1 CK Hutchison - Company Profile
Principal Activities

CK Hutchison has five core businesses - ports and related services, retail, infrastructure, energy and telecommunications.

Latest Results

The Group's profit attributable to shareholders for the 6 months ended 30-06-2021 amounted to HKD 18.30 billion, an increase of 40.8% compared with previous corresponding period. Basic earnings per share was HKD 4.7464. A dividend of HKD 0.8 per share was declared. Turnover amounted to HKD 135.50 billion, an increase of 8.7% over the same period last year, gross profit margin down 1.0% to 63.8%. (Announcement Date: 05 Aug 2021)

Business Review - For the six months ended June 30, 2021

Ports and Related Services

The Ports and Related Services division handled 42.9 million twenty-foot equivalent units (“TEU”) through 288 operating berths in the first half of 2021, a 11% growth compared to the same period last year. Higher volumes across all of the regions were primarily attributable to strong global consumer demands and gradual resumption of trade flows close to pre-pandemic levels, particularly in the Mainland where year-on-year growth momentum at Yantian port continues from the second half of last year. These improvements were partly offset by no contribution from the Dammam port in Saudi Arabia as the concession expired in September 2020.

In reported currency, total revenue of HK$19,933 million, EBITDA(4) of HK$6,983 million and EBIT(4) of HK$4,769 million were 24%, 26% and 38% higher than same period last year respectively from the higher throughput as well as improved margins and continuous efforts in controlling costs.In local currencies, total revenue, EBITDA and EBIT increased 19%, 21% and 32% respectively.

In March 2021, the UK government approved Freeport East as a Freeport which includes the division’s ports in Harwich and Felixstowe. Freeport East will be developed as a hub for global trade and green energy. As a Freeport, Harwich and Felixstowe will benefit from tax reliefs and simplified customs procedures measures, which are expected to boost economic and trade activity in the region.

In June 2021, the division entered into a joint venture agreement with Shenzhen Yantian Port Group Company Limited to establish a 50/50 joint venture to construct, develop, operate and manage phase I of a container terminal with an approximate size of 120 hectares located in the eastern side of the Yantian International Container Terminals, Shenzhen with an approximately 1,470-metre quay length.

The division will continue to exercise cost efficiency measures, focus on operational safety and cautiously look for expansion opportunities that will enhance its global footprint. The pandemic spotlighted the important role port operators play in maintaining and facilitating sustainable trade flows. The division will focus on the application and use of technological innovation and digitalisation of operational processes to maintain its market leadership and enhance profitability in a sustainable manner.

Retail

The Retail division had 16,206 stores across 27 markets at the end of June 2021, a 2% increase compared to the same period last year. Customer engagement continues to be the key focus of the division with its loyalty member base continue to increase, reaching 140 million with 66% sales participation.

Following the gradual easing of the restrictive lockdowns and the significant reduction in temporary store closures in the first half of this year, as well as favourable foreign exchange translation effect, this division’s total revenue, EBITDA(5) and EBIT(5) of HK$82,621 million, HK$6,725 million and HK$4,939 million increased by 12%, 45% and 66% respectively in reported currency against the same period last year. In local currencies, total revenue, EBITDA and EBIT increased by 5%, 35% and 54% respectively.

For the Health and Beauty Segment(6) , total revenue, EBITDA and EBIT improved by 8%, 52% and 81% respectively in local currencies, reflecting the robust recoveries from the pandemic in major markets and from the successful strategic decision to drive further digital transformation in accelerating the integration of physical store portfolio and online channels.

In the Mainland, with almost all stores remained open and a steady store traffic recovery in the first half of 2021, Health and Beauty China recorded a 53% growth in EBITDA in local currency as sales were recovered through its digital channels. Health and Beauty China also continued to expand its store portfolio, with a net increase of 183 stores compared to the same period last year.

