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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  Swire Properties Limited    1972   HK0000063609

SWIRE PROPERTIES LIMITED

(1972)
  Report
End-of-day quote. End-of-day quote Hong Kong Stock Exchange - 07/15
18.82 HKD   -0.74%
04/01SWIRE PROPERTIES LIMITED : Ex-dividend day for final dividend
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03/11SWIRE PROPERTIES : 2019 Final Results
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03/09SWIRE PROPERTIES LIMITED : annual earnings release
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Swire Properties : 2019 Final Results

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03/11/2020 | 11:19pm EDT

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

SWIRE PROPERTIES LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 1972)

2019 Final Results

2019 FINAL RESULTS

CONTENTS

Page

Financial Highlights

1

Chairman's Statement

2

Review of Operations

5

Financing

31

Consolidated Financial Statements

34

Additional Information

56

Glossary

58

Financial Calendar and Information for Investors

59

2019 FINAL RESULTS

FINANCIAL HIGHLIGHTS

2019

2018

Note

HK$M

HK$M

Change

Results

For the year

Revenue

14,222

14,719

-3%

Profit attributable to the Company's shareholders

Underlying

(a),(b)

24,130

10,148

+138%

Recurring underlying

(b)

7,633

7,521

+1%

Reported

13,423

28,666

-53%

Cash generated from operations

5,499

11,619

-53%

Net cash inflow before financing

20,217

10,144

+99%

HK$

HK$

Earnings per share

Underlying

(c)

4.12

1.74

+138%

Recurring underlying

(c)

1.30

1.29

+1%

Reported

(c)

2.29

4.90

-53%

Dividends per share

First interim

0.29

0.27

+7%

Second interim

0.59

0.57

+4%

HK$M

HK$M

Financial Position

At 31st December

Total equity (including non-controlling interests)

288,911

281,291

+3%

Net debt

15,292

29,905

-49%

Gearing ratio

(a)

5.3%

10.6%

-5.3%pt.

HK$

HK$

Equity attributable to the Company's shareholders per share

(a)

49.05

47.74

+3%

Notes:

  1. Refer to glossary on page 58 for definition.
  2. A reconciliation between reported profit and underlying profit attributable to the Company's shareholders is provided on page 6.
  3. Refer to note 9 in the financial statements for the weighted average number of shares.

2019

2018

Underlying profit/(loss) by segment

HK$M

HK$M

Property investment

24,218

10,090

Property trading

(18)

99

Hotels

(70)

(41)

24,130

10,148

1

2019 FINAL RESULTS

CHAIRMAN'S STATEMENT

Our consolidated profit attributable to shareholders for 2019 was HK$13,423 million, compared to HK$28,666 million in 2018. Underlying profit attributable to shareholders, which principally adjusts for changes in the valuation of investment properties, increased by HK$13,982 million from HK$10,148 million in 2018 to HK$24,130 million in 2019. Recurring underlying profit (which excludes the profit on sale of interests in investment properties) was HK$7,633 million in 2019, compared with HK$7,521 million in 2018.

Dividends

The Directors have declared a second interim dividend of HK$0.59 (2018: HK$0.57) per share which, together with the first interim dividend of HK$0.29 per share paid in October 2019, amounts to full year dividends of HK$0.88 (2018: HK$0.84) per share. The second interim dividend, which totals HK$3,451 million (2018: HK$3,334 million), will be paid on Thursday, 7th May 2020 to shareholders registered at the close of business on the record date, being Friday, 3rd April 2020. Shares of the Company will be traded ex-dividend from Wednesday, 1st April 2020.

The full year dividends for 2019 represent a 5% increase over the dividends for 2018. The Company's dividend policy is to deliver sustainable growth in dividends and to pay out approximately half of our underlying profits in ordinary dividend over time. During the five years ending with 2019, our dividends have represented 41% of underlying profits.

Key Developments

In April 2019, Swire Properties completed the sale of its 100% interest in a subsidiary which owned two office buildings at 14 Taikoo Wan Road and 12 Taikoo Wan Road (formerly known as Cityplaza Three and Cityplaza Four) in Taikoo Shing, Hong Kong.

2

In July 2019, Swire Properties completed the sale of its entire 50% interest in a company which owned an office building at 625 King's Road in Hong Kong.

In July 2019, a joint venture between Swire Properties and Jakarta Setiabudi Internasional Group completed the acquisition of a plot of land in south Jakarta, Indonesia. The land will be developed into a residential development with an aggregate gross floor area ("GFA") of approximately 1,140,000 square feet. The development is expected to comprise over 400 residential units and to be completed in 2023. Swire Properties has a 50% interest in the joint venture.

In August 2019, an extension opened at Citygate Outlets in Hong Kong. The extension has an aggregate GFA of approximately 341,000 square feet. Swire Properties has a 20% interest in the development.

In September 2019, a joint venture company held as to 80% by Swire Properties and as to 20% by China Motor Bus Company completed the acquisition of a plot of land in Chai Wan, Hong Kong. Subject to agreement with the Hong Kong government, the plot of land is expected to be redeveloped into a residential complex with an aggregate GFA of approximately 694,000 square feet.

In October 2019, a joint venture company formed by the Company, Kerry Properties Limited and Sino Land Company Limited tendered successfully for a residential property development at Wong Chuk Hang in Hong Kong. The development is expected to comprise two residential towers with an aggregate GFA of approximately 638,000 square feet and about 800 residential units. It is expected to be completed in 2024. Swire Properties has a 25% interest in the joint venture.

In November 2019, EDEN, Swire Properties' first residential project in Singapore, was completed and is available for sale. The development

comprises 20 residential units with an aggregate GFA of approximately 77,000 square feet.

Operating Performance

Underlying profit increased to HK$24,130 million in 2019 from HK$10,148 million in 2018. The increase principally reflected the profit arising from the sale of interests in two office buildings in Taikoo Shing and in other investment properties in Hong Kong.

Recurring underlying profit (which excludes the profit on sale of interests in investment properties) was HK$7,633 million in 2019, compared with HK$7,521 million in 2018. The increase principally reflected higher underlying profit from property investment in Mainland China.

Recurring underlying profit from property investment increased by 3% in 2019. There was satisfactory growth from the Mainland China and U.S.A. portfolios, and from the Hong Kong office portfolio. Gross rental income was HK$12,271 million in 2019, compared to HK$12,117 million in 2018. In Hong Kong, office rental income increased due to positive rental reversions, firm occupancy and a full year of rental income from One Taikoo Place, which opened in the last quarter of 2018. However, this was more than offset by a reduction in retail rental income in Hong Kong. This was due to rental subsidies and lower retail sales in the second half of 2019. Disregarding rental subsidies, gross retail rental income in Hong Kong decreased slightly. In Mainland China, gross rental income increased by 8%, mainly due to positive rental reversions, higher retail sales and firm occupancy. There was satisfactory growth in rental income in the U.S.A., due to improved occupancy and higher retail sales.

The underlying loss from property trading in 2019 related to the residential units in the U.S.A., partly offset by profit from the sale of carparks at the ALASSIO development in Hong Kong and from the share of profit from the sale of offices and carparks at Sino-Ocean Taikoo Li Chengdu in Mainland China.

2019 FINAL RESULTS

Hotels recorded a loss in 2019, mainly due to a deterioration in the results of the Hong Kong hotels (reflecting social unrest) in the second half of the year. The performance of the hotels in Mainland China and the U.S.A. improved.

On an attributable basis, net investment property valuation gains in 2019, after deferred tax relating to investment properties in Mainland China and the U.S.A., were HK$3,450 million, compared to net gains of HK$19,876 million in 2018.

Finance

Net debt at 31st December 2019 was HK$15,292 million, compared with HK$29,905 million at 31st December 2018. Gearing decreased from 10.6% at 31st December 2018 to 5.3% at 31st December 2019. The reduction in net debt reflected receipt of the balance of the proceeds of sale of a subsidiary owning our interests in two office buildings in Taikoo Shing, Hong Kong and the proceeds of sale of the entire 50% interest in a joint venture company which owns an office building at 625 King's Road in Hong Kong. These receipts were partially offset by capital expenditure on investment properties and development expenditure in Hong Kong. Cash and undrawn committed facilities were HK$25,068 million at 31st December 2019, compared with HK$14,147 million at 31st December 2018.

Sustainable Development

Swire Properties is included in the Dow Jones Sustainability World Index ("DJSI World"), the Global Real Estate Sustainability Benchmark ("GRESB"), the FTSE4Good Index, the Hang Seng Corporate Sustainability Index and the MSCI World ESG Leaders Index.

In July 2019, Swire Properties converted an existing five-year revolving credit facility of HK$500 million into a sustainability-linked loan, with the interest rate being linked to sustainability performance.

3

Prospects

In the central district of Hong Kong, reduced demand (particularly from Mainland Chinese companies) and increased vacancy rates are expected to exert downward pressure on office rents. High occupancy is expected to result in office rents at our Taikoo Place developments being relatively resilient (by comparison with rents in other areas) despite reduced demand and increased supply in Kowloon East and other districts. However, given the uncertain outlook, office tenants are delaying making lease commitments. With new supply in the central business districts of Guangzhou and Beijing and weak demand, office vacancy rates are expected to increase and rents to be under pressure in 2020. Demand from domestic and international companies for office space in Shanghai is expected to be weak in 2020. But with high occupancy and limited new supply in the central business district of Jing'an, Shanghai office rents are expected to be relatively resilient. In Miami, the supply of new Grade-A office space in the central business district and the Brickell area is low. Job growth in Miami-Dade County is expected to continue, resulting in sustainable demand for office space and stable rental rates.

COVID-19 is adversely affecting our retail investment properties and our hotel business in Hong Kong and Mainland China. Lower rental income is expected from the retail properties and serviced apartments in 2020. Temporary rental subsidies are being provided to retail tenants on a case by case basis. Occupancy and revenue are significantly down at our hotels. Costs will be saved where this can be done without damaging the long-term relationship with tenants and other customers.

2019 FINAL RESULTS

expected to experience increased competition in the retail leasing market.

In Hong Kong, demand for residential accommodation has weakened due to social unrest, economic uncertainty and COVID-19. There is a shortage of land and a limited supply of housing in Hong Kong. This, together with low interest rates, is expected to result in demand for residential accommodation being resilient in the medium and long term. In Miami, demand for condominiums is weak due to weak South American economies, currency fluctuations and political uncertainty. In Singapore, growth in incomes and robust employment are expected to support a stable residential property market.

A non-managed hotel which is part of the Tung Chung Town Lot No. 11 development in Hong Kong is expected to open later in the first half of 2020. Steady growth in business is expected at our Miami hotels.

With our balanced portfolio and strong balance sheet, we are well placed to withstand the effects of this difficult time and to benefit from improved conditions in the future.

On behalf of the shareholders and my fellow Directors, I wish to express our appreciation to all our employees, whose commitment and hard work have been central to our continuing success. In particular, I should like to commend our staff for the tremendous professionalism and resilience of their responses to the operational challenges arising from social unrest in Hong Kong and COVID-19.

As well as COVID-19, social unrest and economic uncertainty are adversely affecting retail sales in Hong Kong. In Mainland China, demand for retail space from international retailers and food and beverage operators is expected, despite the current effects of COVID-19, to be strong in the long term. In Miami, retail sales in Brickell City Centre are increasing steadily. However, established shopping districts in Miami are expanding. As a result, Brickell City Centre is

4

Merlin Swire

Chairman

Hong Kong, 12th March 2020

2019 FINAL RESULTS

REVIEW OF OPERATIONS

2019

2018

HK$M

HK$M

Revenue

Gross Rental Income derived from

Offices

6,598

6,375

Retail

5,107

5,205

Residential

566

537

Other Revenue (1)

139

137

Property Investment

12,410

12,254

Property Trading

516

1,061

Hotels

1,296

1,404

Total Revenue

14,222

14,719

Operating Profit/(Loss) derived from

Property investment

From operations

8,397

8,597

Sale of interests in investment properties

2,338

1,276

Valuation gains on investment properties

3,720

19,452

Property trading

4

65

Hotels

(62)

(25)

Total Operating Profit

14,397

29,365

Share of Post-tax Profits from Joint Venture and Associated Companies

1,430

1,978

Profit Attributable to the Company's Shareholders

13,423

28,666

(1) Other revenue is mainly estate management fees.

Additional information is provided in the following section to reconcile reported and underlying profit attributable to the Company's shareholders. These reconciling items principally adjust for the net revaluation movements on investment properties and the associated deferred tax in Mainland China and the U.S.A., and for other deferred tax provisions in relation to investment properties. There is a further adjustment to remove the effect of the movement in the fair value of the liability in respect of a put option in favour of the owner of a non-controlling interest. Amortisation of right-of-use assets classified as investment properties is charged to underlying profit.

