1 2

4 5

Cover Photos:

1. Kerry Hotel, Hong Kong

2. Shangri-La's Sanya Resort & Spa, Hainan

3. Shangri-La's Hambantota Golf Resort & Spa, Sri Lanka

3

6

4. Kerry Hotel, Beijing

5. Shangri-La Hotel, Bengaluru

6. Shangri-La Hotel, Bangkok

As at 28 August 2020

BOARD OF DIRECTORS

Executive Director(s)

Ms KUOK Hui Kwong (Chairman)

Mr LIM Beng Chee (Group Chief Executive Officer)

Non-executive Director(s)

Mr HO Kian Guan (alternate - Mr HO Chung Tao)

Independent Non-executive Director(s)

Professor LI Kwok Cheung Arthur

Mr YAP Chee Keong

Mr LI Xiaodong Forrest

Mr ZHUANG Chenchao

EXECUTIVE COMMITTEE

Ms KUOK Hui Kwong (chairman)

Mr LIM Beng Chee

NOMINATION COMMITTEE

Ms KUOK Hui Kwong (chairman)

Professor LI Kwok Cheung Arthur

Mr LI Xiaodong Forrest

REMUNERATION COMMITTEE

Professor LI Kwok Cheung Arthur (chairman)

Ms KUOK Hui Kwong

Mr YAP Chee Keong

AUDIT & RISK COMMITTEE

Mr YAP Chee Keong (chairman)

Mr HO Kian Guan (alternate - Mr HO Chung Tao) Professor LI Kwok Cheung Arthur

COMPANY SECRETARY

Mr SEOW Chow Loong Iain

SENIOR MANAGEMENT

Ms KUOK Hui Kwong (Chairman)

Mr LIM Beng Chee (Group Chief Executive Officer) Mr TAN Lay Beng (Chief Financial Officer)

Mr TAN Chen Kiong George (Chief Human Resources Officer) Mr CHUA Chee Wui (Chief Investment Officer &

 Chief Technology Officer)

Mr Sven Oliver BONKE (Regional Chief Executive Officer of  Middle East, Europe, India and Americas)

Mr CHAN Kong Leong (Regional Chief Executive Officer of  Southeast Asia & Australasia)

AUDITOR

PricewaterhouseCoopers

Certified Public Accountants

Registered Public Interest Entity Auditor

22/F Prince's Building

Central

Hong Kong SAR

CORPORATE

INFORMATION

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

28/F Kerry Centre

683 King's Road

Quarry Bay

Hong Kong SAR

REGISTERED ADDRESS

Victoria Place

5/F, 31 Victoria Street Hamilton HM10 Bermuda

PRINCIPAL SHARE REGISTRAR IN BERMUDA

MUFG Fund Services (Bermuda) Limited 4/F North

Cedar House

41 Cedar Avenue

Hamilton HM12 Bermuda

BRANCH SHARE REGISTRAR IN

HONG KONG

Tricor Abacus Limited

Level 54, Hopewell Centre

183 Queen's Road East

Hong Kong SAR

STOCK CODES

Hong Kong stock exchange - 00069

Singapore stock exchange - S07

American Depositary Receipt - SHALY

WEBSITES

Corporate - www.ir.shangri-la.com

Business - www.shangri-la.com

INVESTOR RELATIONS CONTACT

admin.ir@shangri-la.com 28/F Kerry Centre

683 King's Road Quarry Bay Hong Kong SAR

KEY DATE(S)

Announcement of 2020 final results

March 2021

INTERIM REPORT 2020 1

FINANCIAL

HIGHLIGHTS

The board of directors ("Board") of Shangri-La Asia Limited ("Company") wishes to announce the unaudited interim results of the Company and its subsidiaries ("Group"), and associates for the six months ended 30 June 2020. These results have been reviewed by the Company's auditor, PricewaterhouseCoopers, in accordance with the Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" and by the audit & risk committee of the Board. The review report of the auditor is set out on page 4.

For the six months ended 30 June 2020, consolidated financial results attributable to owners of the Company before non-operating items recorded a loss of USD255.4 million compared to a profit of USD64.2 million for the same period last year. Consolidated financial results attributable to owners of the Company after accounting for non-operating items recorded a loss of USD282.6 million compared to a profit of USD115.1 million for the same period last year.

The Board does not recommend the payment of any interim dividend for the six months ended 30 June 2020 (2019: HK8 cents per share).

The following table summarises the highlights of our financial results:

Six months ended 30 June

2020

2019

% change

USD Million

USD Million

Revenue

453.5

1,195.0

-62.1%

EBITDA(Note 1) of the Company and its subsidiaries

(74.8)

300.9

N/M

Effective share of EBITDA(Note 2) of the Company,

subsidiaries and associates

27.8

449.2

-93.8%

(Loss)/Profit attributable to owners of the Company

- Operating items

(255.4)

64.2

N/M

- Non-operating items

(27.2)

50.9

N/M

Total

(282.6)

115.1

N/M

(Loss)/Earnings per share (US cents per share)

(7.915)

3.221

N/M

2 SHANGRI-LA ASIA LIMITED

FINANCIAL

HIGHLIGHTS

As at

30 June

31 December

2020

2019

% change

USD Million

USD Million

Net assets attributable to owners of the Company

5,660.7

6,189.6

-8.5%

Net assets per share attributable to owners of the Company (USD)

1.58

1.73

-8.7%

(N/M: Not meaningful)

Notes:

  1. EBITDA, which is a non-HKFRS financial measure used to measure the Group's operating profitability, is defined as the earnings before finance costs, tax, depreciation and amortisation, gains/losses on disposal of fixed assets and non-operating items such as gains/losses on disposal of interest in investee companies; fair value gains/losses on investment properties and financial assets; and impairment losses on fixed assets.
  2. Effective share of EBITDA is the aggregate total of the Company's EBITDA and the Group's share of EBITDA of subsidiaries and associates based on percentage of equity interests.
  • Consolidated revenue was USD453.5 million for the six months ended 30 June 2020, a decrease of 62.1%, compared to USD1,195.0 million for the six months ended 30 June 2019.
  • EBITDA of the Company and its subsidiaries was a loss of USD74.8 million for the six months ended 30 June 2020 compared to a profit of USD300.9 million for the six months ended 30 June 2019.
  • Effective share of EBITDA of the Company, subsidiaries and associates was USD27.8 million for the six months ended 30 June 2020, a decrease of 93.8%, compared to USD449.2 million for the six months ended 30 June 2019.
  • Consolidated financial results attributable to owners of the Company was a loss of USD282.6 million for the six months ended 30 June 2020, compared to a profit of USD115.1 million for the six months ended 30 June 2019.

INTERIM REPORT 2020 3

REPORT ON REVIEW OF INTERIM

FINANCIAL INFORMATION

TO THE BOARD OF DIRECTORS OF SHANGRI-LA ASIA LIMITED

(incorporated in Bermuda with limited liability)

Introduction

We have reviewed the interim financial information set out on pages 5 to 37, which comprises the condensed consolidated interim statement of financial position of Shangri-La Asia Limited (the "Company") and its subsidiaries (together, the "Group") as at 30 June 2020 and the condensed consolidated interim statement of profit or loss, condensed consolidated interim statement of comprehensive income, condensed consolidated interim statement of changes in equity and condensed consolidated interim statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants. The Directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting".

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 28 August 2020

4 SHANGRI-LA ASIA LIMITED

CONDENSED CONSOLIDATED INTERIM

STATEMENT OF FINANCIAL POSITION

(All amounts in US dollar thousands)

As at

30 June 2020 31 December 2019

Note

Unaudited

Audited

ASSETS

Non-current assets

Property, plant and equipment

5

4,885,089

5,092,022

Investment properties

5

1,660,881

1,658,560

Right-of-use assets

5

1,248,498

1,318,451

Intangible assets

5

106,356

108,363

Interest in associates

3,792,157

3,912,827

Deferred income tax assets

42,074

27,694

Financial assets at fair value through other comprehensive income

6

4,269

4,357

Financial assets at fair value through profit or loss

6

9,828

9,866

Derivative financial instruments

14

1,721

8,979

Other receivables

7

15,191

14,963

11,766,064

12,156,082

Current assets

Inventories

32,371

33,951

Properties for sale

88,164

90,569

Accounts receivable, prepayments and deposits

8

235,846

291,661

Amounts due from associates

187,941

112,788

Derivative financial instruments

14

390

2,157

Financial assets at fair value through profit or loss

6

14,474

18,188

Short-term deposits with original maturities over 3 months

76,645

107,181

Cash and cash equivalents

875,289

909,496

1,511,120

1,565,991

Total assets

13,277,184

13,722,073

EQUITY

Capital and reserves attributable to owners of the Company

Share capital and premium

9

3,201,995

3,201,995

Shares held for share award scheme

9

(5,017)

(5,985)

Other reserves

11

406,437

653,684

Retained earnings

2,057,245

2,339,885

5,660,660

6,189,579

Non-controlling interests

257,312

314,454

Total equity

5,917,972

6,504,033

INTERIM REPORT 2020 5

CONDENSED CONSOLIDATED INTERIM

STATEMENT OF FINANCIAL POSITION

(All amounts in US dollar thousands)

As at

30 June 2020 31 December 2019

Note

Unaudited

Audited

LIABILITIES

Non-current liabilities

Bank loans

12

4,087,124

3,997,098

Fixed rate bonds

13

1,019,150

868,137

Derivative financial instruments

14

75,120

15,668

Amounts due to non-controlling shareholders

15

46,550

46,550

Long term lease liabilities

564,337

588,530

Deferred income tax liabilities

343,237

357,971

6,135,518

5,873,954

Current liabilities

Accounts payable and accruals

16

485,673

666,377

Contract liabilities

184,503

175,001

Short term lease liabilities

50,429

51,603

Amounts due to non-controlling shareholders

15

47,165

39,528

Current income tax liabilities

7,375

30,105

Bank loans and overdrafts

12

417,577

375,329

Derivative financial instruments

14

30,972

6,143

1,223,694

1,344,086

Total liabilities

7,359,212

7,218,040

Total equity and liabilities

13,277,184

13,722,073

6 SHANGRI-LA ASIA LIMITED

CONDENSED CONSOLIDATED INTERIM

STATEMENT OF PROFIT OR LOSS

(All amounts in US dollar thousands unless otherwise stated)

Six months ended 30 June

2020

2019

Note

Unaudited

Unaudited

Revenue

4

453,536

1,194,994

Cost of sales

17

(295,390)

(534,378)

Gross profit

158,146

660,616

Other (losses)/gains - net

18

(791)

53,494

Marketing costs

17

(30,295)

(52,845)

Administrative expenses

17

(112,799)

(143,567)

Other operating expenses

17

(268,796)

(341,134)

Operating (loss)/profit

(254,535)

176,564

Finance costs - net

- Interest expense

19

(107,462)

(108,758)

- Foreign exchange gains/(losses)

19

2,144

(2,635)

Share of profit of associates

20

32,499

123,892

(Loss)/Profit before income tax

(327,354)

189,063

Income tax credit/(expense)

21

15,133

(64,140)

(Loss)/Profit for the period

(312,221)

124,923

(Loss)/Profit attributable to:

Owners of the Company

(282,627)

115,061

Non-controlling interests

(29,594)

9,862

(312,221)

124,923

(Loss)/Earnings per share for (loss)/profit attributable to

owners of the Company during the period

(expressed in US cents per share)

- basic

22

(7.915)

3.221

- diluted

22

(7.915)

3.221

INTERIM REPORT 2020 7

CONDENSED CONSOLIDATED INTERIM

STATEMENT OF COMPREHENSIVE INCOME

(All amounts in US dollar thousands)

Six months ended 30 June

2020

2019

Unaudited

Unaudited

(Loss)/Profit for the period

(312,221)

124,923

Other comprehensive (loss)/income:

Items that may be reclassified subsequently to profit or loss

Fair value changes of interest-rate swap and cross-currency

swap contracts - hedging

(95,393)

(25,341)

Revaluation of a property held by a subsidiary upon reclassification

from property, plant and equipment and right-of-use assets to

investment properties

246

-

Currency translation differences - subsidiaries

(112,537)

16,231

Currency translation differences - associates

(58,712)

(14,853)

Other comprehensive loss for the period

(266,396)

(23,963)

Total comprehensive (loss)/income for the period

(578,617)

100,960

Total comprehensive (loss)/income attributable to:

Owners of the Company

(529,689)

94,472

Non-controlling interests

(48,928)

6,488

(578,617)

100,960

8 SHANGRI-LA ASIA LIMITED

CONDENSED CONSOLIDATED INTERIM

STATEMENT OF CHANGES IN EQUITY

(All amounts in US dollar thousands)

Unaudited

Attributable to owners of the Company

Share

Shares held

capital

for share

Non-

and

award

Other

Retained

controlling

Total

premium

scheme

reserves

earnings

Total

interests

equity

Balance at 1 January 2019

3,201,995

(4,996)

693,368

2,309,009

6,199,376

382,329

6,581,705

Fair value changes of interest-rate

swap contracts － hedging

-

-

(17,496)

-

(17,496)

(7,845)

(25,341)

Currency translation differences

-

-

(3,093)

-

(3,093)

4,471

1,378

Other comprehensive loss

recognised directly in equity

-

-

(20,589)

-

(20,589)

(3,374)

(23,963)

Profit for the period

-

-

-

115,061

115,061

9,862

124,923

Total comprehensive (loss)/income for

the six months ended 30 June 2019

-

-

(20,589)

115,061

94,472

6,488

100,960

Share-based compensation under

share award scheme

-

-

2,341

-

2,341

-

2,341

Vesting of shares under share

award scheme

-

1,140

(1,024)

(116)

-

-

-

Payment of 2018 final dividend

-

-

-

(64,531)

(64,531)

-

(64,531)

Dividend paid and payable to

non-controlling shareholders

-

-

-

-

-

(12,122)

(12,122)

Difference between the consideration

and the portion of the non-

controlling interests arising from

acquisition of partial equity interest

in a subsidiary from a non-

controlling shareholder

-

-

-

(18,906)

(18,906)

-

(18,906)

