Hopewell : Announcement of 2018/19 Interim Results

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ANNOUNCEMENT OF 2018/19 INTERIM RESULTS

Highlights

1H FY19 (1 April - 30 September 2018)

• • This is the first financial year after the change of financial year end date from 30 June to 31 March

• • Profit attributable to owners of the Company before fair value gain of completed investment properties up 678% yoy to HK$5,514 million, mainly due to gain on disposal of HHI

• • Core profitN1 down 44% yoy to HK$394 million or HK$0.45 per share, mainly due to the growth in profit from investment properties, hospitality, profit shared from Heyuan Power Plant and treasury income were offset by the fall in (i) toll road contribution given HHI Disposal, and (ii) profit recognition of residential sales from Hopewell New Town, Broadwood Twelve and The Avenue

• • First interim dividend of HK30 cents per share

• • EBIT of investment properties and hospitality businesses up 7% yoy to HK$424 million

• • E-Max is undergoing evolution, expansion of upmarket fashion outlet on B1/F opened by phases since July 2018

• • Panda Hotel's EBIT rose 28% yoy to HK$35 million due to increase in room and F&B revenues

• • For Hopewell New Town, no residential sales were launched due to tightening policies in PRC property market. Revenue fell to RMB1 million, which was from car park sales, compared to RMB240 million in 1H FY18 (1 April to 30 September 2017)

• • Disposal of approximately 66.69% of the issued shares of Hopewell Highway Infrastructure Limited completed on 4 April 2018. HHL received net cash proceeds of approximately HK$9 billion and recognised post-tax net gain of approximately HK$5.1 billion

• • Net cash of approximately HK$8.3 billion as at 30 September 2018

Upcoming: 2H FY19 (1 October 2018 to 31 March 2019) and beyond

• • Target to distribute 90% - 100% of core profitN1 on a full year basis as dividends in the years before Hopewell Centre II opensN2

• • Target E-Max's rental income to grow 50% in FY20 as compared to the financial year ended 30 June 2016 given E-Max's evolution with the opening of upmarket fashion outlet and introduction of more elements and popular brands

• • Hopewell Centre II's construction advancing at full steam. Site formation and foundation works target to complete in 2019 while construction is targeted to complete by end of 2021

• • 153-167 QRE project is envisioned to commence operation in 2022. Planning application to build a commercial property was submitted to Town Planning Board in May 2018 and demolition works were completed in September 2018

• • For Hopewell New Town, HHL will continue to monitor the market closely before taking further initiatives, given current tightening policies in the PRC property market

N1: Represents profit attributable to owners of the Company excluding fair value gain of completed investment properties and profit from en bloc sale of entire project

N2: Barring unforeseen circumstances

GROUP RESULTS

Change of Financial Year End Date

As detailed in the Company's announcement published on 8 May 2018, the Board has resolved to change the financial year end date from 30 June to 31 March (the "Change") following the publication of the audited consolidated financial statements of the Group for the year ended 30 June 2018 in order to (i) enable the Group to rationalize and more efficiently use its resources for the preparation of results announcements and reports; and (ii) promote "Work-life Balance" for the well-being of our employees, which the Group believes will result in positive impacts on employees' engagement, productivity and business performance. This is the first financial year after the Change. The condensed consolidated financial statements presented for the current interim financial reporting period covers the three months from 1 July to 30 September 2018 (the "2018 3-month Period") and the comparative figures cover the six-month period from 1 July to 31 December 2017.

Following the aforesaid Change, the subsequent new financial years would cover the full year from 1 April of a relevant year to 31 March of the following year ("FY"), while the new first half-year period of a financial year would cover a six-month period from 1 April to 30 September of a relevant year ("1H FY"). To facilitate a better understanding of the operating results of the Group in the first half-year period of FY19 ("1H FY19") when applying the new financial year end date, the financial information presented herein contains figures for the six-month period from 1 April to 30 September 2018 and the comparative figures for the six-month periods from 1 April to 30 September of relevant years. To provide a clear picture of the Group's past annual operating results when applying the new financial year end date, the financial information also contains annual comparative figures for 12-month periods from 1 April of a relevant year to 31 March of the following year.