5

2019 FINAL RESULTS

Underlying Profit Reconciliation

2019

2018

Note

HK$M

HK$M

Profit attributable to the Company's shareholders per financial statements

13,423

28,666

Adjustments in respect of investment properties:

Revaluation of investment properties

(a)

(4,563)

(20,796)

Deferred tax on investment properties

(b)

1,138

935

Valuation gains realised on sale of interests in investment properties

(c)

14,159

1,351

Depreciation of investment properties occupied by the Group

(d)

24

19

Non-controlling interests' share of revaluation movements less deferred tax

(25)

(15)

Movements in the fair value of the liability in respect of a put option in favour

(13)

of the owner of a non-controlling interest

(e)

(12)

Less amortisation of right-of-use assets reported under investment properties

(f)

(13)

-

Underlying Profit Attributable to the Company's Shareholders

24,130

10,148

Profit on sale of interests in investment properties

(16,497)

(2,627)

Recurring Underlying Profit Attributable to the Company's Shareholders

7,633

7,521

Notes:

  1. This represents the net revaluation movements as shown in the consolidated statement of profit or loss and the Group's share of net revaluation movements of joint venture companies.
  2. This represents deferred tax movements on the Group's investment properties, plus the Group's share of deferred tax movements on investment properties held by joint venture companies. These comprise deferred tax on revaluation movements on investment properties in Mainland China and the U.S.A., and deferred tax provisions made in respect of investment properties held for the long-term where it is considered that the liability will not reverse for some considerable time.
  3. Prior to the implementation of HKAS 40, changes in the fair value of investment properties were recorded in the revaluation reserve rather than the consolidated statement of profit or loss. On sale, the revaluation gains were transferred from the revaluation reserve to the consolidated statement of profit or loss.
  4. Prior to the implementation of HKAS 40, no depreciation was charged on investment properties occupied by the Group.
  5. The value of the put option in favour of the owner of a non-controlling interest is calculated principally by reference to the estimated fair value of the portion of the underlying investment property in which the owner of the non-controlling interest is interested.
  6. HKFRS 16 amends the definition of investment property under HKAS 40 to include properties held by lessees as right-of-use assets to earn rentals or for capital appreciation or both, and requires the Group to account for such right-of-use assets at their fair value. The amortisation of such right-of-use assets is charged to underlying profit.

6

2019 FINAL RESULTS

Underlying Profit

Movement in Underlying Profit

HK$M

Underlying profit in 2018

10,148

Increase in profit from the sale of interests in investment properties

13,870

Increase in profit from property investment

258

Decrease in profit from property trading

(117)

Increase in losses from hotels

(29)

Underlying profit in 2019

24,130

Underlying profit increased to HK$24,130 million in 2019 from HK$10,148 million in 2018. The increase principally reflected the profit arising from the sale of interests in two office buildings in Taikoo Shing and in other investment properties in Hong Kong. Recurring underlying profit (which excludes the profit on sale of interests in investment properties) was HK$7,633 million in 2019, compared with HK$7,521 million in 2018. The increase principally reflected higher underlying profit from property investment in Mainland China.

Recurring underlying profit from property investment increased by 3% in 2019. There was satisfactory growth from the Mainland China and U.S.A. portfolios, and from the Hong Kong office portfolio. Gross rental income was HK$12,271 million in 2019, compared to HK$12,117 million in 2018. In Hong Kong, office rental income increased due to positive rental reversions, firm occupancy and a full year of rental income from One Taikoo Place, which opened in the last quarter of 2018. However, this was more than offset by a reduction in retail rental income in Hong Kong. This was due to rental subsidies and lower retail sales in the second half of 2019. Disregarding rental subsidies, gross retail rental income in Hong Kong decreased slightly. In Mainland China, gross rental income increased by 8%, mainly due to positive rental reversions, higher retail sales and firm occupancy. There was satisfactory growth in rental income in the U.S.A., due to improved occupancy and higher retail sales. The underlying loss from property trading in 2019 related to the residential units in the U.S.A., partly offset by profit from the sale of carparks at the ALASSIO development in Hong Kong and from the share of profit from the sale of offices and carparks at Sino-Ocean Taikoo Li Chengdu in Mainland China. Hotels recorded a loss in 2019, mainly due to a deterioration in the results of the Hong Kong hotels (reflecting social unrest) in the second half of the year. The performance of the hotels in Mainland China and the U.S.A. improved.

7

2019 FINAL RESULTS

Portfolio Overview

The aggregate GFA attributable to the Group at 31st December 2019 was approximately 30.3 million square feet.

Of the aggregate GFA attributable to the Group, approximately 26.8 million square feet are investment properties, comprising completed investment properties of approximately 23.2 million square feet and investment properties under development or held for future development of approximately 3.6 million square feet. In Hong Kong, the investment property portfolio comprises approximately 14.4 million square feet attributable to the Group of primarily Grade-A office and retail premises, hotels, serviced apartments and other luxury residential accommodation. In Mainland China, Swire Properties has interests in six major commercial developments in prime locations in Beijing, Guangzhou, Chengdu and Shanghai. These developments are expected to comprise approximately 9.7 million square feet of attributable GFA when they are all completed. Of this, 8.8 million square feet has already been completed. Outside Hong Kong and Mainland China, the investment property portfolio comprises the Brickell City Centre development in Miami, U.S.A.

The tables below illustrate the GFA (or expected GFA) attributable to the Group of the investment property portfolio at 31st December 2019.

Completed Investment Properties

(GFA attributable to the Group in million square feet)

Residential/

Serviced

Under

Total

Office

Retail

Hotels (1)

Apartments

Planning

Hong Kong

9.3

2.5

0.8

0.6

-

13.2

Mainland China

2.9

4.5

1.2

0.2

-

8.8

U.S.A.

0.3

0.3

0.5

0.1

-

1.2

Total

12.5

7.3

2.5

0.9

-

23.2

Investment Properties Under Development or Held for Future Development

(expected GFA attributable to the Group in million square feet)

Residential/

Serviced

Under

Total

Office

Retail

Hotels (1)

Apartments

Planning

Hong Kong

1.2

-

-

-

-

1.2

Mainland China

-

0.9

-

-

-

0.9

U.S.A.

-

-

-

-

1.5 (2)

1.5

Total

1.2

0.9

-

-

1.5

3.6

Total Investment Properties

(GFA (or expected GFA) attributable to the Group in million square feet)

Residential/

Serviced

Under

Total

Office

Retail

Hotels (1)

Apartments

Planning

Total

13.7

8.2

2.5

0.9

1.5

26.8

  1. Hotels are accounted for in the financial statements under property, plant and equipment and, where applicable, the leasehold land portion is accounted for under right-of-use assets.
  2. This property is accounted for under properties held for development in the financial statements.

8

2019 FINAL RESULTS

The trading portfolio comprises completed developments available for sale at the Reach and Rise developments at Brickell City Centre in Miami, U.S.A. and EDEN in Singapore. There are four residential projects under development, three in Hong Kong and one in Indonesia. There are also land banks in Miami, U.S.A.

The table below illustrates the GFA (or expected GFA) attributable to the Group of the trading property portfolio at 31st December 2019.

Trading Properties

(GFA (or expected GFA) attributable to the Group in million square feet)

Under

Development

or Held for

Total

Completed

Development

Hong Kong

-

0.7

0.7

U.S.A. and elsewhere

0.3

2.5

2.8

Total

0.3

3.2

3.5

9

2019 FINAL RESULTS

Investment Properties - Hong Kong

Offices

Overview

The completed office portfolio in Hong Kong comprises an aggregate of 9.7 million square feet of space on a 100% basis. Total attributable gross rental income from our office properties in Hong Kong was HK$6,439 million in 2019. At 31st December 2019, our office properties in Hong Kong were valued at HK$180,828 million. Of this amount, Swire Properties' attributable interest was HK$170,760 million.

Hong Kong Office Portfolio

GFA (sq. ft.)

Occupancy

Attributable

(100% Basis)

(at 31st December 2019)

Interest

Pacific Place

2,186,433

98%

100%

Taikoo Place Office Towers (1)

3,136,717

99%

50%/100%

One Island East and One Taikoo Place

2,550,379

100%

100%

Cityplaza One

628,785

100%

100%

Others (2)

1,158,595

89%

20%/50%/100%

Total

9,660,909

  1. Including PCCW Tower, of which Swire Properties owns 50%.
  2. Others comprise One Citygate (20% owned), Berkshire House (50% owned), 8 Queen's Road East (wholly-owned), 28 Hennessy Road (wholly-owned) and South Island Place (50% owned).

Gross rental income from the Hong Kong office portfolio in 2019 was HK$6,100 million, a 4% increase from 2018. There were positive rental reversions and occupancy was firm. The increase also reflected a full year of rental income from One Taikoo Place, which opened in the last quarter of 2018. This was partly offset by the loss of rental income from the Cityplaza Three and Four office buildings, the sale of which was completed in April 2019. At 31st December 2019, the office portfolio was 99% let. Demand for office space (particularly from Mainland Chinese companies) started to weaken significantly in the second half of 2019. This reflected global trade tensions and a slowdown in the Hong Kong economy, with gross domestic product declining in 2019.

The table below shows the mix of tenants of the office properties by the principal nature of their businesses (based on internal classifications) as a percentage of the office area at 31st December 2019.

Office Area by Tenants' Businesses (At 31st December 2019)

Banking/Finance/Securities/Investment

26.1%

Trading

16.1%

Professional services (Accounting/Legal/Management consulting/Corporate secretarial)

12.7%

Insurance

11.8%

Technology/Media/Telecoms

11.4%

Real estate/Construction/Property development/Architecture

7.8%

Advertising and public relations

2.8%

Others

11.3%

At 31st December 2019, the top ten office tenants (based on attributable gross rental income in the twelve months ended 31st December 2019) together occupied approximately 20% of the Group's total attributable office area in Hong Kong.

10

2019 FINAL RESULTS

Pacific Place

The offices at One, Two and Three Pacific Place performed well in 2019. Occupancy and rental rates were robust. The occupancy rate was 98% at 31st December 2019. PAG, Bain Capital, Duff & Phelps, Soochow Securities, The Executive Centre, CIMC, China Harmony New Energy Auto, Sinic Holdings, Fullerton Healthcare, TPP(HK), First Eastern Investment, Anchor Equity, Qilu Investment and JIC (HK) became tenants. CACIB, Sequoia Capital, China Boafeng International, Resona Bank, Liquidnet and Shenwan Hongyuan leased more space. CLSA, National Australia Bank, Rabobank, Bank of New York Mellon, Dorsey & Whitney, Bonhams, Tianli Financial, Matthews Global, Papua New Guinea Industry Development, SAIF, United Energy, Oneday Capital, Yanchang Petro, Yida China, SITE Centers, Brilliant City, South South Education, Rifa Securities, Peter Silling, Liquidnet, Shenwan Hongyuan, Ambition and W2 Asset Management renewed their leases. WeWork leased the entire office building at 8 Queen's Road East.

Cityplaza

The occupancy rate at Cityplaza One was 100% at 31st December 2019. FWD Financial, U Banquet Group and Assicurazioni Generali became tenants. Global Institute For Tomorrow, Tetra Pak, Liberty Specialty Markets, Next Sourcing, MG Asia and Diagnostica Stago renewed their leases.

Taikoo Place

There are six office towers at Taikoo Place (including PCCW Tower, in which we have a 50% interest). The occupancy rate was 99% at 31st December 2019. ACCA, Bird Meditation, Currenxie, ELEVATE, Grobest, Hong Kong Adventist Hospital, livi Bank, LyondellBasell, Magnum Research, Mars, MM HK Retail, NCR, Osborne Clarke, Qantas, SinoEnergy Capital, Trinity and Worms Asia became tenants. Balenciaga, Burberry, China CITIC Bank, FWD and LVMH leased more space. Allegis Group, Chrysler, Chung Shek Enterprises, Continental Engineering Corporation, JLL, Paramount Vintage, Verizon and Zuellig Pharma renewed their leases.

One Island East had an occupancy rate of 100% at 31st December 2019. CHANEL, CMS, Mandarin Oriental Hotel Group, Reed Smith Richards Butler, Squarepoint Capital and United High Corporation Limited became tenants. H&H Group leased more space. Aedas, Allied World Assurance Company and Transamerica Life Bermuda renewed their leases.

One Taikoo Place was 100% leased. Over 60% of the office space has been leased by tenants providing professional, insurance and banking services. Other tenants include communications, luxury retail and environmental services companies.

Despite weaker general demand for office properties in Hong Kong, rents were resilient and occupancy was strong at Taikoo Place in 2019. Rental reversions were positive.

South Island Place

The occupancy rate was 75% at 31st December 2019. insurance, financial services and logistics companies. development.

Tenants include professional services, media, Swire Properties has a 50% interest in the

11

2019 FINAL RESULTS

Hong Kong Office Market Outlook

In the central district of Hong Kong, reduced demand (particularly from Mainland Chinese companies) and increased vacancy rates are expected to exert downward pressure on office rents. High occupancy is expected to result in office rents at our Taikoo Place developments being relatively resilient (by comparison with rents in other areas) despite reduced demand and increased supply in Kowloon East and other districts. However, given the uncertain outlook, office tenants are delaying making lease commitments.

The following table shows the percentage of attributable gross rental income from the office properties in Hong Kong, for the month ended 31st December 2019, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 14.7% of the attributable gross rental income in the month of December 2019 are due to expire in 2020, with tenancies accounting for a further 14.9% of such rental income due to expire in 2021.

Office Lease Expiry Profile (At 31st December 2019)

2020

14.7%

2021

14.9%

2022 and later

70.4%

Retail

Overview

The completed retail portfolio in Hong Kong comprises an aggregate of 3.2 million square feet of space on a 100% basis. The portfolio principally consists of The Mall at Pacific Place, Cityplaza at Taikoo Shing and Citygate Outlets at Tung Chung. The malls are wholly-owned by Swire Properties (except for Citygate Outlets, in which Swire Properties has a 20% interest) and are managed by Swire Properties. Total attributable gross rental income from our retail properties in Hong Kong was HK$2,539 million in 2019. At 31st December 2019, our retail properties in Hong Kong were valued at HK$59,255 million. Of this amount, Swire Properties' attributable interest was HK$48,414 million.

