QUICK FACTS 55 countries & territories 47,000+ employees worldwide 75M ft² land & facilities 10,000+ self-owned operating vehicles Cover Photo: A 33,000-kg air drum transported from Italy to a refinery in Russia by sea & road freight in 60 days. (computer-processed image) CONTENTS 02 Corporate Information & Key Dates 03 Financial Highlights 05 2015-2019 Financial Summary 06 Logistics Facilities GLOBAL NETWORK 13 Chairman’s Statement 14 Management Discussion and Analysis 14 Results Overview 15 Business Review 19 Financial Review 20 Staff and Remuneration Policies 21 Environmental, Social and Governance Report 34 Awards and Citations CHINA FOCUS 40 Corporate Governance Report 60 Directors and Senior Management 73 Report of Directors 99 Independent Auditor’s Report 108 Statement of Accounts 203 Definitions ASIA SPECIALIST 1 ANNUAL REPORT 2019 CORPORATE INFORMATION & KEY DATES BOARD OF DIRECTORS AUDITOR Executive Directors PricewaterhouseCoopers Mr KUOK Khoon Hua (Chairman) Certified Public Accountants and Registered PIE Auditor Mr MA Wing Kai William (Group Managing Director) Mr CHEUNG Ping Chuen Vicky LEGAL ADVISER Mr NG Kin Hang Davis Polk & Wardwell Non-executive Director REGISTERED OFFICE Ms TONG Shao Ming Victoria Place, 5th Floor, 31 Victoria Street Hamilton HM 10, Bermuda Independent Non-executive Directors Ms KHOO Shulamite N K CORPORATE HEADQUARTERS AND Ms WONG Yu Pok Marina PRINCIPAL PLACE OF BUSINESS IN HONG KONG Mr YEO Philip Liat Kok 16/F, Kerry Cargo Centre, 55 Wing Kei Road Mr ZHANG Yi Kevin Kwai Chung, New Territories, Hong Kong AUDIT AND COMPLIANCE COMMITTEE PRINCIPAL SHARE REGISTRAR AND Ms WONG Yu Pok Marina (Chairman) TRANSFER AGENT Ms TONG Shao Ming Ocorian Management (Bermuda) Limited Mr ZHANG Yi Kevin (Formerly known as Estera Management (Bermuda) Limited) Victoria Place, 5th Floor, 31 Victoria Street REMUNERATION COMMITTEE Hamilton HM 10, Bermuda Ms KHOO Shulamite N K (Chairman) Mr KUOK Khoon Hua HONG KONG BRANCH SHARE REGISTRAR AND Mr MA Wing Kai William TRANSFER OFFICE Mr YEO Philip Liat Kok Tricor Investor Services Limited Mr ZHANG Yi Kevin Level 54, Hopewell Centre 183 Queen’s Road East, Hong Kong NOMINATION COMMITTEE Mr KUOK Khoon Hua (Chairman) INVESTOR RELATIONS Ms KHOO Shulamite N K T 852 2410 3600 Ms WONG Yu Pok Marina F 852 2480 5958 Mr YEO Philip Liat Kok E [email protected] FINANCE COMMITTEE WEBSITE Mr MA Wing Kai William (Chairman) www.kerrylogistics.com Mr NG Kin Hang KEY DATES Ms TONG Shao Ming Annual General Meeting RISK MANAGEMENT COMMITTEE 29 May 2020 Mr MA Wing Kai William (Chairman) Closure of Registers of Members Mr NG Kin Hang 26 to 29 May 2020 and 4 June 2020 (plus two members of the senior management and a department head, who are non-members Proposed Payment of Final Dividend of the Board) 18 June 2020 COMPANY SECRETARY Ms LEE Pui Nee 2 FINANCIAL HIGHLIGHTS IN HK$M REVENUE SEGMENT PROFIT SEGMENT PROFIT IL IFF 8% 15% 13% 41,139 2,435 622 CORE OPERATING PROFIT CORE NET PROFIT 17% 4% 2,765 1,374 PROFIT ATTRIBUTABLE TO FINAL GROSS GEARING THE SHAREHOLDERS DIVIDEND 18 HK CENTS 34.6% 55% PER SHARE 3,788 3 3 3 ANNUAL REPORT 2019 1 REVENUE BY SEGMENT 2 REVENUE BY REGION HK$ M 41,139 HK$ M 41,139 40,000 38,139 40,000 38,139 35,000 30,788 35,000 30,788 30,000 30,000 24,036 24,036 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 2016 2017 2018 2019 2016 2017 2018 2019 Logistics Operations Mainland China Asia Others Hong Kong Warehouse Hong Kong Americas International Freight Forwarding Taiwan Europe 3 SEGMENT PROFIT 4 PROFIT ATTRIBUTABLE TO THE SHAREHOLDERS HK$ M HK$ M 3,788 4,000 3,500 3,057 3,500 3,000 2,660 2,357 3,000 2,500 2,101 2,440 1,958 2,500 2,116 2,000 1,894 1,877 1,551 2,000 65 1,500 1,301 1,128 1,131 1,500 918 501 773 1,000 1,000 560 541 522 545 500 1,326 1,374 500 1,104 1,183 448 511 549 622 0 0 (50) (14) (45) 2016 2017 2018 2019 (100) 2016 2017 2018 2019 Logistics Operations Change in fair value of financial instruments Hong Kong Warehouse Change in fair value of investment properties, net of deferred tax International Freight Forwarding Core Net Profit Impairment Gain from disposal of warehouses in Hong Kong 5 CAPEX 6 DIVIDEND PER SHARE & DIVIDEND PAYOUT RATIO % HK$ M 34% 2,992 2,971 HK cents 3,000 2,637 70 62 2,500 2,332 990 60 32% 1,451 2,000 924 50 