HKL’s Investment Properties and Development Properties segments both registered year-on-year upturns in operating profits in FY 2018. Operating profit from Investment Properties rose by 6% to USD 1,044 million, while operating profit from Development Properties increased by 13% to USD 582 million. However, this positive growth was not evenly reflected across all geographical markets.

Performance Drivers (Positive Factors)

• Investment Properties – Hong Kong

The rise in operating profits for the Investment Properties segment was attributed to higher average rents and low vacancies in Hong Kong. Average office rents in that city increased by 5% in FY 2018 on the back of limited supply and high occupancy levels. Meanwhile, average rents for the retail portfolio increased by 4%, as retailers experienced improved trading conditions in general.

The Hong Kong Central Portfolio remains HKL’s largest profit contributor, accounting for 84% of the FY 2018 operating profit generated by the company’s Investment Properties.

• Development Properties – Singapore

The growth in operating profit from HKL’s Development Properties segment was mainly due to higher contributions from Singapore – where operating profits increased from USD 39 million in FY 2017 to USD 122 million in FY 2018. Supporting this rise in operating profits was the USD 953 million in revenue recognized in FY 2018, compared to USD 271 million in 2017. This was largely as a result of the completion of Sol Acres, a 1,327-unit executive condominium project; as well as recognition on a percentage of completion basis of other projects being developed.

• Development Properties – Other parts of Southeast Asia

Other parts of Southeast Asia also contributed to the increase in operating profit from the Development Properties segment. HKL’s operations in Southeast Asia recorded strong growth in recognized profits compared to the prior year principally due to the completion of Anandamaya Residences in Indonesia, a 509-unit luxury apartment development; as well as The Nassim in Vietnam, a 238-unit premium condominium project.

Performance Drivers (Negative Factors)

• Development Properties – China

The contribution from mainland China to the FY 2018 operating profit of the Development Properties segment declined 8% year-on-year to USD 431 million. This was primarily caused by fewer completions in HKL’s joint venture developments. Meanwhile, HKL’s attributable interest in revenue (the company’s share of completed units handed over to customers) dropped by 10% year-on-year to USD 1,207 million in FY 2018. Nevertheless, the decrease was just a matter of the timing of completions, whilst modestly higher gross profit margins were recognized due to a change in product mix.

• Investment Properties – Singapore

Singapore’s contribution to HKL’s Investment Properties segment amounted to 11% of the total operating profits, marginally lower than the previous year of 12%. On the other hand, average Singapore dollar rents actually rose slightly due to positive rental reversions.