Good evening, ladies and gentlemen. Welcome to Shui On Land's 2018 full year result announcement, our investor and analyst briefing sessions. I'm Michelle, and I will be the MC today. On the stage we have Mr. Vincent Lo, our Chairman, and to his right-hand side, we have Stephanie Lo, Executive Director of the group, and also to the left of Mr. Lo, we have Douglas, Managing Director and CFO of the group.
Let me quickly pass the stage to Mr. Lo to start the presentation.
Thank you, Michelle. I'm sorry I won't be able to speak too much because I've contacted the, they call parainfluenza about a couple of weeks ago, and it's really been giving me trouble. Hopefully I won't pass anything to you. I'm on the mend right now. Well, performance highlight for last year, contracted sales was CNY 22.2 billion, and revenue up 35% is CNY 24.8 billion. Profit attributable to shareholders is CNY 1.906 billion, which is 14% up from last year. The net gearing has been reduced to 40%. We have cash and bank balance of CNY 15.3, CNY 15.4 billion. We are proposing a dividend of HKD 0.084 for the final, and we recommend that to the shareholders to approve, and it's up 20% compared to the year before.
For the key activities in 2018. We have successfully won the site, which is the last commercial site of the Taipingqiao master plan. The Lot 123, 124 and 132. We have formed a joint venture together with China Pacific Insurance and Yongye. We will be the development manager and asset manager for this project, and we're excited about this arrangement. We have also formed a core plus office investment platform towards the end of last year. We are working together with Manulife and China Life, and we will be looking at other investors. Our first investment will be the Corporate Avenue 5, which we have sold to China Life before, with the option to buy back. We have acquired that project as the foundation project. We also have bought back the 21.89% of China Xintiandi from Brookfield.
Again, the end of last year, but it was just completed a few days ago. I think this arrangement will give us much more flexibility and focus on the things that we need to do for ourselves. On the asset light strategy, which in the past few years I think have really transformed the company. We're realizing the commercial value. We're creating cash flow. We've reduced debt, and we're now forming a new investment platform. I think later on, I'm sure Stephanie and Douglas will share more with you. The past few years, I think it's no use just for me to blow our own trumpet. You can just see for yourself the achievement. Total asset slightly down because we've sold some assets. Net debt reduced from CNY 37 billion to now CNY 18.8 billion, 49% reduction.
Net book value about the same. Cash on hand increased by 45%. Gearing, at that time, three years ago was 81%, now it is 40%. Rental income from CNY 1.5 billion now to CNY 2 billion. Net profit to shareholders three years ago was CNY 788 million. Today is CNY 1.9 billion. I think these are good achievement. We have six joint ventures now with six partners. It is about RMB 55 billion total asset in these ventures. We now have good partners to work with and Shui On Land will continue to be the project manager and asset manager. I think we are developing a lot more fee income. Market outlook. Of course, I think we all know China's growth rate is going to come down a little. Set the range of between 6% to 6.5%.
I think that should be a fairly comfortable level for China to achieve, and that has not really affected the market too much, I think in our sector. We are still concerned about the current sort of international global geopolitics and we believe there will be change coming. That is why we are positioning ourselves for that change. I will not say too much, and later on if you have any questions, we can discuss a bit more. For the company, we want to develop Shui On Land to be a leading commercial focus, property developer owner and asset manager in China with a very strong asset base in Shanghai.
We want to be a very attractive partner for financial institutions. We believe very much in the long-term value of core commercial assets, and we will continue to create unique office and retail products, and then develop our asset management capabilities. We will continue with our asset-light strategy, in the coming years.
Maybe I will stop there and let Stephanie share with you some of her thoughts.
Thank you, Chairman. Over the past 20 years, SOL has continuously invested in Shanghai. As to date, this chart shows that actually, Shui On Land is one of the leading landlords in Shanghai now in terms of our commercial portfolio. We have about 1.67 million sq m of commercial GFA. It is in four key locations in Shanghai, Xintiandi, around Taipingqiao, as you know, around Hongkou, Rainbow City, KIC in Yangpu, and the hub next to the Hongqiao transportation hub. The total asset value is CNY 72 billion. In this next chart, this is a more detailed breakdown of our asset value in Shanghai. As I mentioned, it is 1.67 million of GFA. About 887,000 sq m is comprised of mature IPE, and the asset value of that portfolio is CNY 41.4 billion. 787,000 sq m is PUD. That is about CNY 30.8 billion in asset value.