Equity interest in a subsidiary acquired

from a non-controlling shareholder

-

-

-

-

-

(16,914)

(16,914)

Net change in equity loans due to

non-controlling shareholders

-

-

-

-

-

(46,590)

(46,590)

-

1,140

1,317

(83,553)

(81,096)

(75,626)

(156,722)

Balance at 30 June 2019

3,201,995

(3,856)

674,096

2,340,517

6,212,752

313,191

6,525,943

INTERIM REPORT 2020 9

CONDENSED CONSOLIDATED INTERIM

STATEMENT OF CHANGES IN EQUITY

(All amounts in US dollar thousands)

Unaudited

Attributable to owners of the Company

Share

Shares held

capital

for share

Non-

and

award

Other

Retained

controlling

Total

premium

scheme

reserves

earnings

Total

interests

equity

Balance at 1 January 2020

3,201,995

(5,985)

653,684

2,339,885

6,189,579

314,454

6,504,033

Fair value changes of interest-rate

swap and cross-currency swap

contracts － hedging

-

-

(90,000)

-

(90,000)

(5,393)

(95,393)

Currency translation differences

-

-

(157,308)

-

(157,308)

(13,941)

(171,249)

Revaluation of a property held by

a subsidiary upon reclassification

from property, plant and equipment

and right-of-use assets to

investment properties

-

-

246

-

246

-

246

Other comprehensive loss recognised

directly in equity

-

-

(247,062)

-

(247,062)

(19,334)

(266,396)

Loss for the period

-

-

-

(282,627)

(282,627)

(29,594)

(312,221)

Total comprehensive loss for the six

months ended 30 June 2020

-

-

(247,062)

(282,627)

(529,689)

(48,928)

(578,617)

Share-based compensation under

share award scheme

-

-

770

-

770

-

770

Vesting of shares under share

award scheme

-

968

(955)

(13)

-

-

-

Dividend paid and payable to

non-controlling shareholders

-

-

-

-

-

(8,214)

(8,214)

-

968

(185)

(13)

770

(8,214)

(7,444)

Balance at 30 June 2020

3,201,995

(5,017)

406,437

2,057,245

5,660,660

257,312

5,917,972

10 SHANGRI-LA ASIA LIMITED

CONDENSED CONSOLIDATED INTERIM

STATEMENT OF CASH FLOWS

(All amounts in US dollar thousands)

Six months ended 30 June

2020

2019

Unaudited

Unaudited

Cash flows from operating activities

(334,344)

42,591

Cash flows from investing activities

- purchases of property, plant and equipment, investment properties and

right-of-use assets

(45,686)

(182,802)

- proceeds from disposal of property, plant and equipment

201

284

- decrease/(increase) in short-term bank deposits with more than

3 months maturity

30,536

(6,737)

- capital contribution and net movement of loans to associates

6,570

(8,576)

- dividends received from associates

3,823

13,275

- consideration paid for acquisition of equity interest in a subsidiary from a

non-controlling shareholder

-

(33,580)

- other investing cash flow - net

7,871

4,860

Net cash generated from/(used in) investing activities

3,315

(213,276)

Cash flows from financing activities

- dividend paid

(2,733)

(67,286)

- net increase/(decrease) in bank loans

138,693

(115,763)

- net proceeds from issuance of fixed rate bonds

184,848

221,653

- principal elements of lease payments

(11,800)

(11,364)

Net cash generated from financing activities

309,008

27,240

Net decrease in cash and cash equivalents

(22,021)

(143,445)

Cash and cash equivalents at 1 January

909,496

970,410

Exchange (losses)/gains on cash and cash equivalents

(12,904)

4,507

Cash and cash equivalents at 30 June

874,571

831,472

Analysis of balances of cash and cash equivalents

Cash and bank balances and short-term fund placements (Note)

951,934

927,188

Less: Short-term bank deposits with more than 3 months maturity

(76,645)

(95,716)

Cash and cash equivalents in the condensed consolidated interim

statement of financial position (before bank overdrafts)

875,289

831,472

Less: Bank overdrafts

(718)

-

Cash and cash equivalents

874,571

831,472

Note: Short-term fund placements represent investment in highly liquid money market instruments. This investment is readily convertible to cash and has insignificant risk of changes in value.

INTERIM REPORT 2020 11

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

1. GENERAL INFORMATION

The principal activities of the Group are the development, ownership and operation of hotel properties, the provision of hotel management and related services, the development, ownership and operations of investment properties and property development for sale.

The Company is a limited liability company incorporated in Bermuda. The address of its registered office is Victoria Place, 5/F, 31 Victoria Street, Hamilton HM10, Bermuda.

The Company has its primary listing on the Main Board of The Stock Exchange of Hong Kong Limited with secondary listing on the Singapore Exchange Securities Trading Limited.

These condensed consolidated interim financial statements were approved by the Board for issue on 28 August 2020. These condensed consolidated interim financial statements have been reviewed by the Company's auditor in accordance with the Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity".

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

These unaudited condensed consolidated interim financial statements for the six months ended 30 June 2020 have been prepared in accordance with Hong Kong Accounting Standard ("HKAS") 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). The financial statements have been prepared on a going-concern basis although the Group was affected by the COVID-19 pandemic and was running at a cash loss from its operation during the current reporting period. The future funding requirements can be met through the committed and available bank loan facilities of US$1,089,323,000 which are maturing after 30 June 2021. The Group has adequate resources to continue its operation for the foreseeable future.

These condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRS"). The accounting policies and methods of computation used in the preparation of these condensed consolidated interim financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2019, except for the adoption of the following amendments to accounting standards which are relevant to the Group's operation and are mandatory for the financial year ending 31 December 2020.

Amendments to HKAS 1 and HKAS 8

Definition of Material

Amendments to HKFRS 3

Definition of a Business

Amendment to HKFRS 16

COVID-19 Related Rent Concessions

Except for the amendment to HKFRS 16 mentioned below, the adoption of other amendments to accounting standards has no material impact on the Group's financial statements.

12 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

Amendment to HKFRS 16, COVID-19 Related Rent Concessions

The amendment provides a practical expedient that allows a lessee to by-pass the need to evaluate whether certain qualifying rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and, instead, account for those rent concessions as if they were variable lease payments and were not lease modifications.

The Group has elected to early adopt the amendment and applies the practical expedient to all qualifying COVID-19 related rent concessions granted to the Group during the current reporting period. Consequently, rent concessions received have been accounted for as negative variable lease payments recognised in "Other (losses)/ gains - net" in the condensed consolidated interim statement of profit or loss during the period in which the event or condition that triggers those payments occurred. There is no impact on the opening balance of equity at 1 January 2020.

3. ESTIMATES

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2019.

INTERIM REPORT 2020 13

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

4. REVENUE AND SEGMENT INFORMATION

The Group owns/leases and operates hotels and associated properties; and provides hotel management and related services. The Group also owns investment properties for property rentals and engages in property sales business. Revenue recognised in the condensed consolidated interim financial statements during the period are as follows:

Six months ended 30 June

2020

2019

Revenue

Hotel properties

Revenue from rooms

169,243

533,968

Food and beverage sales

162,301

432,816

Rendering of ancillary services

36,075

58,845

Hotel management and related services

28,719

52,911

Property development for sale

10,981

70,466

Other business

1,760

2,349

Revenue from contracts with customers

409,079

1,151,355

Investment properties

44,457

43,639

Total consolidated revenue

453,536

1,194,994

The Group is managed on a worldwide basis in the following four main segments:

  1. Hotel properties - development, ownership and operations of hotel properties (including hotels under leases)
    - The People's Republic of China

Hong Kong

Mainland China

  • Singapore
  • Malaysia
  • The Philippines
  • Japan
  • Thailand
  • France
  • Australia
  • United Kingdom
  • Mongolia
  • Sri Lanka
  • Other countries (including Fiji, Myanmar, Maldives, Indonesia, Turkey and Mauritius)

14 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

  1. Hotel management and related services for Group-owned hotels and for hotels owned by third parties
  2. Investment properties - development, ownership and operations of office properties, commercial properties and serviced apartments/residences
    • Mainland China
    • Singapore
    • Malaysia
    • Mongolia
    • Sri Lanka
    • Other countries (including Australia and Myanmar)
  4. Property development for sale

The Group is also engaged in other business including wines trading and restaurant operation outside hotel. These other businesses did not have a material impact on the Group's results.

The chief operating decision-maker assesses the performance of the operating segments based on a measure of the share of profit after tax and non-controlling interests. This measurement basis excludes the effects of pre-opening expenses of projects, corporate expenses and other non-operating items such as fair value gains or losses on investment properties, fair value adjustments on monetary items and impairments for any isolated non- recurring event.

INTERIM REPORT 2020 15

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

Segment profit or loss

For the six months ended 30 June 2020 and 2019 (USD million)

2020

2019

Profit/(Loss)

Profit/(Loss)

Revenue

after tax

Revenue

after tax

(Note b)

(Note a)

(Note b)

(Note a)

Hotel properties

The People's Republic of China

41.5

(33.6)

Hong Kong

175.0

27.7

Mainland China

138.4

(108.1)

380.4

(6.1)

Singapore

46.0

(6.8)

111.0

11.7

Malaysia

20.0

(5.3)

58.7

6.7

The Philippines

39.3

(9.2)

92.6

7.9

Japan

11.4

(7.3)

31.0

(0.1)

Thailand

14.2

(1.4)

39.2

6.3

France

6.6

(10.7)

21.6

(7.0)

Australia

17.1

(6.2)

41.1

0.4

United Kingdom

8.7

(13.3)

24.2

(7.4)

Mongolia

1.7

(3.6)

6.9

(2.9)

Sri Lanka

7.8

(10.0)

13.8

(6.6)

Other countries

14.9

(11.3)

30.1

(5.0)

367.6

(226.8)

1,025.6

25.6

Hotel management and related services

55.9

(52.2)

115.7

(15.5)

Sub-total hotel operation

423.5

(279.0)

1,141.3

10.1

Investment properties

10.2

75.9

Mainland China

9.4

79.6

Singapore

4.9

3.5

6.7

3.9

Malaysia

2.6

0.7

3.2

0.8

Mongolia

11.5

1.7

10.9

1.1

Sri Lanka

3.2

(8.3)

-

-

Other countries

12.1

2.8

13.5

3.1

44.5

76.3

43.7

88.5

Property development for sale

11.0

5.5

70.5

46.5

Other business

1.7

(1.0)

2.3

(0.3)

Total

480.7

(198.2)

1,257.8

144.8

Less: Hotel management

(27.2)

- Inter-segment revenue

(62.8)

Total external revenue

453.5

1,195.0

Corporate finance costs (net)

(59.7)

(61.8)

Land cost amortisation and pre-opening

(2.8)

expenses for projects

(3.7)

Corporate expenses

(6.7)

(13.2)

Exchange gains/(losses) of corporate

12.0

investment holding companies

(1.9)

(Loss)/Profit before non-operating items

(255.4)

64.2

16 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

Segment profit or loss (continued)

For the six months ended 30 June 2020 and 2019 (USD million)

2020

2019

Profit/(Loss)

Profit/(Loss)

after tax

after tax

(Note a)

(Note a)

(Loss)/Profit before non-operating items

(255.4)

64.2

Non-operating items

Share of net fair value (losses)/gains on investment properties

(27.9)

48.8

Net unrealised (losses)/gains on financial assets at fair value through

profit or loss

(3.7)

3.8

Fair value adjustments on security deposit on leased premises

-

0.1

Impairment loss on a loan to a third party

(1.1)

-

Fair value gains on cross-currency swap - Non hedging

2.1

-

Insurance claim recovered from a bombing incident

3.6

-

Associated expenses spent due to a bombing incident

(0.2)

-

Others

-

(1.8)

Total non-operating items

(27.2)

50.9

Consolidated (loss)/profit attributable to owners of the Company

(282.6)

115.1

Notes:

  1. Profit/(Loss) after tax includes net of tax results from both associates and subsidiaries after share of non-controlling interests.
  2. Revenue excludes revenue of associates.

INTERIM REPORT 2020 17

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

5.

CAPITAL EXPENDITURE

Property, plant

Investment

Right-of-use

Intangible

and equipment

properties

assets

assets

Opening net book amount as at 1 January 2020

5,092,022

1,658,560

1,318,451

108,363

Additions

36,353

1,641

5,161

1,683

Fair value losses (Note 18)

-

(28,203)

-

-

Exchange differences

(76,743)

(31,829)

(22,700)

(194)

Disposals

(199)

(311)

-

-

Impairments (Note 17)

-

-

-

(1,256)

Depreciation/amortisation charge (Note 17)

(131,126)

-

(26,609)

(2,240)

Transfer

(35,218)

61,023

(25,805)

-

Closing net book amount as at 30 June 2020

4,885,089

1,660,881

1,248,498

106,356

Opening net book amount as at 1 January 2019

5,187,248

1,492,772

1,353,638

100,058

Additions

164,907

22,954

5,048

5,562

Fair value gains (Note 18)

-

39,840

-

-

Exchange differences

18,672

7,652

(252)

69

Disposals

(5,123)

(97)

-

-

Depreciation/amortisation charge (Note 17)

(147,735)

-

(26,916)

(1,676)

Transfer

(22,812)

22,812

-

-

Closing net book amount as at 30 June 2019

5,195,157

1,585,933

1,331,518

104,013

Investment properties were stated at fair value (including those properties being constructed for future use as investment properties for which fair value becomes reliably determinable). Except for a fair value change of USD328,000 (2019: Nil) arising from the reclassification of property, plant and equipment and right-of-use assets to investment properties which is recognised in other comprehensive income, all other changes in the fair value of investment properties were recorded in the condensed consolidated interim statement of profit or loss.

6.

FINANCIAL ASSETS

As at

30 June 2020 31 December 2019

Non-current

Financial assets at fair value through other comprehensive income

- equity and loan instruments

4,269

4,357

Financial assets at fair value through profit or loss

- club debentures

9,828

9,866

Total

14,097

14,223

Current

Financial assets at fair value through profit or loss

- shares listed in Hong Kong

14,474

18,188

There were no additions or disposals of financial assets during the six months ended 30 June 2020 and 2019. The maximum exposure to credit risk at the reporting date is the fair value of the financial assets mentioned above.

