The Group has diverse capabilities with principal activities encompassing property development and investment, hotel and serviced suite operation, property and project management, investment in infrastructure and utility asset operation and aircraft leasing.
The Group's profit attributable to shareholders for the 6 months ended 30-06-2019 amounted to HKD 15.40 billion, a decrease of 38.5% compared with previous corresponding period. Basic earnings per share was HKD 4.096. An interim dividend of HKD 0.52 per share was declared. Turnover amounted to HKD 34.01 billion, an increase of 41.0% over the same period last year, gross profit margin down 2.5% to 57.0%. (Announcement Date: 01 Aug 2019)
Business Review - For the six months ended June 30, 2019
CK Asset Holdings Limited’s results for the first half of 2019 were in line with expectations, reflecting solid performance by its businesses. By adhering to its prudent strategy of achieving asset growth through improving quality earnings, the Group continued to enhance its property business and explore global opportunities to strengthen the recurrent income base by further expansion of its local and overseas business portfolio. Ample liquidity and solid financial fundamentals allow the Group to maintain strategic flexibility and to pursue quality investments to generate stable returns for its shareholders.
The macro economic and political environment remained challenging during the period under review. Through diversification and globalisation, the Group has enhanced the quality of its portfolio and remained resilient to market volatility.
The property market in Hong Kong remained stable for the first half of 2019, largely attributable to the constant demand for residential properties and prospects of a U.S. interest rate cut. Contracted sales of properties during the period amounted to over HK$10 billion and a satisfactory increase in property sale contribution was recorded. The Group’s new property development projects in Wong Chuk Hang, Siu Sau in Tuen Mun and Yau Tong are progressing well as scheduled. Market conditions on the Mainland generally remained steady. Long-term regulatory mechanism of the Central Government supported healthy real estate market development.
Revenue from property rental was slightly less than that of last year whereas contribution from property investment remained stable. Loss of rental income resulting from the commencement of the Hutchison House redevelopment program was offset by the rental income contribution from the commercial property at 5 Broadgate, London which was acquired by the Group in June 2018. The new Hutchison House will bring positive momentum to the Group’s investment property portfolio and will be a landmark of modern Grade A office building in Central, while the soon to be completed OP Mall in Tsuen Wan will become one of the largest shopping malls along the West Rail Line. The Group’s recurrent income base will be strengthened by the increase in total floor area of investment properties following the completion of these projects.
Hotel and Serviced Suite Operation
Inbound tourism continued to improve in the first half of 2019. Contribution from the Group’s hotel and serviced suite operation was similar to that of the same period last year. The addition of a total of approximately 1,200 rooms from the new Hotel Alexandra in North Point and the expansion program of Harbour Grand Kowloon in Hung Hom will enlarge the hotel portfolio. The Group’s hotel and serviced suite portfolio will comprise approximately 15,000 rooms.
Infrastructure and Utility Asset Operation
The Group’s infrastructure and utility asset operation continued to perform solidly for the first half of 2019, and is a key contributor of steady recurrent income to the Group. CK William Group in Australia contributed HK$816 million from its businesses comprising electricity distribution, gas transmission and distribution, as well as the provision of electricity generation solutions for remote customers. Reliance Home Comfort contributed HK$500 million from its building equipment and services business in Canada. ista contributed HK$856 million from its fully integrated energy management services business with Germany as its main market. The economic benefits of infrastructure businesses received by the Group under an economic benefits agreement contributed HK$370 million. The Group will continue to explore global infrastructure and utility asset and related investment opportunities, with high predictability of revenue, to strengthen quality cash flows and enhance the overall portfolio value.
In the first half of 2019, aircraft investment demand continued to be buoyant. While this environment provided great support for aircraft trading values, competition for new growth opportunities has also increased. Our aircraft leasing business provides steady income streams to the Group on a medium to long term basis. With solid operational performance for the first half of the year, profit contribution amounted to HK$717 million, representing an increase of HK$121 million as compared to the same period last year.
Business Outlook - For the six months ended June 30, 2019
Trade negotiations between China and the United States are on track pending resolution of the finer details. Uncertainties about the Brexit process in the United Kingdom lead to market volatility and warrant caution. The increasingly challenging macro environment and global economic slowdown have heightened market risks, and Hong Kong would inevitably be affected.
China’s export growth is likely to be impacted by the uncertainty over international trade. Notwithstanding various unfavourable conditions, China recorded real GDP growth of 6.3% for the first half of the year. China’s economic development is expected to progress on a steady path given the Central Government''''s focus on quality economic growth and the strengthening of supplyside structural reform. The Belt and Road Initiative and the Greater Bay Area integration are projected to create more business opportunities for Hong Kong.
Despite the prolonged global political and economic uncertainty, the local property market remains sound. Changes in global market conditions and Hong Kong housing policies will continue to be determining factors for the property sector. The Group has a pipeline of property projects under planning and development, and is anticipated to generate profit contribution in the years to come. The Group will continue to pursue quality investments in varying ways as suitable opportunities arise to enhance our property development portfolio.
The Group has ample cash on hand with a debt ratio of approximately 0.5% as at the interim period end date, and its operating and financial positions remain strong. The Group maintained “A/Stable” and “A2 Stable” credit ratings from Standard & Poor’s and Moody’s respectively. Based on our solid foundations of strong financial fundamentals and a diversified global business portfolio, the Group is resilient to market challenges.
“Advancing without forgoing stability” will continue to be our motto. The Group will continue to adopt a prudent investment strategy to improve the quality of earnings and enhance the recurrent income base, while achieving asset growth through continual strengthening of our existing property businesses and portfolio and through geographical diversification. The Group will focus on pursuing quality investments and increasing the recurrent income base over time in order to create long-term sustainable value for its shareholders. We remain cautiously optimistic about the Group’s future prospects.
Source: CK Asset Hold (01113) Interim Results Announcement