Hello, everyone. Welcome to the CK Asset Holdings Limited 2021 annual results. My name is Gerald. As usual, I am joined by Mr. Simon Man, our chief accountant, and fellow ExCo members. Shortly, Mr. Victor Li, our chairman, and Mr. Edmond Ip, our deputy MD, will also join us for the Q&A session. Let's get right to it. 2021 full year revenue came to HKD 83.24 billion, up 17%. Net profit to shareholders came to HKD 21.24, up 30%. In terms of earnings per share, because of the share buyback activity during 2021, it went up by 31% to HKD 5.77. We are happy to declare a final dividend of HKD 1.79, making our full year dividend to HKD 2.20, up 22.2%. This is above our guaranteed dividend of HKD 2.08 per share. Some of you may say, shouldn't it be 2.07? I would point you to note two of this presentation.
Based on last year's transaction, our guaranteed amount was the total dividend paid in 2020, plus the higher of HKD 910 million or the actual cash distribution received by the acquired companies. We actually received a cash distribution of HKD 940 million. So the guaranteed dividend became HKD 2.08 per share. Nevertheless, in any case, we declared a total dividend, final dividend, or full year dividend of HKD 2.20. Our recurrent income, in terms of profit contribution, is now 42% of our principal activities, which should act as a good buffer to mitigate against the volatilities that we have seen and are still seeing from the COVID outbreak, and also the geopolitical uncertainties. In terms of geographies, 38% of our contribution comes from Hong Kong, 37% from the Mainland, and 25% from overseas. Turning to divisional performances. Property sales.
Revenue was HKD 37.8 billion, profit contribution HKD 18.15, not a lot of difference from 2020, and still recording a very healthy and solid contribution margin of 48%. Major contribution from Laguna Verona in Dongguan, HKD 5.8 billion. Seaside Sonata, HKD 2.75 billion. HKD 2.7 billion from Upper West Shanghai. HKD 1.57 billion from 21 Borrett Road. Sea To Sky gave us HKD 1.4 billion as well. Looking at Hong Kong, a big increase from 2020. Almost HKD 7 billion of profit contribution at extremely good contribution margin of 44.5%. The Mainland gave us HKD 11.1 billion and also a very solid 51.3% contribution margin. Very little activity from overseas in 2021. As a result, it is only HKD 10 million. We still have HKD 29.5 billion of contracted sales not yet recognized. About HKD 25.2 billion scheduled for completion or recognition booking in 2022.
The majority of which would be as expected from Hong Kong as well as Mainland, from projects such as Sea To Sky, Borrett Road, El Futuro, City Link, and Noble Hills. In terms of calendar year 2021, calendar year contracted sales, it was about HKD 31 billion altogether. Turning to property rental. HKD 6.7 billion of revenue and HKD 5.6 billion of profit contribution, and still a very healthy HKD 84.6 billion contribution margin despite the uncertainties and the pressure brought on by the pandemic. Major contribution from Cheung Kong Center, HKD 1.35 billion. Whampoa Garden, HKD 713 million. Hutchison Logistics Centre, HKD 604 million. We still have 17.6 million sq ft of investment properties. We recorded an increase in fair value from investment property of HKD 1.5 billion, mostly coming from two under development projects in Hong Kong, Hok Yuen, as well as the redevelopment of Hutchison House.
Also a solid increase from Hutchison Logistics Centre as well. Turning to hotel and service suite operation, HKD 2.7 billion of revenue and almost HKD 400 million of proper contribution. A decent improvement, but still impacted by the pandemic, especially for our daily hotel division. If you look at the HKD 399 million of contributions, mostly from Hong Kong, as expected. Out of the 15,000 rooms and service suites for the daily hotel, they recorded a 37% average hotel room occupancy rate. Saved by the service suites recording a 93% average occupancy rate, which is a slight improvement from 2020. Property management and project management continue to be extremely steady. HKD 355 million of contribution and a margin of 40%. Turning to aircraft leasing, as you will see from our financial statement, this division is now recorded as a discontinued operation.
