SJM HOLDINGS LIMITED 澳門博彩控股有限公司 ANNUAL REPORT 年報 2018 ANNUAL REPORT 年報 C015530 ABOUT US SJM Holdings Limited (the “Company”) is the holding company of Sociedade de Jogos de Macau, S.A. (“SJM”), one of the six companies authorised to operate casino games of fortune and other games of chance in casinos, under the terms of a concession granted by the Government of the Macau Special Administrative Region (“Macau”) in March 2002, and the only casino gaming concessionaire with its roots in Macau. SJM’s casinos are located in prime locations on the Macau Peninsula and Taipa and convenient to principal entry points. Gaming operations comprise VIP gaming, mass market table gaming and slot machines. The Grand Lisboa Palace, SJM’s integrated resort on Cotai, is currently under construction. The Grand Lisboa Palace will feature a total of approximately 1,900 hotel rooms and suites, facilities for meetings and conferences, shopping, dining and entertainment, and a casino. As at 31 December 2018, SJM operated 20 casinos, comprising more than 1,700 gaming tables and over 2,400 slot machines. CONTENTS 3 Chairman's Statement 4 Financial Highlights and Dividend Schedule 5 Chief Executive Officer’s Statement 6 Business Review 13 Prospects and Recent Developments 14 Financial Review 16 Corporate Social Responsibility 20 Event Highlights 22 Awards 24 Directors and Senior Management 33 Directors’ Report 65 Corporate Governance Report 95 Environmental, Social and Governance Report 105 Independent Auditor’s Report 111 Consolidated Statement of Profit or Loss and Other Comprehensive Income 113 Consolidated Statement of Financial Position 115 Consolidated Statement of Changes in Equity 116 Consolidated Statement of Cash Flows 118 Notes to the Consolidated Financial Statements 216 Five-Year Financial Summary 217 Corporate Information 218 Definitions 2 SJM Holdings Limited Annual Report 2018 SJM Holdings Limited Annual Report 2018 3 Chairman’s STATEMENT It is my pleasure and honour to serve as Chairman of SJM Holdings, especially as we enter one of the most exciting and potentially productive times in our Group’s long history. SJM will soon extend our presence in Macau from Macau Peninsula, where we have for many years held a dominant share of our market, to Cotai with the completion of the Grand Lisboa Palace. The Grand Lisboa Palace is the third property to carry our Lisboa brand name, but we intend it to be significantly different from and complementary to our existing operations. Conceived in a unique East-West style, the resort will cater to the upscale aspirations of visitors from China and around the world. Notable features of the Grand Lisboa Palace are our two fashion-branded hotels, the Palazzo Versace and the Karl Lagerfeld which, together with our own brand Grand Lisboa Palace Hotel, all surpass five-star standards. With a full complement of luxurious non-gaming facilities, the Grand Lisboa Palace firmly plants SJM’s flag not just in Cotai but also among the most prestigious integrated resorts in Asia, and will be an important anchor of our presence in Macau for decades to come. The Grand Lisboa Palace exemplifies the commitment of SJM to continue developing and positioning our business. All the talents of our staff, both new and long-standing, as well as the diverse capabilities of each of our Board members, will be utilized in achieving our strategy. What we set out to do is to maximize our potential in all segments of casino gaming and attractive non-gaming activities, whilst constantly striving to improve our efficiency. Our primary focus remains on Macau though we selectively consider opportunities elsewhere in the Asian region. SJM fully adheres to the principles of our founder Dr. Stanley Ho, who has always believed in building an enterprise of value to society. We continue this legacy through efforts to improve the environment of Macau and the well-being of all of its residents, through donations and sponsorship of worthy activities, covering charities, welfare groups, education, culture, sports and major tourist events. Our employment policies further reflect our commitment to Macau society as around 90% of our approximately 20,400 employees are local Macau residents. Our outlook for SJM and for Macau over the medium and long term is confidently optimistic. Balancing uncertainties in the global macro economy that are always present, is the growing appeal of Macau as a tourism and leisure destination, aided by progressive enhancements in infrastructure such as the Hong Kong-Zhuhai- Macau Bridge. In addition, the Central Government’s Belt and Road and Greater Bay Area initiatives will provide further benefit to the local economy. In conclusion, I would like to express my grateful thanks to all of our employees for their loyalty and diligent work during the past year, to each of our directors for their wise counsel, and to our shareholders