CK HUTCHISON HOLDINGS LIMITED Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
HIGHLIGHTS
Post-IFRS 16(1) Basis | |||
Reported | |||
2020 | 2019 | currency | |
HK$ million | HK$ million | change | |
Total Revenue (2) | 403,846 | 439,856 | -8% |
Total EBITDA (2) | 122,348 | 136,049 | -10% |
Total EBIT (2) | 58,304 | 75,344 | -23% |
Profit attributable to ordinary shareholders | 29,143 | 39,830 | -27% |
Earnings per share (3) | HK$7.56 | HK$10.33 | -27% |
Final dividend per share | HK$1.70 | HK$2.30 | -26% |
Full year dividend per share | HK$2.314 | HK$3.170 | -27% |
Pre-IFRS 16(1) Basis | |||
Reported | |||
2020 | currency | ||
HK$ million | change | ||
Total Revenue (2) | 403,846 | -8% | |
Total EBITDA (2) | 96,944 | -13% | |
Total EBIT (2) | 53,854 | -24% | |
Profit attributable to ordinary shareholders | 29,000 | -27% |
Local 2019 currencies
HK$ millionchange
439,856 -8%
112,068 -13%
71,108 -24%
39,888 -28%
(1) As Hong Kong Financial Reporting Standards are fully converged with International Financial Reporting Standards in the accounting for leases, for ease of reference, International Financial Reporting Standard 16 "Leases" ("IFRS 16") and the precedent lease accounting standard International Accounting Standard 17 "Leases" ("IAS 17") are referred to in this results announcement interchangeably with Hong Kong Financial Reporting Standard 16 "Leases" ("HKFRS 16") and Hong Kong Accounting Standard 17 "Leases" ("HKAS 17"), respectively. 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 reflects 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 year ended 31 December 2019 and 2020. Unless otherwise specified, the discussion of the Group's operating results in this results announcement is on a Pre-IFRS 16 basis as mentioned above.
(2) Total 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") include the Group's proportionate share of associated companies and joint ventures' respective items.
(3) Earnings per share for the year ended 31 December 2020 and 2019 is calculated based on profit attributable to ordinary shareholders.
CHAIRMAN'S STATEMENT
As for most enterprises globally, 2020 has been a year of unprecedented challenges. The Group has been affected by the pandemic and the significant reduction in oil and gas and refined products prices. However, following a solid recovery in Mainland China from the second quarter and the stabilising effects of very substantial fiscal and monetary support by governments and central banks around the world throughout the year, economic conditions in many of the countries in which we operate have generally improved in the second half.
Although some economic recovery in the second half benefited the Group's businesses which were hit hardest in the first half, particularly the Retail and Ports businesses, this was not sufficient to offset the very material declines in the earnings reported in the first half. In addition, the operating losses and asset impairments recognised by Husky Energy ("Husky") continued to negatively affect the Group's reported net earnings throughout the year.
The material earnings decline was more than offset by transaction activities undertaken at the corporate level. In the year, the Group successfully executed or completed several major transactions. These included completion of the merger between Vodafone Hutchison Australia ("VHA") and TPG Corporation Limited, conclusion of agreements for the disposal of the Group's European Telecommunications Tower Assets to Cellnex Telecom ("Cellnex") for an aggregate consideration of €10 billion, completion of tower sales to Cellnex in three countries in December 2020, as well as the merger between Husky and Cenovus Energy Inc. ("Cenovus Energy"), which was completed on 1 January 2021. These corporate transactions together with prudent cash management have enabled the Group to maintain its strong financial profile and investment grade ratings. The Group's net debt to net total capital ratio(1) at year end was 22.2% (2019: 24.8%).
On a Pre-IFRS 16 basis, EBITDA and EBIT decreased 13% and 24% respectively against last year, primarily reflecting the adverse full year performances due to the pandemic. Comparing against the first half of the year, excluding the one-time transactional gains, as well as the Group's share of Husky's impairments and other charges in both halves, all operations have seen some recovery in the second half, with the overall underlying EBITDA and EBIT increasing 38% and 65% respectively against the first six months of 2020.
On a Pre-IFRS 16 basis, profit attributable to ordinary shareholders for 2020 of HK$29,000 million, a decrease of 27% compared to 2019. On a Post-IFRS 16 basis, profit attributable to ordinary shareholders of HK$29,143 million decreased by 27% from 2019. Earnings per share were HK$7.56 for the year ended 31 December 2020, a decrease of 27%.
The Group's results in 2020 included the net gain attributable to shareholders from the disposal of the European telecommunications tower assets(2) that completed in 2020 of HK$16.6 billion, as well as a dilution gain from the merger of VHA with TPG Corporation Limited(3) of HK$9.2 billion. These gains were partly offset by the Group's share of Husky's impairments and other charges, after tax, of HK$18.7 billion in 2020.
(1) The consolidated net debt to net total capital ratio under IFRS 16 basis, after including IFRS 16 impact in total equity, was 22.7% (2019:
25.3%).
(2) Under Post-IFRS 16 basis, the net gain attributable to shareholders was HK$16.8 billion. For further information, please see Note
5(b)(xviii) to the Financial Statements of this Announcement.
(3) Under Post-IFRS 16 basis, the net gain attributable to shareholders was HK$9.2 billion. For further information, please see Note
5(b)(xix) to the Financial Statements of this Announcement.
Dividend
The Board of Directors recommends a final dividend of HK$1.70 per share (2019 final dividend - HK$2.30 per share), payable on Thursday, 3 June 2021, to shareholders whose names appear on the Register of Members of the Company at the close of business on Thursday, 20 May 2021, being the record date for determining shareholders' entitlement to the proposed final dividend. Combined with the interim dividend of HK$0.614 per share, the full year dividend amounts to HK$2.314 per share (2019 full year dividend - HK$3.170 per share).
Ports and Related Services
The Ports and Related Services division handled 83.7 million twenty-foot equivalent units ("TEU") through 283 operating berths in 2020, a 3% decline compared to 2019. Lower volumes were primarily attributable to poor performance in the first half of 2020 arising from the critical disruption of trade flows and supply chains due to the spread of the pandemic. In certain regions, the situation improved in the second half of 2020, with throughput volume increasing 16% and 2% against the first half of 2020 and the second half of last year respectively, demonstrating the gradual recovery and stabilisation of the trade volumes across all regions, particularly in the Mainland where volumes in the second half exceeded the same period last year. These improvements were partly offset by the concession expiry of Dammam port in Saudi Arabia in September 2020. For the full year, Revenue of HK$32,865 million, EBITDA(4) of HK$10,914 million and EBIT(4) of HK$6,717 million were 7%, 19% and 26% lower respectively against 2019. Despite the throughput growth, EBITDA and EBIT in the second half were 3% and 6% lower respectively compared to the first half of 2020, primarily due to the concession expiry in Dammam and the corresponding closure provisions made in the second half.
In August 2020, this division entered into an agreement to develop and operate a new container terminal in Abu Qir, Egypt, with a total quay length of 1,200 metres. This division holds 61% interest in the new terminal which has a concession period of 38 years and the first phase is expected to commence operations in 2022.
In February 2021, this division has agreed to invest and operate multipurpose terminals within the Jazan City for Primary and Downstream Industries in Saudi Arabia which will be developed in two phases, offering a combined total of 1,270 metres of berth length in Phase 1.
As market uncertainties are likely to persist for some time given the current outlook, this division will continue to exercise rigorous cost discipline, focus on health and operational safety and maintain a prudent approach to capital expenditures and investments.
(4) Under Post-IFRS 16 basis, EBITDA was HK$13,748 million (2019: HK$16,092 million); EBIT was HK$8,055 million (2019: HK$10,216 million).
Retail
The Retail division had 16,167 stores across 27 markets at the end of 2020. Despite a 2% increase in store portfolio compared to 2019, the division experienced a material impact on sales starting from February as the pandemic spread globally. As a result, for the full year, Revenue, EBITDA(5) and EBIT(5) of HK$159,619 million, HK$14,397 million and HK$10,933 million decreased by 6%, 15% and 20% respectively. Excluding a one-off dilution gain recognised in the first half of 2019, EBITDA and EBIT decreased by 11% and 16% respectively. Following the gradual easing of the restrictive lockdowns in the second half, EBITDA and EBIT increased significantly by 111% and 168% respectively when compared to the first half of 2020. Comparing against the second half of 2019, EBITDA and EBIT both increased by 12%. The robust recovery was the result of the strategic decision to drive further digital transformation to accelerate the integration of physical store portfolio and online channels which helped boost eCommerce sales growth by 90% in 2020. Together with the continuing focus on customer engagement, the division's loyalty member base continues to increase, reaching 139 million with 65% sales participation.
In the Mainland, temporary store closures peaked at around 2,500 stores in February, resulting in a year-on-year reduction in EBITDA of 62% in the first half of 2020. As the pandemic related restriction measures gradually eased off, almost all stores reopened by the end of April with steady store traffic recovery. In the second half of 2020, the year-on-year decline in EBITDA narrowed to 13%, which was less adverse than the store traffic reduction of 23% as sales are recovered through its digital channels.
In Europe and Asia, footfall was severely impacted by lockdown measures beginning in late March. The division's major operations are in essential businesses which allowed stores to remain open during the lockdown periods partially mitigating declines. Health and Beauty operations in Europe delivered a very strong recovery in the second half, by turning around a year-on-year reduction in EBITDA of 39% in the first half to an EBITDA growth of 14% in the second half of 2020, primarily from the Benelux countries and Germany. Health and Beauty operations in Asia also narrowed its year-on-year EBITDA decline from 39% in the first half to only 3% in the second half of 2020. Singapore, Malaysia, Thailand and Turkey all recorded EBITDA growth in the second half.
As the Group moves into 2021, whilst the market conditions and sentiments continue to be uncertain, health and beauty products remain essential daily consumables. The Retail division will continue with its strategic direction in accelerating its "Online plus Offline" platform strategy to enhance its recovery path.
(5) Under Post-IFRS 16 basis, EBITDA was HK$24,557 million (2019: HK$27,023 million); EBIT was HK$11,889 million (2019: HK$14,705 million).
Infrastructure
The Infrastructure division comprises a 75.67%(6) interest in CK Infrastructure Holdings Limited ("CKI"), a subsidiary listed in Hong Kong as well as 10% of the economic benefits deriving from the Group's direct holdings in six co-owned infrastructure investments with CKI.
Total EBITDA(7) of this division of HK$29,066 million was 2% higher than 2019, whereas EBIT(7) of HK$18,488 million was 4% lower. The higher EBITDA was mainly driven by the gain on disposal of Portugal Renewable Energy in October 2020, partly offset by pandemic and adverse foreign currency translation impacts, as well as lower earnings from Northumbrian Water which entered a new regulatory regime in April 2020. EBIT was lower due to higher depreciation and amortisation mainly from Energy Developments in Australia and UK Rails that more than offset the EBITDA growth.
CKI
CKI announced a net profit attributable to shareholders under Post-IFRS 16 basis of HK$7,320 million, 30% lower than last year. Excluding the deferred tax charge of HK$1.4 billion in the year as a result of the revision of the UK corporate tax rate glide path from 17% to 19% in 2020, the pandemic impacts, as well as the higher depreciation as mentioned above, net profit decreased 7% in 2020 compared to 2019.
A number of CKI's regulated businesses have gone through or will go through challenging regulatory resets. This was evident in Northumbrian Water's new determination as set by the regulator in 2020 which was more stringent than in previous periods. In 2021, a number of regulated business in the UK and Australia are scheduled to enter new regulatory regimes. Anticipated lower allowable returns given the current low interest rate environment and the stringent stance taken by regulators are expected to result in lower revenues for these operations. Depending on outcomes, declining revenue outlooks and recent transaction multiples may affect the Group's valuations in relation to CKI and some or all of its businesses.
(6) Based on the Group's profit sharing ratio in CKI.
(7)
Under Post-IFRS 16 basis, EBITDA was HK$29,367 million (2019: HK$28,751 million); EBIT was HK$18,537 million (2019: HK$19,259 million).
Energy
In January 2021, Cenovus Energy Inc. ("Cenovus Energy"), a Canadian integrated oil and natural gas company listed on the Toronto and New York stock exchanges, announced the completion of the combination of Cenovus Energy and Husky. The merger creates Canada's third largest oil and natural gas producer, based on total company production, with about 750,000 barrels of oil equivalent per day ("boe/day") of low-cost oil and natural gas production. The combined company also becomes the second largest Canadian-based refiner and upgrader, with total North American refining and upgrading capacity of approximately 660,000 barrels per day ("bbls/day"). Cenovus Energy anticipates to achieve approximately C$1 billion of synergies in 2021, which combined with the strong portfolio of well-matched upstream production, midstream and downstream assets, as well as improved financial strength, are expected to generate value enhancement for the Group.
Post-completion, Husky was delisted from the Toronto Stock Exchange and the Group currently holds approximately 15.71% of Cenovus Energy, together with warrants representing a further 1.08% to 16.79%(8). The results of the Energy division reported in 2020 represent the Group's 40.19% share of Husky's results for the year.
Husky announced Post-IFRS 16 net loss of C$10,016 million for 2020, as compared to the net loss of C$1,370 million for 2019, primarily due to the impairment charges, as well as operational challenges in 2020, including significant crude oil demand reduction due to the pandemic, increased global crude oil supplies in the first half of 2020 as OPEC negotiations broke down, and the Government of Alberta's mandatory production quotas introduced in 2019 which were only lifted in December 2020. As a result of the declines in forecasted long-term commodity prices, reduced capital investment and delayed future development plans, as well as market indicators including the merger with Cenovus Energy, Husky recognised in total C$8.6 billion in 2020 of non-cash after-tax impairments and other charges (2019: C$2.3 billion).
The Group's 40.19% share of the impairment and other charges, after consolidation adjustments, of HK$24,909 million and HK$5,983 million in 2020 and 2019 respectively, were included in the Group's EBITDA and EBIT results. Together with the adverse underlying operating results, the Group's share of LBITDA(9) and LBIT(9) in 2020 were HK$23,003 million and HK$28,096 million respectively, compared to EBITDA and LBIT of HK$3,139 million and HK$3,004 million respectively in 2019.
(8) On a partially-diluted basis assuming the exercise of the Cenovus Energy common share purchase warrants held by the Group.
(9)
Under Post-IFRS 16 basis, the Group's share of LBITDA was HK$22,746 million (2019: EBITDA of HK$3,480 million); LBIT was HK$28,020 million (2019: LBIT of HK$2,974 million).
CK Hutchison Group Telecom
In November 2020, the Group entered into an agreement to dispose of its European telecommunications tower assets for an aggregate consideration of €10 billion. Following the transactions, the Group will be able to increase its focus on developing its networks and IT platforms, and will retain optionality to accelerate the rollout of its 5G networks, while benefiting from significant additional financial capacity to support future growth and opportunities. The disposals of tower assets in Denmark, Austria and Ireland, pursuant to this agreement, were completed in December 2020 and as a result the Group recognised a disposal gain(10) of HK$16,583 million.
Revenue of this division of HK$90,663 million (€10,231 million) was 3% lower than 2019, whereas EBITDA(11) and EBIT(11) of HK$48,540 million (€5,309 million) and HK$32,581 million (€3,512 million) respectively were 37% and 54% higher than 2019 respectively, primarily due to the aforementioned disposal gain.
3 Group Europe
As at 31 December 2020, 3 Group Europe's active customer base stands at 38.5 million, 5% below last year mainly due to lower customer bases in Wind Tre and in the UK, partly offset by net additions in other operations. 3 Group Europe's Revenue, EBITDA(12) and EBIT(12) of HK$85,799 million, HK$31,378 million and HK$16,270 million were 3%, 7% and 20% lower than 2019 respectively in local currencies. The telecommunications businesses have been less affected by the pandemic than the Group's other businesses. Total margin was flat against 2019 in local currencies, primarily driven by increased proportion of higher margin customers, fully offset by lower roaming revenues and certain regulatory impacts introduced since mid-2019. 3 Group Europe's EBITDA and EBIT were adverse year-on-year, primarily due to certain one-time income in 2019, as well as higher operating costs in the UK from escalating annual licence fees and continued dual costs from IT transformation. EBIT of the 3 Group Europe was further impacted by the increase in depreciation and amortisation from a higher asset base from its significant investments in IT and networks. Excluding the impact of one-time items in 2019, underlying EBITDA of 3 Group Europe was the same as last year but EBIT was 9% lower than 2019 in local currencies. Majority of the operations have seen gradual recovery with underlying EBITDA in the second half of 2020 improved against the first half, reflecting margin enhancements and disciplined cost spending, especially in the UK where meaningful improvements have been seen following the replacement of most of the senior management team.
3 Group Europe operations are in varying stages of introducing 5G capabilities, with strong network and spectrum assets available to deploy and support the development of emerging 5G opportunities in all its markets.
(10) Under Post-IFRS 16 basis, the net gain attributable to shareholders was HK$16,763 million. For further information, please see Note 5(b)(xviii) to the Financial Statements of this Announcement.
(11) Under Post-IFRS 16 basis, EBITDA was HK$56,706 million (2019: HK$42,417 million); EBIT was HK$33,484 million (2019: HK$21,987 million).
(12) Under Post-IFRS 16 basis, EBITDA was HK$38,929 million (2019: HK$40,126 million); EBIT was HK$16,982 million (2019: HK$20,952 million).
Hutchison Telecommunications Hong Kong
HTHKH, our Hong Kong listed telecommunications subsidiary operating in Hong Kong and Macau, announced Post-IFRS 16 profit attributable to shareholders of HK$361 million and earnings per share of 7.49 HK cents. As of 31 December 2020, HTHKH had approximately 3.3 million active mobile customers in Hong Kong and Macau. The full deployment of the ultra-fast, low-latency 5G network with extensive territory-wide 5G radio sites coverage was completed during the year, a significant milestone towards building a 5G smart city.
Hutchison Asia Telecommunications
As of 31 December 2020, Hutchison Asia Telecommunications ("HAT") had approximately 57.0 million active customer accounts, 25% higher than 2019, primarily driven by the growth of its largest operation, Indonesia, which reported 31% growth in active customer accounts. Despite reporting 25% growth in active customer accounts growth, revenue of HK$9,147 million in 2020 only represented an increase of 2% compared to 2019, reflecting market pressure of aggressive pricing from other incumbents in Indonesia. EBITDA(13) and EBIT(13) of HK$2,034 million and HK$544 million were 6% and 48% lower than 2019 respectively, primarily due to higher operating costs from network expansion in all operations completed during 2019 and 2020 and non-recurring exchange gains recognised in 2019. EBIT was further impacted by the increase in depreciation and amortisation reflecting the higher network asset base due to the network rollouts and enhancements.
In December, the Group announced that it has entered into exclusive negotiations with Ooredoo Telecom relative to a potential merger of its subsidiary PT Indosat TBK with the Group's subsidiary in Indonesia.
(13) Under Post-IFRS 16 basis, EBITDA was HK$4,362 million (2019: HK$4,328 million); EBIT was HK$1,480 million (2019: HK$2,032 million).
Finance & Investments and Others
The Group's liquidity and financial profile remain strong. Consolidated cash and liquid investments totalled HK$166,539 million and consolidated total bank and other debts( 14 ) amounted to HK$351,837 million, resulting in consolidated net debt(14) of HK$185,298 million and net debt to net total capital ratio(14) of 22.2% (31 December 2019 - 24.8%).
