MANAGEMENT DISCUSSION & ANALYSIS REVIEW OF OPERATIONS Underlying Profit Movement in HK$M Underlying Profit 12,000 +116 -248 11,570 +2,755 +241 10,000 8,706 8,000 Underlying profit Increase in losses in 2022 from property 6,000 trading Increase in profit Decrease in losses 4,000 from divestment from hotels Increase in profit Underlying profit 2,000 from property in 2023 investment 0 2023 2022 Our reported profit attributable to shareholders in 2023 was In Hong Kong, the retail portfolio has significantly HK$2,637 million, compared to a profit of HK$7,980 million recovered, following the lifting of all travel restrictions and in 2022. There was a fair value loss on investment pandemic related control measures, together with the properties (after deducting non-controlling interests) of investment in marketing, digital and loyalty initiatives. HK$4,401 million in 2023, compared with a fair value gain Despite a weak office market (reflecting subdued demand on investment properties (after deducting non-controlling and increased supply), the office portfolio in Hong Kong interests) of HK$1,573 million in 2022, principally due to has proved to be resilient with solid occupancy, as a result the decrease in the fair value gain on the retail investment of the high sustainability standards of the office buildings. properties in the Chinese Mainland and the fair value loss In the Chinese Mainland, foot traffic improved significantly on the investment properties under development (as and retail sales strongly exceeded pre-pandemic levels opposed to a fair value gain for 2022). for most of our malls, after the COVID-19 associated Underlying profit attributable to shareholders (which restrictions were lifted. principally adjusts for changes in fair value of investment In the U.S.A., retail sales and gross rental income were properties) increased by HK$2,864 million from HK$8,706 strong. million in 2022 to HK$11,570 million in 2023. The increase The small underlying loss from property trading in 2023 principally reflected the profit on disposal of certain office was primarily a result of sales and marketing expenses floors in Hong Kong. incurred for several residential trading projects. Recurring underlying profit (which excludes the profit from The hotel businesses in Hong Kong and the Chinese divestment) was HK$7,285 million in 2023, compared with Mainland recovered strongly following the lifting of HK$7,176 million in 2022. COVID-19 measures and the full reopening of the border. Recurring underlying profit from property investment There was solid performance in the U.S.A. hotels. increased in 2023. This mainly reflected higher retail rental income from Hong Kong and the Chinese Mainland, partly offset by lower office rental income from Hong Kong. 30