Everbright (HKSE: 0165.HK) announces annual results for FY2008
Business Related 26 Mar 2009
| Press Release |
To: Business Editor
26 March 2009
Everbright (HKSE: 0165.HK) announces annual results for FY2008
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Persistently pursues “3+2 Macro Asset Management” strategy
Maintains robust financial standing
• Pursued “3+2 Macro Asset Management” strategy and continued to expand foundations of Hong Kong’s operations
• Bank loan at a negligible level while cash on hand amounted to HK$4.4 billion
• Given the lack of exceptional income items as in 2007, profit attributable to shareholders decreased 80% to HK$1.015 billion, earnings per share reduced 80% to HK$0.639
• Exclude non-operating factors and associates’ contributions, core operations (i.e. Hong Kong operations) reported profit after tax of HK$900 million, a slight drop of 11%
• The Board of Directors recommends a final dividend of 12 HK cents per share, together with the interim dividend of 8 HK cents, total dividend grew 100% to 20 HK cents
China Everbright Limited (“Everbright” or the “Group”; stock code: 165) today announced its annual results for the year ended 31 December 2008. The Group’s total turnover amounted to HK$4.14 billion, a decrease of 10% from the last fiscal year; profit attributable to shareholders amounted to HK$1.015 billion, representing a decrease of 80%; shareholders equity amounted to HK$13.2 billion, representing a decrease of 19%; earnings per share were HK$0.639.
Excluding the gain of HK$930 million on deemed disposal of interests and equities dilution from Everbright Bank and Everbright Securities in 2007, plus the reduction of share of associates’ profits from HK$2.9 billion to HK$480 million, profit after tax of the Group’s core business (i.e. Hong Kong operations) amounted to HK$900 million, a slight decline of 11% from 2007.
Everbright said, “The financial markets experienced rapid deterioration in 2008 as a result of the global financial turmoil. Despite this economic volatility, the Group maintained a stable development during the year owing to the sound management of its Board of Directors and the company-wide commitment to pursue its defined strategies and adopt a cautious approach in operations and risk management.”
Operations Review
Everbright said, “Against the backdrop of the challenging market sentiment, the Group continued to adhere to its ‘3+2 Macro Asset Management’ strategy to strengthen direct investment, asset management and asset investment as the major business drivers, while effectively managing the fee-based business of investment banking and brokerage to consolidate the foundation of Hong Kong’s operations. During the year under review, our asset investment division achieved remarkable progress. In addition, our pragmatic and cautious approach to minimize market exposure and to maintain negligible level bank loan and capital-rich financials, provided a solid foundation for our future expansion.”
The Direct Investment Division locked in profits and recovered a large amount of equity in early 2008 as a result of the timely disposal of some of the investments held by its private equity fund “Seabright China Special Opportunities (I) Limited” (“SOF I”), while the remaining investment projectsmaintained good operations. The other two private equity funds “China Special Opportunities Fund, L.P.” (“CSOF”) and“Parallel Investment Fund” remained at their investment period. While continuing
to identify good investment opportunities, the investment team meticulously evaluated the risk factorsof each investment opportunity, aiming to evade market risk. As a result, the team did not make any new investment for the year under review. In 2008, the venture capital fund in joint venture with Zhongguancun, Beijing and another venture capital firm based in Shenzhen explored various market opportunities and invested in three projects. As of 31 December 2008, total fund raised under Direct Investment’s management amounted to HK$1.79 billion.
Our hedge fund “China Everbright Dragon Fund” (“Dragon Fund”), which is managed by the Asset Management Division, suffered from the ongoing market downturn and recorded a relatively significant loss in the first half of 2008 but broke even during the tougher second half of the year. As of 31 December 2008, the Fund’s rate of return was -23.5%.
The Group established Asset Investment Division in 2008, further expanding its asset investment in areas such as real estate, energy and infrastructural establishment in Mainland China. In October 2008, the Group acquired a 51% stake in ALAM (later renamed as “Everbright ALAM”), thereby successfully establishing an investment and management platform for real estate projects in China. Everbright ALAM currently has a total of US$110 million worth of assets for two real estate
investment projects under its management, and has established offices in both Beijing and Hong Kong.
