CDL: Unaudited Second Quarter and Half Year Financial Statement for the period ended 30 June 2019 together with the News Release and 1H 2019 Results Presentation

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CITY DEVELOPMENTS LIMITED

(REG. NO. 196300316Z)

UNAUDITED SECOND QUARTER AND HALF YEAR FINANCIAL STATEMENT FOR THE PERIOD ENDED 30 JUNE 2019

PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS

1(a)(i) An income statement (for the Group) together with a comparative statement for the corresponding period of the immediately preceding financial year.

These figures have not been audited.	The Group		The Group
			Second quarter ended	Incr/	Half year ended	Incr/
			30 June		30 June
			2019	2018	(Decr)	2019	2018	(Decr)
			(Restated) *		(Restated) *
			S$'000	S$'000	%	S$'000	S$'000	%
Revenue (1)
850,364	1,359,541	(37.5)	1,596,528	2,417,370	(34.0)
Cost of sales	(431,092)	(756,037)	(43.0)	(825,122)	(1,443,603)	(42.8)
Gross profit (2)
419,272	603,504	(30.5)	771,406	973,767	(20.8)
Other operating income (3)	16,918	693	NM	161,620	31,918	NM
Administrative expenses (4)	(143,316)	(126,167)	13.6	(282,207)	(251,066)	12.4
Other operating expenses (5)	(122,460)	(111,153)	10.2	(227,176)	(209,772)	8.3
Profit from operating activities		170,414	366,877	(53.6)	423,643	544,847	(22.2)
Finance income		40,545	18,634	NM	58,346	27,814	NM
Finance costs		(52,684)	(46,626)	13.0	(98,227)	(69,248)	41.8
Net finance costs (6)	(12,139)	(27,992)	(56.6)	(39,881)	(41,434)	(3.7)
Share of after-tax profit of
associates (7)	51,665	3,877	NM	58,288	9,668	NM
Share of after-tax profit/(loss) of
joint ventures (8)	14,715	(1,498)	NM	48,248	1,264	NM
Profit before tax		224,655	341,264	(34.2)	490,298	514,345	(4.7)
Tax expense (9)	(41,948)	(91,017)	(53.9)	(96,082)	(124,883)	(23.1)
Profit for the period		182,707	250,247	(27.0)	394,216	389,462	1.2
Attributable to:
Owners of the Company	162,397	220,748	(26.4)	361,961	306,090	18.3
Non-controlling interests	20,310	29,499	(31.2)	32,255	83,372	(61.3)
Profit for the period		182,707	250,247	(27.0)	394,216	389,462	1.2
Earnings per share
- basic	17.2 cents	23.6 cents	(27.1)	39.2 cents	33.0 cents	18.8
- diluted	17.1 cents	23.1 cents	(26.0)	38.0 cents	32.1 cents	18.4

NM: not meaningful

• The 2018 comparative figures have been restated to take into account the retrospective adjustments on adoption of the Agenda Decision issued by the IFRS Interpretation Committee (IFRIC) as detailed in item 5 of this announcement.

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CITY DEVELOPMENTS LIMITED

(REG. NO. 196300316Z)

Notes to the Group's Income Statement:

1. The decrease in revenue for Q2 2019 and 1H 2019 was primarily attributable to the property development segment due to timing of profit recognition for development projects.
   In Q2 2019, revenue was largely recognised from The Tapestry, Gramercy Park, Hongqiao Royal Lake, Whistler Grand and Suzhou Hong Leong City Center (HLCC). Included in Q2 2018 was the maiden contribution from New Futura, Park Court Aoyama The Tower in Tokyo and HLCC.
   Included in 1H 2018 was a significant contribution from The Criterion Executive Condominium (EC), where its revenue was recognised in entirety upon receiving its Temporary Occupation Permit (TOP) in Q1 2018, as well as from Park Court Aoyama The Tower and HLCC. Further, unit sales recognised from completed projects including New Futura and Gramercy Park also boosted revenue for 1H 2018.
   Items 14 and 15 further analyse the performance by segments.
2. The decrease for Q2 2019 and 1H 2019 was largely due to lower gross profit generated by the property development segment. Nevertheless, the gross profit margin for 1H 2019 was 48%, higher than the 40% achieved in 1H 2018, as profit margin for The Criterion EC was more compressed despite its significant revenue contribution in 2018.
3. Other operating income comprised mainly management fee, miscellaneous income, and profit on sale of investment properties and property, plant and equipment.
   In 1H 2018, a gain of $29 million was recognised on divestment of Mercure Brisbane and Ibis Brisbane by CDL Hospitality Trusts (CDLHT). Other operating income for Q2 2019 and 1H 2019 related largely to the unwinding of PPS 1 and PPS 2.
   Profit Participation Securities 1 (PPS 1)
   In Q2 2019, the Group acquired the remaining PPS instruments issued by Sunbright Holdings Limited (Sunbright), an associate of the Group, which was established in 2014 under the Group's PPS 1 structure, in connection to the non-residential components of the Quayside Collection, an integrated development comprising W Singapore - Sentosa Cove hotel and Quayside Isle, a waterfront F&B and retail property, that the Group did not own. With these acquisitions, the Group gained full control of the two properties. As part of the purchase price allocation exercise, a net gain of about $7 million was recorded due to remeasurement of its existing stake in these properties at fair value.
   Profit Participation Securities 2 (PPS 2)
   In Q2 2019, the Group realised a deferred gain of $9.6 million from the divestment of 7 & 9 Tampines Grande in relation to the Group's PPS 2 structure established in 2015. This was in addition to a $144.3 million gain realised in Q1 2019 from the divestment of Manulife Centre. These were gains on the sale of the two properties in 2015 to Golden Crest Holdings (Golden Crest), an associate of the Group established under the PPS 2 platform and were previously deferred to the extent of the Group's retained interest in Golden Crest. Following the divestment of these two properties by Golden Crest to external parties in January 2019 and May 2019 respectively, the deferred gains were realised by the Group.
   In addition, the Group also received distribution of $43.3 million from Golden Crest for its 40% investment in PPS 2 in accordance with the stipulated waterfall distribution. This was accounted under share of after-tax profit of associates.
4. Administrative expenses comprised mainly depreciation, hotel administrative expenses and salaries and related expenses.
   The increase in administrative expenses in Q2 2019 and 1H 2019 was largely due to depreciation accounted on the right-of- use assets following the adoption of SFRS(I) 16 Leases on 1 January 2019 (as detailed in Item 5), as well as full quarter/ period depreciation from investment properties that were recently added to the Group's portfolio in 2018 including Aldgate House, 125 Old Broad Street, Central Mall Office Tower, Le Grove Serviced Residences (reopened in July 2018) and Suzhou HLCC retail mall (opened in June 2018). In addition, the Group's acquisition of W Singapore - Sentosa Cove and Quayside Isle in Q2 2019 via the abovementioned PPS 1 financial instruments also contributed to the increase in depreciation expenses for the current quarter.
5. Other operating expenses comprised mainly property taxes and insurance on hotels, other operating expenses on hotels and professional fees. Increase in Q2 2019 was mainly due to higher other operating expenses on hotels, contributed by W Singapore - Sentosa Cove, which the Group had consolidated with effect from April 2019, as well as higher professional fees incurred.