The office and retail mix is approximately a 50/50 split. For the under development projects, there are two that are of note. Rainbow City, we have a Hall of the Sun project that will launch in 2020-2021 in phases. It is about 340,000 sq m with 180,000 sq m of retail, as well as two office towers. As the chairman mentioned, we acquired the last commercial site in Taipingqiao next to Xintiandi, Lot 123, 124, and 132, and it is approximately 300,000 sq m GFA, due to complete between 2022 and 2023. Both of these projects will contribute significantly to our rental income in the coming years. One point to note, Lot 167 will complete total relocation by the end of this year, so we can start building very soon. Our total asset value of this portfolio is CNY 72 billion.
SOL's attributable shareholding is about 47%. After the completion of the buyback of Brookfield's shares in China Xintiandi, as well as the acquisition of Corporate Avenue 5, SOL's attributable shareholding will increase to 55%, representing approximately CNY 39.8 billion in asset value. China Xintiandi, after the acquisition of Brookfield's shares, will become a 100% subsidiary company, and this will be SOL's asset management platform. It is going to manage all of our commercial portfolio as well as any third-party assets that we may bring in. The focus now will be to continue to strengthen our asset management capabilities as well as our commercial products in order to allow us to fully leverage our brand and continue to expand our AUM. We will continue to innovate in building out our capabilities in our office product.
On one hand, providing a total solution to our office tenants in terms of space and service through our new INNO OFFICE product that we just launched this last year. On the other hand, we continue to hone our skills in building up our AEI capabilities in order to be able to capture any value-add opportunities in the market, as we have already started to do. Xintiandi is our prime retail brand, positioned as a social and cultural destination. We launched a greater Xintiandi initiative in Shanghai, in 2018 to expand the footprint of Shanghai Xintiandi and reinforce its positioning as a social destination. You can see this with the launch of Xintiandi Plaza in the following slides. Xintiandi Plaza was originally an old department store on Huaihai Road, and we renovated the entire retail footprint, and reopened it up at the end of December in 2018.
We had our soft opening then. The intention was to open up the old department store space to create more indoor and outdoor spaces, more public space, and present a much more unique facade to Huaihai Road. It is the only sky garden along Huaihai Road that you see now, with a public plaza. We brought in many first-in-China brands, as you can see in the next couple slides. The positioning of this new mall is to a new woman lifestyle, one who is independent, well-informed, well-educated, and what we call a Chinese global citizen. We did not target traditional luxury brands here because we thought the idea of luxury retail is actually changing, and consumer needs is actually changing. Luxury is no longer what we think about price or just about products, but more driven by experiences and unique brands and content.
On the fourth and fifth floor of Xintiandi Plaza, we launched a new concept called Social House. As part of the positioning of Xintiandi as a social and cultural destination, we have seen that the way customers shop has changed. Social House is a new retail concept that is experience-driven, where customers can come and share a class, attend a talk, or an event together with a friend. Like sections in a lifestyle magazine, the space is actually divided up into various zones such as design, travel, cooking, music, wellness, and such. Each of these zones has its own content and programming as part of the collaboration that we have ongoing with our tenants. You can actually scan an item in the display and purchase it through our online Xintiandi app. That will have the item delivered to you.
This concept is being launched in May, and we feel that the future is in social or experience-driven retail. We are quite excited about the launch of this new concept and this as a pilot case. I can share more here about our rental income. Our rental and related income grew by 18% to CNY 2.2 billion last year, and this represents a CAGR of about 14.8%. Here is a more detailed breakdown. Shanghai Xintiandi had stable growth in 2018, and the moderate growth was because we made some major changes to the tenant mix and brought in many new brands, such as Tom Ford cosmetics, Shake Shack, LeTAO, and such. These all launched their first in China store at Shanghai Xintiandi. Paul Pairet, one of the top globally recognized Michelin chefs, opened a new French bistro called Polux just two weeks ago.
As part of the continuous improvements in Xintiandi, we are also launching the AEI of the south block, that has already just started its first phase. To note here, Shanghai Rainbow City's rental income for 2018 was RMB 184 million , reflecting a year-on-year growth of 28%. We are seeing strong rental reversions of 25% there. At The Hub at Hongqiao in Shanghai, the rental income was RMB 407 million , reflecting a growth of 25% year-on-year, with rental reversion rates now at 40%, entering a new rental reversion cycle. KIC in Shanghai, which is a very mature office-driven property, saw 19% growth in rental income with rental reversions of about 15% for a very mature office property, which we are very happy to see. Wuhan Xintiandi and Horizon, the shopping mall next to Xintiandi, had a rental income of RMB 265 million , reflecting a growth rate of 20%.