In Europe and the rest of Asia, footfall in a number of countries where the division operates was adversely impacted by lockdown measures imposed intermittently throughout the first half of 2021.The division’s major operations are in essential businesses which allowed stores to remain open during the lockdown periods. Health and Beauty operations in Europe delivered a very strong EBITDA growth of 66% in local currencies, primarily from the Benelux countries and Germany.Health and Beauty operations in Asia also recorded an EBITDA growth of 19% in local currencies, with Malaysia, Thailand and the Philippines as the key contributors amidst movement restrictions, demonstrating resilience of the businesses.

The Retail division will continue with its strategic direction in accelerating its“Offline plus Online”platform strategy to provide seamless offline and online retail experiences, stronger customer connectivity and enhance growth and profitability on a sustainable basis. Whilst the market conditions and sentiments continue to be uncertain, health and beauty products remain essential daily consumables. Acknowledging changing customer trends in favour of more sustainable products and services, the division launched several product lines and platforms to help customers to easily identify sustainable product offerings. The division also continues to embark on its“2030 Sustainability Vision”journey which sets out its long-term goals to reduce greenhouse gas emissions by 40% by 2030 and to eliminate problematic or unnecessary packaging and incorporate 20% recycled plastic content in plastic packaging by 2025.

Infrastructure

The Infrastructure division comprises a 75.67%(7) interest in CK Infrastructure Holdings Limited (“CKI”), a subsidiary listed in Hong Kong as well as 10% of the economic benefits deriving from the Group’s direct holdings in six co-owned infrastructure investments with CKI.

CKI

CKI announced a net profit attributable to shareholders under Post-IFRS 16 basis of HK$3,011 million, 5% higher than the same period last year. The performance in the first half of 2021 was impacted by the deferred tax charges arising from the revision of the UK corporate tax rates.Excluding the one-off deferred tax impact for both periods, net profit increased 13% in the first half of 2021 compared to the same period last year.

In 2021, a number of CKI’s regulated businesses in the UK and Australia have entered or are scheduled to enter new regulatory regimes. These are expected to result in lower revenues and allowable returns, reflecting the current low interest rate environment and the stringent stance taken by regulators. Nonetheless, the secure business models of CKI will continue to contribute solid revenue streams and returns. This division continues to partner with customers to deliver on net zero emissions ambitions. A particular area of leadership is in the transition to hydrogen where CKI is at the forefront of hydrogen development in gas networks in the UK and Australia.

CK Hutchison Group Telecom

Revenue, EBITDA( 8 ) and EBIT(8) of this division of HK$45,826 million (4,901 million), HK$25,623 million (2,645 million) and HK$15,996 million (1,616 million) were 7%, 72% and 106% higher than the same period in 2020 respectively, primarily due to the recognition of HK$25,259 million disposal gain(9) on the tower assets in Italy and Sweden, partly offset by a non- cash impairment of goodwill on the Group’s Italian telecommunication business of HK$15,472 million.

3 Group Europe

As at 30 June 2021, the active customer base of 3 Group Europe stands at 38.0 million, 2% lower against the same period last year mainly due to lower customer bases in both Italy and the UK, partly offset by net additions in other operations. Revenue, EBITDA(10) and EBIT(10) before one-time items mentioned above of HK$43,160 million, HK$14,772 million and HK$5,601 million were 4%, 8% and 34% lower against the same period last year respectively in local currencies. The results have been adversely impacted by the incremental tower service fees. On a normalised basis(11), EBITDA and EBIT were 5% and 31% lower year-on-year respectively in local currencies. The adverse EBITDA and EBIT reflected a 5% lower total margin mainly driven by lower customer base in Italy due to intense market competition, partly offset by disciplined spending on customer acquisition cost and operating expenses. EBIT of 3 Group Europe was further impacted by the increase in depreciation and amortisation from a higher asset base from its significant investments in IT and 5G rollouts.