Looking at it did give us a profit contribution of HKD 887 million and a decent margin of 35%, but nevertheless, at a drop of 21% from 2020. The disposal of this investment is expected to be completed sometime in Q2, before the first half, subject to the fulfillment of certain terms and conditions. People ask, "What are these conditions?" Normally, these are antitrust filings that we have to do in three different countries as well as some pre-closing adjustments calculations. If you are still interested, then you see a drop in the Asian contribution, mainly from different leases, many leases expiring or extending. As an aircraft gets older, when you extend the lease, then the rental contribution or the new lease contract would be at a much lower rate. Pub operation. Greene King, an integrated pub retailer with around 2,700 pubs.
We have our managed pub divisions, which we run the business out entirely ourselves. We have our pub partners division, essentially a franchise or tenanted division, and also our two breweries, one in Dunbar, Scotland, the other in Bury St Edmunds in the U.K. We not only have a good mix of pubs in the central London area, you can see from the picture, especially the upper left corner is one of our newly renovated suburban pubs in other residential locations in and around the greater U.K., different areas. First half, the country was under a strict lockdown situation. Second half, I believe July 19th, various restrictions began to be lifted, so a much more normalized situation returned. As a result, the operating conditions in the second half was much improved, which enabled us to make back some of the losses incurred in the first half.
On a full year basis, the EBIT loss was just over HKD 55 million, which is a big improvement from 2020. This number excludes the goodwill impairment of around HKD 2 billion, which we made at year-end. Infrastructure utility asset operation. If you recall, in May 2021, we acquired an interest and also additional interests of four infrastructure companies from the Li Ka Shing Foundation. The new interest was UK Power Networks, and the additional interest was Northumbrian Water, Wales & West Utilities and AVR Waste Management. As a result, we now have seven different JVs, in this category. CK William Duet is an energy utility assets operator mainly in Australia, also in the U.S., Canada, and the United Kingdom. Reliance Home Comfort, CKP Canada, is a boiler HVAC air con leasing company in Canada.
ista is a metering, sub-metering service company based in Germany and have businesses across Europe. UK Power Networks, a power distributor in the U.K. Northumbrian Water, a water company in the U.K. and AVR, a waste management in the Netherlands as well as Wales & West Utilities, a gas distributor in Wales and the south west of England. On the right-hand side, you can see our interest in the respective JVs. As a result of the acquisition, our contribution in 2021 jumped 33% from 2020 to almost HKD 7 billion. We didn't have a full year contribution from the four assets, but had they been contributing on an annualized basis, that number would be roughly HKD 7.5 billion of EBIT. The others, the HKD 405 million that you see, and group under others are actually Park'N Fly, Eversholt UK Rails, and Australian Gas Networks.
I would turn the rest of the presentation to Simon. Simon, please.
Thanks, Gerald. The group's interest in the listed real estate investment trust remain more or less the same at the year-end dates. We hold 32.7% of the Hui Xian REIT, which hosts approximately 11.8 million sq ft of hotels and service suites, office and retail properties on the mainland. Hui Xian REIT is an associate, and we share its profit in the amount of HKD 288 million for the year 2021. We hold 26.7% of the Fortune REIT, which hosts approximately a total of 3 million sq ft of retail properties in Hong Kong. The group hold 18.3% interest in Prosperity REIT, which hosts approximately 1.3 million sq ft of office, retail, and industrial properties in Hong Kong. During the year, total cash distribution received from Fortune REIT and Prosperity REIT amounted to HKD 310 million, which has been recognized as investment income. Turn to next page.
For maturity profile, the group had a net debt at the year-end date of HKD 96.5 billion, and the maturity profile was spread over a period of 15 years, with HKD 28.8 billion repayable within one year, HKD 52.1 billion within 2-5 years, and HKD 15.6 billion beyond five years. If we deduct the cash on hand, HKD 63.4 billion, it gave us a net debt of HKD 33.1 billion. For gearing ratio, it's 8.9% if we take the net debt to shareholders' fund, and the gearing ratio is 7.9% if we take the net debt to net total capital. Our current corporate credit rating is A2 stable from Moody's and A stable from Standard & Poor's. Land bank summary.
We have a total land bank of 125 million sq ft, 73 million of which is under development and 17 million sq ft is currently held for rental, and 9 million sq ft is under hotel and service suite operation, and 26 million sq ft is under pub operation. The geographic location is 25 million sq ft of the 125 million sq ft will be in Hong Kong, and 65 million sq ft on the mainland. And 33 million sq ft overseas, mainly in Singapore and in the U.K. Major property acquisition in Hong Kong. In February 2021, the group was awarded a government tender for a site at Kai Tak.
