Annual Report 2019 - Shangri-La

1 Annual Report 2019 Incorporated in Bermuda with Limited LiabilityStock Code: 69 Cover Photos: 1. Shangri-La s Rasa Ria Resort & Spa, Kota Kinabalu2. Shangri-La s Fijian Resort & Spa, Yanuca Island, Fiji3. Kerry Hotel, Hong Kong4. Shangri-La Hotel, Singapore5. Shangri-La Hotel, Colombo6. One Galle Face, Colombo7. Kerry Hotel, Hong Kong1234567 ContentsOverview2 The Group s Business Presence2 Financial Highlights3 Corporate Information5 Year in Review6 Awards of the Year9 Chairman s Statement10 Board of Directors, Company Secretary and Senior Management13 Directors Report64 General Disclosure Items66 Directors67 Significant Shareholders Interests68 Directors Interests69 Share Option Scheme71 Share Award Scheme74 Connected Transaction(s)77 Continuing Connected Transaction(s)77 Corporate Governance Report86 Directors Handbook and Corporate Governance Functions88 Board90 Executive Committee91 Nomination Committee92 Remuneration Committee94 Audit & Risk Committee97 Risk Management and Internal Controls99 External Auditors103 General Meeting(s)

2 104 General Mandates Granted to Directors105 Dividend Policy105 Investor Relations106 Public Float108 Financial Report109 Independent Auditor s Report109 Consolidated Statement of Financial Position115 Consolidated Statement of Profit or Loss117 Consolidated Statement of Comprehensive Income118 Consolidated Statement of Changes in Equity119 Consolidated Cash Flow Statement121 Notes to the Consolidated Financial Statements122 Five Year Summary244 Abbreviations245 The Group s Listed Members248 Properties Under Development52 Responsible Business58 Discussion and Analysis22 Results of Operations28 Corporate Debt and Financial Conditions41 Treasury Policies44 investment Properties Valuation46 Impairment Provision46 Financial Assets Trading Securities47 Development Programmes47 Acquisition48 Disposal48 Management Contracts for Hotels Owned by Third Parties49 Human Resources49 Prospects51 OverviewShangri-La Asia Limited Annual Report 20192 The Group s Business PresenceOmanSaudi ArabiaBahrainUnited ArabEmiratesMaldivesSri LankaIndiaMainland ChinaMyanmarThailandMongoliaMalaysiaSing aporeIndonesiaCambodiaPhilippinesJapanTa iwanHong Kong SARAs at 31 December 2019 Business in operation Projects under development / in planningAsiaBahrain Cambodia Phnom Penh Hong Kong SARI ndia Bengaluru New DelhiIndonesia Bali Jakarta SurabayaJapan TokyoMainland China Baotou Beihai Beijing Changchun Changzhou Chengdu Dalian Fuzhou Guangzhou Guilin Haikou Hangzhou Harbin Hefei Huhhot Jinan Kunming Lhasa Manzhouli Nanchang Nanjing Nanning Ningbo Putian Qiantan Qingdao Qinhuangdao Qufu Sanya Shanghai Shangri-La Shenyang Shenzhen Suzhou Tangshan Tianjin Wenzhou Wuhan Xiamen Malaysia Johor Kota Kinabalu Penang Kuala LumpurMaldives Male VillingiliMongolia UlaanbaatarMyanmar YangonOman MuscatPhilippines Boracay Cebu ManilaSaudi Arabia Jeddah SingaporeSri Lanka Colombo HambantotaTaiwan Tainan TaipeiThailand Bangkok Chiang MaiUnited Arab Emirates Abu Dhabi Dubai Xian

3 Yangzhou Yiwu Zhengzhou Zhoushan Australia Cairns Sydney Melbourne OceaniaFiji YanucaFrance ParisTurkey IstanbulEuropeUnited Kingdom LondonMauritiusAfricaCanada Toronto VancouverNorth AmericaAustraliaFijiTurkeyFranceUnitedKi ngdomMauritiusCanadaFinancial HighlightsOverview3 Shangri-La Asia Limited Annual Report 2019 The following table summarises the highlights of our financial results:201920182019/18 USD MillionUSD Million% ChangeTotal Revenue2, , of the Company and its share of EBITDA of the Company, subsidiaries and attributable to owners of the Company Operating items 97. Non-operating ( ) per share (US cents per share) assets attributable to owners of the Company6, , assets per share attributable to owners of the Company (US$) of challenges Trade war lingered, impacting Mainland China, Hong Kong and Singapore Prolonged demonstrations in Hong Kong Sri Lanka Easter tragic bombing incidentMitigation actions Increased focus on Chinese domestic leisure market (family packages, catering and F&B promotions) Implemented cost control measures for Hong Kong Enhanced security for Sri Lanka sites.