Foshan Lingnan Tiandi and NOVA's occupancy rate is now at 99%. Last year, phase II of Lingnan Tiandi completed minor AEI works, but all of which have been complete and were now fully let. Together, they achieved a rental income of CNY 217 million, reflecting a 37% growth and a 32% rental reversion rate. We are quite happy to see our rental portfolio growing quite steadily. This last chart here shows the performance of our commercial portfolio in Shanghai versus other non-Shanghai cities. As Shanghai is a more mature market, rental income grew 16%, while other cities showed a growth rate of 24%, though Shanghai makes up about 76% of our total rental income. The growth is primarily driven by an optimization of our tenant mix, reinforcement of our positioning of Xintiandi as a social destination and a cultural destination.
We launched over 1,000 marketing events in the last year over our entire portfolio. We have a lot of unique contents and events such as Shanghai Fashion Week, Design Week, Global Music Festival. We partnered with the Edinburgh Fringe Festival to create Xintiandi's Arts Festival. We partnered with Lyon Festival of Lights to run Lumiere Shanghai across all of our brands in all of our properties in Shanghai. As mentioned just now, we have an online CRM platform that we just launched last year as well. The uptake in members there has been gaining a lot of traction. We ran 200 events specifically just to build member engagement last year, and we've seen that our traffic and sales have risen very substantially.
Our shopper traffic across our retail destinations has increased 15% from 2017 to 2018, and our retail sales has increased 20% across our entire portfolio. Two dates to note this year would be the grand opening of both Xintiandi Plaza, as well as the north block of Wuhan's Horizon Mall later this year. We'll be arranging some investor tours, and we'd be really happy to share some of our progress with everyone then.
Thanks, Stephanie. Let me just walk you through first on the development business. On the next page, you will see our total recognized sales, our property sales. That's roughly about CNY 22 billion in 2018, so up 37%. You can see the breakdown. The contribution of residential sales are mainly from Shanghai. The two projects, Taipingqiao Lot 116 and then Rainbow City Lot 2. These two projects, we have pre-sold in 2018. And part of those units were handed over last year, so we've seen the recognition here, profit recognition. And then at the bottom of the table, you see that CNY 15 billion figure. This is the transaction of the two residential sites, Lot 1 and Lot 7 in Rainbow City that we sold 50% interest to COFCO Real Estate. This is that figure.
On the next page, on contracted sales in 2018, it's also about CNY 22 billion. You can see the breakdown is about CNY 14 billion residential, CNY 8 billion commercial, non-residential. The residential part, again, is primarily from Shanghai. All the remaining units in Taipingqiao 116 and Rainbow City Lot 2. Those will be handed over and profit booked in 2019. And then on the commercial side, it's mainly from the disposal of Dalian, and also the transaction of the Rainbow City, sorry, that we booked in 2018. And the residential development pipeline or the land bank. If you look at it from a sales revenue perspective, we estimate the total is about CNY 79 billion of our land bank in hand. The Shanghai part, the Shanghai projects, will be just over CNY 50 billion, about CNY 51 billion, and the remaining balance outside of Shanghai.
Our attributable share of this sales revenue would be roughly about CNY 48 billion. This will be sufficient for the group's annual sales of about three to four years. We have continued to look at market opportunities to expand our land bank. We are looking at some sites right now, so hopefully there could be some additional new investment coming through in 2019 to expand our residential land bank. On the commercial side, in terms of GFA, the commercial development GFA is about 3.3 million sq m. In Shanghai, is slightly less than 900,000 sq m, and the remaining is outside of Shanghai. The group's share of this commercial land bank is about 1.9 million sq m. Again, this is sufficient for us for development over the next four to five years.
For the Shanghai project, which you see here in the table, this should all be completing between 2021 to 2023. We will see increasing contribution on rental from Shanghai over the next four to five years. On financial, I'm not going to go through all the figures, but maybe just some of the key highlights. On revenue, you can see that is up by about almost CNY 25 billion. You see the breakdown here between property sales, rental, and the other income contributions. I'm not going to go through these. If we net out the cost of sales, gross profit is about CNY 7.1 billion, so down about 9% year-on-year. You see the gross profit margin was a bit down from 2017.