Sustainability response to COVID-19
Faced with the unprecedented challenge of the COVID-19 pandemic in 2020, the Group's top priority has been supporting its employees, customers and communities. The Group implemented a host of safety measures for employees, from distributing face masks daily and conducting temperature checks, to offering flexible working programmes where applicable. Amongst our employees caseloads, hospital admissions and morbidity have trended well below national averages throughout the pandemic. In addition to ensuring rigorous social distancing measures at all premises, customers have also been offered financial relief such as deferred energy charges for those experiencing hardship through the infrastructure division. The Group's community engagement initiatives in 2020 prioritised supporting local healthcare providers and addressing the needs of the vulnerable with the Ports division donated hospital beds, ventilators, and personal protective equipment to local hospitals, the Retail division in the UK became one of several high-street retailers to support the vaccine rollout, and the Telecommunications division offered free internet access, tablets and laptops to disadvantaged school children to enable online learning.
(14) 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, was 22.7% (2019: 25.3%).
Outlook
Looking ahead into 2021, with the spread of the pandemic being well contained, economic growth will be sustained in the Mainland. However, the outlook for the year remains unclear for other major economies with uncertainties surrounding the threat level posed by new virus variants, substantial geopolitical risks, as well as risks to trade stability, risks arising from Brexit, and macro-economic risks associated with the unprecedented levels of global debt. Nevertheless, with the expected easing of the pandemic following rollout of effective vaccination programs globally, economic conditions should improve.
In 2020, the Group reacted quickly to rapidly changing business environments by accelerating digitalisation, enhancing its retail "online plus offline" platform strategy and maintaining stringent cost control at all levels. The Group also emphasised working capital management measures across all businesses, resulting in a significant improvement in free cash flow against 2019.
In 2021, the Group will continue to react nimbly to changing business conditions, which will likely be similar to the second half of 2020, while continuing to prioritise health and safety for our employees and our customers and preserving our strong balance sheet and liquidity. The Group's year end net debt to net total capital ratio of 22.2% is expected to be further reduced following the various transactions completing in 2021. The Group is in a strong financial position and expects a solid performance in 2021.
I would like to thank the Board of Directors and all our dedicated employees around the world for their continued loyalty, diligence, professionalism and contributions to the Group.
Victor T K Li
Chairman
Hong Kong, 18 March 2021
Operations Review
Financial Performance Summary
Pre-IFRS 16 (1) | Pre-IFRS 16 (1) | Local currencies | ||||
2020 | 2019 | Change | change | |||
HK$ million | % | HK$ million | % | % | % | |
Revenue (2) | ||||||
Ports and Related Services (2) | 32,865 | 8% | 35,375 | 8% | -7% | -5% |
Retail | 159,619 | 40% | 169,225 | 38% | -6% | -6% |
Infrastructure | 52,792 | 13% | 51,191 | 12% | 3% | 4% |
Energy | 31,179 | 8% | 47,618 | 11% | -35% | -33% |
CK Hutchison Group Telecom | 90,663 | 22% | 93,517 | 21% | -3% | -4% |
Hutchison Asia Telecommunications | 9,147 | 2% | 8,984 | 2% | 2% | 6% |
Finance & Investments and Others | 27,581 | 7% | 33,946 | 8% | -19% | -18% |
Total Revenue | 403,846 | 100% | 439,856 | 100% | -8% | -8% |
EBITDA (2) | ||||||
Ports and Related Services (2) | 10,914 | 12% | 13,405 | 12% | -19% | -17% |
Retail | 14,397 | 15% | 16,891 | 15% | -15% | -16% |
Infrastructure | 29,066 | 30% | 28,488 | 25% | 2% | 3% |
Energy | (23,003) | -24% | 3,139 | 3% | -833% | -835% |
Underlying | 1,906 | 2% | 9,122 | 8% | -79% | -80% |
One-off impairment and other charges (3) | (24,909) | -26% | (5,983) | -5% | -316% | -316% |
CK Hutchison Group Telecom | 48,540 | 50% | 35,341 | 32% | 37% | 37% |
Hutchison Asia Telecommunications | 2,034 | 2% | 2,167 | 2% | -6% | -3% |
Finance & Investments and Others | 14,996 | 15% | 12,637 | 11% | 19% | 19% |
Total EBITDA | 96,944 | 100% | 112,068 | 100% | -13% | -13% |
EBIT (2) | ||||||
Ports and Related Services (2) | 6,717 | 12% | 9,061 | 13% | -26% | -24% |
Retail | 10,933 | 20% | 13,671 | 19% | -20% | -21% |
Infrastructure | 18,488 | 34% | 19,220 | 27% | -4% | -3% |
Energy | (28,096) | -52% | (3,004) | -4% | -835% | -841% |
Underlying | (3,187) | -6% | 2,979 | 4% | -207% | -213% |
One-off impairment and other charges (3) | (24,909) | -46% | (5,983) | -8% | -316% | -316% |
CK Hutchison Group Telecom | 32,581 | 61% | 21,131 | 30% | 54% | 54% |
Hutchison Asia Telecommunications | 544 | 1% | 1,055 | 1% | -48% | -46% |
Finance & Investments and Others | 12,687 | 24% | 9,974 | 14% | 27% | 26% |
Total EBIT | 53,854 | 100% | 71,108 | 100% | -24% | -24% |
Interest Expenses and other finance Costs (2) | (15,139) | (15,657) | 3% | |||
Profit Before Tax | 38,715 | 55,451 | -30% | |||
Tax (2) | ||||||
Current tax | (7,557) | (7,814) | 3% | |||
Deferred tax | 6,087 | 113 | 5287% | |||
(1,470) | (7,701) | 81% | ||||
Profit after tax | 37,245 | 47,750 | -22% | |||
Non-controlling interests and perpetual capital | ||||||
securities holders' interests | (8,245) | (7,862) | -5% | |||
PROFIT ATTRIBUTABLE TO ORDINARY | ||||||
SHAREHOLDERS ("NPAT") | 29,000 | 39,888 | -27% | -28% |
Note 1:As Hong Kong Financial Reporting Standards are fully converged with International Financial Reporting Standards in the accounting for leases, for ease of reference, International Financial Reporting Standard 16 "Leases" ("IFRS 16") and the precedent lease accounting standard International Accounting Standard 17 "Leases" ("IAS 17") are referred to in this results announcement interchangeably with Hong Kong Financial Reporting Standard 16 "Leases" ("HKFRS 16") and Hong Kong Accounting Standard 17 "Leases" ("HKAS 17"), respectively. 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 reflects 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, interest expenses and other finance costs, tax, non-controlling interests and perpetual capital securities holders' interests and profit attributable to ordinary shareholders prepared under the Pre-IFRS 16 basis relating to the accounting for leases for the years ended 31 December 2019 and 2020. Unless otherwise specified, the discussion of the Group's operating results in this results announcement is on a Pre-IFRS 16 basis as mentioned above.
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:
Represents the Group's share of Husky's impairment and other charges after consolidation adjustments.
16
CK Hutchison Holdings Limited
Financial Performance Summary
Post-IFRS 16 (1) | Post-IFRS 16 (1) | ||||
2020 | 2019 | Change | |||
HK$ million | % | HK$ million | % | % | |
Revenue (2) | |||||
Ports and Related Services (2) | 32,865 | 8% | 35,375 | 8% | -7% |
Retail | 159,619 | 40% | 169,225 | 38% | -6% |
Infrastructure | 52,792 | 13% | 51,191 | 12% | 3% |
Energy | 31,179 | 8% | 47,618 | 11% | -35% |
CK Hutchison Group Telecom | 90,663 | 22% | 93,517 | 21% | -3% |
Hutchison Asia Telecommunications | 9,147 | 2% | 8,984 | 2% | 2% |
Finance & Investments and Others | 27,581 | 7% | 33,946 | 8% | -19% |
Total Revenue | 403,846 | 100% | 439,856 | 100% | -8% |
EBITDA (2) | |||||
Ports and Related Services (2) | 13,748 | 11% | 16,092 | 12% | -15% |
Retail | 24,557 | 20% | 27,023 | 20% | -9% |
Infrastructure | 29,367 | 24% | 28,751 | 21% | 2% |
Energy | (22,746) | -18% | 3,480 | 3% | -754% |
Underlying | 2,163 | 2% | 9,463 | 7% | -77% |
One-off impairment and other charges (3) | (24,909) | -20% | (5,983) | -4% | -316% |
CK Hutchison Group Telecom | 56,706 | 46% | 42,417 | 31% | 34% |
Hutchison Asia Telecommunications | 4,362 | 4% | 4,328 | 3% | 1% |
Finance & Investments and Others | 16,354 | 13% | 13,958 | 10% | 17% |
Total EBITDA | 122,348 | 100% | 136,049 | 100% | -10% |
EBIT (2) | |||||
Ports and Related Services (2) | 8,055 | 14% | 10,216 | 14% | -21% |
Retail | 11,889 | 20% | 14,705 | 19% | -19% |
Infrastructure | 18,537 | 32% | 19,259 | 26% | -4% |
Energy | (28,020) | -48% | (2,974) | -4% | -842% |
Underlying | (3,111) | -5% | 3,009 | 4% | -203% |
One-off impairment and other charges (3) | (24,909) | -43% | (5,983) | -8% | -316% |
CK Hutchison Group Telecom | 33,484 | 57% | 21,987 | 29% | 52% |
Hutchison Asia Telecommunications | 1,480 | 3% | 2,032 | 3% | -27% |
Finance & Investments and Others | 12,879 | 22% | 10,119 | 13% | 27% |
Total EBIT | 58,304 | 100% | 75,344 | 100% | -23% |
Interest Expenses and other finance Costs (2) | (19,591) | (20,117) | 3% | ||
Profit Before Tax | 38,713 | 55,227 | -30% | ||
Tax (2) | |||||
Current tax | (7,538) | (7,834) | 4% | ||
Deferred tax | 6,227 | 215 | 2796% | ||
(1,311) | (7,619) | 83% | |||
Profit after tax | 37,402 | 47,608 | -21% | ||
Non-controlling interests and perpetual capital | |||||
securities holders' interests | (8,259) | (7,778) | -6% | ||
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS ("NPAT") | 29,143 | 39,830 | -27% |
Note 1: | As Hong Kong Financial Reporting Standards are fully converged with International Financial Reporting Standards in the accounting for leases, for ease of |
reference, International Financial Reporting Standard 16 "Leases" ("IFRS 16") and the precedent lease accounting standard International Accounting Standard 17 | |
"Leases" ("IAS 17") are referred to in this results announcement interchangeably with Hong Kong Financial Reporting Standard 16 "Leases" ("HKFRS 16") and Hong | |
Kong Accounting Standard 17 "Leases" ("HKAS 17"), respectively. | |
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: | Represents the Group's share of Husky's impairment and other charges after consolidation adjustments. |
2020 Annual Report
17
Independent Auditor's Report
To the Shareholders of CK Hutchison Holdings Limited
(incorporated in the Cayman Islands with limited liability)
Opinion
What we have audited
The consolidated financial statements of CK Hutchison Holdings Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 19 to 133, which comprise:
the consolidated and Company statements of financial position as at 31 December 2020;
the consolidated income statement for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant accounting policies.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and of the Group as at 31 December 2020, and of its consolidated profit and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.
Basis for Opinion
We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters identified in our audit are summarised as follows:
Goodwill and brand names with an indefinite useful life; and
Investments in associated companies and joint ventures.
Key Audit Matter
Goodwill and brand names with an indefinite useful life
Refer to notes 15, 16 and 43 to the consolidated financial statements
The Group has a significant amount of goodwill and brand names with an indefinite useful life arising from various acquisitions. As at 31 December 2020, goodwill amounted to approximately HK$320 billion and brand names with an indefinite useful life amounted to approximately HK$71 billion.
Goodwill and brand names with an indefinite useful life are subject to impairment assessments annually and when there is an indication of impairment.
In carrying out the impairment assessments, significant judgements are required to estimate the recoverable amounts, taking into consideration the future cash flows of the respective business units based on the latest approved financial budgets for the next five years and a number of other assumptions, including the growth rates used in the cash flow projections and the discount rates applied to bring the future cash flows back to their present values.
Based on the results of the impairment assessments conducted, the Group determined that there is no impairment of goodwill and brand names with an indefinite useful life. This judgement is based on recoverable amounts, being the higher of the fair value less costs of disposal and value in use, exceeding the book amounts of the respective business units including goodwill, brand names with an indefinite useful life and other operating assets.
The significant assumptions are disclosed in notes 15, 16 and 43 to the consolidated financial statements.
How our audit addressed the Key Audit Matter
The procedures to evaluate the Group's assessments of goodwill and brand names with an indefinite useful life included:
Assessing the appropriateness of the valuation methodologies used;
Testing source data to supporting evidence, such as approved budgets and available market data, on a sample basis and considering the reasonableness of these budgets;
Assessing the reasonableness of key assumptions used in the estimation of recoverable amounts based on our knowledge of the relevant businesses and industries and with the involvement of our valuations specialists; and
Performing sensitivity analyses on the key assumptions to evaluate the potential impacts on the recoverable amounts, where we flexed the growth rates and discount rates as these are the key assumptions to which the valuation models are the most sensitive.
We found the assumptions adopted in relation to the impairment assessments to be supportable and reasonable based on available evidence.
Key Audit Matters (continued)
Key Audit Matter
Investments in associated companies and joint ventures
Refer to notes 17, 18 and 43 to the consolidated financial statements
The Group has significant investments in associated companies and joint ventures, which are accounted for under the equity method. As at 31 December 2020, investments in associated companies and joint ventures amounted to approximately HK$278 billion.
Investments in associated companies and joint ventures are subject to impairment assessments when there is an indication of impairment. In carrying out the impairment assessments, significant judgements are required to estimate the recoverable amounts of the Group's investments in the associated companies and the joint ventures, taking into consideration the share of the associated companies' and the joint ventures' future cash flows and a number of other assumptions, including the growth rates used to prepare the associated companies' and joint ventures' cash flow projections, and the discount rates applied to bring the future cash flows back to their present values.
Husky Energy Inc. ("Husky Energy"), a listed associated company of the Group, recorded an impairment loss for the year ended 31 December 2020 as the carrying values of its assets exceeded the recoverable amounts. The Group therefore recognised its share of the impairment loss of Husky Energy of approximately HK$18.7 billion for the year ended 31 December 2020. Refer to note 5(b)(xvi) to the consolidated financial statements for details.
Based on the results of the impairment assessments conducted, the Group determined that, except for the share of impairment loss of Husky Energy, there is no impairment of the Group's investments in other associated companies and joint ventures. This judgement is based on recoverable amounts, being the higher of the fair value less costs of disposal and value in use, exceeding the respective book amounts.
How our audit addressed the Key Audit Matter
The procedures to evaluate the Group's assessments of investments in associated companies and joint ventures included:
Evaluating the Group's assessments as to whether any indication of impairment exists in respect of investments in associated companies and joint ventures;
Assessing the appropriateness of the valuation methodologies used;
Testing source data to supporting evidence, such as approved budgets and available market data, on a sample basis and considering the reasonableness of these budgets;
Checking information used to determine the key assumptions, including growth rates and discount rates, to available market data; and
Performing sensitivity analyses on the key assumptions to evaluate the potential impacts on the recoverable amounts.
We found the assumptions adopted in relation to the impairment assessments to be supportable and reasonable based on available evidence.
Other Information
The directors of the Company are responsible for the other information. The other information comprises all of the information included in the annual report other than the consolidated financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements (continued)
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Luk Lai Yin.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 18 March 2021
Consolidated Income Statement
2020 #
US$ million
Note
2020 HK$ million
2019 HK$ million
34,153
Revenue
(12,250) Cost of inventories sold
(4,551) Staff costs
(2,098) Expensed customer acquisition and retention costs
(5,340) Depreciation and amortisation
(5,446) Other expenses and losses ##
4,010
Other income and gains ### Share of profits less losses of:
(2,376)
635
Associated companies Joint ventures
4, 5 7
266,396
299,021
(95,549) (105,959)
(35,495) (37,958)
(16,362) (17,755)
5 7 7
(41,658) (38,129)
(42,482) (47,339)
31,274 7,293
(18,529) 1,524
4,954 7,404
6,737 (1,391)
Interest expenses and other finance costs
8
52,549 (10,850)
68,102 (14,305)
5,346 Profit before tax
(511) Current tax
(41) Deferred tax
41,699
53,797
9 9
(3,985) (4,891)
(317) (1,129)
4,794
Profit after tax
37,397
47,777
(1,058)Profit attributable to non-controlling interests and holders of perpetual capital securities
(8,254)
(7,947)
3,736
Profit attributable to ordinary shareholders
29,143
39,830
US$ 0.97
Earnings per share for profit attributable to ordinary shareholders
10
HK$ 7.56
HK$ 10.33
Details of distribution paid to the holders of perpetual capital securities, interim dividend paid and proposed final dividend payable to the ordinary shareholders are set out in note 11.
# See note 47.
## Comparative information has been reclassified to conform to the presentation adopted in the current year. See note 7. ### New income statement line item included in the current year. See note 7.
Consolidated Statement of Comprehensive Income
2020
#
US$ million
(1,229)
4,794
(85)
187 (69) (233)
22
(178)
6 Valuation gains recognised directly in reserves
11 Valuation losses previously in reserves recognised in income statement
(8) Losses on cash flow hedges recognised directly in reserves
(286) Losses on net investment hedges recognised directly in reserves Gains (losses) on translating overseas subsidiaries' net assets
1,667 recognised directly in reserves
Losses previously in exchange and other reserves related to subsidiaries, associated companies and joint ventures disposed during the year
268 recognised in income statement
285 Share of other comprehensive income of associated companies
454 Share of other comprehensive income (losses) of joint ventures Tax relating to items that have been reclassified or may be
