ar2016.pdf - 2016 Annual Report Diversification Drives Stable Returns 2016 Annual Report 22nd Floor Hutchison House 10 Harcourt Road Hong Kong Telephone

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Unformatted text preview: 2016 Annual Report Diversification Drives Stable Returns 2016 Annual Report 22nd Floor, Hutchison House, 10 Harcourt Road, Hong Kong Telephone: +852 2128 1188 Facsimile: +852 2128 1705 Corporate Information CK Hutchison Holdings Limited Board of directors EXECUTIVE DIRECTORS Non-executive Directors Chairman CHOW Kun Chee, Roland, LLM LI Ka-shing, GBM, KBE, LLD (Hon), DSSc (Hon) CHOW WOO Mo Fong, Susan, BSc (Note)   Commandeur de la Légion d’Honneur   Grand Officer of the Order Vasco Nunez de Balboa   Commandeur de l’Ordre de Léopold LEE Yeh Kwong, Charles, GBM, GBS, OBE, JP LEUNG Siu Hon, BA (Law) (Hons), Hon LL.D. Group Co-Managing Director and   Deputy Chairman George Colin MAGNUS, OBE, BBS, MA LI Tzar Kuoi, Victor, BSc, MSc, LLD (Hon) Independent Non-executive Directors KWOK Tun-li, Stanley, BSc (Arch), AA Dipl, LLD (Hon), ARIBA, MRAIC Group Co-Managing Director FOK Kin Ning, Canning, BA, DFM, FCA (ANZ) CHENG Hoi Chuen, Vincent, GBS, OBE, JP The Hon Sir Michael David KADOORIE, GBS, LLD (Hon), DSc (Hon) Frank John SIXT, MA, LLL   Group Finance Director and Deputy Managing Director IP Tak Chuen, Edmond, BA, MSc         Commandeur de la Légion d’Honneur Commandeur de l’Ordre des Arts et des Lettres Commandeur de l’Ordre de la Couronne Commandeur de l’Ordre de Leopold II   Deputy Managing Director   (William Elkin MOCATTA, FCA as his alternate) KAM Hing Lam, BSc, MBA LEE Wai Mun, Rose, JP, BBA   Deputy Managing Director LAI Kai Ming, Dominic, BSc, MBA William SHURNIAK, S.O.M., M.S.M., LLD (Hon)   Deputy Managing Director WONG Chung Hin, CBE, JP Edith SHIH, BSE, MA, MA, EdM, Solicitor, FCIS, FCS(PE) (Note) WONG Yick-ming, Rosanna, PhD, DBE, JP AUDIT COMMITTEE COMPANY SECRETARY WONG Chung Hin (Chairman) Edith SHIH, BSE, MA, MA, EdM, Solicitor, FCIS, FCS(PE) KWOK Tun-li, Stanley CHENG Hoi Chuen, Vincent AUDITOR William SHURNIAK PricewaterhouseCoopers REMUNERATION COMMITTEE BANKERS WONG Yick-ming, Rosanna (Chairman) The Hongkong and Shanghai Banking   Corporation Limited LI Ka-shing CHENG Hoi Chuen, Vincent WONG Chung Hin Note:  Appointed on 1 January 2017 Bank of China (Hong Kong) Limited Contents 1 2 4 5 6 7 8 10 14 76 82 87 106 122 124 151 167 172 173 174 176 179 181 275 279 Corporate Information Contents Corporate Profile Analyses of Core Business Segments by Geographical Location Analyses by Core Business Segments Key Financial Information Key Business Indicators Business Highlights Chairman’s Statement Operations Review 16 Ports and Related Services 24 Retail 36 Infrastructure 42 Energy 48 Telecommunications 64 Finance & Investments and Others 69 Additional Information Group Capital Resources and Liquidity Risk Factors Environmental, Social and Governance Report Information on Directors Information on Senior Management Report of the Directors Corporate Governance Report Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Principal Subsidiary and Associated Companies and Joint Ventures Ten Year Summary Information for Shareholders 2016 Annual Report 1 Corporate Profile Ports and Related Services Retail CK We are the world’s leading port investor, developer and operator, holding interests in 48 ports comprising 275 operational berths in 25 countries, including container terminals operating in five of the 10 busiest container ports in the world. In 2016, our ports handled a total throughput of 81.4 million twentyfoot equivalent units (“TEU”). We also engage in mid-stream operations, river trade, cruise terminal operations and ports related logistic services. The Group’s retail division is the largest international health and beauty retailer in Asia and Europe, with over 13,300 stores in 25 markets worldwide. Its diverse retail portfolio comprises health and beauty products, supermarkets, as well as consumer electronics