Everbright Announces FY2011 Interim Results
Business Related 25 Aug 2011
Everbright Announces FY2011 Interim Results
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Net profit soared 251% to reach HK$1.564 billion
Performance Highlights
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Profit after taxation and non-controlling interests of HK$1.564 billion, representing a substantial 251% increase. Earnings per share was HK$0.907, representing a year-on-year increase of 225%.
The “Investment and Financing” business generated rewarding returns on liquidity resources, reported a profit before taxation of HK$206 million
Successfully integrated Hong Kong-based investment banking and securities brokerage business with Everbright Securities and disposed 51% stake of Everbright Securities (International) for an exceptional one-off gain of HK$512 million
Successfully acquired 48% shareholding of China Aircraft Leasing Holdings Limited to set a firm foundation for further developing the financial leasing business and promoting aviation industry investment fund business
Financial position remained strong; cash on hand amounted to HK3.34 billion, interest bearing gearing ratio remained at an extremely low level of 3.3%
The Board of Directors declared an interim dividend of 15 HK cents per share (2010 interim: 13 HK cents)
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China Everbright Limited (“Everbright” or “the Group”, HKSE code:165) todayannounced its interim results for the period ended 30 June 2011. For the first half of 2011, the Group’s profit before taxation of its Hong Kong operations grew by 1,342% to HK$1.24 billion, this includes Everbright Bank contributing a dividend incomeof HK$207 million and the exceptional one-off gain of HK$512 million from the divestment of its 51% interest in Everbright Securities (International). During the period under review, equity sharing from Everbright Securities amounted to HK$438 million. In the first half of 2011, the Group’s Macro Asset Management business reported healthy growth and development. Number of Funds under management grew to a total of 12, with total funds raised exceeding HK$15.3 billion.
Everbright said, “For the first half of 2011, the developed economies experienced varying degrees of financial progress and challenges. However, the Chinese economy managed to maintain its relatively fast growth momentum while Hong Kong’s overall market situation remained relatively stable. Despite rising operating costs, the Group’s Macro Asset Management business strategy, focusing on private equity funds, venture capital funds and asset investments funds, continued to grow prosperously during the period under review. There was significant growth in AUM while investment income and asset management fees continued to increase. Our satisfactory performance validates our solid business foundation which enables us to achieve concrete results even in the face of challenging market volatility.”
Operations Review
“3”Fund Investment and Management Operations
The Direct Investment Division maintained a healthy investment and divestment pipeline, recorded profit before taxation of HK$510 million, a substantial 594% increase year-on-year. Seabright China Special Opportunities (I) Limited (“SOF I”) is already at its divestment stage. Two of its projects were listed in early 2011. The remaining three projects are actively in preparation for their IPO exercises. The China Special Opportunities Fund L.P. (“CSOF”) and its “parallel investment fund” are also reaching the divestment stage, with the Zhejiang-based Beingmate successfully listed on the Shenzhen Stock Exchange, delivering substantial investment returns. The “China Special Opportunities Fund III” explored over 100 potential projects with focus on medical care-related industries.
The venture fund established with Beijing Zhongguancun has completed all its investments, some of which are actively looking for ChiNext Board listing in China. The two venture capital funds established with Wuxi City and Jiangyin City, valued at RMB500 million each, added two investment projects during the review period. One of these is moving towards the pre-IPO A-share listing stage in China.
The Asset Investment Division reported unprecedented growth in fund subscription during the period under review. However, funds under its management were still in the investment and fundraising period, hence its investment value was not fully reflected. A Chongqing commercial property owned by Everbright Ashmore China Real Estate Fund held its grand opening and achieved an occupancy rate of close to 90%, contributing to significant appreciation in its value. Macquarie Everbright Greater China Infrastructure Fund finished its first tranche of fundraising, increasing its capital pool to USD 729 million. The Team will roll out investments in the second half of the year. The Jiangsu, Jiangyin-based new energy fund is now actively reviewing potential projects and planning for investment. Furthermore, the Group successfully acquired 48% shareholding of China Aircraft Leasing Holdings Limited, setting a firm foundation for further developing the financial leasing business and promoting aviation industry investment fund business.
