新濠国际发展(00200) - 2022 - 中期财报

Management Discussion and Analysis Significant Events and Developments The group faced significant COVID-19 impacts in H1 2022, particularly in Macau, while operations in the Philippines and Cyprus showed continuous improvement and revenue recovery. - COVID-19 continued to significantly impact the group's operations and financial performance, with Macau's gross gaming revenue decreasing by 46.4% due to rising mainland China cases and travel restrictions[4] - Philippines and Cyprus operations showed continuous improvement, with revenue gradually recovering to pre-pandemic levels; the Philippines fully reopened in March 2022, increasing gross gaming revenue by nearly 40% quarter-on-quarter[4][5] - Studio City Phase 2 construction progressed well, with phased openings expected from Q2 2023, while City of Dreams Mediterranean faced contractor delays, now anticipated to open in early Q2 2023[4][5] - Macau's gaming law amendment bill passed in June 2022, extending Melco Resorts & Entertainment (Macau)'s gaming sub-concession until December 31, 2022[5] Business Review The group, primarily through its 55.8% owned subsidiary Melco Resorts & Entertainment, saw net revenue decline by 28.5% to HKD 6.03 billion in H1 2022, with loss for the period expanding to HKD 4.58 billion due to Macau's pandemic restrictions. | Indicator | Six Months Ended June 30 (HKD Million) | | :--- | :--- | | | 2022 | 2021 | | Net Revenue | 6,030 | 8,430 | | Loss for the Period | 4,580 | 3,750 | - The group primarily operates its gaming business through its subsidiary Melco Resorts & Entertainment, in which it held approximately 55.8% equity as of June 30, 2022[6] City of Dreams (Macau) As the group's flagship integrated resort, City of Dreams (Macau) was severely impacted by the pandemic in H1 2022, experiencing significant declines in both total operating revenue and Adjusted Property EBITDA. | Indicator (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Total Operating Revenue | 354.1 | 650.1 | | Adjusted Property EBITDA | 15.9 | 119.6 | | Gaming Operations Performance (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | VIP Rolling Chip Turnover | 3,197.2 | 8,687.3 | | Mass Market Table Games Drop | 761.7 | 1,537.7 | Studio City (Macau) Studio City Phase 2 construction is progressing with a USD 1.2 billion budget, expected to open in phases starting Q2 2023, while H1 performance was weak with a significant decline in total operating revenue and a worsening negative Adjusted Property EBITDA. - Studio City Phase 2 construction budget is USD 1.2 billion, with phased openings anticipated from Q2 2023, adding 900 hotel rooms, a large water park, and MICE facilities[11] | Indicator (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Total Operating Revenue | 107.0 | 202.3 | | Adjusted Property EBITDA | (48.4) | (6.4) | Altira Macau Since Q3 2021, Altira Macau has repositioned to focus on the mass and premium mass markets, closing its VIP gaming business, resulting in lower total operating revenue but a narrowed negative Adjusted Property EBITDA in H1. - Since Q3 2021, Altira Macau has strategically repositioned, closing its VIP gaming business to focus on the premium mass market[12][34] | Indicator (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Total Operating Revenue | 21.2 | 32.7 | | Adjusted Property EBITDA | (20.6) | (46.9) | Mocha Clubs As Macau's largest non-casino electronic gaming machine operation, Mocha Clubs maintained relatively stable performance in H1, with slight decreases in both total operating revenue and Adjusted Property EBITDA. | Indicator (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Total Operating Revenue | 38.1 | 42.0 | | Adjusted Property EBITDA | 6.8 | 7.4 | City of Dreams (Manila) Benefiting from eased pandemic restrictions in the Philippines, City of Dreams (Manila) has been fully operational since March 2022, showing strong H1 performance with significant growth in total operating revenue and Adjusted Property EBITDA. | Indicator (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Total Operating Revenue | 198.6 | 132.2 | | Adjusted Property EBITDA | 82.0 | 42.7 | | Gaming Operations Performance (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | VIP Rolling Chip Turnover | 1,419.2 | 544.0 | | Mass Market Table Games Drop | 305.7 | 169.3 | | Gaming Machine Handle | 1,702.3 | 969.9 | City of Dreams Mediterranean