paper: 270gsm Mohawk Strathmore Premium Ultimate White Wove SW_2015_Cover.ai size: 210mm(W) x 258mm(H) spine: 16mm SWI ANNUAL RE REPORT PA 201 5 CIFI www.swirepacific.com C LIM I TE D AN N U A L R E P OR T 2 0 1 5 Stock Codes: ‘A’ Shares 00019 ‘B’ Shares 00087 K-Foil T16 (燙銀) C M Y K 20.0.0.25 CONTENTS 1 Corporate Statement FINANCIAL STATEMENTS 3 2015 Performance Highlights 120 Independent Auditor’s Report 5 Summary of Past Performance 127 Consolidated Statement of Profit or Loss 9 Chairman’s Statement 128 Consolidated Statement of Other Comprehensive Income MANAGEMENT DISCUSSION 129 Consolidated Statement of Financial Position AND ANALYSIS 130 Consolidated Statement of Cash Flows 12 2015 Performance Review and 131 Consolidated Statement of Changes in Equity Outlook 132 Notes to the Financial Statements 12 Property Division 194 Principal Accounting Policies 28 Aviation Division 197 Cathay Pacific Airways Limited – 44 Beverages Division Abridged Financial Statements 54 Marine Services Division 199 Principal Subsidiary, Joint Venture and Associated Companies and Investments 64 Trading & Industrial Division 72 2015 Sustainable Development Review SUSTAINABLE DEVELOPMENT 83 Financial Review STATISTICS 90 Financing 211 Reader’s Guide 212 Independent Practitioner’s Limited CORPORATE GOVERNANCE Assurance Report 214 Sustainable Development Statistics 97 Corporate Governance Report 107 Risk Management 110 Directors and Officers SUPPLEMENTARY INFORMATION 112 Directors’ Report 217 Schedule of Principal Group Properties 228 Group Structure Chart 230 Glossary 232 Financial Calendar and Information for Investors Note: Definitions of the terms and ratios used in this report can be found in the Glossary. 1 CORPORATE STATEMENT SUSTAINABLE GROWTH Swire Pacific has its headquarters in Hong Kong. It is one of the leading companies in Hong Kong, with five operating divisions: Property, Aviation, Beverages, Marine Services and Trading & Industrial. The Group’s operations are predominantly in Greater China, where the name Swire or 太古 has been established for 150 years. The Group has a long history in the region. We take a long- to 53 destinations in Mainland China and elsewhere in Asia. term perspective in formulating strategy and this is reflected The HAECO group is a leading provider of international aircraft in the nature of our investments. We pride ourselves on being engineering services. In 2015, it performed 9.3 million manhours forward-looking and innovative. These qualities have helped us of airframe maintenance in Hong Kong, Mainland China and to grow and have enabled us to set benchmarks in the industries the USA. in which we operate. In 2015, our Beverages Division sold 1,083 million unit cases of Swire Pacific is a highly diversified group. We have a wide range Coca-Cola products to a franchise population of over 450 million of commercial activities and conduct them internationally. We people in Greater China and the USA. have interests in three other listed companies, Swire Properties The Swire Pacific Offshore group (“SPO”) operates a fleet of 92 Limited (“Swire Properties”), Cathay Pacific Airways Limited specialist vessels supporting the offshore energy industry in (“Cathay Pacific”) and Hong Kong Aircraft Engineering Company every major offshore production and exploration region outside Limited (“HAECO”). the USA. Swire Properties is one of Hong Kong’s largest commercial At 31st December 2015, we operated 213 retail outlets in Hong landlords and operators of retail space, with a portfolio Kong, Macau and Mainland China. We have joint ventures totalling 13.4 million square feet of lettable space. In Mainland in Hong Kong and Mainland China with Akzo Nobel in paint China, Swire Properties’ mixed-use property developments in manufacturing. Taikoo Motors sells passenger cars, commercial Guangzhou, Shanghai, Beijing and Chengdu will, when they are vehicles, motorcycles and scooters. Its largest business is in all completed, have 8.9 million square feet of lettable space. In Taiwan where it sells (among other vehicles) Volkswagen, Škoda, the USA, Swire Properties’ mixed-use development in Miami, Mercedes-Benz and Audi cars. We are building a network of Florida will have 2.5 million square feet of lettable space upon cold stores in Mainland China. Five are completed and two are completion after two phases of development. under construction. In 2015, our airlines (which are based in Hong Kong) carried Swire Pacific is one of Hong Kong’s largest and oldest employers, 34.1 million passengers and flew to 193 destinations. Through where we have over 41,000 employees. In Mainland China, in Cathay Pacific, we have an interest of more than 20% in Air ventures under our own management, we have approximately China Limited (“Air China”). Hong Kong Dragon