九龙建业(00034) - 2024 - 中期业绩

2024 Interim Results Announcement Summary Interim Results and Dividend Overview Kowloon Development Company Limited reported a slight increase in underlying profit attributable to shareholders but a significant decrease in unaudited profit, leading to a substantial reduction in interim dividends per share H1 2024 Key Financial Performance | Metric | H1 2024 (HKD) | H1 2023 (HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Underlying Profit Attributable to Shareholders | 289 million | 288 million | +0.3% | | Basic Interim Earnings Per Share | 0.246 | 0.245 | - | | Unaudited Profit Attributable to Shareholders | 113 million | 184 million | -38.6% | | Interim Earnings Per Share | 0.10 | 0.16 | - | | Interim Dividend Per Share | 0.10 | 0.26 | -61.5% | Market Overview and Business Review Market Overview Hong Kong's property market in H1 2024 experienced low buying sentiment due to high interest rates, with a brief stimulus from the government's removal of sales restrictions, while mainland China saw continued declines in both property sales volume and prices - High bank interest rates in Hong Kong severely impacted market buying sentiment[5] - The government's complete removal of property sales restrictions in late February provided only a short-term stimulus, with transaction volumes gradually declining[5] - Hong Kong's residential property price index reached a nearly eight-year low, falling approximately 2.55% from its year-start high and over 24% from its historical peak in September 2021[5] - Mainland China's property market experienced generally sustained low buying sentiment, leading to declines in both sales volume and prices nationwide[5] Property Sales The Group continued to sell its Grand Mayfair project in Tseung Kwan O, Hong Kong, recognizing approximately HKD 1.2 billion in sales revenue in H1, while mainland China development projects achieved total pre-sales/sales of approximately RMB 643 million, with the Group's attributable share being approximately RMB 558 million - Over 1,100 residential units at the Grand Mayfair project in Tseung Kwan O, Hong Kong, have been sold cumulatively[6] - Sales revenue of approximately HKD 1.2 billion from Grand Mayfair was recognized in H1[6] Mainland China Development Projects Pre-sales/Sales (Six Months Ended June 30, 2024) | Metric | Amount | | :--- | :--- | | Total Pre-sales/Sales | Approximately RMB 643 million | | Group's Attributable Pre-sales/Sales | Approximately RMB 558 million | Property Development The Group sold a 60% equity interest in a Shanghai property development project for a total consideration of HKD 1.392 billion to enhance liquidity and reduce its gearing ratio, with total attributable gross floor area of land bank at approximately 3.2 million square meters as of June 30, 2024, and various key property projects in Hong Kong and mainland China progressing towards their estimated completion dates - The Group completed the disposal of a 60% equity interest in a subsidiary holding a Shanghai property development project, along with a 60% shareholder loan, for a total consideration of HKD 1,391,957,000 on June 11, 2024[7] - The disposal helps enhance the Group's liquidity and reduce its gearing ratio[7] - As of June 30, 2024, the Group's attributable total gross floor area of land bank available for development was approximately 3,200,000 square meters[7] Overview of Major Property Project Progress | Property Project | Region/City | Usage | Group's Interest | Project Progress | Estimated Completion Date | | :--- | :--- | :--- | :--- | :--- | :--- | | High Street | Sai Ying Pun, Hong Kong | Residential & Commercial | 60% | Superstructure works in progress | End of 2025 | | Clearwater Bay Road | Ngau Chi Wan, Kowloon | Residential & Commercial | 100% | Foundation works in progress | 2026 to 2028 | | Jiangwan City (Shenyang) | Hunnan New District, Shenyang | Residential & Commercial | 100% | Phase 5A planning modification in progress | Phase 5A to be determined | | Cui Di Wan (Shenyang) | Shenhe District, Shenyang | Residential & Commercial | 100% | Phase 4 design approval in progress | Phase 4 to be