and electrical appliances. It also manufactures and distributes bottled water and beverage products in Hong Kong and Mainland China. Hutchison Group (the “Group”) is a renowned multinational conglomerate committed to development, innovation and technology in many different sectors. We operate a variety of businesses in over 50 countries across the world with over 290,000 employees. We have a strong commitment to the highest standards of corporate governance, transparency and accountability, as recognised by numerous international awards and commendations. Our operations consist of five core businesses – ports and related services, retail, infrastructure, energy, and telecommunications. 2 CK Hutchison Holdings Limited Infrastructure The Group’s infrastructure business includes its shareholding in Cheung Kong Infrastructure Holdings Limited (“CKI”) and interests in six infrastructure assets that are co-owned with CKI. CKI is a global infrastructure company that aims to make the world a better place through a variety of infrastructure investments and developments in different parts of the world. The company has diversified investments in energy infrastructure, transportation infrastructure, water infrastructure, waste management, wasteto-energy and infrastructure related businesses. Its investments and operations span across Hong Kong, the Mainland, the United Kingdom, the Netherlands, Portugal, Australia, New Zealand and Canada. The Group’s investments in energy are principally located in Western and Atlantic Canada, the United States and the Asia Pacific Region. Husky Energy Inc. (“Husky Energy”) is an integrated energy company listed in Canada. Energy We are a leading global operator of mobile telecommunications and data services, and a pioneer of mobile broadband technology. We are also a major owner and operator of an extensive fibre-optic fixed-line network in Hong Kong. Our operations offer telecommunications services comprising 4G long-term evolution (LTE)/3G mobile data and mobile telecommunications services, fixed-line, Internet and broadband services, including international connectivity services over both fibreoptic and mobile networks. Telecommunications 2016 Annual Report 3 Analyses of Core Business Segments by Geographical Location (before profits on disposal of investments & others) 2016 Total Revenue Ports & Related Services HK$372,686 million 4% Retail Europe HK$180,649 million Canada HK$29,992 million Infrastructure 5% Energy 35% Asia, Australia & Others # 15% HK$53,742 million Telecommunications 41% 30% 96% 22% 19% Canada 8% Asia, Australia & Others # 33% 14% Hong Kong HK$49,966 million Europe 49% 5% 2016 Total EBITDA (of which the UK 21%) 23% HK$91,980 million Hong Kong 13% 8% Mainland China 64% 10% 6%* 7% 5% 2% Europe HK$50,902 million 9% 6% 14% Canada HK$8,547 million 10% 37% 91% Asia, Australia & Others # 14% HK$16,251 million Mainland China HK$35,763 million 43% 33% Canada 76% 9% 42% Asia, Australia & Others # 11% 2016 Total EBIT Europe 18% Hong Kong HK$4,800 million 25% 55% (of which the UK 33%) Hong Kong 5% HK$62,414 million Mainland China 52% Canada 16% HK$3,369 million Europe HK$36,763 million 10% 16% 35% Asia, Australia & Others # HK$11,697 million 11% 13% 5% 15% 1% 23% 2% * 12% 18% 29% 84% 44% Canada Mainland China HK$9,967 million 5% 40% 13% 49% Asia, Australia & Others # Hong Kong HK$1,918 million 19% 30% Europe 59% Hong Kong (of which the UK 36%) 3% Mainland China 54% 12% 13% 3% 8% 24% 11% 2% * * # Mainland China HK$7,493 million 57% 4 CK Hutchison Holdings Limited Represents contributions from Finance & Investments and Others Includes Panama, Mexico and the Middle East Includes contribution from the USA for Husky Energy Analyses by Core Business Segments 2016 HK$ millions Revenue (2)   Ports and Related Services (2)   Retail   Infrastructure   Husky Energy   3 Group Europe   Hutchison Telecommunications Hong Kong Holdings   Hutchison Asia Telecommunications   Finance & Investments and Others Total Revenue