and Cyprus Casinos (C2) Cyprus operations significantly improved in H1 due to eased pandemic restrictions, with substantial growth in total operating revenue and a shift from negative to positive Adjusted Property EBITDA, while the flagship City of Dreams Mediterranean is expected to open in early Q2 2023. | Indicator (USD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Total Operating Revenue | 37.8 | 10.0 | | Adjusted Property EBITDA | 6.5 | (7.2) | - The City of Dreams Mediterranean project experienced construction delays due to contractor difficulties and is now expected to open in early Q2 2023[17] Outlook The group anticipates continued pandemic impact in H2, with recovery dependent on eased travel restrictions and restored consumer confidence, while the Philippines and Cyprus show optimistic prospects. - The COVID-19 pandemic is expected to continue impacting the group's operations, financial condition, and outlook in the second half of the year[18] - Macau implemented static management in July due to a COVID-19 outbreak, resulting in a 12-day casino closure and strict epidemic prevention requirements upon reopening[18] - Philippines operations have been fully operational since March, with strong growth in international flight bookings, anticipating further growth in the second half of the year[18] - Cyprus operations rebounded due to tourism recovery, with visitor arrivals increasing by 258.2% year-on-year in H1 2022, benefiting the City of Dreams Mediterranean expected to open in 2023[18] Achievements and Awards The group received multiple accolades for corporate governance, social responsibility, talent development, business operations, and environmental sustainability, with its hotels and restaurants earning star ratings from Forbes Travel Guide and Michelin Guide. - Business Excellence: Melco Resorts & Entertainment earned 97 stars in the Forbes Travel Guide 2022, and four of its premium restaurants received seven stars in the Michelin Guide Hong Kong Macau 2022[24] - Corporate Social Responsibility: Actively supported Macau government's anti-epidemic measures, mobilized volunteers for nucleic acid testing, and organized events generating nearly MOP 4.4 million in revenue for local SMEs[21][23] - Environmental Sustainability: Committed to achieving carbon neutrality and zero waste by 2030 or earlier through its "Beyond Boundaries" sustainability strategy, earning the 2022 International Gaming Awards' Sustainability Award[25] Financial Review In H1 2022, the group's net revenue decreased by 28.5% to HKD 6.025 billion, Adjusted EBITDA declined by 77.0% to HKD 168.2 million, and loss attributable to owners expanded to HKD 2.375 billion, primarily due to tightened travel restrictions in Macau and mainland China. | Financial Indicator (HKD Million) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | Year-on-Year Change | | Net Revenue | 6,025.1 | 8,425.3 | -28.5% | | Adjusted EBITDA | 168.2 | 732.5 | -77.0% | | Loss Attributable to Owners of the Company | (2,374.6) | (1,647.6) | -44.1% | | Basic Loss Per Share (HKD) | (1.58) | (1.09) | -45.1% | | Financial Position (HKD Million) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Total Assets | 94,988.0 | 94,193.3 | | Total Liabilities | 76,647.9 | 71,725.3 | | Gearing Ratio (%) | 67.6% | 61.4% | Liquidity, Financial Resources and Capital Structure The group prudently managed its financial position, holding HKD 13.165 billion in cash and bank balances and HKD 9.02 billion in available borrowing capacity as of June 30, 2022, with the gearing ratio increasing to 67.6%. - As of June 30, 2022, the group held bank balances and cash of HKD 13.165 billion and had available borrowing capacity of HKD 9.02 billion[50] - Key debt changes during the period included: issuance of USD 350 million in senior secured notes; and drawing USD 420 million from a revolving credit facility[50] - The gearing ratio (total interest-bearing borrowings/total assets) increased from 61.4% at the end of 2021 to 67.6% as of June 30, 2022[53][27] Human Resources As of June 30, 2022, the group's total number of employees was 17,270, a decrease from the prior year, with related employee costs of HKD 2.607 billion for H1. | Indicator | As of June 30, 2022 | As of June 30, 2021 | | :--- | :--- | :--- | | Total Number of Employees | 17,270 persons | 18,178 persons | | Employee Costs (HKD Million) | 2,606.7 | 3,034.0 | Interim Financial