1 subsequently reclassified to profit or loss
2,398
2,220
7,014
5,785
# See note 47.
2020 | 2019 | |
HK$ million | HK$ million | |
Profit after tax | 37,397 | 47,777 |
Other comprehensive income (losses) | ||
Items that will not be reclassified to profit or loss: | ||
Remeasurement of defined benefit obligations recognised directly in | ||
reserves | (664) | (899) |
Equity securities at fair value through other comprehensive income ("FVOCI") | ||
Valuation gains (losses) recognised directly in reserves | 1,461 | (323) |
Share of other comprehensive income (losses) of associated companies | (540) | 300 |
Share of other comprehensive income (losses) of joint ventures | (1,815) | 564 |
169 | 170 | |
(1,389) | (188) | |
44 | 104 | |
89 | 29 | |
(65) | (808) | |
(2,229) | (547) | |
13,004 | (813) | |
2,093 | 4,535 | |
2,227 | 40 | |
3,535 | (632) | |
9 | 103 | |
18,707 | 2,011 | |
17,318 | 1,823 | |
54,715 | 49,600 | |
(9,588) | (7,794) | |
45,127 | 41,806 |
Tax relating to items that will not be reclassified to profit or loss
Note
33 (c)
Items that have been reclassified or may be subsequently reclassified to profit or loss:
Debt securities at FVOCI
Other comprehensive income, net of tax
Total comprehensive incomeTotal comprehensive income attributable to non-controlling interests and holders of perpetual capital securities
Total comprehensive income attributable to ordinary shareholders
33 (c)
Consolidated Statement of Financial Position |
at 31 December 2020 |
US$ million |
2020 | 2019 | |||
Note | HK$ million | HK$ million | ||
Non-current assets | ||||
16,936 | Fixed assets | 12 | 132,101 | 119,131 |
10,744 | Right-of-use assets | 13 | 83,805 | 83,708 |
8,583 | Telecommunications licences | 14 | 66,944 | 63,387 |
11,725 | Brand names and other rights | 15 | 91,453 | 88,275 |
40,989 | Goodwill | 16 | 319,718 | 308,986 |
17,446 | Associated companies | 17 | 136,076 | 144,751 |
18,136 | Interests in joint ventures | 18 | 141,465 | 143,555 |
2,555 | Deferred tax assets | 19 | 19,926 | 20,353 |
1,357 | Liquid funds and other listed investments | 20 | 10,588 | 7,722 |
1,916 | Other non-current assets | 21 | 14,944 | 14,276 |
130,387 | 1,017,020 | 994,144 | ||
Current assets | ||||
19,994 | Cash and cash equivalents | 23 | 155,951 | 137,127 |
3,149 | Inventories | 24,565 | 23,847 | |
7,155 | Trade receivables and other current assets | 24 | 55,809 | 55,709 |
30,298 | 236,325 | 216,683 | ||
160 | Assets classified as held for sale | 25 | 1,251 | 149 |
30,458 | 237,576 | 216,832 | ||
Current liabilities | ||||
6,157 | Bank and other debts | 26 | 48,021 | 39,995 |
338 | Current tax liabilities | 2,639 | 1,869 | |
2,387 | Lease liabilities | 13 | 18,621 | 18,079 |
13,318 | Trade payables and other current liabilities | 27 | 103,881 | 99,358 |
22,200 | 173,162 | 159,301 | ||
36 | Liabilities directly associated with assets classified as held for sale | 25 | 284 | - |
22,236 | 173,446 | 159,301 | ||
8,222 | Net current assets | 64,130 | 57,531 | |
138,609 | Total assets less current liabilities | 1,081,150 | 1,051,675 | |
Non-current liabilities | ||||
38,596 | Bank and other debts | 26 | 301,050 | 304,565 |
102 | Interest bearing loans from non-controlling shareholders | 29 | 798 | 728 |
9,698 | Lease liabilities | 13 | 75,644 | 75,609 |
2,266 | Deferred tax liabilities | 19 | 17,672 | 16,819 |
488 | Pension obligations | 30 | 3,804 | 3,123 |
6,682 | Other non-current liabilities | 31 | 52,119 | 53,868 |
57,832 | 451,087 | 454,712 | ||
80,777 | Net assets | 630,063 | 596,963 | |
# See note 47. |
2020 #
Consolidated Statement of Financial Position
at 31 December 2020
2020 | 2019 | |||
Note | HK$ million | HK$ million | ||
Capital and reserves | ||||
494 | Share capital | 32 (a) | 3,856 | 3,856 |
31,330 | Share premium | 32 (a) | 244,377 | 244,377 |
31,547 | Reserves | 33 | 246,063 | 216,052 |
63,371 | Total ordinary shareholders' funds | 494,296 | 464,285 | |
1,591 | Perpetual capital securities | 32 (b) | 12,415 | 12,410 |
15,815 | Non-controlling interests | 123,352 | 120,268 | |
80,777 | Total equity | 630,063 | 596,963 | |
# See note 47. | ||||
Fok Kin Ning, Canning | ||||
Director |
Frank John Sixt Director
2020 # US$ million
Ordinary shareholders
Share capital | Total ordinary | Perpetual | Non- | ||||
Total | and share | shareholders' | capital | controlling | Total | ||
equity # | premium (a) | Reserves (b) | funds | securities | interests | equity | |
US$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
76,534 | At 1 January 2020 | 248,233 | 216,052 | 464,285 | 12,410 | 120,268 | 596,963 |
4,794 | Profit for the year | - | 29,143 | 29,143 | 487 | 7,767 | 37,397 |
Other comprehensive income (losses) | |||||||
Equity securities at FVOCI | |||||||
187 | Valuation gains recognised directly in reserves | - | 1,211 | 1,211 | - | 250 | 1,461 |
Debt securities at FVOCI | |||||||
6 | Valuation gains recognised directly in reserves | - | 44 | 44 | - | - | 44 |
Valuation losses previously in reserves recognised in | |||||||
11 | income statement | - | 89 | 89 | - | - | 89 |
Remeasurement of defined benefit obligations | |||||||
(85) | recognised directly in reserves | - | (511) | (511) | - | (153) | (664) |
Losses on cash flow hedges recognised directly in | |||||||
(8) | reserves | - | (21) | (21) | - | (44) | (65) |
Losses on net investment hedges recognised directly | |||||||
(286) | in reserves | - | (1,687) | (1,687) | - | (542) | (2,229) |
Gains on translating overseas subsidiaries' net | |||||||
1,667 | assets recognised directly in reserves | - | 11,802 | 11,802 | - | 1,202 | 13,004 |
Losses previously in exchange and other reserves | |||||||
related to subsidiaries, associated companies and | |||||||
joint ventures disposed during the year recognised | |||||||
268 | in income statement | - | 2,038 | 2,038 | - | 55 | 2,093 |
Share of other comprehensive income of associated | |||||||
216 | companies | - | 1,565 | 1,565 | - | 122 | 1,687 |
Share of other comprehensive income of joint | |||||||
221 | ventures | - | 1,314 | 1,314 | - | 406 | 1,720 |
Tax relating to components of other comprehensive | |||||||
23 | income (losses) | - | 140 | 140 | - | 38 | 178 |
2,220 | Other comprehensive income, net of tax | - | 15,984 | 15,984 | - | 1,334 | 17,318 |
7,014 | Total comprehensive income | - | 45,127 | 45,127 | 487 | 9,101 | 54,715 |
Transaction with owners in their capacity as owners: | |||||||
(1,137) | Dividends paid relating to 2019 | - | (8,870) | (8,870) | - | - | (8,870) |
(304) | Dividends paid relating to 2020 | - | (2,368) | (2,368) | - | - | (2,368) |
(700) | Dividends paid to non-controlling interests | - | - | - | - | (5,462) | (5,462) |
(62) | Distribution paid on perpetual capital securities | - | - | - | (482) | - | (482) |
1 | Unclaimed dividends write back of a subsidiary | - | 7 | 7 | - | - | 7 |
(609) | Relating to purchase of non-controlling interests (c) | - | (3,943) | (3,943) | - | (806) | (4,749) |
Relating to partial disposal / disposal of subsidiary | |||||||
40 | companies | - | 58 | 58 | - | 251 | 309 |
(2,771) | - | (15,116) | (15,116) | (482) | (6,017) | (21,615) | |
80,777 | At 31 December 2020 | 248,233 | 246,063 | 494,296 | 12,415 | 123,352 | 630,063 |
# See note 47.
(a) See note 32(a) for further details on share capital and share premium.
(b) See note 33 for further details on reserves.
(c) See note 33(b).
Ordinary shareholders
Share capital | Total ordinary | Perpetual | Non- | ||||
Total | and share | shareholders' | capital | controlling | Total | ||
equity # | premium (a) | Reserves (b) | funds | securities | interests | equity | |
US$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
73,734 | At 1 January 2019 | 248,233 | 186,106 | 434,339 | 12,326 | 128,459 | 575,124 |
6,125 | Profit for the year | - | 39,830 | 39,830 | 482 | 7,465 | 47,777 |
Other comprehensive income (losses) | |||||||
Equity securities at FVOCI | |||||||
(41) | Valuation losses recognised directly in reserves | - | (228) | (228) | - | (95) | (323) |
Debt securities at FVOCI | |||||||
13 | Valuation gains recognised directly in reserves | - | 104 | 104 | - | - | 104 |
Valuation losses previously in reserves recognised in | |||||||
4 | income statement | - | 29 | 29 | - | - | 29 |
Remeasurement of defined benefit obligations | |||||||
(115) | recognised directly in reserves | - | (625) | (625) | - | (274) | (899) |
Losses on cash flow hedges recognised directly in | |||||||
(104) | reserves | - | (692) | (692) | - | (116) | (808) |
Losses on net investment hedges recognised directly | |||||||
(70) | in reserves | - | (414) | (414) | - | (133) | (547) |
Losses on translating overseas subsidiaries' net | |||||||
(104) | assets recognised directly in reserves | - | (582) | (582) | - | (231) | (813) |
Losses previously in exchange and other reserves | |||||||
related to subsidiaries, associated companies and | |||||||
joint ventures disposed during the year recognised | |||||||
581 | in income statement | - | 3,850 | 3,850 | - | 685 | 4,535 |
Share of other comprehensive income (losses) of | |||||||
44 | associated companies | - | 380 | 380 | - | (40) | 340 |
Share of other comprehensive income (losses) of | |||||||
(9) | joint ventures | - | (64) | (64) | - | (4) | (68) |
Tax relating to components of other comprehensive | |||||||
35 | income (losses) | - | 218 | 218 | - | 55 | 273 |
234 | Other comprehensive income (losses), net of tax | - | 1,976 | 1,976 | - | (153) | 1,823 |
6,359 | Total comprehensive income | - | 41,806 | 41,806 | 482 | 7,312 | 49,600 |
Hedging reserve gains transferred to the carrying value | |||||||
(11) | of non-financial item during the year | - | (73) | (73) | - | (10) | (83) |
Transaction with owners in their capacity as owners: | |||||||
(1,137) | Dividends paid relating to 2018 | - | (8,870) | (8,870) | - | - | (8,870) |
(430) | Dividends paid relating to 2019 | - | (3,355) | (3,355) | - | - | (3,355) |
(868) | Dividends paid to non-controlling interests | - | - | - | - | (6,769) | (6,769) |
(51) | Distribution paid on perpetual capital securities | - | - | - | (398) | - | (398) |
- | Equity contribution from non-controlling interests | - | - | - | - | 1 | 1 |
(1) | Equity redemption to non-controlling interests | - | - | - | - | (10) | (10) |
Share option schemes and long term incentive | |||||||
8 | plans of subsidiary companies | - | 36 | 36 | - | 27 | 63 |
1 | Unclaimed dividends write back of a subsidiary | - | 6 | 6 | - | - | 6 |
(61) | Relating to purchase of non-controlling interests | - | (200) | (200) | - | (277) | (477) |
Relating to partial disposal / disposal of subsidiary | |||||||
(1,009) | companies | - | 596 | 596 | - | (8,465) | (7,869) |
(3,559) | - | (11,860) | (11,860) | (398) | (15,503) | (27,761) | |
76,534 | At 31 December 2019 | 248,233 | 216,052 | 464,285 | 12,410 | 120,268 | 596,963 |
# | See note 47. |
(a) | See note 32(a) for further details on share capital and share premium. |
(b) | See note 33 for further details on reserves. |
2020 | 2019 | |||
Note | HK$ million | HK$ million | ||
Operating activities | ||||
Cash generated from operating activities before interest expenses | ||||
11,163 | and other finance costs, tax paid and changes in working capital | 34 (a) | 87,072 | 95,291 |
(1,383) | Interest expenses and other finance costs paid (net of capitalisation) | (10,789) | (14,621) | |
(465) | Tax paid | (3,628) | (5,823) | |
9,315 | Funds from operations (before payment of lease liabilities) | 72,655 | 74,847 | |
66 | Changes in working capital | 34 (b) | 516 | (5,577) |
9,381 | Net cash from operating activities | 73,171 | 69,270 | |
Investing activities | ||||
(3,475) | Purchase of fixed assets | (27,104) | (32,190) | |
(87) | Additions to telecommunications licences | (679) | (1,286) | |
(229) | Additions to brand names and other rights | (1,791) | (2,817) | |
- | Purchase of subsidiary companies, net of cash acquired | 34 (c) | - | (30) |
(17) | Additions to other unlisted investments | (131) | (17) | |
206 | Repayments of loans from associated companies and joint ventures | 1,609 | 641 | |
(107) | Purchase of and advances to associated companies and joint ventures | (833) | (885) | |
72 | Proceeds from disposal of fixed assets | 564 | 150 | |
2,664 | Proceeds from disposal of subsidiary companies, net of cash disposed | 34 (d) | 20,780 | (1,522) |
Cash disposed arising from de-consolidation of subsidiaries | ||||
- | classified as held for sale | - | (2,429) | |
Proceeds from partial disposal / disposal of associated companies | ||||
257 | and joint ventures | 2,005 | 2,388 | |
2 | Proceeds from disposal of other unlisted investments | 13 | 130 | |
Cash flows used in investing activities before additions to / | ||||
(714) | disposal of liquid funds and other listed investments | (5,567) | (37,867) | |
94 | Disposal of liquid funds and other listed investments | 730 | 503 | |
(209) | Additions to liquid funds and other listed investments | (1,627) | (55) | |
(829) | Cash flows used in investing activities | (6,464) | (37,419) | |
8,552 | Net cash inflow before financing activities | 66,707 | 31,851 | |
Financing activities | ||||
5,691 | New borrowings | 34 (e) | 44,391 | 211,526 |
(7,225) | Repayment of borrowings | 34 (e) | (56,361) | (211,455) |
(2,309) | Payment of lease liabilities | 34 (e) | (18,010) | (15,969) |
- | Net loans to non-controlling shareholders | 34 (e) | - | (2) |
- | Capital redemption by non-controlling shareholders | - | (10) | |
(134) | Payments to acquire additional interests in subsidiary companies | (1,048) | (478) | |
40 | Proceeds from partial disposal of subsidiary companies | 309 | 2,201 | |
(1,441) | Dividends paid to ordinary shareholders | (11,238) | (12,225) | |
(698) | Dividends paid to non-controlling interests | (5,444) | (6,910) | |
(62) | Distribution paid on perpetual capital securities | (482) | (398) | |
(6,138) | Cash flows used in financing activities | (47,883) | (33,720) | |
2,414 | Increase (decrease) in cash and cash equivalents | 18,824 | (1,869) | |
17,580 | Cash and cash equivalents at 1 January | 137,127 | 138,996 | |
19,994 | Cash and cash equivalents at 31 December | 155,951 | 137,127 | |
# See note 47. |
US$ million
2020 #
2020 | 2019 | |||
Note | HK$ million | HK$ million | ||
Analysis of cash, liquid funds and other listed investments | ||||
19,994 | Cash and cash equivalents, as above | 155,951 | 137,127 | |
1,357 | Liquid funds and other listed investments | 20 | 10,588 | 7,722 |
21,351 | Total cash, liquid funds and other listed investments | 166,539 | 144,849 | |
Total principal amount of bank and other debts and unamortised | ||||
45,082 | fair value adjustments arising from acquisitions | 26 | 351,642 | 347,497 |
102 | Interest bearing loans from non-controlling shareholders | 29 | 798 | 728 |
23,833 | Net debt | 185,901 | 203,376 | |
(102) | Interest bearing loans from non-controlling shareholders | (798) | (728) | |
Net debt (excluding interest bearing loans from | ||||
23,731 | non-controlling shareholders) | 185,103 | 202,648 | |
# See note 47. |
US$ million
2020 #
Notes to the Financial Statements
1 General information
CK Hutchison Holdings Limited (the "Company") is a company incorporated in the Cayman Islands with limited liability and the shares of the Company are listed on The Stock Exchange of Hong Kong Limited ("Stock Exchange"). The consolidated financial statements of the Company and its subsidiaries (collectively, the "Group") as at and for the year ended 31 December 2020 (the "Annual Financial Statements") were authorised for issue by the Company's board of directors on 18 March 2021.
For a detailed discussion about the performance of the Group's businesses for the current year, including the impacts of the Coronavirus Disease 2019 ("COVID-19") pandemic on, and relevant principal risk and uncertainties affecting, the Group's operations, and measures taken to manage these impacts, and other important corporate transactions concluded during the 2020 financial year, please refer to the Chairman's Statement, Operations Review and Risk Factors, included elsewhere in the Annual Report outside the Annual Financial Statements.
For a detailed discussion about the Group's liquidity and financial profile, please refer to the Group Capital Resources and Liquidity, included elsewhere in the Annual Report outside the Annual Financial Statements.
2 Use of judgements, assumptions and estimates
The preparation of financial statements under Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") requires entities to make judgements, estimates and assumptions about the reported amounts and the accompanying disclosures.
In preparing the Annual Financial Statements, the Group has made accounting related estimates based on assumptions about current and, for some estimates, future economic and market conditions that the Group considers are relevant and reasonable. It is reasonably possible that actual conditions could differ significantly from our expectations, given the road to post-pandemic normal and economic recovery will not be straightforward. Hence, our accounting estimates and assumptions could change over time in response to how economic and market conditions develop.
Uncertainty about these judgements, assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected, and the amounts and timing of the results of operations and cash flows, and the accompanying disclosures in future periods.
Note 43 sets out further information on our significant accounting judgements, estimates and assumptions applied in preparing the Annual Financial Statements.
3 Basis of preparation
Management has assessed the potential cash generation of the Group, the liquidity of the Group, existing funding available to the Group and COVID-19 mitigating actions which have been and may be taken to reduce discretionary spend and other operating cash outflows, and non-essential and non-committed capital expenditures. On the basis of these assessments, management has determined that, at the date on which the Annual Financial Statements were authorised for issue, the use of the going concern basis of accounting to prepare the Annual Financial Statements is appropriate.
The Annual Financial Statements have been prepared on a historical cost basis, except that defined benefit plans plan assets, certain properties, certain financial assets and liabilities (including derivative instruments) are measured at fair values, and non-current assets and disposal group classified as held for sale are measured at the lower of carrying amount and fair value less cost to sell. In these financial statements, non-current assets classified as held for sale and assets of a disposal group classified as held for sale are presented separately from other assets in the consolidated statement of financial position. Liabilities directly associated with non-current assets classified as held for sale and liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the consolidated statement of financial position. Major classes of assets classified as held for sale and liabilities directly associated with these assets are disclosed separately in note 25.
The Annual Financial Statements have been prepared in accordance with HKFRS and the applicable disclosure requirements of the Hong Kong Companies Ordinance Cap. 622. In the current year, the Group has adopted all of the new and revised standards, amendments and interpretations issued by the HKICPA that are relevant to the Group's operations and mandatory for annual periods beginning 1 January 2020. In addition, the Group has early adopted Amendment to HKFRS 16: COVID-19-Related Rent Concessions ahead of its effective date. These changes did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. Other than these changes, the accounting policies and methods of computation used in the preparation of the Annual Financial Statements are consistent with those used in the Company's consolidated financial statements for the year ended 31 December 2019. A list of the significant accounting policies adopted in the preparation of these financial statements is set out in note 41.
Revenue
(a)
An analysis of revenue of the Company and subsidiary companies is as follows:
2020 | 2019 | |
HK$ million | HK$ million | |
Sale of goods | 148,712 | 163,500 |
Revenue from services | 112,060 | 129,072 |
Interest | 5,398 | 5,916 |
Dividend income | 226 | 533 |
266,396 | 299,021 |
(b) Further details are set out below in respect of revenue of the Company and subsidiary companies, including the disaggregation of revenue from contracts with customers within the scope of HKFRS 15:
(i) By segments
Ports and Related Services Retail
Infrastructure Energy
CK Hutchison Group Telecom
3 Group Europe
Hutchison Telecommunications Hong
Kong Holdings
Corporate and Others
Hutchison Asia Telecommunications Finance & Investments and OthersPorts and Related Services Retail
Infrastructure Energy
CK Hutchison Group Telecom
3 Group Europe
Hutchison Telecommunications Hong
Kong Holdings
Corporate and Others
Hutchison Asia Telecommunications Finance & Investments and Others
Revenue from contracts with customersrecognised at a point in time
HK$ millionrecognised over time HK$ million
Subtotal HK$ millionRevenue from other sources HK$ million
2020
Total HK$ million
- 121,284 3,866 -24,926 64 - -24,926 121,348 3,866 -
157 25,083
- 121,348
3,480 7,346
-
-
Revenue (continued)
(b)
Further details are set out below in respect of revenue of the Company and subsidiary companies, including the disaggregation of revenue from contracts with customers within the scope of HKFRS 15 (continued):
(ii) By geographical locations
Hong Kong Mainland China
The People's Republic of China
Europe
Canada
Asia, Australia and OthersFinance & Investments and OthersHong Kong Mainland China
The People's Republic of China
Europe
Canada
Asia, Australia and OthersFinance & Investments and Others
Revenue from contracts with customers Revenue
(c) Contract balances related to contracts with customers within the scope of HKFRS 15
Under HKFRS 15, a contract asset or a contract liability is generated when either party to the contract performs, depending on the relationship between the entity's performance and the customer's payment. When an entity satisfies a performance obligation by transferring a promised goods or service, the entity has earned a right to consideration from the customer and, therefore, has a contract asset. When the customer performs first, for example, by prepaying its promised consideration, the entity has a contract liability. Generally, contract assets may represent conditional or unconditional rights to consideration. The right would be conditional, for example, when an entity is required first to satisfy another performance obligation in the contract before it is entitled to payment from the customer. If an entity has an unconditional right to receive consideration from the customer, the contract asset is classified as and accounted for as a receivable and presented separately from other contract assets. A right is unconditional if nothing other than the passage of time is required before payment of that consideration is due.