18 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

7. OTHER RECEIVABLES

As at

30 June 2020 31 December 2019

Security deposit on leased premises

15,191

14,963

An interest-free security deposit amounting to JPY1,751,000,000 (equivalent to USD16,332,000) (31 December 2019: JPY1,751,000,000 (equivalent to USD16,132,000)) was paid to the lessor of the leased premises and will only be recoverable after expiry of the lease. The effective interest rate applied to calculate the fair value upon initial recognition of the deposit is 0.556% per annum.

The fair value of these other receivables is not materially different from the carrying value. The maximum exposure to credit risk at the reporting date is the fair value of other receivables mentioned above.

8. ACCOUNTS RECEIVABLE, PREPAYMENTS AND DEPOSITS

As at

30 June 2020 31 December 2019

Trade receivables - net (Note (b))

45,795

96,101

Other receivables

108,329

106,866

Prepayments and other deposits

81,722

87,644

Short term advance to a third party (Note (c))

-

1,050

235,846

291,661

There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers, internationally dispersed.

  1. The fair values of the trade and other receivables are not materially different from their carrying values. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above.
  2. A significant part of the Group's sales are by credit cards or against payment of deposits. The remaining amounts are with general credit term of 30 days. The Group has a defined credit policy. The ageing analysis of the trade receivables based on invoice date after provision for impairment is as follows:

As at

30 June 2020 31 December 2019

0 - 3 months

34,307

85,604

4 - 6 months

6,250

3,768

Over 6 months

5,238

6,729

45,795

96,101

  1. The outstanding balance for a short term advance of USD1,050,000 provided to a third party and the associated interest receivable of USD423,000 totalling USD1,473,000 was entirely impaired during the six months ended 30 June 2020.

INTERIM REPORT 2020 19

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

9. SHARE CAPITAL AND PREMIUM AND SHARES HELD FOR SHARE AWARD SCHEME

Amount

Number of

Ordinary

Share

shares

shares

premium

Total

('000)

Share capital and premium

Authorised - Ordinary shares of HKD1 each

5,000,000

646,496

-

646,496

At 31 December 2019 and 30 June 2020

Issued and fully paid

- Ordinary shares of HKD1 each

At 1 January 2019

3,585,525

462,904

2,739,091

3,201,995

Exercise of share options

- allotment of shares

-

-

-

-

- transfer from share option reserve

-

-

-

-

At 31 December 2019 and 1 January 2020

3,585,525

462,904

2,739,091

3,201,995

Exercise of share options

- allotment of shares

-

-

-

-

- transfer from share option reserve

-

-

-

-

At 30 June 2020

3,585,525

462,904

2,739,091

3,201,995

Shares held for share award scheme

At 1 January 2019

(3,232)

(417)

(4,579)

(4,996)

Vesting of shares under share award scheme

675

87

1,053

1,140

At 30 June 2019

(2,557)

(330)

(3,526)

(3,856)

Shares purchase for share award scheme

(2,000)

(258)

(1,871)

(2,129)

At 31 December 2019 and 1 January 2020

(4,557)

(588)

(5,397)

(5,985)

Vesting of shares under share award scheme

644

83

885

968

At 30 June 2020

(3,913)

(505)

(4,512)

(5,017)

As at 30 June 2020, except for shares held for share award scheme as shown above, 10,501,055 (31 December 2019: 10,501,055) ordinary shares in the Company were held by a subsidiary which was acquired in late 1999. The cost of these shares was recognised in equity in prior years.

20 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

9. SHARE CAPITAL AND PREMIUM AND SHARES HELD FOR SHARE AWARD SCHEME (CONTINUED)

Share awards

During the six months ended 30 June 2020, no shares in the Company were purchased under the share award scheme and 644,000 shares under such scheme were transferred to the awardees upon vesting of the awarded shares. The remaining 3,913,000 shares under the share award scheme were held in trust as at 30 June 2020. Details of the share award scheme were disclosed in Note 10 to the condensed consolidated interim financial statements.

Share options

The shareholders of the Company approved the adoption of a share option scheme on 28 May 2012 ("Share Option Scheme"). The options granted on 23 August 2013 under the Share Option Scheme are immediately exercisable on the grant date and have a contractual option term of ten years with 22 August 2023 being the last exercisable date. The Group has no legal or constructive obligation to repurchase or settle the options in cash.

Details of the Share Option Scheme are set out under the section headed "Share Option Scheme" of the Company's 2019 annual report.

No share option was exercised during the six months ended 30 June 2020 (year ended 31 December 2019: Nil).

Movements of the number of outstanding option shares with exercise price of HKD12.11 per option share and their related weighted average exercise prices are as follows:

For the six months ended

For the year ended

30 June 2020

31 December 2019

Weighted

Weighted

average

average

exercise price

Number of

exercise price

Number of

in HKD per

outstanding

in HKD per

outstanding

option share

option shares

option share

option shares

At 1 January

12.11

7,563,000

12.11

8,188,000

Exercised

-

-

-

-

Lapsed

12.11

(300,000)

12.11

(625,000)

At 30 June/31 December

12.11

7,263,000

12.11

7,563,000

No new option was granted during the six months ended 30 June 2020 and 2019.

No share option was exercised and options on 35,000 shares were lapsed subsequent to 30 June 2020 and up to the approval date of the financial statements.

INTERIM REPORT 2020 21

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

10. SHARE AWARD SCHEME

The Group operates the share award scheme as part of the benefits for its employees and the Company's directors which allows shares of the Company to be granted to the awardees. The awarded shares can either be purchased on the open market or newly issued by the Company.

Most of the awarded shares vest progressively over the vesting period after the awards are granted and the ultimate number of shares being vested is conditional on the satisfaction of performance conditions set by the management of the Group.

During the six months ended 30 June 2020, no share was granted and a total of 644,000 shares were vested to the qualified awardees. During the period, an expense of USD770,000 (2019: USD2,341,000) for the award shares granted was charged to the condensed consolidated interim statement of profit or loss. Details of the awarded shares granted and vested during 2020 and 2019 are as follows:

Maximum

Number of awarded shares vested

deliverable

Number of

awarded

For the year

awarded

shares on grant

ended 31

For the six

Fair value

shares

date subject to

December

months ended

Vesting

Grant date

per share

granted

adjustment

Before 2019

2019

30 June 2020

period

In year 2018

11 Apr 2018

HKD15.82

1,418,000

1,418,000

1,418,000

-

-

Nil

20 Jul 2018

HKD13.00

707,678

1,228,000

40,000

134,000

52,000

20 Jul 2018 to

1 Apr 2021

30 Aug 2018

HKD11.78

975,893

1,736,000

-

196,000

196,000

30 Aug 2018

to 1 Apr 2021

Total for 2018

3,101,571

4,382,000

1,458,000

In year 2019

1 Apr 2019

HKD11.56

1,477,169

2,338,000

285,000

316,000

1 Apr 2019 to

1 Apr 2022

15 Jun 2019

HKD9.45

1,547,200

2,754,000

-

56,000

15 Jun 2019 to

1 Apr 2022

30 Jun 2019

HKD9.85

751,515

1,292,000

60,000

24,000

30 Jun 2019 to

1 Apr 2022

1 Nov 2019

HKD8.41

494,000

494,000

-

-

1 Nov 2019 to

1 Apr 2022

Total for 2019

4,269,884

6,878,000

675,000

In year 2020

Total for 2020

644,000

Further details of the share award scheme are set out under the section headed "Share Award Scheme" of the Company's 2019 annual report.

22 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

11.

OTHER RESERVES

Share

Share

Capital

Exchange

Asset

option

award

Hedging

redemption

fluctuation

Capital

revaluation

Other

Contributed

reserve

reserve

reserve

reserve

reserve

reserve

reserve

reserve

surplus

Total

Balance at 1 January 2019

6,216

589

4,446

10,666

(321,148)

601,490

-

1,368

389,741

693,368

Currency translation differences

-

-

-

-

(3,093)

-

-

-

-

(3,093)

Fair value changes of

interest-rate swap

contracts - hedging

-

-

(17,496)

-

-

-

-

-

-

(17,496)

Share-based compensation

under share award scheme

-

2,341

-

-

-

-

-

-

-

2,341

Vesting of shares under share

award scheme

-

(1,024)

-

-

-

-

-

-

-

(1,024)

Balance at 30 June 2019

6,216

1,906

(13,050)

10,666

(324,241)

601,490

-

1,368

389,741

674,096

Currency translation differences

-

-

-

-

(50,431)

-

-

-

-

(50,431)

Fair value changes of

interest-rate swap and

cross-currency swap

contracts - hedging

-

-

9,706

-

-

-

-

-

-

9,706

Revaluation of a property held

by an associate upon

reclassification from property,

plant and equipment to

investment properties

-

-

-

-

-

-

20,577

-

-

20,577

Share-based compensation

under share award scheme

-

(264)

-

-

-

-

-

-

-

(264)

Balance at 31 December 2019

and 1 January 2020

6,216

1,642

(3,344)

10,666

(374,672)

601,490

20,577

1,368

389,741

653,684

Currency translation differences

-

-

-

-

(157,308)

-

-

-

-

(157,308)

Fair value changes of

interest-rate swap and

cross-currency swap

contracts - hedging

-

-

(90,000)

-

-

-

-

-

-

(90,000)

Revaluation of a property held

by a subsidiary upon

reclassification from property,

plant and equipment and

right-of-use assets to

investment properties

-

-

-

-

-

-

246

-

-

246

Share-based compensation

under share award scheme

-

770

-

-

-

-

-

-

-

770

Vesting of shares under share

award scheme

-

(955)

-

-

-

-

-

-

-

(955)

Balance at 30 June 2020

6,216

1,457

(93,344)

10,666

(531,980)

601,490

20,823

1,368

389,741

406,437

INTERIM REPORT 2020 23

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

12. BANK LOANS AND OVERDRAFTS

As at

30 June 2020 31 December 2019

Overdrafts - unsecured

718

-

Bank loans - secured (Note 24 (c))

14,111

17,613

Bank loans - unsecured

4,489,872

4,354,814

Total

4,504,701

4,372,427

Less: Non-current portion

(4,087,124)

(3,997,098)

Current portion

417,577

375,329

The maturity of bank loans and overdrafts are as follows:

As at

30 June 2020 31 December 2019

Within 1 year

417,577

375,329

Between 1 and 2 years

1,123,226

640,493

Between 2 and 5 years

2,005,963

2,490,960

Repayable within 5 years

3,546,766

3,506,782

Over 5 years

957,935

865,645

Total

4,504,701

4,372,427

The effective interest rates at the date of the condensed consolidated interim statement of financial position are as follows:

30 June 2020

HKD

RMB

USD

EUR

JPY

AUD

FJD

SGD

Bank loans and

overdrafts

1.47%

4.87%

1.49%

1.00%

0.72%

2.19%

4.25%

1.00%

31 December 2019

HKD

RMB

USD

EUR

JPY

AUD

FJD

SGD

Bank loans

3.74%

4.85%

2.86%

1.02%

0.65%

2.19%

3.75%

-

24 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

12. BANK LOANS AND OVERDRAFTS (CONTINUED)

The carrying amounts of the bank loans and overdrafts approximate their fair values and are denominated in the following currencies:

As at

30 June 2020 31 December 2019

Hong Kong dollars (HKD)

1,464,232

1,394,555

Renminbi (RMB)

516,180

545,657

United States dollars (USD)

2,084,018

2,035,223

Euros (EUR)

210,586

213,801

Japanese yen (JPY)

165,154

120,744

Australian dollars (AUD)

55,055

55,960

Fiji dollars (FJD)

7,680

6,487

Singapore dollars (SGD)

1,796

-

4,504,701

4,372,427

The Group has the following undrawn borrowing facilities:

As at

30 June 2020 31 December 2019

Floating rate

- expiring within one year

141,608

18,783

- expiring beyond one year

1,084,800

1,014,023

Fixed rate

- expiring within one year

-

1,620

- expiring beyond one year

4,523

7,127

1,230,931

1,041,553

INTERIM REPORT 2020 25

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

13. FIXED RATE BONDS

In January 2020, a wholly owned subsidiary of the Company issued 10-year fixed rate bonds in an aggregated amount of SGD250,000,000 (equivalent to USD185,805,000) at 100% of the face value with a coupon rate of 3.50% per annum. The fixed rate bonds recognised in the condensed consolidated interim statement of financial position are as follows:

Balance as at

New issuance

Coupon rate

31 December

during the

Exchange

Balance as at

per annum

Maturity

2019

period

differences

30 June 2020

Bonds issued in 2018

SGD825,000,000

4.50%

November 2025

613,155

-

(20,610)

592,545

USD35,000,000

5.23%

November 2025

35,000

-

-

35,000

Bonds issued in 2019

SGD135,000,000

3.70%

June 2024

100,334

-

(3,372)

96,962

SGD165,000,000

4.10%

June 2027

122,631

-

(4,122)

118,509

Bond issued in 2020

SGD250,000,000

3.50%

January 2030

-

185,805

(6,246)

179,559

Face value

871,120

185,805

(34,350)

1,022,575

Unamortised discount

and issuing expenses

(2,983)

(3,425)

Carrying amount

868,137

1,019,150

26 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

14. DERIVATIVE FINANCIAL INSTRUMENTS

As at

30 June 2020 31 December 2019

Non-current liabilities

- interest-rate swap contracts

69,924

14,011

- cross-currency swap contracts

5,196

1,657

75,120

15,668

Current liabilities

- interest-rate swap contracts

29,950

5,846

- cross-currency swap contracts

1,022

297

30,972

6,143

Total liabilities

106,092

21,811

Non-current assets

- interest-rate swap contracts

-

8,958

- cross-currency swap contracts

1,721

21

1,721

8,979

Current assets

- interest-rate swap contracts

-

2,153

- cross-currency swap contracts

390

4

390

2,157

Total assets

2,111

11,136

INTERIM REPORT 2020 27

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

14. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

Interest-rate swap contracts

The Group has endeavored to hedge its medium term interest rate risk by entering into fixed HIBOR, LIBOR and SHIBOR interest-rate swap contracts and all interest-rate swap contracts qualify for hedge accounting.

