Cheung Kong Infrastructure Holdings Limited
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CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED
ANNOUNCES 2000 RESULTS

THE CHAIRMAN'S LETTER


15 March, 2001 -- Hong Kong

TO OUR SHAREHOLDERS

We are pleased to report that Cheung Kong Infrastructure Holdings Limited ("CKI") continued to grow steadily in year 2000. Net profit for the year ended 31st December, 2000 was HK$3,228 million, an increase of 3 per cent. from the previous year. Earnings per share were HK$1.43.

The Board of Directors is recommending a final dividend of HK$0.40 per share. Together with the interim dividend of HK$0.20 per share, this will bring the total dividend for the year to HK$0.60 per share, a 43 per cent. increase from the HK$0.42 per share paid in respect of 1999. The proposed dividend will be paid on 15th May, 2001 following approval at the Annual General Meeting, to shareholders whose names appear on the Register of Members on 10th May, 2001.

The year 2000 witnessed the bursting of the New Economy bubble and signs of a slowdown in the US and global economies. CKI's prudent financial management has enabled us to weather the situation and maintain a steady growth during the year. Our strategy of "Globalisation and Diversification on Solid Foundations" has played an important role in helping us build on our existing businesses :

1.  

Overall Performance

The Group's full-year net profit continued to record steady growth during the year, rising 3 per cent. The respective growth of profit contribution of the three core businesses were as follows:

Infrastructure Materials and Infrastructure - related Businesses - 44%
Energy + 52%
Transportation + 9%
     
2.  

Infrastructure Materials and Infrastructure - related Businesses

The Group's infrastructure materials business continued to record a profit, notwithstanding a larger than expected drop of 44 per cent. in profit contribution. This impact, resulting from the slowdown of infrastructure materials business, has been mitigated through the development and growth of our other infrastructure-related businesses:

  The decline of our infrastructure materials business during the year under review was the result of a general business downturn in the construction industry led by reductions in government-subsidised housing and slowdown in the construction of infrastructure projects. The impact posed upon our subsidiaries, Green Island Cement (Holdings) Limited and Anderson Asia (Holdings) Limited, who are market leaders in the local materials industry, were therefore unavoidably great.
 
  In response to cyclical movements in the local infrastructure materials industry, challenging market conditions and further price erosion in the materials industry, the Group continued to launch plans to improve its business operations locally while exploring new opportunities overseas. The Group acquired a 63.7 per cent. stake in Polyphalt Inc., a Canadian-listed company engaged in the development and commercialisation of polymer modified asphalt products in March 2000. This acquisition has extended CKI Materials businesses from Hong Kong, the Mainland and the Philippines to Canada in North America.
 
 

Besides geographic expansion, the Group also made remarkable strides in venturing into new industries. The belief that commercial interests and environmental concerns can produce a win/win formula is the primary impetus behind CKI's drive into the environmental protection industry. Our investments in environmentally friendly fuel projects in the Mainland and Canada are good examples. CKI entered into the LPG business in Shenyang in early 2000, a move which complemented the Mainland Chinese Government's active promotion for the use of environmentally friendly fuel.

In August last year, CKI acquired a 12.9 per cent. stake in and formed a joint venture with Canadian-listed Stuart Energy Systems Corporation ("Stuart"), a global leader in the development and provision of fuel-grade hydrogen generation systems. A CKI subsidiary was also granted the exclusive rights in the Asia Pacific Region for the marketing of Stuart's hydrogen fuel technology.
 

  Electronic infrastructure is another new investment area of CKI. Earlier last year, CKI and German-listed Israeli-based On Track Innovations Limited formed a joint venture to develop the patented "Eyecon" microprocessor-based contactless smart card business in Hong Kong and the Asia Pacific Region.
 
3.  

Energy

The energy division remained the largest profit contributor accounting for 78 per cent. of the Group's profit contribution. This represents a rise of 52 per cent. as compared to 1999. This strong growth is a prime example of the success of our strategy of "Globalisation and Diversification on Solid Foundations".

  Hongkong Electric Holdings Limited ("Hongkong Electric"), a listed company in Hong Kong, continued to provide steady earnings and cash income for the Group. Its profit increased by 4.7 per cent. in 2000. During the year under review, CKI increased its holding in Hongkong Electric from 37.63 per cent. to 38.87 per cent.
 