4 Achieved ~80% of original residential handover target despite summary Hotels business declined due to highlighted challenges investment properties continued to provide stable base property development for sale year-over-year growth but lower than originally anticipatedSegment Revenue by Category (USD Million)Effective Share of EBITDA by Category(USD Million)166922,4312,518128832,1732,307 property Developmentfor Sale & Other BusinessInvestment PropertiesHotel Operation20192018-27-3111425999247519626 865941 property Developmentfor Sale & Other BusinessCorporate &Pre-opening ExpensesInvestment PropertiesHotel Operation2019*2018* Figures for FY2019 are prepared under the new accounting standard HKFRS 16 while the comparative figures for FY2018 are prepared under the former accounting standard HKAS 17 without HighlightsOverview4 Shangri-La Asia Limited Annual Report 2019 Movement of Cashflow(USD million)1, , at1/1/19 Cash from operationsCAPEXNet finance costDividend paid to shareholdersof the CompanyDividend incomeNet change in debtOthersCash at31/12/19 Debt refinancing schedule chart including undrawn facilities(USD million)Weighted Average Term.

5 Years1,0425,2413756411,04574779968075913 71147 TotalCommitted Undrawn Facilities202020212022202320242025202620 2720282029+Corporate InformationOverview5 Shangri-La Asia Limited Annual Report 2019As at 27 March 2020 BOARD OF DIRECTORSE xecutive Director(s)Ms KUOK Hui Kwong (Chairman)Mr LIM Beng Chee (Group CEO)Non-executive Director(s)Mr HO Kian Guan (alternate Mr HO Chung Tao)Independent Non-executive Director(s)Professor LI Kwok Cheung ArthurMr YAP Chee KeongMr LI Xiaodong ForrestMr ZHUANG Chenchao (from 1 December 2019)EXECUTIVE COMMITTEEMs KUOK Hui Kwong (chairman)Mr LIM Beng CheeNOMINATION COMMITTEEMs KUOK Hui Kwong (chairman)Professor LI Kwok Cheung ArthurMr LI Xiaodong ForrestREMUNERATION COMMITTEEP rofessor LI Kwok Cheung Arthur (chairman)Ms KUOK Hui KwongMr YAP Chee KeongAUDIT & RISK COMMITTEEMr YAP Chee Keong (chairman)Mr HO Kian Guan (alternate Mr HO Chung Tao)Professor LI Kwok Cheung ArthurCOMPANY SECRETARYMr SEOW Chow Loong IainAUDITORP ricewaterhouseCoopersCertified Public AccountantsRegistered Public InterestEntity Auditor22/F Prince s BuildingCentralHong Kong SARHEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS28/F Kerry Centre683 King s RoadQuarry BayHong Kong SARREGISTERED ADDRESSV ictoria Place5/F, 31 Victoria StreetHamilton HM10 BermudaPRINCIPAL SHARE REGISTRAR IN BERMUDAMUFG Fund Services (Bermuda)

6 Limited4/F NorthCedar House41 Cedar AvenueHamilton HM12 BermudaBRANCH SHARE REGISTRAR IN HONG KONGT ricor Abacus LimitedLevel 54, Hopewell Centre183 Queen s Road EastHong Kong SARSTOCK CODESHKSE 00069 Singapore stock exchange S07 American Depositary Receipt SHALYWEBSITESC orporate RELATIONS Kerry Centre683 King s RoadQuarry BayHong Kong SARKEY DATESC losure of registers of members for Annual General Meeting2 June 2020 to 5 June 2020, both dates inclusiveAnnual General Meeting5 June 2020 Announcement of 2020 interim resultsAugust 2020 Overview6 Shangri-La Asia Limited Annual Report 2019 Year in ReviewMarchShangri-La started construction for a new Mixed-Use Development Complex in Fuzhou, Mainland China. The development is scheduled for completion in Group launched the WeChat Mini Programme and WeChat online pay services for guests. Shangri-La becomes the first hotel group to offer a range of e-services under the WeChat is Ctrip s First Globally Certified Hotel Group under its China Preferred Hotel Programme.

