Record Retail Sales Drove Robust Performance Wharf Real Estate Investment Company Limited 2018 Interim Results 7 Aug 2018
Highlights 999-year Land Leases Offer a Differentiation* HKIP & Hotel 6 Core Assets Malls 73% of HKIP Revenue Record Revenue $7.9B (+9.8%) Record Retail Sales $24.6B (+31.4%) Record Market Share 9.9% (Harbour City 7.5%) Harbour City 11% Revenue Growth Occupancy Cost^ Rapid Improvement 63% 72% HC TS of Group Revenue of Group Operating Profit 18.2% 20.5% (OP Margin 89%) (1H17: 21.3%) (1H17: 25.2%) *999-yr Leasehold (Excl. Ocean Terminal & Pacific Club at Harbour City, Plaza Hollywood and The Murray, Hong Kong) ^Occupancy Cost = Retail Rent/Retail Sales 1
Solid Income Base HKIP Revenue Split # Retail 73.2% Pure IP Play 5 Core HKIP, $255B Valuation* HKIP Revenue $7.1B Expertise Retail, $151B Valuation Incessant Value Creation Initiatives Comprehensive Tenant Mix # Excl. Hotel Serviced Apts 1.7% Office 25.1% * Excl. $16B of Hotels, which are Carried at Cost 2
HK Retail Sales - Normalizing HK Retail Sales (HKD billion) 1H18 $247.8B (+13.4%) 1H 2H Back to 2013 & 2014 Retail Peak 211 226 242 244 230 217 228 Previous Downturn Driven by 128 134 142 169 Unfavourable Currency Movements etc. 1H18 Total Tourist Arrivals +10.1% 120 139 133 156 194 220 253 250 246 220 218 248 (Mainlander +13.4%) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Currency Impact 3
Resilience HC Total Retail Revenue Growth vs HK Retail Sales Growth 2007-2017 CAGR 14.0% 6.1% 20.6% 12.8% Market Downturn 22.0% 17.7% 10.3% 18.3% 14.8% 24.9% 22.0% 18.3% 9.8% 16.2% 15.6% 11.0% Market Downturn 4.8% 4.3% 6.2% 15.3% 13.4% 0.6% 2.2% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H18-0.2% -3.7% -8.1% HC Retail Revenue HK Retail Sales Growth 4
2H18 Uncertainties Trade Tension between US & China RMB Depreciation & Global Currency Movements Reduction of Import Tariff by Mainland China High Comparison Base in 2H17 5
Financial Highlights HKD Million 1H18 1H17 % Chg Group Revenue 8,154 9,546-15% Operating Profit 6,352 7,050-10% Core Profit** 5,022 4,646 +8% Profit Before IP Revaluation Surplus 5,022 4,428 +13% Net IP Revaluation Surplus 5,157 472 +993% Profit After IP Revaluation Surplus 10,179 4,900 +108% Revenue & OP Declined Due to Orderly Exit from DP of HCDL # Group Core Profit +8% to $5.0B ($1.65/Share); IP Core Profit +14% IP Valuation Surplus $5.2B HKIP & Hotel Valuation $271B* Earnings Per Share (HK$) - Attributable to Shareholders 3.35 1.61 +108% DPS $1.05 (65% of Realised HKIP Core - Core** 1.65 1.53 +8% Profit for 1H18) Dividend Per Share (HK$) $1.05 NA **Excl. IP Revaluation Surplus and Exceptional Items # 72%-owned Subsidiary *As of End-Jun18. Incl. Valuation of 3 Marco Polo Hotels & The Murray, Hong Kong; but All Hotels are Booked at Cost in Wharf REIC s Balance Sheet 6
Agenda Harbour City (HC) Times Square (TS) Central Portfolio Plaza Hollywood (PH) Financial Management 7
Agenda Harbour City (HC) Times Square (TS) Central Portfolio Plaza Hollywood (PH) Financial Management 8
Productivity A New Record Retail Sales $18.6B +36.1% Retail Revenue $3,755M +15% Retail Sales psf/mth ~$2,700 Market Share* 7.5% HC is a 999-yr Leasehold Property (Excl. Ocean Terminal, Pacific Club) *HK Incl. Wet Market, Motor Vehicles & Parts, but Excl. F&B 9
Retail Sales Growth (YoY) 36.1% 33.8% 30.0% 27.3% 24.9% 18.3% 18.3% 15.8% 12.8% 13.4% 13.2% 10.3% 11.0% 9.1% 9.8% 10.0% 3.3% 2.2% 0.6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H18 1H18 Outperformed HK by 22.7 ppts (Historical High) Retail Sales Growth Surpassed Previous Peak 1H18 HK Market Share* 7.5% Harbour City Hong Kong -0.2% -3.7% -8.1% -9.9% -12.1% *HK Incl. Wet Market, Motor Vehicles & Parts, but Excl. F&B 10
Stable Income HC Revenue Breakdown (HKD billion) 1H18 $5.2B (+11%) Retail Office S.A. +30% 0.1 Retail Revenue +15% (73% of HC Total 0.2 1.0 0.2 1.1 0.2 1.2 0.2 1.2 1.3 Revenue) Retail Sales Spurs Rental Growth Solid Rental Reversions (Retail & Office) 2.8 3.0 3.1 3.3 3.8 Hampton Court Conversion (to Office) by Mid-2019 New Growth Impetus 1H14 1H15 1H16 1H17 1H18 11
OTE (Opened in Summer 2017) New Icon with Foster-designed Terminal Tip Value-creation Exercises Drive Shopper Traffic Enhanced Ocean Terminal s Destination 7 Out of 11 Dining Outlets Opened (All HK Xihe Ya Yuan Beijing Duck Restaurant FU-RONG HEXA ANA Ten Debuts) Tsukada Nojo Paper Moon A Nu Retrouvez-vous 12