Overview

For the six-month period from 1 April to 30 September 2018 (1H FY19)

The profit attributable to owners of the Company before fair value gain of completed investment properties for the six-month period ended 30 September 2018 significantly increased to HK$5,514 million from HK$709 million for the same period in 2017. The increase was mainly resulted from the HHI Disposal, which was completed in April 2018 and generated a post-tax net gain on disposal of approximately HK$5.1 billion.

The Group's EBIT (before gain on disposal of HHI) for the six-month period ended 30 September 2018 decreased to HK$472 million from HK$1,068 million for the same period in 2017, and the Group's core profit attributable to owners of the Company ("core profit") for the six-month period ended 30 September 2018 decreased to HK$394 million from HK$709 million for the same period in 2017. Profit from investment properties and hospitality businesses and profit shared from Heyuan Power Plant grew. Treasury income also increased due to the higher cash balance resulting from the proceeds of HHI Disposal. However, these positive factors were offset by (i) the fall in toll road's contribution due to HHI Disposal, and (ii) the decreases in profit recognition of residential sales from Hopewell New Town, Broadwood Twelve and The Avenue.

The Group's total revenue for the six-month period ended 30 September 2018 decreased to HK$1,454 million from HK$3,254 million for the same period in 2017. The revenue from investment properties and hospitality continued to grow. Treasury income also increased due to the higher cash balance resulting from the proceeds of HHI Disposal. However, these positive factors were offset by (i) the fall in toll road's contribution due to HHI Disposal, and (ii) the decreases in residential sales recognition of Hopewell New Town, Broadwood Twelve and The Avenue.

The Group's revenue and EBIT by activities for the six months ended 30 September 2018 and 2017 were as follows:

Revenue

EBIT*Six months ended 30 September

HK$ million	2017	2018	2017	2018
Continuing operations:
Property letting and management	576	597	370	386
Hotel, restaurant and catering operation	194	231	26	38
Investment properties and hospitality sub-total	770	828	396	424
Property development	686	1	224	(11)
Power plant	453	494	1	14
Treasury income	41	107	41	107
Others	-	-	(56)	(70)
Continuing operations total	1,950	1,430	606	464
Discontinued operation:
Toll road investment	1,304	24	462	8
Revenue/EBIT (Note)	3,254	1,454	1,068	472

*These figures represent EBIT of the Company and its subsidiaries plus net profits (after interest and tax) shared from JVs

Note:

Reconciliation of Revenue, EBIT and Core Profit with Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

Results

Six months ended 30 September

HK$ million	2017	2018
EBIT	1,068	472
Finance costs	(7)	(6)
Fair value gain of completed investment properties**	954	1,079
Post-tax net gain on disposal of HHI	-	5,120
Profit before taxation	2,015	6,665
Taxation (from continuing and discontinued operations)	(194)	(67)
Profit for the period	1,821	6,598
Non-controlling interests	(158)	(5)
Profit for the period attributable to owners of the Company	1,663	6,593
Less: Fair value gain of completed investment properties**	(954)	(1,079)
Profit for the period attributable to owners of the Company
before fair value gain of completed investment properties	709	5,514
Less: Net gain on disposal of HHI (net of tax)	-	(5,120)
Core profit	709	394
** Includes share of fair value gain of completed investment properties of a JV

Revenue

Six months ended 30 September

HK$ million	2017	2018
Revenue per Group Results	3,254	1,454
Less:
Sales proceeds of Broadwood Twelve properties	(230)	-
Treasury income	(41)	(107)
Share of revenues of JVs engaged in
- Toll road investment	(1,304)	(24)
- Power plant	(453)	(494)
- Property development and property investment	(203)	(14)
Turnover per Condensed Consolidated Statement of Profit or Loss and
Other Comprehensive Income	1,023	815