Hong Kong Retail Portfolio

GFA (sq. ft.)

Occupancy

Attributable

(100% Basis)

(at 31st December 2019)

Interest

The Mall, Pacific Place

711,182

100%

100%

Cityplaza

1,105,227

100%

100%

Citygate Outlets

803,582

98%

20%

Others (1)

542,779

100%

20%/60%/100%

Total

3,162,770

  1. Others largely comprise Taikoo Shing neighbourhood shops and StarCrest retail premises (which are wholly-owned), Island Place retail premises (60% owned) and Tung Chung Crescent neighbourhood shops (20% owned).

The Hong Kong retail portfolio's gross rental income was HK$2,437 million in 2019, a 12% (or HK$318 million) decrease from 2018. The decrease was mainly due to rental subsidies offered to tenants whose retail sales were adversely affected by social unrest in Hong Kong. Disregarding rental subsidies, gross rental income decreased slightly by 2% from 2018. Our malls were almost fully let during the year.

Retail sales in 2019 decreased by 17% at The Mall, Pacific Place, by 3% at Cityplaza and by 5% at Citygate Outlets. These decreases compare with an 11% decrease in retail sales in Hong Kong as a whole. The

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2019 FINAL RESULTS

decreases reflected difficult market conditions. There were fewer tourists and spending by local consumers was weaker. Rental subsidies have been given for specific periods on a case by case basis to maintain occupancy and to help our tenants.

The table below shows the mix of the tenants of the retail properties by the principal nature of their businesses (based on internal classifications) as a percentage of the retail area at 31st December 2019.

Retail Area by Tenants' Businesses (At 31st December 2019)

Fashion and accessories

29.0%

Food and beverages

19.1%

Department stores

13.5%

Supermarkets

5.2%

Cinemas

4.3%

Jewellery and watches

1.8%

Ice rink

0.9%

Others

26.2%

At 31st December 2019, the top ten retail tenants (based on attributable gross rental income in the twelve months ended 31st December 2019) together occupied approximately 27% of our total attributable retail area in Hong Kong.

The Mall at Pacific Place

The Mall at Pacific Place is an integral part of the mixed-use Pacific Place development. The offices and the four hotels at Pacific Place provide a flow of shoppers for The Mall.

The Mall was fully let during the year, with the only void periods resulting from tenant changes and reconfiguration works. adidas, American Vintage, Aveda, Balenciaga, Cocktail, Emmer, Glasstique, Lululemon, maje, Marc Jacobs, Moynat Paris, Muji, Stuart Weitzman and Wolford became tenants. Emporio Armani, I.T, La Perla and The North Face were relocated within The Mall. The premises occupied by Bally, Bottega Veneta, Cartier, CHA LING, Drivepro, Great, Gucci, Harvey Nichols, Jaeger- LeCoultre, La Prairie, Masterpiece by King Fook, Prada and Richard Mille were refitted.

Cityplaza

Cityplaza is one of the most popular regional shopping centres in Hong Kong and is the largest shopping centre on Hong Kong Island, with a total floor area of approximately 1.1 million square feet. It is directly accessible from Tai Koo MTR station. There are more than 170 shopping and dining options, a cinema, an indoor ice rink and more than 800 indoor parking spaces. Cityplaza principally serves customers who live or work in the eastern part of Hong Kong Island. Patronage is also derived from business and leisure travellers who stay at the EAST, Hong Kong hotel.

Cityplaza was fully let in 2019, except for void periods during tenancy changes and reconfiguration works. CRCare, HOBBS, john masters organics, KIKO MILANO, maje, PANDORA, Wai Yuen Tong and YIFANG TAIWAN FRUIT TEA became tenants.

Citygate Outlets

Citygate Outlets is in a good location near tourist attractions and transport links (Hong Kong International Airport and the Hong Kong-Zhuhai-Macao Bridge). It attracts tourists and local shoppers. The development at Tung Chung Town Lot No. 11 extending Citygate Outlets opened in August 2019,

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2019 FINAL RESULTS

providing new shops and restaurants, a food court and a 4-screen cinema. The centre is 98% leased. Major tenants (including at the extension of the development) are adidas, Burberry, Calvin Klein, cdf Beauty, Coach, Fortress, Gap, I.T/i.t, Nike, Polo Ralph Lauren, TaSTe, UA Citygate and Uniqlo.

Hong Kong Retail Market Outlook

COVID-19 is adversely affecting our retail investment properties in Hong Kong. Lower rental income is expected from the retail properties in 2020. Temporary rental subsidies are being provided to retail tenants on a case by case basis. Costs will be saved where this can be done without damaging the long- term relationship with tenants. As well as COVID-19, social unrest and economic uncertainty are adversely affecting retail sales in Hong Kong.

The following table shows the percentage of attributable gross rental income from the retail properties in Hong Kong, for the month ended 31st December 2019, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 17.0% of the attributable gross rental income in the month of December 2019 are due to expire in 2020, with tenancies accounting for a further 22.6% of such rental income due to expire in 2021.

Retail Lease Expiry Profile (At 31st December 2019)

2020

17.0%

2021

22.6%

2022 and later

60.4%

Residential

The completed residential portfolio comprises Pacific Place Apartments at Pacific Place, EAST Residences in Quarry Bay, STAR STUDIOS in Wanchai and a number of luxury houses and apartments on Hong Kong Island, with an aggregate GFA of 573,637 square feet. The occupancy rate at the residential portfolio was approximately 76% at 31st December 2019. Rental demand for our residential investment properties is being affected by social unrest and COVID-19.

Investment Properties Under Development

Taikoo Place Redevelopment

The second phase of the Taikoo Place redevelopment (the redevelopment of Cornwall House and Warwick House) is the construction of an office building with an aggregate GFA of approximately 1,000,000 square feet, to be called Two Taikoo Place. Superstructure works are in progress. Completion of the redevelopment is expected in early 2022.

46-56 Queen's Road East, 1A-11 Landale Street and 2A-12 Anton Street

Planning permission to develop this site for office use was obtained in 2018. The site area is approximately 14,400 square feet. The proposed development has an aggregate GFA of approximately 218,000 square feet. Foundation works are in progress. Completion is expected in 2023.

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2019 FINAL RESULTS

Others

Wah Ha Factory Building, No. 8 Shipyard Lane and Zung Fu Industrial Building, No. 1067 King's Road

In 2018, Swire Properties submitted compulsory sale applications in respect of two sites (Wah Ha Factory Building, No. 8 Shipyard Lane, and Zung Fu Industrial Building, No. 1067 King's Road) in Hong Kong. Subject to Swire Properties having successfully bid in the compulsory sale of the sites, the sites are intended to be redeveloped for office and other commercial uses with an aggregate GFA of approximately 779,000 square feet.

983-987A King's Road and 16-94 Pan Hoi Street, Quarry Bay

In 2018, a joint venture company in which Swire Properties holds a 50% interest submitted a compulsory sale application in respect of this site. Subject to the joint venture company having successfully bid in the compulsory sale and in accordance with applicable town planning controls, it is expected that the site can be redeveloped for residential and retail uses with a GFA of approximately 400,000 square feet.

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2019 FINAL RESULTS

Investment Properties - Mainland China

Retail

Overview

The completed retail portfolio in Mainland China comprises an aggregate of 6.3 million square feet of space at 31st December 2019, 4.5 million square feet of which is attributable to the Group. The portfolio principally consists of Taikoo Li Sanlitun in Beijing and Hui Fang in Guangzhou, which are wholly owned by Swire Properties, Taikoo Hui in Guangzhou, which is 97% owned, and INDIGO in Beijing, Sino-Ocean Taikoo Li Chengdu and HKRI Taikoo Hui in Shanghai, each of which is 50% owned. Total attributable gross rental income from our retail properties in Mainland China grew by 8% to HK$3,352 million in 2019. At 31st December 2019, our retail properties in Mainland China were valued at HK$55,112 million. Of this amount, Swire Properties' attributable interest was HK$40,340 million.

Mainland China Retail Portfolio

GFA (sq. ft.)

Occupancy

Attributable

(100% Basis)

(at 31st December 2019)

Interest

Taikoo Li Sanlitun, Beijing

1,296,308

100%

100%

Taikoo Hui, Guangzhou

1,472,730

99%

97%

INDIGO, Beijing

939,493

100%

50%

Sino-Ocean Taikoo Li Chengdu

1,355,360

97%

50%

HKRI Taikoo Hui, Shanghai

1,173,459

98%

50%

Hui Fang, Guangzhou

90,847

100%

100%

Total

6,328,197

The Group's gross rental income from retail properties in Mainland China increased by 10% to HK$2,376 million in 2019 (despite a 4% depreciation of the Renminbi against the Hong Kong dollar), reflecting positive rental reversions and higher retail sales.

Retail sales in 2019 increased by 11% in Taikoo Li Sanlitun in Beijing, 20% in Taikoo Hui in Guangzhou, 26% in INDIGO in Beijing, 23% in Sino-Ocean Taikoo Li Chengdu and 73% in HKRI Taikoo Hui in Shanghai, all of which percentage increases are higher than the national retail sales percentage increase of 8%.

The table below shows the mix of the tenants of the retail properties by the principal nature of their businesses (based on internal classifications) as a percentage of the retail area at 31st December 2019.

Retail Area by Tenants' Businesses (At 31st December 2019)

Fashion and accessories

40.8%

Food and beverages

27.0%

Supermarkets

5.5%

Cinemas

4.8%

Jewellery and watches

2.0%

Others

19.9%

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2019 FINAL RESULTS

Taikoo Li Sanlitun, Beijing

Situated in the Sanlitun area of the Chaoyang district of Beijing, Taikoo Li Sanlitun was our first retail development in Mainland China. It comprises two neighbouring retail sites, South and North. There are approximately 250 retail outlets.

Taikoo Li Sanlitun South concentrates on contemporary fashion and lifestyle brands, with tenants including adidas, Apple, H&M, Starbucks, Uniqlo, and a 1,597-seat Megabox cinema. In 2019, allbirds, SoleStage, LOOK STORE, Venchi, Din Tai Fung and Red Lobster became tenants. Tenants in Taikoo Li Sanlitun North are principally retailers of luxury, designer fashion and lifestyle brands, including Alexander McQueen, Alexander Wang, Balenciaga, Christian Louboutin, Delvaux, Givenchy, OFF- WHITE, Moncler and Thom Browne. A3, LOEWE, Rossignol and Valentino became tenants in 2019.

Gross rental income at Taikoo Li Sanlitun recorded satisfactory growth in 2019, reflecting positive rental reversions. Retail sales grew by 11%. The occupancy rate was 100% at 31st December 2019. Demand for retail space at Taikoo Li Sanlitun is solid as it reinforces its position as a fashionable retail destination.

The refurbishment of Taikoo Li Sanlitun West as an extension to Taikoo Li Sanlitun (with an aggregate GFA of approximately 256,000 square feet) is expected to be completed by the end of 2020.

Taikoo Hui, Guangzhou

Situated in a prime location in the Tianhe district of Guangzhou, the shopping mall in Taikoo Hui is one of the most popular shopping centres in Guangzhou. Tenants include Bottega Veneta, Cartier, Chanel, DIOR, Gucci, Hermes, I.T, Louis Vuitton, Uniqlo, Fangsuo bookstore, Victoria's Secret and Olé Supermarket. ACQUA DI PARMA, allbirds, Berluti, COMMON GENDER, Kiehl's, LADY M, la prairie, LEGO, LI NING, Moncler, Pence, Saint Laurent, Skinceuticals, The Peninsula Boutique and Van Cleef & Arpels became tenants in 2019.

Gross rental income at Taikoo Hui grew satisfactorily in 2019. Retail sales increased by 20%, reflecting improvements to the tenant mix and stronger marketing and promotion. At 31st December 2019, the occupancy rate at the shopping mall was 99%.

INDIGO, Beijing

INDIGO mall is located in the Jiangtai area in the Chaoyang district of Beijing. It is directly linked to the Beijing Metro Line 14 and is near the airport expressway. H&M, Massimo Dutti, Muji, Page One bookstore, BHG supermarket and a seven-house,1,000-seat CGV cinema are tenants. Arc'teryx, Converse, Fjall Raven, Garmin, I-PRIMO, Lululemon, LOOK STORE, NEIWAI, O bag, SPACE, Staccato, Hey Tea and Le Grenier a Pain became tenants in 2019. The mall is becoming a significant lifestyle shopping centre in north-east Beijing.

Occupancy at the shopping mall was 100% at 31st December 2019. Retail sales increased by 26% in 2019.

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2019 FINAL RESULTS

Sino-Ocean Taikoo Li Chengdu

Sino-Ocean Taikoo Li Chengdu is in the Jinjiang district of Chengdu and is part of the Chunxi Road/Daci Temple shopping district. It is our second Taikoo Li project in Mainland China. adidas, Apple, Cartier, Gucci, Hermes, I.T/i.t, Muji, ZARA, Fangsuo bookstore, Olé Supermarket and a 1,720-seat cinema are tenants. Acne Studios, Golden Goose, Mercedes me and % ARABICA opened their first stores in southwest Mainland China in 2019.

Retail sales increased by 23% in 2019, reflecting an improved mix of brands and growing sales to young shoppers. The development continues to gain popularity as a shopping destination in Chengdu. At 31st December 2019, the occupancy rate was 97%.

HKRI Taikoo Hui, Shanghai

HKRI Taikoo Hui is located at a prime location on Nanjing West Road, one of Shanghai's major shopping and business thoroughfares, in the Jing'an district of Puxi, Shanghai. It has excellent transport connections, being adjacent to the Nanjing West Road metro station (which serves three metro lines) and near the Yan'an Expressway.

