Shui On Land Limited Annual Report 2020 00E_SOLM071_Cover_AW.indd 1 9/4/2021 10:47 A LEADING COMMERCIAL FOCUSED REAL ESTATE DEVELOPER, OWNER AND ASSET MANAGER IN CHINA Headquartered in Shanghai, Shui On Land (Stock Code: 272) is a pioneer of sustainable premium urban communities. As a leading commercial focused real estate developer, owner and asset manager in China, it has a proven track record in developing large scale, mixed-use, sustainable communities, and is the flagship property development company of the Shui On Group. As of 31 December 2020, the Company has 11 projects in various stages of development and 2 projects under management in prime locations of major cities, with a landbank of 8.6 million sq.m. (6.4 million sq.m. of leasable and saleable GFA, and 2.2 million sq.m. of clubhouses, car parking spaces and other facilities). It is also one of the largest private commercial property owners and managers in Shanghai, with a total portfolio of 1.72 million sq.m. of office and retail premises, including its flagship Shanghai Xintiandi, which is currently under its management. The Company was listed on the Hong Kong Stock Exchange on October 4, 2006, being the largest Chinese real estate enterprise listed that year. Shui On Land is a constituent stock of the Hang Seng Composite Index, HSCI Composite Industry Index - Properties & Construction, Hang Seng Composite MidCap Indices as well as the Hang Seng Stock Connect HK Index. ANNUAL REPORT 2020 1 Total landbank GFA 8.6 million sq.m. Commercial property portfolio in Shanghai 1.72 million sq.m. Total asset value of Shanghai commercial property portfolio including properties under development RMB 77 billion NANJING SHANGHAI WUHAN CHONGQING FOSHAN 2 SHUI ON LAND LIMITED CONTENTS 4 Financial Highlights 95 Biographies of Directors and Senior Management 6 Chairman’s Statement 101 Directors’ Report 12 Key Achievements in 2020 113 Independent Auditor’s Report 14 Key Awards in 2020 117 Consolidated Statement of Profit or Loss 28 Project Profiles 118 Consolidated Statement of 38 Business Review Comprehensive Income 48 Landbank 119 Consolidated Statement of Financial Position 50 Financial Review 120 Consolidated Statement of 55 Market Outlook Changes in Equity 58 Corporate Governance Report 122 Consolidated Statement of Cash Flows 73 Risk Management Report 124 Notes to the Consolidated 76 Sustainable Development Report Financial Statements 212 Financial Summary 213 Corporate Information ANNUAL REPORT 2020 3 FINANCIAL HIGHLIGHTS Operating Results for the year ended 31 December 2020 2019 2020 2019 HKD’million HKD’million RMB’million RMB’million Revenue 5,172 11,805 4,597 10,392 Represented by: Property development 1,729 8,250 1,537 7,262 Property investment 2,405 2,664 2,138 2,345 Construction 778 611 691 538 Others 260 280 231 247 Gross profit 2,644 6,035 2,350 5,313 (Decrease) / increase in fair value of investment properties (2,009) 291 (1,786) 256 (Loss) / profit attributable to shareholders of the Company (833) 2,195 (740) 1,932 Core earnings of the Group 1,627 2,639 1,446 2,323 Basic (Loss) earnings per share HKD(10.4) cents HKD27.3 cents RMB(9.2) cents RMB24.0 cents Dividend per share Interim paid HKD0.000 HKD0.036 Proposed final HKD0.000 HKD0.084 Full year HKD0.000 HKD0.12 Note: Except for dividend per share that is originally denominated in HK dollar, all of the HK dollar figures presented above are shown for reference only and have been arrived at based on the exchange rate of RMB1.000 to HKD1.125 for 2020 and RMB1.000 to HKD1.136 for 2019 being the average exchange rates that prevailed during the respective years. Financial Position as of 31 December 2020 2019 RMB’million RMB’million Total cash and bank deposits 15,796 11,859 Total assets 115,475 108,416 Total equity 46,733 49,307 Total debt 36,859 37,741 Bank borrowings 20,283 25,823 Senior notes 16,063 11,399 Receipts under securitisation arrangements 513 519 Net gearing ratio* 45% 52% * Calculated on the basis of the excess of the sum of bank borrowings, senior notes and receipts under securitisation arragements net of the sum of total cash and bank deposits over the total equity. 