CK ASSET(01113)2024-08-29 08:30Financial Performance - Investment property revaluation profit before tax and non-controlling interests decreased by 9.5% to HKD 6,726 million in H1 2024 compared to HKD 7,576 million in H1 2023[6] - Profit attributable to shareholders decreased by 15.3% to HKD 8,603 million in H1 2024 from HKD 10,331 million in H1 2023[6] - Earnings per share decreased by 9.5% to HKD 1.91 in H1 2024 from HKD 2.11 in H1 2023[6] - Interim dividend per share decreased by 9.3% to HKD 0.39 in 2024 from HKD 0.43 in 2023[6] - Group revenue for the first half of 2024 was HKD 22,008 million, a decrease from HKD 24,605 million in the same period in 2023[110] - Profit attributable to shareholders for the first half of 2024 was HKD 8,603 million, down from HKD 10,331 million in 2023[110] - Earnings per share for the first half of 2024 were HKD 2.44, compared to HKD 2.88 in 2023[110] - Other comprehensive income for the first half of 2024 was a loss of HKD 231 million, compared to a gain of HKD 1,307 million in 2023[111] - Total comprehensive income for the period was 8,372 million HKD, compared to 11,803 million HKD in the same period last year[114] - Dividends paid to shareholders amounted to 5,688 million HKD for the 2023 final dividend[114] - Profit attributable to shareholders decreased to HKD 8,603 million in 2024 from HKD 10,331 million in 2023, a decline of 16.7%[122] - Interim dividend per share decreased to HKD 0.39 in 2024 from HKD 0.43 in 2023, a reduction of 9.3%[125] Property Development and Sales - Property sales revenue decreased compared to the same period in 2023, despite strong market response to the Blue Coast project in Wong Chuk Hang[10] - The Perfect Ten project in Singapore sold out, while sales progressed well for projects in Yau Tong and Tuen Mun[10] - The company maintains a prudent land bank policy and continues to seek quality land reserves for future development[10] - The Blue Coast residential project in Wong Chuk Hang has pre-sold HKD 10.8 billion worth of units since its launch in April 2024, with completion expected by the end of 2025[24] - Property sales revenue for the first half of 2024 was HKD 4.635 billion, a decrease from HKD 8.246 billion in the same period in 2023[22][23] - Property sales revenue decreased to HKD 4,635 million in 2024 from HKD 8,246 million in 2023, a decline of 43.8%[120] - Property development risks include rising construction costs, labor shortages, and potential delays in project completion, which could impact profitability and the ability to sell or lease properties[94] - The company may face penalties or sanctions if it fails to develop properties according to land use contracts, particularly in mainland China, where regulations on idle land are becoming more stringent[95] - Property investments are illiquid, which may limit the company's ability to sell properties quickly to raise cash[95] Property Leasing and Rental Income - Property leasing revenue increased compared to the same period in 2023, with stable rental income from the UK's Civitas social infrastructure portfolio due to inflation-linked rent adjustments[11] - Property rental income for the first half of 2024 was HKD 3.118 billion, an increase from HKD 2.862 billion in the same period in 2023[27] - Property rental revenue increased to HKD 3,118 million in 2024 from HKD 2,862 million in 2023, a growth of 8.9%[120] Hotel and Serviced Suite Business - Hotel and serviced suite business revenue and income increased in H1 2024 compared to the same period in 2023, driven by improved visitor traffic and stable occupancy rates[12] - Hotel and serviced suite business revenue increased by HKD 180 million to HKD 2.13 billion, with an average occupancy rate of 81% for hotels and 88% for serviced suites[30] - Hotel and serviced suite business revenue rose to HKD 2,130 million in 2024 from HKD 1,950 million in 2023, an increase of 9.2%[120] - Hotel industry recovery depends on global economic and tourism recovery, as well as consumer confidence, with potential impacts remaining unpredictable[97] Infrastructure and Utility Assets - Infrastructure and utility assets business recorded a revenue increase compared to the same period in 2023, supported by inflation-linked income and regulated asset bases[14] - Infrastructure and utility assets generated HKD 12.58 billion in revenue, with CK William JV contributing HKD 2.37 billion[37][39] - Infrastructure