Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

THE WHARF (HOLDINGS) LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 4)

Interim Results Announcement

for the half-year period ended 30 June 2021

Welcomed Cautious Recovery from Pandemic

HIGHLIGHTS

  • Luxury Development Properties ("DP") market in Hong Kong is emerging from the shadow of the pandemic while long project time profile increases development risk.
  • Strict price control caps Mainland DP returns and suggests a different risk profile. Impairment provisions were made for non-residential stock.
  • For Mainland Investment Properties ("IP"), luxury segment out-performance is spurring a tenancy chase from new malls. New office supply keeps an unattractive lid on both occupancy and rent.
  • Disruptions in supply chains create opportunities for Hong Kong port while materialization is constrained by shortage of land.

GROUP RESULTS

The Group reported an underlying net loss of HK$526 million (2020: HK$1,132 million) for the period.

Group profit attributable to equity shareholders, including IP revaluation surplus and other unrealised accounting gains/losses, was HK$1,038 million (2020: loss of HK$1,741 million).

INTERIM DIVIDEND

An interim dividend of HK$0.20 (2020: HK$0.20) per share will be paid on 15 September 2021 to Shareholders on record as at 6:00 p.m. on 1 September 2021. This will absorb a total amount of HK$611 million (2020: HK$610 million).

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The Wharf (Holdings) Limited - 2021 Interim Results Announcement (10 August 2021)

BUSINESS REVIEW

HONG KONG PROPERTIES

A burst of activities in the luxury residential segment on the Peak put the Group in the public spotlight briefly at the beginning of the year. In quick succession, HK$15.6 billion was invested in 2 prime sites, 5 houses and 1 apartment were sold for a total of HK$3.4 billion, and 2 houses were leased by tender for a total monthly rent exceeding HK$2.2 million.

On an attributable basis, revenue increased to HK$2,429 million and operating profit to HK$682 million during the period, mainly due to recognition from houses sold at 77/79 Peak Road. A gain of HK$573 million was also recognised from disposal of the Group's remaining interest in Cable TV Tower and One Midtown in Tsuen Wan.

The Peak Portfolio

Acquisition of 2 sites in Mansfield Road doubled total attributable gross floor area ("GFA") to nearly 600,000 square feet. However, the development profile in this segment is characterized by long holding period and high capital intensity.

Mount Nicholson may be a useful illustration of the long holding period in this segment. This site was acquired 11 years ago in 2010. It was not until 2016 when the first units were sold. After selling one more apartment at HK$490 million during the period, 12 units (2 houses and 10 apartments) remain unsold. Project internal rate of return will be weighed down by the long payback period.

77/79 Peak Road sold first five houses for a total of HK$3 billion at up to HK$92,100 per square foot. 4 houses were booked in the first half of 2021. Redevelopment had started in 2012.

MAINLAND CHINA DEVELOPMENT PROPERTIES

Prevailing policies and strict price control in the residential sector significantly increase development risk and render some projects no longer profitable. On the other hand, oversupply in the non-residential sectors has been observed in many cities with slow-moving stock piling up. Attributable impairment provisions totaling HK$3,650 million were made during the period.

Inclusive of joint ventures and associates on an attributable basis, revenue increased by 64% to HK$6,995 million, while operating profit decreased by 25% to HK$883 million.

Attributable contracted sales amounted to RMB5.7 billion (2020: RMB8.1 billion), representing 1,815 units totaling 214,400 square metres. Net order book at the end of June was RMB27.3 billion for 0.9 million square metres. In the absence of new acquisitions, the Group's land bank depleted further to 2.6 million square metres.

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The Wharf (Holdings) Limited - 2021 Interim Results Announcement (10 August 2021)

MAINLAND CHINA INVESTMENT PROPERTIES

Retail sales is keeping up good growth momentum, mainly led by the luxury segment. However, due to an oversupply of retail space, many landlords are willing to pay a high price to chase a small number of dominant brands. On the office side, the inflating new supply in many cities is keeping an unattractive lid on both occupancy and rent.

Revenue increased by 45% to HK$2,677 million and operating profit by 50% to HK$1,780 million, driven mainly by the malls in the International Finance Squares ("IFS").

Changsha IFS

Spanning one million square metres, Changsha IFS is a trendsetter for entertainment, dining, lifestyle, retail and culture in central China. It reported growth of revenue by 90% and operating profit by 122% in the run-up to its third anniversary, compared to the first half of 2020 at the peak of the pandemic.

The 246,000-square-metre mega shopping mall housing over 370 brands has been sought after by retailers with nearly full occupancy of 99%.

The 452-metre Tower 1, the tallest building in Hunan province, may be the best address in the city for the still emerging Grade A segment. Occupancy of IP floors further climbed to 85%.

The luxury sky hotel at the top floors of Tower 1, Niccolo Changsha, has quickly become the market leader in occupancy and room yield in the city. Record room yield with occupancy of over 95% was achieved in the second quarter of 2021.

Tower 2, which comprises high-end apartments and hotels, is scheduled to complete in phases from the second half of 2022.

Chengdu IFS

A landmark in western China, Chengdu IFS reported that revenue increased by 45% and operating profit by 54%.

Ranking regularly among the Mainland's top 10 for sales, Chengdu IFS mall is renowned for its collection of top tier brands, bridging pop trends and cultural innovations. Occupancy maintained high at 96%.

Commanding the highest rental rate in Chengdu, the three Grade A office towers provide a leading platform for Fortune 500 companies and multinational corporations. Occupancy rate grew notably to 86%.

