We Do It Right continued to be a guiding principle for Hang Lung Group during 2013. We remained committed to building quality properties in the right locations, and creating mixed development projects with world-class designs despite challenges that arose in the property market.

In 2013, we saw the continuation of steady rental turnover from both our existing, well-managed portfolio and from our new developments. Both income streams contributed to the impressive results we achieved, enabling us to deliver yet another year of stable growth for our shareholders.

Total turnover was HK$9,734 million, up 22% from the 2012 financial year. As there was insignificant gain on disposal of investment properties compared to 2012, underlying net profit attributable to shareholders was down by 14% to HK$3,071 million, and earnings per share declined 14% to HK$2.27 as a result.



22%

8%
 
   
   
PROPERTY LEASING

Profit growth in our core business of property leasing saw solid returns for the 12-month period ended December 31, 2013. Rental turnover during this period increased 1% (increased 10% when excluding the impact of the discontinued operations) in Hong Kong and 13% in mainland China, contributing to a total overall increase of 8% to HK$7,216 million.

Hong Kong

The Company was able to achieve a steady growth in 2013, reporting an increase in rental turnover of 10% to HK$3,232 million and operating profit by 11% to HK$2,736 million, when excluding the impact of the discontinued operations. Overall, the year-on-year growth in rental turnover and operating profit were 1% and 3%, respectively.

In 2013, the property leasing business in Hong Kong contributed 45% to the Group’s total rental turnover.

Mainland China

Economic growth on the Mainland was relatively moderate in recent years. However, Hang Lung achieved stable growth in this market, with total rental turnover rising to HK$3,984 million, up 13% from 2012. Total operating profit increased by 12% to HK$2,995 million.

Center 66 in Wuxi, one of the Group’s new developments, opened in September 2013 with 95% occupancy rate, accounting for a rental turnover of HK$77 million in the first three months of operation.

Plaza 66 and Grand Gateway 66 have been part of the Group’s strong real estate foothold in Shanghai since the early 2000s. In 2013, they recorded stable occupancy rates at 96%. Rental turnover from these properties amounted to HK$3,098 million, up 6%.

In 2013, Forum 66 was almost fully let, with occupancy rate of 99%.Palace 66 is now reshuffling the tenant mix after the completion of the first lease term, with occupancy rate recorded at 88%.

Located in Jinan, the capital city of Shandong Province, Parc 66, in the course of tenant reshuffle, recorded an increase of 1% in rental turnover to HK$367 million.

The expansion of our mainland China operations means that this side of the business now accounts for 55% of the Group’s total rental turnover.



PROPERTY DEVELOPMENT

In September 2013, Hang Lung Group achieved a milestone in its property development division with the grand opening of a new landmark shopping mall, Center 66 in Wuxi, Jiangsu Province. Home to more than 250 world-class tenants, Center 66 brings an all-new shopping and leisure experience to the public in Wuxi.

Center 66, strategically located in the Yangtze River Delta, will tap into the enormous potential of mainland China’s most dynamic economic region. Situated on Renmin Zhong Lu in the heart of the city’s Chong’an central business district, the mall of Phase 1 has a gross floor area of 118,135 square meters, excluding the car park areas. In addition to the shopping mall, the first phase of this development will ultimately include two Grade A office towers that are due to be completed, in stages, beginning in 2014.

Marking Hang Lung Group’s first entry into central China, we held a groundbreaking ceremony on November 19, 2013 in Wuhan for Heartland 66. This new state-of-the-art commercial complex is located in the commercial and business heart of Wuhan. Combining the best design elements of East and West, Heartland 66 will be a showcase of modern architecture. This project represents the Group’s 10th development on the Mainland and will be its flagship property in this part of the country when completed, in phases, from 2019.

Another exciting shopping mall development, Riverside 66 in Tianjin, will have its grand opening in the third quarter of 2014. Pre-leasing of the mall’s world-class retail facilities is underway.

On November 26, 2013, a topping-out ceremony of its major structure was held for another of the Group’s major landmark projects, Olympia 66 in Dalian, Liaoning Province. Opening in 2015, Olympia 66 will become the largest commercial landmark in Dalian, with a gross floor area of approximately 221,900 square meters (excluding the car park areas). Olympia 66 will include more than 400 shops, a cinema and a skating rink, all of which will be interconnected by a series of exciting atrium spaces.

Hang Lung Group has several other projects in development on the Mainland, and each of them progressed well and according to plan in 2013.



FINANCIAL POSITION

Hang Lung Group continued to enjoy a healthy balance sheet during 2013. Cash and bank balances amounted to HK$39,704 million. After deducting total borrowings of HK$45,024 million, the Group had a net debt to equity ratio of 3.9%.

Our strong financial position provides us with ample capacity to fund not only our current development projects, but also allows us to be well positioned for capturing any future expansion opportunities that may arise.



OUTLOOK

Hang Lung has advanced into becoming a leading national commercial property developer with operations across many cities. This exceptional growth is a direct result of our deep knowledge of the Mainland property market, combined with a tight focus on quality design. These factors, along with our robust financial position, have enabled us to rise above the impact of the recent market slowdown and, importantly, to capitalize on opportunities for further land acquisitions.

In Hong Kong, our outstanding portfolio of properties, all in excellent locations, allows us to attract and retain high quality tenants. We take the opportunity to refine our tenant mix, upgrade our properties and run regular promotional campaigns to market the attractiveness and profitability of our properties. By monitoring the residential market very closely, we are able to offer the sale of residential units at the most opportune time.

In addition to Riverside 66 which will open in Tianjin in 2014, we have other important projects underway in mainland China. These projects will come on stream over the next few years, and each will carry our renowned “66” brand name. Work on these new projects is progressing well and according to plan.

We are confident about our long-term development prospects both in Hong Kong and on the Mainland. As a result of the steady progress we made in 2013, and despite the economy is full of challenge for the year ahead, Hang Lung Group looks forward to continued success in 2014.