Wharf Real Estate Inv Co

Good afternoon, everyone. Welcome to the webinar of Warwick Final Results Briefing. I am Angela Ng, Investor Relations Manager. Our management team in the webinar include Mr. Steven Ng, Chairman and Managing Director, and Mr. Kevin Hoi, Director. Before the presentation and Q&A session, we will start with an opening remarks by the Chairman, Mr. Ng, please.

Thank you, Angela. Good afternoon, ladies and gentlemen. 2020 is behind us. I don't think anybody needs 2020 vision to tell that it wasn't a very good year. I remember telling you in August that the first half of last year was already a wash out. Indeed it was. And we did not encounter a miracle in the second half. to make up for the losses in the first half to make up for the downturn I should say in the first half so the year as a whole is obviously disappointing but probably no surprise to anyone I'll let Angela take you through it and then we'll leave some more time for Q&A thank you thank you chairman

Now I believe that you can see our PowerPoint presentation on your computer screen or mobile device. The theme of the presentation is unprecedented pandemic spared no one. COVID-19 has caused great distress to IP and hotel sectors. with cross-border tourism largely at a standstill and social distancing measures made a serious dent in domestic consumption. Hong Kong retail sales declined for the second consecutive year with 24% drop in 2020. All this has led to a drop of the group's IP revaluation. Under the pandemic, Retail tenants have shortened operating hours and stepped up anti-pandemic measures to support social distancing. F&B businesses were a hot hit. In this abnormal period, the group has granted over $2 billion of rent relief to support small tenants, majority in the form of base rent. In line with the market, negative rental reversion was recorded. During the year, retail revenue decreased by 26% to $7.6 billion. After rents dropped, rent relief and tripling in marketing expenses, more net operating cash flow dropped 36%. On the other hand, the office sector was hit by downturn in the global economy. slowdown in economic activities under local work from home arrangement and new supply in the market. As a result, the group's office revenue dropped slightly. Although the pandemic continues to drag on our business performances, we see a narrowing decline in Hong Kong IP revenue in the second half of 2020. During the year, the group has made significant investments to retain our market position and support our retail tenants. With tripling marketing expenses, extensive campaigns have been rolled out to subsidize shoppers' consumption. In particular, the first of its kind citywide spending reward scheme Rewarding Everyone campaign in May and the several runs of voucher program have been proven to be an effective stimulus. Ongoing retenanting exercises also help bring in excitement in the changing market environment. As a result, We saw robust footfall and sales recovery in between COVID-19 waves Sales dropped in our mall slowed down despite the occurrence of COVID wave in the fourth quarter Moving on to our financial highlights Group revenue and underlying net profit decreased by 3% and 24% respectively with underlying net profit of IP decreasing by 23% to $7.3 billion and hotel turning to a loss. Non-cash IP revaluation dropped 5.5%, contributing to a net loss. The group has a stable dividend policy maintaining at 65% of underlying net profit from IP and hotels in Hong Kong which represents a TPS of $1.47 for the full year. In the following slides, we will walk through the performance of our IP and hotel portfolio as well as financial management and outlook. First, Harbor City. The pandemic hurts all business segments at Harbor City with hotel segments hit the most severely by the paralyzed tourism. For the retail side, we are glad to see activity gradually reviving. However, office demand remains subdued amid cautious sentiments. Total revenue at Harbor City was $8.7 billion. As at year end, retail occupancy was 90%, and office occupancy was 85%. Featuring a unique critical mass with over 500 shops, tenant demand continues at the landmark retail destination. We believe the comprehensive mix helps to mitigate the market risk to our tenants. The retail income distribution by different types of tenants is shown in the chart. with an established position of must-have address for renowned brands. Harbor City has attracted a variety of forward-looking local and international brands to open doors or expand. New openings included a number of debut brands and a variety of dining options. In addition, a number of top-tier brands unveiled their new flagships after expansion in harvard city including ms alessandra mcqueen christian nabuton and jimmy choo moving on to the three marco polo hotels in harvard city marco polo hong kong and gateway hotel proactively draw in the local market while Prince Hotel was closed since February last year for a major renovation. An operating deficit was inevitable in spite of stringent cost control measures. Then we will walk through the performance of Times Square. The competitive landscape of Causeway Bay has intensified with higher vacancy nearby. market adjustment is in process. We believe the current consolidation would allow more new enticing brands to enter the mall. Under our extensive marketing support, we are glad to see a rise in footfall and year on year sales growth resumed in the fourth quarter. As at year end, Retail Occupancy was 93% and Office Occupancy was 86% Total Revenue at Times Square was $2.3 billion Then switching to Plaza Hollywood The mall enjoyed relatively stable labor market demand and footfall Occupancy was 95% at year end The next one is Central Portfolio, comprising Villa House, Private House and the Murray. With prime locations, occupancy at Villa House and Private House remained high. As for the Murray Hotel, in response to the cross-border travel huts, a range of tempting staycation packages and dining offers are promoted to welcome more local guests. and it has successfully achieved top red part and an outperforming occupancy against its competitive set. However, an operating deficit was still inevitable. Moving on to our Singapore portfolio, which comprises Willow Place and Square Square, both located at the BC Orchard Road intersection. the most recorded mild sequential recovery after the circuit breakup period. Moving on to the financial management. The group maintained a prudent approach on financial management. Net debt was $52 billion and maintained a comfortable gearing of 24.8%. average interest costs lowered to 1.9%. The group continued to maintain the Moody's A2 rating. This year, we are glad to welcome a coming attraction. Niccolo Suzhou is scheduled for opening in early April. Same as the Murray, Niccolo Suzhou is operate under the Niccolo Hotel brand, and it is the fifth hotel in the collection. The hotel will comprise over 230 spacious contemporary-shaped rooms and command stunning view of Jingji Lake. It has already garnered a number of the most anticipated luxury hotel of the year from different organizations. Looking ahead, Mainland China is leading the world with rapid recovery but there are a number of lingering uncertainties that add challenges to the post-pandemic economic outlook. We believe the road to recovery will be uneven to different business segments in different parts of the world. As the pandemic has accelerated the paradigm shift across all sectors, especially to the retail and hotel, The group will adhere to the proactive business strategies to stay ahead in the changing business environment. In the last part of the presentation, I will walk through our efforts in sustainability. WolfRig is a member in Hansen Corporate Sustainability Index. through WAF Emergency Relief Fund. The group provided instant support to the nearly affected by COVID-19. The group is also devoted to making a positive impact in the face of climate change and committed to arts development and nurturing talents. The Star Ferry launched the first low-emission Green Ferry Morning Star to reduce emissions of air pollutants. The group has also introduced the World Hong Kong Secondary School Arts Competition since 2011. In regard to youth development, our business units are partnering with 16 weekend schools to provide support. That concludes my presentation. Now we will come to the Q&A session. If you have any questions, please press the raise hand button on your Zoom control panel. Now we will receive the first question from Carl Choi of Bank of America.