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  • Financial Review
  • Financial Review

FINANCIAL REVIEW

Profit attributable to ordinary shareholders

In 2018, the Group achieved a net profit attributable to ordinary shareholders of HK$50,239 million, an increase of HK$6,337 million, or 14%, from the previous year.

The financial services segment recorded net profit attributable to ordinary shareholders of HK$41,704 million, an increase of 5.6% from 2017. Our banking business showed steady growth, with a year-on-year increase in net profit attributable to the bank’s shareholders of 4.6%. Our insurance business optimised its business structure and maintained rapid premium growth, with net profit increasing by 5.0%. Our security and trust businesses continued to maintain a leading position in the market, although net profit was affected by the downturn in the capital market.

The non-financial segments, benefited from higher production volumes and lower costs in the Sino Iron Project, the growth of the mental trade business driven by the effective marketing strategies as well as the improved performance of the crude oil business due to the increase in the crude oil prices, our resource and energy business turned from loss to profit, with a net profit attributable to ordinary shareholders of HK$2,102 million. The manufacturing business recorded a net profit attributable to ordinary shareholders of HK$6,008 million, an increase of 81%. This was mainly due to higher sales volumes and prices in the special steel and aluminium wheels businesses and steady growth in the robotics and intelligent equipment business. The real estate business recorded a net profit attributable to ordinary shareholders of HK$5,353 million, a year-on-year decrease of 30%,which was mainly due to a shared profit of approximately HK$2,900 million realised from the Lujiazui Project of Shanghai Ruibo Real Property Co., Ltd recorded for the previous year. Our engineering contracting business recorded a net profit attributable to ordinary shareholders of HK$2,053 million, a year-on-year increase of 19%. This was mainly due to the profit increase from EPC projects and survey and design services, a tax gain following the adjustment in the PRC’s income tax policy on overseas projects, and an increase in investment income. The profit of other businesses, such as McDonald’s, international telecommunications, environmental protection, and publishing, all grew steadily during the year.

Earnings per share and dividends

Earnings per share of profit attributable to ordinary shareholders was HK$1.73 in 2018, an increase of 14% from HK$1.51 in 2017. As at 31 December 2018, the number of ordinary shares outstanding was 29,090,262,630.

At the forthcoming annual general meeting, the Board will recommend a final dividend of HK$0.26 per share to ordinary shareholders. Together with the interim dividend of HK$0.15 per share paid in October 2018, the total ordinary dividend will be HK$0.41 (2017: HK$0.36 per share). This equates to an aggregate cash distribution of HK$11,927 million.

Profit/(loss) and assets by segment

 

 

Profit/(loss)

Year  ended 31 December

Assets as at 31 December

HK$ million

2018

2017

2018

2017

Financial services

61,695

57,579

7,067,565

6,925,076

Resources and energy

2,972

(9,484)

131,842

129,438

Manufacturing

6,686

3,524

134,882

130,381

Engineering contracting

2,057

1,729

55,432

46,127

Real estate

5,937

7,941

154,631

159,664

Others

4,097

11,045

151,071

163,835

Total

83,444

72,334

7,695,423

7,554,521

Operation management

(7,564)

(7,286)

 
Elimination (855) 48

Net profit attributable to non- controlling interests and holders of perpetual capital securities

24,786

21,194

Net profit attributable to ordinary shareholders

50,239

43,902

Profit/(loss) attributable to ordinary shareholders
Financial services

In 2018, this segment recorded a net profit attributable to ordinary shareholders of HK$41,704 million, a year- on-year increase of HK$2,198 million, or 5.6%.

CITIC Bank focused on its loan business, which contributed to a steady increase in assets. Due to efforts in pricing management, net interest margin rebounded by 0.15 percentage point to 1.94%. Asset quality was further enhanced, with the ratio of loans overdue for more than 90 days to non-performing loans decreasing by 17.0 percentage points to 92.4% from the end of the previous year. As a result, net profit attributable to shareholders of the bank recorded a year-on-year increase of 4.6%. All major businesses of CITIC Securities continued to retain their leading industry positions, but net profit fell by 18% year-on-year due to the downturn in the capital market. CITIC Prudential continued to optimise its business structure and established its differentiation advantage in marketing channel, with both renewal premiums and new premiums recording double-digit growth and an increase in net profit increasing of 5.0%. CITIC Trust continued to improve quality and efficiency, while increasing the proportion of its active management business. Trust fee income was the highest in the industry as was net profit, although net profit declined by 6.3% year-on-year due to a decrease in intrinsic equity investment income in a capital market downturn.

