Annual Report 2018 is a cultural vision, a philosophy for living. In the age of machines, we want to celebrate something more human and kindle the artisan spirit in us. Through Collect, Connect, Collide, The Artisanal Movement becomes an incubator for ideas, and a channel for audiences to experience them. Contents 16 Corporate Structure 17 Financial Highlights 18 Chairman’s Statement 20 Executive Vice-chairman’s Report 48 Major Property Projects in Hong Kong 50 Major Property Development Projects in Mainland China 52 Directors’ Profile 61 Senior Management Profile 62 Investor Relations 64 Corporate Sustainability 88 Corporate Information 89 Report of the Directors 113 Management Discussion and Analysis 122 Independent Auditor’s Report 128 Consolidated Income Statement 129 Consolidated Statement of Comprehensive Income 130 Consolidated Statement of Financial Position 132 Consolidated Statement of Changes in Equity 134 Consolidated Statement of Cash Flows 136 Notes to the Financial Statements 239 Five-year Financial Summary 241 Risk Factors 254 Corporate Governance Report 263 Principal Projects Summary 284 Glossary of Terms Disclaimer The photographs, images, drawings or sketches shown in this annual report represent an artist’s impression of the development concerned only. They are not drawn to scale and/or may have been edited and processed with computerised imaging techniques. Prospective purchasers should make reference to the sales brochure for details of the development. The vendor also advises prospective purchasers to conduct an on-site visit for a better understanding of the development site, its surrounding environment and the public facilities nearby. All parties engaged in the production of this annual report have made their best efforts to ensure the highest accuracy of all information, photographs, images, drawings or sketches herein contained as to the printing of this annual report and to minimise the existence of clerical errors. Readers are invited to make enquires to sales personnel or consult relevant professionals for verification of doubts or particulars of specific items. If there is any inconsistency or conflict between the English and the Chinese versions, the English version shall prevail. craftsmanship Artistry • Creation • Humanised bespoke Encounter • Indulgence • Peculiar heritage AestheticsAesthetics • CultureCulture • LegacyLegacy contemporary Innovation • Provocative • Visionary victoria dockside mainland china Corporate Structure (HK Stock Code: 0017) Property Development & Investment in Hong Kong New World New World China Land Limited Department Store (100%)* China Limited Property development & (75%)* investment in Mainland China (HK Stock Code: 0825) Department store in Mainland China NWS Holdings Limited (61%)* (HK Stock Code: 0659) Infrastructure & service in Hong Kong and Mainland China * The percentage of interest held by the Group as at 30 June 2018 16 New World Development Company Limited Annual Report 2018 Financial Highlights FY2018 FY2017 HK$m HK$m Revenues 60,688.7 56,628.8 Segment results (include share of results of joint ventures and associated companies, but excluding changes in fair value of investment properties) 15,844.6 14,090.4 Changes in fair value of investment properties 15,367.1 1,363.8 Profit attributable to shareholders of the Company 23,338.1 7,675.7 Dividend per share (HK$) Interim 0.14 0.13 Final 0.34 0.33 Full-year 0.48 0.46 As at As at 30 June 30 June 2018 2017 HK$m HK$m Total assets 481,454.8 437,056.3 Net debt(1) 74,859.0 76,870.2 Gearing ratio(2) (%) 29.3 34.8 Remarks: (1) Net debt: The aggregate of bank loans, other loans and fixed rate bonds and other borrowings less cash and bank balances (2) Gearing ratio: Net debt divided by total equity * The Group has adopted HKFRS 15 for the year ended 30 June 2018, which resulted in changes in accounting policies and adjustments to the amounts recognised in the consolidated financial statements. For details, please refer to the section of Basis of Preparation under “Notes to the Financial Statements” on page 136. ** For further details in relation to the EBITDA of the Group, please refer to “Management Discussion and Analysis” on page 113. Annual Report 2018 New World Development Company Limited 17 Chairman’s Statement The year 2018 In full support of China’s development strategies including “The Belt and Road Initiative” and Guangdong-Hong Kong-Macao Bay Area development, the Group will continue to shoulder the responsibilities as a city builder, contribute to our homeland and plow back to society. 