determined | | Jiangwan South Bank Garden (Huizhou) | Huicheng District, Huizhou | Residential & Commercial | 60% | Phase 3 planning in progress | Phase 3 to be determined | | Shan Yu Hu (Foshan) | Nanhai District, Foshan | Residential & Commercial | 50% | Phase 5 superstructure works in progress | 2024/2025 | | Jiangwan City (Wuxi) | Liangxi District, Wuxi | Residential & Commercial | 100% | Phase 4 interior fitting-out works in progress | Q3 2024 | | City Plaza (Tianjin) | Hedong District, Tianjin | Residential, Commercial & Office | 49% | Phase 3B superstructure works in progress | End of 2026 | | Yangpu (Shanghai) | Yangpu District, Shanghai | Residential, Commercial & Office | 40% | Preliminary construction permit obtained; site formation works in progress | End of 2029 | | Polytec • Guifu (Shanxi) | Jiexiu City | Residential & Commercial | 100% | Phase 1 interior fitting-out works in progress | End of 2024 | | Henda Plaza (Zhuhai) | Xiangzhou District, Zhuhai | Commercial, Office & Serviced Apartments | 70% | Phase 1 superstructure works in progress | End of 2025 | Property Investment In the first six months of 2024, the Group's total rental income from its Hong Kong investment property portfolio was HKD 148 million, with its flagship property, Pioneer Centre, experiencing a 3.3% year-on-year decline in total rental income to HKD 116 million, reflecting pressure from a weak retail market and record-high office vacancy rates - The Group's total rental income from its Hong Kong investment property portfolio was HKD 148 million[10] Pioneer Centre Total Rental Income (H1 2024) | Metric | H1 2024 (HKD) | H1 2023 (HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Pioneer Centre Total Rental Income | 116 million | 120 million | -3.3% | Outlook The Group anticipates a boost in the Hong Kong property market from factors such as declining US interest rates, the removal of stamp duties, and a temporary halt in land sales, with a focus on selling remaining units at Grand Mayfair and launching pre-sales for the new High Street project in Sai Ying Pun in the second half of the year, while the outlook for mainland China remains challenging with limited profit contribution expected; the Group will continue to operate cautiously and has temporarily reduced its interim dividend to navigate the severe market conditions, with plans to resume increasing dividends when market conditions permit - Hong Kong interest rates are expected to gradually decline after September, following US interest rates, and the Hong Kong government's removal of stamp duties and temporary halt in land sales are anticipated to boost market buying confidence[11] - The Group will launch pre-sales for its new project on High Street in Sai Ying Pun, Hong Kong Island, in the fourth quarter of this year[12] - Operating income from mainland China will primarily come from the sale of remaining units in Wuxi and other development projects, but given the current low property prices in mainland China, the contribution of domestic development projects to the Group's profit is expected to be limited[12] - Under the principle of prudent operation, the Group has temporarily altered its strategy of gradually increasing dividends over the past decade, reducing this interim dividend, and will resume increasing dividends when market conditions permit[12] Interim Financial Report Consolidated Statement of Profit or Loss In H1 2024, the Group's operating revenue significantly increased to HKD 1.941 billion, but profit for the period decreased by 38.6% to HKD 113 million due to an expanded fair value loss on investment properties and a reversal from loss to gain in fair value changes of property development interests Consolidated Statement of Profit or Loss Key Data (Six Months Ended June 30, 2024) | Metric | 2024 (HKD thousand) | 2023 (HKD thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 1,940,947 | 1,275,963 | +52.1% | | Cost of Sales | (916,223) | (402,254) | +127.8% | | Operating Profit | 269,188 | 313,391 | -14.1% | | Fair Value Change of Investment Properties | (189,846) | (36,972) | +413.5% (Loss widened) | | Fair Value Change of Property