China Everbright Limited Core Business Records Stable and Healthy Performance in 2018. Total AUM Increases 11% to HK$143.5 billion

 

(HK$ 100 million)

2018

2017

Change

2018

(excluding the impact of HKFRS 9)

Change

Total AUM

1,435

1,291

+11%

--

--

Total Income

46.96

55.29

(15%)

58.68

+6%

Profit attributable to shareholders

31.04

41.48

(25%)

37.99

(8%)

Profit attributable to shareholders from

direct operating business                                       

26.42

28.62

(8%)

33.37

+17%

Annual dividend

HK$0.66per share

HK$0.85per share

(22%)

--

--

 

China Everbright Limited (“Everbright” or “the Group”, stock code: 165.HK) today announced its annual results for the year ended 31 December 2018.

The year 2018 was filled with challenges for the private equity investment and asset management industry. In spite of the challenges, Everbright took full advantage of its cross-border investment platform and delivered solid performance with a set of stable and healthy business indicators. Last year, the Group’s total AUM surged to HK$143.5 billion, an increase of 11%. The Group has 62 actively managed funds which holds 158 post-investment projects under the primary market segment, including real estate, medical & healthcare, elderly care, infrastructure, high-end manufacturing, advanced technology, as well as culture consumption, creating a global investment footprint.

The implementation of HKFRS 9 on 1 January 2018 had an extraordinarily one-off negative impact on the total income of around HK$1,172 million on Everbright’s 2018 income statement, which meant that the full-term investment income from the divestments including but not limited to Betta Pharmaceuticals, Beijing Genomics Institute, China TCM and Macquarie Everbright Greater China Infrastructure Fund, etc. could not be fully recognised in Everbright’s 2018 income statement. If adopting 2017 accounting standards, the total income in 2018 would jump from HK$4,696 million to HK$5,868 million, an increase of 6% year-on-year after adjustment.

Due to the same reason, the full-term investment net profit attributable to shareholders generated from investment projects, which is HK$695 million in total, could not be fully recognised in the 2018 income statement. Therefore, Everbright’s profit attributable to shareholders is down 25% to HK$3,104 million. Using 2017 accounting standards for comparison, Everbright’s profit attributable to shareholders in 2018 would be down for 8%, the net profit attributable to shareholders of Everbright’s direct operating businesses in 2018 would rise from HK$2,642 million to HK$3,337 million, an increase of 17% after adjustment.

During the reporting period, share of profit from Everbright Securities was HK$60 million, a drop of 93%, while dividend contribution from Everbright Bank (after tax) amounted to HK$313 million, an increase of 99% compared with last year.

The board recommends the payment of a 2018 final dividend of HK$0.40 per share (2017: HK$0.60 per share). Together with the interim dividend of HK$0.26 per share already paid, the aggregate dividends for the year is HK$0.66 per share, down 22% year-on-year.

2018 Financial Highlights

During 2018, Everbright’s direct operating businesses of fund management and principal investments served as dual business drivers, delivering multiple breakthroughs as follows:

  • Continuous innovation in fund offerings, with total AUM increasing to HK$143.5 billion, up 11% year-on-year.  Everbright stepped up its domestic and overseas fundraising efforts in dual currencies. In 2018, several USD funds, RMB funds and Fund of Funds (FoF) were successfully established. Moreover, the secondary market’s AUM continuously increased, which helped the Group’s AUM surge 11% to HK$143.5 billion. This further enhanced the Group’s leading position in China’s private equity business.
  • The fund management business steadily internationalised, which promoted cross-border inbound and outbound investments and balanced global asset allocation. During the year, Everbright’s funds invested in projects overseas, such as the Artic Green Energy Corporation, Norway-based Boreal Holding AS, Kateeva, AQUANTIA and ACM Research. In addition, Everbright successfully facilitated the setup of a new factory in Wuxi for an investee of the Everbright Global Investment Fund, the Burke Porter Group (“BPG”), a world-leading US advanced manufacturing solution and high-end equipment supplier. The introduction to China will help accelerate the development of relevant industries. Meanwhile, EBA Investments, the Group’s private equity real estate fund management platform, also successfully “went global” by completing an overseas acquisition of a well-known US asset management company, Arrow RE Holdings in April 2018, helping EBA Investments realise its vision of becoming a global cross-border real estate asset manager.
  • Principal investments nurtured strategic industrial platforms: building up an ecosystem for aircraft leasing, artificial intelligence and Internet of Things (AIoT), elderly care.