EBITDA (2)   Ports and Related Services (2)   Retail   Infrastructure   Husky Energy   3 Group Europe   Hutchison Telecommunications Hong Kong Holdings   Hutchison Asia Telecommunications   Finance & Investments and Others Total EBITDA before profits on disposal of investments & others Pro forma (1) 2015 HK$ millions % Change % % 32,184 9% 151,502 41% 53,211 14% 30,467 8% 62,415 17% 12,133 3% 8,200 2% 22,574 6% 372,686 100% 34,009 151,903 55,762 40,029 62,799 22,122 6,900 22,563 396,087 9% 38% 14% 10% 16% 5% 2% 6% 100% -5% 11,639 13% 14,567 16% 31,128 34% 9,284 10% 18,944 20% 2,607 3% 2,298 2% 1,513 2% 91,980 100% 11,964 14,838 32,291 9,375 17,396 2,911 1,176 2,142 92,093 13% 16% 35% 10% 19% 3% 2% 2% 100% -3% -2% -4% -1% 9% -10% 95% -29% 7,567 12% 12,059 19% 22,162 36% 3,429 5% 12,838 21% 1,055 2% 2,130 3% 1,174 2% 62,414 100% (12,229) 50,185 7,957 13% 12,328 20% 23,477 38% 2,229 3% 11,664 19% 1,426 2% 1,176 2% 1,822 3% 62,079 100% (12,581) 49,498 -5% -2% -6% 54% 10% -26% 81% -36% 1% 3% 1% (6,247) (1,769) (8,016) 42,169 (8,856) (6,734) (463) (7,197) 42,301 (10,173) 7% -282% -11% 33,313 (305) 33,008 32,128 (960) 31,168 4% 68% 6% – -5% -24% -1% -45% 19% – -6% – (2) EBIT   Ports and Related Services (2)   Retail   Infrastructure   Husky Energy   3 Group Europe   Hutchison Telecommunications Hong Kong Holdings   Hutchison Asia Telecommunications   Finance & Investments and Others Total EBIT before profits on disposal of investments & others Interest expenses and other finance costs (2) Profit Before Tax Tax (2)   Current tax   Deferred tax Profit after tax Non-controlling interests and perpetual capital securities holders’ interests Profit attributable to ordinary shareholders before profits   on disposal of investments & others (“Recurring NPAT”) Profits on disposal of investments & others, after tax (3) Profit attributable to ordinary shareholders (“NPAT”) – 13% Note 1: CKHH Pro forma results for the year ended 31 December 2015 assume that the Reorganisation was effective as at 1 January 2015. Pro forma revenue, earnings before interest expenses and other finance costs, tax, depreciation and amortisation (“EBITDA”) and earnings before interest expenses and other finance costs and tax (“EBIT”) by operating segments for the year ended 31 December 2015 have been reclassified to include the respective additional contributions as a result of the Reorganisation as shown in the table below, to enable a like-for-like comparison with CKHH actual results for the year ended 31 December 2016. The CKHH statutory results for the year ended 31 December 2015 reflect the impact of Reorganisation that occurred on 3 June 2015 and the total revenue and profit attributable to ordinary shareholders for the year ended 31 December 2015 reported on that basis was HK$316,318 million and HK$118,570 million respectively. See the Consolidated Income Statement included in this Annual Report and CKHH 2015 Annual Report for Reconciliation from CKHH Statutory Results to CKHH Pro forma Results for the year ended 31 December 2015. Revenue EBITDA EBIT Recurring NPAT Ports and Related Services Infrastructure Energy Telecommunications Finance & Investments and Others 242 11,918 6,205 80 2,895 124 8,144 1,453 20 356 70 5,376 345 (22) 282 43 3,320 211 (21) (789) Total Additional Contributions for the year ended 31 December 2015 21,340 10,097 6,051 2,764 Note 2: Total revenue, EBITDA, EBIT, interest expenses and other finance costs and tax include the Group’s proportionate share of associated companies and joint ventures’ respective items. Total revenue, EBITDA and EBIT were adjusted to exclude non-controlling interests’ share of results of HPH Trust. Note 3: Profits on disposal of investments and others, after tax in 2016 was a charge of HK$305 million comprising an impairment charge on certain non-core investments held by the ports operation of HK$577 million and the Group’s 50% share of operating losses of Vodafone Hutchison Australia (“VHA”) which amounted to HK$326 million, partly offset by a non-cash mark-to-market gain upon acquisition of additional interest in an existing port operation of HK$598 million. This is compared to the HK$960 million charge arising from VHA’s losses recorded in 2015. 