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CITY DEVELOPMENTS LIMITED

(REG. NO. 196300316Z)

1. Net finance costs comprised the following:

			The Group						The Group
			Second quarter ended						Half year ended
			30 June						30 June
		2019	2018			Incr/	2019	2018		Incr/
	Note			(Restated)			(Decr)				(Restated)		(Decr)
Finance income			S$'000	S$'000	%			S$'000	S$'000	%
Interest income	(i)	27,538	12,691			NM	49,426	26,294	88.0
Fair value gain on financial derivatives	(ii)	11,340	5,943	90.8	8,922	-		NM
Fair value gain on financial assets measured at
fair value through profit or loss	(iii)	1,668	-			NM	-	-		NM
Net exchange gain	(iv)	-	-			NM	-	1,581		NM
Finance income capitalised		(1)	-			NM	(2)	(61)	(96.7)
Finance costs		40,545	18,634			NM	58,346	27,814		NM
Amortisation of transaction costs capitalised		(2,268)	(1,326)	71.0	(3,911)	(2,603)	50.2
Interest expenses	(v)	(51,685)	(31,560)	63.8	(95,518)	(60,666)	57.4
Fair value loss on financial derivatives	(ii)	-	-	-	-	(342)		NM
Fair value loss on financial assets measured at
fair value through profit or loss	(iii)	-	(4,499)			NM	(5,191)	(7,077)	(26.6)
Net exchange loss	(iv)	(4,656)	(10,110)	(53.9)	(5,182)	-		NM
Unwinding of discount on non-current provisions		(147)	(451)	(67.4)	(305)	(922)	(66.9)
Finance costs capitalised		6,072	1,320			NM	11,880	2,362		NM
			(52,684)	(46,626)		13.0		(98,227)	(69,248)		41.8
Net finance costs					(56.6)					(3.7)
		(12,139)	(27,992)	(39,881)	(41,434)

NM: not meaningful

1. The increase in interest income in Q2 2019 and 1H 2019 was largely due to loans granted to Sincere Property Group, an established real estate developer in China which the Group intends to take an approximately 24% equity stake in the company when relevant conditions, including regulatory approvals, are met, and to acquire one of its office projects located in Shanghai, held by the subsidiaries in the Sincere Property Group.
2. Fair value gain/(loss) on financial derivatives related mainly to the remeasurement of foreign exchange forward contracts, cross-currency and interest rate swaps that the Group entered into.
3. 1. This mainly arose from remeasurement of unquoted debt instruments and investments in equities and funds to their fair values at the reporting date.

1. The net exchange loss in 1H 2019 was mainly attributable to the weakening of the Sterling Pound against Singapore dollar which led to translation loss of a Sterling Pound denominated loan granted to a subsidiary.
2. 
   The net exchange loss in Q2 2018 mainly relate to translation loss from CDLHT, an indirect subsidiary of the Group, arising from its United States dollar denominated bank loans as well as the depreciation of Australian dollar receivables and cash balances against Singapore dollar.

1. 1. The increase in interest expenses in Q2 2019 and 1H 2019 was mainly attributable to the Group's higher borrowings.
2. The increase in share of after-tax profit of associates was mainly attributable to the share of distribution from Golden Crest arising from the unwinding of PPS 2 structure.
3. The increase for Q2 2019 and 1H 2019 was mainly due to contribution from South Beach Residences and Boulevard 88 which were launched for sale in Q3 2018 and Q1 2019 respectively, along with returns recognised from the sale of units in the Ivy and Eve project in Australia.

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