2020 Interim Results Operations Analysis Disclaimer
The information, statements and opinions contained in this Presentation and subsequent discussion do not constitute an offer to sell or solicitation of any offer to subscribe for or purchase any securities or other financial instruments or any advice or recommendation in respect of such securities or other financial instruments.
Potential investors and shareholders of the Company (the “Potential Investors and Shareholders”) are reminded that information contained in this Presentation and subsequent discussion comprises extracts of operational data and financial information of the Group for the six months period ended 30 June 2020. The information included in this Presentation and subsequent discussion, which does not purport to be comprehensive nor render any form of financial or other advice, has been provided by the Group for general information purposes only and certain information has not been independently verified. No representations or warranties, expressed or implied, are made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information, statements or opinions presented or contained in this Presentation and any subsequent discussions or any data which such information generates. Potential Investors and Shareholders should refer to the 2020 Interim Report for the unaudited results of the Group which are published in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
The performance data and the results of operations of the Group contained in this Presentation and subsequent discussion are historical in nature, and past performance is no guarantee of the future results of the Group. Any forward-looking statements and opinions contained in this Presentation and subsequent discussion are based on current plans, beliefs, expectations, estimates and projections at the date the statements are made, and therefore involve risks and uncertainties. There can be no assurance that any of the matters set out in such forward-looking statements are attainable, will actually occur or will be realised or are complete or accurate. Actual results may differ materially from those stated, implied and/or reflected in such forward-looking statements and opinions. The Group, the Directors, officers, employees and agents of the Group assume (a) no obligation to correct, update or supplement the forward-looking statements or opinions contained in this Presentation and subsequent discussion; and (b) no liability in the event that any of the forward-looking statements or opinions do not materialise or turn out to be incorrect.
Potential Investors and Shareholders should exercise caution when investing in or dealing in the securities of the Company. 2020 Results Highlights Financial Highlights
Net Revenue (1) EBIT (1) EPS (2) Debt Ratio
Net (Post-IFRS 16) $189.9bn (1) $26.7bn 25.1% EBITDA Earnings (1)(2) $3.37 DPS - 12% - 22% 1.1%-pt - 29% (-9% in local (-19% in local Y-o-Y currencies) $47.0bn currencies) $13.2bn $0.614 - 13% - 28% - 29% (-10% in local (-25% in local currencies) currencies)
(1) The Group believes that the IAS 17 basis (“Pre-IFRS 16 basis”) metrics, which are not intended to be a substitute for, or superior to, the reported metrics on a IFRS 16 basis (“Post-IFRS 16 basis”), better reflect management’s view of the Group’s underlying operational performance. IAS 17 basis metrics financial information is regularly reviewed by management and used for resource allocation, performance assessment and internal decision-making. As a result, the Group has provided an alternative presentation of the Group’s EBITDA, EBIT and profit attributable to ordinary shareholders prepared under the Pre-IFRS 16 basis relating to the accounting for leases for the first six months of 2019 and 2020. Unless otherwise specified, the discussion of the Group’s operating results in this presentation is on a Pre-IFRS 16 basis as mentioned above. Under Post-IFRS 16 basis, Revenue, EBITDA, EBIT and Net Earnings were HK$189.9bn, HK$59.3bn, HK$28.6bn and HK$13.0bn respectively. (2) Net earnings represent profit attributable to ordinary shareholders. 1H 2020 EPS is calculated based on profit attributable to ordinary shareholders. 4 EBITDA
