CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 OVERVIEW 14 15 CHAIRMAN’S STATEMENT ENERGISED FOR GROWTH It has been three tumultuous years since COVID-19 emerged and dramatically altered how we live, work and operate. Fortunately, a sense of normalcy has returned. And while market uncertainties persist, given near-term economic headwinds and ongoing challenges, including geopolitical tensions, inflation and interest rate hikes, we will remain steadfast in repositioning and growing our business. Our hospitality arm, led by Millennium and Copthorne Hotels Limited (M&C), continues to be a key growth engine for the Group. We remain a sizeable hotel owner and operator with a diversified portfolio of over 150 hotels worldwide, many located in key gateway cities. With pent-up travel demand and the easing of travel restrictions in most regions, we witnessed a strong recovery momentum in the hospitality sector in 2022. Our hotel operations have since recovered in most markets to prepandemic levels, a marker of the restored confidence in global travel. Divestments and Capital Management The Group recorded a pre-tax profit of $1.9 billion for FY 2022 (restated FY 2021: $214.8 million). The extraordinary gains were driven by the distribution in specie of 144.2 million stapled securities in CDL Hospitality Trusts (CDLHT), resulting in the accounting deconsolidation of CDLHT from a subsidiary to an associate in May 2022 and the recognition of a total gain (inclusive of negative goodwill) of $492.4 million. The sale of properties amounting to $1.26 billion mainly from the record sale of Millennium Hilton Seoul and its adjoining land site in February 2022 and the completion of the collective sales of Tanglin Shopping Centre and Golden Mile Complex in 2H 2022, where the Group owns share values and strata areas, also bolstered our pre-tax gains. As at 31 December 2022, the Group maintained a sizeable war chest with cash reserves of $2.4 billion, and cash and available undrawn committed bank facilities totalling $4.1 billion. After factoring in fair value on investment properties, the Group’s net gearing ratio stands at 51% (FY 2021: 61%). Net Asset Value (NAV) per share increased 9.7% to $10.16 as at 31 December 2022 (restated 31 December 2021: $9.26). The Group adopts the policy of stating our investment and hotel properties at cost less accumulated depreciation and impairment losses. Had fair value gains on the Group’s investment properties been factored in, the Group’s Revalued NAV (RNAV) per share would be $16.98 (restated 31 December 2021: $15.73). Had the revaluation surpluses of our hotels been included, the Group’s RNAV per share would be $19.14 (restated 31 December 2021: $18.63). With a strong balance sheet, the Group is well-positioned for strategic acquisition opportunities in our key markets. Resilient Business Performance In 2022, all our operating segments reported strong performance. For our property development business, the Group, together with our joint venture (JV) associates, sold 1,487 units, including Executive Condominiums (ECs), with a total sales value of $2.9 billion in Singapore. The Group’s office portfolio in Singapore reported a committed occupancy of 95.2%, above the island-wide occupancy of 88.7%. Our retail portfolio also remained healthy, with a committed occupancy of 96.1%, higher than the island-wide occupancy of 92.9%. The gain in traction from the lifting of COVID-19 restrictions, coupled with the reopening of global economies in 2022, injected much vibrancy into the retail sector once again. While Singapore will always be the Group’s home ground and core market, we continue to pursue our strategic diversification push to build our portfolio in our key overseas markets of Australia, China, Japan and the UK. On this front, we expanded our Living Sector portfolio in 2022, which our Group CEO will elaborate on more in his statement. Our hotel operations segment reported a strong performance in FY 2022. The Group’s hotel RevPAR grew 91% to $137.9 (FY 2021: $72.2), attributable to higher room rates and improved occupancies across all geographies. Notably, hotels in London, Singapore and New York outperformed in 2022. Average Gross Operating Profit (GOP) margin improved by 11.3 percentage points to 30.8%, surpassing FY 2019 levels, primarily led by the UK, US and Singapore markets. Portfolio Sharpening With a focus on revenue generation and asset yield optimisation, the Group continued to enhance our hospitality offerings and revitalise our assets through Asset Enhancement Initiatives (AEIs) and repositionings. In Singapore, we completed the renovation of all 360 guestrooms at Studio M Hotel in May 2022. In Q4 2022, Grand Copthorne Waterfront Hotel in Singapore commenced its phased refurbishment for its 550 guestrooms and public areas. In Thailand, in tandem with the ongoing AEI of the Group’s Jungceylon Shopping Center in