All the interest-rate swap contracts were initially recognised at fair value on the dates the contracts were entered and are subsequently re-measured at fair value at each date of the statement of financial position. The recorded fair value could be an asset or liability depending on the prevailing financial market conditions and the anticipated interest rate environment.

During the six months ended 30 June 2020, no new interest-rate swap contract was executed.

The notional principal amounts of the outstanding HIBOR, LIBOR and SHIBOR interest-rate swap contracts at 30 June 2020 are as follows:

  • HKD6,170,000,000 (equivalent to USD796,129,000) (31 December 2019: HKD6,170,000,000 (equivalent to USD796,129,000)) with fixed interest rates vary from 1.505% to 1.855% per annum maturing during July 2023 to August 2026.
  • USD1,265,000,000 (31 December 2019: USD1,265,000,000) with fixed interest rates vary from 1.365% to 3.045% per annum maturing during April 2022 to July 2024.
  • RMB443,300,000 (equivalent to USD62,617,000) (31 December 2019: RMB464,000,000 (equivalent to USD66,512,000)) with fixed interest rates vary from 3.370% to 3.550% per annum maturing during June 2022 to October 2022.

Cross-currency swap contracts

During the year ended 31 December 2019, a wholly-owned subsidiary of the Company entered into a cross-currency swap contract amounting to JPY8,000,000,000 to hedge the JPY bank borrowings of the same amount, under which the principal amount was exchanged at inception to HKD578,754,000 at an exchange rate of JPY 13.8228 to HKD1 and will be re-exchanged on expiry date in July 2026 at the same exchange rate. Under the contract, a fixed interest rate of 3.345% per annum on the exchanged Hong Kong dollar principal amounts would be paid and a floating interest rate of JPY LIBOR+0.675% per annum on the JPY principal amount would be received. The cross-currency swap contract qualifies for hedge accounting.

During the year ended 31 December 2018, a wholly-owned subsidiary of the Company entered into a cross-currency swap contract amounting to USD35,000,000, under which the principal amount was exchanged at inception to SGD48,377,000 at an exchange rate of USD1 to SGD1.3822 and will be re-exchanged on expiry date in November 2025 at the same exchange rate. Under the contract, a fixed interest rate of 4.25% per annum on the exchanged Singapore dollar principal amounts would be paid and a fixed interest rate of 5.23% per annum on the United States dollar principal amount would be received. The cross-currency swap contract does not qualify for hedge accounting.

28 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

15. AMOUNTS DUE TO NON-CONTROLLING SHAREHOLDERS

Amounts due to non-controlling shareholders are unsecured and with the following terms:

As at

30 June 2020

31 December 2019

Non-current portion

- interest-bearing at LIBOR +5%

46,550

46,550

Current portion

- interest-free with no fixed repayment terms

47,165

39,528

The fair values of the amounts due to non-controlling shareholders are not materially different from their carrying values.

16. ACCOUNTS PAYABLE AND ACCRUALS

As at

30 June 2020 31 December 2019

Trade payables

84,952

94,432

Construction cost payable, other payables and accrued expenses

400,721

571,945

485,673

666,377

The ageing analysis of the trade payables based on invoice date is as follows:

As at

30 June 2020 31 December 2019

0 - 3 months

60,301

85,316

4 - 6 months

13,096

2,834

Over 6 months

11,555

6,282

84,952

94,432

INTERIM REPORT 2020 29

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

17. EXPENSES BY NATURE

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

For the six months ended

30 June 2020

30 June 2019

Depreciation of property, plant and equipment (net of amount

capitalised of USD7,000 (2019: USD7,000)) (Note 5)

131,119

147,728

Amortisation of trademark; and website and system

development (Note 5)

2,240

1,676

Amortisation of right-of-use assets (Note 5)

26,609

26,916

Employee benefit expenses excluding directors' emoluments

295,794

409,008

Cost of sales of properties

5,567

30,313

Cost of inventories sold or consumed in operation

62,474

147,279

Loss on disposal of property, plant and equipment and

partial replacement of investment properties

318

742

Impairment of intangible assets (Note 5)

1,256

-

Pre-opening expenses

90

1,568

18. OTHER (LOSSES)/GAINS - NET

For the six months ended

30 June 2020

30 June 2019

Net unrealised (losses)/gains on financial assets at fair value through

profit or loss - equity securities

(3,714)

4,188

Fair value losses on financial assets at fair value through profit or loss

- club debentures

(38)

(430)

Fair value change of cross-currency swap contracts

2,087

75

Net fair value (losses)/gains of investment properties (net of amount

recognised in other comprehensive income of USD 328,000) (Note 5)

(28,531)

39,840

Impairment loss on a loan to a third party

(1,050)

-

Insurance claim recovered from a bombing incident

4,009

-

Associated expenses spent due to a bombing incident

(211)

-

Government grants due to COVID-19 pandemic

16,487

-

Rent concessions received from lessors

1,601

-

Interest income

7,658

10,749

Dividend income

602

764

Others

309

(1,692)

(791)

53,494

30 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

19. FINANCE COSTS - NET

For the six months ended

30 June 2020

30 June 2019

Interest expense

- bank loans

63,558

81,675

- interest-rate swap contracts - hedging

6,235

(1,363)

- fixed rate bonds

21,229

14,918

- other loans

2,623

2,791

- interest on lease liability

15,337

15,796

108,982

113,817

Less: Amount capitalised

(1,520)

(5,059)

107,462

108,758

Net foreign exchange (gains)/losses

(2,144)

2,635

105,318

111,393

The effective capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 3.38% per annum for the period (2019: 3.67% per annum).

20. SHARE OF PROFIT OF ASSOCIATES

For the six months ended

30 June 2020

30 June 2019

Share of profit before tax of associates before share of net fair value

changes of investment properties

66,099

141,660

Share of net fair value (losses)/gains of investment properties

(13,689)

31,475

Share of profit before tax of associates

52,410

173,135

Share of associates' taxation before provision for deferred tax liabilities

on net fair value changes of investment properties

(22,935)

(41,374)

Share of provision for deferred tax liabilities on net fair value changes of

investment properties

3,024

(7,869)

Share of associates' taxation

(19,911)

(49,243)

Share of profit of associates

32,499

123,892

INTERIM REPORT 2020 31

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

21. INCOME TAX (CREDIT)/EXPENSE

Income tax (credit)/expense is accrued using the tax rate that would be applicable to expected total annual earnings. Hong Kong profits tax has been provided at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits for the period. Taxation outside Hong Kong includes withholding tax paid and payable on dividends and tax provided at the prevailing rates on the estimated assessable profits of group companies operating outside Hong Kong.

For the six months ended

30 June 2020

30 June 2019

Current income tax

- Hong Kong profits tax

-

5,926

- overseas taxation

7,896

39,294

Deferred income tax

(23,029)

18,920

(15,133)

64,140

22. (LOSS)/EARNINGS PER SHARE

Basic

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the period after adjustment of those issued ordinary shares of the Company held by a subsidiary and the share award scheme.

For the six months ended

30 June 2020

30 June 2019

(Loss)/Profit attributable to owners of the Company (USD'000)

(282,627)

115,061

Weighted average number of ordinary shares in issue (thousands)

3,570,789

3,572,102

Basic (loss)/earnings per share (US cents per share)

(7.915)

3.221

32 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

22. (LOSS)/EARNINGS PER SHARE (CONTINUED)

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has the potential dilutive effect on the outstanding share options. A calculation is done to determine the number of shares that would be issued at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is increased by the number of shares that would have been issued assuming the exercise of the share options.

For the six months ended 30 June 2020 and 30 June 2019, there is anti-dilution on the loss per share and earnings per share, respectively. As the Group incurred losses for the six months ended 30 June 2020, the potential dilutive ordinary shares were not included in the calculation of the dilutive losses per share as their inclusion would be anti-dilutive and the diluted loss per share is the same as the basic loss per share.

For the six months ended

30 June 2020

30 June 2019

(Loss)/Profit attributable to owners of the Company (USD'000)

(282,627)

115,061

Weighted average number of ordinary shares in issue (thousands)

3,570,789

3,572,102

Adjustments (thousands)

-

-

Weighted average number of ordinary shares for

diluted (loss)/earnings per share (thousands)

3,570,789

3,572,102

Diluted (loss)/earnings per share (US cents per share)

(7.915)

3.221

23. DIVIDENDS

For the six months ended

30 June 2020

30 June 2019

No interim dividend has been proposed

(2019: HK8 cents per ordinary share)

-

36,877

Notes:

  1. At a meeting held on 27 March 2020, the Board recommends no final dividend payment for the year ended 31 December 2019.
  2. At a meeting held on 28 August 2020, the Board recommends no interim dividend payment for the year ending 31 December 2020.

INTERIM REPORT 2020 33

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

  1. FINANCIAL GUARANTEES, CONTINGENCIES AND CHARGES OVER ASSETS
    1. Financial guarantees
      The Group executed proportionate guarantees in favour of banks for securing banking facilities granted to certain associates. The utilised amount of such facilities covered by the Group's guarantees for these associates as at 30 June 2020 amounted to USD101,514,000 (31 December 2019: USD96,909,000).
      Guarantees are stated at their respective contracted amounts. The Board is of the opinion that it is not probable that the above guarantees will be called upon.
    2. Contingent liabilities
      As at 30 June 2020 and 31 December 2019, there were no material contingent liabilities.
    3. Charges over assets
      As at 30 June 2020, bank loan of a subsidiary amounted to USD14,111,000 (31 December 2019: USD17,613,000) was secured by legal mortgage over the property owned by the subsidiary with a net book value of USD98,884,000 (31 December 2019: USD113,923,000).
  3. COMMITMENTS

The Group's commitments for capital expenditure at the date of the condensed consolidated interim statement of financial position but not yet incurred are as follows:

As at

30 June 2020 31 December 2019

Existing properties - property, plant and equipment and

investment properties

- contracted but not provided for

60,354

44,914

- authorised but not contracted for

78,977

98,291

Development projects

- contracted but not provided for

48,967

53,143

- authorised but not contracted for

419,211

221,984

607,509

418,332

34 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

26. RELATED PARTY TRANSACTIONS

Kerry Holdings Limited ("KHL"), a substantial shareholder and a related party of the Company, has significant influence over the Company.

The following transactions were carried out with related parties:

For the six months ended

30 June 2020

30 June 2019

(a)

Transactions with subsidiaries of KHL

(other than subsidiaries of the Company)

Receipt of hotel management and related services fees

and royalty fees

3,857

6,518

Reimbursement of office expenses and payment of

administration and related expenses

144

875

Payment of office rental, management fees and rates

4,129

3,562

Purchase of wines

555

1,502

For the six months ended

30 June 2020

30 June 2019

(b)

Transactions with associates of the Group (other than the

subsidiaries of KHL included under item(a) above)

Receipt of hotel management and related services fees

and royalty fees

4,579

11,854

Receipt of laundry services fees

97

233

As at

30 June 2020 31 December 2019

(c)

Financial assistance provided to subsidiaries of KHL

(other than subsidiaries of the Company)

Balance of loan to associates of the Group

134,629

184,435

Balance of guarantees executed in favour of banks for securing

bank loans/facilities granted to associates of the Group

86,678

78,996

As at

30 June 2020 31 December 2019

(d)

Financial assistance provided to associates of the Group

(excluding item (c) above)

Balance of loan to associates of the Group

47,314

47,314

Balance of guarantees executed in favour of banks for securing

bank loans/facilities granted to associates of the Group

14,836

17,913

There are no material changes to the terms of the above transactions during the period.

INTERIM REPORT 2020 35

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

26. RELATED PARTY TRANSACTIONS (CONTINUED)

For the six months ended

30 June 2020

30 June 2019

(e)

Key management compensation

Fees, salaries and other short-term employee benefits of

executive directors

1,479

4,324

Post-employment benefits of executive directors

14

23

1,493

4,347

27. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The Group measures financial assets and liabilities using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

Level 1

-

Quoted market prices (unadjusted) in active markets for identical assets or liabilities

Level 2

-

Inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly (that is, as prices) or indirectly (that is, derived from prices)

Level 3

-

Fair value measured using significant unobservable inputs

The definitions, the valuation technique and inputs used in the fair value measurements for financial assets and liabilities under Level 1, Level 2 and Level 3 are consistent with those used in the Group's annual financial statements for the year ended 31 December 2019.

The following table presents the Group's financial assets and liabilities that are measured at fair value at 30 June 2020.

Level 1

Level 2

Level 3

Total

Assets

Derivative financial instruments

- cross-currency swap contracts

-

2,111

-

2,111

Financial assets at fair value through other

comprehensive income

- equity and loan instruments

-

-

4,269

4,269

Financial assets at fair value through profit or loss

- club debentures

9,828

-

-

9,828

- listed shares

14,474

-

-

14,474

24,302

2,111

4,269

30,682

Liabilities

Derivative financial instruments

- interest-rate swap contracts

-

99,874

-

99,874

- cross-currency swap contracts

-

6,218

-

6,218

-

106,092

-

106,092

36 SHANGRI-LA ASIA LIMITED

NOTES TO THE CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

(All amounts in US dollar thousands unless otherwise stated)

27. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (CONTINUED)

The following table presents the Group's financial assets and liabilities that are measured at fair value at 31 December 2019.

Level 1

Level 2

Level 3

Total

Assets

Derivative financial instruments

- interest-rate swap contracts

-

11,111

-

11,111

- cross-currency swap contracts

-

25

-

25

Financial assets at fair value through other

comprehensive income

- equity and loan instruments

-

-

4,357

4,357

Financial assets at fair value through profit or loss

- club debentures

9,866

-

-

9,866

- listed shares

18,188

-

-

18,188

28,054

11,136

4,357

43,547

Liabilities

Derivative financial instruments

- interest-rate swap contracts

-

19,857

-

19,857

- cross-currency swap contracts

-

1,954

-

1,954

-

21,811

-

21,811

During the six months ended 30 June 2020, there was no transfer between the levels of fair value hierarchy of the Group's financial assets and liabilities .

