Annual Report 2014

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Annual Report 2014 ANNUAL REPORT 2014 Kerry Properties Limited (“KPL”) is a world-class property company with significant investments in Asia. The Company is known for its property development activities in the People's Republic of China (the “PRC”) and Hong Kong. In both markets, KPL focuses on investing in premium quality property developments in prime locations. The Company has developed a successful business model for doing this over many years and has considerable experience as a developer and manager of quality properties. We act on principles of fairness and integrity, and we value the many relationships we have developed over our long history with staff, suppliers, partners, government agencies, and other key stakeholders. CORPORATE INFORMATION & KEY DATES Corporate Information BOARD OF DIRECTORS REGISTERED OFFICE Executive Directors Canon’s Court, 22 Victoria Street & Key Dates Mr WONG Siu Kong, Chairman Hamilton HM12, Bermuda Mr HO Shut Kan, Co-Managing Director Mr QIAN Shaohua, Co-Managing Director HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS 25/F, Kerry Centre, 683 King’s Road Mr Bryan Pallop GAW Quarry Bay, Hong Kong Independent Non-executive Directors PRINCIPAL SHARE REGISTRAR AND Mr LAU Ling Fai, Herald TRANSFER OFFICE Mr KU Moon Lun MUFG Fund Services (Bermuda) Limited Ms WONG Yu Pok, Marina, JP The Belvedere Building, 69 Pitts Bay Road Mr CHANG Tso Tung, Stephen Pembroke HM08, Bermuda AUDIT AND CORPORATE GOVERNANCE HONG KONG BRANCH SHARE REGISTRAR AND COMMITTEE TRANSFER OFFICE Mr LAU Ling Fai, Herald, Chairman Tricor Abacus Limited Mr KU Moon Lun Level 22, Hopewell Centre, 183 Queen’s Road East Hong Kong Ms WONG Yu Pok, Marina, JP Mr CHANG Tso Tung, Stephen CORPORATE COMMUNICATION DEPARTMENT Kerry Properties Limited REMUNERATION COMMITTEE 25/F, Kerry Centre, 683 King’s Road Mr LAU Ling Fai, Herald, Chairman Quarry Bay, Hong Kong Mr WONG Siu Kong Telephone: (852) 2967 2200 Mr KU Moon Lun Facsimile: (852) 2967 2900 Ms WONG Yu Pok, Marina, JP Email: [email protected] Mr CHANG Tso Tung, Stephen INVESTOR RELATIONS DEPARTMENT nomination COMMITTEE Kerry Properties Limited Mr WONG Siu Kong, Chairman 25/F, Kerry Centre, 683 King’s Road Quarry Bay, Hong Kong Mr LAU Ling Fai, Herald Telephone: (852) 2967 2200 Mr KU Moon Lun Facsimile: (852) 2967 2900 Ms WONG Yu Pok, Marina, JP Email: [email protected] Mr CHANG Tso Tung, Stephen WEBSITE FINANCE COMMITTEE www.kerryprops.com Mr WONG Siu Kong Mr HO Shut Kan STOCK CODES Stock Exchange of Hong Kong: 683 EXECUTIVE COMMITTEE Bloomberg: 683 HK Mr WONG Siu Kong Reuters: 683.HK Mr HO Shut Kan Mr QIAN Shaohua KEY DATES Annual General Meeting Mr Bryan Pallop GAW 7 May 2015 COMPANY SECRETARY Closure of Registers of Members Ms LI Siu Ching, Liz 6 May 2015, 7 May 2015 and 13 May 2015 AUDITOR Proposed Payment of Final Dividend PricewaterhouseCoopers 21 May 2015 2 KERRY PROPERTIES LIMITED ANNUAL REPORT 2014 CONTENTS 4 Financial Highlights 7 Chairman’s Statement 10 Management Discussion & Analysis 10 Overall Results 12 Review of Property Business 29 Financial Review 30 Particulars of Properties Held Contents 40 Corporate Social Responsibility Report 50 Awards and Citations 55 Corporate Governance Report 65 Audit and Corporate Governance Committee Report 67 Remuneration Committee Report 68 Nomination Committee Report 69 Internal Controls 70 Directors and Senior Management 73 Report of Directors 85 Independent Auditor’s Report 87 Consolidated Income Statement 88 Consolidated Statement of Comprehensive Income 89 Consolidated Statement of Financial Position 91 Statement of Financial Position 92 Consolidated Statement of Cash Flows 93 Consolidated Statement of Changes in Equity 95 Notes to the Financial Statements 196 Five-Year Financial Summary ANNUAL REPORT 2014 KERRY PROPERTIES LIMITED 3 FINANCIAL HIGHLIGHTS Two-year Overview FY 2014 FY 2013 % Change Turnover (HK$M) Continuing operations 14,664 13,970 +5% Discontinued operations – 19,188 Total 14,664 33,158 -56% Gross profit (HK$M) Continuing operations 6,208 6,057 +2% Discontinued operations – 2,897 Total 6,208 8,954 -31% Gross profit margin (%) Continuing operations 42.3 43.4 Discontinued operations – 15.1 Total 42.3 27.0 Operating profit (HK$M) Continuing operations 8,231 11,745 -30% Discontinued operations – 1,918 Total 8,231 13,663 -40% Operating profit margin (%) Continuing operations 56.1 84.1 Discontinued operations – 10.0 Total 56.1 41.2 Profit attributable to shareholders (HK$M) – before fair value change of properties and spin-off gains 