and business partners for their support. Ho Chiu Fung, Daisy Chairman and Executive Director Hong Kong, 28 February 2019 4 SJM Holdings Limited Annual Report 2018 FINANCIAL HIGHLIGHTS AND DIVIDEND SCHEDULE FINANCIAL HIGHLIGHTS Year Ended Year Ended 31 December 2018 31 December 2017 (HK$ million) (HK$ million) (restated) Net Gaming Revenue 33,677 31,095 Hotel, Catering, Retail and Other Income 1,063 822 Adjusted EBITDA* 3,724 3,074 Profit attributable to owners of the Company 2,850 1,963 Earnings per share basic HK50.4 cents HK34.7 cents diluted HK50.3 cents HK34.7 cents Dividend per ordinary share proposed final dividend HK21 cents HK15 cents interim dividend paid HK8 cents HK5 cents * Adjusted EBITDA is earnings after adjustment for non-controlling interests and before accounting for interest income and expense, tax, depreciation and amortisation, donations, gain/loss on disposal of property and equipment, share-based payments, loss on deregistration of a subsidiary, loss on modification of long-term bank loans and impairment loss (including reversal) on property and equipment. DIVIDEND SCHEDULE Events Date and Time Announcement of proposed final dividend 28 February 2019 2019 Annual General Meeting 2:30 p.m. on (to approve the proposed final dividend) Tuesday, 11 June 2019 Ex-dividend date 13 June 2019 Record date for proposed final dividend 14 June 2019 Latest time to lodge transfer documents with share registrar to 4:30 p.m. on qualify for proposed final dividend Friday, 14 June 2019 Expected payment date of proposed final dividend (if approved at the 2019 Annual General Meeting) 27 June 2019 SJM Holdings Limited Annual Report 2018 5 CHIEF EXECUTIVE OFFICER’S STATEMENT (All amounts expressed in Hong Kong dollars unless otherwise stated) Macau’s gaming market experienced positive growth in 2018, continuing the expansion of 2017, which reversed the previous three years’ declining revenue. Reasons for the increase include Macau’s 9.8% growth in visitor arrivals, including 13.8% growth in arrivals from the Mainland, as well as the ramp-up of new casino resort projects in Cotai. Gaming revenue growth was mainly in the mass segment, and as expected favoured the developing Cotai area as opposed to Macau Peninsula. SJM enjoyed decent increases in mass market gaming revenue and slot machine revenue, which grew by 12.1% and 12.6%, respectively, in 2018 compared with the previous year, whilst our VIP gaming revenue declined by 1.1%. SJM’s market share of Macau gaming revenue was 14.9% in 2018. We are pleased to report that the Group’s Adjusted EBITDA (as defined herein) increased by 21.1% and profit attributable to owners of the Company increased by 45.2%. At the Group’s flagship Casino Grand Lisboa, VIP gaming revenue, mass market table gaming revenue and slot machine revenue increased by 0.5%, 13.3% and 16.0%, respectively. The property showed an increase in Adjusted Grand Lisboa EBITDA of 24.3% for the year. Occupancy at the Grand Lisboa Hotel was 95.5% for the full year, at an average room rate of $1,495. In 2018 the Group maintained a strong financial position, whilst drawing against banking facilities arranged during the previous year to finance construction of the Grand Lisboa Palace. Total cash and bank balances stood at $18.8 billion as at 31 December 2018, and debt outstanding of the Group was $15.4 billion. The Group’s Grand Lisboa Palace project on Cotai, which embodies our long-term confidence in Macau and in China as well as our commitment to the solid diversification of our tourism and hospitality businesses, made substantial progress in 2018. We are anticipating construction of the resort to complete in the first half of this year and we will seek the relevant licenses to begin operation as soon as possible thereafter. The Grand Lisboa Palace will increase our hotel room capacity almost five-fold and will provide best-in-category shopping, dining, entertainment and events facilities that will enhance Macau’s position as a world centre of tourism and leisure. In 2018 SJM continued its strong support of the local community. We actively supported the Macau SAR Government’s policy on prioritising purchases from local SMEs, as we launched the “SJM and Macau SME Procurement Partnership Programme” jointly with the Macao Chamber of Commerce in 2016, and up until 31 December 2018, 1,250 local suppliers have enrolled in the Programme. SJM also launched a programme in 2018 to aid local SME restaurants that were affected by severe Typhoon Hato by distributing free dining coupons to residents and visitors. Subject to approval by shareholders at the 2019 annual general meeting, the Board of Directors has recommended a final dividend of HK21 cents per ordinary share. In addition to the interim dividend of HK8 cents per ordinary share paid previously, total dividends for the year would amount to HK29 cents per ordinary share.