and utility assets revenue remained stable at HKD 12,576 million in 2024, compared to HKD 11,740 million in 2023[120] - Regulated infrastructure investments face challenges from lower permitted profits, energy price caps, and stricter regulatory attitudes, impacting returns[103] - Extreme weather, climate events, or geopolitical conflicts could disrupt utility networks, leading to significant repair costs and reputational risks[103] UK Pub Business - Greene King's sales revenue and income saw a slight increase compared to the same period in 2023, despite challenging market conditions in the UK[13] - UK pub business revenue rose by HKD 559 million to HKD 11.82 billion, driven by price adjustments to maintain profitability[34] - UK pub business profit increased to HKD 597 million, with the largest revenue contribution from the pub company segment at HKD 9.74 billion[35] - Revenue from the UK region increased to HKD 17,034 million in 2024 from HKD 15,737 million in 2023, a growth of 8.2%[121] - The UK pub industry faces challenges from inflation, rising costs (energy, labor, food), and geopolitical conflicts, negatively impacting consumer confidence and disposable income[98] - Supply chain disruptions due to sanctions, strikes, or pandemics could lead to revenue loss and increased costs for the company's pub business[99] - Rising operational costs, including energy, food prices, and wages, are pressuring the company's managed pubs, potentially reducing revenue and profitability[100] Share Repurchases and Acquisitions - The company repurchased 48,656,000 shares in H1 2024, with over HKD 3.5 billion used for share repurchases since 2023[9] - The company repurchased 48,656,000 shares at a total cost of HKD 1,538,294,825 from March to June 2024, and an additional 250,000 shares at HKD 7,270,000 in July 2024[21] - The company repurchased a total of 48,656,000 shares on the Hong Kong Stock Exchange for a total consideration of HKD 1,538,294,825.00 (excluding fees) during the six months ended June 30, 2024[76] - The company, along with Cheung Kong Infrastructure Holdings and Power Assets Holdings, acquired Phoenix Energy Holdings Limited for approximately GBP 312 million (HKD 3.049 billion) in March 2024[21] - The company, along with Cheung Kong Infrastructure Holdings and Power Assets Holdings, acquired UU Solar for approximately GBP 88 million (HKD 859 million) in May 2024[21] - The company, along with Cheung Kong Infrastructure Holdings and Power Assets Holdings, agreed to acquire a UK onshore wind portfolio for approximately GBP 350 million (HKD 3.506 billion) in August 2024[21] - CK William JV acquired Phoenix Energy for approximately HKD 3.05 billion, and UK Power Networks JV acquired UU Solar for approximately HKD 859 million[40] Sustainability and ESG Initiatives - The company aims to achieve BEAM Plus Platinum certification for all new commercial property projects by 2030 and has already secured LEED Platinum certifications for its properties[16] - The company is committed to achieving net-zero emissions under the Science-Based Targets initiative (SBTi) and has submitted short-term and net-zero emission reduction targets[16] - The Sustainability Committee, chaired by the Vice Chairman, oversees the Group's sustainability initiatives and provides advice on ESG-related policies and practices[74] - Climate change poses risks to the company's assets, operations, and supply chains, potentially leading to disruptions, financial losses, and regulatory challenges[89] - The company faces increasing pressure to transition to a low-carbon economy, which may lead to unpredictable changes in government policies, regulations, and consumer behavior, potentially impacting its financial condition and operational performance[90] Corporate Governance and Shareholding Structure - The company's net debt to total capital ratio was approximately 5.5% as of the interim settlement date, with credit ratings of "A/Stable" from S&P and "A2/Stable" from Moody's[18] - The company's directors and senior executives hold a combined total of 1,697,789,393 shares, representing 48.35% of the company's equity[58] - Li Ka-shing holds approximately 48.35% of the company's shares through direct and indirect interests, including trusts and family holdings[58] - The Li Ka-shing Unity Trust (UT1) holds 1,171,881,779 shares, representing a significant portion of the company's equity[60] - The Li