HKRI Taikoo Hui is our second Taikoo Hui development in Mainland China. Starbucks Reserve Roastery, Atelier Cologne, CHA LING, Champion, COS, diptyque, The Disney Store, G Givenchy, Guerlain, i.t, Kenzo, Lululemon, McQ, Nike Kicks Lounge, Nio, Puma, SpaceCycle, Tesla, ZWILLING HOME, Shanghai Club, Ho Hung Kee and a city'super supermarket are tenants. DEVIALET, DMG Transformer and Netease Yanxuan

opened their first Shanghai stores at the mall in 2019.

Retail sales increased by 73% in 2019. Footfall has grown steadily since early 2019. At 31st December 2019, the occupancy rate was 98%.

Mainland China Retail Market Outlook

COVID-19 is adversely affecting our retail investment properties in Mainland China. Lower rental income is expected from the retail properties in 2020. Temporary rental subsidies are being provided to retail tenants on a case by case basis. Costs will be saved where this can be done without damaging the long-term relationship with tenants.

In Mainland China, demand for retail space from international retailers and food and beverage operators is expected, despite the current effects of COVID-19, to be strong in the long term.

The following table shows the percentage of attributable gross rental income from the retail properties in Mainland China, for the month ended 31st December 2019, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 30.3% of the attributable gross rental income in the month of December 2019 are due to expire in 2020, with tenancies accounting for a further 24.9% of such rental income due to expire in 2021.

Retail Lease Expiry Profile (At 31st December 2019)

2020

30.3%

2021

24.9%

2022 and later

44.8%

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2019 FINAL RESULTS

Office

Overview

The completed office portfolio in Mainland China comprises an aggregate of 4.2 million square feet of space at 31st December 2019, 2.9 million square feet of which is attributable to the Group. The portfolio principally consists of Taikoo Hui in Guangzhou, which is 97% owned, and INDIGO in Beijing and HKRI Taikoo Hui in Shanghai, each of which is 50% owned. Total attributable gross rental income from our office properties in Mainland China grew by 3% to HK$830 million in 2019. At 31st December 2019, our office properties in Mainland China were valued at HK$21,060 million. Of this amount, Swire Properties' attributable interest was HK$13,281 million.

Mainland China Office Portfolio

GFA (sq. ft.)

Occupancy

Attributable

(100% Basis)

(at 31st December 2019)

Interest

Taikoo Hui, Guangzhou

1,731,766

97%

97%

INDIGO, Beijing

589,071

76%

50%

HKRI Taikoo Hui, Shanghai

1,828,060

99%

50%

Others

19,747

100%

100%

Total

4,168,644

The Group's gross rental income from office properties in Mainland China decreased by 3% to HK$380 million in 2019 (after taking into account a 4% depreciation of the Renminbi against the Hong Kong dollar). There were positive rental reversions in Renminbi terms. This was despite weak demand for office space because of economic uncertainty arising from trade tensions.

The table below shows the mix of the tenants of the office properties by the principal nature of their businesses (based on internal classifications) as a percentage of the office area at 31st December 2019.

Office Area by Tenants' Businesses (At 31st December 2019)

Banking/Finance/Securities/Investment

32.3%

Trading

27.0%

Technologies/Media/Telecom

13.9%

Professional services

11.8%

Real estate/Construction/Property Development/Architecture

5.5%

Pharmaceutical manufacturing

3.3%

Others

6.2%

Taikoo Hui, Guangzhou

There are two office towers in Taikoo Hui, Guangzhou. Rents were stable in 2019 despite weak demand for office space. Occupancy at 31st December 2019 was 97%. Canon, HSBC, Microsoft and Toyota are tenants. Asahi and Everwin leased more office spaces. A&F Scientific Technology, Bank of China, Fila, Intuitive Fosun, Phoenix Metropolis Media, Quercus and United Overseas Bank became tenants in 2019.

INDIGO, Beijing

Occupancy at ONE INDIGO was 76% at 31st December 2019. Demand for office space in 2019 was weak and office rents were under pressure. AG Tech, CJ Group, Rolls Royce and Western Cloud are tenants. Alcon, Coupang and Wanshan became tenants in 2019.

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2019 FINAL RESULTS

HKRI Taikoo Hui, Shanghai

There are two office towers at HKRI Taikoo Hui in Shanghai. The occupancy rate was 99% at 31st December 2019. Demand was subdued because of economic uncertainty. The main sources of demand were from financial and professional services providers, domestic law firms and retailers. Abbvie, Advent Capital, Alibaba, Allbright Law Offices, Amore Pacific, Audemars Piguet, Bally, Bank of China, BDA Partners, Blackstone, Clifford Chance, China Media Capital, Citic Capital, EA, Eli Lilly, Epic Games, Fangda Partners, Fidelity, Grosvenor, H&M, Harry Winston, Heinz, Han Kun Law Offices, KKR, Jimmy Choo, JLL, Jun He Law Offices, Neuberger Berman, Prelude Capital, Rothschild, Supercell, Warner Brothers and Warburg Pincus are tenants. Alliance Bernstein, Chanel, CVC Capital Partners, Emaar, Firmenich, FountainVest Partners, Nio Capital and Towers Research Capital became tenants in 2019.

Mainland China Office Market Outlook

With new supply in the central business districts of Guangzhou and Beijing and weak demand, office vacancy rates are expected to increase and rents to be under pressure in 2020. Demand from domestic and international companies for office space in Shanghai is expected to be weak in 2020. But with high occupancy and limited new supply in the central business district of Jing'an, Shanghai office rents are expected to be relatively resilient.

The following table shows the percentage of attributable gross rental income from the office properties in Mainland China, for the month ended 31st December 2019, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 13.9% of the attributable gross rental income in the month of December 2019 are due to expire in 2020, with tenancies accounting for a further 24.6% of such rental income due to expire in 2021.

Office Lease Expiry Profile (At 31st December 2019)

2020

13.9%

2021

24.6%

2022 and later

61.5%

Serviced Apartments

The completed residential portfolio comprises 24 serviced apartments at the Mandarin Oriental in Taikoo Hui Guangzhou, 42 serviced apartments at The Temple House in Sino-Ocean Taikoo Li Chengdu and 102 serviced apartments at The Middle House Residences in HKRI Taikoo Hui Shanghai.

The performance of the serviced apartments in 2019 was stable. The Middle House Residences was opened in 2018 and occupancy is building up.

Mainland China Serviced Apartments

GFA (sq. ft.)

Occupancy

Attributable

(100% Basis)

(at 31st December 2019)

Interest

Mandarin Oriental, Guangzhou

51,517

96%

97%

The Temple House, Chengdu

109,857

98%

50%

The Middle House Residences, Shanghai

147,273

91%

50%

Others

2,917

100%

100%

Total

311,564

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2019 FINAL RESULTS

Mainland China Serviced Apartments Market Outlook

The performance of the serviced apartments is being affected by COVID-19.

Investment Property Under Development

Taikoo Li Qiantan, Shanghai

Taikoo Li Qiantan is a low-rise retail development with an aggregate GFA of 1,247,006 square feet in Qiantan, Pudong New District. It is our second development in Shanghai and the third Taikoo Li project in Mainland China. Qiantan International Business Zone is envisaged as a new international business district of Shanghai and as a commercial, residential and cultural centre. The development will be connected to a three-line metro interchange station.

In 2018, Swire Properties and a subsidiary of Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd. formed a joint venture for the purpose of undertaking this development. The project was named Taikoo Li Qiantan in January 2019. Construction and pre-leasing are in progress. The development is expected to be completed by the end of 2020.

The table below illustrates the expected attributable area of the completed property portfolio in Mainland China.

Attributable Area of Completed Property Portfolio in Mainland China

2020

GFA (sq. ft.)

2019

and later

Taikoo Li Sanlitun, Beijing

1,465,771

1,721,502

Taikoo Hui, Guangzhou

3,724,990

3,724,990

INDIGO, Beijing

943,434

943,434

Sino-Ocean Taikoo Li Chengdu

830,864

830,864

HKRI Taikoo Hui, Shanghai

1,768,311

1,768,311

Taikoo Li Qiantan, Shanghai

-

623,503

Hui Fang, Guangzhou

90,847

90,847

Others

22,664

22,664

Total

8,846,881

9,726,115

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2019 FINAL RESULTS

Investment Properties - U.S.A.

Overview

Brickell City Centre, Miami

Brickell City Centre, Miami

GFA (sq. ft.) (1)

Attributable

(100% Basis)

Interest

Completed

Shopping centre

496,508

62.9%

Two and Three Brickell City Centre

263,384

100%

EAST, Miami - hotel (2)

218,000

100%

EAST, Residences - serviced apartments

109,000

100%

Reach and Rise (3)

216,277

100%

Sub-Total

1,303,169

Future Development

Residential

523,000

100%

One Brickell City Centre

1,444,000

100%

Total

3,270,169

  1. Represents leasable/saleable area except for the carpark, roof top and circulation areas.
  2. The hotel is accounted for under property, plant and equipment in the financial statements.
  3. Remaining unsold units at 31st December 2019.

Brickell City Centre is an urban mixed-use development in the Brickell financial district of Miami, U.S.A. It has a site area of 504,017 square feet (approximately 11.6 acres).

The first phase of the Brickell City Centre development consists of a shopping centre, two office buildings (Two Brickell City Centre and Three Brickell City Centre), a hotel and serviced apartments (EAST, Miami) managed by Swire Hotels and two residential towers (Reach and Rise). The residential towers have been developed for sale.

Two and Three Brickell City Centre were almost fully leased. The shopping centre was 90% let (including by way of letters of intent) at 31st December 2019. Retail sales in 2019 increased by 14%.

The shopping centre was developed jointly with Bal Harbour Shops and Simon Property Group. Swire Properties is the primary developer of the Brickell City Centre project.

At 31st December 2019, Swire Properties owned 100% of the office, hotel and unsold residential portions and 62.93% of the shopping centre at the Brickell City Centre development. The remaining interest in the shopping centre was owned by Simon Property Group (25%) and Bal Harbour Shops (12.07%). Bal Harbour Shops has an option, exercisable from February 2020, to sell its interest to Swire Properties.

One Brickell City Centre is planned to be a mixed-use development comprising retail, office, hotel and residential space in an 80-storey tower. It will incorporate a site at 700 Brickell Avenue acquired by Swire Properties in 2013. Development of this site will connect the Brickell City Centre development with Brickell Avenue. Swire Properties owns 100% of One Brickell City Centre.

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2019 FINAL RESULTS

Miami Market Outlook

In Miami, the supply of new Grade-A office space in the central business district and the Brickell area is low. Job growth in Miami-Dade County is expected to continue, resulting in sustainable demand for office space and stable rental rates.

In Miami, retail sales in Brickell City Centre are increasing steadily. However, established shopping districts in Miami are expanding. As a result, Brickell City Centre is expected to experience increased competition in the retail leasing market.

Valuation of Investment Properties

The portfolio of investment properties was valued at 31st December 2019 on the basis of market value (95% by value having been valued by Cushman & Wakefield Limited and 2% by value having been valued by another independent valuer). The amount of this valuation was HK$276,791 million, compared to HK$272,927 million at 31st December 2018.

The increase in the valuation of the investment property portfolio is mainly due to modest increases in the valuation of the office properties in Hong Kong and of the investment properties in Mainland China following rental increases, partly offset by a decrease in the valuation of the retail properties in Hong Kong.

Under HKAS 40, hotel properties are not accounted for as investment properties. The hotel buildings are included within property, plant and equipment. The leasehold land is included within right-of-use assets. Both are recorded at cost less accumulated depreciation or amortisation and any provision for impairment.

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2019 FINAL RESULTS

Property Trading

Overview

The trading portfolio comprises completed developments available for sale at the Reach and Rise developments at Brickell City Centre in Miami, U.S.A. and EDEN in Singapore. There are four residential projects under development, three in Hong Kong and one in Indonesia. There are also land banks in Miami, U.S.A.

Property Trading Portfolio (At 31st December 2019)

Actual/Expected

Construction

GFA (sq. ft.)

Completion

Attributable

(100% Basis)

Date

Interest

Completed

U.S.A.

- Reach, Miami

51,505

- Rise, Miami

164,772

Singapore

- EDEN, 2 Draycott Park

77,212

(1)

(1)

2016100%

2016100%

2019100%

Under Development

Hong Kong

- 21-31 Wing Fung Street, Wanchai

30,867

2022

100%

- Wong Chuk Hang Station Package Four Property

638,305

2024

25%

Development

- Chai Wan Inland Lot No. 88

694,000

-

80%

Indonesia

- South Jakarta Project

1,139,908

2023

50%

Held for Development / for sale

U.S.A.

- Fort Lauderdale, Florida

825,000

N/A

75%

- South Brickell Key, Miami, Florida

550,000

N/A

100%

- Brickell City Centre, Miami, Florida - North Squared site

523,000

N/A

100%

(1) Remaining saleable area.

Hong Kong

21-31 Wing Fung Street, Wanchai

The site at 21-31 Wing Fung Street, Wanchai is to be redeveloped into a 34,000 square feet residential building with retail outlets on the two base levels. Superstructure works are in progress. The development is expected to be completed in 2022.

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2019 FINAL RESULTS

Chai Wan Inland Lot No. 88

In September 2019, a joint venture company held as to 80% by Swire Properties and as to 20% by China Motor Bus Company completed the acquisition of a plot of land in Chai Wan, Hong Kong. Subject to agreement with the Hong Kong government, the plot of land is expected to be redeveloped into a residential complex with an aggregate GFA of approximately 694,000 square feet.