During the first half of 2011, the weakening regional markets impacted the “Dragon Fund” and “Equity Advantage Fund” under the Asset Management Division. These two funds had investment returns of -9.1% and -9.6% respectively, delivering performances similar to the drop in the Hang Seng Index.
Investment and Financing Business
As a strategically crucial supplement to the “3+2 Macro Asset Management” strategy, the Group established a new business division to manage its capital investment and financing business in 2010. Leveraging the Group’s capital-rich position, through stringent due diligence conducted on both the industry and the project itself and also high requirements of collaterals, the Group will adopt an “investment + financing” approach for projects of high potential but which are not directly suitable for investment with existing funds. During the review period, the Division generated rewarding returns on its liquidity resources and reported a profit before taxation of HK$206 million.
“2” Fee-based Business
During the review period, the integration of the Hong Kong-based Investment banking and brokerage business with Everbright Securities was completed, securing a divestment cash consideration of approximately HK$890 million. Given Everbright Securities’ extensive customer base and network, the integration will enhance the Group’s income from comprehensive agency brokerage services and as IPO sponsors and underwriters. In addition, the Group also enjoyed added income-sharing via its 33.3% shareholding at the Everbright Securities level. The Group will further strengthen its resources for the Macro Asset Management business.
During the period under review, due to global and China market uncertainties, Hong Kong’s securities market lacked direction. However, commission income and demand in margin financing from clients for Brokerage and Wealth Managementbusiness remained stable. The investment banking business sponsored Dragon Crown Group’s Main Board listing in Hong Kong in the first half of 2011 and was actively involved in sponsoring and underwriting the IPO exercise of Everbright Bank’s H-share listing.Investment banking and securities brokerage business become a 49% owned associate of the Group from 18 May 2011 onwards. The equity sharing of profit up to 30 June 2011 entitled by the Group is around HK$19 million.
Everbright Securities, in which the Group holds a 33.33% stake, was committed to expanding its investment banking, asset management and margin financing businesses, effectively eliminating the impact of China’s rate hike during the review period. . For the first half of 2011, Everbright Securities reported a total revenue of
RMB2.95 billion. Its after-tax profits increased by 41% to RMB1.1 billion under Hong Kong Financial Reporting Standards.
During the review period, Everbright Bank, in which the Group holds a 4.51% interest, reported positive development across all its businesses with continuous improvements in asset quality. As of 30 June 2011, and based on the unaudited accounts prepared under PRC accounting standards, Everbright Bank’s total assets and loan balance stood at RMB1,662.1 billion and RMB851.1 billion respectively, representing growth of 12% and 9.2%. Profit before tax amounted to RMB12.3 billion, an increase of 33% compared to the same period last year. Non-performing loan ratio stood at 0.67%, 0.08 percentage points lower compared with the beginning of the year. The non-performing loans provisioning coverage ratio was 358.61%, an increase of 45.23% compared with the beginning of the year. It is actively preparing for the issuance of H-shares in Hong Kong during the review period.
Outlook
“In the second half of 2011, our Macro Asset Management business is expected to maintain its stable growth momentum. Fundraising for the Macquarie Everbright Infrastructure Fund (Phase 2 and its RMB-denominated fund) has already commenced, and the Everbright Ashmore China Real Estate Fund (RMB-denominated) will soon complete its fund raising exercise, which will further boost the investment funds’ scale. On the other hand, the “SOF I”, “CSOF” and venture capital funds are progressively looking forward to facilitating the listing process for remaining projects and exit opportunities which will generate rewarding cash returns. The Group will take full advantage of its strong balance sheet and ample cash reserve to develop its “Investment and Financing” business, bringing satisfactory interest income. We expect to generate more benefits to our shareholders.”