Resources and energy

In 2018, this business segment turned from loss to profit, recording net profit attributable to ordinary shareholders of HK$2,102 million.

The Sino Iron project achieved a substantial reduction in net loss as compared with previous year by actively promoting the measures of increasing production volume, improving product quality and reducing costs. The production volume of iron ore concentrate reached approximately 19.2 million wet metric tonnes, representing an increase of around 19% as compared with previous year, while the average iron ore grade has reached over 65%, and the FOB prices increased by approximately 16% year-on-year. The Sino Iron project did not provide for impairment this year.

Due to the higher crude oil prices and ongoing cost control measures, the profitability of the crude oil business continued to grow rapidly during the year. CITIC Metal Group recorded a year-on-year increase in net profit of HK$315 million, due mainly to a significant increase in the profit of niobium product and iron ore trading business. The Las Bambas copper mine in Peru, which is 15% owned by CITIC Metal Group, has contributed a net profit of approximately HK$226 million to the Group. The power generation business continued to provide steady cash flow.

Manufacturing

In 2018, the manufacturing business recorded a net profit attributable to ordinary shareholders of HK$6,008 million, a year-on-year increase of HK$2,690 million, or 81%. Through steady improvements in product quality and product mix together with enhanced production-marketing integration, the special steel business achieved a year-on-year increase in sales volume and sales prices of 23% and 11%, respectively, and a year-on- year increase in net profit of 88%. The newly-acquired Qingdao Special Steel and Jingjiang Special Steel have realised a turning from loss into profit, contributing a profit of approximately RMB680 million and about RMB40 million, respectively. CITIC Dicastal’s net profit increased by 18% year-on-year, with sales of more than 54 million aluminium wheels, a year-on-year increase of 5.3%, and achieved a first-place ranking worldwide for ten consecutive years. Also in 2018, CITIC Dicastal optimised its global production layout, and achieved a 65% year- on-year growth in the production volume at its American plants. At CITIC Heavy Industries, where the robotics and intelligent equipment business remained the principal source of profit, the heavy equipment business turned a profit after the loss of the previous year and new orders effective in 2018 grew by 27% year-on-year.

Engineering contracting

The engineering contracting business recorded a net profit attributable to ordinary shareholders of HK$2,053 million in 2018, an increase of HK$322 million, or 19%, over 2017. The net profit of CITIC Construction increased 13% from 2017, which was mainly attributable to a tax gain following the adjustment in the PRC’s income tax policy on overseas projects and an increase in investment income. The net profit of CITIC Engineering increased 31% year-on-year due to the rapid growth of EPC projects and survey and design services, driven by appropriate investment under the business model of PPP + Fund + EPC.

Real Estate

The real estate business recorded a net profit attributable to ordinary shareholders of HK$5,353 million in 2018, a year-on-year decrease of HK$2,307 million, or 30%, due to a share of net profit of approximately HK$2,900 million from the Lujiazui Project of Shanghai Ruibo Real Property Co., Ltd recorded for the previous year. The net profit for the current year mainly consisted of the shared profit from COLI, the sale of residential units in the Kadooria project in Hong Kong and the settlement of a land development project, CITIC Coast New Town in Shantou.

The occupancy rate for investment properties was approximately 95% as at 31 December 2018, which was comparable with preceding years.

Others

The net profit attributable to ordinary shareholders in 2018 amounted to HK$2,049 million, a decrease of HK$7,406 million, or 78%, as compared with previous year. This was mainly due to one-off revaluation gains of approximately HK$5,900 million recorded for the previous year as well as an increased share of the loss from associates such as Guoan Football Club in 2018.

The McDonald’s business in mainland China and Hong Kong recorded significant growth by expanding outlets, actively promoting delivery service as well as digital ordering and personalised products and services. CITIC Environment recorded a significant increase in net profit, which was mainly attributable to increased sales in its bio-membrane business, the growth of the water treatment business and decreased finance costs due to valuation adjustments of put options. CITIC Press maintained fast growth in its publication business. Besides, the net profit mainly came from international telecommunication business and Dah Chong Hong.