The following table provides information about trade receivables, contract assets and contract liabilities from contracts with customers within the scope of HKFRS 15.
2020 | 2019 | |
HK$ million | HK$ million | |
Trade receivables (see note 24) | 16,898 | 16,863 |
Contract assets (see notes 21 and 24) | 8,999 | 7,385 |
Contract liabilities (see note 27) | (6,160) | (6,188) |
Trade receivables are non-interest bearing and are generally on terms of 30 to 45 days. In 2020, HK$1,577 million (2019: HK$1,587 million) was recognised in the income statement as provision for expected credit losses on trade receivables.
Contract assets primarily relate to the Group's rights to consideration for delivered services and devices but not billed at the reporting date.
Contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an invoice to the customer. In 2020, HK$1,024 million (2019: HK$1,042 million) was recognised in the income statement as provision for expected credit losses on contract assets.
Contract liabilities primarily relate to the Group's unfulfilled performance obligations for which consideration has been received at the reporting date. On fulfilment of its obligations, the contract liability is recognised in revenue in the period when the performance obligations are fulfilled. HK$5,028 million (2019: HK$5,106 million) was recognised as revenue in 2020 that was included in the contract liability balance at the beginning of the year.
(d) Transaction price allocated to the remaining performance obligations
The following table includes revenue expected to be recognised in the future related to performance obligations that are unsatisfied or partially unsatisfied at the reporting date. The Group applies the practical expedient in paragraph 121 of HKFRS 15 and does not disclose the amount of the transaction price allocated to the remaining performance obligations for contracts with an original expected duration of one year or less. In addition, contracts that include a promise to perform an undefined quantity of tasks at a fixed contractual rate per unit, with no contractual minimums that would make some or all of the consideration variable, are not included in the following analysis as the possible transaction prices and the ultimate consideration for those contracts will depend on the occurrence or non-occurrence of future customer usage. In light of these basis of preparation, the following does not reflect the expectation of the Group's future performance. The analysis is for compliance with HKFRS 15 disclosure requirement in respect of transaction price allocated to the remaining performance obligations.
2020 | 2019 | |
HK$ million | HK$ million | |
Within one year | 14,801 | 17,293 |
More than one year | 7,707 | 7,534 |
22,508 | 24,827 |
5 Operating segment information
(a) Basis of presentation of segment information, and description of segments and principal activities
In 2019, the Group has adopted the HKFRS 16 "Leases" accounting standard (which relates to accounting for leases) for its statutory reporting but its management reporting has remained on the precedent lease accounting standard Hong Kong Accounting Standard 17 "Leases" ("HKAS 17"). The Group believes that the HKAS 17 basis metrics, which are not intended to be a substitute for, or superior to, the reported metrics on a HKFRS 16 basis ("Post-HKFRS 16 basis"), better reflect management's view of the Group's underlying operational performances. HKAS 17 basis metrics financial information is regularly reviewed by management and used for resource allocation, performance assessment and internal decision-making. Accordingly, segmental information is presented on a HKAS 17 basis ("Pre-HKFRS 16 basis"), except where indicated otherwise, together with reconciliations to the total under the Post-HKFRS 16 basis.
In addition, section (c) of this note sets out reconciliation from Pre-HKFRS 16 basis metrics to Post-HKFRS 16 basis metrics for the Group's consolidated income statement, consolidated statement of comprehensive income, and consolidated statement of cash flows for the current and comparative years, and the Group's consolidated statement of financial position as at 31 December 2020 and 2019.
The Group manages its businesses by divisions, which are organised by a mixture of both business lines and geography. In a manner consistent with the way in which information is reported internally to the Group's most senior executive management and board of directors for the purposes of making decisions about resource allocation and performance assessment, the Group presents its operating segment information based on the following operating divisions.
Ports and Related Services:
This division is the world's leading port network, and has interests in 52 ports comprising 283 operational berths in 26 countries as at
31 December 2020. This division operates container terminals in six of the 10 busiest container ports in the world. The division comprises the Group's 80% interest in the Hutchison Ports group of companies and its 30.07% interest in the Hutchison Port Holdings Trust
("HPH Trust"). Results of HPH Trust are included in the segment results (under Ports and Related Services) based on the Group's effective shareholdings (net of non-controlling interests) in HPH Trust.
Retail:
The retail division consists of the A. S. Watson ("ASW") group of companies, the world's largest international health and beauty retailer with a 139 million loyalty member base. ASW operated 12 retail brands with 16,167 stores in 27 markets worldwide as at
31 December 2020.
Infrastructure:
The Infrastructure division comprises the Group's 75.67% interest in CK Infrastructure Holdings Limited ("CKI"), a subsidiary company listed on the Stock Exchange as well as 10% of the economic benefits derived from the Group's direct holdings in six infrastructure investments co-owned with CKI comprising of interests in Northumbrian Water, Park'N Fly, UK Rails, Australian Gas Networks, Dutch Enviro Energy and Wales & West Utilities. In October 2018, the Group completed the divesture of an aggregated 90% economic benefits in its direct interest in these six co-owned infrastructure investments. In December 2019, the Group completed supplementary agreements with the counter-parties to the economic arrangements in respect of its direct interests in Northumbrian Water, Park'N Fly, UK Rails, Dutch Enviro Energy and Wales & West Utilities to effectively transfer to these parties the proportionate voting rights of the Group's direct interests in these five co-owned infrastructure investments. Results of these co-owned infrastructure investments following the divesture are included in the segment results on a net of divesture basis.
Energy:
The operating segment information of the Energy division represents the Group's 40.19% interests in Husky Energy Inc. ("Husky").
Telecommunications:
The Group's telecommunications division consists of CK Hutchison Group Telecom Holdings ("CK Hutchison Group Telecom") and Hutchison Asia Telecommunications.
In July 2019, the Group formed a new wholly-owned telecommunication holding company, CK Hutchison Group Telecom to consolidate the 3 Group businesses in Europe ("3 Group Europe") and a 66.09% interest in Hutchison Telecommunications Hong Kong Holdings ("HTHKH"), which is listed on the Stock Exchange. In November 2020, the Group entered into agreements to dispose interests in its European telecommunications tower assets in six countries for an aggregate consideration of €10 billion. Transactions in respect of three countries were completed in December 2020. See note 5(b)(xviii) for further details. For segment information presentation purposes, CK Hutchison Group Telecom is presented as an operating division for the current and comparative years in this operating segment note, with separate sub-totals for 3 Group Europe, HTHKH and CK Hutchison Group Telecom's Corporate and Others (which covers CK Hutchison Group Telecom's corporate head office operations and the returns earned on its holdings of cash and liquid investments).
(a) Basis of presentation of segment information, and description of segments and principal activities (continued)
Finance & Investments and Others is presented to reconcile to the totals included in the Group's income statement and statement of financial position. Finance & Investments and Others covers the activities of other areas of the Group that are not presented separately and includes a 87.87% interest in the Australian Securities Exchange listed Hutchison Telecommunications (Australia) ("HTAL"), which has a 25.05% interest in a listed associated company TPG Telecom Limited ("TPG") (formerly known as Vodafone Hutchison Australia ("VHA")), Hutchison Whampoa (China), Hutchison E-Commerce, the Marionnaud business, listed associated company Hutchison China MediTech ("HUTCHMED"), TOM Group and CK Life Sciences Int'l., (Holdings) Inc., corporate head office operations and the returns earned on the Group's holdings of cash and liquid investments.
Saved as disclosed in the notes below, the column headed as Company and Subsidiaries refers to the holding company of the Group and subsidiary companies' respective items, and the column headed as Associates and JV refers to the Group's share of associated companies and joint ventures' respective items.
(b) Segment results, assets and liabilities
(i) An analysis of revenue by segments
Revenue and expenses are allocated to the reportable segments with reference to revenue generated by those segments and the expenses incurred by those segments. Revenue from external customers is after elimination of inter-segment revenue. The amounts eliminated mainly attributable to Retail of HK$71 million (2019: HK$61 million), Hutchison Telecommunications Hong Kong Holdings of HK$14 million (2019: HK$14 million) and Hutchison Asia Telecommunications of HK$1 million (2019: HK$3 million).
Revenue
Company and | Associates | 2020 | Company and | Associates | 2019 | |||
Subsidiaries | and JV | Total | Subsidiaries | and JV | Total | |||
HK$ million | HK$ million | HK$ million | % | HK$ million | HK$ million | HK$ million | % | |
Ports and Related Services | 25,083 | 7,782 | 32,865 | 8% | 26,996 | 8,379 | 35,375 | 8% |
Retail | 121,348 | 38,271 | 159,619 | 40% | 132,493 | 36,732 | 169,225 | 38% |
Infrastructure | 7,346 | 45,446 | 52,792 | 13% | 12,837 | 38,354 | 51,191 | 12% |
Energy | - | 31,179 | 31,179 | 8% | - | 47,618 | 47,618 | 11% |
CK Hutchison Group Telecom | ||||||||
3 Group Europe | 85,787 | 12 | 85,799 | 21% | 87,505 | 11 | 87,516 | 20% |
Hutchison Telecommunications Hong | ||||||||
Kong Holdings | 4,545 | - | 4,545 | 1% | 5,582 | - | 5,582 | 1% |
Corporate and Others | 201 | 118 | 319 | - | 292 | 127 | 419 | - |
90,533 | 130 | 90,663 | 22% | 93,379 | 138 | 93,517 | 21% | |
Hutchison Asia Telecommunications | 9,147 | - | 9,147 | 2% | 8,984 | - | 8,984 | 2% |
Finance & Investments and Others | 12,939 | 14,642 | 27,581 | 7% | 16,687 | 17,259 | 33,946 | 8% |
266,396 | 137,450 | 403,846 | 100% | 291,376 | 148,480 | 439,856 | 100% | |
Portion attributable to: | ||||||||
Non-controlling interests of HPH Trust | - | 1,074 | 1,074 | - | 1,098 | 1,098 | ||
Divesture of infrastructure investments | - | 857 | 857 | 7,645 | 4,481 | 12,126 | ||
266,396 | 139,381 | 405,777 | 299,021 | 154,059 | 453,080 | |||
HKFRS 16 impact | - | - | - | - | - | - | ||
266,396 | 139,381 | 405,777 | 299,021 | 154,059 | 453,080 |
The Group uses two measures of segment results, EBITDA (see note 5(b)(xiv)) and EBIT (see note 5(b)(xv)). Analyses of segment results by EBITDA and EBIT are set out in (ii), (iii), (ix), (x) and (xiii) below.
(ii) An analysis of EBITDA by segments
Ports and Related Services Retail
Infrastructure Energy (xvi)
CK Hutchison Group Telecom
3 Group Europe (xvii)
Hutchison Telecommunications Hong
Kong Holdings
Corporate and Others (xviii)
Hutchison Asia Telecommunications Finance & Investments and Others (xix)
EBITDA (see note 5(b)(xiii))
Portion attributable to: Non-controlling interests of HPH Trust
EBITDA
Depreciation and amortisation
Interest expenses and other finance costs Current tax
Deferred tax credit (charge) Non-controlling interestsHKFRS 16 impact
EBITDA
Depreciation and amortisation
Interest expenses and other finance costs Current tax
Deferred tax Non-controlling interests
EBITDA (LBITDA) (xiv)
Company andAssociates and JV HK$ million
2020
Company andAssociates and JV HK$ million
2019
Subsidiaries HK$ million
Total HK$ million
%
Subsidiaries HK$ million
Total HK$ million
7,672 11,108 3,574 -
%
3,242 3,289 25,492 (23,003)
10,914 14,397 29,066 (23,003)
12% 15% 30% -24%
9,806 13,676 7,437 -3,599 3,215 21,051 3,139
13,405 12%
16,891 15%
28,488 25%
3,139 3%
31,377 1,278 15,824 48,479 2,034 13,143 86,010
61 - 1,853
1 63 (3)
31,378 1,341 15,821 48,540 2,034 14,996 96,944
32% 1% 17% 50% 2% 15%
33,510 1,320 458 35,288 2,167 8,768
1 69 (17)
33,511 30%
1,389 1%
441 1%
53 35,341 32%
- 2,167 2%
3,869 12,637 11%
10,934
100%
77,142
34,926
112,068 100%
86,010 ^
-11,674 ^
740
740 97,684 ^
77,142 ^
-
35,682 ^
756
756 112,824 ^
(23,550)
(4,004)
(7,166)
(19,812)
(3,553)
(7,973)
(15,139)
(43,362)
(7,557)
(23,097)
(4,612)
(9,269)
(18,136) (41,233) (6,388) (15,657) (3,202) (7,814)
(8,240)
(431)
6,518
(473)
(8,713)
6,087
(7,865)
(1,122)
1,235 (480)
113 (8,345)
42,619
(13,619)
29,000
31,177
8,711 39,888
22,073 ^
3,331 ^
25,404 ^
20,644 ^ (16,873) (3,623)
3,337 ^ 23,981
(18,108)
(2,846)
(20,954)
(2,872) (19,745)
(3,684)
(768)
(4,452)
(837) (4,460)
19
-
19
(20) - (20)
114
26 -
140
65 37 102
(14)
(14)
84 - 84
^
^ Reconciliation to Post-HKFRS 16 basis EBITDA :
Pre-HKFRS 16 basis EBITDA per above HKFRS 16 impact per above
Post-HKFRS 16 basis EBITDA
(see note 34(a)(i))
43,019
(13,876)
29,143
31,454
8,376
39,830
86,010 22,073
11,674 3,331
97,684 25,404
77,142 20,644
35,682 112,824 3,337 23,981
108,083
15,005
123,088
97,786
39,019
136,805
Operating segment information (continued)
(iii) An analysis of EBIT by segments
Ports and Related Services Retail
Infrastructure Energy (xvi)
CK Hutchison Group Telecom
3 Group Europe (xvii)
EBITDA before the following non-cash items: Depreciation
Amortisation of licence fees, other rights, customer acquisition and retention costs
EBIT - 3 Group Europe
Hutchison Telecommunications Hong
Kong Holdings
Corporate and Others (xviii)
Hutchison Asia Telecommunications Finance & Investments and Others (xix)
EBIT (LBIT) (see note 5(b)(xiii))
Portion attributable to: Non-controlling interests of HPH Trust
EBIT (LBIT)
Interest expenses and other finance costs Current tax
Deferred tax credit (charge) Non-controlling interestsHKFRS 16 impact
EBIT
Interest expenses and other finance costs Current tax
Deferred tax Non-controlling interests
EBIT (LBIT) (xv)Company andAssociates and JV HK$ million
2020
Company andAssociates and JV HK$ million
2019
Subsidiaries HK$ million
Total HK$ million
%
Subsidiaries HK$ million
Total HK$ million
4,793 8,434 3,206 -
%
1,924 2,499 15,282 (28,096)
6,717 10,933 18,488 (28,096)
12% 20% 34% -52%
6,827 11,164 5,320 -
2,234 2,507 13,900 (3,004)
9,061 13%
13,671 19%
19,220 27%
(3,004) -4%
31,377 (9,237)
1 -
31,378 (9,237)
33,510
1
33,511
(9,139) - (9,139)
(5,871) 16,269
- 1
(5,871) 16,270
(4,260) - (4,260)
30% 1% 30% 61% 1% 24%
20,111
1 22 (17)
20,112 28%
479 15,818 32,566 544 12,917 62,460
17 (3)
496 15,815 32,581 544 12,687 53,854
559 455
581 1%
438 1%
15 - (230)
21,125 1,055 8,554
6 -
21,131 30%
1,055 1%
1,420 9,974 14%
(8,606)
100%
54,045
17,063
71,108 100%
62,460 ^
-
(8,138) ^
468
468 54,322 ^
54,045 ^
-
17,546 ^
483
483 71,591 ^
(7,166) (4,004)
(7,973) (3,553) 6,518 (473)
(15,139)
(7,557) 6,087 (8,713)
(9,269) (4,612) (1,122) (7,865)
(6,388) (15,657) (3,202) (7,814)
(431) (8,240)
1,235 (480)
113 (8,345)
42,619
(13,619)
29,000
31,177
8,711 39,888
3,965 ^
485 ^ (768)
4,450 ^
3,771 ^ (3,623)
465 ^ 4,236
(3,684)
(4,452)
(837) (4,460)
19
- 26 -
19
(20) - (20)
114
140
65 37 102
(14)
(14)
84 - 84
^
43,019
^ Reconciliation to Post-HKFRS 16 basis EBIT (LBIT) :
Pre-HKFRS 16 basis EBIT (LBIT) per above HKFRS 16 impact per above
(13,876)
29,143
31,454
8,376
39,830
62,460 3,965
(8,138)
54,322 4,450
54,045 3,771
17,546 71,591
485
465 4,236
Post-HKFRS 16 basis EBIT (LBIT)
66,425
(7,653)
58,772
57,816
18,011
75,827
Operating segment information (continued)
(b) Segment results, assets and liabilities (continued) |
(iv) An analysis of depreciation and amortisation expenses by segments |
Subsidiaries |
Depreciation and amortisation
Associates | 2020 | Company and | Associates | 2019 | ||
and JV | Total | Subsidiaries | and JV | Total | ||
HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
Ports and Related Services | 2,879 | 1,318 | 4,197 | 2,979 | 1,365 | 4,344 |
Retail | 2,674 | 790 | 3,464 | 2,512 | 708 | 3,220 |
Infrastructure | 368 | 10,210 | 10,578 | 2,117 | 7,151 | 9,268 |
Energy | - | 5,093 | 5,093 | - | 6,143 | 6,143 |
CK Hutchison Group Telecom | ||||||
3 Group Europe | 15,108 | - | 15,108 | 13,399 | - | 13,399 |
Hutchison Telecommunications Hong Kong Holdings | 799 | 46 | 845 | 761 | 47 | 808 |
Corporate and Others | 6 | - | 6 | 3 | - | 3 |
15,913 | 46 | 15,959 | 14,163 | 47 | 14,210 | |
Hutchison Asia Telecommunications | 1,490 | - | 1,490 | 1,112 | - | 1,112 |
Finance & Investments and Others | 226 | 2,083 | 2,309 | 214 | 2,449 | 2,663 |
23,550 | 19,540 | 43,090 | 23,097 | 17,863 | 40,960 | |
Portion attributable to: | ||||||
Non-controlling interests of HPH Trust | - | 272 | 272 | - | 273 | 273 |
23,550 | 19,812 | 43,362 | 23,097 | 18,136 | 41,233 | |
Divesture of infrastructure investments | - | 156 | 156 | (1,841) | - | (1,841) |
23,550 | 19,968 | 43,518 | 21,256 | 18,136 | 39,392 | |
HKFRS 16 impact | 18,108 | 2,846 | 20,954 | 16,873 | 2,872 | 19,745 |
41,658 | 22,814 | 64,472 | 38,129 | 21,008 | 59,137 |
5
Operating segment information (continued)
(b) Segment results, assets and liabilities (continued)
(v) An analysis of capital expenditure by segmentsPorts and Related Services Retail
Infrastructure Energy
CK Hutchison Group Telecom
3 Group Europe Hutchison
Telecommunications
Hong Kong Holdings Corporate and Others
Hutchison Asia
Telecommunications Finance & Investments and Others
HKFRS 16 impact
@
Capital expenditure (xxv)
excluding capital expenditure incurred during the year for assets classified as held for sale during the year.