INTERIM REPORT 2020 37

DISCUSSION

AND ANALYSIS

The principal activities of the Group remained the same as in 2019. The Group's business is organised into four main segments:

  • Hotel Properties - development, ownership and operations of hotel properties (including hotels under leases)
  • Hotel Management and Related Services for Group-owned hotels and for hotels owned by third parties
  • Investment Properties - development, ownership and operations of office properties, commercial properties and serviced apartments/residences
  • Property Development for Sale

The Group continues to develop hotel properties, investment properties for rental purpose and properties for sales for the above mentioned business segments.

The Group currently owns and/or manages hotels under the following brands:

  • Shangri-LaHotels and Resorts
  • Kerry Hotels
  • JEN by Shangri-La
  • Traders Hotels

38 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

The following table summarises the hotels and rooms of the Group as at 30 June 2020:

Total

Owned/Leased

Managed

Operating Hotels

Hotels Under Development

Hotels under

Owned

Management

Hotels

Rooms

Hotels

Rooms

Hotels

Rooms

Hotels

contracts

in '000

in '000

in '000

72

30.6

15

4.7

87

35.3

3

8

3

1.6

-

-

3

1.6

-

-

7

2.8

2

0.6

9

3.4

-

2

-

-

3

1.2

3

1.2

1

-

Total

82

35.0

20

6.5

102

41.5

4

10

Note:

Shangri-La Hotel, Zhoushan in Mainland China opened for business in January 2020.

The following table summarises the total Gross Floor Area ("GFA") of the operating investment properties for rental owned by subsidiaries and associates:

Total GFA of the operating investment

properties as at 30 June 2020

Group's

Serviced

equity

Office

Commercial

apartments/

(in thousand square metres)

interest

spaces

spaces

residential

Mainland China

20.0-100.0%

854.6

578.8

266.5

Malaysia

52.8%

45.2

8.5

17.4

Singapore

44.6-100.0%

3.3

22.9

24.7

Australia

100.0%

0.5

11.4

-

Mongolia

51.0%

58.0

39.6

30.0

Myanmar

55.9-59.3%

37.6

11.8

56.8

Sri Lanka

90.0%

58.2

74.7

3.7

Total

1,057.4

747.7

399.1

INTERIM REPORT 2020 39

DISCUSSION

AND ANALYSIS

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

The following table shows the Group's profit or loss for the six months ended 30 June 2020 and 2019 presented in the conventional financial statement format and the effective share format, respectively. Amounts presented in the conventional financial statement format refer to the aggregate total of the Company and its subsidiaries at 100% basis less non-controlling interests and add share of profit of associates to come up with the Group's final reported profit or loss attributable to owners of the Company. The alternative presentation of the Group's profit or loss at effective share is a non-HKFRS financial presentation format and the amounts presented at effective share are the aggregate total of the Company and the Group's share of subsidiaries and associates based on percentage of equity interests.

Profit or loss for the

Profit or loss for the

six months ended

six months ended

2020/19

30 June 2020

30 June 2019

% change

Financial

Financial

Financial

statement

Effective

statement

Effective

statement

Effective

format

share

format

share

format

share

USD Mil

USD Mil

USD Mil

USD Mil

Revenue

453.5

622.5

1,195.0

1,448.8

-62.1%

-57.0%

Cost of sales

(295.4)

(354.5)

(534.4)

(609.8)

44.7%

41.9%

Gross profit

158.1

268.0

660.6

839.0

-76.1%

-68.1%

Operating expenses

(251.7)

(259.5)

(360.6)

(390.6)

30.2%

33.6%

Other gains - operating items

18.8

19.3

0.9

0.8

N/M

N/M

EBITDA

(74.8)

27.8

300.9

449.2

N/M

-93.8%

Depreciation and amortisation

(160.0)

(177.0)

(176.3)

(193.5)

9.2%

8.5%

Loss on disposal of fixed assets

(0.3)

(0.2)

(0.7)

(0.7)

57.1%

71.4%

Interest income

7.7

8.7

10.7

13.0

-28.0%

-33.1%

Other (losses)/gains -

non-operating items

(27.2)

(33.3)

41.9

65.7

N/M

N/M

Operating (loss)/profit

(254.6)

(174.0)

176.5

333.7

N/M

N/M

Finance costs - net

(105.3)

(101.7)

(111.4)

(112.0)

5.5%

9.2%

Share of profit of associates

32.5

-

123.9

-

-73.8%

N/M

(Loss)/Profit before income tax

(327.4)

(275.7)

189.0

221.7

N/M

N/M

Income tax (credit)/expense

- Operating items

10.5

(13.0)

(56.1)

(91.8)

N/M

85.8%

- Non-operating items

4.7

6.1

(8.0)

(14.8)

N/M

N/M

(Loss)/Profit for the period

(312.2)

(282.6)

124.9

115.1

N/M

N/M

Add/(Less): Loss/(Profit) attributable

to non-controlling interests

29.6

-

(9.8)

-

N/M

N/M

(Loss)/Profit attributable to

owners of the Company

(282.6)

(282.6)

115.1

115.1

N/M

N/M

40 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS

Consolidated Revenue

Details of the segment revenue information are provided in Note 4 to the condensed consolidated interim financial statements included in this interim report.

Consolidated revenue was USD453.5 million for the six months ended 30 June 2020, a decrease of 62.1% (or USD741.5 million), compared to USD1,195.0 million for the six months ended 30 June 2019. The decrease was mainly driven by:

  • Severe business disruptions caused by the COVID-19 pandemic to the operations of the Group's hotel operations, leading to a revenue decline of USD717.8 million.
  • A decrease of USD59.5 million in property development for sale mainly driven by slower recognition of revenue of sale of residences in Shangri-La's One Galle Face development in Colombo, Sri Lanka.
  1. Hotel Properties
    For the six months ended 30 June 2020, the decrease of revenue from our consolidated hotel properties was mainly driven by the effects of travel restrictions, social distancing measures and governmental actions connected with the COVID-19 pandemic.
    Please refer to table below for their respective impact on the decrease of our revenue in the six months ended 30 June 2020:

For the six months ended 30 June

Hotel Properties

2020

2019

2020/19

USD Million

USD Million

% change

The People's Republic of China

Hong Kong

41.5

175.0

-76.3%

Mainland China

138.4

380.4

-63.6%

Singapore

46.0

111.0

-58.6%

Malaysia

20.0

58.7

-65.9%

The Philippines

39.3

92.6

-57.6%

Japan

11.4

31.0

-63.2%

Thailand

14.2

39.2

-63.8%

France

6.6

21.6

-69.4%

Australia

17.1

41.1

-58.4%

United Kingdom

8.7

24.2

-64.0%

Mongolia

1.7

6.9

-75.4%

Sri Lanka

7.8

13.8

-43.5%

Other countries

14.9

30.1

-50.5%

Total consolidated revenue

367.6

1,025.6

-64.2%

INTERIM REPORT 2020 41

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Revenue (Continued)

  1. Hotel Properties (Continued)
    The key performance indicators of the Group-owned hotels (including hotels under leases) on an unconsolidated basis (including both subsidiaries and associates) for the six months ended 30 June 2020 and 2019 are as follows:

2020 Weighted Average

2019 Weighted Average

Country

Occupancy

Room Rate

RevPAR

Occupancy

Room Rate

RevPAR

(%)

(USD)

(USD)

(%)

(USD)

(USD)

The People's Republic of China

Hong Kong

14

216

30

82

290

237

Mainland China

24

98

24

64

122

79

Tier 1 Cities

22

142

31

76

170

130

Tier 2 Cities

26

83

22

63

95

60

Tier 3+4 Cities

23

71

16

48

86

41

Singapore

42

155

65

78

215

168

Malaysia

25

130

32

72

132

95

The Philippines

33

177

59

69

201

139

Japan

29

560

160

79

615

485

Thailand

24

170

41

68

173

117

France

38

1,128

434

54

1,220

663

Australia

36

227

82

85

232

198

United Kingdom

30

544

161

77

558

429

Mongolia

7

159

12

35

186

66

Sri Lanka

18

137

24

33

165

54

Other countries

24

173

42

49

188

92

Weighted Average

26

139

35

66

167

110

The weighted average occupancy of our hotels was 26% for the six months ended 30 June 2020, a decrease of 40 percentage points compared to 66% for the six months ended 30 June 2019. The RevPAR was USD35 for the six months ended 30 June 2020, a decrease of 68%, compared to USD110 for the six months ended 30 June 2019.

Below are comments on hotel performances on selected geographies that had reasonable significance to movements to performance of our Hotel Properties business as a whole:

The People's Republic of China

Hong Kong

For Hong Kong, the occupancy was 14% for the six months ended 30 June 2020, a decrease of 68 percentage points, compared to 82% for the six months ended 30 June 2019. The RevPAR was USD30 for the six months ended 30 June 2020, a decrease of 87%, compared to USD237 for the six months ended 30 June 2019. Our hotels in Hong Kong saw a sharp decline of business as the city saw its first confirmed COVID-19 case in late January and remained challenging throughout the period. Although there were slight pick up during weekends due to promotions, the momentum was lost as third wave began to hit in early July. Total revenue from Hong Kong hotel properties for the six months ended 30 June 2020 decreased by 76.3% to USD41.5 million.

42 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Revenue (Continued)

  1. Hotel Properties (Continued)
    The People's Republic of China (Continued)
    Mainland China
    The Group had equity interest in 45 operating hotels in Mainland China as at 30 June 2020.
    For Mainland China, the occupancy was 24% for the six months ended 30 June 2020, a decrease of 40 percentage points, compared to 64% for the six months ended 30 June 2019. The RevPAR was USD24 for the six months ended 30 June 2020, a decrease of 70%, compared to USD79 for the six months ended 30 June 2019. The China hotel market marked a bottom in early February with low single-digit occupancy, and have since seen a gradual recovery during the period. For the month of June 2020, average occupancy has reached 35% and RevPAR of USD31. The recovery was supported by domestic leisure and corporate travel as well as some government businesses.
    Below is the performance of our hotels in different tiered cities:
    • In Tier 1 cities, the occupancy was 22% for the six months ended 30 June 2020, a decrease of 54 percentage points, compared to 76% for the six months ended 30 June 2019. The RevPAR was USD31 for the six months ended 30 June 2020, a decrease of 76%, compared to USD130 for the six months ended 30 June 2019.
      Recovery of business in Tier 1 cities was slower than the country's average, mainly due to a more cautious re-opening approach in Beijing. The capital city was also affected by a second wave of COVID-19 in June, where average occupancy of our five hotels in the city dropped back to 19% for the month.
    • In Tier 2 cities, the occupancy was 26% for the six months ended 30 June 2020, a decrease of 37 percentage points, compared to 63% for the six months ended 30 June 2019. The RevPAR was USD22 for the six months ended 30 June 2020, a decrease of 63%, compared to USD60 for the six months ended 30 June 2019. The recovery of business in Tier 2 cities was helped by cities such as Hangzhou where it saw stronger pent up staycation demand, helping our two hotels in the city reach occupancy of 51% in June 2020. Jinan and Nanchang saw healthy pick up in local corporate demand for conferences and business restarts, where their occupancies in June 2020 reached 62% and 58%, respectively.
    • In Tier 3 and Tier 4 cities, the occupancy was 23% for the six months ended 30 June 2020, a decrease of 25 percentage points, compared to 48% for the six months ended 30 June 2019. The RevPAR was USD16 for the six months ended 30 June 2020, a decrease of 61%, compared to USD41 for the six months ended 30 June 2019. Cities such as Lhasa, Diqing, Hainan and Qinhuangdao were helped by a strong domestic demand, where occupancies for June 2020 reached 83%, 54%, 49% and 43%, respectively. Tangshan was helped by the restart of local businesses such as steel mills, and occupancy in June 2020 reached 50%.

Total revenue from Mainland China hotel properties for the six months ended 30 June 2020 decreased by 63.6% to USD138.4 million.

INTERIM REPORT 2020 43

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Revenue (Continued)

  1. Hotel Properties (Continued) Singapore
    For Singapore, the occupancy was 42% for the six months ended 30 June 2020, a decrease of 36 percentage points, compared to 78% for the six months ended 30 June 2019. The RevPAR was USD65 for the six months ended 30 June 2020, a decrease of 61%, compared to USD168 for the six months ended 30 June 2019. A strong start of the year was quickly disrupted by COVID-19, where occupancy dropped to below 30% in March. Recovery was gradual from April onwards, helped by Government contracts for overseas workers and stay home notice programme for returning residents. Total revenue from Singapore hotel properties for the six months ended 30 June 2020 decreased by 58.6% to USD46.0 million.
    Malaysia
    For Malaysia, the occupancy was 25% for the six months ended 30 June 2020, a decrease of 47 percentage points, compared to 72% for the six months ended 30 June 2019. The RevPAR was USD32 for the six months ended 30 June 2020, a decrease of 66%, compared to USD95 for the six months ended 30 June 2019. Hotels in Malaysia were closed for business beginning late March, and were only allowed to reopen in early June. Total revenue from Malaysia hotel properties for the six months ended 30 June 2020 decreased by 65.9% to USD20.0 million.
    The Philippines
    For The Philippines, the occupancy was 33% for the six months ended 30 June 2020, a decrease of 36 percentage points, compared to 69% for the six months ended 30 June 2019. The RevPAR was USD59 for the six months ended 30 June 2020, a decrease of 58%, compared to USD139 for the six months ended 30 June 2019. Hotels in The Philippines were closed for business beginning late March and have largely remained closed for the rest of the period, aside from certain short-term Business Process Outsourcing contracts. Total revenue from The Philippines hotel properties for the six months ended 30 June 2020 decreased by 57.6% to USD39.3 million.
    Japan
    For Japan, the occupancy was 29% for the six months ended 30 June 2020, a decrease of 50 percentage points, compared to 79% for the six months ended 30 June 2019. The RevPAR was USD160 for the six months ended 30 June 2020, a decrease of 67%, compared to USD485 for the six months ended 30 June 2019. Our hotel in Tokyo saw a bottom in April with single-digit occupancy and has stayed relatively flat since. Total revenue from Japan hotel property for the six months ended 30 June 2020 decreased by 63.2% to USD11.4 million.
    Thailand
    For Thailand, the occupancy was 24% for the six months ended 30 June 2020, a decrease of 44 percentage points, compared to 68% for the six months ended 30 June 2019. The RevPAR was USD41 for the six months ended 30 June 2020, a decrease of 65%, compared to USD117 for the six months ended 30 June 2019. Our hotels in Thailand saw a bottom in April with single-digit occupancy and has stayed relatively flat since. Total revenue from Thailand hotel properties for the six months ended 30 June 2020 decreased by 63.8% to USD14.2 million.