Development Interests | 14,050 | (8,777) | Turned from loss to profit | | Profit Before Tax | 199,345 | 260,997 | -23.6% | | Profit for the Period | 113,104 | 183,594 | -38.4% | | Profit Attributable to Equity Holders of the Company | 113,453 | 184,481 | -38.5% | | Earnings Per Share – Basic and Diluted | HKD 0.10 | HKD 0.16 | -37.5% | Consolidated Statement of Comprehensive Income In H1 2024, the Group's total comprehensive income for the period turned from a loss in the prior year to a profit of HKD 78.542 million, primarily due to a significant narrowing of exchange differences on financial statements of subsidiaries outside Hong Kong and the release of exchange reserves upon disposal of a subsidiary Consolidated Statement of Comprehensive Income Key Data (Six Months Ended June 30, 2024) | Metric | 2024 (HKD thousand) | 2023 (HKD thousand) | Change (HKD thousand) | | :--- | :--- | :--- | :--- | | Profit for the Period | 113,104 | 183,594 | -70,490 | | Exchange Differences on Financial Statements of Subsidiaries Outside Hong Kong | (32,719) | (129,063) | +96,344 | | Exchange Reserve Released on Disposal of Subsidiary | 17,082 | - | +17,082 | | Share of Other Comprehensive Income of Joint Ventures and Associates | (18,925) | (100,431) | +81,506 | | Total Comprehensive Income for the Period | 78,542 | (45,900) | +124,442 (Turned from loss to profit) | Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets decreased from the end of 2023, mainly due to a reduction in inventories, while net current liabilities improved and the gearing ratio decreased, with a significant increase in interests in associates within non-current assets reflecting investments in these entities Consolidated Statement of Financial Position Key Data (As of June 30, 2024) | Metric | June 30, 2024 (HKD thousand) | December 31, 2023 (HKD thousand) | Change (HKD thousand) | | :--- | :--- | :--- | :--- | | Total Assets | 44,455,032 | 47,732,654 | -3,277,622 | | Investment Properties | 13,502,300 | 13,633,020 | -130,720 | | Interests in Associates | 2,287,563 | 1,315,962 | +971,601 | | Inventories | 22,845,215 | 26,551,788 | -3,706,573 | | Cash and Bank Balances | 708,832 | 1,080,599 | -371,767 | | Net Current Liabilities | 16,431,556 | 19,529,624 | -3,098,068 | | Bank Loans (Current) | 2,898,391 | 3,744,569 | -846,178 | | Bank Loans (Non-current) | 16,449,906 | 17,151,977 | -702,071 | | Loans from Related Companies (Non-current) | 1,079,763 | 2,789,185 | -1,709,422 | | Total Equity | 17,846,513 | 17,767,971 | +78,542 | Notes to the Financial Statements The notes to the financial statements provide detailed information on the basis of preparation, changes in accounting policies, segment reporting, components of profit before tax, income tax calculation, earnings per share, dividend policy, property development interests, and trade and other receivables/payables, offering a deeper understanding of the Group's financial performance Basis of Preparation This interim financial report is prepared in accordance with the disclosure requirements of the Listing Rules of The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants, consistently applying the accounting policies used in the 2023 annual financial statements - This interim financial report is prepared in accordance with the disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including compliance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[17] - Except for changes in accounting policies expected to be reflected in the 2024 annual financial statements, the accounting policies adopted in the 2023 annual financial statements have been consistently applied in this interim financial report[17] Changes in Accounting Policies Revisions to Hong Kong Financial Reporting Standards effective for the current accounting period had no material impact on the preparation and presentation of the Group's current or prior period results and financial position - The Hong Kong Institute of Certified Public Accountants has issued certain amendments to Hong Kong Financial Reporting Standards that are effective for the Group's current accounting period, but they have no material impact on the