18 New World Development Company Limited Annual Report 2018 Chairman’s Statement TO OUR SHAREHOLDERS, City is a people-centered complex system. It is an Some research institutions predict that the Bay Area will aggregation of technological advancement, economic surpass the three existing bay areas by 2030 to become a development and social evolvement; a network arising from new global free economic zone with the highest population the interactions between citizens and natural environment; and largest economic size in the world. Through innovation and a combination of imagination and reality. and greater regional collaboration, this multi-core development plan will enhance the complementary strengths From the perspective of an urban ecologist, the ecological of the cities in the Bay Area, achieve interconnections in quality of a city casts direct impact on the pace of economic terms of finance, trade, shipping, services, technology and social development. Urban development becomes and talents, improve and innovate upon a cooperation more constrained by objective conditions such as land, mechanism, foster the development of industrial value chain, resources, environment, society and economy when and deliver mutual benefits. evolving to the mature period. By harmonising the conflicts between economic development and urban environment, With its long-standing commitment to developing the or through the synergies across regions and expansion of Greater China market, the New World Group advocates the overall urban development scale and so forth, a city a sustainable model of development and fabricates builder contributes to sustainability and creates a perpetual different products and services that cater to various needs ecological environment in which residents can live in peace. generating from the city evolvement. In full support of China’s development strategies including “The Belt and With the tremendously rapid development of our country Road Initiative” and Guangdong-Hong Kong-Macao Bay Area and the overall expedition of the integration among Development, the Group will continue to shoulder the Guangdong, Hong Kong and Macao, Hong Kong has responsibilities as a city builder, contribute to our homeland vigorously utilized its unique strengths to interact and and plow back to society. Meanwhile, the Group will further bond with neighbouring cities. This has key significance to enhance the New World brand and, by way of boundless sustainable development, competitiveness improvement and imagination and meticulous planning, create room for long-term prosperity and stability for the city cluster. sustainable and diversified development and in turn create values for stakeholders and society. On 1 July 2017, the “Framework Agreement on Deepening Guangdong-Hong Kong-Macao Cooperation in the Development of the Bay Area” was signed among the National Development and Reform Commission and the Governments of Guangdong Province, Hong Kong and Macao. Comprising 11 cities, the Guangdong-Hong Kong- Macao Bay Area (“Bay Area”) will be a region with the highest density of population, capital and global patents of the country. Its geographical area, population, economic Dr. Cheng Kar-Shun, Henry growth rate, ports handling capacity and airport traffic Chairman volume will be comparable to world-renowned bay areas Hong Kong, 20 September 2018 which are based on single-core economy, including San Francisco, New York and Tokyo. Annual Report 2018 New World Development Company Limited 19 Executive Vice-chairman’s Report BUSINESS REVIEW mainly attributable to Victoria Dockside and the enhancement of the flagship In FY2018, profit attributable to properties in Hong Kong especially in The New World shareholders of the Company office sector. Group will amounted to HK$23,338.1 million, up 204.1%, which was mainly due to The basic earnings per share of the continue to the improved performance in segment Group increased by 192.5% to HK$2.34. results, together with the surplus in Net gearing stood at 29.3%, down 5.5 stay ahead of changes in fair value of investment percentage points. the market with properties. In FY2018, the Group’s underlying the passion and Segment results up 12.4% year-on- profit amounted to HK$7,977.6 million, commitment year, in which, property development increased by 11.8%. The deduction and infrastructure recorded a growth were mainly due to changes in fair enshrined under of 26.2% and 14.7% respectively, value of investment properties, mainly attributable to the increase non-controlling shareholder’s interests, The Artisanal in contribution from property together with the disposal and Movement development in Hong Kong and revaluation of the shares in Beijing Mainland China, and the improved Capital International Airport Co., Ltd. performance of road and aviation (“BCIA”) under NWS Holdings Limited businesses. The increase in changes in (“NWSH”). In FY2017, the Group’s fair value of investment properties were underlying