Profits plunge at Li Ka-shing’s flagships Hutchison and CK Asset as they run aground after 12 full months of the coronavirus pandemic
- CK Hutchison’s net profit fell 27 per cent to HK$29.1 billion last year, while CK Asset’s underlying profit declined 32.5 per cent to HK$19.34 billion
- CK Asset unveils US$2.2 billion deal to acquire four European infrastructure assets from the tycoon’s Li Ka Shing Foundation and a share buy-back programme
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.
Revenue declined 8 per cent to HK$403.8 billion, a second consecutive annual decline.
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.
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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”.
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.