Operating segment information (continued)
(vi) An analysis of total assets by segments
Ports and Related Services Retail
Infrastructure Energy
CK Hutchison Group Telecom
3 Group Europe Hutchison
Telecommunications
Hong Kong Holdings Corporate and Others
Hutchison Asia
Telecommunications Finance & Investments and Others
HK$ millionSegment assets (xxi)
Deferred tax assets HK$ million
73,386 201,517 61,119 -152 1,043 6 -
334,695
16,696
15,730 30,603 381,028 17,508 147,044 881,602
84 - 16,780
- 34
18,015
HKFRS 16 impact
74,276
1,911
955,878
19,926
(vii) An analysis of total liabilities by segments
Ports and Related Services Retail
Infrastructure Energy
CK Hutchison Group Telecom
3 Group Europe Hutchison
Telecommunications
Hong Kong Holdings Corporate and Others
Hutchison Asia
Telecommunications Finance & Investments and Others
AssetsInvestments in associatedclassified companies andas held for sale (xxiii)
HK$ million
- - - -
979
- - 979
- -979
272
1,251
Current & non-current borrowings (xxii)
and other
Segment non-current liabilities (xxi) liabilities HK$ million HK$ million
9,138 26,315 6,359 -15,342 16,840 33,973 -
39,493
22,506
1,662 4,443 45,598 11,999 9,971
565 80,171 103,242 13,075 219,718
109,380 402,190
Total assets
interests in joint ventures HK$ million
2020 Total assets
Segment assets (xxi)
HK$ million HK$ million
19,370 16,451 171,174 39,208
92,908 219,011 232,299 39,208
74,648 200,111 60,929 -
10
352,380
304,498
- 32,141
282 36 328
16,096 30,639 399,115 17,508 179,219
278,672
1,179,268
15,345 15,516 335,359 15,782 141,436 828,265
(1,131)
75,328
73,903
277,541
1,254,596
902,168
Total liabilities
Liabilities directly associated with assets classified as held for sale (xxiii)HK$ millionCurrent & 2020 deferred tax Total liabilities liabilities HK$ million HK$ million
HKFRS 16 impact
201,950
92,570
401,988
(202)
283
284
1
1
- - 1 - -- - - -
4,165 10,404 669 -
21,219
20,311
2 5,069
(908)
- 11 910
899
2,227 84,625 149,751 25,076 234,758
624,533
532,790
28,645 53,559 41,001 -
91,743
62,899
Segment liabilities (xxi)HK$ million HK$ millionHK$ million HK$ million
196,169
104,360 399,385
Deferred tax assets
18,640
20,353
40,476 105,203
11,241 14,304
91,809
11,982 17,384
25,799 12,905
168 - 17,510
38,325 22,745
17,342
8,987 217,291
5,875 32,298
1,713
1,554 482 597 81,976
189 908 4 -
- 29
-
Investments | ||
in associated | ||
companies and | 2019 | |
interests in | Total | |
joint ventures | assets | |
HK$ million | HK$ million | |
20,250 | 95,087 | |
14,338 | 215,357 | |
169,167 | 230,100 | |
61,706 | 61,706 | |
9 | 321,998 | |
335 | 15,848 | |
28 | 15,544 | |
372 | 353,390 | |
- | 15,782 | |
23,550 | 165,015 | |
289,383 | 1,136,437 | |
(1,077) | 74,539 | |
288,306 | 1,210,976 | |
borrowings (xxii) | ||
and other | Current & | 2019 |
deferred tax | Total | |
liabilities | liabilities | |
HK$ million | HK$ million | |
4,032 | 33,398 | |
9,819 | 48,523 | |
604 | 38,777 | |
- | - | |
230 | 61,300 | |
24 | 2,060 | |
31 | 82,604 | |
285 | 145,964 | |
2 | 25,547 | |
5,000 | 231,278 | |
19,742 | 523,487 | |
(1,054) | 90,526 | |
18,688 | 614,013 |
399,156
Assets classified as held for sale (xxiii)
- - - -
149
- - 149
- -149
-149
Current & non-currentnon-current liabilities
-(229)
Operating segment information (continued)
(viii) An analysis of revenue by geographical locations
Company andRevenue (xx)Associates and JV HK$ million
2020
Company and
Subsidiaries HK$ million
Total HK$ million
Subsidiaries % HK$ million
Hong Kong Mainland China
The People's Republic of China
33,793 24,458 58,251
12,606
4,475 8,131
38,268 32,589 70,857
17%
9% 8%
35,033 30,470 65,503
Europe
Canada (xxiv)
Asia, Australia and OthersFinance & Investments and Others
145,679 236 49,291
64,792 30,638 14,772
210,471 30,874 64,063
52% 155,782
8%
448
16% 52,956
195,206
253,457 12,939
110,202
122,808 14,642
305,408
376,265 27,581
76%
93% 7%
209,186 274,689 16,687
266,396
137,450
403,846
**
100%
291,376
** see note 5(b)(i) for reconciliation of segment revenue to revenue presented in the consolidated income statement.
(ix) An analysis of EBITDA by geographical locations
Company and
EBITDA (LBITDA) (xiv)
Associates and JV HK$ million
2019
Total HK$ million
%
12,557
4,498 8,059
39,531 38,529 78,060
9% 9% 18%
118,664 131,221 17,259
56,566 47,280 14,818
327,850 405,910 33,946
212,348 47,728 67,774
48% 11% 15% 74%
92% 8%
148,480
439,856 **
100%
Associates and JV HK$ million
2020
Company andAssociates and JV HK$ million
2019
Subsidiaries HK$ million
Total HK$ million
%
Subsidiaries HK$ million
Total HK$ million
%Hong Kong Mainland China
The People's Republic of China
2,374 3,806 6,180
2,055 3,956 6,011
12,191
4,429 7,762
13%
5% 8%
1,811 5,988 7,799
1,861 4,526 6,387
3,672 10,514 14,186
3% 10% 13%
Europe
Canada (xxiv)
Asia, Australia and OthersFinance & Investments and Others
56,471
18,912
238 (24,395)
66,687 72,867 13,143
9,978
8,553 3,070 9,081 1,853
75,383 (24,157) 18,531 69,757 81,948 14,996
78% -25% 19% 72% 85% 15%
47,409 347 12,819 60,575 68,374 8,768
24,670 31,057 3,869
14,358 1,555 8,757
61,767 1,902 21,576 85,245 99,431 12,637
55% 2% 19% 76% 89% 11%
##
86,010
10,934
96,944
100%
77,142
34,926
## see note 5(b)(ii) for reconciliation of segment EBITDA to profit or loss presented in the consolidated income statement.
##
112,068
100%
5
Operating segment information (continued)
(b) Segment results, assets and liabilities (continued)
(x)An analysis of EBIT by geographical locations
Company and | Associates | 2020 | |
Subsidiaries | and JV | Total | |
HK$ million | HK$ million | HK$ million | |
Hong Kong | 1,164 | 1,049 | 2,213 |
Mainland China | 2,726 | 2,726 | 5,452 |
The People's Republic of China | 3,890 | 3,775 | 7,665 |
Europe | 39,458 | 11,917 | 51,375 |
Canada (xxiv) | 238 | (29,316) | (29,078) |
Asia, Australia and Others | 5,957 | 5,248 | 11,205 |
45,653 | (12,151) | 33,502 | |
49,543 | (8,376) | 41,167 | |
Finance & Investments and Others | 12,917 | (230) | 12,687 |
62,460 | (8,606) | 53,854 |
4% | 706 | |
10% | 4,947 | |
14% | 5,653 | |
95% | 30,370 | |
-54% | 324 | |
21% | 9,144 | |
62% | 39,838 | |
76% | 45,491 | |
24% | 8,554 | |
@@ | 100% | 54,045 |
EBIT (LBIT) (xv) | |||
Company and | Associates | 2019 | |
Subsidiaries | and JV | Total | |
% HK$ million | HK$ million | HK$ million | % |
861 | 1,567 | 2% | |
3,068 | 8,015 | 11% | |
3,929 | 9,582 | 13% | |
10,306 | 40,676 | 57% | |
(4,206) | (3,882) | -5% | |
5,614 | 14,758 | 21% | |
11,714 | 51,552 | 73% | |
15,643 | 61,134 | 86% | |
1,420 | 9,974 | 14% | |
17,063 | 71,108 | 100% |
@@
@@ see note 5(b)(iii) for reconciliation of segment EBIT to profit or loss presented in the consolidated income statement.
The People's Republic of China
An analysis of capital expenditure by geographical locations |
Assets |
(xi)
Fixed munications assets @ licences @ HK$ million HK$ million
Hong Kong Mainland ChinaEurope Canada
Asia, Australia and OthersFinance & Investments and OthersHKFRS 16 impact
@
(xii)
excluding capital expenditure incurred during the year for assets classified as held for sale during the year.
An analysis of total assets by geographical locations
Hong Kong Mainland China
The People's Republic of China
Segment tax assets (xxi) assets HK$ million HK$ million
Europe
Canada (xxiv)
Asia, Australia and OthersFinance & Investments and OthersHKFRS 16 impact
Telecom- Brand names
1,075 670
202 -
1,745
202
19,537 - 5,662
477 - -
25,199 26,944
477 679
174
-27,118
679
(14)
-27,104
679
Deferred
52,168 43,312
119 551
95,480
670
498,704 16,942
3,430 136,944 639,078
6 363
17,311
734,558 17,981
and other rights @ HK$ millionclassified as held for sale HK$ million
- -- -
-
-1,791
1,786 1,786
1,772 - 14
5
-
- - - - - - - -
1,791
-
Investments
Assets in associated
classified companies andas held for sale (xxiii)HK$ millioninterests in joint ventures HK$ million
- -9,782 25,534
-
35,316
979 - -115,899 38,019 57,297
979
211,215
979
246,531 1,000,049
147,044 881,602
34
-
32,141 179,219
18,015
979 278,672
Capital expenditure (xxv)
955,878
74,276
19,926
1,911
1,251
272
277,541
(1,131)
Total HK$ million
2020 Total assets HK$ million
1,179,268
1,254,596
632,524 41,455 194,604 868,583
131,466
29,574
29,588
21,786 - 5,676
27,462 29,409
75,328
62,069 69,397
Total assets
1,277 670
1,947
2020
179
(14)
Telecom- Brand names |
Fixed munications and other |
assets @ licences @ rights @ |
HK$ million HK$ million HK$ million |
Assets | ||
classified | ||
as held | 2019 | |
for sale | Total | |
HK$ million | HK$ million | |
- | 1,498 | |
- | 958 | |
- | 2,456 | |
6,711 | 27,547 | |
33 | 33 | |
- | 6,028 | |
6,744 | 33,608 | |
6,744 | 36,064 | |
- | 322 | |
6,744 | 36,386 | |
- | (93) | |
6,744 | 36,293 | |
Investments | ||
in associated | ||
companies and | 2019 | |
interests in | Total | |
joint ventures | assets | |
HK$ million HK$ million HK$ million | HK$ million | HK$ million |
10,417 | 61,835 | |
23,077 | 66,675 | |
33,494 | 128,510 | |
115,288 | 596,316 | |
62,883 | 66,317 | |
54,168 | 180,279 | |
232,339 | 842,912 | |
265,833 | 971,422 | |
23,550 | 165,015 | |
289,383 | 1,136,437 | |
(1,077) | 74,539 | |
288,306 | 1,210,976 |
1,295 958
203 -
2,253
203
17,072 - 5,896
1,026 - 57
22,968 25,221
1,083 1,286
318
-25,539
1,286
(93)
-25,446
1,286
Deferred
Segment tax assets (xxi) assets
51,207 43,132
211 466
94,339
677
463,304 17,575
3,430 125,756 592,490
4 355
17,934
686,829 18,611
- -
-2,738 - 75
2,813 2,813
4
2,817
-2,817
Assets classified
as held for sale (xxiii)
- -
-149 - -
149
149
141,436
29
-828,265
18,640
149
73,903
1,713
-902,168
20,353
149
(xiii) An analysis of results (EBITDA and EBIT) before net gains from major transaction activities and share of Husky's impairments and other charges by segments
The Group's EBITDA and EBIT in 2020 included the net gain attributable to shareholders from the disposal of interests in the Group's European telecommunications tower assets that completed in 2020 of HK$16.6 billion (see note 5(b)(xviii)), as well as a dilution gain from the merger of VHA with TPG Corporation Limited of HK$10.1 billion (see note 5(b)(xix)). These gains were partly offset by the Group's share of Husky's impairments and other charges of HK$24.9 billion (see note 5(b)(xvi)) in 2020. For the comparative year, the Group's 2019 EBITDA and EBIT included a net gain attributable to shareholders of approximately HK$6.9 billion (see note 5(b)(xix)) arising from the derecognition of HUTCHMED as a subsidiary, which was mostly offset by the Group's share of Husky's impairments and other charges, before tax, of HK$6.0 billion (see note 5(b)(xvi)) in that year.
Set out below are analyses of EBITDA and EBIT before the aforementioned items.
An analysis of EBITDA by segments
EBITDA (LBITDA) (xiv)
Company and
Subsidiaries HK$ millionAssociates and JV HK$ million
2020
Total HK$ million
EBITDA before the following one-off items
Ports and Related Services
Retail
Infrastructure Energy
7,672 11,108 3,574 -3,242 3,289 25,492 1,906
10,914 11%
14,397 15%
29,066 31%
1,906 2%
CK Hutchison Group Telecom
3 Group Europe (xvii)
Hutchison Telecommunications Hong
Kong Holdings
Corporate and Others
31,377 1,278 (759)
1 63 (3)
31,378 33%
1,341 2%
(762) -1%
Hutchison Asia Telecommunications Finance & Investments and Others
31,896 2,034 3,038
61 31,957 34%
- 2,034 2%
1,853 4,891 5%
59,322
35,843 95,165
One-off items
Gains from disposal of European telecommunications tower assets (xviii)
16,583 - 16,583
Dilution gain from merger of VHA and
TPG Corporation Limited (xix)
10,105 - 10,105
Gain from derecognition of HUTCHMED as a subsidiary (xix)
Share of Husky's impairments and other charges (xvi)
- --
-
(24,909)
(24,909)
86,010
10,934
96,944
Company and | Associates | 2019 | |
Subsidiaries | and JV | Total | |
HK$ million | HK$ million | HK$ million | % |
9,806 | 3,599 | 13,405 | 12% |
13,676 | 3,215 | 16,891 | 15% |
7,437 | 21,051 | 28,488 | 26% |
- | 9,122 | 9,122 | 8% |
33,510 | 1 | 33,511 | 30% |
1,320 | 69 | 1,389 | 1% |
458 | (17) | 441 | 1% |
35,288 | 53 | 35,341 | 32% |
2,167 | - | 2,167 | 2% |
1,883 | 3,869 | 5,752 | 5% |
70,257 | 40,909 | 111,166 | 100% |
- | - | - | |
- | - | - | |
6,885 | - | 6,885 | |
- | (5,983) | (5,983) | |
## | 77,142 | 34,926 | 112,068 |
##
%
100%
## see note 5(b)(ii) for reconciliation of segment EBITDA to profit or loss presented in the consolidated income statement.
(xiii) An analysis of results (EBITDA and EBIT) before net gains from major transaction activities and share of Husky's impairments and other charges by segments
(continued)
An analysis of EBITDA by geographical locationsEBITDA before the following one-off items
Hong Kong
Mainland China
The People's Republic of China
Europe
Canada (xxiv)
Asia, Australia and OthersFinance & Investments and OthersOne-off items
Gains from disposal of European telecommunications tower assets (xviii)
Dilution gain from merger of VHA and
TPG Corporation Limited (xix)
Gain from derecognition of HUTCHMED as a subsidiary (xix)
Share of Husky's impairments and other charges (xvi)
EBITDA (LBITDA) (xiv)Company andAssociates and JV HK$ million
2020
Subsidiaries HK$ million
Total HK$ million
2,374 3,806 6,180
2,055 3,956 6,011
4,429 5%
7,762 8%
12,191
39,888 238 9,978
18,912 514 8,553
58,800 62%
752 1%
18,531 19%
50,104 56,284 3,038
27,979 33,990 1,853
78,083
90,274 95%
4,891 5%
59,322
35,843 95,165
16,583 - 16,583
10,105 - 10,105
86,010
- -
(24,909)
10,934
-
(24,909)
96,944
-
Company and | Associates | 2019 | |
Subsidiaries | and JV | Total | |
HK$ million | HK$ million | HK$ million | % |
1,811 | 1,861 | 3,672 | 3% |
5,988 | 4,526 | 10,514 | 9% |
7,799 | 6,387 | 14,186 | 12% |
47,409 | 14,358 | 61,767 | 56% |
347 | 7,538 | 7,885 | 7% |
12,819 | 8,757 | 21,576 | 20% |
60,575 | 30,653 | 91,228 | 83% |
68,374 | 37,040 | 105,414 | 95% |
1,883 | 3,869 | 5,752 | 5% |
70,257 | 40,909 | 111,166 | 100% |
- | - | - | |
- | - | - | |
6,885 | - | 6,885 | |
- | (5,983) | (5,983) | |
## | 77,142 | 34,926 | 112,068 |
##
%
13%
82%
100%
## see note 5(b)(ii) for reconciliation of segment EBITDA to profit or loss presented in the consolidated income statement.
5 Operating segment information (continued)
(b) Segment results, assets and liabilities (continued)
(xiii) An analysis of results (EBITDA and EBIT) before net gains from major transaction activities and share of Husky's impairments and other charges by segments
(continued)
An analysis of EBIT by segments
EBIT before the following one-off items
Ports and Related Services
Retail
Infrastructure Energy
CK Hutchison Group Telecom
3 Group Europe (xvii)
Hutchison Telecommunications Hong
Kong Holdings
Corporate and Others
Hutchison Asia Telecommunications Finance & Investments and OthersOne-off items
Gains from disposal of European telecommunications tower assets (xviii)
Dilution gain from merger of VHA and
TPG Corporation Limited (xix)
Gain from derecognition of HUTCHMED as a subsidiary (xix)
Share of Husky's impairments and other charges (xvi)
An analysis of EBIT by geographical locationsEBIT before the following one-off items
Hong Kong
Mainland China
The People's Republic of China
Europe
Canada (xxiv)
Asia, Australia and OthersFinance & Investments and OthersOne-off items
Gains from disposal of European telecommunications tower assets (xviii)
Dilution gain from merger of VHA and
TPG Corporation Limited (xix)
Gain from derecognition of HUTCHMED as a subsidiary (xix)
Share of Husky's impairments and other charges (xvi)
EBIT (LBIT) (xv)
@@ see note 5(b)(iii) for reconciliation of segment EBIT to profit or loss presented in the consolidated income statement.
(xiv) EBITDA (LBITDA) represents the EBITDA (LBITDA) of the Company and subsidiary companies as well as the Group's share of the
EBITDA (LBITDA) of associated companies and joint ventures except for HPH Trust which are included based on the Group's effective share of EBITDA for this operation and the Group's interests in six infrastructure investments co-owned with CKI that are based on the Group's 10% direct interests in these investments. EBITDA (LBITDA) is defined as earnings (losses) before interest expenses and other finance costs, tax, depreciation and amortisation. Information concerning EBITDA (LBITDA) has been included in the Group's financial information and consolidated financial statements and is used by many industries and investors as one measure of gross cash flow generation. The Group considers EBITDA (LBITDA) to be an important performance measure which is used in the Group's internal financial and management reporting to monitor business performance. EBITDA (LBITDA) is therefore presented as a measure of segment results in accordance with HKFRS 8. EBITDA (LBITDA) is not a measure of cash liquidity or financial performance under HKFRS and the EBITDA (LBITDA) measures used by the Group may not be comparable to other similarly titled measures of other companies. EBITDA (LBITDA) should not necessarily be construed as an alternative to cash flows or results from operations as determined in accordance with HKFRS.