5 CK Hutchison Holdings Limited Key Financial Information 2016 HK$ millions Reported profit attributable to ordinary shareholders of the Company Reported earnings per share (HK$) (4) Recurring profit attributable to ordinary shareholders of the Company (5) Recurring earnings per share (HK$) (6) Full year dividend per share 2015 HK$ millions 33,008 8.55 33,313 8.63 2.680 118,570 36.91 32,128 8.32 2.550 Total assets 1,013,465 Net assets 544,190 Net assets attributable to shareholders of the Company per ordinary share (HK$) 102.2 Total principal amount of bank and other debts 292,047 Total cash, liquid funds and other listed investments (“liquid assets”) 162,224 Total principal amount of bank and other debts including unamortised fair value adjustments from acquisitions 304,030 Net debt 141,806 Net debt to net total capital ratio (7) 20.5% Credit rating: Moody’s A3 Standard & Poor’s A- Fitch A- 1,032,944 549,111 101.9 287,603 131,426 304,006 172,580 23.7% Liquid Assets by Currency Denomination at 31 December 2016 Debt Profile by Currency Denomination at 31 December 2016 6% A3 AA- 5% 8% 18% 6% 21% 8% 41% 6% 27% 54% Total principal amount of bank and other debts: HK$292,047 million HKD USD EUR GBP Total: HK$162,224 million Others HKD USD RMB EUR GBP Others Debt Maturity Profile at 31 December 2016 - Principal only HK$ millions 180,000 160,000 162,224 Total Debt (Principal only): HK$292,047 million 140,000 120,000 100,000 80,000 74,411 71,593 60,000 40,000 40,451 33,646 31,213 22,861 20,000 10,550 7,322 0 at December 2016 In 2017 In 2018 In 2019 Liquid Assets In 2020 Bank and Other Loans In 2021 In 2022 to 2026 In 2027 to 2036 Beyond 2036 Notes and Bonds Note 4: Reported earnings per share is calculated based on profit attributable to ordinary shareholders. For the year ended 31 December 2016, the earnings per share is calculated based on CKHH’s weighted average number of shares outstanding during the year of 3,859,441,388 (2015 - 3,212,671,194 shares). Note 5: Recurring profit attributable to ordinary shareholders of the Company for the year ended 31 December 2016 is calculated based on profit attributable to ordinary shareholders before profits on disposal of investments and others, after tax. Recurring profit attributable to ordinary shareholders of the Company for the year ended 31 December 2015 is prepared on a pro forma basis and is calculated based on pro forma profit attributable to ordinary shareholders before profits on disposal of investments and others, after tax arising from continuing operations. Note 6: Recurring earnings per share for the year ended 31 December 2016 is calculated based on recurring profit attributable to ordinary shareholders of the Company for the year ended 31 December 2016 of HK$33,313 million and on CKHH’s weighted average number of shares outstanding during the year ended 31 December 2016 of 3,859,441,388. Recurring earnings per share for the year ended 31 December 2015 is calculated based on recurring profit attributable to ordinary shareholders of the Company for the year ended 31 December 2015 prepared on a pro forma basis of HK$32,128 million and on CKHH’s issued shares outstanding as at 31 December 2015 of 3,859,678,500. Note 7: Net debt is defined on the Consolidated Statement of Cash Flows. Total bank and other debts are defined, for the purpose of “Net debt” calculation, as the total principal amount of bank and other debts and unamortised fair value adjustments arising from acquisitions. Net total capital is defined as total bank and other debts plus total equity and loans from non-controlling shareholders net of total cash, liquid funds and other listed investments. 