HOPEWELL HOLDINGS LIMITED Stock Code: 54 ANNUAL 2016/17 REPORT 64th Floor, Hopewell Centre 183 Queen’s Road East A Wan Chai, Hong Kong N N Tel: (852) 2528 4975 U A Fax: (852) 2861 2068 L REPORT www.hopewellholdings.com 2 0 1 6 / 1 7 Hopewell Holdings Limited, a Hong Kong-based group listed on the Stock Exchange since 1972 (stock code: 54). The Group has continuously grown and become one of the leading business conglomerates in Hong Kong. The Group is actively engaged in property development and investment, highway infrastructure, power, hotel & hospitality and other businesses. While achieving substantial long term growth, the Group recognises the vital importance of promoting sustainable development. It devotes significant resources to enhance corporate governance, promote environmental protection, make community investment, instill best workplace practices and engage stakeholders. CONTENTS 2 Financial Highlights 3 5-Year Financial Summary 4 Chairman’s Statement 10 Awards & Recognition 12 Profile of Directors 21 Management Discussion and Analysis 21 Business Review 59 Financial Review 68 Others 69 Highlights of Sustainability Report 71 Corporate Governance Report 89 Report of the Directors 101 Independent Auditor’s Report 107 Consolidated Statement of Profit or Loss and Other Comprehensive Income 108 Consolidated Statement of Financial Position 110 Consolidated Statement of Changes in Equity 111 Consolidated Statement of Cash Flows 113 Notes to the Consolidated Financial Statements 113 Company’s Statement of Financial Position 114 Notes 1 to 42 175 List of Major Properties 178 Glossary 183 Corporate Information 184 Financial Calendar Financial Highlights Revenue (HK$m) Earnings before Interest and Tax (HK$m) 10,000 9,235 2,500 2,257 9,000 1,944 1,994 8,000 2,000 870 6,590 Other Other 7,000 6,235 495 410 5,257 Segments Segments 6,000 1,500 2,330 2,513 Toll Road Toll Road 5,000 610 720 Segment 623 Segment 4,000 1,000 Investment Investment 3,000 2,408 2,463 2,406 Properties & Properties & 2,000 500 839 864 Hospitality Hospitality 764 1,000 1,499 1,570 1,614 0 0 FY15 FY16 FY17 FY15 FY16 FY17 Operating Prot* from Prime-Earning Prot Attributable to Owners of Businesses (HK$m) the Company (HK$m) 1,500 3,000 2,835 2,762 1,332 1,234 1,169 2,500 1,200 468 1,180 395 Toll Road 1,345 1,961 Revaluation 405 Investment 2,000 gain of 900 (after interest & completed 627 tax of JVs) 1,500 investment properties 600 1,000 864 Investment 764 839 1,655 Property & 1,417 1,334 300 Core Prot Hospitality 500 0 0 FY15 FY16 FY17 FY15 FY16 FY17 * Being the EBIT net of the proportional share by non-controlling interests Net Asset vs Market Value per Share (HK$) Return on Shareholders’ Equity* 60 6 53.5 54.3 55 52.2 50 4 3.6% 45 3.0% 2.8% 40 35 29.8 2 28.4 30 24.6 25 20 0 FY15 FY16 FY17 FY15 FY16 FY17 Market Value Net Asset Value Return on per Share per Share Shareholders’ Equity * Based on prot attributable to owners of the Company excluding revaluation gain of completed investment properties and attributable deferred tax 2 HOPEWELL HOLDINGS LIMITED ANNUAL REPORT 2016/17 5-Year Financial Summary Consolidated Results (in HK$ million) Year ended 30 June 2013 2014 2015 2016 2017 Revenue 6,148 5,992 6,235 9,235 6,590 Turnover 1,725 2,093 1,865 1,850 2,360 Earnings before interest and tax 4,150 1,920 2,257 1,944 1,994 Profit before taxation 12,768 1,945 3,347 3,230 2,609 Taxation (295) (329) (267) (235) (386) Profit before non-controlling interests 12,473 1,616 3,080 2,995 2,223 Non-controlling interests (267) (258) (245) (233) (262) Profit attributable to owners of the Company 12,206 1,358 2,835 2,762 1,961 Consolidated Statement of Financial Position (in HK$ million) As at 30 June 2013 2014 2015 2016 2017 Completed investment properties 26,320 26,839 28,196 29,639 30,319 Property, plant and equipment 686 740 690 660 700 Properties under/for development 7,393 7,877 8,380 8,527 9,117 Interests in JVs 9,177 8,984 9,341 9,159 7,956 Amounts due from JVs (non-current) 3,513 763 – – – Other non-current assets 41 40 48 48 47 Properties held for sale (Hopewell New Town and Broadwood Twelve) 1,676 1,486 1,620 1,425 725 Amounts due from JVs (current) 690 2,251 2,070 529 305 Bank balances and cash 5,357 5,210 4,485 3,647 4,576 Other current assets 551 480 413 211 195 Total assets 55,404 54,670 55,243 53,845 