Annual Report 2016
39
Managemen t D i s cu s s i on and Ana l y s i s
Department stores
In FY2016, segment contributions from the department stores amounted to HK$205.0 million, down 33.3% year-on-year. This
was primarily attributable to competition from e-commerce and shopping malls, increasingly diverse consumer demands and
rising operating costs in the context of slower economic growth in China, which had continued to affect the business
environment of the department store sector in Mainland China.
As at 30 June 2016, NWDS operated and managed a total of 39 stores and two shopping malls spreading across 21 cities in
Mainland China with total GFA in excess of 1.6 million sq m.
Others
In FY2016, other businesses reported segment contributions of HK$233.2 million in a turnaround to profit, which was mainly
attributable the increase in dividend income.
Other gains, net
Net other gains for FY2016 amounted to HK$6,255.8 million, down 57.6% year-on-year.
For FY2015, contributions represented mainly disposal gain on the partial disposal of hotel assets in Hong Kong. For the year
under review, contributions represented mainly from the disposal gain of five property projects held by NWCL in Mainland
China located in Haikou, Chengdu, Guiyang, Wuhan and Huiyang.
Changes in fair value of investment properties
The Group reported a fair-value change of HK$307.3 million for FY2016 in its investment properties despite numerous
unfavourable factors denting the overall performance of Hong Kong’s retail market during the year under review, in addition
to the stable performance of its investment properties in Hong Kong and Mainland China as a whole and the solid market
prospects in both Hong Kong and Mainland China.
Taxation
Taxation charge for FY2016 amounted to HK$6,423.7 million, up 50.6% year-on-year, reflecting mainly a higher tax expenses
and land appreciation tax incurred by NWCL following the disposal of five property projects in Mainland China located in
Haikou, Chengdu, Guiyang, Wuhan and Huiyang during the year.
Liquidity and Capital Resources
The Group’s debts were primarily denominated in Hong Kong dollar and Renminbi. In respect of the Group’s operations in
Mainland China, the Group maintains an appropriate level of external borrowings in Renminbi for natural hedging of Renminbi
attributed to those projects. The Renminbi exposure of the Group is mainly derived from the translation of non-current
assets and liabilities of the subsidiaries, associated companies and joint ventures in Mainland China with functional currency
of Renminbi and the Renminbi deposits held for future development costs to be expended to Hong Kong Dollar. As at 30 June
2016, the translation of non-current assets and liabilities of subsidiaries, associated companies and joint ventures with
functional currency other than Hong Kong Dollar to Hong Kong Dollar by using exchange rates at that day resulted a loss of
HK$5,937.7 million was recognised in equity. Apart from this, the Group does not have any material foreign exchange
exposure.
The Group’s borrowings were mainly arranged on a floating rate basis. The Group used interest rate swaps and foreign
currency swaps to hedge part of the Group’s underlying interest rate and foreign exchange exposure. As at 30 June 2016, the
Group had outstanding derivative instruments in the amounts of HK$5,800.0 million and US$600.0 million (equivalent to
approximately HK$4,662.0 million). As at 30 June 2016, the Group had outstanding foreign currency swap contracts in the
amounts of HK$387.5 million and US$347.6 million (equivalent to approximately HK$2,700.9 million).