Wong Chuk Hang Station Package Four Property Development

In October 2019, a joint venture company formed by the Company, Kerry Properties Limited and Sino Land Company Limited tendered successfully for a residential property development at Wong Chuk Hang in Hong Kong. The development is expected to comprise two residential towers with an aggregate GFA of approximately 638,000 square feet and about 800 residential units. Schematic design is in progress. The development is expected to be completed in 2024. Swire Properties has a 25% interest in the joint venture.

Hong Kong Residential Market Outlook

In Hong Kong, demand for residential accommodation has weakened due to social unrest, economic uncertainty and COVID-19. There is a shortage of land and a limited supply of housing in Hong Kong. This, together with low interest rates, is expected to result in demand for residential accommodation being resilient in the medium and long term.

Mainland China

At Sino-Ocean Taikoo Li Chengdu, 89% of the office's total GFA (approximately 1.15 million square feet) and 350 carparking spaces at Pinnacle One were pre-sold in 2013 and the profit from the sales of approximately 52% of the pre-sold GFA was recognised in 2015. Application was made to the court to cancel the sale of the remaining pre-sold GFA and 350 carparking spaces as part of the consideration was not received on time. The application succeeded (after an unsuccessful appeal by the buyer). The profit on the sales of 122,136 square feet of the GFA and 44 carparking spaces was recognised in 2018. The profit on the sales of a further 436,988 square feet of the GFA and 163 carparking spaces was recognised in 2019. The remaining 34,015 square feet of the GFA will be retained for its own use by the joint venture company which owns the property.

U.S.A.

The residential portion of the first phase of the Brickell City Centre development was developed for trading purposes. There are 780 units in Reach and Rise, with an aggregate GFA of 1,134,078 square feet.

The Reach and Rise developments were completed, and handover to purchasers commenced, in 2016. 364 units at Reach and 282 units at Rise had been sold at 10th March 2020. Sales of two units at Reach, 38 units at Rise and the last unit in the ASIA development were recognised in 2019.

Miami Residential Market Outlook

In Miami, demand for condominiums is weak due to weak South American economies, currency fluctuations and political uncertainty.

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2019 FINAL RESULTS

Singapore

EDEN, at 2 Draycott Park in District 10, comprises 20 residential units with an aggregate GFA of approximately 77,000 square feet. The development was completed in November 2019 and is available for sale.

Indonesia

In July 2019, a joint venture between Swire Properties and Jakarta Setiabudi Internasional Group completed the acquisition of a plot of land in south Jakarta, Indonesia. The land will be developed into a residential development with an aggregate GFA of approximately 1,140,000 square feet. Demolition works have been completed and foundation works are expected to commence soon. The development is expected to comprise over 400 residential units and to be completed in 2023. Swire Properties has a 50% interest in the joint venture.

Singapore Residential Market Outlook

In Singapore, growth in incomes and robust employment are expected to support a stable residential property market.

Estate Management

Swire Properties manages 19 residential estates which it has developed. It also manages OPUS HONG KONG, a residential property in Hong Kong which Swire Properties redeveloped for Swire Pacific Limited. The management services include day to day assistance for occupants, management, maintenance, cleaning, security and renovation of common areas and facilities. Swire Properties places great emphasis on maintaining good relationships with occupants.

26

2019 FINAL RESULTS

Hotels

Managed Hotels and Restaurants

Overview

Swire Properties owns and manages (through Swire Hotels) hotels in Hong Kong, Mainland China and the U.S.A. The House Collective, comprising The Upper House in Hong Kong, The Opposite House in Beijing, The Temple House in Chengdu and The Middle House in Shanghai, is a group of small and distinctive luxury hotels. EAST hotels are business hotels in Hong Kong, Beijing and Miami.

The performance of our managed hotels in Hong Kong deteriorated in 2019. They were adversely affected by a decrease in the number of tourists visiting Hong Kong due to social unrest. The number of overnight visitors to Hong Kong decreased by 19% for the full year and by 57% in December 2019.

The operating profit before depreciation of the managed hotels decreased by 16% to HK$168 million in 2019. Results in Shanghai and the U.S.A. improved, but this was more than offset by a deterioration in results in Hong Kong.

Hotel Portfolio (managed by Swire Hotels)

No. of Rooms

Attributable

(100% Basis)

Interest

Completed

Hong Kong

- The Upper House

117

100%

- EAST, Hong Kong

345

100%

- Headland Hotel (1)

501

0%

Mainland China

- The Opposite House

99

100%

- EAST, Beijing

369

50%

- The Temple House (2)

142

50%

- The Middle House (2)

213

50%

U.S.A.

- EAST, Miami (3)

352

100%

Total

2,138

  1. Headland Hotel is owned by Airline Property Limited, a wholly-owned subsidiary of Cathay Pacific Airways Limited.
  2. Comprising one hotel tower and one serviced apartment tower.
  3. Including serviced apartments in a hotel tower.

The Upper House

At The Upper House, a 117-room luxury hotel at Pacific Place, revenue per available room and occupancy declined in 2019. Social unrest adversely affected the number of visitors. TripAdvisor named the hotel number 9 in its "Top 25 Luxury Hotels in the World" category, number 2 in its "Top 25 Hotels in China" category and number 1 in its "Top 25 Luxury Hotels in China" category. The hotel received awards from Condé Nast Traveler, Forbes Travel Guide and Hotels.com. Café Gray Deluxe was named number 3 by TripAdvisor in its "Top 10 Fine Dining Restaurants - China" category.

27

2019 FINAL RESULTS

EAST, Hong Kong

At EAST, Hong Kong, a 345-room hotel in Taikoo Shing, revenue per available room and occupancy were adversely affected by social unrest. The hotel received awards from HolidayCheck and Agoda.

The Opposite House

The Opposite House is a 99-room luxury hotel at Taikoo Li Sanlitun, Beijing. Its occupancy and revenue per available room decreased slightly in 2019, due to renovation in the second half of 2019. Its food and beverage business was affected by increased competition. The hotel received an award from Condé Nast Traveler and was named number 6 by TripAdvisor in its "Top 25 Hotels in China" category. Jing Yaa Tang was awarded a Michelin star in the Michelin Guide Beijing 2020.

EAST, Beijing

EAST, Beijing is a 369-room business hotel at INDIGO in Beijing, in which Swire Properties has a 50% interest. Revenue per available room improved in 2019. The hotel received awards from TripAdvisor and Airtime. The hotel's Xian bar received an award from Travel + Leisure.

The Temple House

The Temple House is a luxury property with 100 hotel rooms and 42 serviced apartments at Sino-Ocean Taikoo Li Chengdu. Swire Properties has a 50% interest in the property. Revenue per available room improved in 2019. Occupancy was stable. The hotel received awards from Condé Nast Traveler and Ctrip. TripAdvisor named the hotel number 1 in its "Top 25 Hotels in China" category. TIVANO restaurant and Jing bar received awards from Dianping.

The Middle House

The Middle House is a luxury property with 111 hotel rooms and 102 serviced apartments at HKRI Taikoo Hui, Shanghai. Swire Properties has a 50% interest in the property. It opened in 2018 and is building up its occupancy. Revenue per available room and occupancy improved in 2019. The hotel received awards from Condé Nast Traveler and The Bund. The hotel's Café Gray Deluxe restaurant received an award from Metropolitan. The hotel's MI XUN Spa received an award at Ahead Asia 2019 in its "SPA & Wellness" category.

EAST, Miami

EAST, Miami at the Brickell City Centre development in Miami has 263 hotel rooms and 89 serviced apartments. Its revenue per available room and operating margins improved in 2019. The hotel received an award from Condé Nast Traveler. Sugar restaurant received an award at the 2019 Miami Hospitality Design Awards.

Swire Restaurants

Swire Hotels operates restaurants in Hong Kong. There are PUBLIC cafés at One Island East and North Point. The Continental is a European restaurant at Pacific Place. Mr & Mrs Fox is a restaurant with an international menu in Quarry Bay. The Plat du Jour restaurants are French bistros at Pacific Place and in Quarry Bay. Mr & Mrs Fox received an award from TripAdvisor.

28

2019 FINAL RESULTS

Non-managed Hotels

Overview

Swire Properties has ownership interests in (but does not manage) hotels with 3,146 rooms in aggregate.

Hotel Portfolio (not managed by the Group)

No. of Rooms

Attributable

(100% Basis)

Interest

Completed

Hong Kong

- Island Shangri-La Hong Kong

565

20%

- JW Marriott Hotel Hong Kong

608

20%

- Conrad Hong Kong

513

20%

- Novotel Citygate Hong Kong

440

20%

Mainland China

- Mandarin Oriental, Guangzhou (1)

287

97%

- The Sukhothai Shanghai

201

50%

U.S.A.

- Mandarin Oriental, Miami

326

75%

Under Development

Hong Kong

- The Silveri Hong Kong - MGallery

206

20%

Total

3,146

(1) Including serviced apartments in the hotel tower.

The performance of the non-managed hotels in Hong Kong was adversely affected by social unrest. The Mandarin Oriental, Guangzhou is a leading luxury hotel in Guangzhou. Average room rates improved in 2019. The Chinese Restaurant, Jiang by Chef Fei, in the Mandarin Oriental obtained a 2- star Michelin award. The operating results of the Mandarin Oriental, Miami improved.

The Sukhothai Shanghai has established itself as a leading luxury boutique hotel in Shanghai. Occupancy started to build up.

Hotels Market Outlook

COVID-19 is adversely affecting our hotel business in Hong Kong and Mainland China. Occupancy and revenue are significantly down at our hotels. Costs will be saved where this can be done without damaging the long-term relationship with our customers. A non-managed hotel (The Silveri Hong Kong

  • MGallery) which is part of the Tung Chung Town Lot No. 11 development in Hong Kong is expected to open later in the first half of 2020. Steady growth in business is expected at our Miami hotels.

29

2019 FINAL RESULTS

Capital Commitments

Capital Expenditure and Commitments

Capital expenditure in 2019 on Hong Kong investment properties and hotels, including the Group's share of the capital expenditure of joint venture companies, amounted to HK$2,460 million (2018: HK$5,479 million). Outstanding capital commitments at 31st December 2019 were HK$14,735 million (2018: HK$15,213 million), including the Group's share of the capital commitments of joint venture companies of HK$66 million (2018: HK$251 million). The Group was committed to funding HK$18 million (2018: HK$64 million) of the capital commitments of joint venture companies in Hong Kong.

Capital expenditure in 2019 on Mainland China investment properties and hotels, including the Group's share of the capital expenditure of joint venture companies, was HK$643 million (2018: HK$2,463 million). Outstanding capital commitments at 31st December 2019 were HK$1,865 million (2018: HK$2,081 million), including the Group's share of the capital commitments of joint venture companies of HK$821 million (2018: HK$1,500 million). The Group was committed to funding HK$465 million (2018: HK$400 million) of the capital commitments of joint venture companies in Mainland China.

Capital expenditure in 2019 on investment properties and hotels in the U.S.A. and elsewhere amounted to HK$168 million (2018: HK$168 million). Outstanding capital commitments at 31st December 2019 were HK$3 million (2018: HK$328 million).

Profile of Capital Commitments at 31st December 2019 for Investment Properties and Hotels

Expenditure

Forecast expenditure

2023

Commitments (1)

2019

At 31st December 2019

2020

2021

2022

and later

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

Hong Kong

2,460

1,832

5,479

2,123

5,301

14,735

Mainland China

643

1,365

44

202

254

1,865

U.S.A. and elsewhere

168

3

-

-

-

3

Total

3,271

3,200

5,523

2,325

5,555

16,603

  1. The capital commitments represent the Group's capital commitments of HK$15,716 million plus the Group's share of the capital commitments of joint venture companies of HK$887 million. The Group was committed to funding HK$483 million of the capital commitments of joint venture companies.

30

2019 FINAL RESULTS

FINANCING

Sources of Finance

Audited Financial Information

At 31st December 2019, committed loan facilities and debt securities amounted to HK$39,848 million, of which HK$10,083 million (25%) remained undrawn. In addition, the Group had undrawn uncommitted facilities totalling HK$747 million. Sources of funds at 31st December 2019 comprised:

Undrawn

Undrawn

Expiring

Expiring

Within

After

Available

Drawn

One Year

One Year

HK$M

HK$M

HK$M

HK$M

Facilities from third parties

Term loans

6,146

6,146

-

-

Revolving loans

12,500

2,417

800

9,283

Bonds

21,202

21,202

-

-

Total committed facilities

39,848

29,765

800

9,283

Uncommitted facilities

Bank loans and overdrafts

831

84

747

-

Total

40,679

29,849

1,547

9,283

Note: The figures above are stated before unamortised loan fees of HK$120 million.

At 31st December 2019, 79% of the Group's gross borrowings were on fixed rate basis and 21% were on floating rate basis (2018: 75% and 25% respectively).

The Group had bank balances and short-term deposits of HK$14,985 million at 31st December 2019, compared to HK$2,094 million at 31st December 2018.

Maturity Profile and Refinancing

Bank loans and other borrowings are repayable on various dates up to 2028 (2018: up to 2028). The weighted average term and cost of the Group's debt are:

2019

2018

Weighted average term of debt

3.3 years

3.9 years

Weighted average cost of debt

3.4%

3.3%

Note: The weighted average cost of debt above is stated on gross debt basis.

