Wheelock and : & Company Limited – 2018 Final Results Announcement

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WHEELOCK AND COMPANY LIMITED

(Incorporated in Hong Kong with limited liability)

Stock Code: 20

2018 Final Results Announcement

Strong residential sales despite mixed outlook

Hong Kong Properties Highlights

•  Residential contracted sales reached approximately HK$26.0 billion in 2018, an increase of 52% compared with 2017. Up to 6 March 2019:

  • ‐ MALIBU has presold 1,559 units for HK$14.4 billion with continuous interests from buyers.

  • ‐ OASIS KAI TAK has presold 607 units for HK$7.4 billion since first launch.

  • ‐ MONTEREY sold or presold 845 units for HK$9.1 billion with sell-through 97%.

•  Net order book surged to HK$26.7 billion, representing an increase of 203% from 2017, contributed by the successful launches of MALIBU, OASIS KAI TAK and MONTEREY.

•  Land bank under management stood at 6.3 million square feet in December 2018. If including the newly acquired Kai Tak residential land subsequent to last December, land bank has increased to 6.9 million square feet.

Group Financials

•  Group underlying profit increased by 9% to HK$13,208 million, mainly attributable to higher IP profits in Hong Kong and Mainland China and good HKP profit.

•  Attributable underlying profit from Wharf REIC increased by 6% to HK$6.2 billion.

•  Prudent balance sheet with Wheelock's own net gearing before consolidation at 13%.

•  Second interim dividend at HK$1.05 per share, increased by 10.5% from last year, making total dividend for the year 2018 HK$1.55 per share.

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Wheelock - Final Results Announcement

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GROUP RESULTS

Excluding investment property revaluation gain and exceptional items, underlying profit was HK$13,208 million (2017: HK$12,117 million).

Group profit attributable to equity shareholders was HK$17,239 million (2017: HK$20,570 million). Earnings per share were HK$8.43 (2017: HK$10.09).

DIVIDENDS

A first interim dividend of HK$0.50 per share was paid on 17 September 2018. In lieu of a final dividend, a second interim dividend ("Second Interim Dividend") of HK$1.05 per share will be paid on 26 April 2019 to Shareholders on record as at 11 April 2019. Total distribution for the year 2018 will amount to HK$1.550 (2017: HK$1.425) per share.

BUSINESS REVIEW

Hong Kong Properties ("HKP")

2018 Residential contracted sales increased by 52% to a new record of approximately HK$26.0 billion with 2,145 units sold.

MALIBU, a large-scale waterfront residential development in the new O'EAST portfolio, was launched in March 2018. A total of 1,559 units were presold for HK$14.4 billion in 2018, representing 97% of total stock sold. O'EAST is a natural waterside urban living environment, a neighbour to O'SOUTH portfolio. Located at only 46 meters from LOHAS Park MTR station and the upcoming 480,000 square feet LOHAS mall, the project is the only site in LOHAS to enjoy Silverstrand and O'SOUTH sea views.

GRAND OASIS KAI TAK, launched in January 2018, is the premier phase of a riverside residential development, within a minute's walking distance to the future Kai Tak MTR station. In 2018, a total of 299 units were presold for HK$4.4 billion, representing 93% of total stock sold for the development. Ideally located at the heart of the Kai Tak new development area, the extensive green landscape of OASIS KAI TAK brings tranquillity and an urban retreat living concept to residents.

MONTEREY, an additional 152 units were presold for HK$2.3 billion in 2018. The low-density residential development offers unobstructed panoramic ocean views. The development marks the continuance of previous successful launches of residential developments in O'SOUTH, namely, THE PARKSIDE, CAPRI and SAVANNAH. Our exquisite villas are planned to launch in 2019.

On commercial contracted sales, O'SOUTH Retail Portfolio at Tseung Kwan O, namely, Capri Place, Savannah Place and Monterey Place, with a total of approximately 300,000 square feet gross floor area, was sold en-bloc for HK$3.3 billion in October 2018, increasing total contracted sales for Hong Kong properties to a new record of HK$29.3 billion by 13% from 2017.

Net order book increased by 203% to HK$26.7 billion, contributed mainly by the successful launches of MALIBU, OASIS KAI TAK and MONTEREY in 2018. Contracted sales of approximately HK$8.7 billion were not recognised in 2018 due to the adoption of new accounting standard for sales recognition under Hong Kong Financial Reporting Standard 15 which basically redefine the timing of sales recognition from occupation permit to legal assignment. During the year under review, five residential developments, namely, MONTEREY, ONE HOMANTIN, NAPA, ISLAND RESIDENCE and SAVANNAH have obtained certificates of compliance and were handed over during the year.

