CKH HOLDINGS(00001) Company Profile
    Company Profile  
  Stock Name CK Hutchison  
  Listing Date 1972-11-01  
  Sector Conglomerates  
  Chairman LI Tzar Kuoi, Victor  
  Par Value 1  
  Total Issued Capital 3.856B  
  Market Cap 291.917B  
  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 year ended 31-12-2018 amounted to HKD 39.00 billion, an increase of 11.1% compared with previous corresponding period. Basic earnings per share was HKD 10.1109. A final dividend of HKD 2.3 per share was declared. Turnover amounted to HKD 277.13 billion, an increase of 11.5% over the same period last year, gross profit margin up 1.2% to 60.5%. (Announcement Date: 21 Mar 2019)

Business Review - For the year ended December 31, 2018

Ports and Related Services

The ports and related services division handled throughput of 84.6 million twenty-foot equivalent units (“TEU”) through 288 operating berths in 2018, flat against 2017. Volume improvements primarily in ports in Asia offset declines in Hong Kong and Mainland China as well as in Panama. Total revenue, EBITDA and EBIT of HK$35,175 million, HK$13,392 million and HK$8,726 million increased 3%, 7% and 6% against last year respectively, driven by the growth in certain Asian ports, improved performance in Rotterdam, as well as the gain arising from the disposal of the Group’s entire interest in Shantou International Container Terminals during the year, partly offset by the lower contribution from the Mainland and Panama.

The impact of uncertainty surrounding trade disputes was marginal in 2018. However, the outlook for 2019 is unclear, particularly as regards to the Mainland ports. Overall the division’s geographical diversity, particularly in Asia, leaves it in a good position to respond to any meaningful supply chain shifts that may eventuate by providing services in neighbouring country ports.

Retail

The retail division had 14,976 stores across 24 markets at the end of 2018, a 6% increase compared to last year. Total revenue, EBITDA and EBIT of HK$168,991 million, HK$16,164 million and HK$13,078 million increased by 8%, 9% and 8% respectively with all subdivisions reporting solid growth and favourable foreign currency translation impacts.

Overall, the Health and Beauty segment reported total sales growth of 10% from a 6% increase in store numbers and a 2.1% growth in comparable store sales. EBITDA and EBIT growth were 9% and 7% respectively in 2018. Health and Beauty operations in Asia in particular contributed very strong growth with a 20% increase in EBITDA arising from a 10% increase in store number and a comparable store sales uplift of 7.1%. Health and Beauty China continues to be the major earnings contributor and reported a 7% growth in EBITDA and a continuing healthy EBITDA margin of 19%. Health and Beauty operations in Europe also delivered another solid performance with EBITDA growth of 6%.

The Health and Beauty division has continued to expand its online and offline customer community, which includes 132 million loyalty members. In addition to enhancing store formats and adding digital and delivery capabilities to be directly competitive with online players, the ASW Group are increasingly able to personalise customer experiences and develop exclusive products and shopping experiences as a direct response to the desires of their customers.

Infrastructure

CK Infrastructure Holdings Limited (“CKI”), the Group’s 75.67%1 subsidiary listed in Hong Kong, recorded net profit attributable to shareholders of HK$10,443 million, an increase of 2% from last year. Excluding the one-off items recorded in 2017, the increase in underlying business profit contribution was 13%, mainly due to the full year contribution from the businesses acquired during 2017.

In October 2018, the Group completed the divesture of an aggregated 90% economic benefits in its direct interest in the six co-owned infrastructure investments for a cash consideration of HK$21.6 billion under the Economic Benefits Agreements entered with CK Asset Holdings Limited, CKI and Power Assets Holdings Limited.

Husky Energy

Husky Energy (“Husky”), the Group’s associated company listed in Canada, announced net earnings of C$1,457 million in 2018, 85% above 2017 net earnings of C$786 million. Although year on year production volumes were reduced and oil prices declined sharply in the last quarter of 2018, Husky was able to benefit from its integrated business model and capture strong margins in the Infrastructure and Marketing segment using its committed export capacity on the Keystone pipeline, as well as contributions from higher realised margins for Upgrading operations and growth in the Asia Pacific region.