31

2019 FINAL RESULTS

The maturity profile of the Group's available committed facilities is set out below:

Maturity Profile

(HK$M)

Total

2020

2021

2022

2023

2024

2025

2026

2027

2028

Facilities from third parties

Term and revolving loans

18,646

3,136

6,250

7,893

1,367

-

-

-

-

-

Bonds

21,202

3,893

300

3,893

200

1,100

1,940

4,593

1,390

3,893

Total

39,848

7,029

6,550

11,786

1,567

1,100

1,940

4,593

1,390

3,893

Audited Financial Information

The table below sets forth the maturity profile of the Group's borrowings:

2019

2018

HK$M

HK$M

Bank borrowings and bonds from third parties due

Within 1 year

6,308

21%

1,230

4%

1 - 2 years

1,807

6%

6,951

22%

2 - 5 years

9,846

33%

10,915

34%

After 5 years

11,768

40%

12,903

40%

Total

29,729

100%

31,999

100%

Less: Amount due within one year included under current liabilities

6,308

1,230

Amount due after one year included under non-current liabilities

23,421

30,769

32

2019 FINAL RESULTS

Currency Profile

Audited Financial Information

An analysis of the carrying amounts of gross borrowings by currency (after cross-currency swaps) is shown below:

2019

2018

HK$M

HK$M

Currency

Hong Kong dollars

22,783

77%

24,834

78%

United States dollars

6,208

21%

6,234

20%

Renminbi

-

-

455

1%

Singapore dollars

738

2%

476

1%

Total

29,729

100%

31,999

100%

Gearing Ratio and Interest Cover

2019

2018

Gearing ratio (1)

5.3%

10.6%

Interest cover - times (1)

Per financial statements

28.9

33.3

Underlying

48.2

12.6

Cash interest cover - times (1)

Per financial statements

18.6

25.6

Underlying

31.5

9.7

(1) Refer to Glossary on page 58 for definitions.

Debt in Joint Venture and Associated Companies

In accordance with Hong Kong Financial Reporting Standards, the net debt of Swire Properties reported in the consolidated statement of financial position does not include the net debt of its joint venture and associated companies. These companies had the following net debt positions at the end of 2019 and 2018:

Portion of Net Debt

Net Debt of Joint Venture

Attributable to

Debt Guaranteed by

and Associated Companies

the Group

the Group

2019

2018

2019

2018

2019

2018

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

Hong Kong Entities

5,342

4,533

2,184

1,879

1,405

1,295

Mainland China Entities

12,874

12,033

6,437

6,017

-

-

U.S.A. and other Entities

537

458

409

354

473

476

Total

18,753

17,024

9,030

8,250

1,878

1,771

If the attributable portion of the net debt in joint venture and associated companies were to be added to the Group's net debt, gearing would rise to 8.4%.

33

2019 FINAL RESULTS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Profit or Loss

For the year ended 31st December 2019

2019

2018

Note

HK$M

HK$M

Revenue

2

14,222

14,719

Cost of sales

3

(4,028)

(4,493)

Gross profit

10,194

10,226

Administrative and selling expenses

(1,674)

(1,576)

Other operating expenses

(203)

(206)

Other net gains

4

5

246

Profit on sale of subsidiary companies

1,361

1,223

Profit on sale of a joint venture company

994

-

Change in fair value of investment properties

3,720

19,452

Operating profit

14,397

29,365

Finance charges

(837)

(995)

Finance income

338

113

Net finance charges

6

(499)

(882)

Share of profits less losses of joint venture companies

1,359

1,825

Share of profits less losses of associated companies

71

153

Profit before taxation

15,328

30,461

Taxation

7

(1,862)

(1,740)

Profit for the year

13,466

28,721

Profit for the year attributable to:

The Company's shareholders

13,423

28,666

Non-controlling interests

43

55

13,466

28,721

HK$

HK$

Earnings per share from profit attributable to

the Company's shareholders (basic and diluted)

9

2.29

4.90

34

2019 FINAL RESULTS

Consolidated Statement of Other Comprehensive Income

For the year ended 31st December 2019

2019

2018

HK$M

HK$M

Profit for the year

13,466

28,721

Other comprehensive income

Items that will not be reclassified to profit or loss

Revaluation of properties previously occupied by the Group

- gains recognised during the year

16

11

Defined benefit plans

- remeasurement gains/(losses) recognised during the year

50

(44)

- deferred tax

(8)

8

58

(25)

Items that can be reclassified subsequently to profit or loss

Cash flow hedges

- gains/(losses) recognised during the year

358

(137)

- reclassification to profit or loss

(20)

(21)

- deferred tax

(56)

26

Share of other comprehensive income of joint venture and associated

(253)

companies

(632)

Net translation differences on foreign operations

(689)

(1,381)

(660)

(2,145)

Other comprehensive income for the year, net of tax

(602)

(2,170)

Total comprehensive income for the year

12,864

26,551

Total comprehensive income attributable to:

The Company's shareholders

12,838

26,516

Non-controlling interests

26

35

12,864

26,551

35

2019 FINAL RESULTS

Consolidated Statement of Financial Position

At 31st December 2019

2019

2018

Note

HK$M

HK$M

ASSETS AND LIABILITIES

Non-current assets

4,457

Property, plant and equipment

7,877

Investment properties

10

277,033

273,186

Intangible assets

199

212

Right-of-use assets

11

3,416

-

Properties held for development

12

1,212

1,360

Joint venture companies

13,575

13,540

Loans due from joint venture companies

16,591

15,251

Associated companies

409

413

Derivative financial instruments

222

64

Deferred tax assets

79

123

Other financial assets at amortised cost

36

37

Current assets

317,229

312,063

Properties for sale

14

3,604

1,469

Stocks

72

63

Trade and other receivables

15

1,926

2,401

Contract assets

15

-

16

Amount due from immediate holding company - Swire Pacific Limited

4

15

Derivative financial instruments

44

-

Short-term deposits maturing after three months

22

1

Cash and cash equivalents

14,963

2,093

20,635

6,058

Assets classified as held for sale

13

-

15,526

Total current assets

20,635

21,584

Current liabilities

Trade and other payables

16

8,146

10,154

Contract liabilities

16

19

7

Tax payable

938

392

Derivative financial instruments

10

-

Bank overdrafts and short-term loans

84

234

Long-term loans and bonds due within one year

6,224

996

Lease liabilities due within one year

17

52

-

15,473

11,783

Liabilities directly associated with assets classified as held for sale

13

-

207

Total current liabilities

15,473

11,990

Net current assets

5,162

9,594

Total assets less current liabilities

322,391

321,657

Non-current liabilities

Long-term loans and bonds

23,421

30,769

Long-term lease liabilities

17

496

-

Other payables

16

-

601

Derivative financial instruments

17

70

Deferred tax liabilities

9,381

8,716

Retirement benefit liabilities

165

210

33,480

40,366

NET ASSETS

288,911

281,291

EQUITY

10,449

Share capital

18

10,449

Reserves

19

276,478

268,826

Equity attributable to the Company's shareholders

286,927

279,275

Non-controlling interests

1,984

2,016

TOTAL EQUITY

288,911

281,291

36

2019 FINAL RESULTS

Consolidated Statement of Cash Flows

For the year ended 31st December 2019

2019

2018

HK$M

HK$M

Operating activities

Cash generated from operations

5,499

11,619

Interest paid

(990)

(1,116)

Interest received

276

110

Tax paid

(586)

(1,443)

Dividends received from joint venture and associated companies and financial

4,199

9,170

176

assets at fair value through other comprehensive income

221

Net cash from operating activities

4,375

9,391

Investing activities

Purchase of property, plant and equipment

(120)

(121)

Additions to investment properties

(1,962)

(3,917)

Additions to assets classified as held for sale/other current assets

-

(452)

Purchase of intangible assets

(23)

(16)

Proceeds from sale of property, plant and equipment

1

-

Proceeds from sale of investment properties

295

350

Proceeds from sale of subsidiary companies

16,985

7,857

Proceeds from sale of a joint venture company

2,352

-

Equity to joint venture companies

(214)

(1,670)

Loans to joint venture companies

(2,452)

(1,555)

Repayment of loans by joint venture companies

1,020

338

Increase in deposits maturing after three months

(21)

(1)

Initial leasing costs incurred

(19)

(60)

Net cash from investing activities

15,842

753

Net cash inflow before financing

20,217

10,144

Financing activities

Loans drawn and refinanced

657

2,426

Bonds issued

-

3,917

Repayment of loans and bonds

(2,844)

(6,232)

Principal elements of lease payments

(48)

-

(2,235)

111

Repayment of loans to a fellow subsidiary company

-

(5,177)

Dividends paid to the Company's shareholders

(5,031)

(4,622)

Dividends paid to non-controlling interests

(58)

(24)

Net cash used in financing activities

(7,324)

(9,712)

Increase in cash and cash equivalents

12,893

432

Cash and cash equivalents at 1st January

2,093

1,708

Currency adjustment

(23)

(47)

Cash and cash equivalents at end of the year

14,963

2,093

Represented by:

14,963

Bank balances and short-term deposits maturing within three months

2,093

37

2019 FINAL RESULTS

1. Segment Information

The Group is organised on a divisional basis: Property investment, Property trading and Hotels. The reportable segments that make up each of the three divisions are classified according to the nature of business.

  1. Information about reportable segments
    Analysis of Consolidated Statement of Profit or Loss

Operating

Share of

profit/(loss)

profits less

Share of

Depreciation

after

losses of

profits less

Profit/

Profit/

Profit/(Loss)

and

Inter-

depreciation

joint

losses of

(Loss)

(Loss)

attributable to

amortisation

External

segment

and

Finance

Finance

venture

associated

before

for the

the Company's

charged to

revenue

revenue

amortisation

charges

income

companies

companies

taxation

Taxation

year

shareholders

operating profit

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

Year ended 31st December 2019

Property investment

12,410

35

11,252

(1,123)

10,129

10,061

(179)

10,735

(760)

335

942

-

Property trading

516

-

4

(41)

3

30

-

(4)

(14)

(18)

(18)

-

Hotels

1,296

3

(62)

(36)

-

(46)

71

(73)

3

(70)

(70)

(226)

Change in fair value of

investment properties

-

-

3,720

-

-

433

-

4,153

(728)

3,425

3,450

-

Inter-segment elimination

-

(38)

-

-

-

-

-

-

-

-

-

-

14,222

-

14,397

(837)

338

1,359

71

15,328

(1,862)

13,466

13,423

(405)

Year ended 31st December 2018

Property investment

12,254

40

9,844

(1,052)

8,792

8,732

(160)

9,873

(913)

112

772

-

Property trading

1,061

-

65

(40)

1

107

-

133

(24)

109

99

-

Hotels

1,404

5

(25)

(42)

-

(117)

153

(31)

(10)

(41)

(41)

(234)

Change in fair value of

investment properties

-

-

19,452

-

-

1,063

-

20,515

(654)

19,861

19,876

-

Inter-segment elimination

-

(45)

-

-

-

-

-

-

-

-

-

-

14,719

-

29,365

(995)

113

1,825

153

30,461

(1,740)

28,721

28,666

(394)

Note: Sales between business segments are accounted for at competitive prices charged to unaffiliated customers for similar goods and services.

38

2019 FINAL RESULTS

1. Segment Information (continued)

(a) Information about reportable segments (continued)

Analysis of external revenue of the Group - Timing of revenue recognition

Rental

At a point

income

in time

Over time

on leases

Total

HK$M

HK$M

HK$M

HK$M

Year ended 31st December 2019

Property investment

1

138

12,271

12,410

Property trading

516

-

-

516

Hotels

649

647

-

1,296

1,166

785

12,271

14,222

Year ended 31st December 2018

Property investment

1

136

12,117

12,254

Property trading

1,061

-

-

1,061

Hotels

664

740

-

1,404

1,726

876

12,117

14,719

39

2019 FINAL RESULTS

1. Segment Information (continued)

(a) Information about reportable segments (continued)

Analysis of total assets of the Group

Joint

Bank

Additions to

Segment

venture

Associated

deposits

Total

non-current

assets

companies*

companies

and cash

assets

assets

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

At 31st December 2019

Property investment

321,958

2,282

281,646

25,609

-

14,703

Property trading

4,876

3,281

-

130

8,287

8

Hotels

5,782

1,276

409

152

7,619

80

292,304

30,166

409

14,985

337,864

2,370

At 31st December 2018

Property investment

321,293

4,938

293,340

26,133

-

1,820

Property trading

3,034

1,411

-

118

4,563

52

Hotels

5,975

1,247

413

156

7,791

(19)

302,349

28,791

413

2,094

333,647

4,971

* The assets of joint venture companies include the respective loans due from these companies.

Note: Additions to non-current assets during the year exclude joint venture and associated companies, financial assets at fair value through other comprehensive income, financial instruments, deferred tax assets, retirement benefit assets and other financial assets at amortised cost.

Analysis of total liabilities and non-controlling interests of the Group

Current and

Non-

Segment

deferred tax

Gross

Total

controlling

liabilities

liabilities

borrowings

liabilities

interests

HK$M

HK$M

HK$M

HK$M

HK$M

At 31st December 2019

Property investment

43,887

1,863

7,792

10,278

25,817

Property trading

327

41

3,194

3,562

92

Hotels

238

-

1,266

1,504

29

8,357

10,319

30,277

48,953

1,984

At 31st December 2018

49,089

1,897

Property investment

10,751

9,063

29,275

Property trading

257

45

1,558

1,860

92

Hotels

241

-

1,166

1,407

27

11,249

9,108

31,999

52,356

2,016

40

2019 FINAL RESULTS

1. Segment Information (continued)

  1. Information about geographical areas
    The activities of the Group are principally based in Hong Kong, Mainland China and the U.S.A.
    An analysis of revenue and non-current assets of the Group by principal markets is outlined below:

Revenue

Non-current assets

2019

2018

2019

2018

HK$M

HK$M

HK$M

HK$M

Hong Kong

9,909

10,704

243,538

239,779

Mainland China

3,096

2,903

33,740

32,247

U.S.A.

