Annual Report 2019

Management Discussion and Analysis 22 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED FINANCIAL REVIEW For the year ended 31 December 2019, the Group’s recorded revenue of HK$8,898 million, representing a decrease of 12.4%, which was mainly attributed to the disposal of equity interest in Shenzhen Chiwan in the previous year. The revenue derived from core ports operation decreased by 13.6% over last year to HK$8,243 million. Profit attributable to equity holders of the Company amounted to HK$8,362 million, representing a year-on-year increase of 15.4%, which included a gain of HK$3,281 million (net of tax) recognised from the Group’s resumption of certain land parcels at Qianhai during the year, while the amount for the previous year included a gain from the disposal of equity interest in Shenzhen Chiwan. Meanwhile, due to the decrease in share of profits of associates, the recurrent profit Note 1 decreased by 3.1% over the previous year to HK$4,163 million. As at 31 December 2019, total assets of the Group increased by 6.5% from HK$139,937 million as at 31 December 2018 to HK$149,082 million, which was mainly attributed to a gain on resumption of certain land parcels at Qianhai which was used for capital contribution to an associate during the year. Meanwhile, the total liabilities of the Group increased by 5.8% from HK$51,933 million as at 31 December 2018 to HK$54,948 million as at 31 December 2019, which was attributable to the income tax liabilities arising from gains on resumption of certain land parcels at Qianhai of approximately HK$1,539 million, combined with lease liabilities recognised under the new lease standards of approximately HK$1,002 million. As at 31 December 2019, net assets attributable to equity holders of the Company was HK$79,783 million, up by 5.9% as compared to that as at 31 December 2018. This was mainly attributed to the increase in profit attributable to equity holders of the Company, which offset the losses on translation of financial statements denominated in foreign currencies of subsidiaries, associates and joint ventures. The financial statements of the Group’s foreign investments are in Renminbi, Euro, United States dollar or Brazilian Real and any exchange difference so arising from retranslation of these financial statements have been dealt with in the reserve of the Group. The Group will keep monitoring market changes and explore on the use of forward exchange contracts, where deemed necessary, in order to hedge foreign exchange risk and to optimise its overall exposure to maintain foreign exchange risk at a manageable level. In general, the Group’s ports operation continued to yield stable cash inflow. The Group’s total net cash inflow from operating activities for the year ended 31 December 2019 amounted to HK$6,310 million, basically flat with the previous year. For the year ended 31 December 2019, mainly because capital expenditure on business acquisitions decreased significantly as compared to the previous year, the Group’s net cash outflow from investment activities decreased from HK$15,354 million in the previous year to HK$2,410 million, including the Company’s recovered advance from a related party of HK$1,177 million during the current year. At the same time, as a result of significant decrease in new loans granted as compared to the previous year, the Group’s cash flow from financing activities for the year ended 31 December 2019 decreased from a net inflow of HK$5,349 million in the previous year to a net outflow of HK$2,092 million for the current year. LIQUIDITY AND TREASURY POLICIES As at 31 December 2019, the Group had approximately HK$7,800 million in cash and bank balances, 0.9% of which was denominated in Hong Kong dollars, 22.7% in United States dollars, 63.8% in Renminbi, 7.6% in Euro, 4.3% in Brazilian Real and 0.7% in other currencies. The Group mainly derived its funding sources from its operating activities related to ports operation, bonded logistics operation and property investment, and investment returns received from associates and joint ventures, which amounted to HK$6,310 million in total. During the year, the Group incurred capital expenditure amounted to HK$2,889 million while the Group adopted a prudent financial policy and maintained a sound financial position. In addition, as a significant portion of the Group’s bank loans were medium-term to long-term loans, the Group, supported by adequate undrawn bilateral bank facilities, does not anticipate any difficulty in refinancing its short-term loans while the pressure for repaying the short- term loans is limited. Note 1 Profit attributable to equity holders of the Company net of non-recurrent gains after tax. Non-recurrent gains include: for 2019, change in fair value of financial assets and liabilities at fair value through profit or loss, change in fair value of investment properties, gain on deemed disposal of interest in a joint venture and gain on resumption of certain land parcels at Qianhai and Shantou; while for 2018, gain on disposal of subsidiaries, change in fair value of financial assets and liabilities at fair value through profit or loss and change in fair value of investment properties.