44 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Revenue (Continued)

  1. Hotel Properties (Continued) France
    For France, the occupancy was 38% for the six months ended 30 June 2020, a decrease of 16 percentage points, compared to 54% for the six months ended 30 June 2019. The RevPAR was USD434 for the six months ended 30 June 2020, a decrease of 35%, compared to USD663 for the six months ended 30 June 2019. Our hotel in Paris started the year strong with double-digit RevPAR growth as the same period in 2019 was affected by the yellow vest protests. However, due to COVID-19, the hotel was closed since mid-March and has remained closed for the rest of the period. Total revenue from France hotel property for the six months ended 30 June 2020 decreased by 69.4% to USD6.6 million.
    Australia
    For Australia, the occupancy was 36% for the six months ended 30 June 2020, a decrease of 49 percentage points, compared to 85% for the six months ended 30 June 2019. The RevPAR was USD82 for the six months ended 30 June 2020, a decrease of 59%, compared to USD198 for the six months ended 30 June 2019. After seeing a sharp decline in business in February, the hotels were closed for business in April and have only reopened in June. Total revenue from Australia hotel properties for the six months ended 30 June 2020 decreased by 58.4% to USD17.1 million.
    United Kingdom
    For United Kingdom, the occupancy was 30% for the six months ended 30 June 2020, a decrease of 47 percentage points, compared to 77% for the six months ended 30 June 2019. The RevPAR was USD161 for the six months ended 30 June 2020, a decrease of 62%, compared to USD429 for the six months ended 30 June 2019. Our hotel in London saw a strong start of the year with double-digit RevPAR growth, but has closed for business since mid-March and has remained closed for the period. Total revenue from UK hotel property for the six months ended 30 June 2020 decreased by 64.0% to USD8.7 million.
    Sri Lanka
    For Sri-Lanka, the occupancy was 18% for the six months ended 30 June 2020, a decrease of 15 percentage points, compared to 33% for the six months ended 30 June 2019. The RevPAR was USD24 for the six months ended 30 June 2020, a decrease of 56%, compared to USD54 for the six months ended 30 June 2019. Tourism to Sri Lanka remained weak at the start of the year due to 2019's bombing incident, and the decline was exacerbated in February due to COVID-19. Total revenue from Sri-Lanka hotel properties for the six months ended 30 June 2020 decreased by 43.5% to USD7.8 million.

INTERIM REPORT 2020 45

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Revenue (Continued)

  1. Hotel Management & Related Services
    As at 30 June 2020, the Group's wholly owned subsidiary, SLIM International Limited, together with its subsidiaries and certain fellow subsidiaries ("SLIM") managed a total of 102 hotels and resorts:
    • 79 Group-owned hotels
    • 3 hotels under lease agreements
    • 20 hotels owned by third parties

The 20 operating hotels (6,499 available rooms) owned by third parties are located in the following destinations:

  • Canada: Toronto and Vancouver
  • The Philippines: Manila
  • Oman: Muscat (2 hotels)
  • UAE: Abu Dhabi (2 hotels) and Dubai
  • Malaysia: Johor and Kuala Lumpur
  • India: New Delhi and Bengaluru
  • Taiwan: Taipei and Tainan
  • Mainland China: Changzhou (2 hotels), Haikou, Suzhou (2 hotels) and Yiwu

The overall weighted average occupancy of the hotels under third-party hotel management agreements was 30% for the six months ended 30 June 2020, a decrease of 34 percentage points, compared to 64% for the six months ended 30 June 2019. The RevPAR was USD38 for the six months ended 30 June 2020, a decrease of 59%, compared to USD92 for the six months ended 30 June 2019.

Gross revenues from SLIM was USD55.9 million for the six months ended 30 June 2020, a decrease of 51.7% (or USD59.8 million) compared to USD115.7 million for the six months ended 30 June 2019.

After eliminating inter-segment sales with subsidiaries, the net revenues from SLIM was USD28.7 million for the six months ended 30 June 2020, a decrease of 45.7% (or USD24.2 million) compared to USD52.9 million for the six months ended 30 June 2019. The decrease of gross and net revenues was mainly driven by the drop in management fees as a result of the challenging operating environment due to COVID-19.

46 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Revenue (Continued)

  1. Investment Properties
    The table below shows the geographical breakdown of our consolidated revenue derived from our Investment Properties.

For the six months ended 30 June

Investment Properties

2020

2019

2020/19

USD Million

USD Million

% change

Mainland China

10.2

9.4

8.5%

Singapore

4.9

6.7

-26.9%

Malaysia

2.6

3.2

-18.8%

Mongolia

11.5

10.9

5.5%

Sri Lanka

3.2

-

N/M

Other countries

12.1

13.5

-10.4%

Total consolidated revenue

44.5

43.7

1.8%

During the period, we benefited from opening of Sri Lanka One Galle Face office and shopping mall in November 2019. Our investment properties in Mainland China were mainly helped by improvement in occupancy rates of our offices in Chengdu Shangri-La Centre, albeit at a lower rental rate. For Mongolia, we continued to see the benefits from the ramping up of Shangri-La Centre, Ulaanbaatar, which opened for business in July 2016.

This was partially offset by our investment properties in Singapore as we saw a drop in occupancy rates for Shangri- La Residences serviced apartments.

Revenues from other geographies remained largely stable during the period.

As a result, consolidated revenue from our investment properties for the six months ended 30 June 2020 stood at USD44.5 million, an increase of 1.8% (or USD0.8 million), compared to USD43.7 million for the six months ended 30 June 2019.

  1. Property Development for Sale
    Property development for sale by subsidiaries for the six months ended 30 June 2020 stood at USD11.0 million, a decrease of 84.4%, compared to USD70.5 million for the six months ended 30 June 2019.
    During the period we had a slower recognition of sales of residential units of One Galle Face, Colombo (Sri Lanka), as well as units of residential tower of the Shangri-La Hotel, Dalian Phase II project (Yavis), Mainland China.
    4 units of Yavis sold were handed over to the buyers during the period. As at 30 June 2020, Yavis had a remaining inventory of 63 units.
    In the first half of 2020, we handed over 9 pre-sold apartments of One Galle Face, Colombo (Sri Lanka) to the buyers and recognised USD9.1 million in revenue. As at 30 June 2020, One Galle Face, Colombo had a remaining of 88 apartments for sale and 37 units sold but not handed over.

INTERIM REPORT 2020 47

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

EBITDA and Aggregate Effective Share of EBITDA

The following table summarises information related to the EBITDA of the Company and its subsidiaries and the aggregate effective share of EBITDA of the Company, subsidiaries and associates for the six months ended 30 June 2020 and 2019 by geographical areas and by business segments. All figures (including last year comparative figures) are presented in accordance with accounting standard HKFRS 16 "Lease" which was adopted on 1 January 2019.

EBITDA of

Effective share of

Effective share of

Aggregate Effective

subsidiaries

EBITDA of subsidiaries

EBITDA of associates

share of EBITDA

(USD million)

2020

2019

2020

2019

2020

2019

2020

2019

Hotel Properties

The People's Republic

of China

(25.7)

(23.8)

(0.5)

(24.3)

Hong Kong

53.2

48.6

0.6

49.2

Mainland China

(12.9)

96.5

(13.1)

87.4

(5.9)

29.9

(19.0)

117.3

Singapore

2.8

27.1

2.9

27.1

1.7

2.5

4.6

29.6

Malaysia

(5.3)

16.4

(2.8)

9.4

0.2

4.0

(2.6)

13.4

The Philippines

2.4

30.2

2.3

29.6

1.9

5.3

4.2

34.9

Japan

(2.1)

5.0

(2.1)

5.0

-

-

(2.1)

5.0

Thailand

(0.1)

15.0

-

11.1

-

-

-

11.1

France

(5.5)

(0.8)

(5.5)

(0.8)

-

-

(5.5)

(0.8)

Australia

1.2

10.2

1.2

10.2

-

-

1.2

10.2

United Kingdom

(3.0)

3.0

(3.0)

3.0

-

-

(3.0)

3.0

Mongolia

(1.3)

1.4

(0.7)

0.7

-

-

(0.7)

0.7

Sri Lanka

(2.0)

(0.4)

(1.8)

(0.4)

-

-

(1.8)

(0.4)

Other countries

(4.3)

-

(3.0)

0.1

(0.9)

2.8

(3.9)

2.9

(55.8)

256.8

(49.4)

231.0

(3.5)

45.1

(52.9)

276.1

Hotel Management and Related Services

(41.3)

(3.7)

(41.3)

(3.7)

-

-

(41.3)

(3.7)

Sub-total Hotel Operations

(97.1)

253.1

(90.7)

227.3

(3.5)

45.1

(94.2)

272.4

Investment

Properties

Mainland China

6.4

3.9

5.8

3.6

103.7

118.1

109.5

121.7

Singapore

2.4

2.7

2.4

2.7

1.3

2.2

3.7

4.9

Malaysia

1.7

2.1

0.9

1.1

-

-

0.9

1.1

Mongolia

7.1

5.9

3.6

3.0

-

-

3.6

3.0

Sri Lanka

(0.2)

-

(0.2)

-

-

-

(0.2)

-

Other countries

7.0

8.1

4.0

4.7

-

-

4.0

4.7

Sub-total Investment Properties

24.4

22.7

16.5

15.1

105.0

120.3

121.5

135.4

Property Development for Sale

& Other Business

4.9

39.3

4.4

35.4

3.7

20.2

8.1

55.6

Sub-total

(67.8)

315.1

(69.8)

277.8

105.2

185.6

35.4

463.4

Corporate and pre-opening expenses

(7.0)

(14.2)

(7.0)

(14.0)

(0.6)

(0.2)

(7.6)

(14.2)

Grand total

(74.8)

300.9

(76.8)

263.8

104.6

185.4

27.8

449.2

48 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

EBITDA and Aggregate Effective Share of EBITDA (Continued)

Aggregate effective share of EBITDA was USD27.8 million for the six months ended 30 June 2020, a decrease of 93.8% (or USD421.4 million), compared to USD449.2 million for the six months ended 30 June 2019. Below shows the breakdown by business segments:

  • Effective share of EBITDA from Hotel Operations business for the six months ended 30 June 2020 was a loss of USD94.2 million, a decrease of USD366.6 million, compared to a profit of USD272.4 million for the six months ended 30 June 2019.
  • Effective share of EBITDA from Investment Properties business for the six months ended 30 June 2020 was USD121.5 million, a decrease of 10.3% (or USD13.9 million), compared to USD135.4 million for the six months ended 30 June 2019.
  • Effective share of EBITDA from Property Development for Sale & Other Business for the six months ended 30 June 2020 was USD8.1 million, a decrease of 85.4% (or USD47.5 million), compared to USD55.6 million for the six months ended 30 June 2019.

The declines in effective share of EBITDA were mainly driven by disruptions caused by the COVID-19 pandemic, where we saw worldwide concerted implementation of travel restrictions and social distancing measures. The decrease in amount of EBITDA was lower than we saw for revenues as we were able to effectively reduce both fixed and variable costs in businesses that were impacted by the pandemic.

INTERIM REPORT 2020 49

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Profit or Loss Attributable to Owners of the Company

The following table summarises information related to the consolidated profit or loss attributable to owners of the Company before and after non-operating items for the six months ended 30 June 2020 and 2019 by geographical areas and by business segments:

For the six months ended 30 June

2020

2019

2020/19

USD Mil

USD Mil

% change

Hotel Properties

The People's Republic of China

Hong Kong

(33.6)

27.7

N/M

Mainland China

(108.1)

(6.1)

N/M

Singapore

(6.8)

11.7

N/M

Malaysia

(5.3)

6.7

N/M

The Philippines

(9.2)

7.9

N/M

Japan

(7.3)

(0.1)

N/M

Thailand

(1.4)

6.3

N/M

France

(10.7)

(7.0)

-52.9%

Australia

(6.2)

0.4

N/M

United Kingdom

(13.3)

(7.4)

-79.7%

Mongolia

(3.6)

(2.9)

-24.1%

Sri Lanka

(10.0)

(6.6)

-51.5%

Other countries

(11.3)

(5.0)

-126.0%

(226.8)

25.6

N/M

Hotel Management and Related Services

(52.2)

(15.5)

-236.8%

Sub-total Hotel Operations

(279.0)

10.1

N/M

Investment Properties

Mainland China

75.9

79.6

-4.6%

Singapore

3.5

3.9

-10.3%

Malaysia

0.7

0.8

-12.5%

Mongolia

1.7

1.1

54.5%

Sri Lanka

(8.3)

-

N/M

Other countries

2.8

3.1

-9.7%

Sub-total Investment Properties

76.3

88.5

-13.8%

Property Development for Sale & Other Business

4.5

46.2

-90.3%

Consolidated (loss)/profit from operating properties

(198.2)

144.8

N/M

50 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Profit or Loss Attributable to Owners of the Company (Continued)

For the six months ended 30 June

2020

2019

2020/19

USD Mil

USD Mil

% change

Consolidated (loss)/profit from operating properties

(198.2)

144.8

N/M

Net corporate finance costs (including foreign exchange

gains and losses)

(47.7)

(63.7)

25.1%

Land cost amortisation & pre-opening expenses for projects

& corporate expenses

(9.5)

(16.9)

43.8%

Consolidated (loss)/profit attributable to owners

of the Company before non-operating items

(255.4)

64.2

N/M

Non-operating items

(27.2)

50.9

N/M

Consolidated (loss)/profit attributable to owners

of the Company after non-operating items

(282.6)

115.1

N/M

Consolidated financial results attributable to owners of the Company after non-operating items for the six months ended 30 June 2020 was a loss of USD282.6 million compared to a profit of USD115.1 million for the six months ended 30 June

2019. Below shows the breakdown by business segments:

  • Hotel Properties registered a loss of USD226.8 million for the six months ended 30 June 2020 compared to a profit of USD25.6 million for the six months ended 30 June 2019.
  • Hotel Management and Related Services registered a loss of USD52.2 million for the six months ended 30 June 2020, an increase in loss of 236.8% (or USD36.7 million), compared to a loss of USD15.5 million for the six months ended 30 June 2019.
  • Investment Properties profit for the six months ended 30 June 2020 was USD76.3 million, a decrease of 13.8% (or USD12.2 million), compared to USD88.5 million for the six months ended 30 June 2019.
  • Property Development for Sale & Other Business profit for the six months ended 30 June 2020 was USD4.5 million, a decrease of 90.3% (or USD41.7 million), compared to USD46.2 million for the six months ended 30 June 2019.