EBITDA EBITDA Change by Division
HK$ m $47.0bn ( 688 ) 53,988 8,797
129 ( 2,766 ) ( 930 ) 178 ( 633 ) -13% ( 1,028 ) ( 754 ) ( 4,418 ) (-10% in local currencies) 48,773 ( 1,827 ) 46,946
( 3,102 )
1H 2019 Ports & Retail - Retail - Infrastructure Husky Net gains CKHGT Wind Tre - HAT F&I 1H 2020 Foreign 1H 2020 EBITDA Related underlying one-off gain Energy from (3 Group & one-time and Underlying currency EBITDA Services in 2019 non-recurring HTHKH ) - income in Others(5) EBITDA translation transactions (4) underlying(5) 2019 impact
Represents share of Husky – impairment & other charges
Port & Related Services Retail Infrastructure Energy Telecommunications Finance and Investments & Others
(1) Represents contributions from Finance & Investments and Others. (2) Asia, Australia & Others includes Panama, Mexico and the Middle East. (3) Canada includes contribution from the USA for Husky Energy. (4) Net gains from non-recurring transactions in 1H 2020 includes gain arising from the merger of VHA and TPG and certain impairment provisions. (5) EBITDA of HK$549 million in 1H 2019 were reclassified from Finance & Investments and Others segment to CKH Group Telecom segment to conform with the 1H 2020 presentation. 5 Operating FCF
Operating FCF Operating FCF by Core Business
$19.1bn
(1H 2019: $27.9bn) -1% 37% HK$ m 21%
3% 18% 22% 33,203 24,959
4,859 5,006 Port & Related Services Retail (9,615) (10,074) Infrastructure Energy EBITDA of Subsidiaries Dividends from Asso & JVs Telecommunications Finance and Investments & Others (504) (757) Capex Investments in Asso & JVs EBITDA – Share of Telecom licences Asso & JVs 1H 2019 1H 2020
(1) The Operating FCF represents EBITDA (Pre-IFRS 16 basis) of Company & subsidiaries and dividends from Asso. & JVs less capex of Company & subsidiaries (excluding Telecom licences) and investments in Asso. & JVs. For 1H 2019, capex of Company & subsidiaries also excludes capex of assets classified as held for sale. (2) EBITDA of subsidiaries in 1H 2020 excludes net gains from non-recurring transactions of HK$8.8 billion. EBITDA – Share of Asso & JVs in 1H 2020 excludes share of impairment and other charges of the Energy segment of HK$3.1 billion. 6 Financial Profile - Operating FCF by division
EBITDA – Co & Subsidiaries 4,025 3,472 1,686 - 14,900 872 4 24,959 EBITDA – Share of Asso. & JVs 1,514 1,154 12,082 351 21 - 1,170 16,292 Dividends from Asso. & JVs 626 873 2,852 574 - - 81 5,006 Capex 726 628 113 - 6,762 1,787 58 10,074 Investments in Asso. & JVs - 308 220 - 53 - 176 757 Capex – Telecom Licences - - - - 202 - - 202
(1) Operating FCF (Operating Free Cash Flow) represents EBITDA (Pre-IFRS 16 basis) of Company & subsidiaries and dividends from Asso. & JVs less capex of Company & subsidiaries (excluding Telecom licences) and investments in Asso. & JVs. (2) EBITDA of subsidiaries in 1H 2020 excludes net gains from non-recurring transactions of HK$8.8 billion. EBITDA – Share of Asso & JVs in 1H 2020 excludes share of impairment and other charges of the Energy segment of HK$3.1 billion. 7 Financial Profile - Free Cash Flow
Free Cash Flow Free Cash Flow Year-on-Year Change
1H 2020 Operating (1) 19,134 Free Cash Flow $8.9bn
Interests and taxes paid ( 5,748 ) +51%
HK$ m
Working Capital 8,435 869 changes and ( 4,280 ) Others ( 459 ) ( 612 ) ( 253 ) 8,904