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Land bank under management was 6.3 million square feet of attributable GFA as at 31 December 2018 after the successful launch of MALIBU which presold 1.1 million square feet. If including the newly acquired Kai Tak residential land subsequent to last December, land bank has been increased to 6.9 million square feet by now.

Our diversified land bank portfolio which provides a wide variety of product offerings, ranging from The Peak collection, MTR residences, waterfront living, suburban houses to commercial properties. The urban-focused land bank is sufficient to fulfill our needs in the coming years, and we strive to further replenish quality land bank through various means.

In the first quarter of 2019, the Group acquired a residential site in Kai Tak, which commands a maximum GFA of 551,138 square feet. The transaction offers an opportunity for us to further expand our development property portfolio in Kai Tak area and is therefore beneficial through capturing synergies.

Corporate Social Responsibility ("CSR") and Business-in-Community

On Project WeCan, the Group's key Business-in-Community initiative, supporting less-privileged students with opportunities and care to empower them for pursuing higher studies and future career. With the support of 68 organisations, the programme currently has developed from 10 schools at 8 years ago to 76 secondary schools for now, benefitting 66,000 students in Hong Kong.

In July 2018, the annual Job Tasting Programme was officially kicked off, offering nearly 200 internship opportunities from 32 companies for secondary school students. It simulates a proper job search and application process, from job posting, writing application letters, to attending interviews. Appointed students received a taste of working in real life through a two-to-four-week internship in different departments of participating companies. We also supported the Career Exploration Days held in November 2018 and January 2019. The programme introduced a total of 50 job tasters and other career-related activities covering 20 industries to over 5,000 Form 4 students from WeCan schools.

On sustainable development, Wheelock Properties Limited ("Wheelock Properties") has not only been awarded "Corporate Social Responsibility Project of the Year" by the Royal Institution of Chartered Surveyors Hong Kong for five consecutive years, but also the "Top 10 Developers Award" by BCI Asia for seven consecutive years. In addition, Wheelock Properties is honoured to have received "CAPITAL Magazine Corporate Social Responsibility Awards 2018" and "Metro Awards for Corporate Social Responsibility 2018".

These prominent achievements again demonstrate their confidence in our project quality and recognition of our commitment to sustainable and green development. Advocating the concept of "Business-in-Community", Wheelock Properties has promoted diversified youth development through our flagship programmes Project WeCan.

As of 31 December 2018, 100% of construction floor area in our entire portfolio has been certified with BEAM Plus standard or under application, demonstrating our commitment to green building standard. In addition, with our concerted effort in greening our daily operations and development projects, Wheelock Properties have attained Low-carbon Office Operation Programme (LOOP) Gold Label for the seventh consecutive year, which recognised our outstanding performance in pursuing long-term sustainability.

On innovation, CLUB WHEELOCK mobile application has been awarded the "e-brand awards 2018" by Hong Kong Economic Times and e-Zone on 15 August 2018, honouring the "Best lifestyle mobile application" nominated by general public and professional judging panel. The launch of HKSTP@Wheelock Gallery signifies our support for technology innovators and start-ups by

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leveraging the company's primely-located Wheelock Gallery and business expertise. The initiative creates a platform to connect technology and industry by providing incubation programmes and workshop seminars to help start-ups turn their innovative ideas into marketable products and solutions. The initiative echoes well with our corporate innovation culture and CSR approach "Business-in-Community".

Wheelock Properties also held Wheelock Innovation Competition 2018 to drive innovation initiative within our company. Around 70 submissions have been received from different departments and business units, top 16 winners were awarded based on their ideas' effectiveness and innovativeness.

On art and culture, National Geographic Wheelock Hong Kong Photo Contest 2018 officially kicked off in October 2018. Themed "Hong Kong Story", the global competition invites both enthusiasts and novices aged 16 and above to explore and story tell the best of Hong Kong nature, city and people through their lens. Other CSR initiatives including Wheelock Interior Design Internship Program (WIND) are established to support and nurture local art and design talents in interior design to undertake overseas internships, gaining valuable exposure.