Riding on Everbright’s post-investment management capabilities, the Group has allocated principal investments to high growth potential industries in the mid to long run. Through the integration of industry and fundraising, the investees operation and profitability have been improved, cultivating them as high-quality ecosystem platforms with great potential.

During the year, CALC (stock code: 1848.HK) set up China Aircraft Global Limited (“CAG”), as it embarked on its transition towards an asset-light business model. It also opened an aircraft recycling remanufacturing base that covers the entire supply chain with differentiated services. 

In the AIoT sector, Terminus, an AIoT enterprise incubated by Everbright, empowered traditional industries by utilising AIoT, helping the industries to upgrade. It provides solutions for governments and companies in smart city management, building energy management and public security management. It aspires to become the largest city-level AIoT platform operator in China and has developed into a unicorn enterprise.

For elderly care, Everbright has two elderly care brands, namely Huichen Senior Care and Enjoy Twilight Years, which have a presence in the Beijing-Tianjin-Hebei and Yangtze River Delta regions. Currently, there are 25 elderly centres and close to 10,000 beds under management, accelerating its nationwide footprint.

  • Accelerated development of structured finance business, optimising the Group’s return

During the year, Everbright proactively developed its structured financing business, all of which were subject to rigorous risk management and control. As a result, the Group established a business model for its principal investments, featuring a short cycle, efficient divestment and high returns, significantly boosting its capital efficiency and generating stable and healthy returns.

  • Sufficient project reserves and diversified measures of divestment

As at the end of 2018, via its Funds and Principal Investments,  Everbright has been managing over 180 post-investment projects. Among them, 21 primary market projects have been listed on different exchange boards around the world. According to market conditions, Everbright has adopted flexible and diversified measures of divestment, including overseas and domestic IPOs, equity transfers, as well as M&As, and so on.

Strategies and outlook

Looking ahead, the global economy is expected to continue to take divergent paths throughout 2019. The US economy has already showed signs of slowing down. In Europe, various political issues continue to plague economies in the region. For China, the economy is expected to continue to trend down in the foreseeable future. However, the government is proactively adjusting its policies on credit and finance. With the increasing likelihood of the US and China reaching phased agreements on their trade row, the Chinese economy is expected to stabilise in 2019 with various factors. In addition, fundraising will remain a challenge with little chance of a fundamental shift for the Chinese asset management industry in short term. However, the overall situation is still more optimistic than that of 2018.

Against this backdrop, investors and capital will gravitate towards industry leaders. Looking ahead, Everbright will actively implement its five business development strategies in 2019:

First, in terms of regional exposure, Everbright will increase the percentage of its foreign asset allocation and boost its USD-denominated funds, in order to maintain stable AUM growth.

Second, with respect to funding structure, Everbright will invest in various primary market funds through its FoFs to enhance capital operation efficiency.

Third, Everbright will consistently make strategic investments that align with the country’s development direction and people’s needs, with continuous support for the development of CALC’s globalisation strategy and the integration of the Group’s elderly care ecosystem by building its proprietary elderly care brand “Everbright Senior Healthcare”.

Fourth, Everbright will fully develop Terminus into a leading player in the areas of AI application, smart cities and the Internet of Things, as well as helping the Group to forge business partnerships with other business segments, building a synergistic business ecosystem.

Fifth, in terms of internationalisation, Everbright will leverage its existing overseas industrial funds to expand its international business in a professional manner.

From left: Richard Tang, Exective Director and CFO of Everbright, Chen Shuang, Exective and CEO of Everbright, Frederick Tsang, CRO of Everbright

Chen Shuang, Executive Director and CEO of China Everbright Limited, said: “In spite of a challenging macro-economic outlook, I firmly believe that China Everbright Limited can leverage its international platform, rich investment experience and robust risk management capabilities to capture global investment opportunities amidst volatile market conditions. We will maintain stable AUM growth, strengthen our competitive advantage in cross-border investments and deliver on ‘The Power to Transform’. Meanwhile, we will pay attention to the opportunities brought about by national initiatives such as “One Belt, One Road” and the “Guangdong-Hong Kong-Macau Greater Bay Area”, creating balanced global asset allocations and investing in what China needs. In addition, we are optimistic about the growth potential arising from China’s economic structural reforms, and we will continue to increase our investment in sectors related to the new economy. With a series of initiatives, China Everbright Limited will continue to build a cross-border asset management and investment platform that performs high growth, high returns, creates long-term value and core competitiveness, and delivers stable returns to our fund investors, shareholders and business partners.”