CHEUNG KONG INFRASTRUCTURE
INTERIM REPORT FOR 2001
SUSTAINING GROWTH THROUGH
DIVERSIFICATION AND CONSOLIDATION
16 August, 2001 -- Hong Kong
We are pleased to report that Cheung Kong Infrastructure Holdings Limited ("CKI") recorded satisfactory earnings growth in the first half of 2001. The unaudited consolidated net profit after tax for the first six months ended 30th June, 2001 was HK$1,509 million, up 8.6 per cent. from the same period last year. Earnings per share were HK$0.67 (2000: HK$0.62).
The Board of Directors has declared an interim dividend for 2001 of HK$0.21 per share (2000: HK$0.20). The interim dividend will be paid on Thursday, 11th October, 2001 to shareholders whose names appear on the Register of Members on Wednesday, 10th October, 2001.
Solid Growth in Infrastructure Investments
CKI's infrastructure investments in energy and transportation reported satisfactory growth of 13 per cent. in profit contribution for the first half of the year attributable to the good performance of the various investments:
|||Profit contribution from the Group's investment in Hongkong
Electric Holdings Limited ("Hongkong Electric") was
a 24 per cent. increase over the same period last year
arising from the increased shareholding in and performance
of Hongkong Electric.
|||Profit contributions from Australian infrastructure
businesses have exceeded initial projections.
|||The Group's divestment programme brought a gain of HK$572
million, of which HK$351 million was attributable to the
sale of Powercor Australia Limited retail business in
Australia and HK$221 million from the disposal of Nanhai
Power Plant I investment in China. Divestment of the Group's
interest in Nanhai Road Network is in progress.
|||The Group has decided to take a more conservative and
prudent accounting policy, and has decided to make a provision
of HK$500 million against the Group's China infrastructure
portfolio of approximately HK$8 billion.
Repositioning Infrastructure-related Businesses
Softening infrastructure materials prices continued to put pressure on profit margins resulting in a reduction of 24 per cent. in profit contribution from this business over the same period last year.
The Group continued to refocus its initiatives on other infrastructure-related businesses. In the environmental industry, CKI obtained an exclusive license to develop and to market in Mainland China the environmentally friendly polymer modified asphalt, a patented technology owned by Polyphalt Inc., a Canadian listed company of which CKI is the majority shareholder. On the electronic infrastructure front, efforts on integrating smart card applications with biometrics, such as fingerprint matching and facial recognition technologies, have been carried out through the Group's newly established subsidiary, bioSecure Systems Limited.
Strong Financial Position
As of 30th June, 2001, key financial figures and our credit
rating are as follows :
|||Cash position of HK$3,213 million.
|||Net debt of HK$5,196 million.
|||Net debt to equity ratio of 20 per cent.
|||S&P credit rating of "A-/Stable".
Sustaining Growth through Diversification and Consolidation
In the face of the fast-changing market place, we have adopted strategies to reposition ourselves to be even more responsive in the infrastructure business arena. The Group is currently in a very strong financial position to pursue capital intensive infrastructure projects aggressively.
|||The significant and steady contributions from CKI infrastructure
investments continue to provide the Group with a broad
profit and cash base. It is expected that the existing
energy portfolio will continue to be the major profit
generator for the Group. Adequate resources will be allocated
to ensure such contributions to be sustained. In addition,
initiatives will be carried out to identify energy investment
opportunities around Asia, Europe and North America. Meanwhile,
we aim to expand the transportation portfolio aggressively
both in terms of geography and industry diversification.
We have the extensive knowledge, experience and financial
resources necessary to invest in the capital intensive
transportation industry. We are currently studying a number
of investment opportunities in roads, bridges, tunnels,
airports and rail systems in markets including Hong Kong,
Mainland China, South Korea, and Australia.
|||The infrastructure materials business has been facing
increasing pressure with declining volumes due to a slowdown
of government housing and domestic infrastructure developments.
Profit enhancement and overhead containment programmes
are being implemented to optimise the profit and cash
contribution from this maturing business, while it faces
the challenges at the bottom of its industry cycle.
|||The infrastructure materials and infrastructure-related
businesses sector has just been repositioned. We believe
that there is large market potential in the environmental
industry and electronic infrastructure business. A number
of opportunities in clean energy, waste-to-energy, waste
handling, biometrics and smart card application are being
|||In addition to investigating new investment opportunities,
the Group will continue to capitalise on divestment opportunities
at preferential terms.
With the broad and secure foundation established over the past five years, we aim to continue sustaining the Group's growth through diversification and consolidation in the coming years.
I would like to thank the Board of Directors and our staff for their hard work and dedication, and our shareholders for their continued support of our vision.
Li Tzar Kuoi, Victor
Hong Kong, 16th August, 2001
Financial Resources, Treasury Activities and Gearing Ratio
The Group's capital expenditure and investments for the period were funded from cash on hand, internal cash generation, the syndication loan drawn since September 1997 and new project loans drawn during the period.
The Group maintained bank balances and cash totalling HK$3,213 million as at 30th June, 2001, of which more than 90 per cent. were denominated in Hong Kong dollars or U.S. dollars.
As at 30th June, 2001, total borrowings of the Group amounted to HK$8,409 million, which included Hong Kong dollar syndication loan of HK$3,800 million, foreign currency bank and other borrowings of HK$4,477 million and RMB bank loans of HK$132 million. Of the total borrowings, 47 per cent. were repayable in 2002, 4 per cent. repayable in 2003 and the remaining portion repayable in 2004 to 2006. Committed borrowing facilities available to the Group, but not yet drawn as at 30th June, 2001, amounted to HK$25 million. Of these undrawn facilities, 37 per cent. will expire in 2002 and the remaining portion will expire in 2003. The Group's financing activities continue to be well received and fully supported by its bankers.