Area 4E, Site 2, which has approximately 648,000 sq ft of developable gross floor area. In May 2021, the group reached a land exchange agreement with the government in respect of a site at Kam Tin, which has approximately 137,000 sq ft of developable gross floor area. In August 2021, the group was awarded a government tender for a site at Lot Number 1677 in DD115, Yuen Long, which the site has approximately 78,000 sq ft of developable gross floor area. In March this year, 2022, the group was awarded a tender by the Urban Renewal Authority for the combined development of four projects at To Kwa Wan, which will give us approximately 526,000 sq ft of developable gross floor area. I will pass it back to Gerald to talk about ESG.
Thanks, Simon. Turning to the next page, you will see that climate change is an issue for all of us, so the group is committed to reduction and certain targets have been set, such as electricity, water, waste management, waste and carbon emission reduction. To the extent that we can, a lot of our developments are now qualified as green buildings, and we will continue to hopefully do better in this particular area as well. In terms of financing, we are also participating in green financing, and this year we did two of them and totaled HKD 5.5 billion. This last page, I would suggest not to go into detail. You can, at your leisure, feel free to look at the highlights of the various ESG initiatives by different business units.
Our Chairman, Mr. Victor Li, and our Deputy MD, Mr. Edmond Ip, have joined us, so I think it is a good time to turn to our Q&A session. As in the past, thank you for all your questions. Please continue to send them in. For similar questions, I will try to consolidate them and ask them all in one go. If there are questions that I do not have an answer, or maybe not quite relevant for this particular occasion, feel free to contact us via email at a later point. There are a couple of.
Gerald, I am just testing. You can hear me properly, right?
Yes.
Okay.
Questions have been coming in steadily. The first question, I will ask the question, and our Chairman, Mr. Li, will direct traffic, so to speak, and see who is the appropriate person to answer such question. The first one is about 5 Broadgate. Why did you decide to sell 5 Broadgate, and how much of a return are you generating? Does it mean you are bearish on U.K. property investments? What will your gearing be after completion?
First, buying and selling property is our daily business, so I do not think we have to read too much as to why we are selling or why we are buying. Tomorrow, we may be buying another property if we see good value. This is purely an exercise to recognize a gain and allow us to look at new deals. I think the return is a little bit complicated because there is a part of the profit that goes with the derivative from the hedging profits. In total, I think we made a profit of approximately HKD 4.8 billion, which is a 45% return on our total investment. Simon, correct me if I am wrong, but before December last year, our net debt to net capital is about 7.9%, so the sale would reduce about 2%-3% reduction in the total gearing, which would bring us to about 5% roughly.
Yeah, that is right.
Yeah, about 5% gearing. I hope I answered that question.
Yes. Thank you. The second question, when will the sale of your aircraft leasing business be closed or completed? Can you remind us again on your rationale behind the sale and the profit to be booked?
Maybe I will start with a general remark. I think Gerald is the best person to answer that question. The general remark is that we went through a tough time during COVID on aircraft business, and at the end of the day, we still can achieve an almost double-digit return on our investment over the seven-year period. We thought it is a good time to book it, to receive some money and receive some profit. Maybe Gerald, you can give some more concrete numbers.
Yes, Mr. Li. We expect the transaction to close sometime in Q2, so in the next one or two months, hopefully. If you look at the impact by the pandemic on the industry, as we stated in our announcement, there has been a structural or some would say paradigm shift in the sector. The risk and return dynamics have become very volatile and much more unpredictable. The industry has gone through a lot of different consolidation, M&A activities, and people are trying to grow bigger to mitigate the volatility as well as the lower return being forecasted for the near to medium term. Like Mr. Li said, we thought it would be a good time because we had a decent portfolio, narrow body focus, and there was a strong and willing buyer.
It was a good time for us to exit the sector, recycle the capital, and focus strategically on other things. Per the announcement, the profit is in the region of HKD 170 million, subject to closing adjustments. You always have these pre-completion adjustments depending from signing to closing, the amount of rent you receive, the amount of maintenance expenses you incur. There are some adjustments. Like Mr. Li said, the IRR for seven years is roughly double digits. Question number three, your announcement says that there is HKD 29.5 billion contracted sales not yet recognized. Which projects are expected to be booked in 2022? I think I covered some of that, but we can expand more.