Niccolo Chengdu has been a market leader in terms of occupancy and room yield since opening in 2015. Record room yield with 91% occupancy was reported in the second quarter of 2021 to continue to lead the pack.

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The Wharf (Holdings) Limited - 2021 Interim Results Announcement (10 August 2021)

WHARF HOTELS

Niccolo Suzhou, the fifth hotel in the contemporary chic Niccolo Hotels' portfolio, celebrated its opening in April. Including this new addition, the Group currently manages 17 hotels in mainland China, Hong Kong and the Philippines under the luxury Niccolo Hotels brand and the foundation Marco Polo Hotels brand, comprising a total of over 5,000 rooms.

Crowning the top floors of the 450-metre Suzhou IFS, Niccolo Suzhou features a Sky Lobby and 233 elegant rooms and suites, offering a stunning view of Suzhou's skyline and Jinji Lake. Its iconic positioning was recognised ahead of its opening by winning the title of "Most Anticipated Hotel of the Year" in various awards, followed by "Best Design Hotel Award" from WITrip, "The Hot List" from Conde Nast Traveler, China and "Top 10 Newly Open Hotels of China" in 16th China Hotel Starlight Awards. Business flow is growing steadily since opening.

Segment revenue increased by 111% to HK$259 million from a low base and operating profit was HK$35 million. The hotel sector is still very sensitive to the ongoing COVID-19 scare. The Group adheres to the strictest health and safety standards and is concurrently preparing for travellers to return upon relaxation of border controls.

LOGISTICS

Virus control measures in Guangdong and the Suez Canal congestion caused disruptions in global supply chains. Port activities were further challenged by regional competition and geopolitical tension, whereas air cargo volume had seen healthy growth. Segment revenue increased by 13% to HK$1,361 million and operating profit by 43% to HK$281 million.

Modern Terminals ("MTL")

MTL managed to sustain growth in the first half of 2021 with more transshipment volume. Yet, the pandemic-induced disruption in Guangdong had a ripple effect on MTL's operations. Throughput handled in Hong Kong increased by 5% to 2.5 million TEUs. In Shenzhen, throughput at DaChan Bay Terminals (MTL's stake: 65%) increased by 37% to 0.8 million TEUs. Shekou Container Terminals (MTL's stake: 20%) increased by 18% to 3 million TEUs.

Hong Kong Seaport Alliance was formed in 2019 to jointly operate the 23 berths at Kwai Tsing Port to enhance efficiency and competitiveness. Nonetheless, handicapped by its natural geographical disadvantage, Kwai Tsing Port mainly competes with other ports in South China for price sensitive transshipment cargo. Disruptions in supply chains create opportunities for Kwai Tsing port while materialization is constrained by severe shortage of land.

Hong Kong Air Cargo Terminals ("HACTL")

The 20.8%-owned HACTL, having a substantial market share in the freighters segment, benefitted from market opportunities amidst limited passenger flights in the pandemic. Total cargo handled increased by 26% to 0.9 million tonnes.

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The Wharf (Holdings) Limited - 2021 Interim Results Announcement (10 August 2021)

FINANCIAL REVIEW

  1. Review of 1H 2021 Results
    Group underlying net loss narrowed to HK$526 million after a total impairment provision of HK$3,650 million for Mainland DP (2020: HK$1,132 million loss after HK$2,864 million impairment provision for Hong Kong DP). Including net IP revaluation surplus of HK$282 million (2020: deficit of HK$641 million) and other non-recurring gains, the Group reported an attributable profit to Shareholders of HK$1,038 million (2020: loss of HK$1,741 million).
    Revenue and Operating Profit ("OP")
    Group revenue increased by 122% to HK$12,337 million (2020: HK$5,551 million)
    and OP by 71% to HK$4,301 million (2020: HK$2,517 million).
    Hong Kong DP reported revenue of HK$2,428 million (2020: nil) and OP of HK$694
    million (2020: loss of HK$3 million), mainly attributable to sales completion for 4 houses at 77/79 Peak Road.
    Mainland IP revenue increased by 45% to HK$2,677 million (2020: HK$1,851 million)
    and OP by 50% to HK$1,780 million (2020: HK$1,183 million), resulting mainly from growth in retail rental upon stabilisation of the COVID pandemic.
    Mainland DP revenue increased to HK$4,276 million (2020: HK$1,176 million) and
    OP to HK$714 million (2020: HK$489 million), on a lower OP margin of 17% (2020: 42%).
    Hotels revenue increased by 111% to HK$259 million (2020: HK$123 million) and OP
    improved to HK$35 million (2020: loss of HK$49 million) as Mainland hotels recovered from the hard hit first half of 2020.
    Logistics revenue increased by 13% to HK$1,361 million (2020: HK$1,202 million)
    and OP by 43% to HK$281 million (2020: HK$196 million), mainly due to increase in volume handled by Modern Terminals Limited ("Modern Terminals").
    Investment OP increased by 39% to HK$773 million (2020: HK$558 million) mainly due to increase in dividend income from the enlarged investment portfolio.
    IP Revaluation Surplus/Deficit
    The Group's IP portfolio was stated at HK$75.7 billion (2020: HK$78.2 billion), based on independent valuation as at 30 June 2021, giving rise to an attributable net revaluation surplus (after related deferred tax and non-controlling interests) of HK$282 million (2020: deficit of HK$641 million), credited to the consolidated income statement. Net of deferred tax and non-controlling interests, the portfolio's value attributable to the Group was HK$67.3 billion.

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The Wharf (Holdings) Limited - 2021 Interim Results Announcement (10 August 2021)

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The Wharf (Holdings) Ltd. published this content on 10 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 August 2021 11:33:11 UTC.