Principally engaged in property, property management and other services, hotel operations, investments in securities and financing.
The Group's profit attributable to shareholders for the 6 months ended 31-12-2018 amounted to HKD 3.13 billion, a decrease of 69.8% compared with previous corresponding period. Basic earnings per share was HKD 0.4724. An interim dividend of HKD 0.14 per share was declared. Turnover amounted to HKD 4.60 billion, an increase of 17.1% over the same period last year, gross profit margin down 11.0% to 48.4%. (Announcement Date: 28 Feb 2019)
Business Review - For the six months ended December 31, 2018
(1) Sales Activities
Total revenue from property sales for the Interim Period, including property sales of associates and joint ventures recognised by the Group, was HK$2,146.5 million (2017 : HK$4,560.2 million).
Total revenue from property sales comprises mainly the sales of residential units in Commune Modern in Fanling (98% sold), The Spectra in Yuen Long (99% sold) and Providence Bay in Pak Shek Kok (99% sold) as well as the sales of carparking spaces in The Coronation, The Mediterranean and The Spectra.
During the Interim Period, the Group launched two residential projects for sale, namely Grand Central in Kwun Tong which has 1,999 residential units (75% sold) and Madison Park in Cheung Sha Wan which has 100 residential units (67% sold). Subsequent to the Interim Period, Mayfair By The Sea 8 in Pak Shek Kok which has 528 residential units, was launched for sale in January 2019 and approximately 50% have been sold. To date, attributable revenue from property sales derived from Grand Central, Mayfair By The Sea 8 and Madison Park amounted to approximately HK$19.3 billion.
(2) Land Bank
As at 31st December, 2018, the Group has a land bank of approximately 21.7 million square feet of attributable floor area in Mainland China, Hong Kong, Singapore and Sydney which comprises a balanced portfolio of properties of which 40% is commercial; 36% residential; 11% industrial; 7% car parks and 6% hotels. In terms of breakdown of the land bank by status, 9.1 million square feet were properties under development, 11.9 million square feet of properties for investment and hotels, together with 0.7 million square feet of properties held for sale. The Group will continue to be selective in replenishing its land bank to optimise its earnings potential.
During the Interim Period, the Group acquired a site in Hong Kong from the HKSAR Government with total attributable floor area of approximately 11,582 square feet.
(3) Property Development
The Group obtained Certificates of Compliance for Commune Modern and The Hillside in November 2018 and January 2019 respectively
(4) Rental Activities
For the Interim Period, the Group’s gross rental revenue, including attributable share from associates and joint ventures, increased 4.8% to HK$2,097.5 million (2017: HK$2,000.4 million) and net rental income increased 4.7% to HK$1,830.1 million (2017: HK$1,747.2 million). Overall occupancy of the Group’s investment property portfolio was at approximately 96% (2017: 96%) for the Interim Period.
The Group’s retail portfolio in Hong Kong recorded an increase in rental income with overall occupancy rate maintained at approximately 97% (2017: 97%) for the Interim Period. The Group’s flagship shopping malls, namely Tuen Mun Town Plaza Phase I, Olympian City 1, 2 and 3 showed steady leasing performance.
The leasing performance of the Group’s office portfolio saw stable rental growth while overall occupancy rate was at approximately 96% (2017: 96%) for the Interim Period. Leasing performance of the Group’s industrial portfolio saw a steady rental growth with slight improvement in the occupancy rate to approximately 94% (2017: 93%).
The Group’s investment property portfolio primarily serves the need of its customers which include tenants, shoppers and the communities around the properties. The design and condition of the properties together with the quality of service provided to customers are of paramount importance. To ensure that the properties are in good condition with the proper layout and design, the Group would perform regular review of the properties. On service quality, the Group places a strong emphasis on regular training particularly for all front-line staff to ensure that the service provided to customers meets their expectations. Comments from customers, reports by silent shoppers and recognitions from professional institutions all play a role in assessing the quality of service delivered by the staff.
As at 31st December, 2018, the Group has approximately 11.9 million square feet of attributable floor area of investment properties and hotels in Mainland China, Hong Kong, Singapore and Sydney. Of this portfolio, commercial developments (retail and office) account for 62%, industrial 15%, car parks 13%, hotels 7%, and residential 3%.