Ka-shing Castle Trust (UT3) holds 72,387,720 shares, further consolidating the family's control over the company[61] - Li Ka-shing Unity Holdings Limited (Unity Holdco) owns all issued shares of TUT1, TDT1, and TDT2, with Li Ka-shing and Victor Li holding one-third and two-thirds respectively[61] - The Li Ka-shing Foundation holds 366,195,098 shares, with Victor Li potentially controlling over one-third of the voting rights[60] - Victor Li is a potential beneficiary of DT1, DT2, DT3, and DT4, which hold significant stakes in the company through various trusts[60][61] - Precise Result Global Limited, Jabrin Limited, and Mightycity Company Limited, all associated with Victor Li, hold 15, 2,000, and 168,375 shares respectively[59] - The company's shareholding structure is heavily influenced by the Li family, with multiple trusts and holding companies ensuring control over a substantial portion of the equity[58][59][60][61] - Li Ka-Shing and his son Li Tzar Kuoi (Victor Li) hold one-third and two-thirds of the issued share capital of Castle Holdco, respectively, which owns all issued shares of TUT3, TDT3, and TDT4[62] - TUT3 holds 84,427,246 shares of the company as the trustee of DT3[62] - Li Ka-Shing Unity Trustee Company Limited, as the trustee of The Li Ka-Shing Unity Trust, holds 1,171,881,779 ordinary shares, representing 33.37% of the company's equity[65] - Li Ka-Shing holds a total of 1,694,891,843 shares, representing 48.27% of the company's equity, including 366,195,098 shares held by the Li Ka-Shing Foundation[65][66] - The Li Ka-Shing Foundation holds 366,195,098 shares, representing 10.43% of the company's equity[65] - As of June 30, 2024, the company's issued share capital was 3,510,828,333 shares[66] - The company's board of directors consists of 9 independent non-executive directors, providing diverse expertise and perspectives[67] - The company adheres to high corporate governance standards, including anti-fraud, anti-bribery, and anti-money laundering policies[67] - The Board of Directors consists of 16 members, including 7 executive directors and 9 independent non-executive directors, with over half being independent non-executive directors as of June 30, 2024[68] - The Chairman and Managing Director roles are held by the same individual, and all major decisions are made after careful deliberation by the Board and relevant committees[68] - The company has established an internal audit mechanism to independently assess risk management and internal control systems, including ESG-related risks[70] - The Audit Committee, composed of 7 independent non-executive directors, reviewed the Group's interim report for the six months ended June 30, 2024[71] - The Remuneration Committee, chaired by an independent non-executive director, is responsible for recommending compensation policies for directors and management[72] - The Nomination Committee, primarily composed of independent non-executive directors, reviews the Board's structure, size, and diversity, and makes recommendations for director appointments[73] Financial Position and Debt Management - The company's net debt was HK56.1 billion as of the interim reporting date, an increase of HK3.79 billion in notes due April 2024 and US$250 million in notes due June 2024[42] - 38% of the company's borrowings are in HKD or USD, while 62% are in other currencies including AUD, GBP, and CNY[43] - The company redeemed USD 250 million of 0.75% guaranteed senior fixed-rate notes due 2024 under its EUR 5 billion medium-term note program on June 30, 2024[76] - Total assets increased to 400,316 million HKD as of June 30, 2024, compared to 399,436 million HKD at the end of 2023[113] - Net current assets stood at 131,524 million HKD, slightly up from 130,666 million HKD at the end of 2023[113] - Shareholders' equity reached 386,985 million HKD, up from 385,844 million HKD at the end of 2023[113] - Cash and cash equivalents decreased to 31,419 million HKD from 40,986 million HKD at the beginning of 2024[116] - Investment properties increased to 150,186 million HKD from 147,223 million HKD at the end of 2023[113] - Bank and other borrowings under current liabilities decreased to 14,877 million HKD from 17,799 million HKD at the end of 2023[113] - Net cash outflow from investing activities was 1,306 million HKD, primarily due to investments in joint ventures and property acquisitions[116] - Restricted bank deposits