preparation and presentation of the Group's current or prior period results and financial position[18] Segment Reporting The Group's operations are categorized into property development (Hong Kong/Mainland China), property investment, and other businesses, with property development (Hong Kong) contributing the largest operating revenue and profit in H1 2024, while property investment recorded a negative fair value change - The Group manages its businesses by the nature of the business and geographical area, identifying three reportable segments: property development (Hong Kong/Mainland China), property investment, and other businesses[19] Segment Results and Assets (Six Months Ended June 30, 2024) | Segment | Operating Revenue (HKD thousand) | Reportable Segment Profit (HKD thousand) | | :--- | :--- | :--- | | Total Property Development | 1,940,947 | 497,394 | | - Hong Kong | 1,174,307 | 346,022 | | - Mainland China | 271,326 | 5,024 | | Property Investment | 147,555 | 118,469 | | Others | 347,759 | 27,879 | | Fair Value Change of Investment Properties | - | (189,846) | | Fair Value Change of Property Development Interests | - | 14,050 | Segment Assets (As of June 30, 2024) | Segment | Reportable Segment Assets (HKD thousand) | | :--- | :--- | | Total Property Development | 29,442,882 | | - Hong Kong | 15,483,649 | | - Mainland China | 13,959,233 | | Property Investment | 13,519,341 | | Others | 653,611 | Profit Before Tax Profit before tax was influenced by fair value gains on other financial assets and finance costs, with an increase in interest on bank loans and related company loans in H1 2024, largely offset by amounts capitalized - Other net expenses primarily consisted of fair value gains on other financial assets of HKD 669,000 (compared to impairment and fair value losses of HKD 57,643,000 in the corresponding period of 2023)[28] Finance Costs (Six Months Ended June 30, 2024) | Metric | 2024 (HKD thousand) | 2023 (HKD thousand) | | :--- | :--- | :--- | | Interest on Bank Loans | 543,149 | 483,723 | | Interest on Loans from Related Companies | 73,904 | 45,362 | | Less: Amounts Capitalized | (531,913) | (434,051) | | Net Finance Costs | 85,140 | 95,034 | - Borrowing costs capitalized were calculated at an annual interest rate of 4.98% – 6.98% (2023: 2.42% – 6.29%)[29] Other Items (Six Months Ended June 30, 2024) | Metric | 2024 (HKD thousand) | 2023 (HKD thousand) | | :--- | :--- | :--- | | Depreciation and Amortization | 10,155 | 10,471 | | Interest Income | (36,425) | (74,346) | Income Tax Total income tax for H1 2024 was HKD 86.241 million, an increase from the prior year, mainly due to higher provision for Hong Kong profits tax, with mainland China land appreciation tax calculated at progressive rates Income Tax Components (Six Months Ended June 30, 2024) | Tax Category | 2024 (HKD thousand) | 2023 (HKD thousand) | | :--- | :--- | :--- | | Provision for Hong Kong Profits Tax | 77,775 | 53,605 | | Provision for Profits Tax Outside Hong Kong | 397 | (473) | | Land Appreciation Tax | 818 | 9,139 | | Deferred Tax | 7,251 | 15,132 | | Total Income Tax | 86,241 | 77,403 | - Hong Kong profits tax is calculated at 16.5% of the estimated assessable profit[31] - Mainland China land appreciation tax is levied at progressive rates ranging from 30% to 60%[32] Earnings Per Share Basic earnings per share for H1 2024 decreased to HKD 0.10 from HKD 0.16 in the prior year, with no dilutive potential shares for the Company during the period Basic Earnings Per Share (Six Months Ended June 30, 2024) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Profit Attributable to Equity Holders of the Company | HKD 113,453,000 | HKD 184,481,000 | | Weighted Average Number of Shares in Issue | 1,176,631,296 shares | 1,176,631,296 shares | | Basic Earnings Per Share | HKD 0.10 | HKD 0.16 | - There were no dilutive potential shares of the Company for the six months ended June 30, 2024 and 2023[34] Dividends The interim dividend declared for H1 2024 was HKD 0.10 per share, a significant reduction from HKD 0.26 per share in the prior year Interim Dividends (Six Months Ended June 30, 2024) | Metric | 2024 (HKD thousand) | 