  Power investments in Mainland China continued to be another source of steady earnings for the Group. The Zhuhai power station, a RMB1.4 billion investment, commenced operation in 2000 and has begun to make profit contributions.
 
  In addition to our investments in Hong Kong and the Mainland, another major factor for the strong growth in the energy division is the profit contribution from our three major investments in Australia. The investment in Envestra Limited in mid-1999, our first venture beyond Asia, made CKI the single largest shareholder of the largest listed natural gas distribution company in Australia. In 2000, CKI together with Hongkong Electric, acquired two Australian power operators - ETSA Utilities which has the right to operate electricity distribution in the state of South Australia for a period of 200 years; and Powercor Australia Limited, an electricity distributor and retail operator in the state of Victoria. The two investments, which amount to a total of A$5.6 billion (approximately HK$24 billion), made CKI and Hongkong Electric the largest electricity distributor in Australia, serving over 1.3 million customers. Since all three Australian projects stated above were in operations when CKI made the investments, they immediately provided steady income for the Group upon acquisitions, and became new sources of profit contribution.
 
4.  

Transportation

A number of projects in CKI Transportation has reached harvesting stage and are providing long-term recurrent income for the Group. Year 2000 was another year of satisfactory growth for the division, with profit contribution rising 9 per cent. compared to 1999.

The Guangzhou East-South-West Ring Road, a RMB 2 billion investment of the Group, commenced operation in the middle of 2000, one year ahead of schedule. As an important part of Guangdong province's transportation network, the Ring Road has become a solid income generator for CKI Transportation since its opening. The 3.25 km Beidou Bridge in Panyu was also completed on schedule at the end of 2000.
 

5.  

Financial Management

As a leading global infrastructure company, CKI has investments outside Hong Kong totalling HK$23 billion as at the end of 2000 of which investments in the Mainland and in Australia amount to HK$11 billion and HK$12 billion respectively. The Group's net debt-to-equity ratio stood at 35 per cent., with cash on hand of over HK$2 billion and debt of HK$11 billion. With a solid financial position and strong cash flow, the Group has the financial strengths to ensure continuous steady growth and the capability to aggressively pursue high quality capital-intensive infrastructure projects.

Over the past year, the Group has followed its principle of prudent financial management. Appropriate financing schemes were also implemented to manage currency risks and to maintain proper gearing to generate better shareholder returns. In April 2000, the Group successfully arranged an A$2.05 billion debt financing programme for ETSA Utilities in capital markets.

OUTLOOK

In recent years, the continuing slowdown of the infrastructure materials market has caused an impact on the Group. We are pleased to say that our strong analytical abilities, steadfast enterprising spirit and flexible approach have helped CKI weather this rough transitional period. We will draw on the experience gained during this period and continue to implement our strategy of "Globalisation and Diversification on Solid Foundations" to drive the Group's future growth.

Looking ahead, China's impending WTO entry, the prospect of lower interest rates worldwide and other favourable factors should stimulate flagging economies and present plentiful business opportunities for the Group, enabling us to further pursue our ongoing initiatives of globalisation and diversification.

For CKI, our geographic expansion plan will continue. Investments beyond Hong Kong and the Mainland will grow as they already have in the case of the Group's investments in Australia. The Group first started investments in Australia in 1999 and by now, Australian investments already account for more than 50 per cent. of the Group's total investments outside of Hong Kong. Going forward, CKI will be keeping a close eye on opportunities in the Asian, North American and European infrastructure markets. With our strong financial position, we will seize upon every opportunity to consolidate our position as a leading multi-national infrastructure company.

Following our past success formula of geographic expansion from Hong Kong and the Mainland to Australia, and industry diversification from power generation to power distribution, CKI will continue to grow based on our existing businesses. The Infrastructure Materials division will be repositioned to become an integral part of the larger "Infrastructure Materials and Infrastructure - related Businesses" division, which includes our ventures in the electronic infrastructure and environmental industries initiated last year. We will continue to explore new business grounds and target to attain new heights.

I would like to thank the Board of Directors and our staff for their hard work and dedication. I would also like to thank our shareholders for their continued support of our vision.

Li Tzar Kuoi, Victor
Chairman

Hong Kong, 15th March, 2001

 

FINANCIAL REVIEW

Financial Resources, Treasury Activities And Gearing Ratio

The Group's capital expenditure and investments for the year were funded from cash on hand, internal cash generation, the syndication loan drawn since September 1997 and new project loans drawn during the year.