2016 Annual Report 6 Key Business Indicators Ports and Related Services Total Container Throughput by Subdivision million TEU "Annual throughput totalled 81.4 million TEU." 100 80 76.8 83.8 82.9 78.3 81.4 24.3 22.8 14.0 13.8 15.6 14.6 29.9 30.2 60 40 "Over 13,300 retail stores worldwide in 25 markets." 0 2012 2013 HPH Trust 2015 2014 Total Retail Store Numbers by Subdivision Retail 20 2016 Stores 14,000 13,331 12,400 12,000 11,435 Mainland China and Other Hong Kong 10,000 9,742 Asia, Australia and Others * Europe * Asia, Australia and Others includes Panama, Mexico and the Middle East. 2,929 2,483 10,581 8,000 2,361 2,603 5,056 5,190 2,006 494 2,138 6,000 4,000 Earnings per Share and NPAT announced by CKI 2,000 Infrastructure 0 HK dollars HK$ millions 31,782 18.00 30,000 15.00 25,000 2012 "Announced earnings for the year amounted to HK$9,636 million." 2013 2015 2014 471 2016 Health & Beauty China Health & Beauty Asia Health & Beauty Western Europe Health & Beauty Eastern Europe Other Retail 13.03 20,000 12.00 15,000 9.00 11,639 6.00 9,427 4.77 3.93 3.00 4.44 3.82 "Average production decreased 7% to 321.2 mboe/day in 2016." 5,000 0 0 2012 2013 2014 2015 2016 NPAT as announced by CKI Earnings per share Proved and Probable Reserves & Production Energy 9,636 10,000 11,162 (mmboe) 4,500 4,000 301.5 (mboe/day) 340.1 345.7 321.2 312.0 3,500 3,000 2,915 3,127 3,149 2,912 2,815 2,500 2,000 1,588 1,591 1,324 1,224 1,500 3 Group Europe’s Active Customers and Data Usage Customers (’000) Telecommunications 500 Petabytes (per year) 2,000 50,000 45,966 (8) 1,600 40,000 1,432.04 1,200 30,000 20,000 18,542 22,142 25,031 26,116 948.98 605.52 10,000 1,000 800 "Active customer base totals over 45.9 million, an increase of 76% owing to the successful formation of the Wind Tre joint venture, while data consumption was approximately 1,430 petabytes in 2016." 0 2012 2014 2013 Proved Reserves (mmboe) 2015 2016 Probable Reserves (mmboe) Production (mboe/day) 400 384.70 247.31 0 0 2012 2013 2014 3 Group Europe’s Active Customers (at 31 December) 2015 2016 3 Group Europe Customer Data Usage Note 8: Includes approximately 18.9 milion of active mobile customers added upon the formation of the joint venture, Wind Tre in Italy. 2016 Annual Report 7 Business Highlights January to June A S Watson Group (“ASW”) celebrates its 175th anniversary. 3 Denmark is the first operator in the country to launch nationwide Wi-Fi calling. UK Rails S.à r.l., the holding company of Eversholt Rail Group, enters into an agreement with Arriva Rail North Limited to procure and lease out 281 new vehicles worth £490 million. Cheung Kong Infrastructure Holdings Limited and Power Assets Holdings Limited enter into an agreement with Husky Energy Inc. (“Husky Energy”) to acquire a 65% stake in a portfolio of Husky Energy’s oil pipeline assets in Canada for approximately C$1.7 billion. 3 Ireland announces €65 million IT digital transformation investment – entering into a five-year managed services contract with Amdocs to transform its IT infrastructure, and deliver customer experience innovation across all lines of business. Hutchison China MediTech Limited completes an IPO on the Nasdaq Global Select Market in the US, raising over US$110 million. 8 CK Hutchison Holdings Limited With three new thermal projects in Saskatchewan (Edam East, Vawn and Edam West), Husky Energy’s total thermal production now reaches 100,000 barrels per day. July to December 3 Italy is merged with WIND to form Italy’s largest mobile operator, serving over 31 million mobile customers and 2.7 million fixed-line customers. It is now the number one operator in Italy in terms of customers. First oil is achieved from the Hibernia formation well at North Amethyst with peak production of approximately 5,000 barrels per day net to Husky Energy. 3 Denmark and 3 Sweden win licences for the frequencies 2x30 MHz and 2x5 MHz respectively in the 1800 MHz band in their governments’ spectrum auctions. Vietnamobile receives four licences for Telecom network establishment, Telecom service provision an...
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