Wheelock and Company Limited is the majority shareholder of The Wharf (Holdings) Limited, Wharf Real Estate Investment Company Limited and Wheelock Properties (Singapore) Limited. Below is a report on their operations and achievements in 2018.

The Wharf (Holdings) Limited ("WHL")

WHL, a major subsidiary of Wheelock, is a property company focused on Hong Kong and China.

Due to lower recognition, HKP revenue decreased to HK$1,667 million and operating profit to HK$1,067 million on an attributable basis. WHL's Peak Portfolio redefines the concept of luxury living. MOUNT NICHOLSON was highly-acclaimed since its launch in early-2016, and the re-development of other peak projects including 1 Plantation Road is well underway and will feature 20 houses. Meanwhile, Chelsea Court and Strawberry Hill have been leasing well. The vibrant transformation of Kowloon East is providing a vast potential for WHL's "Kowloon East Waterfront Portfolio", among which different re-development options of Kowloon Godown are under evaluation. Yau Tong Bay's general building plans have been approved. Lease modification is under way.

China IP continued to benefit from International Finance Square ("IFS") contribution. Changsha IFS's impressive performance has been achieved since opening on 7 May 2018. Occupancy reached 98% by year-end, demonstrating retailers' confidence in the mall's success. Average monthly retail sales in 2018 surpassed RMB300 million soon after business began, exceeding expectation. During the year, revenue of Chengdu IFS grew by 27% to HK$1,568 million and operating profit by 59% to HK$783 million. On China DP, against the backdrop of a more flexible policy environment towards the end of the year, new launches increased and sales momentum was regained, attributable contracted sales of RMB22.8 billion exceeded target by 4%. Operating profit increased by 19% to HK$7,949 million. DP land bank at year-end amounted to 3.7 million square metres.

Wharf Real Estate Investment Company Limited ("Wharf REIC")

Wharf REIC, a major subsidiary of Wheelock, is a premium Hong Kong investment property company with a focus on retail property.

Harbour City remained the key driver of Wharf REIC and continued to outperform the market with 12% increase in operating profit to HK$9,678 million. Amidst major re-tenanting, Times Square's operating profit retreated by 2% to HK$2,479 million. Compelling offerings and marketing strategies continued to drive the performance of Plaza Hollywood, the operating profit was HK$430 million.

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Meanwhile, office revenue reflected solid rental reversion and stable rents for new commitments.

Revenue at Wheelock House and Crawford House was maintained at HK$469 million, and operating profit at HK$407 million.

During the year, the operating profit of the three hotels, Marco Polo Hongkong, Gateway and Prince, increased by 32% to HK$442 million.

The Murray, Hong Kong, became fully operational in August 2018 and achieved an average occupancy of 71.3% in the fourth quarter. Profitability in the early years will be hit by start-up losses including depreciation of land and building costs as well as interest cost.

Wheelock Properties (Singapore) Limited ("WPSL")

On 19 July 2018, the voluntary unconditional general offer (the "Offer") was made at S$2.1 per share in cash for all the issued and paid-up ordinary shares in the share capital of WPSL. The Offer was closed on 2 October 2018, with the Group holding 90.1% of the total issued shares of WPSL. WPSL officially delisted from the Singapore Stock Exchange on 18 October 2018. As at 31 December 2018, the Group has increased its stake to 97.1%.

FINANCIAL REVIEW

(I) REVIEW OF 2018 RESULTS

WHEELOCK AND COMPANY (before consolidation of listed subsidiaries WHL, Wharf REIC and WPSL)

Wheelock and Company's own underlying profit increased by 114% to HK$2,375 million (2017: HK$1,109 million), mainly due to general improved profit margins of development properties sold in Hong Kong, despite fewer new project completions and the adoption of new accounting standards during the year which requires revenue from development properties sold in Hong Kong recognised at the time of assignment and resulted in lower revenue recognition in current year. Should the new accounting standards not adopted, Wheelock and Company's own revenue for the year under review would have increased by HK$8,664 million.

WHEELOCK GROUP

Group underlying profit increased by 9% to HK$13,208 million (2017: HK$12,117 million), mainly attributable to higher IP profits in Hong Kong and Mainland China and higher DP profits in Hong Kong.

Group profit attributable to equity shareholders decreased by 16% to HK$17,239 million (2017: HK$20,570 million), mainly due to the non-recurrent gain on disposal of an investment property, 8 BAY EAST, in 2017 and the deficit on reclassification of an associate during the year, partly offset by improved Group underlying profit.

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