5,907 Telecom licences ( 202 )
3,114
1H 2020 Free Cash Flow 8,904 147 (8,244)
1H 2019 EBITDA of Dividends from Interests and Working Capital Capex Investments in Telecom licences Others (2) 1H 2020 Free Cash Flow subsidiaries(1) Asso & JVs taxes paid changes Asso & JVs Free Cash Flow
(1) EBITDA of subsidiaries in 1H 2020 excludes net gains from non-recurring transactions of HK$8.8 billion. (2) Others mainly represents additions and proceeds from disposals of subsidiaries, Asso & JVs and other investments. 8 Financial Profile
Debt Maturity Profile Net Debt
Jun 2020 Dec 2019 Jun 2019 Net debt (1) $205.9bn $202.9bn $212.5bn Net debt to net total capital ratio (1) 25.1% 24.8% 26.2% Credit Ratings
30 Jun 2020 31 Dec 2019 Moody’s A2 (Stable) A2 (Stable) S & P A (Stable) A (Stable) Sufficient to cover 27% of debt due in 2023 Fitch A- (Stable) A- (Stable)
Weighted Average Maturity 5 years
Average Cost of Debt 1.7% 0.4%-pts y.o.y
(1) Total bank and other debts are defined, for the purpose of “Net debt” calculation, as the total principal amount of bank and other debts and unamortised fair value adjustments arising from acquisitions. Net debt is defined as total bank and other debts less total cash, liquid funds and other listed investments. Net total capital is defined as total bank and other debts plus total equity (adjusted to exclude IFRS 16 effects) and loans from non-controlling shareholders net of total cash, liquid funds and other listed investments. The consolidated net debt to net total capital ratio under IFRS 16 basis, after including IFRS 16 impact in total equity is 25.6%. 9 Ports & Related Services
TEUs EBITDA Growth
HK$ m -11% in local currencies 10.3 (-9%) 15.1 (-6%) 38.7m 6,450 ( 43 ) ( 42 ) ( 276 ) • Assets: ( 224 ) 6.1 -8% ( 103 ) (-6%) 5,762 ( 223 ) US$11.9bn 7.2 5,539 (-12%)
1H 2019 HPH Trust Mainland Europe Asia, Australia Corporate 1H 2020 Foreign 1H 2020 EBITDA China and Others (2) costs & Underlying currency EBITDA and Other other port EBITDA translation 291 Berths Hong Kong related impact • EBITDA (1) services 52 Ports
27 Countries 9% 11% Monthly Throughput Change (YoY) 8% $5,539m HPH Trust Mainland China & Other Hong Kong • 38.7m TEUs -14% 10% 10% 22% 0% 0% handled in 50% (-11% in local 1H 2020 currencies) -10% -10% -20% -20% Europe Asia, Australia and Others HPH Trust Mainland China and Other Hong Kong 10% 10% Europe Asia, Australia and Others (2) 0% 0% Corporate costs & other port related services -10% -10% (1) Under Post-IFRS 16 basis, EBITDA was HK$6,958 million. -20% -20% (2) Asia, Australia and Others includes Panama, Mexico and the Middle East. Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun 10 Retail
Store number EBITDA Growth
473 • Assets: 2,388 3,951 HK$ m US$27.4bn 15,836 H&B: -44% in local currencies World’s largest 8,182 • +4% ( 1,444 ) 5,649 3,375 international ( 574 ) 401 ( 930 ) ( 219 ) ( 633 ) ( 157 ) H&B retailer 4,783 4,626
(1) • Operating in EBITDA
25 markets with 1H 2019 H&B H&B H&B H&B Other One-off 1H 2020 Foreign 1H 2020 EBITDA China Asia Western Eastern Retail gain in Underlying currency EBITDA 17% Europe Europe 2019 (2) EBITDA translation 12 retail brands 20% $4,626m impact 15% -43% • 137m loyalty H&B H&B H&B H&B H&B 20% members (-42% in local China Asia Western Europe Eastern Europe Total currencies) EBITDA worldwide 28% Margin % 11% 7% 4% 10% 7%
H&B China H&B Asia • 34% exclusives H&B Western Europe H&B Eastern Europe sales participation Other Retail
(1) Under Post-IFRS 16 basis, EBITDA was HK$9,627 million. (2) During the first half of 2019, ASW formed a joint venture with Yonghui and Tencent and recognised a one-off gain of approximately HK$633 million, with its interest in China supermarket business reduced to 40%. 11 Retail - A Journey to Recovery