(xv) EBIT (LBIT) represents the EBIT (LBIT) of the Company and subsidiary companies as well as the Group's share of the EBIT (LBIT) of associated companies and joint ventures except for HPH Trust which are included based on the Group's effective share of EBIT for this operation and the Group's interests in six infrastructure investments co-owned with CKI that are based on the Group's 10% direct interests in these investments. EBIT (LBIT) is defined as earnings (losses) before interest expenses and other finance costs and tax.
Information concerning EBIT (LBIT) has been included in the Group's financial information and consolidated financial statements and is used by many industries and investors as one measure of results from operations. The Group considers EBIT (LBIT) to be an important performance measure which is used in the Group's internal financial and management reporting to monitor business performance. EBIT (LBIT) is therefore presented as a measure of segment results in accordance with HKFRS 8. EBIT (LBIT) is not a measure of financial performance under HKFRS and the EBIT (LBIT) measures used by the Group may not be comparable to other similarly titled measures of other companies. EBIT (LBIT) should not necessarily be construed as an alternative to results from operations as determined in accordance with HKFRS.
(xvi) The Group's 40.19% owned listed associated company, Husky recognised non-cash after-tax impairments and other charges of C$8.6 billion in 2020. These were primarily related to declines in forecasted long-term commodity prices, reduced capital investment and delayed future development plans, as well as market indicators including the merger with Cenovus Energy Inc. ("Cenovus Energy"). The Group's share of these charges, after consolidation adjustments, is HK$24,909 million at the EBITDA and EBIT levels, and is reported under "Energy" in the segment results. For the comparative year 2019, Husky recognised non-cash asset impairments and other charges aggregating C$2.3 billion (after tax), primarily related to its upstream assets in North America, including the Sunrise Energy Project and the Atlantic and Western Canada segments, and were largely due to lower long-term commodity price assumptions and a reduction in future capital spending. The reduction in future capital spending had the effect of reducing reserves, which in turn reduced asset values. Other charges included exploration-related write-downs and asset de-recognition at the Lima Refinery associated with redundant equipment following the completion of the crude oil flexibility project. The Group's share of these charges, after consolidation adjustments, was HK$5,983 million at the EBITDA and EBIT levels, and was reported under "Energy" in the segment results.
The Group's share of Husky's impairments and other charges for 2020, after consolidation adjustments, is HK$24,909 million (before tax) and is HK$18,724 million (after tax). The Group's share of Husky's non-cash asset impairments and other charges for 2019, after consolidation adjustments, was HK$5,983 million (before tax) and was HK$4,223 million (after tax). The after tax amount is reported in "Share of profits less losses of associated companies" in the consolidated income statement for the current and comparative years.
In January 2021, Cenovus Energy, a Canadian integrated oil and natural gas company listed on the Toronto and New York stock exchanges, announced the completion of the combination of Cenovus Energy and Husky. The merger creates Canada's third largest oil and natural gas producer, based on total company production, with about 750,000 barrels of oil equivalent per day ("boe/day") of low-cost oil and natural gas production. The combined company also becomes the second-largest Canadian-based refiner and upgrader, with total North American refining and upgrading capacity of approximately 660,000 barrels per day ("bbls/day"). Post-completion, Husky was delisted from the Toronto Stock Exchange and the Group currently holds approximately 15.71% of Cenovus Energy, together with share purchase warrants representing a further 1.08% to 16.79%.
(xvii) For the comparative year, included in the EBITDA and EBIT of 3 Group Europe was a one-time income of approximately €110 million (approximately HK$1,028 million) recognised by Wind Tre in the first half of 2019.
(xviii) In December 2020, the Group completed the disposal of interests in telecommunications tower assets in Denmark, Austria and Ireland, and recognised a disposal gain of approximately HK$16,583 million (HK$16,763 million at Post-HKFRS 16 basis). The amount of gain is HK$16,583 million at the EBITDA and EBIT levels, and is reported under "CK Hutchison Group Telecom - Corporate and Others" in the segment results. See note 7(e).
(xix) In the first half of 2020, joint venture VHA and TPG Corporation Limited have completed the merger of their telecommunications businesses in Australia. As a result, the Group's attributable interest in VHA has been diluted from 43.93% to 22.01%. The Group has recognised a gain arising from the dilution during the year. The amount of the gain is HK$10,105 million (HK$10,186 million at Post-HKFRS 16 basis) at EBITDA and EBIT levels and is reported under "Finance & Investments and Others" in the segment results. The gain attributable to ordinary shareholders amounted to HK$9,177 million (HK$9,247 million at Post-HKFRS 16 basis).
Pursuant to the merger, VHA was renamed as TPG. The Group accounts for the retained interest as an associated company using the equity method of accounting. In addition, write-downs on certain non-strategic equity investments totalling HK$1,308 million is reported under the "Finance & Investments and Others" in the segment results. For the comparative year 2019, the Group recognised a one-off disposal gain arising from the de-consolidation of former subsidiary HUTCHMED. The disposal gain was HK$6,885 million at the EBITDA and EBIT levels, and was reported under "Finance & Investments and Others" in the segment results. Included in this gain amount was a HK$6,841 million gain on remeasurement of the entire block (being the unit of accounting) of the Group's retained interest in HUTCHMED to its fair value at the date of de-consolidation. See note 7(f) and 7(g).
(xx) The geographical location of customers is based on the location at which the services were provided or goods delivered. Hong Kong is the location of principal place of business of the Company.
(xxi) Segment assets and segment liabilities are measured in the same way as in the financial statements.
Segment assets are assets other than deferred tax assets, assets classified as held for sale, and investments in associated companies and interests in joint ventures.
Segment liabilities are liabilities other than bank and other debts, interest bearing loans from non-controlling shareholders, tax liabilities (including deferred tax liabilities), liabilities directly associated with assets classified as held for sale and other non-current liabilities.
The specified non-current assets are non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts. The geographical location of the specified non-current assets is based on the physical location of the asset (for fixed assets, right-of-use assets and other operating assets), the location of the operation in which they are allocated (for assets classified as held for sale, intangible assets and goodwill), and the location of operations (for associated companies and interests in joint ventures).
Geographical analysis of the Group's non-current assets (based on Post-HKFRS 16 basis) other than financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts is as follows:
2020
2019
HK$ million
HK$ million
Hong Kong
74,264
75,997
Mainland China
79,034
78,356
The People's Republic of China
153,298
154,353
Europe
591,099
563,367
Canada (xxiv)
41,431
66,207
Asia, Australia and Others
193,953
174,976
826,483
804,550
979,781
958,903
(xxii) Current and non-current borrowings comprise bank and other debts and interest bearing loans from non-controlling shareholders.
(xxiii) See note 25.
(xxiv) Include contribution from the United States for Husky.
(xxv) For the purpose of segmental information analysis, expenditures incurred for leases are not regarded as capital expenditures.
5 | Operating segment information (continued) |
(c) | Reconciliation from Pre-HKFRS 16 basis metrics to Post-HKFRS 16 basis metrics |
(i) | Consolidated Income Statement |
2020 | 2019 | ||||
Pre- | Effect on | Post- | Pre- | Effect on | Post- |
HKFRS 16 | adoption of | HKFRS 16 | HKFRS 16 | adoption of | HKFRS 16 |
basis | HKFRS 16 | basis | basis | HKFRS 16 | basis |
HK$ million |
HK$ million HK$ million HK$ million HK$ million HK$ million
Revenue | 266,396 | - | 266,396 | 299,021 | - | 299,021 |
Cost of inventories sold | (95,579) | 30 | (95,549) | (105,983) | 24 | (105,959) |
Staff costs | (35,495) | - | (35,495) | (37,958) | - | (37,958) |
Expensed customer acquisition and retention costs | (16,830) | 468 | (16,362) | (18,247) | 492 | (17,755) |
Depreciation and amortisation | (23,550) | (18,108) | (41,658) | (21,256) | (16,873) | (38,129) |
Other expenses and losses | (63,693) | 21,211 | (42,482) | (67,467) | 20,128 | (47,339) |
Other income and gains | 30,910 | 364 | 31,274 | 7,293 | - | 7,293 |
Share of profits less losses of: | ||||||
Associated companies | (18,463) | (66) | (18,529) | 1,579 | (55) | 1,524 |
Joint ventures | 5,145 | (191) | 4,954 | 7,684 | (280) | 7,404 |
48,841 | 3,708 | 52,549 | 64,666 | 3,436 | 68,102 | |
Interest expenses and other finance costs | (7,166) | (3,684) | (10,850) | (10,682) | (3,623) | (14,305) |
Profit before tax | 41,675 | 24 | 41,699 | 53,984 | (187) | 53,797 |
Current tax | (4,004) | 19 | (3,985) | (4,871) | (20) | (4,891) |
Deferred tax | (431) | 114 | (317) | (1,194) | 65 | (1,129) |
Profit after tax | 37,240 | 157 | 37,397 | 47,919 | (142) | 47,777 |
Profit attributable to non-controlling interests and holders of | ||||||
perpetual capital securities | (8,240) | (14) | (8,254) | (8,031) | 84 | (7,947) |
Profit attributable to ordinary shareholders | 29,000 | 143 | 29,143 | 39,888 | (58) | 39,830 |
Earnings per share for profit attributable to ordinary shareholders | HK$ 7.52 | HK$ 0.04 | HK$ 7.56 | HK$ 10.34 | (HK$ 0.01) | HK$ 10.33 |
5 | Operating segment information (continued) |
(c) | Reconciliation from Pre-HKFRS 16 basis metrics to Post-HKFRS 16 basis metrics (continued) |
(ii) | Consolidated Statement of Comprehensive Income |
2020 | 2019 | ||||
Pre- | Effect on | Post- | Pre- | Effect on | Post- |
HKFRS 16 | adoption of | HKFRS 16 | HKFRS 16 | adoption of | HKFRS 16 |
basis | HKFRS 16 | basis | basis | HKFRS 16 | basis |
HK$ million |
HK$ million HK$ million HK$ million HK$ million HK$ million
Profit after tax
Other comprehensive income (losses)
Items that will not be reclassified to profit or loss: Remeasurement of defined benefit obligations recognised directly
Share of other comprehensive income (losses) of associated
Share of other comprehensive income (losses) of joint ventures Tax relating to items that will not be reclassified to profit or lossin reserves (664)
Equity securities at FVOCI
Valuation gains (losses) recognised directly in reserves 1,461
companies (540)
Items that have been reclassified or may be subsequently reclassified to profit or loss:
Debt securities at FVOCI
Valuation gains recognised directly in reserves
Valuation losses previously in reserves recognised in income statement
Losses on cash flow hedges recognised directly in reserves Losses on net investment hedges recognised directly in reserves
Gains (losses) on translating overseas subsidiaries' net assets recognised directly in reserves
Losses previously in exchange and other reserves related to subsidiaries, associated companies and joint ventures disposed during the year recognised in income statement
Share of other comprehensive income of associated companies Share of other comprehensive income (losses) of joint ventures
Tax relating to items that have been reclassified or may be subsequently reclassified to profit or loss
Other comprehensive income, net of tax
Total comprehensive incomeTotal comprehensive income attributable to non-controlling interests and holders of perpetual capital securities
Total comprehensive income attributable to ordinary shareholders
157 | 37,397 | 47,919 | (142) | 47,777 | |
- | (664) | (899) | - | (899) | |
- | 1,461 | (323) | - | (323) | |
- | (540) | 300 | - | 300 | |
- | (1,815) | 564 | - | 564 | |
- | 169 | 170 | - | 170 | |
- | (1,389) | (188) | - | (188) | |
44 | - | 44 | 104 | - | 104 |
89 | - | 89 | 29 | - | 29 |
(65) | - | (65) | (808) | - | (808) |
(2,229) | - | (2,229) | (547) | - | (547) |
13,592 | (588) | 13,004 | (663) | (150) | (813) |
2,093 | - | 2,093 | 4,534 | 1 | 4,535 |
2,231 | (4) | 2,227 | 40 | - | 40 |
3,528 | 7 | 3,535 | (635) | 3 | (632) |
9 | - | 9 | 103 | - | 103 |
19,292 | (585) | 18,707 | 2,157 | (146) | 2,011 |
17,903 | (585) | 17,318 | 1,969 | (146) | 1,823 |
55,143 | (428) | 54,715 | 49,888 | (288) | 49,600 |
(9,705) | 117 | (9,588) | (7,941) | 147 | (7,794) |
45,438 | (311) | 45,127 | 41,947 | (141) | 41,806 |
37,240
(1,815)
169
(1,389)
Operating segment information (continued)
(c) Reconciliation from Pre-HKFRS 16 basis metrics to Post-HKFRS 16 basis metrics (continued)
(iii) Consolidated Statement of Financial Position
2020
2019
Fixed assets | 132,920 | (819) | 132,101 | 119,835 | (704) | 119,131 |
Right-of-use assets | - | 83,805 | 83,805 | - | 83,708 | 83,708 |
Leasehold land | 6,940 | (6,940) | - | 7,209 | (7,209) | - |
Telecommunications licences | 66,944 | - | 66,944 | 63,387 | - | 63,387 |
Brand names and other rights | 91,766 | (313) | 91,453 | 88,275 | - | 88,275 |
Goodwill | 319,718 | - | 319,718 | 308,986 | - | 308,986 |
Associated companies | 136,329 | (253) | 136,076 | 144,842 | (91) | 144,751 |
Interests in joint ventures | 142,343 | (878) | 141,465 | 144,541 | (986) | 143,555 |
Deferred tax assets | 18,015 | 1,911 | 19,926 | 18,640 | 1,713 | 20,353 |
Liquid funds and other listed investments | 10,588 | - | 10,588 | 7,722 | - | 7,722 |
Other non-current assets | 14,536 | 408 | 14,944 | 14,031 | 245 | 14,276 |
940,099 | 76,921 | 1,017,020 | 917,468 | 76,676 | 994,144 | |
Current assets | ||||||
Cash and cash equivalents | 155,951 | - | 155,951 | 137,127 | - | 137,127 |
Inventories | 24,565 | - | 24,565 | 23,847 | - | 23,847 |
Trade receivables and other current assets | 57,674 | (1,865) | 55,809 | 57,846 | (2,137) | 55,709 |
238,190 | (1,865) | 236,325 | 218,820 | (2,137) | 216,683 | |
Assets classified as held for sale | 979 | 272 | 1,251 | 149 | - | 149 |
239,169 | (1,593) | 237,576 | 218,969 | (2,137) | 216,832 | |
Current liabilities | ||||||
Bank and other debts | 48,096 | (75) | 48,021 | 40,054 | (59) | 39,995 |
Current tax liabilities | 2,646 | (7) | 2,639 | 1,870 | (1) | 1,869 |
Lease liabilities | - | 18,621 | 18,621 | - | 18,079 | 18,079 |
Trade payables and other current liabilities | 105,576 | (1,695) | 103,881 | 101,237 | (1,879) | 99,358 |
156,318 | 16,844 | 173,162 | 143,161 | 16,140 | 159,301 | |
Liabilities directly associated with assets classified as held for sale | 1 | 283 | 284 | - | - | - |
156,319 | 17,127 | 173,446 | 143,161 | 16,140 | 159,301 | |
Net current assets | 82,850 | (18,720) | 64,130 | 75,808 | (18,277) | 57,531 |
Total assets less current liabilities | 1,022,949 | 58,201 | 1,081,150 | 993,276 | 58,399 | 1,051,675 |
Non-current liabilities | ||||||
Bank and other debts | 301,170 | (120) | 301,050 | 304,735 | (170) | 304,565 |
Interest bearing loans from non-controlling shareholders | 798 | - | 798 | 728 | - | 728 |
Lease liabilities | - | 75,644 | 75,644 | - | 75,609 | 75,609 |
Deferred tax liabilities | 18,573 | (901) | 17,672 | 17,872 | (1,053) | 16,819 |
Pension obligations | 3,804 | - | 3,804 | 3,123 | - | 3,123 |
Other non-current liabilities | 52,126 | (7) | 52,119 | 53,868 | - | 53,868 |
376,471 | 74,616 | 451,087 | 380,326 | 74,386 | 454,712 | |
Net assets | 646,478 | (16,415) | 630,063 | 612,950 | (15,987) | 596,963 |
Capital and reserves | ||||||
Share capital | 3,856 | - | 3,856 | 3,856 | - | 3,856 |
Share premium | 244,377 | - | 244,377 | 244,377 | - | 244,377 |
Reserves | 258,327 | (12,264) | 246,063 | 228,005 | (11,953) | 216,052 |
Total ordinary shareholders' funds | 506,560 | (12,264) | 494,296 | 476,238 | (11,953) | 464,285 |
Perpetual capital securities | 12,415 | - | 12,415 | 12,410 | - | 12,410 |
Non-controlling interests | 127,503 | (4,151) | 123,352 | 124,302 | (4,034) | 120,268 |
Total equity | 646,478 | (16,415) | 630,063 | 612,950 | (15,987) | 596,963 |
5
Operating segment information (continued)
(c) Reconciliation from Pre-HKFRS 16 basis metrics to Post-HKFRS 16 basis metrics (continued)
(iv) Consolidated Statement of Cash Flows
Pre- | ||||||
HKFRS 16 | ||||||
basis | ||||||
HK$ million | ||||||
(A) | (B) | (A) | (B) | |||
Operating activities | ||||||
Cash generated from operating activities before interest expenses | ||||||
and other finance costs, tax paid and changes in working capital | 66,276 | 20,796 | 87,072 | 74,740 | 20,551 | 95,291 |
Interest expenses and other finance costs paid (net of capitalisation) | (7,105) | (3,684) | (10,789) | (10,998) | (3,623) | (14,621) |
Tax paid | (3,628) | - | (3,628) | (5,823) | - | (5,823) |
Funds from operations (Funds from operations under (B) is before | ||||||
payment of lease liabilities) | 55,543 | 17,112 | 72,655 | 57,919 | 16,928 | 74,847 |
Changes in working capital | (332) | 848 | 516 | (4,583) | (994) | (5,577) |
Net cash from operating activities | 55,211 | 17,960 | 73,171 | 53,336 | 15,934 | 69,270 |
Investing activities | ||||||
Purchase of fixed assets | (27,118) | 14 | (27,104) | (32,283) | 93 | (32,190) |
Additions to telecommunications licences | (679) | - | (679) | (1,286) | - | (1,286) |
Additions to brand names and other rights | (1,791) | - | (1,791) | (2,817) | - | (2,817) |
Purchase of subsidiary companies, net of cash acquired | - | - | - | (30) | - | (30) |
Additions to other unlisted investments | (131) | - | (131) | (17) | - | (17) |
Repayments of loans from associated companies and joint ventures | 1,609 | - | 1,609 | 641 | - | 641 |
Purchase of and advances to associated companies and joint ventures | (833) | - | (833) | (885) | - | (885) |
Proceeds from disposal of fixed assets | 564 | - | 564 | 150 | - | 150 |
Proceeds from disposal of subsidiary companies, net of cash disposed | 20,780 | - | 20,780 | (1,522) | - | (1,522) |
Cash disposed arising from de-consolidation of subsidiaries classified | ||||||
as held for sale | - | - | - | (2,429) | - | (2,429) |
Proceeds from partial disposal / disposal of associated companies and | ||||||
joint ventures | 2,005 | - | 2,005 | 2,388 | - | 2,388 |
Proceeds from disposal of other unlisted investments | 13 | - | 13 | 130 | - | 130 |
Cash flows used in investing activities before additions to / | ||||||
disposal of liquid funds and other listed investments | (5,581) | 14 | (5,567) | (37,960) | 93 | (37,867) |
Disposal of liquid funds and other listed investments | 730 | - | 730 | 503 | - | 503 |
Additions to liquid funds and other listed investments | (1,627) | - | (1,627) | (55) | - | (55) |
Cash flows used in investing activities | (6,478) | 14 | (6,464) | (37,512) | 93 | (37,419) |
Net cash inflow before financing activities | 48,733 | 17,974 | 66,707 | 15,824 | 16,027 | 31,851 |
Financing activities | ||||||
New borrowings | 44,405 | (14) | 44,391 | 211,526 | - | 211,526 |
Repayment of borrowings | (56,411) | 50 | (56,361) | (211,397) | (58) | (211,455) |
Payment of lease liabilities | - | (18,010) | (18,010) | - | (15,969) | (15,969) |
Net loans to non-controlling shareholders | - | - | - | (2) | - | (2) |
Capital redemption by non-controlling shareholders | - | - | - | (10) | - | (10) |
Payment to acquire additional interests in subsidiary companies | (1,048) | - | (1,048) | (478) | - | (478) |
Proceeds from partial disposal of subsidiary companies | 309 | - | 309 | 2,201 | - | 2,201 |
Dividends paid to ordinary shareholders | (11,238) | - | (11,238) | (12,225) | - | (12,225) |
Dividends paid to non-controlling interests | (5,444) | - | (5,444) | (6,910) | - | (6,910) |
Distribution paid on perpetual capital securities | (482) | - | (482) | (398) | - | (398) |
Cash flows used in financing activities | (29,909) | (17,974) | (47,883) | (17,693) | (16,027) | (33,720) |
Increase (decrease) in cash and cash equivalents | 18,824 | - | 18,824 | (1,869) | - | (1,869) |
Cash and cash equivalents at 1 January | 137,127 | - | 137,127 | 138,996 | - | 138,996 |
Cash and cash equivalents at 31 December | 155,951 | - | 155,951 | 137,127 | - | 137,127 |
Analysis of cash, liquid funds and other listed investments | ||||||
Cash and cash equivalents, as above | 155,951 | - | 155,951 | 137,127 | - | 137,127 |
Liquid funds and other listed investments | 10,588 | - | 10,588 | 7,722 | - | 7,722 |
Total cash, liquid funds and other listed investments | 166,539 | - | 166,539 | 144,849 | - | 144,849 |
Total principal amount of bank and other debts and unamortised | ||||||
fair value adjustments arising from acquisitions | 351,837 | (195) | 351,642 | 347,726 | (229) | 347,497 |
Interest bearing loans from non-controlling shareholders | 798 | - | 798 | 728 | - | 728 |
Net debt | 186,096 | (195) | 185,901 | 203,605 | (229) | 203,376 |
Interest bearing loans from non-controlling shareholders | (798) | - | (798) | (728) | - | (728) |
Net debt (excluding interest bearing loans from non-controlling | ||||||
shareholders) | 185,298 | (195) | 185,103 | 202,877 | (229) | 202,648 |
2020 | 2019 | |||
Effect on | Post- | Pre- | Effect on | Post- |
adoption of | HKFRS 16 | HKFRS 16 | adoption of | HKFRS 16 |
HKFRS 16 | basis | basis | HKFRS 16 | basis |
6 Directors' emoluments
2020 HK$ million
2019 HK$ millionDirectors' emoluments
487
581
Directors' emoluments comprise payments to directors by the Company and its subsidiaries in connection with the management of the affairs of the Company and its subsidiaries. The emoluments exclude amounts received from the Company's listed subsidiaries and paid to the Company. The amounts disclosed above are the amounts recognised as directors' emolument expenses and are included in "Staff costs" and "Other expenses and losses" in the income statement.