I think a lot of the deals that you hear in the media are not booked in 2021, obviously. Quite a number of development projects, they happen to be all completed, some of them in 2022, January. Naturally booked in 2022. Maybe Edmond, you have the numbers, in more concrete numbers?
Yeah. It's about HKD 25.2 billion, as Gerald just said, the property sales we transacted but not yet booked, and will be booked in 2022 and beyond. The major contributors are Sea to Sky in Tseung Kwan O, Borrett Road, of course, and then the Kau To Shan project, as well as City Link in Shanghai. On top of that, obviously the 5 Broadgate property in London, disposal gain of GBP 108 million sterling, will also be booked in 2022 instead of last year. The other one is the aircraft leasing business. Again, it was going to be HKD 170 million to be booked this year as well. Those are the numbers for the transacted deals that haven't been booked into profit.
Thank you, Mr. Edmond. The next question, how does the recent Russian-Ukraine conflict affect your business?
The conflict is sad. In terms of CK Asset business, I think the direct impact is rather small. Let me see. I think Greene King has some beer exports to Russia, but that is tiny numbers. Gerald, maybe you are better to answer the two aircraft, I think, we leased to Russian Airlines. But that is again, small numbers.
Yeah. There are two aircraft that operate in Russia, so there is some impact and we are managing the best we can. But the situation of whatever happens to these two aircraft is not going to impact the completion of the rest of the transaction. That, which is much more important.
Yeah. We are talking tiny numbers here.
Yeah. Next question, there have been news reports on the potential sale of UK Power Networks. Could you please give us an update?
I cannot possibly comment from media rumors. I think the fact that there is an offer does not mean that we are thinking of selling or contemplating a sale. All I can say is that under the CK Group, we have a lot of quality assets. The value sometimes are not yet fully appreciated by some shareholders. I think outside people in the market in general recognize that these are very valuable and quality assets. I think these type of things will happen from time to time, that people will try to offer certain of our businesses.
Next question. What's your view on the property market right now? Do you plan to buy more land?
Let me see. I think Hong Kong has a long-term demand for homes. I think our sales would continue to be quite strong. We never have a mentality of, in any deals or in any purchase, that we have a must-win mentality. I don't think that's healthy for returns. We look at projects that has healthy return and that it is of quality. Whenever the opportunities manifest themselves, we certainly have the muscle to purchase them. In 2021, we have invested over HKD 11 billion in three new projects, in terms of land purchase. We've just purchased another plot in Tsuen Wan for almost HKD 6 billion. I can say that, how should I put it? We have the resources, we have the ability, but we will never go crazy. Financial discipline, that's our motto.
Next question. Overall Hong Kong office vacancy is still high. Do you expect a further drop in property rental contribution in 2022? When will Cheung Kong Center II commence pre-letting?
I think Hong Kong office vacancy, obviously, its vacancy will be higher during COVID times. There is one big difference between Central and other districts, because Central office space is not only about space. Being in Central is telling the whole world who you are. Whenever Central rents are slightly more affordable, companies who aspire to grow bigger or tell the world that they are here to stay and be strong, would like to locate in Central. Central is a lot more than just convenience. It is prestige. It is telling the world who you are. I am a bit more optimistic about Central. There is only one Central.
Next question. Considering the COVID situation in Hong Kong, do you have plans to offer rent concessions to tenants?
Oh, this question we have answered last year also. Remember, our property are full range. We generally analyze it on a case-by-case basis. Not everybody needs our assistance. Some business actually do better during COVID times. Of course, some business do worse. We cannot have a broad-brush approach. Once you do a broad-brush approach, then it is a bit too bureaucratic. Usually we evaluate on a case-by-case basis. In the last COVID crisis in Hong Kong, I think we have handled it quite well. In addition, a lot of our malls are in what I call basic necessities. They are less affected by the COVID measures.
Next question. There have been news reports of CK Asset obtaining approvals for converting hotels into other uses. What are your redevelopment plans for these sites?
I don't think I can give an update immediately, but we do review other options for various of our properties from time to time. For example, during this pandemic, we converted a lot of our short-term stay rooms to longer term stays, be it for staycations or for people to enjoy the hotel facilities for a few months. As a result, even during the worst of COVID, our hotel division is always cash flow positive. This year, meaning 2021, I think our profit contribution from the hotel and suites division has gone up 53% compared to 2020. I think we do review our assets and their utility from time to time.