The Group maintained bank balances and cash totalling HK$2,169 million as at 31st December, 2000, of which more than 90 per cent. were denominated in Hong Kong dollars or U.S. dollars.

At the end of 2000, total borrowings of the Group amounted to HK$10,546 million, which included Hong Kong dollar syndication loan of HK$3,800 million, foreign currency bank borrowings of HK$6,628 million, RMB bank loans of HK$113 million and Canadian dollar debentures of HK$5 million. Of the total borrowings, 34 per cent. were repayable in 2001, 37 per cent. repayable in 2002 and the remaining portion repayable in 2003 to 2005. Committed borrowing facilities available to the Group, but not yet drawn as at 31st December, 2000, amounted to HK$311 million. Of these undrawn facilities, 95 per cent. will expire in 2001 and the remaining portion will expire in 2003. Given the positive responses from local and overseas bankers on the Group's financing activities during the year, the Group believes that its bankers will continue to support the Group's future financing needs.

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 frequently reviewed. In anticipation of new investments or maturity of bank loans, the Group will consider new financing while maintaining an appropriate level of gearing.

As at 31st December, 2000, the Group maintained a gearing ratio at 35 per cent. which was based on its net debt of HK$8,377 million and equity of HK$23,862 million. This ratio was higher than the gearing ratio of 11 per cent. at the year end of 1999 as a result of the new financing requirements for the acquisitions of ETSA Utilities and Powercor Australia Limited during the year of 2000. As at 31st December, 2000, HK$6,165 million of the loans related to these two projects remained outstanding, including a short-term Australian dollar bridging loan of approximately HK$3,421 million which will be repaid in 2001. 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 currencies of those countries. As at 31st December, 2000, the Group has swapped the floating interest rates of its borrowings totalling HK$4,717 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, as appropriate.

Charge On Group Assets

As at 31st December, 2000, a bank deposit of HK$52 million and certain of the Group's land and buildings with a net book value of HK$51 million were pledged to secure the Group's bank loans totalling HK$89 million. Moreover, the assets of a non-wholly owned subsidiary with net book value of HK$50 million were pledged as a floating charge to secure the debentures with face value totalling HK$5 million issued by the aforesaid subsidiary.

Contingent Liabilities

As at 31st December, 2000, the Group was subject to outstanding performance bonds totalling HK$5 million.

Employees

The Group, including its subsidiaries but excluding associated companies, employs a total of 2,363 employees. Employees' cost (excluding directors' emoluments) amounted to HK$449 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.

DISCLOSURE OF INFORMATION ON THE WEBSITE OF THE STOCK EXCHANGE OF HONG KONG LIMITED

A detailed results announcement containing all the information required by paragraphs 45(1) to 45(3) of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") will be published on the website of the Stock Exchange in due course.

CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Shareholders of the Company will be held at the Ballroom, 1st Floor, Harbour Plaza Hong Kong, 20 Tak Fung Street, Hunghom, Kowloon, Hong Kong on Thursday, 10th May, 2001 at 2:20 p.m. for the following purposes:

1.   To receive and consider the audited Financial Statements, the Group Managing Director's Report and the Reports of the Directors and Auditors for the year ended 31st December, 2000.
2.   To declare a final dividend.
3.   To elect Directors.
4.   To appoint Auditors and authorise the Directors to fix their remuneration.
5.  

To consider and, if thought fit, pass with or without amendments, the following resolutions as Ordinary Resolutions:

ORDINARY RESOLUTIONS
(i)   "THAT a general mandate be and is hereby unconditionally given to the Directors to issue and dispose of additional shares not exceeding twenty per cent. of the existing issued share capital of the Company at the date of the said Resolution until the next Annual General Meeting."
(ii)   "THAT:-
(a)   subject to paragraph (b) below, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchase shares of HK$1.00 each in the capital of the Company in accordance with all applicable laws and the requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited or of any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;
(b)   the aggregate nominal amount of shares of the Company to be repurchased by the Company pursuant to the approval in paragraph (a) above shall not exceed ten per cent. of the aggregate nominal amount of the share capital of the Company in issue at the date of this Resolution, and the said approval shall be limited accordingly; and
(c)   for the purposes of this Resolution, "Relevant Period" means the period from the passing of this Resolution until whichever is the earliest of:-
(1)   the conclusion of the next Annual General Meeting of the Company;
(2)   the expiration of the period within which the next Annual General Meeting of the Company is required by law to be held; and
(3)   the date on which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders in general meeting."
(iii)   "THAT the general mandate granted to the Directors to issue and dispose of additional shares pursuant to Ordinary Resolution (i) set out in the notice convening this meeting be and is hereby extended by the addition thereto of an amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the authority granted pursuant to Ordinary Resolution (ii) set out in the notice convening this meeting, provided that such amount shall not exceed ten per cent. of the aggregate nominal amount of the issued share capital of the Company at the date of the said Resolution."