53,940 Corporate bonds and bank borrowings (non-current) 4,212 3,498 4,360 2,350 1,200 Other non-current liabilities 505 536 554 595 604 Corporate bonds and bank borrowings (current) 2,965 2,625 296 200 1,150 Other current liabilities 1,210 1,119 1,227 1,347 1,379 Total liabilities 8,892 7,778 6,437 4,492 4,333 Non-controlling interests 3,269 3,117 3,276 2,841 2,361 Shareholders’ equity 43,243 43,775 45,530 46,512 47,246 Per Share Basis 2013 2014 2015 2016 2017 Basic earnings per share (HK cents) 1,397 156 325 317 225 Dividend per share (HK cents) 100 130 120 130 175 — Interim 45 50 50 55 55 — Final 55 60 70 75 75 — Special – 20# – – 45 Net asset value per share (HK$) 49.6 50.2 52.2 53.5 54.3 # Represent distribution in specie of shares in HHI Financial Ratios 2013 2014 2015 2016 2017 Net debt to shareholders’ equity (excluding equity shared from HHI Group) 6% 3% 2% Net cash Net cash Return on shareholders’ equity* 8.0%** 2.8% 3.6% 3.0% 2.8% Dividend payout ratio* 25%** 78%Δ 63% 80% 85%# * Excluding revaluation gain of completed investment properties and attributable deferred tax ** Including land conversion gain of Hopewell Centre II HK$2,249 million Δ Excluding distribution in specie of shares in HHI # Excluding special dividend HOPEWELL HOLDINGS LIMITED ANNUAL REPORT 2016/17 3 Chairman’s Statement I am pleased to report to shareholders that the Group achieved profit attributable to owners of the Company of HK$1,961 million for the financial year ended 30 June 2017. The Group’s total revenue for the year amounted to HK$6,590 million, 29% less than the previous year’s figure primarily due to the decrease in property sales recognition of The Avenue. The Group’s core profit (excluding the fair value gain of completed investment properties) attributable to owners of the Company (“core profit”) decreased to HK$1,334 million for the year under review from HK$1,417 million for the previous year. The decrease in the core profit was mainly resulted from a lower profit shared from sales of The Avenue for the year. If excluding the profit shared from sales of The Avenue, the core profit for the year increased by 32% yoy to HK$1,304 million from HK$990 million, mainly resulted from the continued healthy growth of the profits of investment properties, toll road business and property development of the Hopewell New Town project as well as a lower exchange loss from RMB depreciation. Final Dividend and Special Final Dividend The Board has proposed a final dividend of HK75 cents per share and a special final dividend of HK45 cents per share for the year ended 30 June 2017. Together with an interim dividend of HK55 cents per share paid on 22 February 2017, the total dividends for the year will amount to HK175 cents per share. Excluding the special final dividend of HK45 cents per share, this represents a payout ratio of 85% of the Company’s core profit. Subject to shareholders’ approval at the 2017 Annual General Meeting to be held on Thursday, 26 October 2017, the proposed final dividend and special final dividend will be paid on Tuesday, 7 November 2017 to shareholders of the Company registered at the close of business on Wednesday, 1 November 2017. Closure of Register of Members To ascertain shareholders’ eligibility to attend and vote at the 2017 Annual General Meeting to be held on Thursday, 26 October 2017, the Register of Members of the Company will be closed from Thursday, 19 October 2017 to Thursday, 26 October 2017, both days inclusive, during which period no transfer of shares of the Company will be effected. In order to qualify to attend and vote at the 2017 Annual General Meeting, all transfers of share ownership, accompanied by relevant share certificates, must be lodged with the Company’s Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong not later than 4:30 p.m. on Wednesday, 18 October 2017. 4 HOPEWELL HOLDINGS LIMITED ANNUAL REPORT 2016/17 To ascertain shareholders’ entitlement to the proposed final dividend and special final dividend, the Register of Members of the Company will be closed for one day on Wednesday, 1 November 2017, if and only if the proposed final dividend and special final dividend are approved by the shareholders at the 2017 Annual General Meeting. No transfer of shares of the Company will be effected on the aforementioned book-close date.