1,217

1,112

9,039

9,460

Others

-

-

-

1,149

14,222

14,719

286,317

282,635

Note: The above non-current assets exclude joint venture and associated companies, financial assets at fair value through other comprehensive income, financial instruments, deferred tax assets, retirement benefit assets and other financial assets at amortised cost.

2. Revenue

Revenue represents sales by the Company and its subsidiary companies to external customers and comprises:

2019

2018

HK$M

HK$M

Gross rental income from investment properties

12,271

12,117

Property trading

516

1,061

Hotels

1,296

1,404

Rendering of other services

139

137

14,222

14,719

3. Cost of Sales

2019

2018

HK$M

HK$M

Direct rental outgoings in respect of investment properties that

- generated rental income

2,300

2,237

- did not generate rental income

158

152

2,458

2,389

Property trading

392

870

Hotels

1,138

1,193

Rendering of other services

40

41

4,028

4,493

41

2019 FINAL RESULTS

4. Other Net Gains

2019

2018

HK$M

HK$M

(Loss)/Profit on sale of investment properties

(17)

53

Loss on disposal of property, plant and equipment

(6)

(9)

Net foreign exchange losses

(27)

(3)

Recognition of income on forfeited deposits in respect of trading properties

6

5

Others

49

200

5

246

5. Expenses by Nature

Expenses included in cost of sales, administrative and selling expenses, and other operating expenses are analysed as follows:

2019

2018

HK$M

HK$M

Depreciation of property, plant and equipment

288

324

Depreciation of right-of-use assets

- leasehold land held for own use

26

-

- property

20

-

Amortisation of

- intangible assets

36

31

- initial leasing costs in respect of investment properties

35

39

Staff costs

1,975

1,854

Operating lease rentals

- properties

-

91

- plant and equipment

-

6

Short-term lease expenses*

17

-

Low-value assets lease expenses*

16

-

Auditors' remuneration

- audit services

13

13

- tax services

4

6

- other services

1

2

  • These lease expenses are directly charged to the consolidated statement of profit or loss and are not included in the measurement of lease liabilities under HKFRS 16.

42

2019 FINAL RESULTS

6.

Net Finance Charges

2019

2018

HK$M

HK$M

Interest charged on:

Bank loans and overdrafts

254

314

Bonds

722

722

Lease liabilities

10

-

Loans from fellow subsidiary companies

-

95

Loans from joint venture and related companies

-

6

Net fair value gains on derivative instruments

Cash flow hedges - transferred from other comprehensive income

(20)

(21)

Cross-currency swaps not qualifying as hedges

(1)

-

Other financing costs

163

162

1,128

1,278

Gain on the movement in the fair value of the liability in respect of a put option

in favour of the owner of a non-controlling interest

(17)

(16)

Capitalised on:

Investment properties

(242)

(265)

Properties for sale

(32)

(2)

837

995

Interest income on:

Short-term deposits and bank balances

(268)

(34)

Loans to joint venture companies

(69)

(78)

Others

(1)

(1)

(338)

(113)

Net finance charges

499

882

7.

Taxation

2019

2018

HK$M

HK$M

HK$M

HK$M

Current taxation:

Hong Kong profits tax

678

960

Overseas tax

434

356

Over-provisions in prior years

(11)

(2)

1,101

1,314

Deferred taxation:

Changes in fair value of investment properties

366

501

Origination and reversal of temporary differences

406

(75)

Effect of change in tax rate in the U.S.A.

(11)

-

761

426

1,862

1,740

Hong Kong profits tax is calculated at 16.5% (2018: 16.5%) on the estimated assessable profits for the year. Overseas tax is calculated at tax rates applicable in jurisdictions in which the Group is assessable for tax.

43

2019 FINAL RESULTS

8. Dividends

2019

2018

HK$M

HK$M

First interim dividend paid on 3rd October 2019 of HK$0.29 per share

1,697

(2018: HK$0.27)

1,580

Second interim dividend declared on 12th March 2020 of HK$0.59 per share

3,451

(2018: HK$0.57)

3,334

5,148

4,914

The second interim dividend is not accounted for in 2019 because it had not been declared or approved at the year-end date. The actual amount will be accounted for as an appropriation of the revenue reserve in the year ending 31st December 2020.

The Directors have declared a second interim dividend of HK$0.59 (2018: HK$0.57) per share which, together with the first interim dividend of HK$0.29 per share paid in October 2019, amounts to full year dividends of HK$0.88 (2018: HK$0.84) per share. The second interim dividend, which totals HK$3,451 million (2018: HK$3,334 million), will be paid on Thursday, 7th May 2020 to shareholders registered at the close of business on the record date, being Friday, 3rd April 2020. Shares of the Company will be traded ex-dividend from Wednesday, 1st April 2020.

The register of members will be closed on Friday, 3rd April 2020, during which day no transfer of shares will be effected. In order to qualify for entitlement to the second interim dividend, all transfer forms accompanied by the relevant share certificates must be lodged with the Company's share registrars, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, for registration not later than 4:30 p.m. on Thursday, 2nd April 2020.

To facilitate the processing of proxy voting for the annual general meeting to be held on 12th May 2020, the register of members will be closed from 7th May 2020 to 12th May 2020, both days inclusive, during which period no transfer of shares will be effected. In order to be entitled to attend and vote at the annual general meeting, all transfer forms accompanied by the relevant share certificates must be lodged with the Company's share registrars, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, for registration not later than 4:30 p.m. on Wednesday, 6th May 2020.

9. Earnings Per Share (Basic and Diluted)

Earnings per share are calculated by dividing the profit attributable to the Company's shareholders of HK$13,423 million (2018: HK$28,666 million) by the weighted average number of 5,850,000,000 ordinary shares in issue during 2019 (2018: 5,850,000,000 ordinary shares).

44

2019 FINAL RESULTS

10. Investment Properties

Under

Completed

Development

Total

HK$M

HK$M

HK$M

At 1st January 2019

as originally stated

249,666

23,261

272,927

adjustment on adoption of HKFRS 16

4

332

336

as restated

249,670

23,593

273,263

Translation differences

(750)

(15)

(765)

Additions

663

1,492

2,155

Cost written back

(1)

(49)

(50)

Disposals

(312)

-

(312)

Transfer to properties for sale

-

(1,040)

(1,040)

Net transfers from/(to) property, plant and equipment and

right-of-use assets

34

(214)

(180)

Net fair value gains

2,956

764

3,720

252,260

24,531

276,791

Add: Initial leasing costs

242

-

242

At 31st December 2019

252,502

24,531

277,033

At 1st January 2018

231,295

35,997

267,292

Translation differences

(1,440)

(19)

(1,459)

Additions

725

4,018

4,743

Cost written back

(15)

(1)

(16)

Disposals

(285)

-

(285)

Transfer from properties for sale

142

-

142

Net transfers (to)/from property, plant and equipment

(32)

72

40

Transfer between categories

17,076

(17,076)

-

Transfers to assets classified as held for sale

(14,546)

(435)

(14,981)

Disposal of subsidiary companies

-

(2,001)

(2,001)

Net fair value gains

16,746

2,706

19,452

249,666

23,261

272,927

Add: Initial leasing costs

259

-

259

At 31st December 2018

249,925

23,261

273,186

Geographical Analysis of Investment Properties

2019

2018

HK$M

HK$M

Held in Hong Kong:

34,777

On medium-term leases (10 to 50 years)

34,640

On long-term leases (over 50 years)

203,421

199,969

238,198

234,609

Held in Mainland China:

11

On short-term leases (less than 10 years)

-

On medium-term leases (10 to 50 years)

32,165

30,575

32,176

30,575

Held in U.S.A. and elsewhere:

6,417

Freehold

7,743

276,791

272,927

45

2019 FINAL RESULTS

11. Right-Of-Use Assets

The recognised right-of-use assets relate to the following types of assets:

2019

HK$M

Leasehold land held for own use

3,327

Property

89

3,416

Additions to right-of-use assets during the year ended 31st December 2019 were HK$69 million.

During the year ended 31st December 2019, total cash outflow for leases was included in the statement of cash flows in (a) interest paid of HK$9 million under "operating activities", (b) payment for short-term and low-value assets leases of HK$33 million under "operating activities" and (c) principal elements of lease payments of HK$48 million under "financing activities".

12. Properties Held for Development

2019

2018

HK$M

HK$M

Freehold land

989

1,141

Development cost

223

219

1,212

1,360

46

2019 FINAL RESULTS

  1. Assets Classified as Held for Sale
    In May 2019, the Company entered into a sale and purchase agreement with a third party for the sale of its entire 50% interest in a joint venture company which held 625 King's Road, a 26-storey office building in North Point, Hong Kong. The consideration for the sale of HK$2,375 million (before net asset value adjustments) resulted in a profit on sale of a joint venture company being recorded in July 2019 when the transaction was completed. Prior to completion of the transaction, the Group's interest in that joint venture company was included under assets classified as held for sale.
    At 31st December 2018, assets classified as held for sale mainly relate to a sale and purchase agreement entered into by a subsidiary of the Company with a third party for the sale of the Company's interests in office buildings at 14 Taikoo Wan Road and 12 Taikoo Wan Road, Hong Kong. The consideration for the sale of HK$15,000 million (before net asset value adjustments) resulted in a profit on sale of subsidiaries being recorded in April 2019 when the transaction was completed. Assets classified as held for sale at 31st December 2018 also include several wholly owned subsidiaries holding investment properties in Hong Kong in respect of which a sale and purchase agreement was entered into in August 2018. The total consideration for the sale of HK$2,037 million resulted in a profit on sale of subsidiaries being recorded in January 2019 when the transaction was completed.
  2. Properties for Sale

2019

2018

HK$M

HK$M

Properties for sale

Properties under development

- development costs

77

30

- leasehold land

1,260

338

Completed properties

- development costs

1,507

1,008

- freehold land

759

92

- leasehold land

1

1

3,604

1,469

47

2019 FINAL RESULTS

15. Trade and Other Receivables and Contract Assets

2019

2018

HK$M

HK$M

Trade debtors

205

216

Prepayments and accrued income

72

240

Other receivables

1,649

1,945

1,926

2,401

Contract assets

-

16

The analysis of the age of trade debtors at year-end (based on the invoice date) is as follows:

2019

2018

HK$M

HK$M

Under 3 months

201

209

Between 3 and 6 months

4

6

Over 6 months

-

1

205

216

The Group does not grant any credit terms to its customers, except to corporate customers in the hotel division where commercial trade credit terms are given. The Group also holds non-interest bearing rental deposits as security against trade debtors.

16. Trade and Other Payables and Contract Liabilities

2019

2018

HK$M

HK$M

Trade and other payables - current:

Trade creditors

642

419

Rental deposits from tenants

2,905

2,751

Deposits received on the sale of subsidiary companies

-

3,238

Other current payables

Accrued capital expenditure

1,138

1,211

Amounts due to intermediate holding company

100

109

Amounts due to an associated company

18

15

Advances from a non-controlling interest

187

35

Put option in respect of a non-controlling interest

564

-

Others

2,592

2,376

4,599

3,746

8,146

10,154

Contract Liabilities

19

7

Other payables - non-current:

Put option in respect of a non-controlling interest

-

601

48

2019 FINAL RESULTS

16. Trade and Other Payables and Contract Liabilities (continued)

The analysis of the age of trade creditors at year-end is as follows:

2019

2018

HK$M

HK$M

Under 3 months

642

419

17. Lease Liabilities

31st December

2019

HK$M

Maturity Profile:

52

Within 1 year

1-2 years

54

2-5 years

103

After 5 years

339

548

At 31st December 2019, the weighted average incremental borrowing rate applied to the lease liabilities is 3.4%.

18. Share Capital

Ordinary shares

HK$M

Issued and fully paid:

At 1st January 2019 and 31st December 2019

5,850,000,000

10,449

At 1st January 2018 and 31st December 2018

5,850,000,000

10,449

There was no purchase, sale or redemption by the Company of its shares during the years ended 31st December 2019 and 31st December 2018.

