Hang Lung Group (10) H2 2024 earnings summary

Executive summary

• FY2024 revenue increased, with figures ranging from HK$11,242 million to HK$11,760 million, driven by strong property sales, but rental revenue declined 6% and operating profit fell between 9% and 13% year-over-year due to weak retail and office markets in both mainland China and Hong Kong.

• Underlying net profit dropped between 21% and 25%, mainly due to weaker leasing profits, higher finance costs, and lower fair value gains.

• Strategic reset included a 33% dividend cut, proactive financial management with a HK$10 billion syndicated loan, and increased Renminbi borrowings to 36%.

• Strong occupancy rates and resilience in the super-luxury sector, with record-high new leases and renewals, despite overall market sluggishness.

• Notable one-time provisions of around HK$380 million for property sales in Aperture and Wuhan, impacting underlying profit.

Financial highlights

• Rental revenue ranged from HK$9,515 million to HK$10,033 million (down 6% YoY); hotel revenue surged 123% to HK$189 million; property sales reached HK$1,538 million.

• Operating profit ranged from HK$6,455 million to HK$6,826 million (down 12–13% YoY); underlying net profit between HK$2,327 million and HK$3,095 million (down 21–25%).

• Net gearing stood at 33.4%, with financing costs managed at 4.3% despite high interest rates.

• Dividend payout ratio ranged from 73% to 80% of underlying profit after provisions.

• Net assets per share ranged from HK$27.5 to HK$70.3, reflecting different calculation bases.

Outlook and guidance

• Management expects continued market pressure in early 2025 but anticipates a mild increase in performance for the full year, with confidence expected to gradually recover.

• Major projects like Westlake 66 in Hangzhou and Center 66 Phase 2 in Wuxi are set to open from 2025, with strong pre-leasing commitments.

• CapEx cycle expected to peak in 2025, with gearing projected to stabilize and then decline if no new projects are taken on.

• Net Zero Roadmap to be published in February 2025, with refreshed 2030 sustainability targets to be announced.

• Scrip dividend and other cash preservation measures are interim, with ongoing review as gearing improves.