By Order of the Board
Eirene Yeung
Company Secretary
Hong Kong, 15th March, 2001

Notes:   1.   Any Member entitled to attend and vote at the meeting is entitled to appoint proxy to attend and vote in his stead. A proxy need not be a Member of the Company.
    2.   The Register of Members will be closed from Thursday, 3rd May, 2001 to Thursday, 10th May, 2001, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the proposed final dividend, all share certificates with completed transfer forms either overleaf or separately, must be lodged with the Company's Branch 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 Wednesday, 2nd May, 2001.
    3.   Concerning item 5(i) above, the Directors wish to state that they have no immediate plans to issue any new shares of the Company. Approval is being sought from the Members as a general mandate for the purposes of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("the Listing Rules").
    4.   Concerning item 5(ii) above, the Directors are not aware of any consequences which may arise under the Takeover Code as a result of any repurchase of shares of the Company. The Explanatory Statement containing the information necessary to enable the shareholders to make an informed decision on whether to vote for or against the resolution to approve the repurchase by the Company of its own shares, as required by the Listing Rules, will be set out in a separate letter from the Company to be enclosed with the 2000 Annual Report.

CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED
2000 Results Announcement
FINANCIAL HIGHLIGHTS

for the year ended 31st December

CHEUNG KONG INFRASTRUCTURE HOLDINGS LIMITED
SUMMARY OF AUDITED RESULTS

for the year ended 31st December


HK$ million Note 2000 1999

       
Turnover 1    
Group turnover   2,567 3,063
Share of turnover of jointly controlled entities   778 124

    3,345 3,187

 
Group turnover   2,567 3,063
Other revenue   1,373 268
Operating costs   (2,819) (1,869)
Finance costs   (621) (131)

Operating profit 500 1,331
Share of results of associates 2,413 2,004
Share of results of jointly controlled entities   588 49

Profit before taxation 3,501 3,384
Taxation 2 (288) (245)


Profit after taxation 3,213 3,139
Minority interests 15 2

Profit attributable to shareholders 3,228 3,141
Dividends (1,353) (947)

 
Profit for the year retained 1,875 2,194

 
Earnings per share

3

HK$1.43 HK$1.39

 
Dividends per share      
    Interim   HK$0.20 HK$0.13
    Final   HK$0.40 HK$0.29

    HK$0.60 HK$0.42

Notes:

1.   Turnover
   


Group turnover represents net sales from infrastructure materials businesses, return on investments and interest income received and receivable from infrastructure project investments, net of withholding tax, where applicable.

In addition, the Group also accounts for its proportionate share of turnover of jointly controlled entities. Turnover of associates are not included.

     
2.   Taxation
   
HK$ million 2000 1999

Company and Subsidiaries
Hong Kong profits tax - current
  - deferred
46 59
(4) 1

  42 60

Associates
Hong Kong profits tax - current
  - deferred
246 182
- 3

  246 185

Total 288 245

     
   
(a)  Hong Kong profits tax is provided for at the rate of 16 per cent. (1999: 16 per cent.) on the estimated assessable profits for the year less available tax relief for losses brought forward.
 
(b) Tax deferred or accelerated by the effects of timing differences is provided, using the liability method, to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.
     
3.   Earnings per share
   


The calculation of earnings per share is based on the profit attributable to shareholders of HK$3,228 million (1999: HK$3,141 million) and on 2,254,209,945 shares (1999: 2,254,209,945 shares) in issue during the year.

Diluted earnings per share for the year ended 31st December, 2000 has not been shown as there was no dilutive effect on the earnings per share if the convertible debentures outstanding during the year were fully converted into shares of a non-wholly owned subsidiary which issued the debentures.

Diluted earnings per share for the year ended 31st December, 1999 has not been calculated as no dilutive potential ordinary shares existed during the year.


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