The Group adopts conservative treasury policies in cash and financial management. To achieve better risk control and minimise cost of funds, the Group's treasury activities are centralised. Cash is generally placed in short-term deposits mostly denominated in Hong Kong or U.S. dollars. The Group's liquidity and financing requirements are reviewed regularly. The Group will consider new financing while maintaining an appropriate level of gearing in anticipation of new investments or maturity of bank loans.
As at 30th June, 2001, the Group maintained a gearing ratio at 20 per cent. which was based on its net debt of HK$5,196 million and equity of HK$25,436 million. This ratio was lower than the gearing ratio of 34 per cent. at the end of 2000, mainly because of the repayment of a short-term Australian dollar bridging loan during the period. In view of the expiry of the HK$3,800 million syndication loan in 2002 and potential project financing requirements from business growth, the Group has established a medium term note programme of up to US$2 billion in March 2001.
To minimise currency risk exposure, the Group has a policy
of hedging its investments in other countries with the appropriate
level of borrowings denominated in the local currencies of
those countries. As at 30th June, 2001, the Group has swapped
the floating interest rates of its borrowings totalling HK$4,294
million into fixed interest rates. The Group will consider
entering into further interest and currency swap transactions
to hedge against its interest rate and currency risk exposures,
Charge on Group Assets
As at 30th June, 2001, certain of the Group's land and buildings and a fixed deposit with net book values totalling HK$59 million were pledged to secure a bank loan and a performance bond totalling HK$61 million.
The assets of a non-wholly owned subsidiary with a net book value of HK$52 million were pledged as a floating charge to secure debentures with a face value totalling HK$5 million issued by the aforesaid subsidiary. In addition to the floating charge, a second charge on the subsidiary's land and buildings with a net book value of HK$7 million was created to secure a mortgage loan of HK$7 million borrowed by the subsidiary.
As at 30th June, 2001, the Group was subject to outstanding performance bonds totalling HK$25 million.
The Group, including its subsidiaries but excluding associated companies, employs a total of 2,352 employees. Employees' cost (excluding directors' emoluments) amounted to HK$217 million. The Group ensures that the pay levels of its employees are competitive and that its employees are rewarded on a performance related basis within the general framework of the Group's salary and bonus system.
Preferential subscription of 2,978,000 new shares of the Company had been given to its employees who had submitted the pink application forms to subscribe for shares of HK$1.00 each in the Company at HK$12.65 per share on flotation of the Company in 1996. The Group does not have any share option scheme for employees.
The Group's interim report for the six months ended 30th June, 2001 was reviewed by the Audit Committee ("Committee"). Regular meetings have been held by the Committee since its establishment and it shall meet at least twice each year.
PUBLICATION OF INTERIM RESULTS ON THE WEBSITE OF THE STOCK EXCHANGE OF HONG KONG LIMITED
A detailed interim results announcement for the six months ended 30th June, 2001 containing all the information required by paragraphs 46(1) to 46(6) of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Stock Exchange") will be published on the website of the Stock Exchange in due course.
CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED
NOTICE OF PAYMENT
OF INTERIM DIVIDEND, 2001
The Board of Directors of Cheung Kong Infrastructure Holdings Limited announces that the Group's unaudited consolidated net profit after tax for the six months ended 30th June, 2001 amounted to HK$1,509 million which represents earnings of HK$0.67 per share. The Directors have resolved to pay an interim dividend for 2001 of HK$0.21 per share to shareholders whose names appear on the Register of Members of the Company on Wednesday, 10th October, 2001. The dividend will be paid on Thursday, 11th October, 2001.
The Register of Members of the Company will be closed from Wednesday, 3rd October, 2001 to Wednesday, 10th October, 2001, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the interim dividend, all share certificates with completed transfer forms either overleaf or separately, must be lodged with the Company's Branch Share Registrars, Central Registration Hong Kong Limited, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, not later than 4:00 p.m. on Friday, 28th September, 2001.
| By Order of the Board
Hong Kong, 16th August, 2001
CONSOLIDATED INCOME STATEMENT
for the six months ended 30th June 2001
|Share of turnover of jointly controlled entities||705||249|
|Share of results of associates||1,438||850|
|Share of results of jointly controlled entities||191||240|
|Profit before taxation||1,635||1,488|
|Profit after taxation||1,497||1,382|
|Profit attributable to shareholders||4||1,509||1,389|
|Proposed interim dividend||473||451|
|Earnings per share||6||HK$0.67||HK$0.62|
|Proposed interim dividend per share||HK$0.21||HK$0.20|
* Operating profit is stated after a provision (see notes 3 and 4).
NOTES TO THE CONSOLIDATED INCOME STATEMENT
In addition, the Group also accounts for its proportionate share of turnover of jointly controlled entities. Turnover of associates are not included.
By business segment
By geographical region
The comparative figures of turnover for the six months ended 30th June, 2000 have been restated to conform to the current period's presentation.
Other revenue includes the following:
Operating costs include the following:
By geographical region
|6.||EARNINGS PER SHARE|
Diluted earnings per share has not been shown as there was no dilutive effect on the earnings per share if the convertible debentures outstanding during the six months ended 30th June, 2001 and 2000 were fully converted into shares of a non-wholly owned subsidiary which issued the debentures.