This is mainly because the way we have booked the two residential sites, Lot 1 and Lot 7, the 50% disposal to COFCO. We have some profit remaining to be recognized in 2019. Last year, despite the CNY 15 billion top line from this transaction, we have not booked all the profit because there is part of it relating to the completion of the relocation of the site, which we expect will be finishing mid this year. That's why you see that the profit margin was actually slightly lower because we booked all the revenue in 2018, but only part of the profit. That's the drag on the gross profit margin because of that. Other income, you can see that, about CNY 400 million, and then the expenses. Operating profit is about CNY 6.5 billion. Again, also down about 9% year-on-year.
Below that, there was a couple of numbers that I will walk you through. There is a disposal of IPE gain. This is mainly coming from the Rainbow City commercial transaction we did with China Life. This CNY 194 million is coming from the final account adjustment that they need to pay us. There is an initial closing, and then when we did the final account adjustment, there is an additional CNY 194 million that China Life had to pay us. This is where that profit is coming from. Then you see this CNY 990 million provision. This is primarily relating to our land bank, particularly some of the commercial sites that have not yet started construction. We have made some adjustment on the valuation based on current market condition. We've made some provisions in some of that land bank.
This accounts for most of that CNY 900 million, almost CNY 1 billion of provision that we made in 2018. That CNY 122 million impairment losses, this is mainly relating to the final payment of CNY 180 million that Country Garden still need to pay us for the final payment of the Foshan site we sold them two years ago. Again, there's a final relocation that we need to complete before they pay us. The original schedule was to complete the relocation 2018, but we haven't been able to clear all the site yet. We made that provision for that reason, and we expect the site clearance will be done in 2019. This will be written back. The CNY 180 million will be written back in 2019. These are some of those one-off figures that you might see here.
Exchange losses of about CNY 270 million. This is obviously because of RMB depreciation in the second half of the year. We have been hedging roughly about half of our FX exposure. We have already mitigated actually some of the potential losses because of our hedging that we have done. The interest expense is about CNY 1.4 billion, down by about 20%+ from a year ago. So reflecting our reduced gearing and reduced interest expenses. Okay? On the next page, if we run through the number, profit attributable to shareholders will be CNY 1.9 billion, so up 14% year-on-year. As the Chairman mentioned, the board recommends a 20% increase in the final dividend and also the full-year dividend.
Okay. Next page is lock-in sales. We have about CNY 11 billion of lock-in sales as of end of last year, mainly from residential. This, again, mainly coming from Shanghai. The remaining units in Taipingqiao Lot 116, remaining units in Rainbow City Lot 2. All these are basically sold, will be handed over this year, and profit will be booked in 2019. Financial balance sheet. This is pretty straightforward, so I'm not going to go through the figures. Gearing is down to 40% at year-end, and you can see that the net debt has been reduced quite substantially since 2016. This is just graphically showing you gearing and net debt again, so it's for your reference.
The debt maturity on the table on the left, you can see that in 2019, we have about CNY 14 billion of total debt maturity, including bond maturity, including bank loans, bank financing. What we have done in second half of last year is to focus on extending some of this maturity and also to ensure that SOL has sufficient liquidity despite the market volatility. You can see that we have basically received committed approval from banks on about CNY 8 billion of this CNY 14 billion in terms of refinancing. These are refinancing that the banks have already signed off. They have already received their own credit committee's approval.
All we need to do is upon the maturity time, we will just refinancing or renew some of these financing. You can see that at the bottom of the table, the actual outstanding amount that we need to refinance this year is about CNY 6.5 billion, and then next year is about CNY 6 billion. We, at the end of last year, have about CNY 15 billion of cash on hand. We certainly have more than enough to repay all the debt if we need to use up our cash. And certainly, we will do some additional refinancing going forward. We have ample liquidity. We do not expect to see any financing issue in the next 12-18 months.
Then finally, on the balance sheet in terms of asset, we have about CNY 110 billion of total assets. You can see the breakdown on the right-hand side pie chart. Roughly about just over 50% of this total asset is commercial related, including completed IPE and commercial site under development. Then about 25%, 28% is relating to residential or inventory for sale. And the remaining, you can see about 14% in cash. This is basically the breakdown of the asset of the company.