18 742 32% 37 40 29% 1,500 30 22 16 1,000 19 35 1,981 1,713 20 1,541 1,590 500 14 12 10 12 0 7 8 9 9 2016 2017 2018 2019 2016 2017 2018 2019 Acquisition of subsidiaries, associates and joint ventures Dividend payout ratio (Interim and final dividend/Core net profit) Additions of PP&E, leasehold land and land use rights Special dividend Final dividend Interim dividend 4 2015 - 2019 FINANCIAL SUMMARY 2019 2018 2017 2016 2015 Income statement HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Revenue 41,139,102 38,138,528 30,787,654 24,035,567 21,079,494 Operating profit 5,200,992 3,491,694 3,063,853 2,677,360 2,578,014 Finance costs (358,171) (224,245) (159,825) (145,209) (134,650) Share of results of associates and joint ventures 85,530 110,734 64,784 101,003 103,125 Profit before taxation 4,928,351 3,378,183 2,968,812 2,633,154 2,546,489 Taxation (588,951) (506,561) (469,350) (397,596) (401,323) Profit after taxation 4,339,400 2,871,622 2,499,462 2,235,558 2,145,166 Non-controlling interests (551,077) (431,847) (383,565) (358,356) (340,721) Profit attributable to the Shareholders 3,788,323 2,439,775 2,115,897 1,877,202 1,804,445 Represented by: Core net profit 1,374,098 1,326,330 1,183,063 1,104,024 1,060,678 Change in fair value of investment properties, net of deferred tax 501,813 1,127,445 917,834 773,178 743,767 Change in fair value of financial instruments – (14,000) 65,000 – – Gain on disposal of warehouses 1,957,540 – – – – Impairment (45,128) – (50,000) – – Profit attributable to the Shareholders 3,788,323 2,439,775 2,115,897 1,877,202 1,804,445 2019 2018 2017 2016 2015 Assets and liabilities HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Non-current assets 32,205,467 28,148,752 25,998,821 22,367,726 19,430,936 Net current assets 6,017,714 2,565,010 1,797,767 3,582,096 2,540,753 Total assets less current liabilities 38,223,181 30,713,762 27,796,588 25,949,822 21,971,689 Long-term liabilities and non-controlling interests (15,209,832) (10,670,489) (9,972,927) (10,649,919) (6,542,469) 5 ANNUAL REPORT 2019 LOGISTICS FACILITIES 1 Facilities by REGION 4 GFA Growth M Sq.ft. Mainland China 29% 80 Hong Kong 8% 75 Taiwan 13% Asia 48% 70 Americas 1% Europe 1% 60 60 52 50 48 46 40 35 30 2 OWNED facilities by REGION 26 22 20 19 19 17 18 Mainland China 30% 10 Hong Kong 16% 7 7 7 8 Taiwan 14% 0 Asia 39% 2016 2017 2018 2019 Europe 1% Leased Facilities Owned Investment Properties Owned Self-Used Properties Total 3 Leased facilities by REGION Mainland China 26% Hong Kong 3% Taiwan 13% Asia 54% Americas 2% Europe 2% 6 PARTICULARS OF MATERIAL LOGISTICS FACILITIES Approximate GFA owned Usage type Total Attributable (sq.ft.) (sq.ft.) (%) A. Properties classified as Investment Properties 1. Kerry Cargo Centre Warehouse 1,443,356 1,443,356 100.0 55 Wing Kei Road, Kwai Chung, New Territories, Hong Kong Kwai Chung Town Lot No. 455 2. Song Than Logistics Centre Logistics centre 789,012 789,012 100.0 20 Thong Nhat Boulevard, Song Than Industrial Zone 2, Di An District, Binh Duong Province, Vietnam 3. Kerry TC Warehouse 1 Warehouse 659,783 659,783 100.0 3 Kin Chuen Street, Kwai Chung, New Territories, Hong Kong 4. Kerry Wuhan Logistics Centre Logistics Centre 629,007 629,007 100.0 East of Hua Xiang Road, North of Shang Mao Da Road, West Lake District, Wuhan East, China 5. Kerry Changsha Logistics Centre Logistics Centre 626,938 626,938 100.0 Jin Xia Economic Development Zone, Changsha, China 6. Kerry Warehouse (Tsuen Wan) Warehouse 591,973 591,973 100.0 3 Shing Yiu Street, Kwai Chung, New Territories, Hong Kong Kwai Chung Town Lot No. 452 7. Kerry TC Warehouse 2 Warehouse 490,942 490,942 100.0 35 Wing Kei Road, Kwai Chung, New Territories, Hong Kong Kwai Chung Town Lot No. 437 8. Kerry Tampines Logistics Centre Logistics centre 371,466 371,466 100.0 19 Greenwich Drive, Tampines Logistics Park, Singapore 9. Kerry Kunshan Logistics Centre Phase 2 Logistics centre 363,092 363,092 100.0 No. 118 Yuxi Middle Road, Qiandeng Town, Kunshan, China 7 ANNUAL REPORT 2019 Approximate GFA owned Usage type Total Attributable (sq.ft.) (sq.ft.) (%) A. Properties classified as Investment Properties (continued) 10. Kerry Warehouse (Sheung Shui) Warehouse 356,253 356,253 100.0 2 San Po Street, Sheung Shui, New Territories, Hong Kong 11.