Sun Sep 15, 2019 22:01
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CKI HOLDINGS (1038)

Principal Activities

The Group’s principal activities during the year are development, investment and operation of infrastructure businesses in Hong Kong, Mainland China, the United Kingdom, Continental Europe, Australia, New Zealand and Canada.

Latest Results

The Group's profit attributable to shareholders for the 6 months ended 30-06-2019 amounted to HKD 6.34 billion, an increase of 0.0% compared with previous corresponding period. Basic earnings per share was HKD 2.3587. An interim dividend of HKD 0.68 per share was declared. Turnover amounted to HKD 18.07 billion, a decrease of 7.1% over the same period last year. (Announcement Date: 31 Jul 2019)

Business Review - For the six months ended June 30, 2019

Power Assets

The profit contribution from Power Assets was HK$1,363 million, a decline of 13% compared to the corresponding period last year. The financial performance was adversely affected by the weakness of foreign currencies against the Hong Kong dollar, and a lower contribution from the United Kingdom investment portfolio. In addition, the Hong Kong business faced reduced allowed returns under the new Scheme of Control, which commenced on 1st January, 2019. Despite lower returns than that of the last regime, the new framework will apply for 15 years, providing predictable returns on investment as well as growth opportunities during the new regulatory period.

United Kingdom Infrastructure Portfolio

The profit contribution from the United Kingdom portfolio was HK$2,490 million, a decrease of 15% from that of the same period last year. The contribution was affected negatively by a weaker pound sterling, and lower reported earnings from UK Power Networks, which ceased to recognise certain non-cash revenue commencing January this year. This has no impact on the cash earnings and distributions from UK Power Networks.

Northumbrian Water generated steady income for the Group. It was named the “World’s Most Ethical Water Company” by the Ethisphere Institute for the eighth time, and it continues to be the only water company on the list.

Both gas distribution networks – Northern Gas Networks and Wales & West Gas Networks – achieved satisfactory operational performance. In the Gas Industry Awards, the “H21” hydrogen research project, whose initiators count Northern Gas Networks and Wales & West Gas Networks and contributors to the fund include the regulator, Ofgem, won the Project of the Year Award.

At UK Rails, earnings were higher than the same period last year, and a fleet of new trains has been delivered for service commencement in July.

Australian Infrastructure Portfolio

Profit contribution from the Australian portfolio dropped by 4% year-on-year to HK$1,103 million. The decrease in profit contribution was caused by the weak exchange rate. In Australian dollar terms, the portfolio reported a 3% increase. The performance of the Australian businesses was satisfactory.

During the period under review, SA Power Networks, Victoria Power Networks, and United Energy in Victoria have been preparing proposals for the new regulatory period which will start in 2020 in South Australia and 2021 in Victoria. Plans are in place to maximise the flow of stable, regulated income, leveraging on efficiencies and synergies, while improving service levels.

Multinet Gas recorded an earnings increase, while Dampier Bunbury Pipeline reported satisfactory performance and had its credit ratings upgraded by Moody’s Investors Service from “Baa3/Positive” to “Baa2/Stable”.

Earnings at Energy Developments recorded year-on-year growth. The company achieved a significant milestone by entering into an agreement to build and own a power station to provide electricity to the Agnew Gold Mine in Western Australia under a 10-year power purchase agreement. The initiative is partly funded by the Australian Renewable Energy Agency and is one of Australia’s first power stations in a mining operation to be predominantly powered by renewable and low-carbon energy.

New Zealand Infrastructure Portfolio

The New Zealand business performed very well in the first half of 2019 – profit contribution increased 15% to HK$76 million.

During the period under review, EnviroNZ saw volume growth from commercial refuse collection, while Wellington Electricity performed steadily.

Canadian Infrastructure Portfolio

Profit contribution from the Canadian portfolio was HK$183 million, an increase of 2% from the same period last year. In Canadian dollar terms, the portfolio reported an increase of 7%.

Both Reliance Home Comfort and Canadian Midstream Assets achieved healthy performance with double-digit growth in the first half of 2019. Canadian Power Holdings, on the other hand, reported a less stellar result due to the expiry of the Mississauga plant power purchase agreement.

Continental Europe Infrastructure Portfolio

In Continental Europe, profit contribution was HK$508 million, a decrease of 14% compared to the same period last year. CKI’s Continental Europe Infrastructure Portfolio consists of three companies – ista, Dutch Enviro Energy, and Portugal Renewable Energy. The portfolio recorded mixed performance during the period under review. Operating performance of both ista and Dutch Enviro Energy were better than last year, while Portugal Renewable Energy’s financial result was impacted by lower wind resources.

Hong Kong and Mainland China Businesses

In Hong Kong and Mainland China, CKI’s portfolio recorded profit contribution of HK$266 million, a decrease of 13% from the corresponding period last year. This was caused by lower traffic revenue from the toll roads in the Mainland as well as a drop in earnings from the material businesses due to weakening demand in the Hong Kong market.

Business Outlook - For the six months ended June 30, 2019

The challenges which characterised the global economic environment in the first half of the year are showing no signs of abatement. Market uncertainties, challenging regulatory resets, and volatile exchange rates are expected to continue.

Despite such circumstances, investment opportunities still arise in the infrastructure industry. With CKI’s solid financials as well as that of our strategic partners within the CK Group – CK Asset and Power Assets – we are in a good position to selectively take on sizeable opportunities around the world. A pipeline of acquisition opportunities are being studied seriously. Nonetheless, in line with our traditionally prudent practice, we will not approach them with a “must-win” mentality.

Through the years, CKI has demonstrated a solid track record as a strong operator of infrastructure businesses. We will keep up this reputation and continue to grow our existing businesses effectively and efficiently.

We remain cautiously optimistic about the prospects for CKI given the broad geographical spread of its sound infrastructure businesses in mature economies.

Source: CKI Holdings (01038) Interim Results Announcement

Business Nature

The Group is principally engaged in the developing, investment and operation of infrastructure businesses in Hong Kong, the Mainland, United Kingdom and Australia.

Prospect

Looking forward, the opportunities in the global infrastructure industry are immense. As well as generating organic growth in its existing businesses, it will continue to pursue new investments that accord with its prudent investment criteria. CKI will also explore new corporate finance initiatives and divestments to further enhance the value of its business

Chairman
LI Tzar Kuoi, Victor
Contact Info
Company Address:
12/F, Cheung Kong Center, 2 Queen's Road Central, H.K.
Web: http://www.cki.com.hk
Quote
HSI: 27,352.69 265.06
53.70
0.30 (0.6%)
As of16:15 13 Sep 2019
Open: 53.40 52Wk High: 65.95
Day High: 53.75 52Wk Low: 51.05
Day Low: 53.15 P/E: 12.956
Prev. Close: 53.40 Yield: 4.525%
Volume: 1.31M
Mkt Cap: 141.55B
Turnover: 70.08M NAV: 42.536
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Contact CKI HOLDINGS
Company Address:
12/F, Cheung Kong Center, 2 Queen's Road Central, H.K.
Web: http://www.cki.com.hk

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