At noon on March 12, Swire Properties (01972.HK) issued its 2019 annual results announcement. The announcement shows that Swire Properties achieved operating income of HK $ 14.222 billion in 2019.
Editor’s note: This article comes from China network of real estate , author: Li Yu a, authorized reprint
On the afternoon of March 12, Swire Properties (01972.HK) issued its 2019 annual results announcement. The announcement shows that in the whole year of 2019, Swire Properties achieved operating revenue of HK $ 14.222 billion, a year-on-year decrease of 1%; operating profit during the period was HK $ 13,792 million, a year-on-year decrease of 55%; net profit attributable to shareholders was HK $ 13,423 million, a year-on-year decrease of 53.17%.
From 2019 to 2020, Swire Properties has encountered the “Black Swan” incident for two consecutive years. In the second half of 2019, there was a storm of amendments in Hong Kong. The hotel and retail levels were particularly affected. Swire Properties, as an established Hong Kong company, was not spared. In the beginning of 2020, the new crown pneumonia epidemic struck, and it has already adversely affected retail properties in Hong Kong and the Mainland.
For this reason, Swire Properties also pointed out in the results announcement that retail property and residential rental income is expected to decline in 2020, and hotel occupancy rates and revenue will fall sharply. It will save costs as much as possible without affecting the long-term relationship between tenants and other customers.
Poor performance of retail properties in Hong Kong, rental income drops by 12%
Announcement shows that in 2019, Swire Properties ’retail property revenue was HK $ 5.107 billion, a decrease of 1.88% compared to 5.205 billion yuan in 2018; hotel business revenue was 1.296 billion yuan, a 7.69% decrease compared to 1.404 billion yuan in 2018. . The decline in the above two business revenues was higher than the 1% decline in the total revenue of Swire Properties.
Source: Results Announcement
Due to social events and the instability of the global economy, Swire Properties’ retail and hotel businesses in Hong Kong experienced a “cold wave” and underperformed.
As of December 31, 2019, the total rental income of Swire Properties’ Hong Kong retail property portfolio was HK $ 2.437 billion, a decrease of 12% over 2018. Of which, Shoppers at Pacific PlaceAs an important part of Taikoo Plaza’s comprehensive development project under Swire Group, the market is different from the performance of 11.8% in 2018, and the retail sales in 2019 are down 17%.
In this regard, Swire Properties stated that it was mainly due to providing rental support to tenants whose retail sales were adversely affected by social events in Hong Kong.
In addition to retail properties, Swire Properties’ hotel business in Hong Kong has also been adversely affected. Overall, overnight visitors to Hong Kong due to social events decreased by 19% in 2019, compared with 57% in December 2019. Swire Properties’ group-managed hotels in Hong Kong were affected by the decline in tourists and their performance deteriorated.
The announcement shows that in 2019, the operating profit before depreciation of hotels managed by Swire Properties fell by 16% to HK $ 168 million. Although the performance of Shanghai and the United States has improved, it is not enough to offset the worsening performance of Hong Kong.
However, the rental income of Swire Properties’ Hong Kong office portfolio business has been stable in 2019. The total rental income of Swire Properties’ Hong Kong office building portfolio in 2019 was HK $ 6.1 billion, an increase of 4% over 2018.
Swire Properties said that the growth also reflects the annual rental income of Taikoo Place, which opened in the fourth quarter of 2018, but partly due to the completion of the sale of the third and fourth office buildings in Taikoo Shing Centre in April 2019. Reduced income offsets.
At the same time, due to the sale of two office buildings in Taikoo Shing and other investment properties in Hong Kong in 2019, the basic profit attributable to shareholders of Swire Properties in 2019 was HK $ 24.13 billion, an increase of 138 from HK $ 10.148 billion in 2018 %.
In the past few years, Swire Properties has withdrawn funds from the sale of non-core assets for the acquisition, construction and repair of core properties. It is worth noting that although the sale of assets can bring short-term benefits, which in turn boosts performance, this type of revenue is not sustainable in comparison.
Source: Results Announcement
Inland retail property revenues increase by 10%, uncertainties increase in 2020
Compared to the situation in Hong Kong, Swire Properties’ performance in the Mainland and the United States is strong in 2019.
Announcement shows that Swire Properties’ recurring basic profit in 2019 (excluding profit from the sale of equity in investment properties) was HK $ 7.633 billion, compared to HK $ 7.521 billion in 2018.The increase mainly reflects the increase in basic profits from property investment in Mainland China.
Source: Results Announcement
Of the completed investment properties of Swire Properties in 2019, the total floor area attributable to Mainland China amounted to 8.8 million square feet, which accounted for 37.93% of Swire Properties’ 23.2 million square feet. Among them, the area of retail properties in Mainland China reached 4.5 million square feet, accounting for 61.64% of the total floor area of Swire Properties’ 7.3 million square feet.
Data shows that in 2019, Swire Properties ’retail property valuation in Mainland China was HK $ 55.112 billion, of which Swire Properties’ attributable equity was HK $ 40.34 billion. Despite a 4% depreciation of the RMB against the Hong Kong dollar, Swire Properties’ rental income from retail properties in Mainland China in 2019 was HK $ 2,376 million, an increase of 10% over 2018.
According to the announcement, Swire Properties currently holds 8 investment properties in Beijing, Shanghai, Guangzhou, and Chengdu, including 3 office buildings and 5 retail properties. For example, Beijing Sanlitun Taikoo Li, Guangzhou Taikoo Hui, Beijing Yidi Port, Chengdu Ocean Taikoo Li and Shanghai Xingye Taikoo Hui.
The above properties have achieved good retail sales last year. Among them, the retail sales of Beijing Sanlitun Taikoo Li, Guangzhou Taikoo Hui, Beijing Yidi Port, and Chengdu Ocean Taikoo Li increased by 11%, 20%, and 26% respectively , 23%; Shanghai Xingye Taikoo Hui performed best, with retail sales increasing by 73%.
In terms of the office building business in the Mainland, Swire Properties’ completed office building portfolio in mainland China in 2019 totaled 4.2 million square feet, and the total attributable rental income for the year increased by 3% to HK $ 830 million.
In terms of U.S. business, Swire Properties ’Miami-based urban complex project Brickell City Centre ’s retail sales rose 14% in 2019.
Today, the global spread of the new crown pneumonia epidemic is obvious, and the uncertainty in 2020 will increase. It is foreseeable that Swire Properties’ related operations in Mainland China and the United States will also be affected. To this end, the management of Swire Properties also expressed concerns.
2020 will continue to sell assets management is optimistic about mainland investment
During the period, Swire Properties’ cash and cash equivalents settled at the end of the year amounted to HK $ 14,963 million, an increase from 2018’s 2.093 billion615%.
Source: Results Announcement
At the same time, Swire Properties ’net debt in 2019 was HK $ 15.292 billion, a decrease of 48.86% compared to HK $ 29,905 million in 2018; the net capital to debt ratio also decreased from 10.6% in 2018 to 5.3%.
While continuing to sell assets, Swire Properties is also buying other assets. In 2019, Swire Properties’ portfolio of properties for sale includes completed portions of the Reach and Rise projects at Brickell City Centre in Miami, USA and EDEN in Singapore. In addition, there are four residential projects under development, three of which are in Hong Kong and one in Indonesia.
Source: Results Announcement
For future development, Liu Meixuan, financial director of Swire Pacific, said at the results conference that investment in mainland China continues to be bullish. At the same time, I am very confident in the development of the Greater Bay Area. Some non-core assets will also be sold in 2020 in order to gain more capital flow.