7 The programme aims to promote customised hospitality standard specifically for Chinese travellers going Group and Shangri-La signed a hotel management agreement for a hotel project at Shougang Park in Beijing. The hotel will be one of the Official Hotels of the Beijing 2022 Winter signed a hotel management agreement to manage Hotel Jen Qianhai, Mainland China. The hotel is scheduled to open in December family-themed rooms and suites, unveiled at Shangri-La Hotel, Harbin and Shangri-La Hotel, Qinhuangdao along with child-friendly amenities and Asia Limited Annual Report 2019 JulyShangri-La bans single-use plastics straws and stirrers across its properties as the Group promotes more sustainability of Race for Hope Campaign - a China-wide CSR initiative leveraging Alipay s Ant Forest programme to engage our employees and guests to adopt a low carbon lifestyle. Shangri-La is the first hotel group to participate in Ant Forest digital of Shangri-La Academy Online, the Group s e-learning platform to facilitate individual learning and personalised content for our colleagues anytime, of a new culinary R&D centre in Dalian, Mainland China to drive innovation and to explore new dining concepts.

8 The centre aims to scale for success and to improve our F&B offerings across the Group s Asia Limited Annual Report 2019 NovemberOpening of Shangri-La Hotel, Suzhou Yuanqu, Mainland China marking the Group s return to the historical water town since its first property 10 years ago. The 303-room hotel is located at the new commercial official opening of One Galle Face (OGF) Mall and office tower. Together with OGF Residences, this mixed-use integrated project is the Group s largest venture in South Asia to of a lease agreement between Shanghai Airport Authority and Shangri-La for a hotel project at Hongqiao Airport. The new airport hotel will combine elements of Shangri-La Hotel and Traders for a dual brand Remembrance: A Garden Memorial erected in Shangri-La Hotel, Colombo, Sri Lanka on 7 November 2019 in memory of those who lost their lives on 21 April Asia Limited Annual Report 2019 Best Business Hotel Brand in Asia-PacificBusiness Traveller Asia-Pacific AwardsBest Hotel Brand in ChinaBusiness Traveller China Awards Best Business Hotel Brand in Asia-PacificBusiness Traveller UK Awards 2019 Best Hotel by Region, Best Business Hotel Brand in AsiaBusiness Traveler Magazine (USA)

9 Top 60 Hotel Groups in China 2018 China Tourist Hotel Association Top 20 Hotels in AsiaConde Nast Traveler s Readers Choice Awards Best Business Hotel BrandDestinAsian Readers Choice Awards 2019 Best Leisure Hotel BrandDestinAsian Readers Choice Awards 2019 International AwardDHL/SCMP Hong Kong Business Awards Recommended International Hotel GroupHOTELN World s Best Hotel GroupJie Mian x Quality MSC Leadership in Sustainable Seafood AwardMarine Stewardship Council Top 25 Hotel BrandsTravel + Leisure World s Best Awards 2019 Best Luxury Hotel Brand in Greater ChinaTTG China Travel Awards 2019 Best Luxury Hotel BrandTTG Travel Awards 2019 Annual Best Hotel GroupVoyage Best Hotel & Resort Value Award (China) Awards of the YearOverview10 Shangri-La Asia Limited Annual Report 2019 Chairman s Statement Dear Shareholders,On behalf of the Board, I am pleased to present the Annual results of Shangri-La Asia Limited for the financial year ended 31 December 2019, consolidated revenues decreased by to USD2, million.

10 Aggregate effective share of EBITDA to the Group decreased by to million, dropping at a rate faster than our revenues as fixed labour costs form a significant portion of operating expenses at our hotel operations. As a result, consolidated profit attributable to owners of the Company (before non-operating items) decreased by to million. Consolidated profit attributable to owners of the Company (after non-operating items) decreased by to million, partially helped by lower impairment charges compared to last proved to be a challenging year for the hotels business of the Group. Market sentiment was dampened by uncertainties arising from the extended Sino-US trade war that began in mid-2018. Our business was further impacted by the tragic bombing incident on 21 April 2019 in Colombo, Sri Lanka, which affected not only our hotel business, but also the handing over of our completed residential units and delayed the opening of our mall and office. Two months later, protests began sprouting around various areas of Hong Kong.