The Group’s portfolio of hotels comprises The Fullerton Hotel Singapore, The Fullerton Bay Hotel Singapore, Conrad Hong Kong, The Westin Sydney and The Olympian Hong Kong. Overall business performance of the Group’s hotels was steady during the Interim Period. The Group will continue to improve the quality of its hotel services to ensure our discerning guests have enjoyable experiences during their stays in the hotels.
(6) Mainland China Business
China’s residential property market continued to consolidate in 2018 as a result of policy control on mortgage lending and home prices. The growth in residential property prices has been contained and the market has been stablised. Central Government continues to implement its policies on urbanisation and housing reforms which should lead to a more sustainable housing market in Mainland China.
As at 31st December, 2018, the Group has approximately 5.3 million attributable square feet of land bank in Mainland China. Of the total, approximately 4.3 million square feet are projects under development. These projects include 100% interest in Dynasty Park in Zhangzhou, 50% interest in a serviced apartment project in Qianhai and 20% interest in The Palazzo in Chengdu.
Other than the matters mentioned above, there has been no material change from the information published in the report and accounts for the year ended 30th June, 2018.
Business Outlook - For the six months ended December 31, 2018
40 years of economic reforms since the third Plenary Session of the 11th Central Committee of the Communist Party of China held in December 1978 has turned China from a primary production based economy to a service and innovation based economy with rising middle-class households. Like most developed countries, economic growth has changed gradually from an exponential rate to more steady. The successful management of such a country’s economic development with over 1.3 billion population and 670 cities over the last 40 years have been a tremendous achievement and is unprecedented. It requires insightful planning and management skill at national and international levels.
Central Government’s economic policy to develop the Greater Bay Area (“GBA”) is an integral part of the Belt and Road Initiative. The objective is for the 11 key cities in the GBA to complement and synergise their economic strengths and potentials so that the economic development in GBA can be managed in a more organised and orderly manner. Integrating each city’s specialty with that of other neighbouring cities in GBA will yield economies of scale and resources can be used more efficiently and effectively.
On 18th February, 2019, the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area was released by the Central Government. It outlines the economic objectives that each of the major cities in the GBA should focus on. The policy framework provides a roadmap for the GBA to be a world-class city cluster that is vibrant and highly innovative. The timeframe for the development plan of GBA to build the bay area, the city cluster is by 2022, with a view to complete the integration is by 2035. We are delighted to learn that Hong Kong has been given an important role to further develop its strengths in the areas of aviation, trade, technology industries, legal services and international finance including banking, asset management and risk management. It opens up more economic growth opportunities for Hong Kong and allows its people to develop their career or businesses in a much bigger territory.
The Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link connecting to the 29,000-kilometre national high-speed rail network in Mainland China started operations in September 2018 and the Hong Kong-Zhuhai-Macao Bridge, known to be the longest bridge-cum-tunnel sea crossing in the world, was opened in October 2018. These two mega infrastructure developments set the milestones for the integration of the GBA.
Trade dispute between China and the United States will affect the global economy if it continues. Market sentiment fluctuates as economic outlook becomes uncertain causing volatility in financial markets and the World Bank lowering its forecasts for global economic growth. The negotiation on the bilateral trade arrangement between China and the United States is not expected to be straightforward. Although much needed to be discussed and mutually agreed among both parties, the progress is positive as both sides have started to work out solutions to narrow their differences.
The Policy Address announced in October 2018 sets out a comprehensive and practical approach to build a housing ladder that caters to the housing needs of families of different income groups. The pilot schemes announced comprise the redevelopment of existing aged public housing and some buildings developed under the Civil Servants’ Co-operative Building Society Scheme together with the initiatives to increase transitional housing through revitalisation and conversion of industrial buildings. All are feasible solutions to increase the housing supply in the short to medium term. Under the concept of Lantau Tomorrow as described in the Policy Address that covers the development areas at the artificial islands near Kau Yi Chau and Hei Ling Chau at North Lantau as well as the coastal areas of Tuen Mun as long-term solution to increase supply of land is both visionary and insightful. It will solve the land supply shortage which would support the growth of Hong Kong.
Management will continue to optimise earnings, enhance efficiency and productivity and improve the quality of products and services. The Group will continue to maintain a policy of selectively and continuously replenishing its land bank, which will enable it to strengthen earnings and shareholders’ value. The Group’s recurrent businesses, which comprise property leasing, hospitality and property management services, continue to contribute stable stream of income. With a good financial position, the Group is well-positioned to respond to the changing economic environment.
Source: Sino Land Company (00083) Interim Results Announcement