49

2019 FINAL RESULTS

19. Reserves

Property

Cash flow

Revenue

Merger

revaluation

hedge

Translation

reserve

reserve

reserve

reserve

reserve

Total

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

At 1st January 2019

as originally stated

269,010

(1,108)

1,823

(195)

(704)

268,826

adjustment on adoption of HKFRS 16

(155)

-

-

-

-

(155)

as restated

268,855

(1,108)

1,823

(195)

(704)

268,671

Profit for the year

13,423

-

-

-

-

13,423

Other comprehensive income

Revaluation of properties previously occupied by the Group

-

-

16

- gains recognised during the year

-

-

16

Defined benefit plans

-

-

50

- remeasurement gains recognised during the year

50

-

-

- deferred tax

(8)

-

-

-

-

(8)

Cash flow hedges

358

-

358

- gains recognised during the year

-

-

-

- reclassification to profit or loss

-

-

-

(20)

-

(20)

- deferred tax

-

-

-

(56)

-

(56)

Share of other comprehensive income of joint

venture and associated companies

-

-

-

(6)

(247)

(253)

Net translation differences on foreign operations

-

-

-

-

(672)

(672)

Total comprehensive income for the year

13,465

-

16

276

(919)

12,838

2018 second interim dividend (note 8)

(3,334)

-

-

-

-

(3,334)

2019 first interim dividend (note 8)

(1,697)

-

-

-

-

(1,697)

At 31st December 2019

277,289

(1,108)

1,839

81

(1,623)

276,478

50

2019 FINAL RESULTS

19. Reserves (continued)

Property

Cash flow

Revenue

Merger

revaluation

hedge

Translation

reserve

reserve

reserve

reserve

reserve

Total

HK$M

HK$M

HK$M

HK$M

HK$M

HK$M

At 1st January 2018

245,002

(1,108)

1,812

(62)

1,288

246,932

Profit for the year

28,666

-

-

-

-

28,666

Other comprehensive income

Revaluation of properties previously occupied by the Group

-

-

11

- gains recognised during the year

-

-

11

Defined benefit plans

-

-

(44)

- remeasurement losses recognised during the year

(44)

-

-

- deferred tax

8

-

-

-

-

8

Cash flow hedges

(137)

-

(137)

- losses recognised during the year

-

-

-

- reclassification to profit or loss

-

-

-

(21)

-

(21)

- deferred tax

-

-

-

26

-

26

Share of other comprehensive income of joint

venture and associated companies

-

-

-

(1)

(631)

(632)

Net translation differences on foreign operations

-

-

-

-

(1,361)

(1,361)

Total comprehensive income for the year

28,630

-

11

(133)

(1,992)

26,516

2017 second interim dividend

(3,042)

-

-

-

-

(3,042)

2018 first interim dividend (note 8)

(1,580)

-

-

-

-

(1,580)

At 31st December 2018

269,010

(1,108)

1,823

(195)

(704)

268,826

51

2019 FINAL RESULTS

20. Changes in Accounting Policies and Disclosures

The following new and revised standards and a new interpretation were required to be adopted by the Group effective from 1st January 2019:

HKFRSs (Amendment) HKFRS 16 HK(IFRIC)-Int 23 Amendments to HKFRS 9 Amendments to HKAS 19 Amendments to HKAS 28

Annual Improvements to HKFRSs 2015-2017 Cycle Leases

Uncertainty over Income Tax Treatments Prepayment Features with Negative Compensation Plan Amendment, Curtailment or Settlement Long-term interests in Associates and Joint Ventures

None of these new and revised standards and new interpretation had a significant effect on the Group's financial statements or accounting policies, except the following set out below:

HKFRS 16 Leases

HKFRS 16 replaces HKAS 17 "Leases" and related interpretations where the distinction between operating and finance leases is removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised in the statement of financial position for all leases by lessees, except for leases that have a lease term of twelve months or less and leases of low-value assets. HKFRS 16 also amends the definition of investment property under HKAS 40 to include property held by a lessee as right-of-use assets to earn rentals or for capital appreciation or both and requires the Group to account for such right-of-use assets at their fair value. The standard does not significantly change the accounting of lessors.

The Group has adopted HKFRS 16 retrospectively from 1st January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and adjustments arising from the new leasing rules for lessees are therefore recognised in the opening statement of financial position on 1st January 2019.

Adjustment recognised on adoption of HKFRS 16

On adoption of HKFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of HKAS 17. These liabilities were measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate of the lessees at 1st January 2019. The weighted average incremental borrowing rate of the lessees applied to the lease liabilities on 1st January 2019 was 3.4%.

52

2019 FINAL RESULTS

20. Changes in Accounting Policies and Disclosures (continued)

A reconciliation between (i) commitments under operating leases for future periods at 31st December 2018 and (ii) lease liabilities recognised at 1st January 2019 under HKFRS 16 is provided below:

2019

HK$M

Operating lease commitments disclosed at 31st December 2018

700

Discounted using the lessee's incremental borrowing rate at the date of initial application (i.e.

561

1st January 2019)

Less: short-term leases recognised on a straight-line basis as expenses

(17)

Less: low-value assets leases recognised on a straight-line basis as expenses

(6)

Lease liabilities recognised at 1st January 2019

538

Of which:

32

Current lease liabilities

Non-current lease liabilities

506

538

The associated right-of-use assets for leases were measured on a modified retrospective basis as if the new rules had always been applied. Other right-of-use assets were measured at amounts equal to the lease liabilities, adjusted by the amounts of any prepaid or accrued lease payments relating to the leases recognised in the financial statements at 31st December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

53

2019 FINAL RESULTS

20. Changes in Accounting Policies and Disclosures (continued)

The change in accounting policy affected the following items in the statement of financial position at 1st January 2019:

Adjustments

As originally

on adoption

stated

of HKFRS 16

As restated

Assets

HK$M

HK$M

HK$M

Property, plant and equipment

7,877

(3,229)

4,648

Investment properties

273,186

336

273,522

Right-of-use assets

-

3,194

3,194

Joint venture companies

13,540

58

13,598

Trade and other receivables

2,401

(3)

2,398

356

Adjustments

As originally

on adoption

stated

of HKFRS 16

As restated

Liabilities

HK$M

HK$M

HK$M

Trade and other payables

10,154

(27)

10,127

Lease liabilities

-

538

538

511

Equity

Reserves

268,826

(155)

268,671

Non-controlling interests

2,016

-

2,016

(155)

For the year ended 31st December 2019, the change in accounting policy has increased the profit for the year by HK$70 million.

In applying HKFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

  • use of a single discount rate for a portfolio of leases with reasonably similar characteristics,
  • accounting for operating leases with a remaining lease term of less than twelve months at 1st January 2019 as short-term leases,
  • exclusion of initial direct costs for the measurement of right-of-use assets at the date of initial application, and
  • use of hindsight in determining lease terms where the contracts contain options to extend or terminate the leases.

54

2019 FINAL RESULTS

21. Requirement in Connection with Publication of "Non-statutory Accounts" under Section 436 of the Hong Kong Companies Ordinance Cap. 622

The financial information relating to the years ended 31st December 2018 and 2019 that is included in this document does not constitute the Company's statutory annual consolidated financial statements for those years but is derived from those financial statements.

The non-statutory accounts (within the meaning of section 436 of the Companies Ordinance (Cap.

  1. (the "Ordinance")) in this document are not specified financial statements (within such meaning). The specified financial statements for the year ended 31st December 2018 have been delivered to the Registrar of Companies in Hong Kong in accordance with section 664 of the Ordinance. The specified financial statements for the year ended 31st December 2019 have not been but will be delivered to the Registrar of Companies in Hong Kong in accordance with section 664 of the Ordinance. Auditor's reports have been prepared on the specified financial statements for the years ended 31st December 2018 and 2019. Those reports were not qualified or otherwise modified, did not refer to any matters to which the auditor drew attention by way of emphasis without qualifying the reports and did not contain statements under section 406(2) or 407(2) or (3) of the Ordinance.

55

2019 FINAL RESULTS

ADDITIONAL INFORMATION

Corporate Governance

The Company is committed to maintaining a high standard of corporate governance. The Company complied with all the code provisions set out in the Corporate Governance Code ("CG Code") contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") throughout the year covered by the annual report with the following exceptions which it believes do not benefit shareholders:

  • Sections A.5.1 to A.5.4 of the CG Code in respect of the establishment, terms of reference and resources of a nomination committee. The Board has considered the merits of establishing a nomination committee but has concluded that it is in the best interests of the Company and potential new appointees that the Board collectively reviews and approves the appointment of any new Director as this allows a more informed and balanced decision to be made by the Board as to suitability for the role.

The Company has adopted codes of conduct regarding securities transactions by Directors and by relevant employees (as defined in the CG Code) on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") contained in Appendix 10 to the Listing Rules.

On specific enquiries made, all Directors have confirmed that, in respect of the accounting period covered by the annual report, they have complied with the required standard set out in the Model Code and the Company's code of conduct regarding Directors' securities transactions.

Details of the Company's corporate governance principles and processes will be available in the 2019 annual report.

The annual results have been reviewed by the Audit Committee of the Company.

Annual Report

The 2019 Annual Report containing all the information required by the Listing Rules will be published on the Stock Exchange website and the Company website www.swireproperties.com. Printed copies will be available to shareholders on 7th April 2020.

56

2019 FINAL RESULTS

List of Directors

At the date of this announcement, the Directors of the Company are:

Executive Directors: M.B. Swire (Chairman), G.M.C. Bradley and F.N.Y. Lung;

Non-ExecutiveDirectors: N.A.H. Fenwick, P. Healy, R.S.K. Lim and M.M.S. Low; and

Independent Non-ExecutiveDirectors: L.K.L. Cheng, T.T.K. Choi, S.T. Fung, J.L. Wang and M.Y. Wu.

By Order of the Board

Swire Properties Limited

Merlin Swire

Chairman

Hong Kong, 12th March 2020

57

2019 FINAL RESULTS

GLOSSARY

Terms

Attributable gross rental income Gross rental income less amount shared by non-controllinginterests plus the Group's share of gross rental income of joint venture and associated companies.

Equity attributable to the Company's shareholders Equity before non-controllinginterests.

Gross borrowings Total of loans, bonds and overdrafts.

Net debt Total borrowings and lease liabilities less short-term deposits and bank balances.

Ratios

Underlying profit Reported profit adjusted principally for the impact of (i) changes in the fair value of investment properties, (ii) deferred tax on investment properties and (iii) amortisation of right-of-use assets reported under investment properties.

Recurring underlying profit Underlying profit adjusted for significant credits and charges of a non-recurringnature, including gains on the sale of interests in investment properties.

Profit attributable to the

Operating profit

Earnings

=

Company's shareholders

Interest cover

=

per share

Weighted average number of

Net finance charges

shares in issue during the

year

Equity attributable to

Equity before

the Company's

=

non-controlling interest

Cash interest cover

=

Operating profit

shareholders

Number of shares in

Total of net finance charges

per share

issue at the end of the

and capitalised interest

year

Gearing ratio =

Net debt

Dividend payout

=

Dividends paid and proposed

Total equity

ratio

Profit attributable to the

Company's shareholders

58

2019 FINAL RESULTS

FINANCIAL CALENDAR AND INFORMATION

FOR INVESTORS

Financial Calendar 2020

Shares traded ex-dividend

1st April

Share register closed for 2019 second interim dividend entitlement

3rd April

Annual Report available to shareholders

7th April

Payment of 2019 second interim dividend

7th May

Share register closed for attending and voting at Annual General Meeting

7th - 12th May

Annual General Meeting

12th May

Interim results announcement

August 2020

2020 first interim dividend payable

October 2020

Registered Office

Investor Relations

Swire Properties Limited

E-mail:

ir@swireproperties.com

33rd Floor, One Pacific Place

88 Queensway

Public Affairs

Hong Kong

Registrars

E-mail:

pad@swireproperties.com

Tel:

(852) 2844-3888

Computershare Hong Kong Investor Services Limited

Fax:

(852) 2918-9960

Website: www.swireproperties.com

17M Floor, Hopewell Centre

183 Queen's Road East

Hong Kong

Request for Feedback

Website: www.computershare.com

In order that we may improve our

Stock Code

reporting, we would be grateful to receive

your

comments on our

public

announcements and disclosures via e-mail

Hong Kong Stock Exchange

1972

to ir@swireproperties.com.

Auditors

PricewaterhouseCoopers

Certified Public Accountants and Registered PIE Auditor

59

2019 FINAL RESULTS

Disclaimer

This document may contain certain forward-looking statements that reflect the Company's beliefs, plans or expectations about the future or future events. These forward‐looking statements are based on a number of assumptions, current estimates and projections, and are therefore subject to inherent risks, uncertainties and other factors beyond the Company's control. The actual results or outcomes of events may differ materially and/or adversely due to a number of factors, including changes in the economies and industries in which the Group operates (in particular in Hong Kong and Mainland China), macroeconomic and geopolitical uncertainties, changes in the competitive environment, foreign exchange rates, interest rates and commodity prices, and the Group's ability to identify and manage risks to which it is subject. Nothing contained in these forward-looking statements is, or shall be, relied upon as any assurance or representation as to the future or as a representation or warranty otherwise. Neither the Company nor its directors, officers, employees, agents, affiliates, advisers or representatives assume any responsibility to update these forward‐looking statements or to adapt them to future events or developments or to provide supplemental information in relation thereto or to correct any inaccuracies.

60

Disclaimer

Swire Properties Ltd. published this content on 12 March 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 March 2020 04:18:08 UTC

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Sales 2020 13 494 M 1 741 M 1 741 M
Net income 2020 7 116 M 918 M 918 M
Net Debt 2020 16 062 M 2 072 M 2 072 M
P/E ratio 2020 15,0x
Yield 2020 4,75%
Capitalization 110 B 14 201 M 14 202 M
EV / Sales 2019
EV / Sales 2020 9,35x
Nbr of Employees 5 000
Free-Float 18,0%
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Technical analysis trends SWIRE PROPERTIES LIMITED
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TrendsBearishBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 15
Average target price 26,09 HKD
Last Close Price 18,82 HKD
Spread / Highest target 113%
Spread / Average Target 38,6%
Spread / Lowest Target 2,55%
EPS Revisions
Managers
NameTitle
Guy Martin Coutts Bradley Chief Executive Officer & Executive Director
Merlin Bingham Swire Chairman
Ngan Yee Lung Finance Director & Executive Director
Mei Shuen Low Director, Director-Finance & Human Resources
Spencer Theodore Fung Independent Non-Executive Director