2023 (HKD thousand) | | :--- | :--- | :--- | | Interim Dividend Declared After Period End Per Share | HKD 0.10 (130,621) | HKD 0.26 (305,924) | Property Development Interests Property development interests primarily represent the Group's co-investment agreements with Polytec Holdings for property development projects in Huizhou and Zhuhai, mainland China, with an expected recoverable amount of HKD 439 million within one year as of June 30, 2024 - Property development interests represent the Group's interests in several property development projects in Huizhou and Zhuhai, mainland China, under co-investment agreements with a related company, Polytec Holdings International Limited[35] Property Development Interests Receivable (As of June 30, 2024) | Metric | June 30, 2024 (HKD) | December 31, 2023 (HKD) | | :--- | :--- | :--- | | Property Development Interests Expected to be Recovered Within One Year | 439,153,000 | 427,589,000 | Trade and Other Receivables / Loans As of June 30, 2024, total trade and other receivables/loans amounted to HKD 1.064 billion, with current amounts accounting for HKD 405 million, and the Group maintains specific credit policies and regular monitoring to mitigate credit risk Ageing Analysis of Trade and Other Receivables / Loans (As of June 30, 2024) | Ageing | June 30, 2024 (HKD thousand) | December 31, 2023 (HKD thousand) | | :--- | :--- | :--- | | Current | 405,039 | 444,648 | | Less than Three Months | 28,630 | 22,122 | | Three to Six Months | 3,617 | 3,587 | | Over Six Months | 17,231 | 17,255 | | Total Trade and Other Receivables / Loans | 454,517 | 487,612 | | Utilities and Other Deposits | 17,710 | 17,048 | | Prepaid Taxes | 86,065 | 83,966 | | Other Receivables and Prepayments | 505,858 | 487,459 | | Total | 1,064,150 | 1,076,085 | - The Group maintains specific credit policies and regularly prepares and closely monitors the ageing analysis of trade and other receivables/loans to minimize any credit risk associated with receivables and loans[37] Trade and Other Payables As of June 30, 2024, total trade and other payables amounted to HKD 4.690 billion, with contract liabilities (deposits received for property sales) accounting for HKD 2.178 billion, an increase from the end of 2023 Ageing Analysis of Trade and Other Payables (As of June 30, 2024) | Ageing | June 30, 2024 (HKD thousand) | December 31, 2023 (HKD thousand) | | :--- | :--- | :--- | | Not Yet Due or Current | 1,980,383 | 2,125,394 | | Less than Three Months | 489 | 107 | | Total Trade Payables | 1,980,872 | 2,125,501 | | Rental and Other Deposits | 78,106 | 78,543 | | Other Payables and Accrued Expenses | 452,683 | 778,061 | | Contract Liabilities – Deposits Received for Property Sales | 2,178,314 | 1,898,721 | | Total | 4,689,975 | 4,880,826 | Financial Review Financial Resources and Bank Borrowings As of June 30, 2024, the Group's total bank loans were HKD 19.348 billion, with net bank borrowings of HKD 18.639 billion, and the gearing ratio decreased to 104.4%, primarily due to the use of proceeds from the disposal of a 60% interest in a Shanghai property development project for debt repayment and over HKD 200 million in cash generated from the disposal of non-core assets, while project sales in Hong Kong and mainland China contributed significant cash inflows Bank Borrowings and Gearing Ratio (As of June 30, 2024) | Metric | June 30, 2024 (HKD) | December 31, 2023 (HKD) | | :--- | :--- | :--- | | Total Bank Loans | 19,348,000,000 | 20,897,000,000 | | Cash and Bank Balances | 709,000,000 | 1,080,599,000 | | Net Bank Borrowings | 18,639,000,000 | - | | Gearing Ratio | 104.4% | 111.5% | - The Group utilized the HKD 1,391,957,000 proceeds from the disposal of a 60% equity interest in a Shanghai property development project for repayment of the Group's borrowings and general working capital, strengthening its financial position and cash flow[39] - Since 2023, the Group has generated over HKD 200,000,000 in cash from the disposal of commercial properties and car parking spaces in Hong Kong and mainland China[39] Project Sales Cash Inflow (During the Period) | Source | Cash Inflow (HKD) | | :--- | :--- | | Hong