related to real estate development in mainland China amounted to 383 million HKD[117] Risks and Challenges - The company faces intense competition in its operating markets, including increased price competition and new market entrants, which may adversely affect market share and returns[104] - The company is expanding into new business areas and investment opportunities globally to enhance profit quality and strengthen fixed income sources, though success is not guaranteed[105] - The company may continue to pursue acquisitions if suitable opportunities arise, but faces risks such as hidden liabilities, regulatory approvals, and integration challenges[106] - The company operates through joint ventures and strategic alliances, which may face risks such as inconsistent economic interests or financial difficulties among partners[107] - Transactions with CK Hutchison Holdings Limited are considered connected transactions under Hong Kong listing rules, requiring independent shareholder approval and potentially increasing business risks[108] - The company's financial statements include forward-looking statements that involve risks and uncertainties, and actual results may differ significantly from expectations[109] - The company's business, financial condition, operating performance, and development prospects may be affected by risks such as trade protectionism, currency fluctuations, supply chain disruptions, high interest rates, inflation, geopolitical tensions, and climate risks[80] - The company operates in multiple countries and regions, including Hong Kong, Mainland China, Singapore, Europe, Australia, Canada, and the UK, exposing it to potential currency volatility risks[82] - The company uses currency swaps and maintains appropriate levels of local currency-denominated borrowings to hedge against currency risks in its investments[82] - The company's regulated businesses are subject to regulatory regimes that consider local interest rates when calculating regulated capital costs, which may affect permitted returns[81] - The company's financial and treasury income is particularly dependent on capital markets, interest rates, currency environments, and global economic and market conditions[81] - The company faces risks from local, national, and international regulations that could impact its operations, financial performance, and development prospects[83] - Economic sanctions imposed by governments and international organizations could disrupt the company's business operations, partnerships, and supply chains, potentially leading to financial losses[84] - The company is subject to data protection laws in various jurisdictions, and non-compliance could result in regulatory actions, legal costs, and reputational damage[85] - Cybersecurity risks, including fraud, attacks, and breaches, could significantly impact the company's operations, financial performance, and reputation[86] - Adoption of new or revised International Financial Reporting Standards (IFRS) may require changes to the company's accounting policies, potentially affecting its financial position and performance[87] - Social unrest, terrorist threats, and geopolitical tensions in regions where the company operates could adversely affect its business, financial condition, and performance[88] - The company's assets and operations are located in areas prone to natural disasters such as earthquakes, floods, and extreme weather, which could disrupt business and negatively affect financial performance[91] - The ongoing effects of the COVID-19 pandemic, including potential future outbreaks, could continue to impact the company's operations and financial performance, depending on the duration and severity of the pandemic[92] - Brexit has introduced significant uncertainties for the UK economy, including trade intensity, labor supply, and currency fluctuations, which may affect the company's UK-based property, infrastructure, and pub businesses[93] - Non-compliance with food safety, health regulations, or data protection laws could result in significant financial losses and reputational damage[101][102] Investments and Joint Ventures - The company invested in UK assets including Phoenix Energy Holdings Limited, UU Solar, and onshore wind power portfolio through joint ventures[9] - The company acquired 40% and 20% stakes in Phoenix Energy and UU Solar in April and May 2024, respectively, and agreed to acquire a 40