What is your rationale for making a goodwill impairment for Greene King? What is your outlook for the pub business?
Can I answer that question in two separate angles? One, CK Asset has always been conservative in terms of our carrying book value. This is not in particular to Greene King, this is on everything. I think we're quite well-known in the industry for carrying conservative book value for all our rental properties, for all our long-term investments. Making a revaluation gain on revaluing our property is not what we normally look forward to unless we have to. We tend to be rather conservative on all of our carrying book value, as a general rule. The rationale for making that goodwill impairment is basically something that's in line with our tradition. That is part one to the question. If I may go on to part two.
Actually, I think we're getting a bit more optimistic about the pub business, especially during the second half of 2021. Because as soon as the COVID measures are slightly more relaxed, the pubs are actually quite full and businesses are coming back. Maybe Gerald can say this better, but I think recently they are almost, in terms of revenue, back to pre-COVID levels. Is that correct?
Yes, we are back to pre-COVID, more or less 2019 pre-COVID revenue. Obviously, inflation is an issue. Supply logistics, a bit of an issue.
Yeah.
We are doing what we can, either raising prices a bit and try to keep the margin up.
But the basic thing is that pub is more than F&B. It is U.K. culture. As soon as COVID measures up, a lot of customers are quite eager to go back to their local pubs. Business has returned very quickly, and I think actions, it is the best demonstrator of how we see that business during 2021. We acquired an additional 40 pubs during the year because we can buy them at good value. We are expanding.
Next question is, you have announced the disposal of 5 Broadgate, the aircraft leasing business, and mulling over a possible sale of UK Power Networks. With so much cash on hand, what are your acquisition plans? Any countries of interest?
First, I have to correct that question first. Do not say we are mulling over a sale. We have received an offer, and this is our duty to look at an offer. I do not want to go as far as mulling over a sale of UK Power Networks. But in terms of countries of interest, as a general rule in this whole CK Group, we never looked at a country first, and then we look at the investment. We look at the deal first. I do not think I have a particular budget for one country versus the other. Our analysis is very clear. It is the numbers on return equity and the quality of the projects or businesses. We like to work in countries where the legal system is clear. The whole world, because we have been operating in so many countries for years.
In our vocabulary, there are little places we call really too foreign a market. A lot of countries, we have colleagues there for over 30 years. So we consider them our domestic market. Of course, Hong Kong and the Mainland is something that is close to our hearts. So that is easier because we are close to it, but we will not restrict ourselves to just one market.
The next question is, could you share with us your outlook on CK Asset in 2022? It is a very high level general question.
Sorry, can I jump back to your earlier question about which country? I think the more important thing for shareholders is that the return. For example, earlier in our press conference, people asked me about whether selling the U.K. or selling this country or selling that country. To the shareholders, money from 5 Broadgate is the same as money from a sale of property, be it in New York or Shanghai. As long as we can provide the return, I do not think shareholders make a big difference as to where we make that money, as long as we make the money. So I think, again, I go back to quality and return. Sorry, I go back to that question of outlook in CK Asset in 2022. I am not going to tell the whole world as to our strategy.
I think that's more for the board and then for public consumption. All I can say is that we have muscle, we have knowledge, we see opportunities, and we're going to be busy.
Next question.
Sorry.
Any plans for further share buyback?
I can't go on detail on share buyback, but we have done deals on the on-market buyback and we'll consider as one of the capital management strategy to enhance shareholder value. We'll be opportunistic.
I think the next one, this should be our final question for the period. As I understand, Mr. Li will have to go to the CK Hutchison Q&A session with the analysts as well. Your final dividend was above your guaranteed amount, which is positive. What is your dividend policy going forward?
I think it should be roughly in line with our profit outlook. This year, I think the numbers are quite nice, and it is the year 2022. You notice there are lots of twos in our total dividend this year. Just a nice round number. We have increased our dividend this year by 2%. Our total dividend is HKD 2.20 and announced in the year 2022. There is a lot of twos. In Chinese, that is very good numbers.
With that, I would like to thank our management team for participating and thank you online for participating. This concludes our analyst presentation and Q&A session. We wish you good health, and we will see everyone soon again.
I look forward to having an analyst meetings when I do not have to stare at a screen until my eyes go dim. I will see some of you again in the CKHH meetings. I am going to leave now, okay? Thank you.