WKCDA Releases 2022-23 Annual Report Achieving Fiscal Resilience and Operational Success

The West Kowloon Cultural District Authority (WKCDA or the Authority) is proud to announce a year marked by fiscal resilience, proactive revenue generation and operational success including the opening of the Hong Kong Palace Museum (HKPM) in July 2022. The FY2022-23 financial results illustrate an effective reduction in operating deficits, a noteworthy surge in operating income, a record-high visitation, and significant strides in fundraising and business development in the face of challenging times.

Commercial and Fundraising Success

The dawn of 2023 marked a pivotal moment for WKCD. With the lifting of all anti-epidemic and social distancing measures, WKCD saw a significant resurgence in interest from both overseas and Mainland visitors. With two world-class museums, M+ and HKPM, excellent performing arts programmes and a welcoming Art Park, WKCD swiftly became a popular destination for tourists, playing a vital role in rejuvenating Hong Kong’s cultural tourism landscape. This growing interest has had a positive impact on the Authority’s business development efforts.

WKCDA’s operating income (excluding interest and investment income) has increased more than four-fold year-on-year to reach HK$553 million, of which fundraising income has grown six-fold year-on-year to reach HK$197 million as a result of WKCDA’s concerted fundraising efforts. Capitalising on the enthusiasm towards WKCD, the Authority has made significant strides in our commercial efforts. All lettable spaces in the Art Park, HKPM, and WKCDA Tower were leased out by the end of the financial year, resulting in 3.8 times increase in our commercial leasing income year-on-year. Food and beverage sales of our RDE tenants have increased by 75% year-on-year. Over 360 events were hosted by external hirers across WKCD, including some of the high-profile international events in Hong Kong. The combination of world-class cultural content and attractive open green spaces have become a dual engine driving footfall and revenue, contributing to WKCD’s increasing popularity and vibrancy.

Achieving Financial Resilience: A Review of Fiscal Performance

In the spirit of financial prudence and resilience, the Authority continued to implement rigorous cost management and revenue generation strategies during the financial year. As a result, WKCDA's underlying operating deficit (before depreciation, amortisation, and financing costs) was HK$718 million, representing 50% reduction as compared to the forecast prior to the implementation of tightening measures in 2021.

Operating Income¹

Total underlying Income³

Operating Expenses

Operating Deficit before depreciation, amortisation and financial costs

Furthermore, WKCDA’s cost recovery rate performance for FY2022-23 was noteworthy. The Performing Arts Division achieved an impressive cost recovery rate of 34%, and those for M+ and HKPM were at 46% and 44% respectively. For the WKCD venues which are operational only for a short time, their cost recovery rates confidently stand alongside those of other globally renowned and established museums, reflecting WKCDA’s strive and commitment to business development and operational efficiency.

Sustainability-Linked Loan

In April 2022, WKCDA secured a three-year, HK$4 billion Sustainability-linked Loan (SLL), the first of its kind amongst statutory bodies and arts and cultural institutions in Hong Kong. The loan syndicate comprises nine banks from diverse geographies, showcasing the banking community’s confidence in WKCDA’s development prospects and capability in fulfilling its missions. WKCDA has successfully fulfilled the environmental and social impact targets undertaken under the SLL, reaffirming WKCDA’s commitment to sustainability.

Record-High Visitations Amid Pandemic

Although the operations of WKCD were affected by the pandemic and social distancing measures in the first ten months of FY2022-23, and despite the closure of our performing arts venues and M+ until April 2022, WKCD’s arts and cultural venues welcomed around 4 million visitors during the financial year. M+, which celebrated its first full year of operation, recorded over 2.6 million visitations in FY2022-23; and HKPM, which opened to the public in July 2022, recorded close to 1 million in the financial year. WKCD’s performing arts programmes reached an audience of over 260,000 as well, demonstrating our dedication to fostering a robust cultural scene despite the challenges. The abovementioned figure has not included the visitations to the Art Park throughout the year, with tens of thousands of people visiting during festive periods.

Sustained Commitment to Nurturing Audience and Talents

WKCD remained steadfast in our mission of promoting learning and participation, as evidenced by the involvement of over 1 million people in the learning programmes offered by WKCD’s museums and over 141,300 participants in our performing arts learning programmes, many of them were students and young people. These initiatives not only expanded the audience base, enhanced the vibrancy of the local cultural scene, but also highlighted the resilience of our arts and cultural community during these challenging times.

Addressing Financial Challenges

As a self-financed cultural institution, the long-term financial strategy of WKCDA is to sustain the operation of arts and cultural facilities through incomes generated from the Hotel/Office/Residential (HOR) developments. However, while most of the arts and cultural facilities in WKCD have been opened in phases, it will take some time for the income-generating commercial facilities to be in place for various reasons. In November 2022, WKCDA awarded its first HOR package for the Artist Square Towers project with enhanced terms under the Build-Operate-Transfer (BOT) model. This is a pivotal milestone amid the economic uncertainties, allowing WKCDA to move on to the future phases of the HOR developments.

As of 31 March 2023, WKCDA’s net cash⁴ stood at HK$6.5 billion. According to the latest projection, WKCDA’s net cash would be exhausted by March 2025. In view of the stringent financial situation, WKCDA submitted a proposal to the HKSAR Government earlier this year recommending a revised HOR development strategy. WKCDA will work with the Government closely to achieve long-term financial sustainability of the WKCD project.

Future Outlook

We extend our deepest gratitude to our patrons, sponsors, members, the public and visitors from the mainland and from all around the world for their unwavering support for WKCD, which has been instrumental in fostering its continual growth and success. We also want to acknowledge the crucial role of the HKSAR Government, whose ongoing support has been instrumental to the success of the implementation of the WKCD project.

With such steadfast support, we firmly believe that the WKCD can continue to illuminate the unique character of Hong Kong as an East-meets-West Centre for International Cultural Exchange. WKCDA is firmly committed to this vision, and we eagerly anticipate another fruitful year ahead.

Annual Report

For a comprehensive understanding of WKCDA's operational success and financial performance in FY2022-23, we invite you to explore the online version of our Annual Report which has been laid on the table of the Legislative Council by the Financial Secretary today. It is available on the West Kowloon Cultural District website and can be directly accessed via the following link: www.westkowloon.hk/annual-report

¹ Excluding the accounting income to amortise the sponsorship from Hong Kong Jockey Club Charities Trust for the construction of the Hong Kong Palace Museum.
² The estimates in 2021/22 were made on the assumption of a slow and gradual recovery from the COVID-19 pandemic by September 2021.
³ Including bank interest and investment income.
⁴ Net cash is calculated as cash and bank balances less interest-bearing borrowings.

Remarks

About the West Kowloon Cultural District
The West Kowloon Cultural District is one of the largest and most ambitious cultural projects globally. Its vision is to create a vibrant new cultural quarter for Hong Kong on forty hectares of reclaimed land located alongside Victoria Harbour. With a varied mix of theatres, performance spaces, and museums, the West Kowloon Cultural District will produce and host world-class exhibitions, performances and cultural events, providing twenty-three hectares of public open space, including a two-kilometre waterfront promenade.