As at 31 December 2020 and 31 December 2019, the Company and its subsidiary companies do not have share option scheme. None of the directors have received any share-based payments from the Company or any of its subsidiaries during the year (2019: nil).
In 2020, the five individuals whose emoluments were the highest for the year were directors of the Company. In 2019, the five individuals whose emoluments were the highest for the year were four directors of the Company and one director of a subsidiary of the Company. The remuneration of the director of the subsidiary company consisted of basic salary, allowances and benefits-in-kind of HK$4.86 million; provident fund contribution of HK$0.32 million and discretionary bonus of HK$29.19 million.
Further details of the directors' emoluments are set out in table below:
(a) Directors' emolument expenses recognised in the Group's income statement:
2020 | ||||||
Basic salaries, | Provident | Inducement or | ||||
Director's | allowances and | Discretionary | fund | compensation | Total | |
fees | benefits-in-kind | bonuses | contributions | fees | emoluments | |
Name of directors | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million |
Victor T K LI (1) (2) | ||||||
Paid by the Company | 0.28 | 4.89 | 55.21 | - | - | 60.38 |
Paid by CKI | 0.10 | - | 25.93 | - | - | 26.03 |
0.38 | 4.89 | 81.14 | - | - | 86.41 | |
FOK Kin Ning, Canning (3) | 0.22 | 11.56 | 153.22 | 1.04 | - | 166.04 |
Frank John SIXT (3) (4) | 0.25 | 8.66 | 99.96 | 0.75 | - | 109.62 |
IP Tak Chuen, Edmond | ||||||
Paid by the Company | 0.22 | 1.62 | 7.85 | - | - | 9.69 |
Paid by CKI | 0.08 | 1.80 | 10.26 | - | - | 12.14 |
0.30 | 3.42 | 18.11 | - | - | 21.83 | |
KAM Hing Lam | ||||||
Paid by the Company | 0.22 | 2.42 | 7.30 | - | - | 9.94 |
Paid by CKI | 0.08 | 4.20 | 9.42 | - | - | 13.70 |
0.30 | 6.62 | 16.72 | - | - | 23.64 | |
LAI Kai Ming, Dominic (3) | 0.22 | 5.94 | 50.25 | 0.48 | - | 56.89 |
Edith SHIH (3) (4) | 0.25 | 4.58 | 14.25 | 0.33 | - | 19.41 |
CHOW Kun Chee, Roland (5) | 0.22 | - | - | - | - | 0.22 |
CHOW WOO Mo Fong, Susan (5) | 0.22 | - | - | - | - | 0.22 |
LEE Yeh Kwong, Charles (5) | 0.22 | - | - | - | - | 0.22 |
LEUNG Siu Hon (5) | 0.22 | - | - | - | - | 0.22 |
George Colin MAGNUS (5) | ||||||
Paid by the Company | 0.22 | - | - | - | - | 0.22 |
Paid by CKI | 0.08 | - | - | - | - | 0.08 |
0.30 | - | - | - | - | 0.30 | |
KWOK Tun-li, Stanley (6) (7) | 0.35 | - | - | - | - | 0.35 |
CHENG Hoi Chuen, Vincent (1) (2) (6) (7) | 0.41 | - | - | - | - | 0.41 |
Michael David KADOORIE (6) | 0.22 | - | - | - | - | 0.22 |
LEE Wai Mun, Rose (6) | 0.22 | - | - | - | - | 0.22 |
William SHURNIAK (6) (8) | 0.21 | - | - | - | - | 0.21 |
Paul Joseph TIGHE (6) (9) | - | - | - | - | - | - |
WONG Chung Hin (6) (10) | 0.15 | - | - | - | - | 0.15 |
WONG Kwai Lam (2) (6) (7) (11) | 0.26 | - | - | - | - | 0.26 |
WONG Yick-ming, Rosanna (1) (2) (4) (6) | 0.32 | - | - | - | - | 0.32 |
Total | 5.24 | 45.67 | 433.65 | 2.60 | - | 487.16 |
6 Directors' emoluments (continued)
(a) Directors' emolument expenses recognised in the Group's income statement (continued):
2019
Basic salaries, | Provident | Inducement or | ||||
Director's | allowances and | Discretionary | fund | compensation | Total | |
fees | benefits-in-kind | bonuses | contributions | fees | emoluments | |
Name of directors | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million |
Victor T K LI (1) (2) | ||||||
Paid by the Company | 0.28 | 4.89 | 78.87 | - | - | 84.04 |
Paid by CKI | 0.08 | - | 33.24 | - | - | 33.32 |
0.36 | 4.89 | 112.11 | - | - | 117.36 | |
FOK Kin Ning, Canning (1) (3) | 0.22 | 11.56 | 215.09 | 1.04 | - | 227.91 |
Frank John SIXT (1) (3) | 0.22 | 8.65 | 67.58 | 0.75 | - | 77.20 |
IP Tak Chuen, Edmond (1) | ||||||
Paid by the Company | 0.22 | 1.62 | 11.21 | - | - | 13.05 |
Paid by CKI | 0.08 | 1.80 | 12.07 | - | - | 13.95 |
0.30 | 3.42 | 23.28 | - | - | 27.00 | |
KAM Hing Lam (1) | ||||||
Paid by the Company | 0.22 | 2.42 | 10.43 | - | - | 13.07 |
Paid by CKI | 0.08 | 4.20 | 12.07 | - | - | 16.35 |
0.30 | 6.62 | 22.50 | - | - | 29.42 | |
LAI Kai Ming, Dominic (1) (3) | 0.22 | 5.92 | 67.00 | 0.48 | - | 73.62 |
Edith SHIH (1) (3) | 0.22 | 4.44 | 20.36 | 0.32 | - | 25.34 |
CHOW Kun Chee, Roland (1) (5) | 0.22 | - | - | - | - | 0.22 |
CHOW WOO Mo Fong, Susan (1) (5) | 0.22 | - | - | - | - | 0.22 |
LEE Yeh Kwong, Charles (1) (5) | 0.22 | - | - | - | - | 0.22 |
LEUNG Siu Hon (1) (5) | 0.22 | - | - | - | - | 0.22 |
George Colin MAGNUS (1) (5) | ||||||
Paid by the Company | 0.22 | - | - | - | - | 0.22 |
Paid by CKI | 0.08 | - | - | - | - | 0.08 |
0.30 | - | - | - | - | 0.30 | |
KWOK Tun-li, Stanley (1) (6) (7) | 0.35 | - | - | - | - | 0.35 |
CHENG Hoi Chuen, Vincent (1) (2) (6) (7) | 0.41 | - | - | - | - | 0.41 |
Michael David KADOORIE (1) (6) | 0.22 | - | - | - | - | 0.22 |
LEE Wai Mun, Rose (1) (6) | 0.22 | - | - | - | - | 0.22 |
William SHURNIAK (1) (6) (7) | 0.35 | - | - | - | - | 0.35 |
WONG Chung Hin (1) (2) (6) (7) | 0.41 | - | - | - | - | 0.41 |
WONG Yick-ming, Rosanna (1) (2) (6) | 0.28 | - | - | - | - | 0.28 |
Total | 5.26 | 45.50 | 527.92 | 2.59 | - | 581.27 |
(1) Member of the Nomination Committee. All Directors were members of the Nomination Committee until 25 November 2020. Following the change of composition of the Nomination Committee on 26 November 2020, the Committee comprises Dr Wong Yick-ming, Rosanna (chairman of the Nomination Committee), Mr Victor T K Li and Mr Cheng Hoi Chuen, Vincent.
(2) Member of the Remuneration Committee.
(3) Directors' fees to these Directors from the Company's listed subsidiaries during the period they served as directors have been paid to the Company and are not included in the amounts above.
(4) Member of the Sustainability Committee.
(5) Non-executive Director.
(6) Independent Non-executive Director. The total emoluments of the Independent Non-executive Directors of the Company are HK$2.14 million
(2019: HK$2.24 million).
(7) Member of the Audit Committee.
(8) Former member of the Audit Committee and Nomination Committee. Passed away on 9 August 2020.
(9) Appointed on 28 December 2020. The amount of director's fee shown above is a result of rounding.
(10) Former member of the Audit Committee, Nomination Committee and Remuneration Committee. Retired on 14 May 2020.
(11) Appointed on 14 May 2020.
7 Presentation of other expenses and losses, other income and gains, and cost of goods sold
In the current year, the Group presents an additional line item "Other income and gains" in the consolidated income statement to provide information in respect of the profit and loss effects arising from, amongst others, major corporate transactions that completed in 2020. As a result, comparative information has been reclassified to conform to this presentation. See below for further details on "Other expenses and losses", "Other income and gains" and "Cost of goods sold" for the current and comparative years.
2020 | 2019 | |
HK$ million | HK$ million | |
Other expenses and losses: | ||
Cost of providing services (a) | 24,103 | 26,034 |
Office and general administrative expenses and others | 8,594 | 9,828 |
Expenses for short-term, low-value assets leases and payment for variable rent | 4,414 | 5,559 |
Advertising and promotion expenses | 3,782 | 3,998 |
Legal and professional fees | 1,300 | 1,559 |
Auditors' remuneration (b) | 289 | 361 |
42,482 | 47,339 | |
2020 | 2019 | |
HK$ million | HK$ million | |
Other income and gains: | ||
Rent concessions (c) | (737) | - |
Employment and other subsidies (d) | (2,261) | - |
Gains on disposal of European telecommunications tower assets (e) | (16,763) | - |
Dilution gain (f) | (10,186) | - |
Gains and losses on disposal of subsidiaries (g) | 4 | (7,518) |
Gains and losses on disposals of interests in associated companies and joint ventures | (1,331) | 225 |
(31,274) | (7,293) | |
2020 | 2019 | |
HK$ million | HK$ million | |
Cost of goods sold: | ||
included in "Cost of inventories sold" | 95,549 | 105,959 |
included in "Expensed customer acquisition and retention costs" | 10,536 | 11,579 |
106,085 | 117,538 |
(a) Cost of providing services of HK$24,103 million (2019: HK$26,034 million) includes telecommunication network related costs of HK$13,222 million (2019: HK$14,873 million), repair and maintenance of HK$5,828 million (2019: HK$5,199 million) and others of HK$5,053 million (2019: HK$5,962 million).
(b) Auditors' remuneration of HK$289 million (2019: HK$361 million) are charged for audit and audit related work performed by the Company's auditor, PricewaterhouseCoopers of HK$211 million (2019: HK$246 million) and performed by other auditors of HK$13 million (2019: HK$23 million), and for non-audit work, including tax compliance and other tax services, and financial due diligence services, performed by the Company's auditor, PricewaterhouseCoopers of HK$24 million (2019:
HK$26 million) and performed by other auditors of HK$41 million (2019: HK$66 million).
(c) Benefits derived from changes in lease payments arising from COVID-19 related rent concessions.
(d) Benefits received from governments and other authorities under COVID-19 related employment and other support schemes.
7 Presentation of other expenses and losses, other income and gains, and cost of goods sold (continued)
(e) On 12 November 2020, the Group entered into agreements with Cellnex Telecom, S.A. ("Cellnex"), a company incorporated and listed in Spain, to sell the Group's interests in telecommunications tower assets supporting the Group's mobile telecommunications businesses in Austria, Denmark, Ireland, Italy, Sweden and the United Kingdom. The aggregate consideration to be received by the Group is €10 billion (subject to closing adjustments). Each of the six transactions is subject to its own terms and conditions, and closing of each transaction can occur on a standalone basis as each transaction is independent and not inter-conditional upon the others. The Austrian transaction, Denmark transaction and Ireland transaction were completed in December 2020. The amount of the gains from these three disposal transactions is HK$16,763 million and is reported under "Other income and gains"
in the current year's consolidated income statement. The Sweden transaction was completed after the reporting date in January 2021 and resulted in a gain attributable to shareholders of approximately HK$6.6 billion to be reported in the Group's 2021 results. Subject to regulatory approval, it is anticipated that closings in respect of the Italy transaction and the United Kingdom transaction will take place within 2021. See note 5(b)(xviii).
(f) In the first half of 2020, joint venture VHA and TPG Corporation Limited have completed the merger of their telecommunications businesses in Australia. As a result, the Group's attributable interest in VHA has been diluted from 43.93% to 22.01%. The Group has recognised a gain arising from the dilution. The amount of the gain is HK$10,186 million and is reported under "Other income and gains" in the current year's consolidated income statement. Pursuant to the merger, VHA was renamed as TPG. Upon completion of the merger, the Group no longer has joint control but has significant influence over TPG. Accordingly, the Group continues to apply the method of equity accounting to account for its retained interests in TPG. For balance sheet classification, the Group classifies its interests in TPG from "Interests in joint ventures" to "Associated companies" with effect from the merger completion date of 26 June 2020. See note 5(b)(xix).
(g) The comparative amount includes a HK$6,885 million gain arising from the de-consolidation of former subsidiary HUTCHMED.
Included in this amount was a HK$6,841 million gain on remeasurement of the entire block (being the unit of accounting) of the Group's retained interest in HUTCHMED to its fair value at the date of de-consolidation. See note 5(b)(xix).
8 Interest expenses and other finance costs
2020 | 2019 | |
HK$ million | HK$ million | |
Bank loans and overdrafts | 1,660 | 2,257 |
Other loans | 1 | 5 |
Notes and bonds | 5,210 | 8,282 |
Interest bearing loans from non-controlling shareholders | 11 | 241 |
Other finance costs | 241 | 413 |
7,123 | 11,198 | |
Amortisation of loan facilities fees and premiums or discounts relating to borrowings | 320 | 315 |
Other non-cash interest adjustments (a) | (259) | (631) |
7,184 | 10,882 | |
Less: interest capitalised (b) | (37) | (219) |
Interest on lease liabilities | 3,703 | 3,642 |
10,850 | 14,305 |
(a) | Other non-cash interest adjustments represent amortisation of bank and other debts' fair value adjustments arising from acquisitions |
of HK$702 million (2019: HK$1,037 million) net with HK$443 million (2019: HK$406 million) notional adjustments to the | |
carrying amount of certain obligations recognised in the consolidated statement of financial position to the present value of the | |
estimated future cash flows expected to be required for their settlement in the future. | |
(b) | For the year ended 31 December 2019, borrowing costs have been capitalised at various applicable rates ranging from 4.3% to |
5.9% per annum. | |
9 | Tax |
2020 | 2019 | |
HK$ million | HK$ million | |
Current tax charge | ||
Hong Kong | 40 | 308 |
Outside Hong Kong | 3,945 | 4,583 |
3,985 | 4,891 | |
Deferred tax charge | ||
Hong Kong | 95 | 72 |
Outside Hong Kong | 222 | 1,057 |
317 | 1,129 | |
4,302 | 6,020 |
Hong Kong profits tax has been provided for at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits less estimated available tax losses. Tax outside Hong Kong has been provided for at the applicable rate on the estimated assessable profits less estimated available tax losses.
9 Tax (continued)
The differences between the Group's expected tax charge (credit), calculated at the domestic rates applicable to the jurisdiction concerned, and the Group's tax charge (credit) for the years were as follows: 2020 2019
HK$ million HK$ million
Tax calculated at the domestic rates applicable in the jurisdiction concerned | 6,055 | 8,760 |
Tax effect of: | ||
Tax losses not recognised | 3,071 | 1,638 |
Income not subject to tax | (1,900) | (1,311) |
Expenses not deductible for tax purposes | 1,132 | 1,363 |
Recognition of previously unrecognised tax losses | (22) | (214) |
Utilisation of previously unrecognised tax losses | (103) | (894) |
Under (over) provision in prior years | (94) | 19 |
Other temporary differences | (3,315) | (3,522) |
Effect of change in tax rate | (522) | 181 |
Total tax for the year | 4,302 | 6,020 |
10 Earnings per share for profit attributable to ordinary shareholders
The calculation of earnings per share is based on profit attributable to ordinary shareholders of the Company of HK$29,143 million (2019: HK$39,830 million) and 3,856,240,500 shares in issue in 2020 (2019: 3,856,240,500 shares).
The Company and its subsidiary companies do not have share option scheme as at 31 December 2020 and 31 December 2019. Certain of the Company's associated companies have employee share options outstanding as at 31 December 2020 and 31 December 2019. The employee share options of these associated companies outstanding as at 31 December 2020 and 31 December 2019 did not have a dilutive effect on earnings per share.
