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 year ended 30-06-2019 amounted to HKD 6.91 billion, a decrease of 50.6% compared with previous corresponding period. Basic earnings per share was HKD 1.0315. A final dividend of HKD 0.41 per share was declared. Turnover amounted to HKD 8.01 billion, a decrease of 25.4% over the same period last year, gross profit margin up 10.8% to 56.1%. (Announcement Date: 29 Aug 2019)
Business Review - For the year ended June 30, 2019
Total revenue from property sales for the Financial Year, including property sales of associates and joint ventures recognised by the Group, was HK$2,986.5 million (2017/2018: HK$8,890.5 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), Marinella (99% sold) and Providence Bay in Pak Shek Kok (99% sold) as well as the sales of carparking spaces in Mayfair By The Sea I and II, The Coronation, The Mediterranean and The Spectra. In respect of the sales of the commercial project at 38 Wai Yip Street in Kowloon East (49% sold), the Group obtained the Certificate of Compliance for the project on 27th June, 2019. In accordance with the Group’s change in accounting policy on revenue recognition from property sales, earnings derived from this project will be recognised in the next financial year.
During the Financial Year, the Group launched three residential projects for sale, namely Grand Central in Kwun Tong which has 1,999 residential units (82% sold), Mayfair By The Sea 8 in Pak Shek Kok which has 528 residential units (76% sold) and Madison Park in Cheung Sha Wan which has 100 residential units (70% sold). To date, attributable revenue from property sales derived from Grand Central, Mayfair By The Sea 8 and Madison Park amounted to approximately HK$22.4 billion.
As at 30th June, 2019, the Group has a land bank of approximately 22.1 million square feet of attributable floor area in Mainland China, Hong Kong,
Singapore and Sydney which comprises a balanced portfolio of properties of which 39.4% is commercial; 37.1% residential; 11.0% industrial; 7.1% car parks and 5.4% hotels. In terms of breakdown of the land bank by status, 9.3 million square feet were properties under development, 11.9 million square feet of properties for investment and hotels, together with 0.9 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.
For the Financial Year, the Group’s gross rental revenue, including attributable share from associates and joint ventures, increased 3.8% to HK$4,239.9 million (2017/2018: HK$4,082.5 million) and net rental income increased 3.1% to HK$3,685.2 million (2017/2018: HK$3,572.0 million). Overall occupancy of the Group’s investment property portfolio was at approximately 96% (2017/2018: 96%) for the Financial Year.
The Group’s retail portfolio in Hong Kong recorded an increase in rental income with overall occupancy rate maintained at approximately 97% (2017/2018: 97%) for the Financial Year. 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% (2017/2018: 96%) for the Financial Year. Leasing performance of the Group’s industrial portfolio saw a steady rental growth with slight improvement in the occupancy rate to approximately 94% (2017/2018: 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 30th June 2019, 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 61.6%, industrial 14.7%, car parks 13.2%, hotels 7.7%, and residential 2.8%.
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 Financial Year. 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.
Mainland China Business
On 8th April, 2019, National Development and Reform Commission (“NDRC”) under the State Council released a policy to remove restrictions for household restriction or Hukou in cities with an urban population of 1 million to 3 million. This will enable workers who have migrated from rural areas to urban cities to be entitled to social benefits including health care and education as well as the right to purchase property in cities where they reside. This is part of China’s reform on the Hukou registration system to facilitate Central Government’s countrywide urbanisation plan. The reform of the Hukou system is positive for the housing market in Mainland China.
As at 30th June 2019, 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. Subsequent to the Financial Year, the Group acquired 30% equity interest in a new commercial development site located in Qianwan Area in Qianhai in July 2019. Including this site, total attributable floor area for the projects under development would be approximately 4.5 million square feet.
Business Outlook - For the year ended June 30, 2019
The residential property market in Hong Kong was stable in the first half of 2019 despite increasing uncertainties in the global economy. With a slower pace of growth expected in Hong Kong’s economy in the second half of 2019, the residential property market remains fundamentally sound due to keen demand and potential interest rate cuts in the United States. Going forward, the Greater Bay Area (“GBA”) and Belt and Road Initiative will be the growth drivers for China and create business opportunities for Hong Kong.
Hong Kong has faced challenges since June this year and the economy has been impacted by internal and external problems. In the last two months, there have been rallies which have affected businesses, tourism and retail business. We sincerely hope that the disruption can settle down quickly and society can return to peace and harmony. We are confident in Hong Kong’s solid foundation and resilience. Management will closely monitor the situation and minimise the impact arising therefrom by taking necessary and appropriate measures.
Central Government has recently announced a plan to transform Shenzhen into a pilot demonstration area of socialism with Chinese characteristics with a view to developing Shenzhen into a leading and model city in the world focusing on research and development, industrial innovation, medical technology, public services and ecological environment. This plan for Shenzhen will also be incorporated in the Central Government’s framework for developing the GBA integrating all the key cities in the area through a better flow of people, capital, technology and information. Hong Kong is closest proximity to Shenzhen, and reforms for Shenzhen would be positive for both cities and bring complementary benefits to Hong Kong, particularly in technology innovation. Hong Kong can capitalise on its strengths and contribute positively to this national initiative. The economic growth generated from the plan will benefit Hong Kong and expedite its expansion within the GBA.
The Group will continue to optimise earnings, enhance efficiency and productivity and improve the quality of products and services. The Group’s recurrent businesses, which comprise property leasing, hospitality and property management services, continue to contribute stable stream of income. In respect of property sales, the Group has a strong pipeline of property projects under development which will be launched for sale over the next few years. Management shall maintain a policy of selectively and continuously replenishing its land bank, which will enable it to strengthen earnings and shareholders’ value. The Group is cautiously optimistic on the outlook of the property market in Hong Kong. With a good financial position and sustainable business strategy, the Group is well placed to respond to the changing economic environment and upcoming challenges.
Source: Sino Land Company (00083) Annual Results Announcement