Information Review Report Auditor's Review Conclusion Ernst & Young conducted a review of the interim financial information in accordance with HKSRS 2410, concluding that nothing came to their attention to suggest the information was not prepared in all material respects according to HKAS 34. - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity"[61] - Conclusion: We have not become aware of any material modifications that should be made to the interim financial information for it to be prepared in accordance with Hong Kong Accounting Standard 34[62] Condensed Consolidated Interim Financial Statements Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income In H1 2022, the group's net revenue decreased by 28.5% to HKD 6.025 billion, operating loss expanded to HKD 3.024 billion, and total loss for the period increased to HKD 4.579 billion, with loss attributable to owners at HKD 2.375 billion. | Indicator (HKD Thousand) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Net Revenue | 6,025,107 | 8,425,275 | | Operating Loss | (3,024,122) | (2,574,752) | | Loss for the Period | (4,579,376) | (3,754,765) | | Loss Attributable to Owners of the Company | (2,374,583) | (1,647,621) | Condensed Consolidated Statement of Financial Position As of June 30, 2022, the group's total assets were HKD 94.988 billion, total liabilities were HKD 76.648 billion, and net assets were HKD 18.340 billion, with a net current liability of HKD 248 million. | Indicator (HKD Thousand) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Total Non-current Assets | 80,180,608 | 78,979,622 | | Total Current Assets | 14,807,406 | 15,213,655 | | Total Assets | 94,988,014 | 94,193,277 | | Total Current Liabilities | 15,055,167 | 12,731,552 | | Total Non-current Liabilities | 61,592,708 | 58,993,717 | | Total Liabilities | 76,647,875 | 71,725,269 | | Total Equity | 18,340,139 | 22,468,008 | Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2022, the group's total equity decreased by HKD 4.128 billion from HKD 22.468 billion to HKD 18.340 billion, primarily due to a total comprehensive loss of HKD 5.186 billion. - Total equity decreased from HKD 22.468 billion at the beginning of the period to HKD 18.340 billion at the end of the period[70] - The decrease in equity was primarily due to a total comprehensive loss of HKD 5.186 billion for the period, including a loss for the period of HKD 4.579 billion and other comprehensive loss of HKD 607 million from foreign currency translation differences[70] Condensed Consolidated Statement of Cash Flows In H1 2022, net cash generated from operating activities was HKD 201 million, net cash used in investing activities was HKD 2.585 billion, and net cash from financing activities was HKD 2.209 billion, resulting in a net decrease of HKD 175 million in cash and cash equivalents. | Activity (HKD Thousand) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Net Cash from Operating Activities | 201,045 | 383,560 | | Net Cash Used in Investing Activities | (2,585,488) | (4,142,689) | | Net Cash from Financing Activities | 2,209,121 | 2,089,291 | | Net Decrease in Cash and Cash Equivalents | (175,322) | (1,669,838) | Notes to the Condensed Consolidated Interim Financial Information Note 1: Organization and Business This note outlines the group's business structure, detailing the ongoing impact of COVID-19 across Macau, the Philippines, and Cyprus, and discloses the extension of Macau's gaming sub-concession to December 31, 2022, along with related financial guarantees and asset reversion commitments. - The COVID-19 pandemic continued to significantly disrupt the group's business, particularly impacting Macau operations due to travel restrictions, while operations in the Philippines and Cyprus showed recovery[79][80] - The Macau gaming sub-concession contract was extended to December 31, 2022, for which the group paid an extension fee of MOP 47 million and will provide a bank guarantee of no less than MOP 820 million[83] - The group committed that upon the sub-concession's expiry, the gaming areas, gaming support areas, and gaming equipment of its Macau casinos will revert to the Macau government without compensation[83] - As of June 30, 2022, the group had a net current liability of HKD 248 million, but management believes existing cash and undrawn borrowing facilities will support operations for at least the next twelve months, thus preparing financial statements