Phuket, Millennium Resort Patong Phuket started renovating its 418 guestrooms and common areas. The hotel will be rebranded as M Social Hotel Phuket – the first M Social property in Thailand. Completion works for both assets are expected by 2H 2023. Looking ahead, other AEIs in the pipeline include a major renovation for Millennium Downtown New York, which will be rebranded to M Social Hotel Downtown, New York and the Millennium Knightsbridge London, which will be rebranded to M Social Hotel Knightsbridge, London. In Singapore, the Group plans to unveil our newest hotel, The Singapore EDITION, in 2H 2023. The iconic eight-storey 204-room hotel on Cuscaden Road is EDITION’s first hotel in Southeast Asia, a unique concept in the lifestyle hotel space conceived by Ian Schrager and Marriott International. Over in China, the 295-room five-star M Social Suzhou is scheduled to open in Q2 2023. Riding on the return of corporate travel and unabated pent-up demand for leisure travel, our hospitality segment will continue to strengthen and is poised to be a star performer for the year ahead, contributing meaningfully to our recurring earnings. A key focus for the hospitality portfolio will be to accelerate plans for asset optimisation, alignment with the Group’s sustainability goals and driving growth. Dear Shareholders, The Group delivered a record net profit of $1.3 billion for FY 2022, the highest ever since the Group’s inception in 1963 (restated FY 2021: $84.7 million). Prudent divestments and strong operational performance from our core business segments drove the Group’s stellar earnings. In FY 2022, we realised significant capital gains from our successful divestments of several major properties held at book value over a long period of time – a testament to the Group’s ability to extract value at the most opportune time. Revenue increased by 25.4% to $3.3 billion for FY 2022 (FY 2021: $2.6 billion). While our property development segment remained the biggest contributor, the significant jump in FY 2022 revenue was propelled by our hotel operations segment, which registered a 58.1% increase in revenue and a 91% growth in revenue per available room (RevPAR), spurred by the post-pandemic travel rebound in the hospitality sector. In Singapore, we remained a market leader for private home sales with a strong development pipeline. Our asset rejuvenation and portfolio enhancement initiatives achieved improved occupancies and positive rental reversions, and we pushed ahead to build scale in new growth areas, like the Living Sector. 2023 marks the Group’s Diamond Jubilee. Over the past six decades, the Group has weathered many economic storms, property cycles and unprecedented disruptions, but we have always tackled the odds head-on and successfully emerged stronger. The Board and Management will continue to apply this same discipline and tenacity in executing our Growth, Enhancement and Transformation (GET) strategy and bring CDL to greater heights. APPRECIATION On behalf of the Board of Directors, I would like to express my heartfelt appreciation to all our shareholders, customers, business associates and partners for your continued support in our journey. To my fellow Directors, I am grateful for your invaluable contributions, counsel and stewardship as we strive to grow our Group to its fullest potential. We welcomed Mr Tan Kian Seng as the latest member to the Board, pursuant to his appointment as an Independent Non-Executive Director in March 2023. With his qualifications in finance and extensive experience in the hospitality and manufacturing sectors, his appointment would further strengthen the Board’s core competencies, especially in the areas of hospitality and finance, which are identified in the Board’s skills matrix. To our shareholders, thank you for your confidence in the Group. For FY 2022, the Board has recommended a final ordinary dividend of 8.0 cents per share and a special final ordinary dividend of 8.0 cents per share. Together with the special interim ordinary dividend of 12.0 cents per share paid in September 2022, the total cash dividend for FY 2022 amounts to 28.0 cents per share. Finally, to the Management and staff, thank you for your unwavering dedication, hard work and commitment. Your tenacity in navigating the business challenges reflects the Group’s spirit of enterprise and resilience. Despite the ever-changing macroeconomic landscape and inherent market unpredictability, we are confident that growth opportunities will always exist. Our Group remains poised to capitalise on these as they arise. We have gleaned from our past experiences and emerged stronger from each challenge. We are determined to pursue our strategic initiatives with nimbleness, pragmatism and a conviction to steer the Group towards sustained growth. Kwek Leng Beng Executive Chairman Kwek Leng Beng Executive Chairman
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