Airlines Limited 24,000 employees. Globally, we employ over 82,000 staff. (“Dragonair”) (a wholly-owned subsidiary of Cathay Pacific) flies 2 CORPORATE STATEMENT OUR STRATEGY We concentrate on businesses where we have expertise, and where our expertise can add value. Our aim is sustainable long-term growth in shareholder value. – We deploy capital and people where we see – We provide premium quality products and opportunities to generate returns which exceed our services, so as to differentiate ourselves from cost of capital over the long term. our competitors. – We invest in existing and new businesses, focussing – We invest in sustainable development, not just on those where we have a competitive advantage because it is the right thing to do, but because and where our capital and people can generate long- it helps to achieve long-term growth through term value. innovation and improved efficiency. – We divest from businesses which have reached – We are committed to the highest standards of their full potential and deploy the capital released to corporate governance and to the preservation and existing or new businesses. development of the Swire brand. – Our people, and our ability to deploy them across In implementing the above strategy, the principal our businesses (which is facilitated by services risks and uncertainties facing the Group are that the agreements with our principal shareholder), are economies in which it operates (in particular Hong Kong critical to our ability to generate long-term value. and Mainland China) will not perform as well in the We recruit the best people and invest heavily in their future as they have in the past and the uncertainties as training and development. to whether this will happen. – We are conservative financial managers. This lets us We are and intend to remain a conglomerate with execute long-term investment plans irrespective of diverse businesses capable of generating sustainable short-term financial market volatility. long-term growth in value. SWIRE PACIFIC 2015 ANNUAL REPORT 3 2015 PERFORMANCE HIGHLIGHTS Attributable Profit Underlying Profit Net Assets Employed 21% increase from 2014 2% increase from 2014 1% increase from 2014 HK$13.4 bn HK$9.9 bn HK$323.6 bn Underlying Return on Dividends Per Share Net Assets Employed Unchanged from 2014 0.1 percentage point decrease from 2014 HK$3.90 per ‘A’ share 3.6% HK$0.78 per ‘B’ share Underlying Return on Net Assets Employed by Division PROPERTY AVIATION BEVERAGES MARINE TRADING & 2.9% 7.9% 18.8% SERVICES INDUSTRIAL -5.5% 4.2% 2015 2014 GHG Emissions LTIR Water Consumed Tonnes of CO e (No. of injuries per 100 full-time 2 cbm (Millions) equivalent employees) (Millions) 18.3 1.64 10.0 17.7 2.03 9.4 4 2015 PERFORMANCE HIGHLIGHTS 2015 Financial Performance 2015 2014 Change Note HK$M HK$M % Revenue 60,885 61,301 -1% Operating profit 16,461 13,697 +20% Profit attributable to the Company’s shareholders 13,429 11,069 +21% Cash generated from operations 14,362 16,250 -12% Net cash inflow/(outflow) before financing 6,824 (215) N/A Total equity (including non-controlling interests) 263,986 262,130 +1% Net debt 59,584 58,624 +2% HK$ HK$ Earnings per share (a) ‘A’ share 8.93 7.36 +21% ‘B’ share 1.79 1.47 Dividends per share ‘A’ share 3.90 3.90 – ‘B’ share 0.78 0.78 Equity attributable to the Company’s shareholders per share (a) ‘A’ share 145.22 145.40 -0% ‘B’ share 29.04 29.08 Underlying Profit Change HK$M HK$M % Underlying profit attributable to the Company’s shareholders (b) 9,892 9,739 +2% HK$ HK$ Underlying earnings per share (a) ‘A’ share 6.58 6.47 +2% ‘B’ share 1.32 1.29 2015 Sustainable Development Performance Change 2015 2014 % GHG emissions (Million tonnes of CO2e) 18.3 17.7 +3% Energy consumed (GJ Millions) 250.4 239.3 +5% Water consumed (cbm Millions) 10.0 9.4 +6% LTIR (Number of injuries per 100 full-time equivalent employees) 1.64 2.03 -19% Expenditure on community programmes (HK$ Millions) 56 56 – Notes: (a) Refer to note 13 in the financial statements for the weighted average number of shares. (b) Refer to note 11 in the financial statements for a reconciliation between the reported and underlying profit attributable to the Company’s shareholders. SWIRE PACIFIC 2015 ANNUAL REPORT 5 SUMMARY OF PAS T P ERFORMANCE Underlying Profit Attributable Underlying Return on to the Company’s Shareholders Net Assets Employed HK$M % 20,000 8 7 15,000 6 5 10,000 4 3 5,000 2 1 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Net Cash Generated from Operating Activities Net Assets Employed HK$M HK$M 15,000 350,000 300,000 12,000 250,000 9,000 200,000 150,000 6,000 100,000 3,000 50,000 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Note: The same measures of performance are presented for each Division in the 2015 Performance Review and Outlook section.