on a going concern basis[81][82] Note 3: Segment Information The group's operations are primarily categorized into "Casino and Hotel" and other segments, with Macau remaining the largest revenue source at HKD 4.147 billion despite a significant year-on-year decline, while the Philippines and Cyprus segments showed strong revenue growth. | Net Revenue from External Customers by Geography (HKD Thousand) | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Macau | 4,147,205 | 7,296,938 | | Philippines | 1,554,431 | 1,026,762 | | Cyprus | 295,864 | 77,707 | | Total | 6,025,107 | 8,425,275 | | Non-current Segment Assets by Geography (HKD Thousand) | As of June 30, 2022 | | :--- | :--- | | Macau | 71,107,635 | | Cyprus | 3,400,548 | | Philippines | 2,496,058 | | Total | 78,338,685 | Note 9: Loss Per Share Attributable to Owners of the Company For the six months ended June 30, 2022, basic and diluted loss per share attributable to owners of the company expanded to HKD 1.58, compared to HKD 1.09 in the prior year, based on a weighted average of approximately 1.504 billion ordinary shares. | Indicator | Six Months Ended June 30 | | :--- | :--- | | | 2022 | 2021 | | Loss Attributable to Owners of the Company (HKD Thousand) | (2,374,583) | (1,647,621) | | Weighted Average Number of Ordinary Shares (Thousand Shares) | 1,504,474 | 1,514,766 | | Basic Loss Per Share (HKD) | (1.58) | (1.09) | Note 16: Interest-bearing Borrowings As of June 30, 2022, the group's total interest-bearing borrowings (net of deferred costs) increased to HKD 64.25 billion from HKD 57.88 billion at the end of 2021, driven by the issuance of USD 350 million in senior secured notes and a USD 420 million draw from a revolving credit facility. | Borrowing Type (HKD Thousand) | As of June 30, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Unsecured Notes | 48,469,327 | 48,151,277 | | Secured Bank Loans | 6,665,568 | 6,608,324 | | Unsecured Bank Loans | 6,412,953 | 3,117,000 | | Secured Notes | 2,701,789 | – | | Total | 64,249,637 | 57,876,601 | - In February 2022, the group issued USD 350 million aggregate principal amount of 7.00% Senior Secured Notes due 2027[124] - During the period, the group drew USD 420 million from an unsecured revolving credit facility of HKD 14.85 billion[125] - In March 2022, the company entered into a financing agreement with subsidiary Melco Resorts & Entertainment for a USD 250 million revolving loan, of which USD 200 million was drawn by period-end[123] Note 18: Long Term Incentive Plans Both the company and its subsidiary Melco Resorts & Entertainment implemented share option exchange programs during the period, allowing eligible participants to exchange certain underwater options for newly granted options and award shares/restricted shares to better incentivize and retain talent, resulting in incremental share-based compensation expenses. - The company implemented the "Melco Share Option Exchange Program" on April 6, 2022, canceling 33,590,000 eligible share options and granting 453,000 new share options and 11,032,000 new award shares[129] - Melco Resorts & Entertainment implemented a similar exchange program on April 15, 2022, canceling 26,076,978 eligible share options and granting 2,486,241 new share options and 5,912,547 new restricted shares[130] Note 19: Changes in Ownership Interests in Certain Subsidiaries During the reporting period, the group's ownership interests in key subsidiaries, including Melco Resorts & Entertainment, SCIHL, and the Philippine subsidiary (MRP), experienced minor changes due to share repurchases, private placements, and share award vesting, without altering controlling status. - Due to share repurchases and share award vesting by Melco Resorts & Entertainment, the group's interest in Melco Resorts & Entertainment slightly increased from 57.10% to 57.26%[131] - Following SCIHL's private placement, in which the group participated, its interest in SCIHL slightly increased from 31.41% to 31.50%[132] - The group's interest in MRP increased from 56.52% to 56.85% due to the acquisition of MRP shares held by non-controlling interests[133] Note 21: Commitments and Contingencies As of June 30, 2022, the group had capital commitments of approximately HKD 1.927 billion, primarily for property, plant, and equipment acquisition, while the development period for the Studio City Macau land concession was extended to June 30, 2023, and the City of