Canton Road Hotels 3 Marco Polo Hotels at HC Prince Hotel 4 Consecutive Outstanding Quarters Total Revenue +16.8% Total GOP +32.1% Overall Occupancy 94.2% Hong Kong Hotel High Guest Satisfaction Gateway Hotel 13
Agenda Harbour City (HC) Times Square (TS) Central Portfolio Plaza Hollywood (PH) Financial Management 14
Vertical Landmark Retail Sales $4.6B +21.6% Retail Revenue $1,062M Stable Cluster of Luxury Brands New Tenants Well Received by Shoppers Retail Sales psf/mth ~$1,400 Market Share* 1.9% Tenant Mix Optimization Providing Upside TS is a 999-yr Leasehold Property *HK Incl. Wet Market, Motor Vehicles & Parts, but Excl. F&B 15
Vertical Landmark TS Revenue Breakdown (HKD billion) $1.4B (Flat) Retail Office 0.3 0.3 0.3 0.3 0.3 0.9 1.0 1.1 1.1 1.1 1H14 1H15 1H16 1H17 1H18 16
Agenda Harbour City (HC) Times Square (TS) Central Portfolio Plaza Hollywood (PH) Financial Management 17
Premier Commercial Properties Wheelock House Ground Zero Location Valuable Commercial Property Crawford House Wheelock House Office Crawford House Office Diversity of Tenants Spot Rent psf/mth $108 +20% Rental Reversion +28% Spot Rent psf/mth $69 +12% Rental Reversion +14% Home to Zara s HK Flagship Wheelock House & Crawford House are 999-yr Leasehold Properties 18
The Murray, Hong Kong Contemporary Chic Key Awards in 1H18 Long-term Strategic Investment Part of Government s Conserving Central Initiative Rare Asset in Strategic Location Condé Nast Traveller s The Hot List 2018, Best New Hotels around the world National Geographic Traveller s City Slicker - Big Sleep awards 2018 Full Operation in Aug 2018 19
Agenda Harbour City (HC) Times Square (TS) Central Portfolio Plaza Hollywood (PH) Financial Management 20
CBD2-destination Retail Sales Retail Revenue $1.3B +9.5% $290M +1% Immense Growth Opportunities in Kowloon East CBD2 Atop Diamond Hill MTR Station (Interchange for Shatin to Central Link in 2019*) Collaborate with Kai Tak Cruise Terminal to Draw Tourists & Spending *Commissioning Date (Tai Wai to Hung Hom via Diamond Hill in 2019); Hung Hom to Admiralty to be Completed in 2021 21
Agenda Harbour City (HC) Times Square (TS) Central Portfolio Plaza Hollywood (PH) Financial Management 22
Prudent Financial Management Debt Maturity (HKD billion) (As at 30 Jun 2018) Own Net Debt $40B, -$2.9B (Total Asset $277B) 7.6 12.0 14.1 7.1 Gearing: 18.7% (2017: 19.9%) Average Interest Cost: 1.5% (2017: 3.2%) 2.2 Jul18-Jun19 Jul19-Jun20 Jul20-Jun21 Jul21-Jun22 Jul22-Jun23 Jul23 & After 0.0 Moody s A2 Issuer Rating; Outlook Stable 23
OUR SUSTAINABILITY
Key Sustainability Performance Wharf REIC s 1 st standalone Sustainability Report 2017 published in accordance with the core option of GRI Standards, and in alignment with HKEX ESG Reporting Guide Hang Seng Corporate Sustainability Index Series Member 2017-18 Activities in alignment with 11 of the 17 United Nations Sustainable Development Goals ( UNSDGs ). Wharf Architectural Design Internship Programme has awarded 24 students since 2011. Wharf Art Scholarship Programme has awarded 12 students since 2013. A partner of Project WeCan, the signature multi-faceted project currently linking 53 schools and over 50,000 students, will be expanded to cover 76 schools by September 2018 GRI Standards stand for Global Reporting Initiative Sustainability Reporting Standards
2017 Sustainability Performance Highlights Hang Seng Corporate Sustainability Index Series Member 2017-18 Recycled 6,200+ tonnes waste 2,853 talent 57,826 training hours* 186+ events and activities supported Donations totalling HK$33 million The Wharf REIC s Sustainability Report 2017 is prepared in accordance with the core option of Global Reporting Initiative Sustainability Reporting Standards. *Reporting scope covers operations as identified in the report. http://www.wharfreic.com/en/sustainability_reports.php
Record Retail Sales Drove Robust Performance Thank You 27
End of Presentation Wharf Real Estate Investment Company Limited [HKEx Stock Code: 1997.HK] Disclaimer All information and data are provided for information purposes only. All opinions included herein constitute our judgment as of the date hereof and are subject to change without notice. The Group, its subsidiaries and affiliates hereby disclaim (i) all express, implied, and statutory warranties of any kind to user and/or any third party including warranties as to accuracy, timeliness, completeness, or fitness for any particular purpose; and (ii) any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the information and data contained herein. 28