H&B China H&B Asia Operating FCFH&B by China Core Business
-30% (-26% in local currency) -18% (-17% in local currencies) • Store traffic reduction improved from the peak of -87% in February to –26% in June -78% -16% -40% -20% Feb Jun Apr Jun • Sales reduction peaked at -78% in February and recovered to -16% in June • MyStore (WeChat Enterprise app) enabling 22+k Beauty Advisors to stay connected with the 63+m loyalty members
Weekly Sales Change (YOY) Store Traffic Weekly Sales Change (YOY) H&B Asia Monthly Sales Change (YOY) Monthly Sales Change (YOY)
60+% • Taiwan, Thailand & Malaysia leading the 2,500+ recovery with sales reduction of only -5%, -7% & -8% in local currencies respectively in June • Philippines is taking longer to recover with sales reduction of -17% in local currency in June as populated areas (such as Metro Manila) are still under quarantine 20+% 750+ • Hong Kong represented only 2% of the Retail division’s revenue in 1H 2020, remains challenging since the close of 0.1% < 1% border in February with tourist comparable sales decline of 2 < 20 over –90% (+30%) Feb Jun Apr Jun Temporary Store Closures Temporary Store Closures
12 Retail - A Journey to Recovery
H&B Western Europe H&B Eastern Europe OperatingH&B FCF Western by Core Europe Business
leading the recovery with sales growth of +5% in -9% (-5% in local currencies) -9% (-2% in local currencies) • Benelux local currency in June • Germany has proved resilient in 1H 2020 with sales and EBITDA growth of +4% and +12% in local currency respectively -27% -5% -27% -4% • UK remains challenging since the country lockdown in March Apr Jun Apr Jun with some improvements towards the end of June following easing of lockdown
H&B Eastern Europe Weekly Sales Change (YOY) Weekly Sales Change (YOY) Monthly Sales Change (YOY) Monthly Sales Change (YOY) • Poland, despite weak consumer sentiment due to a 20+% rising unemployment rate, proved to have robust sales with 1,100+ a decline of only -4% in local currency in June
5+% ~ 1% 130+ < 1% < 70 < 10
Apr Jun Mar Jun (+30%)
Temporary Store Closures Temporary Store Closures 13 Infrastructure
CKI’s reported NPAT (1) Stable Earnings & Dividend Growth
HK$ m
(2) • Assets: 5,943 $2,860m (2) -52% US$29.7bn 2,860
1H 2019 1H 2020
* 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H • Largest CKI’s S&P Credit 2020 Earnings Per Share publicly listed Net Debt Ratio Rating (HK$) infrastructure 2.460 2.430 2.380
13.9% A/Stable 2.260 company on 2.150 2.000 1.860 1.660 SEHK (3) 1.530 1.330
EBITDA 1.201 1.135 1.100 1.000 0.948 0.790 0.715
Infrastructure Division 0.680 0.630 0.600 • Diversified HK$ m (incl. six co-owned assets) 0.680 310
operations in 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H 14,046 270 $13,768m 2020 31 countries 13,498 -4% Dividends Per Share (HK$) 1H 2019 1H 2020 (+1% in local currencies)
co-owned infrastructure assets * Excludes share of one-off gains arising from the spin-off of HKE by PAH and privatisation of Envestra
(1) Post-IFRS16 basis. (2) 1H 2020 included deferred tax charge of HK$1.4 billion as a result of the revision of the UK corporate tax rate glide path from 17% to 19% in 2020 as well as lower earnings contribution from Northumbrian Water from lower allowable returns following tariff reset in April 2020; whereas 1H 2019 included gain on partial disposal of Power Assets of HK$427 million. As the Group rebased Power Assets’ assets to their fair values in the 2015 Reorganisation, after consolidation adjustment, the disposal gain recognised by CKI in first half of 2019 resulted in a loss on disposal of HK$302 million in the Group’s reported EBITDA and EBIT. 14 (3) Under Post-IFRS 16 basis, EBITDA was HK$13,911 million. Energy