INTERIM REPORT 2020 51

DISCUSSION

AND ANALYSIS

RESULTS OF OPERATIONS (CONTINUED)

Consolidated Profit or Loss Attributable to Owners of the Company (Continued)

As discussed in earlier sections, the decreases were mainly driven by the impact of COVID-19. The decrease in financial results was lower than we saw for revenues as we were able to effectively reduce both fixed and variable costs in businesses that were impacted by the pandemic.

  • Net corporate finance costs for the six months ended 30 June 2020 were USD47.7 million, a decrease of 25.1% (or USD16.0 million), compared to USD63.7 million for the six months ended 30 June 2019. This was mainly due to the recognition of an exchange gain of USD12.0 million arising from the intra-group borrowings at Corporate level during the period, compared to an exchange loss of USD1.9 million for the comparable period last year.
  • Non-operatingitems for the six months ended 30 June 2020 was an aggregate loss of USD27.2 million compared to a total profit of USD50.9 million for the six months ended 30 June 2019. The variance was mainly due to the recognition of fair value losses on investment properties of USD27.9 million for the period compared to fair value gains on investment properties of USD48.8 million recognised for the six months ended 30 June 2019.

CORPORATE DEBT AND FINANCIAL CONDITIONS

As at 30 June 2020, the Group's net borrowings (total bank loans, bank overdrafts and fixed rate bonds less cash and bank balances and short-term fund placements) was USD4,572.0 million, an increase of USD348.1 million, compared to USD4,223.9 million as at 31 December 2019. As at 30 June 2020, the aggregate effective share of net borrowings of subsidiaries and associates based on percentage of equity interests was USD4,487.7 million, an increase of USD317.0 million, compared to USD4,170.7 million as at 31 December 2019. The increase was mainly driven by the operating cash deficits from hotel operations as affected by COVID-19 pandemic during the period.

The Group's net borrowings to total equity ratio, i.e. the gearing ratio, increased to 77.3% as at 30 June 2020 from 64.9% as at 31 December 2019. This increase was mainly driven by the decrease of total equity of USD586.1 million due to the loss recorded during the period and the impact on the general depreciation of the Asian currencies against US dollar as well as the increase in net borrowings during the period.

At the corporate level, the Group executed the following bank loan agreements in 2020 for financing maturing loans as well as for working capital and project financing use:

  • One 7-year bank loan agreement of HKD500.0 million
  • One 7-year bank loan agreement of USD145.0 million
  • One 10-year bank loan agreement of JPY4,700.0 million

In January 2020, the Group issued 10-year term fixed rate bonds in an aggregated amount of SGD250 million with a coupon rate of 3.50% per annum.

52 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

CORPORATE DEBT AND FINANCIAL CONDITIONS (CONTINUED)

At the subsidiary level, the Group also executed the following bank loan agreements in 2020:

  • Two five-year bank loan agreements totalling RMB496.7 million and one five-year bank loan agreement of USD50.0 million for refinancing maturing loans
  • One five-year bank loan agreement of HKD1,190.0 million and one 15-year bank loan agreement of RMB1,100.0 million for funding requirements of renovation and project development

The Group has not encountered any difficulty when drawing loans from committed banking facilities. None of the banking facilities were cancelled by the banks during or after 30 June 2020.

The Group has satisfactorily complied with all covenants under its borrowing agreements.

The analysis of borrowings outstanding as at 30 June 2020 is as follows:

Maturities of Borrowings Contracted as at 30 June 2020

Repayment

Within

In the

In the 3rd to

After

(USD million)

1 year

2nd year

5th year

5 years

Total

Borrowings

Corporate borrowings

- unsecured bank loans

130.8

922.9

1,200.7

755.9

3,010.3

- fixed rate bonds

-

-

96.9

922.2

1,019.1

Bank loans and overdrafts

of subsidiaries

- secured

7.1

7.1

-

-

14.2

- unsecured

279.7

193.3

805.3

202.0

1,480.3

Total outstanding balance

417.6

1,123.3

2,102.9

1,880.1

5,523.9

% of total outstanding balance

7.6%

20.3%

38.1%

34.0%

100.0%

Undrawn but committed facilities

Bank loans and overdrafts

141.6

113.3

525.3

450.7

1,230.9

INTERIM REPORT 2020 53

DISCUSSION

AND ANALYSIS

CORPORATE DEBT AND FINANCIAL CONDITIONS (CONTINUED)

The currency mix of borrowings and cash and bank balances as at 30 June 2020 is as follows:

Cash and Bank

(USD million)

Borrowings

Balances

(Note)

In United States dollars

2,118.8

269.0

In Hong Kong dollars

1,464.2

81.5

In Singapore dollars

986.2

104.6

In Renminbi

516.2

312.7

In Euros

210.6

8.6

In Australian dollars

55.1

6.0

In Japanese yen

165.1

14.3

In Fiji dollars

7.7

0.3

In Philippines pesos

-

26.7

In Thai baht

-

48.6

In Malaysian ringgit

-

52.5

In British pounds

-

7.0

In Mongolian tugrik

-

11.5

In Sri Lankan rupee

-

7.4

In Myanmar kyat

-

0.3

In Maldivian rufiyaa

-

0.2

In other currencies

-

0.7

5,523.9

951.9

Note: Cash and bank balances as stated included short-term fund placements.

Except for the fixed rate bonds, all borrowings are generally at floating interest rates.

Details of financial guarantees, contingencies and charges over assets as at 30 June 2020 are disclosed in Note 24 to the condensed consolidated interim financial statements included in this interim report.

54 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

TREASURY POLICIES

The Group's treasury policies are aimed at minimising interest and currency risks. The Group assesses the market environment and its financial position and adjusts its tactics from time to time.

  1. Minimising Interest Risks
    The majority of the Group's borrowings are in US dollars, HK dollars and Singapore dollars and arranged at the corporate level. The corporate bonds were issued at fixed rates. The Group has closely monitored the cash flow forecasts of all its subsidiaries and arranged to transfer any surplus cash to the corporate to reduce corporate debts. In order to minimise the overall interest cost, the Group also arranged intra-group loans to utilise the surplus cash of certain subsidiaries to meet the funding requirements of other group companies. The Group reviews the intra-group loan arrangements from time to time in response to changes in currency exchange rates and bank loan interest rates.
    The Group has endeavoured to hedge its medium term interest rate risks arising from the Group's bank loans by entering into fixed HIBOR, LIBOR and SHIBOR interest-rate swap contracts. As at 30 June 2020, the outstanding interest-rate swap contracts are:
    • USD1,265.0 million at fixed rates ranging between 1.365% and 3.045% per annum maturing during April 2022 to July 2024
    • HKD6,170.0 million at fixed rates ranging between 1.505% and 1.855% per annum maturing during July 2023 to August 2026
    • RMB443.3 million at fixed rates ranging between 3.370% and 3.550% per annum maturing during June 2022 to October 2022

Taking into account the fixed rate bonds, fixed rate bank loans and the interest-rate swap contracts (including a cross-currency swap contract that also fixes the interest rate of a bank borrowing of JPY8,000 million as mentioned in next section), the Group has fixed its interest liability on 58.4% of its outstanding borrowings as at 30 June 2020, compared to 66.3% as at 31 December 2019.

All these interest-rate swap contracts qualify for hedge accounting.

INTERIM REPORT 2020 55

DISCUSSION

AND ANALYSIS

TREASURY POLICIES (CONTINUED)

  1. Minimising Currency Risks
    The Group aims at using bank borrowings in local currency to finance the capital expenditure and operational funding requirements of the properties and/or development projects in the corresponding country to achieve natural hedging of its assets. In 2020, the Group has arranged a new Japanese yen bank borrowing of JPY4,700 million to hedge the Japanese yen investment in the new Kyoto project in Japan.
    The Group would also execute cross-currency swap contracts to hedge the currency risks arising from foreign currency borrowings. As at 30 June 2020, the Group has the following cross-currency swap contracts:
    • 7-yearterm USD35 million between Singapore dollar and US dollar to hedge the US dollar fixed rate bonds at fixed interest rate of 4.25% per annum maturing November 2025
    • 7-yearterm JPY8,000 million between Japanese yen and HK dollar in order to hedge the Japanese yen bank borrowings at fixed interest rate of 3.345% per annum maturing July 2026

It is also the Group's practice, wherever and to the extent possible, to quote tariffs in the stronger currency and maintain bank balances in that currency, if legally permitted.

INVESTMENT PROPERTIES VALUATION

Investment properties of subsidiaries and associates continue to be stated at fair value and are reviewed semi-annually (including those properties being constructed for future use as investment properties for which fair value becomes reliably determinable). The fair values of investment properties are based on opinions from independent professional valuers as obtained by the Group and the relevant associates which own the investment properties. Changes in the fair value of investment properties (including those under construction) are recorded in the statement of profit or loss. For the six months ended 30 June 2020, the Group recorded an overall effective share of net fair value losses of USD27.9 million for its investment properties.

The following table shows the fair value losses of the investment properties held by the Group's subsidiaries and associates for the six months ended 30 June 2020:

Subsidiaries

Associates

Total

Effective

Effective

Effective

(USD million)

100%

Share

100%

Share

100%

Share

Losses

(28.5)

(20.3)

(32.1)

(13.7)

(60.6)

(34.0)

Deferred tax

4.6

3.1

7.1

3.0

11.7

6.1

Net losses

(23.9)

(17.2)

(25.0)

(10.7)

(48.9)

(27.9)

56 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

FINANCIAL ASSETS - TRADING SECURITIES

As at 30 June 2020, the market value of the Group's investment portfolio was USD14.5 million, which mainly included 4,483,451 ordinary shares in Kerry Properties Limited amounting to USD11.5 million, and 2,241,725 ordinary shares in Kerry Logistics Network Limited amounting to USD3.0 million. The Group recorded an unrealised net fair value loss of USD3.7 million and dividend income of USD0.6 million during the current period.

DEVELOPMENT PROGRAMMES

Construction work on the following projects is on-going:

(A)

Hotel Developments

Group's

Projected

Equity Interest

Hotel Rooms

Opening

Hotels in Mainland China

Shangri-La Hotel, Putian

40%

260

Q1 2021

Traders Hotel, Kunming

45%

273

2022

Shangri-La Hotel, Kunming (part of a composite

development project in Kunming City)

45%

81

TBD*

Shangri-La Hotel, Zhengzhou

45%

211

2024

    • TBD: To be determined
  2. Composite Developments and Investment Property Developments

Total gross floor area upon completion

Group's

(excluding hotel component)

(approximate in square metres)

Equity

Scheduled

Interest

Residential

Office

Commercial

Completion

In Mainland China

Shenyang Kerry Centre - Phase II

25%

36,149

-

-

2H 2020

Kunming City Project

45%

21,141

-

-

2022

Shenyang Kerry Centre - Phase III

25%

309,032

85,201

65,502

2022 onwards*

Phase II of Shangri-La Hotel, Fuzhou

100%

-

34,319

50,447

2023

Composite development project

in Zhengzhou

45%

94,222

58,946

3,993

2023 onwards*

460,544

178,466

119,942

* Being developed in phases

INTERIM REPORT 2020 57

DISCUSSION

AND ANALYSIS

DEVELOPMENT PROGRAMMES (CONTINUED)

The Group is currently reviewing the development plans of the following projects:

Hotel development

  • Wolong Bay in Dalian, Mainland China (wholly owned by the Group)
  • Rome, Italy (wholly owned by the Group)
  • Lakeside Shangri-La, Yangon, Myanmar (55.86% equity interest owned by the Group)
  • Bangkok, Thailand (wholly owned by the Group)
  • Kyoto, Japan (wholly owned by the Group)

Composite development

  • Nanchang city project - Phase II, Mainland China (20% equity interest owned by the Group)
  • Tianjin Kerry Centre - Phase II, Mainland China (20% equity interest owned by the Group)
  • Accra, the Republic of Ghana (45% equity interest owned by the Group)

The Group continues to review its asset portfolio and may sell assets it considers non-core at an acceptable price and introduce strategic investors for some of its operating assets/development projects. The Group adjusts its development plans and investment strategy from time to time in response to changing market conditions and in order to improve the financial position of the Group.

MANAGEMENT CONTRACTS FOR HOTELS OWNED BY THIRD PARTIES

As at the date of this report, the Group has management agreements for 20 operating hotels owned by third parties. In addition, the Group also has agreements on hand for the development of 10 new hotels currently under development and owned by third parties. The development projects are located in Nanning, Qiantan, Beijing and Shenzhen (Mainland China); Kota Kinabalu (Malaysia), Bali (Indonesia), Jeddah (Saudi Arabia), Phnom Penh (Cambodia), Melbourne (Australia) and Manama (Bahrain).

The Group continues to review proposals it receives for management opportunities and intends to secure management agreements for third-party owned hotels that do not require capital commitment in locations/cities which it considers to be of long-term strategic interest.

HUMAN RESOURCES

As at 30 June 2020, the Company and its subsidiaries had approximately 29,200 employees. The headcount of all the Group's managed hotels and resorts totalled approximately 46,000. Remuneration policies, share option scheme, share award scheme and training schemes have been consistently applied by the Group as disclosed in 2019 annual report.