4,384 4,413 -1% – after fair value change of properties and spin-off gains 6,774 13,154 -49% Net profit margin (%) – before fair value change of properties and spin-off gains 29.9 13.3 – after fair value change of properties and spin-off gains 46.2 39.7 Earnings per share (HK$) – before fair value change of properties and spin-off gains 3.04 3.06 -1% – after fair value change of properties and spin-off gains 4.69 9.13 -49% Shareholders’ equity (HK$M) 80,079 75,755 +6% Net borrowings (HK$M) 22,847 23,482 -3% Net asset value per share (HK$) 55.43 52.45 +6% Share price as at 31 December (HK$) 28.15 26.90 +5% Price earnings ratio # (times) – before fair value change of properties and spin-off gains 9.3 8.8 – after fair value change of properties and spin-off gains 6.0 2.9 Market capitalization as at 31 December # (HK$M) 40,667 38,851 +5% Dividend per share (HK$) 0.9 0.9 Dividend payout ratio (%) – before fair value change of properties and spin-off gains 29.6 29.4 – after fair value change of properties and spin-off gains 19.2 9.9 Dividend cover (times) – before fair value change of properties and spin-off gains 3.4 3.4 – after fair value change of properties and spin-off gains 5.2 10.1 Dividend yield # (%) 3.2 3.3 Return on shareholders’ equity (%) – before fair value change of properties and spin-off gains 5.5 5.8 – after fair value change of properties and spin-off gains 8.5 17.4 Gearing (%) 28.5 31.0 Interest cover – excluding discontinued operations (times) – before fair value change of properties 8.2 5.8 – after fair value change of properties 11.4 13.4 Current ratio (times) 2.2 1.7 Liquidity ratio (times) 1.2 1.0 Discount to net asset value # (%) (49.2) (48.7) # Based on share prices as at 31 December 2014 and 31 December 2013, respectively. 4 KERRY PROPERTIES LIMITED ANNUAL REPORT 2014 Breakdown of Total Turnover Breakdown of Recurrent Income (excluding discontinued operations) (excluding discontinued operations) HK$ million HK$ million 18,000 5,000 4,390 16,000 4,500 15,218 14,664 13,970 4,000 14,000 3,500 12,000 10,346 3,000 10,000 2,705 70% 72% 2,500 2,114 8,000 86% 81% 2,000 1,829 1,914 6,000 82% 79% 1,500 4,626 Financial Highlights 4,000 88% 87% 84% 59% 1,000 22% 2,000 28% 500 15% 15% 12% 36% 21% 8% 16% 12% 13% 0 3% 5% 2% 4% 0 FY2010 FY2011 FY2012 FY2013 FY2014 FY2010 FY2011 FY2012 FY2013 FY2014 Proceeds from sales of properties Rental and others Rental and others Hotel revenue Hotel revenue Net Profit Net Profit Profit Attributable to Shareholders Total Recurrent before fair after fair Turnover Income value change value change (excluding (excluding of properties of properties HK$ million discontinued discontinued and spin-off and spin-off 16,000 operations) operations) % gain gain HK$ million HK$million Weighting HK$ million HK$ million 14,000 13,154 12,000 FY 2010 10,346 1,829 18% 3,419 6,703 10,000 FY 2011 4,626 1,914 41% 3,657 5,348 8,000 6,703 6,961 6,774 6,000 5,348 FY 2012 15,218 2,114 14% 4,696 6,961 4,000 FY 2013 13,970 2,705 19% 4,413 13,154 2,000 FY 2014 14,664 4,390 30% 4,384 6,774 FY2010 FY2011 FY2012 FY2013 FY2014 ANNUAL REPORT 2014 KERRY PROPERTIES LIMITED 5 FINANCIAL HIGHLIGHTS Earnings per Share Earnings per Share (before fair value change of properties and spin-off gain) (after fair value change of properties and spin-off gain) HK$ HK$ 4.0 10 9.13 9 3.5 3.26 3.06 3.04 8 3.0 2.54 7 2.5 2.39 6 2.0 5 4.68 4.84 4.69 3.72 1.5 4 3 1.0 2 0.5 1 Financial Highlights FY2010 FY2011 FY2012 FY2013 FY2014 FY2010 FY2011 FY2012 FY2013 FY2014 Gross Asset Value of Properties HK$100,358 million HK$98,536 million 4% 5% 11% 10% FY 2014 54% FY 2013 52% 31% 33% PRC Hong Kong Residential Hong Kong Commercial Others 6 KERRY PROPERTIES LIMITED ANNUAL REPORT 2014 Chairman’s STATEMENT Mr Wong Siu Kong Chairman Chairman’s Statement Dear Shareholders, On behalf of the Board, I am delighted to report the annual results of the Group for the year ended 31 December 2014. The Group’s consolidated net profit attributable to shareholders for the year ended 31 December 2014, before taking into account the effects of the increase in fair value of investment properties, was HK$4,384 million, representing a decrease of 1% compared with HK$4,413 million reported for 2013. Profit attributable to shareholders for the year, after taking into account the effects of the increase in fair value of investment properties, was HK$6,774 million (2013: HK$13,154 million). Earnings per share for the year were HK$4.69, representing a decrease of 49% compared with HK$9.13 per share in 2013.
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