Net Loss (1) Production Preserving Value, Positioned For the Future • Assets: C$(2,009)m 272.7 mboe/day Business resilience C$ m US$7.1bn -388% -1% • Strong balance sheet and ample liquidity • 2020 capital cut ~50% to C$1.7bn 698 • Approx. C$150mn cost efficiencies identified to date • Listed on the (1,654) • Well within debt covenants, no debt maturities until 2022 (2,009) 1H 2019 1H 2020 45% (1,053) 276.8 49% 272.7 51% • 90% dividend cut Toronto Stock 55% mboe/day mboe/day • Investment-grade credit rating affirmed by S&P 1H 2019 Underlying One-off 1H 2020 Exchange impairment Asset performance in low price environment charge • • Integrated Corridor: Sizable downstream & midstream
Heavy crude oil & bitumen segments capture margins • Integrated Attributable LBITDA • Offshore: includes long-term contracted prices in Asia (2) Other oil & gas Corridor – to CKHH Positioned for value capture Canada & US • Deep physical integration HK$(2,751)m • Flexibility to adjust upstream production to price conditions Upstream, -158% • Ability to optimise throughput and refined product slate to Midstream and (-160% in local currency) meet market demands 33.89 • Offshore production has direct access to markets HK$ m 29.32 Downstream • Dedicated transportation and storage capacity 4,713 ( 4,418 ) 9.23 businesses 6.15 Improving safety, reliability & ESG performance 2.09 1.72 (3,102) (2,751) • Target to be top quartile in 2022 56 2016 Average benchmark prices 2020 Q1 Q2 • ESG performance & transparency 1H 2019 Underlying One-off Foreign 1H 2020 • Offshore – impairment currency NYMEX natural gas (US$/mmbtu) • Define carbon intensity targets charge(3) translation Brent Crude Oil (US$/bbl) production in Chicago 3:2:1 crack spread (US$/bbl) • Diversity targets Atlantic and (1) Represents Husky’s Post-IFRS 16 net loss for the six months ended 30 June 2020. (2) Under Post-IFRS 16 basis, the Group’s share of LBITDA was HK$2,609 million. Asia Pacific (3) Represents the Group’s share of non-cash impairment charge (before-tax) in Q1 2020. 15 Telecommunications - 3 Group Europe
Total Revenue EBITDA $40,524m HK$ m -7% -7% in local currencies (-3% in local currencies) $14,449m 428
KPI -11% 16,297 (-7% in local ( 837 ) Active mobile customers 77 80 currencies) 52 16 38.7m -7% ( 1,028 ) 15,085
12-month trailing Net AMPU ( 636 ) 14,449 €11.24 +1%
Data Usage 1H 2019 UK Italy - Italy - Sweden Denmark Austria Ireland 1H 2020 Foreign 1H 2020 EBITDA underlying one-time Underlying currency EBITDA income in EBITDA translation 2,560 pb/ half yr +39% 1H2019 impact +8% +5% +6% +5% 5G capabilities +4% EBITDA 5G rollout continues Launched largest 5G Network Change % with leading spectrum on 2100 MHz covering six (in local currencies) cities portfolio -25% Best network based on Go live with services offering UK Italy - Sweden Denmark Austria Ireland independent survey to including FWA and connected underlying complement 5G roll-out products utilising the broadest 5G spectrum from Q4 2020 EBITDA Margin % 30% 44% 47% 37% 51% 41%
(1) Under Post-IFRS 16 basis, EBITDA was HK$17,974 million 16 Telecommunications - CKHGT
UK Italy Sweden Denmark Austria Ireland 3 Group Europe In million GBP EURO SEK DKK EURO EURO HK$
1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019
Total Revenue 1,116 1,167 2,324 2,398 3,249 3,238 1,127 1,054 417 425 294 296 40,524 43,464 % change -4% -3% - +7% -2% -1% -7% Local currencies change % -3% Total margin 713 721 1,740 1,718 2,019 1,935 880 837 309 308 229 224 28,899 29,871 % change -1% +1% +4% +5% - +2% -3% Local currencies change % +1% TOTAL CACs (391) (408) (176) (230) (1,105) (1,166) (123) (124) (50) (60) (39) (42) (7,068) (8,198) Less: Handset Revenue 280 323 141 201 877 913 49 49 45 53 35 39 5,360 6,694 Total CACs (net of handset revenue) (111) (85) (35) (29) (228) (253) (74) (75) (5) (7) (4) (3) (1,708) (1,504) Operating