58 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

PROSPECTS

We had a very challenging first half of 2020 and we anticipate the rest of the year to continue to be volatile. While we are seeing gradual business recovery in destinations where the virus is under control, we are cognizant that the situation can still rapidly change, as evidenced by second or third waves in some countries. Furthermore, tensions between US and China have intensified in recent months, where some commentators and observers expect this to heighten as we approach the US presidential elections in November. Last but not least, new trade deal negotiations between UK and EU are scheduled to be finalised in December, though the no-deal outcome is still a real possibility. With such uncertainties lingering for the remainder of the year, this could in turn impact our Group's business for the full year.

In such challenging times, we remain focused on what we can control. The wellbeing of our guests and staff continue to be our top priority, where we provide a safe and hygienic environment. We implemented Shangri-La Cares Commitment program, our health and safety commitment, which is at least on par, if not higher, than local requirements. As we anticipate limited international travel in the foreseeable future, we have also continued to increase our efforts in capturing the domestic market. As an example for Mainland China, where half of our hotels are located, it has seen a strong pick up in local leisure and corporate traveling. This helped the region reach 49% occupancy in the month of July.

We have been and will also keep a close watch on our costs and balance sheet. With the support of our employees, management and directors, we have been able to collectively keep cost down by implementing voluntary no pay leave, wage reduction and fee reduction. As at 30 June 2020, the Group had cash and cash equivalent of USD952 million and committed undrawn facilities of USD1.2 billion. During the first six months of 2020, we have secured an additional USD863 million of debt facility, where USD214 million was used for refinancing. As at 30 June 2020, the Group has USD141 million of maturing loans for repayment or refinancing for the remainder of the year. We continue to conserve our accessible cash reserve by declaring no interim dividend and keeping our capital expenditure at a minimal level.

As we enter the latter half of 2020, we will continue to utilise this quieter period to provide skills training and learning opportunities for our colleagues. We have also taken the opportunity to restructure and streamline our teams. While we remain vigilant and cautious, we are also prepared for recoveries as there are parts of the world where the pandemic are under control, specifically in Mainland China, and more recently Malaysia and Australia. Mainland China has been paving the way to demonstrate there is still a strong desire for travel once normality resumes, with June occupancy recovering to 35%, helping the hotels in the region achieve EBITDA breakeven for the first time since the first outbreak of the pandemic. If its momentum continues we may be able to obtain positive cash flow from the region for the full year.

INTERIM REPORT 2020 59

DISCUSSION

AND ANALYSIS

CORPORATE GOVERNANCE

The Company recognises the importance of transparency in governance and accountability to shareholders and that shareholders benefit from good corporate governance. The Company reviews its corporate governance framework on an ongoing basis to ensure compliance with best practices.

Directors Handbook

The Board has adopted a composite handbook ("Directors Handbook") comprising (amongst other things) a set of principles for securities transactions by directors or any non-directors of the Company ("Securities Principles") and a set of corporate governance principles of the Company ("CG Principles"), whose terms align with or are stricter than the requirements set out in the Model Code for Securities Transactions by Directors of Listed Issuers ("Securities Model Code") as contained in Appendix 10 to the Rules Governing the Listing of Securities ("Listing Rules") on The Stock Exchange of Hong Kong Limited ("HKSE") and the code provisions under the Corporate Governance Code and Corporate Governance Report ("CG Model Code") as contained in Appendix 14 to the Listing Rules, save for the provision in the Directors Handbook that the positions of the chairman and the chief executive officer of the Company may be served by the same person. The Directors Handbook serves as a comprehensive guidebook for all directors of the Company.

Code on Securities Transactions

The Company has made specific enquiry of each of the directors of the Company, and all the directors have confirmed compliance with the Securities Principles throughout the underlying six-month period.

Code on Corporate Governance

The Company has complied with the CG Principles and the CG Model Code throughout the underlying six-month period.

Changes in Directors' Information

There have been changes in the information of some of the directors since the date of the Company's 2019 annual report. Details of the changes as reported to the Company and as required to be disclosed under Rule 13.51B(1) of the Listing Rules are as follows:

  1. Mr YAP Chee Keong ceased to act as an independent non-executive director of Citibank Singapore Limited on 30 June 2020 and was appointed an independent non-executive director of Maxeon Solar Technologies, Ltd (listed on the Nasdaq) on 17 August 2020.
  2. At the Company's annual general meeting held on 5 June 2020, shareholders of the Company have approved the voluntary downward adjustment of the annual fee payable to the directors and the committee members (both for directors other than executive directors) for 2020 and the amounts after adjustment are set out as follows:
    1. non-executivedirector: HK$196,000
    2. member of Remuneration Committee: HK$42,000
    3. member of Nomination Committee: HK$42,000
    4. chairman/member of Audit & Risk Committee: HK$161,000/HK$140,000
  4. The Remuneration Committee has reviewed and approved the adjustment in the monthly salary of the executive directors for 2020. The monthly salary was voluntarily decreased by 30%.

60 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

CONTINUING CONNECTED TRANSACTION

Reference is made to the announcement of the Company dated 27 August 2020 regarding the renewal of the land lease in relation to Edsa Shangri-La, Manila ("Edsa Lease"). The Directors have considered that the pricing policy for the determination of rent under the Edsa Lease was conducted on normal commercial terms by reference to the terms of the Edsa Lease and by comparing the same with the terms of the land lease that the Company's other hotel had entered into with a third party land owner in Manila and ascertaining that the pricing policy of the Edsa Lease is comparable to or more favourable for the Company when compared to the lease with the third party land owner.

SIGNIFICANT SHAREHOLDERS' INTERESTS

As at 30 June 2020, the interests and short positions of those persons (other than the directors of the Company) in shares and underlying shares in the Company as recorded in the register that is required to be kept by the Company under Section 336 of the Securities and Futures Ordinance ("SFO") or as ascertained by the Company after reasonable enquiry were as follows:

Approximate % of

Number of

total issued

ordinary shares

shares of the

Name

Capacity

held

Company

Substantial shareholders

Kerry Group Limited ("KGL")

Interest of controlled corporation(s)

1,799,537,010

50.19

(Note 1)

Kerry Holdings Limited ("KHL")

Beneficial owner

87,237,052

2.43

(Notes 1 and 2)

Interest of controlled corporation(s)

1,538,441,491

42.91

Caninco Investments Limited

Beneficial owner

568,568,684

15.86

("Caninco") (Note 2)

Interest of controlled corporation(s)

157,280,233

4.39

Paruni Limited ("Paruni")

Beneficial owner

382,904,547

10.68

(Note 2)

Interest of controlled corporation(s)

36,667,449

1.02

Other major shareholders

Darmex Holdings Limited

Beneficial owner

267,068,070

7.45

("Darmex") (Note 2)

Kuok Brothers Sdn Berhad

Beneficial owner

84,441,251

2.36

Interest of controlled corporation(s)

227,043,761

6.33

Kuok (Singapore) Limited ("KSL")

Interest of controlled corporation(s)

220,444,907

6.15

(Note 3)

Baylite Company Limited ("Baylite")

Beneficial owner

220,444,907

6.15

(Note 3)

Notes:

  1. KHL is a wholly owned subsidiary of KGL and accordingly, the shares in which KHL is shown as interested are also included in the shares in which KGL is shown as interested. The number of shares shown were the holdings as at 30 June 2020 and might be different from the latest public record having been filed by the relevant shareholder(s) before 30 June 2020 as required under SFO.
  2. Caninco, Paruni and Darmex are wholly owned subsidiaries of KHL and accordingly, the shares in which Caninco, Paruni and Darmex are shown as interested are also included in the shares in which KHL is shown as interested. The number of shares shown were the holdings as at 30 June 2020 and might be different from the latest public record having been filed by the relevant shareholder(s) before 30 June 2020 as required under SFO.
  3. Baylite is a wholly owned subsidiary of KSL and accordingly, the shares in which Baylite is shown as interested are also included in the shares in which KSL is shown as interested.

INTERIM REPORT 2020 61

DISCUSSION

AND ANALYSIS

DIRECTORS' INTERESTS

As at 30 June 2020, the interests and short positions of the directors of the Company in shares, underlying shares and debentures in/of the Company and its associated corporation(s) (within the meaning of Part XV of the SFO) ("Associated Corporation(s)") as recorded in the register required to be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company and HKSE pursuant to the Securities Model Code were as follows:

  1. Long positions in shares in the Company and Associated Corporations

Approximate

Number of shares held

% of total

issued

shares in the

Class of

Personal

Family

Corporate

Other

relevant

Name of company

Name of director

shares

interests

interests

interests

interests

Total

company

The Company

KUOK Hui Kwong

Ordinary

690,833

1,038,000

2,000,000

71,251,718

74,980,551

2.091

(Note 1)

(Note 2)

(Note 3)

(Note 4)

LIM Beng Chee

Ordinary

754,000

-

-

-

754,000

0.021

HO Kian Guan

Ordinary

1,341,116

-

145,887,718

-

147,228,834

4.106

(Note 5)

Notes:

    1. 32,000 shares were held jointly by Ms KUOK Hui Kwong and her spouse.
    2. These shares were the deemed interest of Ms KUOK Hui Kwong's spouse.
    3. These shares were held through the company which was owned by Ms KUOK Hui Kwong.
    4. These shares were held through discretionary trusts of which Ms KUOK Hui Kwong is a discretionary beneficiary.
    5. 106,620,788 shares were held through companies that were owned as to 33.33% by Mr HO Kian Guan.
      39,266,930 shares were held through companies that were owned as to 6.79% by Mr HO Kian Guan.
  2. Long positions in underlying shares in the Company and Associated Corporations
    As at 30 June 2020, there were share options and/or share awards held by the directors of the Company with rights to shares in the Company. Details of such underlying shares are set out in the sections entitled "SHARE OPTIONS" and "SHARE AWARDS" of this report.

62 SHANGRI-LA ASIA LIMITED

DISCUSSION

AND ANALYSIS

SHARE OPTIONS

The share options having been granted by the Company and remaining outstanding during the underlying six-month period were granted under the Company's share option scheme adopted by the shareholders of the Company on 28 May

2012. Details and movements of such option shares during the underlying six-month period are as follows:

Number of option shares

Transferred

Transferred

from other

to other

Exercise

Granted

category

category

Exercised

Lapsed

price per

Held as at

during the

during the

during the

during the

during the

Held as at

option

Grantees

Date of grant

1 Jan 2020

period

period

period

period

period

30 Jun 2020

share (HK$)

Exercise period

1.

Director(s)

LI Kwok Cheung Arthur

23 Aug 2013

100,000

-

-

-

-

-

100,000

12.11

23 Aug 2013 -

22 Aug 2023

2.

Employees

23 Aug 2013

4,343,000

-

-

(75,000)

-

(300,000)

3,968,000

12.11

23 Aug 2013 -

22 Aug 2023

3.

Other participants

23 Aug 2013

3,120,000

-

75,000

-

-

-

3,195,000

12.11

23 Aug 2013 -

22 Aug 2023

Total

7,563,000

-

75,000

(75,000)

-

(300,000)

7,263,000

Note: No options were cancelled during the underlying six-month period.

INTERIM REPORT 2020 63

DISCUSSION

AND ANALYSIS

SHARE AWARDS

The award shares having been granted by the Company and remaining outstanding during the underlying six-month period were granted under the Company's share award scheme adopted by the shareholders of the Company on 28 May 2012 (as amended on 10 August 2012 and 31 May 2018). Details and movements of such award shares during the underlying six-month period are as follows:

Number of award shares

Change to

Max

upside

Upside

deliverable

Granted

Accepted

adjustment

delivered

award shares

Consideration

Held as at

during the

during the

Lapsed during

Held as at

Max upside

during the

during the

as at

per award

Vesting date/

Grantees

Date of grant

1 Jan 2020

period

period

the period

30 Jun 2020

adjustment

period

period

30 June 2020

share (HK$)

period

1.

Directors

KUOK Hui Kwong

30 Aug 2018

63,609

-

(63,609)

-

-

24,391

-

(24,391)

-

Nil

1 Apr 2020

30 Aug 2018

306,520

-

-

-

306,520

263,480

-

-

570,000

Nil

1 Apr 2021

15 Jun 2019

658,605

-

(24,000)

(586,605)

48,000

513,395

(513,395)

-

48,000

Nil

1 Apr 2020 -

1 Apr 2022

LIM Beng Chee

30 Aug 2018

79,509

-

(79,509)

-

-

28,491

-

(28,491)

-

Nil

1 Apr 2020

30 Aug 2018

383,137

-

-

-

383,137

330,827

-

-

713,964

Nil

1 Apr 2021

15 Jun 2019

888,595

-

(32,000)

(792,595)

64,000

693,405

(693,405)

-

64,000

Nil

1 Apr 2020 -

1 Apr 2022

2.

Employees

20 Jul 2018

97,917

-

(37,449)

(60,468)

-

14,083

468

(14,551)

-

Nil

1 Apr 2020

20 Jul 2018

471,844

-

-

(291,382)

180,462

264,156

(108,618)

-

336,000

Nil

1 Apr 2021

1 Apr 2019

1,192,169

-

(316,000)

(47,239)

828,930

860,831

(651,761)

-

1,038,000

Nil

1 Apr 2019 -

1 Apr 2022

30 Jun 2019

691,515

-

(24,000)

(231,380)

436,135

540,485

(154,620)

-

822,000

Nil

30 Jun 2019 -

1 Apr 2022

1 Nov 2019

494,000

-

-

(22,000)

472,000

-

-

-

472,000

Nil

1 Oct 2020 -

1 Apr 2022

Total

5,327,420

-

(576,567)

(2,031,669)

2,719,184

3,533,544

(2,121,331)

(67,433)

4,063,964

Note: During the underlying six-month period, there were no new shares allotted or planned for allotment under any special/generate mandate for the purpose of the Company's share award scheme.

REPURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

During the underlying six-month period, neither the Company nor any of its subsidiaries had repurchased, sold or redeemed any of the listed securities of the Company.

On behalf of the Board

KUOK Hui Kwong

Chairman

Hong Kong, 28 August 2020

64 SHANGRI-LA ASIA LIMITED

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