Kong Project Sales (mainly from Grand Mayfair) | Approximately 1,205,000,000 | | Mainland China Property Development Pre-sales and Sales (mainly from Jiangwan City (Wuxi)) | Approximately 351,000,000 | - The Group invested approximately HKD 829,000,000 in construction costs during the period[41] - The Group's borrowings are all arranged on a floating interest rate basis, with RMB income and RMB borrowings generated from mainland China development projects serving as a natural hedge against RMB exchange rate risk[41] Capital Commitments As of June 30, 2024, the Group's capital commitments amounted to HKD 80 million, primarily for investment properties Capital Commitments (As of June 30, 2024) | Item | Amount (HKD) | | :--- | :--- | | Total Capital Commitments | 80,000,000 | | Primary Use | Investment Properties | Pledged Assets As of June 30, 2024, the Group had pledged HKD 26.857 billion in properties and HKD 14 million in deposits, primarily as security for bank facilities and performance guarantees Pledged Assets (As of June 30, 2024) | Asset Category | Amount (HKD) | | :--- | :--- | | Properties | 26,857,000,000 | | Deposits | 14,000,000 | | Primary Use | Security for bank facilities and performance guarantees | Contingent Liabilities As of June 30, 2024, the Group had provided guarantees of HKD 35 million to financial institutions for performance guarantees entered into by its subsidiaries Contingent Liabilities (As of June 30, 2024) | Item | Amount (HKD) | | :--- | :--- | | Guarantees for Subsidiary Performance | 35,000,000 | Other Information Review of Interim Financial Report The Company's Audit Committee has reviewed the interim financial report, which was also reviewed by KPMG, the independent auditor, in accordance with Hong Kong Standard on Review Engagements 2410 - The Company's Audit Committee has reviewed the Group's unaudited interim financial report for the six months ended June 30, 2024[43] - The Group's independent auditor, KPMG, has reviewed the interim financial report in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[43] Compliance with Corporate Governance Code For the six months ended June 30, 2024, the Company complied with all code provisions set out in Part 2 of Appendix C1 to the Listing Rules, except for code provision C.2.1 (where the roles of Chairman and Chief Executive Officer are performed by the same individual) - The Company has complied with all code provisions set out in Part 2 of Appendix C1 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, save for code provision C.2.1[44] - Mr. Or Wai Sheun concurrently holds the roles of Chairman of the Board and Chief Executive Officer, responsible for the overall operations of the Group[44] Purchase, Sale or Redemption of the Company's Listed Securities During the six months ended June 30, 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - During the six months ended June 30, 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[45] Closure of Register of Members To qualify for the interim dividend, the Company will suspend its share transfer registration from December 16 to December 17, 2024, with all transfer documents to be submitted by 4:30 p.m. on December 13, 2024 - The Company will suspend its share transfer registration from Monday, December 16, 2024, to Tuesday, December 17, 2024 (both days inclusive)[45] - To qualify for the interim dividend, all transfer documents, together with the relevant share certificates, must be lodged with the Company's share registrar by 4:30 p.m. (Hong Kong time) on Friday, December 13, 2024[45] Publication of Interim Report The Company will publish its 2024 Interim Report, containing all required comprehensive information prepared in accordance with the Listing Rules, on the "HKEXnews" website and the Company's website by the end of September 2024, with printed copies sent to shareholders upon request - The Company will publish its 2024 Interim Report, containing all required comprehensive information prepared in accordance with the Listing Rules, on the "HKEXnews" website www.hkexnews.hk and the Company's website www.kdc.com.hk by the end of September 2024[46]