2023 2024 12,000 2,000 4,000 6,000 8,000 10,000 0 -3,996 -625 -79 -102 6,768 11,570 HK$M Movement in Underlying Profit Underlying profit in 2023 Decrease in profit from divestment Decrease in profit from property investment Increase in loss from property trading Increase in loss from hotels Underlying profit in 2024 30 MANAGEMENT DISCUSSION & ANALYSIS REVIEW OF OPERATIONS Underlying Profit Our reported loss attributable to shareholders in 2024 was HK$766 million, compared to a profit of HK$2,637 million in 2023. There was a fair value loss on investment properties (after deducting non-controlling interests) of HK$6,299 million in 2024, compared to HK$4,401 million in 2023, mainly arising from the Hong Kong office portfolios for both years. Underlying profit attributable to shareholders (which principally adjusts for changes in fair value of investment properties) decreased by HK$4,802 million from HK$11,570 million in 2023 to HK$6,768 million in 2024. The decrease primarily reflected the substantial profit arising from the disposal of certain office floors in Hong Kong in 2023, and a reduction in profit from the sale of car parking spaces in Hong Kong in 2024. Also, there were higher net finance charges (due to higher borrowings) and a reduction in rental income from Hong Kong office portfolios. Recurring underlying profit (which excludes profit from divestment) was HK$6,479 million in 2024, compared to HK$7,285 million in 2023. Recurring underlying profit from property investment decreased in 2024. This principally reflected lower office rental income from Hong Kong (partly due to the loss of revenue arising from the disposal of nine floors of One Island East in December 2023). In Hong Kong, office market remained difficult. Weak demand, high vacancy rates and new supplies continued to exert downward pressure on office rent. Despite these challenges, the occupancy of the office portfolio remained steady and outperformed the relevant submarkets. The performance of retail portfolio was soft. Trade mix improvement, marketing campaigns and loyalty programme initiatives were continuously and actively carried out to attract local customers and tourists, so as to offset the negative impact of outbound travel and the changing tourist spending behaviour. In the Chinese Mainland, the performance of our retail portfolio was stable. Retail sales declined in 2024 (compared with a strong rebound in 2023 following the lifting of pandemic-related restrictions) but the overall foot traffic increased notwithstanding the increase in outbound travel. In the U.S.A., retail sales and gross rental income increased compared to 2023, primarily due to an improved tenant mix and higher opening rate. The underlying loss from property trading in 2024 was primarily a result of sales and marketing expenses incurred for several residential trading projects which will be launched in the next few years. The speed of recovery of hotel businesses in Hong Kong was slower than anticipated, while the performance of the hotels in the Chinese Mainland was relatively stable. Performance of the managed hotel in the U.S.A. was strong.