ft of completed properties[42] Aircraft Leasing Aircraft leasing revenue for the first half of the year was HKD 1.520 billion, with a contribution of HKD 733 million, a slight year-on-year increase, primarily benefiting from HKD 195 million from aircraft sales, despite the pandemic severely impacting the aviation industry, AMCK Aviation focuses on younger, in-demand narrow-body aircraft, expecting short-haul routes to recover first - Aircraft leasing revenue for the first half of 2020 was HKD 1.520 billion (compared to HKD 1.556 billion in the same period of 2019)[43] Aircraft Leasing Contribution | Region | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Asia | 256 | 272 | | Europe | 164 | 219 | | North America | 256 | 174 | | Latin America | 57 | 52 | | Total | 733 | 717 | - The contribution included HKD 195 million from aircraft sales[43] UK Pub Business The Group entered the UK pub business with the acquisition of Greene King in October 2019, which recorded an operating loss of HKD 1.938 billion in the first half of the year due to mandatory closures of pubs and restaurants by the UK government amid the pandemic - Business Acquisition: The Group completed the acquisition of Greene King in October 2019, which operates approximately 2,700 pubs, restaurants, and hotels in the UK[45] - Operating Loss: The UK pub business recorded an operating loss of HKD 1.938 billion in the first half of the year, primarily due to mandatory closure measures by the UK government[46] UK Pub Business Segment Revenue and Contribution | Segment | Revenue (HKD million) | Contribution (HKD million) | | :--- | :--- | :--- | | Pub Company | 3,078 | (1,574) | | Pub Partners | 310 | (35) | | Brewing & Brands | 474 | (329) | | Total | 3,862 | (1,938) | Infrastructure and Utility Assets Business The infrastructure and utility assets business, a key source of stable income for the Group, was relatively less affected by the pandemic, contributing HKD 2.456 billion in profit for the first half of the year, primarily from joint ventures like CK William JV, CKP (Canada) JV, and Sarvana JV, as well as economic interest investments in projects such as Park'N Fly and UK Rails - Joint Venture Interests: The Group holds interests in joint ventures including CK William JV (40%), CKP (Canada) JV (75%), and Sarvana JV (65%)[47] Joint Venture Revenue | Joint Venture | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | CK William JV | 2,020 | 2,132 | | CKP (Canada) JV | 1,782 | 1,698 | | Sarvana JV | 2,807 | 2,828 | | Total | 6,609 | 6,658 | Infrastructure and Utility Assets Profit Contribution | Region | 2020 (HKD million) | 2019 (HKD million) | | :--- | :--- | :--- | | Australia | 808 | 816 | | Europe | 1,067 | 856 | | North America | 581 | 500 | | Total | 2,456 | 2,542 | Interests in Real Estate Investment Trusts The Group holds interests in Hui Xian REIT, Fortune REIT, and Prosperity REIT, with a share of Hui Xian REIT's profit of HKD 99 million and distributions of HKD 190 million in the first half of the year, while interests in Fortune REIT and Prosperity REIT recorded a fair value decrease of HKD 1.318 billion - REITs Interests: The Group holds interests in Hui Xian REIT (31.9%), Fortune REIT (27.0%), and Prosperity REIT (18.2%)[51] - Hui Xian REIT Profit and Distributions: Share of profit was HKD 99 million (compared to HKD 166 million in the same period of 2019), and distributions received were HKD 190 million (compared to HKD 260 million in the same period of 2019)[51] - Fair Value Change: Interests in Fortune REIT and Prosperity REIT recorded a fair value decrease of HKD 1.318 billion (compared to an increase of HKD 1.056 billion in the same period of 2019)[51] Financial Overview The Group maintains a robust financial position with ample cash flow and a low net debt-to-total capital ratio, implementing prudent financial policies to manage foreign exchange and interest rate risks, and disclosing information on asset pledges, contingent liabilities, and employee costs - Liquidity: The Group's total bank and other borrowings amounted to HKD 76.7 billion, a decrease of HKD 3.4 billion from the end of 2019, with a net debt-to-total capital ratio of approximately 4.7%[52] - Financial Policy: The Group adopts a prudent approach to managing foreign exchange risk, with borrowings primarily on a floating rate basis, utilizing hedging instruments such as swaps and forward contracts to mitigate risks[53] - Asset Pledges: As of the interim reporting date, properties valued at HKD 15.099 billion were pledged for bank borrowings related to mainland property projects, and properties