3 Group Europe has continued to enhance its network capabilities which includes focusing on innovation in machine learning and AI to enable network optimisation, as well as sourcing energy efficient equipment to enhance profitability. With the performances of the operations in Italy and the UK both stabilising from various initiatives to improve margins and controlling costs as well as the gradual reopening of most European regions, 3 Group Europe will also continue its focus on capturing emerging opportunities by accelerating the rollout of 5G services in order to support meaningful recoveries in the second half of 2021.

Hutchison Telecommunications Hong Kong

HTHKH, our Hong Kong listed telecommunications subsidiary operating in Hong Kong and Macau, announced Post-IFRS 16 profit attributable to shareholders of HK$31 million and earnings per share of 0.64 HK cents. As of 30 June 2021, HTHKH had approximately 3.2 million active mobile customers in Hong Kong and Macau.

Hutchison Asia Telecommunications

Hutchison Asia Telecommunications (“HAT”) includes the Group’s telecommunication businesses in Indonesia, Vietnam and Sri Lanka. These countries are currently experiencing a devastating virus wave spread from the new variant with very low vaccination coverage.

As of 30 June 2021, HAT had approximately 60.4 million active customer accounts, 24% higher than same period last year, primarily driven by its Indonesia operation which representing 73% of the total active customer base.

Despite reporting customer base growth, total revenue and EBITDA(12) of HK$4,350 million and HK$803 million decreased 4% and 8% respectively when compared to same period last year, primarily driven by the Indonesia operation which faced aggressive pricing from other incumbents, as well as an unprecedented severity in the recent waves of the pandemic. HAT reported LBIT(12) of HK$76 million for the first half of 2021, compared to EBIT of HK$194 million in the same period last year, reflecting higher depreciation and amortisation from an enlarged asset base as a result of continuing network rollout and enhancements. In local currencies, Revenue, EBITDA and EBIT were 5%, 9% and 143% below same period last year respectively.

Finance & Investments and Others

The Group’s liquidity and financial profile remain strong. Consolidated cash and liquid investments totalled HK$190,416 million and consolidated total bank and other debts( 13 ) amounted to HK$354,701 million, resulting in consolidated net debt(13) of HK$164,285 million (30 June 2020–HK$205,875 million) and net debt to net total capital ratio(13) of 19.9% (30 June 2020–25.1%).

Following the gradual completion of the tower sales, the Group has deployed part of the tower sales proceeds amounting to approximately HK$460 million in on-market share repurchases in the first half of 2021 to reflect the underlying value of the Group. As the tower sales in Italy has also completed on 30 June 2021, the Group will continue assessing the various alternatives, including the continuation of the share repurchase plan in the second half and new investment opportunities, in order to maximise long term sustainable shareholder values.

Business Outlook - For the six months ended June 30, 2021

Global recovery from the pandemic is becoming steadier as global economic growth gathers strength supported by strong macro indicators, good progress in the reopening of major economies, as well as accommodative monetary and fiscal policies. However, the efficacy of the vaccines against new virus mutations, the new wave of infection particularly across developing countries with low vaccination rates, the effectiveness of policy support to facilitate the transition back to normalcy and the associated inflationary risks and supply constraints from subdued mobility caused by the pandemic, continue to pose risks and uncertainties ahead.

Since the start of the pandemic, the Group has maintained its resilience and agility in responding to the evolving market dynamics. From the successful execution of corporate transactions at opportune market junctures to the swift adaptation of operational strategies to changing business environment, such as digitalisation in both the Ports and Telecommunications divisions and the“Offline plus Online”platform strategy of the Retail division, the Group has maintained a steady course through the recovery. Together with a well-disciplined and prudent financial, liquidity and cash flow management, and increased emphasis across all core businesses on sustainability, barring any unforeseen circumstances, the Group should be able to continue on its current growth trajectory and expects to deliver a solid performance for the full year in 2021.

Source: CK Hutchison (00001) Interim Results Announcement
Chairman
LI Tzar Kuoi, Victor
Issued Capital (shares)
3,835
Par Value
HKD 1
Market Capitalisation
213,583,571,650
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2016 Netquity Financial Data Limited All rights reserved.
Updated : 2022/01/26 16:01:38