Expenses (351) (302) (747) (664) (665) (617) (403) (373) (115) (121) (119) (123) (12,742) (12,070) Opex as a % of total margin 49% 42% 43% 39% 33% 32% 46% 45% 37% 39% 52% 55% 44% 40% EBITDA - Underlying 251 334 958 910 1,126 1,065 403 389 189 180 106 98 14,449 15,269 % change -25% +5% +6% +4% +5% +8% -5% Local currencies change % -1% One-time income - - - 115 ------1,028 EBITDA 251 334 958 1,025 1,126 1,065 403 389 189 180 106 98 14,449 16,297 % change -25% -7% +6% +4% +5% +8% -11% Local currencies change % -7% EBITDA margin %(1) 30% 40% 44% 47% 47% 46% 37% 39% 51% 48% 41% 38% 41% 44% Depreciation & Amortisation (165) (163) (386) (333) (559) (469) (206) (180) (75) (67) (61) (59) (6,727) (6,327) EBIT - Underlying 86 171 572 577 567 596 197 209 114 113 45 39 7,722 8,942 % change -50% -1% -5% -6% +1% +15% -14% Local currencies change % -10% One-time income - - - 115 ------1,028 EBIT 86 171 572 692 567 596 197 209 114 113 45 39 7,722 9,970 % change -50% -17% -5% -6% +1% +15% -23% Local currencies change % -19% Capex (excluding licence) (192) (155) (348) (352) (606) (549) (82) (80) (58) (68) (72) (56) (6,650) (6,320) EBITDA less Capex 59 179 610 673 520 516 321 309 131 112 34 42 7,799 9,977 Licence(2) ------(488) - (52) - - - (1,045)
(1) EBITDA margin % represents EBITDA as a % of total revenue excluding handset revenue. (2) 1H 2019 licence cost for Austria represents investment for 10x10 MHz of 3500 MHz spectrum acquired in March 2019 and the licence cost for Denmark represents investment for 2x10 MHz of 700 MHz spectrum and 2x10MHz of 900MHz spectrum acquired in March 2019.
17 Telecommunications - CKH Networks
Project Timeline Key Highlights
July 2020 Towers Completion of Reorganisation and 29,100 CKHN operational Tenancy Ratio 1.2x
Geographical Presence
June 2020 March 2021 Senior management Pro forma FY2020 results teams appointed – CEO (1) overseeing local teams Pro Forma FY 2020 EBITDA including 6 local Managing Directors ~€300m
(1) Assumes set-up of CKH Networks completed on 1 January 2020 18 Telecommunications - HAT
Total Revenue EBITDA $4,521m + 5% HK$ m (+8% in local currencies) $872m(1) +25% in local currencies
35 +20% 23 197 KPI ( 30 ) (+25% in local 902 currencies) 872
724 ( 77 ) Active mobile customer account 48.8m +7%
Data Usage 1H 2019 Indonesia Vietnam Sri Lanka Corporate 1H 2020 Foreign 1H 2020 EBITDA costs Underlying currency EBITDA EBITDA translation 1,974.0 pb/ half yr +42% impact
(1) Under Post-IFRS 16 basis, EBITDA was HK$2,065 million. 19
Towards Better GROWTH and a Sustainable FUTURE
Inaugural sustainability report Improving CDP reporting kicking off with CKHGT Disclosure Next Actions: Seeking stakeholder feedback for continuous improvement to disclosure
Board-level Sustainability Committee established Strengthening Sustainability committees at the business-unit level in place Semi-annual sustainability risk assessment setup Governance Next Actions: Setting group-wide goals and targets
Targeting 8% reduction in carbon intensity across the Group Commitment to Business-level climate commitments being set, both medium and long term, e.g. Climate Action Husky is aspiring to achieve net zero emissions by 2050 Next Actions: Focusing on important frameworks and assessments: TCFD, CDP and SBTi
21 Material Sustainability Issues by Division
Anti-Corruption
Product Responsibility
Data Privacy
Supply Chain Management
Labour Management
Occupational Health and Safety
Community Engagement
Greenhouse Gas (GHG) Emissions
Waste Management
Opportunities in Clean Technology
Land Use and Reclamation
Environmental Management
Ports and Related Services Retail Infrastructure Energy Telecommunications
22 Q & A 2020 Interim Results Appendix Analyses of Core Business Segments by Geographical Location