CK Hutchison Holdings and CK Asset Holdings, the listed flagships of billionaire Li Ka-shing, reported sharply lower annual profits as economic disruptions caused by the coronavirus pandemic took a toll on their retail, ports, hotel and property operations.
CK Hutchison, the conglomerate with businesses spanning from container ports, retailing to telecommunications and energy, said net profit fell 27 per cent to HK$29.1 billion (US$3.7 billion) for 2020. It was the first profit decline since its restructuring in 2015, as Europe, from where it derived 78 per cent of its operating profit last year, saw steep economic decline.
However, the profit was in line with the HK$29.4 billion consensus estimate by 10 analysts polled by Bloomberg.
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Revenue declined 8 per cent to HK$403.8 billion, a second consecutive annual decline.
“[As] CK Hutchison’s cash flows are very good with a low debt leverage, we will certainly seek investment opportunities, especially businesses with stable cash flows,” Victor Li Tzar-kuoi, CK Hutchison’s chairman and the eldest son of Li Ka-shing, told reporters on Thursday.
Both flagships will consider acquisitions in countries that “have clear rule of law and which are safe for our colleagues to travel to”, he added.
The elder Li, Hong Kong’s richest man according to Forbes’ latest ranking, continues to serve as senior adviser to CK Hutchison and CK Asset since stepping down as chairman in May 2018.
CK Hutchison booked its share of impairment - HK$18.7 billion - from minority-owned Husky Energy, the listed Canadian energy company that merged with Toronto-listed Cenovus Energy early January. Husky suffered a loss of C$10 billion (US$8 billion) after crude oil prices crashed and demand for motor fuel declined amid the pandemic.
Operating profit at CK Hutchison’s retail operations fell 15 per cent as the public health crisis forced store closures and affected foot traffic. A slowdown in global trade cut volumes at its ports by 3 per cent last year, while operating profit fell 19 per cent.
“Despite the pandemic, our retail volume has seen year-on-year growth in last year’s second-half, helped by our online channel,” said group co-managing director Canning Fok Kin-ning, adding container throughput has improved since the fourth quarter.
CK Asset, Hong Kong’s second biggest property developer by market capitalisation, reported a 32.5 per cent decline in underlying profit to HK$19.34 billion last year.
Revenue from recognised property sales last year plunged 39.7 per cent to HK$38.67 billion. In particular, sales in Hong Kong sank 82.1 per cent to HK$8.94 billion. The pandemic saw the city’s economy, from where CK Asset derived 22.6 per cent of its revenue, shrink 6.1 per cent last year - the sharpest annual contraction on record.
Victor Li, however, remained confident, saying the local property market was expected to remain stable and resilient over the medium and long term amid low interest rates and unfaltering demand. He said the developer plans to launch three new property projects this year. Including leftover stock, 2,400 units could be on offer for over HK$20 billion.
Revenue from hotels and serviced apartments fell by half to HK$2.06 billion last year, as the hotel sector in Hong Kong was severely hit by the Covid-19 pandemic.
Average occupancy at its Harbour Grand, Harbour Plaza hotels and resorts stood at 20.1 per cent last year.
“Based on the [experience] last year, for hotels, not making losses is already good performance,” Victor Li said. He was optimistic that when the border reopens, there will be “revenge spending in tourism” as “many people want to travel”.
CK Asset also said that it had agreed to buy three UK power, natural gas and water distribution projects and one waste-to-energy project in Holland from Li Ka Shing Foundation for HK$17 billion by issuing 333 million new shares at HK$51 each - 8.4 per cent higher than Thursday’s closing price. The deal does not require minority shareholders’ approval.
To offset the potential dilution to existing shareholders’ stakes from the acquisition, CK Asset will offer to buy 333 million from minority shareholders by open tender at HK$51 each. It plans to buy from the open market the same number of shares that will not be tendered by minority shareholders at no higher than HK$51.
The foundation will guarantee that the assets will distribute not less than HK$910 million in cash to CK Asset this year and next.
CK Hutchison declared a final dividend of HK$1.7 a share, 26 per cent less than HK$2.3 in 2019. CK Asset declared a final dividend of HK$1.46 a share, 7.6 per cent lower than in 2019.
Ahead of the results, CK Hutchison’s shares closed 1.4 per cent higher at HK$62.9, while CK Asset rose 2.5 per cent to HK$47.05.
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