Average production in 2018 was 299,200 barrels of oil equivalent per day (“boe/day”), a 7% decrease when compared to last year, mainly due to lower production in Western Canada subsequent to the disposition of certain low margin legacy assets in 2017, expiry of Husky’s participation in the Wenchang contract in late 2017, FPSO vessel suspension and maintenance in Atlantic, as well as reduction of heavy crude oil production from natural declines and in response to the widening of the light/heavy oil differentials during the year. The reduction was partly offset by higher production in Asia.

With the mandatory oil production curtailments imposed by Government of Alberta in December 2018, 2019 production level is expected to be in the range of 290,000 – 305,000 boe/day. Husky is committed to maintaining safe and reliable operations and capital investment disciplines, as well as increasing focus in its core heavy oil projects and Downstream assets in the integrated business model. Concurrently, Husky’s balance sheet has continued to improve with net debt to funds from operations improving from below 0.9x in 2017 to approximately 0.7x in 2018. Husky’s 2018 full year dividend amounted to C$0.45 per common share, representing a 500% increase from C$0.075 in 2017.

b>3 Group Europe

As at 31 December 2018, 3 Group Europe’s active customer base stands at 42.9 million, a 4% drop against last year mainly from a lower Wind Tre base due to intense market competition, partly offset by higher customer acquisition in Sweden, Denmark, Austria and Ireland.

3 Group Europe’s revenue, EBITDA and EBIT of HK$78,411 million, HK$28,761 million and HK$17,663 million were 11%, 18% and 7% higher against last year respectively, reflecting primarily the accretive contribution from the additional 50% share in Wind Tre acquired in September 2018. 3 Group Europe continued to report healthy growth in EBITDA margin from 41% last year to 43% in 2018 and maintained a prudent stance towards spending on spectrum licences and network expansion. All 3 Group Europe operations continued to deliver positive EBITDA less capital expenditure and spectrum licences in 2018.

Hutchison Telecommunications Hong Kong

Hutchison Telecommunications Hong Kong Holdings (“HTHKH”), our Hong Kong listed telecommunications subsidiary operating in Hong Kong and Macau, announced profit attributable to shareholders of HK$404 million and earnings per share of 8.38 HK cents. As of 31 December 2018, HTHKH had approximately 3.3 million active mobile customers in Hong Kong and Macau.

Hutchison Asia Telecommunications

As of 31 December 2018, Hutchison Asia Telecommunications (“HAT”) had an active customer base of approximately 49.8 million, which represents 34% decrease compared to last year, primarily due to the reduction in Indonesia’s customer base from the government-imposed subscriber registration which resulted in a significant number of disconnections of multi-SIM users.

HAT reported revenue, EBITDA and EBIT of HK$8,220 million, HK$1,028 million and HK$321 million respectively, representing 7%, 84% and 42% increase compared to 2017, primarily driven by better operating performances in Indonesia. Despite the drop in active customer base, Indonesia operation reported revenue and margin growth through focusing on higher margin customers, promoting recharge activities and improving distribution strategies. This is partly offset by the margin decline in Vietnam as a result of strong competition, aggressive pricing in the market and delays in network rollout. EBITDA growth was partly offset by higher depreciation and amortisation with the continued network rollout and enhancements in Indonesia and Vietnam, as well as additional amortisation of the new spectrum licences in Indonesia.

In November 2018, the Group completed the acquisition of Etisalat Lanka and now holds 85% interest in the enlarged Sri Lanka telecommunication business.

Business Outlook - For the year ended December 31, 2018

Uncertainties in trade disputes and Brexit outcome, fluctuations in commodity and currency prices and expectation of slower growth in major economies are posing headwinds and heightening risks to global economic prospects. Although there are moderate signs of stability during the first quarter of 2019 ranging from lower unemployment rates to more benign monetary policy to potential easing of major trade disputes, considerable uncertainties in economic and trade conditions will likely persist through the year.

Resilience, diversity and strong financial fundamentals continue to be the key strengths of the Group for achieving robust earnings and cash flow growth without compromising financial stability and strength. Prudent capital management of all investment activities, strict financial management, as well as a healthy liquidity and debt profile which supports its current investment grade ratings, all continue as the core disciplines and strategic directions of the Group and I am cautiously optimistic about the Group’s future prospects.

Source: CK Hutchison (00001) Annual Results Announcement
 

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Last Update:5/21/2019
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