4 SHUI ON LAND LIMITED Landbank as of 31 December 2020 million sq.m. million sq.m. Residential 1.7 Shanghai 2.5 3% Office 2.3 14% Wuhan 1.9 27% Retail 2.2 39% Chongqing 1.1 34% 17% Hotel/ Foshan 0.9 Serviced Apartments 0.2 36% 30% Total Leasable Total Leasable and Saleable GFA 6.4 and Saleable GFA 6.4 Attributable GFA 4.1 Attributable GFA 4.1 Rental and Contracted Property Sales Revenue Related Income* (RMB’million) (RMB’million) (RMB’million) 2020 21,184 2020 4,597 2020 2,528 2019 12,501 2019 10,392 2019 2,573 (Loss)/Profit Attributable to Gross Profit Gross Profit Margin Shareholders of the Company (RMB’million) % (RMB’million) 2020 2,350 2020 51 2020 (740) 2019 5,313 2019 51 2019 1,932 Basic (Loss)/Earnings Shareholders’ per Share Equity per Share Dividend per Share (RMB’cent/share) (RMB/share) (HKD/share) 2020 2020 (9.2) 2020 4.79 Final 0.000 2019 2019 24.0 2019 4.97 Final 0.084 Total Cash and Total Assets Net Gearing Ratio Bank Deposits (RMB’million) % (RMB’million) 2020 115,475 2020 45 2020 15,796 2019 108,416 2019 52 2019 11,859 * Including Rental Income from Rui Hong Xin Cheng Commercial Partnership Portfolio and Shanghai Taipingqiao 5 Corporate Avenue, in which, the Group has 49.5% and 44.55% effective interest, respectively. ANNUAL REPORT 2020 5 CHAIRMAN’S STATEMENT VINCENT H. S. LO Chairman Our projects continued to make strong progress despite the disruption, with construction well underway at the Group’s developments in Shanghai and elsewhere. Dear Shareholders, The year 2020 was one of momentous and far-reaching The Group’s balance sheet remains strong. The net gearing change. On one hand, the COVID-19 pandemic and the ratio was 45% as of 31 December 2020, compared with 52% ensuing public-health crisis dealt a devastating blow to as of 31 December 2019. Cash and bank deposits increased economies around the world and consequently to our by 33% to RMB 15,796 million. operating businesses as well. On the other hand, it has ushered in new ways of working and living that will likely have a lasting impact. Weathering the Storm The pandemic brought about unprecedented disruptions to Against this challenging backdrop, the Group has taken the economy and our business in the first half of the year, substantial write-downs on the value of its property particularly during the first quarter, when operations were portfolio, the majority of which took place in the first half mostly halted in response to the government measures of 2020, reflecting the near cessation of business activities implemented to combat the pandemic. With the virus immediately after the COVID-19 outbreak. However, market outbreak coming under control in China, the country’s conditions improved markedly in the second half, propelling economy saw a rapid recovery in the latter half of 2020. our operating performance to exceed our expectations. As we enter 2021, I believe we are well positioned to benefit from Our projects continued to make strong progress despite the the strength of the Shui On brand and our sound strategy to disruption, with construction well underway at the Group’s capitalise on emerging trends. developments in Shanghai and elsewhere. For our residential business, sales were far stronger than expected. Contracted Financial Highlights sales for the year reached RMB21.2 billion, ahead of our target. We launched the remaining portion of Wuhan Tiandi The Group’s financial performance in 2020 can be La Riva II (Lot B10) with a total GFA of 34,000 sq.m. in April, characterised as a year of two halves. shortly after the city re-opened following the COVID-19 lockdown. Over RMB1.6 billion in sales was achieved online For the first half of 2020 (“1H 2020”), disruptions brought in just a few minutes on the launch day and all units in the about by the COVID-19 pandemic resulted in a loss of development have been fully subscribed. Our residential RMB1,622 million, which were primarily due to a decline in projects in Shanghai recorded outstanding sales. This was the fair value of the Group’s investment properties and other especially so for Rui Hong Xin Cheng Parkview, which led property assets, as well as delays in the construction and property sales by value in Shanghai in 2020. VILLE V was handover of residential units. However, in the second half of among the top six developments in Shanghai by sales value, the year (“2H 2020”), the Group saw notable recovery across during the three days of pre-sale, a total of 128 units out of all its operations, which translated into a net profit attributable 132 units launched were subscribed in June. Panlong Tiandi, to shareholders of RMB882 million. For the full year, the meanwhile, released its first batch of 948 residential units Group reported a net loss attributable to shareholders of in October. Purchase applications were four times the units RMB740 million, as compared with a profit attributable to available and almost all units were sold on the first day. These shareholders of RMB1,932 million in 2019. results reflect the Group’s brand value and reputation among home buyers for quality residential products. ANNUAL REPORT 2020 7 CHAIRMAN’S STATEMENT Our portfolio of retail properties benefited from the strength As a property developer focusing on premium developments, of the XINTIANDI brand and our innovative, omni-channel we are also ready to seize opportunities presented by the business model.