The Investment Banking Division successfully sponsored the listing of Vitar International Holdings Limited and Strong Petrochemical Holdings Limited on the Main Board of the Stock Exchange of Hong Kong Limited during the second half of 2008. During the year, the division also undertook the underwriting and placing functions of 12 corporate exercises and acted as the financial advisor for 21 projects.
The Brokerage and Wealth Management Division opened a new securities trading and wealth management branch in Hung Hom to provide more convenient service for our clients.
As the necessary enhancement for the Group’s return on capital, the Group’s Strategic Investment has brought significant economic benefits over the past decade. In view of the market conditions and the industry outlook of its investment enterprises, the Group reduced its investment portfolio size during the year and effectively mitigated the impact from the drop in return from its other businesses.
The income generated by the securities industry fell sharply in comparison to the previous year. Against such a backdrop, the total annual income of Everbright Securities Company Limited, a 39.31% associated company of the Group, amounted to RMB4.83 billion and the profit after tax of RMB1.19 billion was recorded in accordance with the Hong Kong Financial Reporting Standards, a decrease of 76% from last year. In 2008, the market share of Everbright Securities’ brokerage business (securities and fund trading) was 3.29%, ranked 9th in the industry. Everbright Securities obtained three business qualifications in 2008 — the Qualified Domestic Institutional Investor (QDII),the Stock, Index and Futures Introducing Brokers (IB) and the Pilot Direct Investment Business. The margin financing and short-selling business also passed the networking trial organised by the China Securities Regulatory Commission. Meanwhile, Everbright Securities was rated as a “Category A Grade AA” brokerage house in the Mainland, which is presently the highest rating for brokerage houses in Mainland China. On 30 June 2008, Everbright Securities’ A-share listing application was successfully approved by the China Securities Regulatory Commission and Everbright Securities has become the first brokerage house permitted to launch an IPO in Mainland China over the past five years.
Everbright Bank, whose 6.23% interest is held by the Group, disposed of its previous non-performing assets on a wholesale basis and successfully offset its accumulated losses. The ongoing developments of various businesses under the Everbright Bank were on track with the quality of assets continuing to improve. According to the unaudited accounts based on the Mainland’s accounting standards, total assets of Everbright Bank amounted to RMB851.8 billion as at the end of 2008 with a loan balance of RMB468.5 billion, representing a year-on-year growth of 15.2% and 12.3% respectively. After-tax profit increased 45.2% to RMB7.32 billion. The balance of non-performing loans decreased to RMB9.4 billion while the non-performing loan ratio stood at 2.0%, a year-on-year decline of 2.49 percentage points and the credit provision increased by 58.5% to 150%. The IPO application was formally submitted to the regulatory authorities in early June with acknowledgement of receiving the application and is subject to approval from the regulatory authorities.
The Group attached even greater importance to risk management by creating the position of “Chief Risk Officer”, responsible for monitoring risks and directly accountable to the audit and risk management committee of the Board. The Group spares no effort to attract and retain high-caliber talent and has reorganized the staff structure during the year to cope with its business expansion plan, introducing professionals of international vision, while maintaining a downward trend in the overall staff turnover rate.
Outlook
Everbright said, “Following the completion of the business integration over the past five years, Everbright has successfully developed a scalable business foundation for Hong Kong’s operations. We will continue to adhere to our “3+2 Macro Asset Management” strategy to consolidate Hong Kong operation’s development. The Group has implemented effective risk management and successfully coped with market changes and challenges in 2008. The operation philosophy of the management and the capabilities of the management team proved their worth amid the volatility of the markets. Our excellent cash flow of as high as HK$4.4 billion and solid financial strengths provided superior opportunities for our expansions amid market downturn. It is expected that the new business stream such as Asset Investment will generate rewarding returns and growth driving forces. In addition, as the economic development and the opening-up of the domestic financial industry in China continue, we are confident that more business opportunities will be presented to theGroup and shareholders will enjoy a better return on investment.”
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