Dreams Mediterranean project in Cyprus experienced construction delays. - Contracted but unprovided capital expenditure for the acquisition of property, plant, and equipment amounted to HKD 1.927 billion[135] - The Macau government further extended the development period for the Studio City land concession development project to June 30, 2023[137] - The City of Dreams Mediterranean project in Cyprus experienced construction delays and is now expected to open in early Q2 2023[139] Note 24: Events After the Reporting Period Subsequent to the reporting period, the group undertook several significant financial actions, including securing an extension for financial covenant waivers on a major credit facility, Melco Resorts & Entertainment repurchasing shares from a company subsidiary, and drawing an additional USD 400 million from its revolving credit facility for general corporate purposes. - In August 2022, the group obtained an extension of the financial covenant waiver for its 2020 credit facility until March 31, 2024[148] - In August 2022, Melco Resorts & Entertainment repurchased approximately 85 million ordinary shares (including ADSs) from Melco Leisure, a subsidiary of the company[149] - On August 24, 2022, the group drew an additional USD 400 million from its 2020 credit facility for general corporate purposes[149] Other Information Directors' and Chief Executive's Interests and Major Shareholders' Interests The report discloses the interests of directors, the chief executive, and major shareholders in the company's shares, related shares, and debentures of the company and its associated corporations (e.g., Melco Resorts & Entertainment, SCIHL) as of June 30, 2022. - Chairman and Chief Executive Officer Mr. Lawrence Ho held a total long position of 886,992,396 shares in the company as of June 30, 2022, representing approximately 58.48% of the issued shares[154] - Mr. Lawrence Ho is deemed to have an interest in 820,091,853 ordinary shares of its subsidiary Melco Resorts & Entertainment, representing approximately 56.30% of its issued shares[159][160] - Major shareholder Southeastern Asset Management, Inc., as an investment manager, held 196,518,781 shares in the company, representing approximately 12.96%[195] Share Option Schemes and Share Award Schemes The report details changes in the company's and its subsidiary Melco Resorts & Entertainment's share option and share award schemes, including the implementation of option exchange programs and the adoption of a new share option scheme by the company in June 2022. - The company implemented a share option exchange program in April 2022, canceling 33,590,000 old share options and granting 453,000 new share options and 11,032,000 new award shares[166] - Subsidiary Melco Resorts & Entertainment also implemented a similar program, canceling 26,076,978 old share options and granting 2,486,241 new share options and 5,912,547 new restricted shares[174] - The company's share option scheme adopted in 2012 expired in May 2022, and a new share option scheme was adopted in June of the same year[166] Corporate Governance The company complied with the Corporate Governance Code during the reporting period, with one deviation: the roles of Chairman and Chief Executive Officer are combined and held by Mr. Lawrence Ho, which the Board believes is in the company's best interest given his deep industry knowledge. - The company complied with the Corporate Governance Code, with one deviation: the roles of Chairman and Chief Executive Officer are not separated, both held by Mr. Lawrence Ho[198] - The Board believes that Mr. Lawrence Ho's combined role as Chairman and Chief Executive Officer, leveraging his deep industry knowledge and business network, is in the company's current best interest[198] - The Audit Committee reviewed the company's unaudited interim results and interim report for the six months ended June 30, 2022[201] Company Information Basic Company Information This section lists the company's essential details, including its Board of Directors, committee members, company secretary, registered office, auditor (Ernst & Young), legal advisors, share registrar (Tricor Standard Limited), and website. - The company's Chairman and Chief Executive Officer is Mr. Lawrence Ho[205] - The company's auditor is Ernst & Young[206] - The company's shares are listed on The Stock Exchange of Hong Kong Limited under stock code 200[206]