11 Distributions and dividends
(a) Distribution paid on perpetual capital securities
2020 | 2019 | |
HK$ million | HK$ million | |
Distribution paid on perpetual capital securities | 482 | 398 |
(b) Dividends | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Interim dividend, paid of HK$0.614 per share (2019: HK$0.87 per share) | 2,368 | 3,355 |
Final dividend, proposed of HK$1.70 per share (2019: HK$2.30 per share) | 6,555 | 8,870 |
8,923 | 12,225 |
In 2020, the calculation of the interim dividend and final dividend is based on 3,856,240,500 shares (2019: 3,856,240,500 shares) in issue.
At 1 January 2019 |
Additions |
Relating to subsidiaries acquired (see note 34(c)) |
Disposals |
Relating to subsidiaries disposed (see note 34(d)) |
Transfer between categories |
Exchange translation differences |
Transfer to assets classified as held for sale (see note 25) |
At 31 December 2019 and 1 January 2020 |
Additions |
Disposals |
Relating to subsidiaries disposed (see note 34(d)) |
Transfer between categories |
Exchange translation differences |
Transfer to assets classified as held for sale (see note 25) |
At 31 December 2020 |
Accumulated depreciation and impairment |
At 1 January 2019 |
Charge for the year |
Disposals |
Relating to subsidiaries disposed (see note 34(d)) |
Transfer between categories |
Exchange translation differences |
At 31 December 2019 and 1 January 2020 |
Charge for the year |
Disposals |
Relating to subsidiaries disposed (see note 34(d)) |
Transfer between categories |
Exchange translation differences |
Transfer to assets classified as held for sale (see note 25) |
At 31 December 2020 |
Net book value |
At 31 December 2020 |
At 31 December 2019 |
At 1 January 2019 |
12 | |||
Telecom- | |||
Land and | munications | Other | |
buildings | network assets | assets (a) | Total |
HK$ million | HK$ million | HK$ million | HK$ million |
Cost | |||
25,892 | 51,012 | 63,534 | 140,438 |
1,494 | 4,293 | 19,659 | 25,446 |
38 | - | 3 | 41 |
(54) | (425) | (781) | (1,260) |
(11) | - | (369) | (380) |
21 | 10,798 | (10,514) | 305 |
127 | 15 | (455) | (313) |
- | (55) | - | (55) |
27,507 | 65,638 | 71,077 | 164,222 |
1,229 | 5,440 | 20,435 | 27,104 |
(193) | (1,494) | (1,040) | (2,727) |
- | (2,425) | (165) | (2,590) |
174 | 10,806 | (10,970) | 10 |
522 | 4,516 | 3,813 | 8,851 |
- | (1,397) | - | (1,397) |
29,239 | 81,084 | 83,150 | 193,473 |
3,339 | 10,837 | 16,217 | 30,393 |
1,023 | 7,958 | 6,487 | 15,468 |
(40) | (398) | (585) | (1,023) |
(4) | - | (106) | (110) |
- | 306 | (1) | 305 |
39 | 64 | (45) | 58 |
4,357 | 18,767 | 21,967 | 45,091 |
1,062 | 8,359 | 6,833 | 16,254 |
(185) | (972) | (829) | (1,986) |
- | (696) | (18) | (714) |
1 | (3) | 12 | 10 |
166 | 1,651 | 1,374 | 3,191 |
- | (474) | - | (474) |
5,401 | 26,632 | 29,339 | 61,372 |
23,838 | 54,452 | 53,811 | 132,101 |
23,150 | 46,871 | 49,110 | 119,131 |
22,553 | 40,175 | 47,317 | 110,045 |
Fixed assets
(a)Net book value of other assets of HK$53,811 million (2019: HK$49,110 million) primarily relate to fixed assets used in business of Ports and related services of HK$17,970 million (2019: HK$18,665 million), Telecommunications of HK$25,043 million (2019: HK$19,144 million), and Infrastructure of HK$1,521 million (2019: HK$1,503 million).
As at 31 December 2020, other assets with a net book value of HK$17,055 million (2019: HK$15,353 million) are assets under construction.
12 | ||
(b) | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Within 1 year | 151 | 99 |
Between 1 and 2 years | 53 | 23 |
Between 2 and 3 years | 29 | 6 |
Between 3 and 4 years | 6 | 3 |
Between 4 and 5 years | 3 | 1 |
After 5 years | 10 | 3 |
252 | 135 | |
13 | Leases | |
(a) | Group as a lessee - amounts recognised in the consolidated statement of financial position | |
2020 | 2019 | |
HK$ million | HK$ million | |
Right-of-use assets | ||
Container terminals | 18,250 | 16,749 |
Retail stores | 25,186 | 26,489 |
Telecommunications network infrastructure sites | 28,818 | 28,495 |
Leasehold land | 6,939 | 7,209 |
Other assets | 4,612 | 4,766 |
83,805 | 83,708 | |
Lease liabilities | ||
Current | 18,621 | 18,079 |
Non-current | 75,644 | 75,609 |
94,265 | 93,688 |
Fixed assets (continued)
The analysis of the Group's aggregate future minimum lease receivable under non-cancellable operating leases of fixed assets is as follows:
On leases that commenced during the year, the Group has recognised HK$20,028 million (2019: HK$17,918 million) of right-of-use assets, and HK$20,008 million (2019: HK$17,851 million) of lease liabilities.
13 | ||
(b) | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Depreciation charge of right-of-use assets (included in "Depreciation and amortisation") | ||
Container terminals | 1,089 | 1,119 |
Retail stores | 7,895 | 7,917 |
Telecommunications network infrastructure sites | 7,723 | 6,597 |
Leasehold land | 369 | 374 |
Other assets | 1,455 | 1,277 |
18,531 | 17,284 | |
Interest on lease liabilities (included in "Interest expenses and other finance costs") | 3,703 | 3,642 |
Expenses relating to short-term leases (included in "Other expenses and losses") | 881 | 1,077 |
Expense relating to leases of low-value assets that are not short term leases | ||
(included in "Other expenses and losses") | 1,189 | 1,375 |
Expense relating to variable lease payments not included in lease liabilities | ||
(included in "Other expenses and losses") | 2,344 | 3,107 |
8,117 | 9,201 | |
Total charges recognised in profit or loss for leases | 26,648 | 26,485 |
(c) | Group as a lessee - amounts recognised in the consolidated statement of cash flows | |
2020 | 2019 | |
HK$ million | HK$ million | |
Within operating cash flows | 7,518 | 9,189 |
Within financing cash flows (see note 34(e)) | 18,010 | 15,969 |
Total cash outflows for leases | 25,528 | 25,158 |
(d) | Group as lessee - other lease disclosure | |
Variable lease payments |
Leases (continued)
Group as a lessee - amounts recognised in the consolidated income statement
Some leases contain variable payment terms that are linked to sales generated from a store. For individual retail stores, lease payments are on the basis of variable payment terms and there is a wide range of sales percentages applied. Variable payment terms are used for a variety of reasons, including minimising the fixed costs base for newly established stores. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
A 1% increase in sales across all stores / operations in the companies with leases containing variable lease payment terms that are linked to sales would increase total lease payments (see note (c)) by approximately 0.1% or HK$22 million (2019: approximately 0.1% or HK$27 million).
Extension and termination options
Extension and termination options are included in a number of leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor.
As at 31 December 2020, in accordance with applicable provision in HKFRS 16, potential future cash outflows of
HK$17,994 million (2019: HK$11,471 million) (undiscounted) have not been included in calculating the lease liability because it is not reasonably certain that the leases will be extended (or not terminated).
13 Leases (continued)
(d) Group as lessee - other lease disclosure (continued)
Residual value guarantees
As at 31 December 2020, residual value guarantee of HK$12 million (2019: HK$9 million) is expected to be payable and had been included in calculating the lease liabilities.
Leases not yet commenced to which the lessee is committed
At 31 December 2020, the Group is committed to leases that are not yet commenced, and the lease payments payable under which amounted to HK$404 million (2019: HK$873 million). This amount has not been included in calculating the lease liabilities as at 31 December 2020.
Restriction or covenants imposed by leases
The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.
(e) Group as lessor
2020
2019
HK$ million
HK$ million
Income from subleasing right-of-use assets (included in "Other expenses and losses")
191
261
The analysis of the Group's aggregate future minimum lease receivable under non-cancellable operating leases from subleasing right-of-use assets is as follows: 2020 2019
HK$ million HK$ million
Within 1 year | 138 | 169 |
Between 1 and 2 years | 83 | 119 |
Between 2 and 3 years | 70 | 82 |
Between 3 and 4 years | 51 | 63 |
Between 4 and 5 years | 45 | 35 |
After 5 years | 209 | 189 |
596 | 657 |
In addition, the Group has recognised income of HK$258 million (2019: HK$152 million) from leasing of fixed assets for the year ended 31 December 2020.
14 Telecommunications licences | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Net book value | ||
At 1 January | 63,387 | 64,221 |
Additions | 679 | 1,286 |
Amortisation for the year | (1,485) | (1,311) |
Disposal | - | (28) |
Exchange translation differences | 4,363 | (781) |
At 31 December | 66,944 | 63,387 |
Cost | 73,354 | 68,022 |
Accumulated amortisation and impairment | (6,410) | (4,635) |
66,944 | 63,387 |
The Group's telecommunications licences in the UK and Italy (except for a licence with carrying value at 31 December 2020 of
HK$133 million (2019: HK$243 million)) are considered to have an indefinite useful life. The carrying value of these telecommunications licences at 31 December 2020 of approximately HK$55 billion (2019: HK$51 billion) has been allocated to the Telecommunications segment.
15 Brand names and other rights
Brand names | Other rights | Total | |
HK$ million | HK$ million | HK$ million | |
Net book value | |||
At 1 January 2019 | 69,037 | 19,724 | 88,761 |
Additions | - | 2,817 | 2,817 |
Amortisation for the year | (12) | (2,483) | (2,495) |
Disposal | - | (4) | (4) |
Relating to subsidiaries disposed (see note 34(d)) | (2) | - | (2) |
Exchange translation differences | (560) | (242) | (802) |
At 31 December 2019 and 1 January 2020 | 68,463 | 19,812 | 88,275 |
Additions | - | 1,791 | 1,791 |
Amortisation for the year | (11) | (2,654) | (2,665) |
Disposal | - | (13) | (13) |
Relating to subsidiaries disposed (see note 34(d)) | - | (5) | (5) |
Exchange translation differences | 2,426 | 1,644 | 4,070 |
At 31 December 2020 | 70,878 | 20,575 | 91,453 |
Cost | 70,945 | 30,312 | 101,257 |
Accumulated amortisation | (67) | (9,737) | (9,804) |
70,878 | 20,575 | 91,453 |
Brand names are considered to have an indefinite useful life. The carrying value of brand names at 31 December 2020 of approximately HK$51 billion (2019: HK$50 billion) and approximately HK$20 billion (2019: HK$18 billion) has been allocated to Retail segment and the Telecommunications segments, respectively.
Other rights primarily include operating and service content rights of approximately HK$10,135 million (2019: HK$9,139 million) and resource consents and customer lists of approximately HK$10,440 million (2019: HK$10,279 million). Other rights are amortised over their finite useful lives.
16 Goodwill
2020 | 2019 | |
HK$ million | HK$ million | |
Cost | ||
At 1 January | 308,986 | 323,160 |
Relating to subsidiaries disposed (see note 34(d)) | (703) | (10,438) |
Exchange translation differences | 11,435 | (3,736) |
At 31 December | 319,718 | 308,986 |
As at 31 December 2020, the carrying amount of goodwill has been mainly allocated to Telecommunications segment of approximately HK$134 billion (2019: HK$123 billion), Retail segment of approximately HK$114 billion (2019: HK$114 billion), and Infrastructure segment of approximately HK$39 billion (2019: HK$39 billion).
The impairment test for the Telecommunications segment is carried out at the end of the reporting period and the recoverable amount is determined based on value in use calculation. Value in use is measured using discount cash flow projections for the next five years and a calculated terminal value at the end of the five-year period. The cash flows are based on the latest approved financial budgets of the relevant Telecommunications businesses for the next five years. The Group prepared the financial budgets reflecting current and prior year performances and experience, market development expectations, including the expected market share and growth momentum, and where available and appropriate, observable market data. There are a number of assumptions and estimates involved for the preparation of the budget, the cash flow projections for the period covered by the approved budget, and the estimated terminal value at the end of the budget period. Key assumptions, include the revenues, service margin and operating costs, and growth rates used for the budget periods, and selection of discount rates and the terminal growth rate used to extrapolate cash flow projections to estimate the terminal value at the end of the five-year period. The value in use amount derived from the cash flow projections is sensitive to the discount rate used for the cash flow projections as well as the growth rate used for extrapolation purposes. A discount rate (pre-tax) ranging from 0.3% to 9.4% (2019: 1.1% to 9.7%) has been applied. A growth rate, for the purpose of impairment testing calculation, ranging from 0% to 2% p.a. (2019: 1% to 2% p.a.), which is not expected to exceed the anticipated economic growth for the underlying business units, is used to extrapolate cash flow projections to estimate the terminal value of the underlying business units at the end of the five-year period.
The impairment test for the Retail segment is carried out at the end of the reporting period and the recoverable amount is determined based on fair value less costs of disposal calculation. Fair value is measured using discount cash flow projections for the next five years and a calculated terminal value at the end of the five-year period. The cash flows are based on the latest approved financial budgets for the next five years. The Group prepared the financial budgets reflecting current and prior year performances and experience, market development expectations, including the expected market share and growth momentum, and where available and appropriate, observable market data. There are a number of assumptions and estimates involved for the preparation of the budget, the cash flow projections for the period covered by the approved budget, and the estimated terminal value at the end of the budget period. Key assumptions, include the expected growth in revenues and gross margin, inventory level, volume and operating costs, timing of future capital expenditures, growth rates used for the budget periods, and selection of discount rates and the terminal growth rate used to extrapolate cash flow projections to estimate the terminal value at the end of the five-year period. The fair value less cost of disposal amount derived from the cash flow projections is sensitive to the discount rate used for the discount cash flow projections as well as the growth rate used for extrapolation purposes. A discount rate (pre-tax) of 5.7% (2019: 6.6%) has been applied. In estimating the terminal value at the end of the five year period a growth rate, for the purpose of impairment testing calculation, of 2.1% p.a. (2019: 2.4% p.a.), which is not expected to exceed the anticipated economic growth for the business, has been used to extrapolate cash flow projections.
The results of the impairment tests undertaken as at 31 December 2020 and 2019 indicated no impairment charge was necessary for the Group.
A reasonably possible change in a key assumption would not cause the recoverable amount to fall below the carrying value of the respective business units and divisions.
Please refer to note 43(b)(i) for significant accounting judgement applied, estimates and assumptions made in assessing whether goodwill has suffered any impairment.
17 Associated companies
2020 | 2019 | |
HK$ million | HK$ million | |
Unlisted shares | 9,420 | 9,112 |
Listed shares, Hong Kong | 61,070 | 61,070 |
Listed shares, outside Hong Kong | 104,123 | 91,772 |
Share of undistributed post acquisition reserves | (42,262) | (20,893) |
132,351 | 141,061 | |
Amounts due from (net with amounts due to) associated companies (a) | 3,725 | 3,690 |
136,076 | 144,751 |
No provision for credit loss was made at 31 December 2020 and 31 December 2019 in respect of the amounts due from associated companies as they were considered to be of low credit risk. The expected credit loss was minimal as the amounts were due from companies which the Group has significant influence, and where applicable, including participation in their financial and operating policies, and which are subject to the Group's financial and investment requirements. These amounts had no recent history of default. There was no unfavourable current conditions and forecast future economic conditions at the reporting date that would require the Group to make a provision for expected credit loss in respect of these assets.
The market value of the above listed investments at 31 December 2020 was HK$99,125 million (2019: HK$97,118 million), inclusive of HK$15,352 million (2019: HK$25,005 million) and HK$32,120 million (2019: HK$43,747 million) for material associated companies, namely Husky and Power Assets Holdings Limited ("Power Assets") respectively.
There are no material contingent liabilities relating to the Group's interests in the associated companies, save as for those disclosed in note 37.
17 Associated companies (continued) | ||
(a) Amounts due from (net with amounts due to) associated companies | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Amounts due from associated companies (i) | ||
Interest free | 470 | 719 |
Interest bearing at fixed rates (ii) | 3,064 | 2,795 |
Interest bearing at floating rates (iii) | 908 | 905 |
4,442 | 4,419 | |
Amount due to associated companies (iv) | ||
Interest free | 717 | 729 |
Amounts due from (net with amounts due to) associated companies | 3,725 | 3,690 |
(i) At 31 December 2020 and 2019, the amounts due from associated companies are unsecured and have no fixed terms of repayment except for HK$711 million which are repayable within one to four years (2019: HK$936 million which are repayable within one to two years).
(ii) At 31 December 2020, HK$3,064 million (2019: HK$2,795 million) bear interests at fixed rates ranging from approximately 4.7% to 11.2% (2019: 4.7% to 11.2%) per annum.
(iii) At 31 December 2020, HK$908 million (2019: HK$905 million) bear interests at floating rates ranging from approximately 1.6% to 2.1% (2019: 1.7% to 3.8%) per annum with reference to Euro Interbank Offered Rate and Hong Kong Interbank Offered Rate, as applicable.
(iv) At 31 December 2020 and 2019, the amount due to an associated company is unsecured and has no fixed terms of repayment.
(b) Material associated companies
Set out below are additional information in respect of the Group's material associated companies:
2020 | 2019 | |||
Power | Power | |||
Husky | Assets | Husky | Assets | |
HK$ million | HK$ million | HK$ million | HK$ million | |
Dividends received from associated companies | 633 | 2,149 | 1,164 | 2,149 |
Gross amount of the following items of the | ||||
associated companies (i): | ||||
Total revenue | 77,574 | 1,270 | 118,473 | 1,348 |
EBITDA (LBITDA) | (56,591) | 18,830 | 8,658 | 18,270 |
EBIT (LBIT) | (69,714) | 13,062 | (7,399) | 12,995 |
Other comprehensive income (losses) | 572 | (883) | 1,145 | 804 |
Total comprehensive income (losses) | (54,376) | 5,250 | (3,586) | 7,935 |
Current assets | 19,062 | 6,062 | 29,332 | 5,015 |
Non-current assets | 170,078 | 125,177 | 231,865 | 126,243 |
Current liabilities | 14,567 | 7,406 | 27,538 | 4,324 |
Non-current liabilities | 72,136 | 1,380 | 76,074 | 3,755 |
Net assets (net of preferred shares, perpetual capital | ||||
securities and non-controlling interests) | 97,419 | 122,453 | 152,696 | 123,179 |
Reconciliation to the carrying amount of the Group's | ||||
interests in associated companies: | ||||
Group's interest | 40.2% | 36.0% | 40.2% | 36.0% |
Group's share of net assets | 39,150 | 44,034 | 61,369 | 44,295 |
Amount due from associated company | 30 | - | 300 | - |
Carrying amount | 39,180 | 44,034 | 61,669 | 44,295 |
For information, the carrying amount of the Group's interests in all individually immaterial associated companies that are accounted for using the equity method of accounting is HK$52,862 million (2019: HK$38,787 million).
17 Associated companies (continued)
(b) Material associated companies (continued)
Set out below are additional information in respect of the Group's material associated companies (continued):
2020
2019
Other
Other
Power associated
Power associated
Husky Assets companies Total Husky Assets companies Total
HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Group's share of the following items of the associated companies (i):
862 | 1,524 | |
(409) | 340 | |
453 | 1,864 | |
(i) After translation into Hong Kong dollars and consolidation adjustments. | ||
Particulars regarding the principal associated companies are set forth on pages 131 to 133. | ||
18 Interests in joint ventures | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Unlisted shares | 98,594 | 101,422 |
Share of undistributed post acquisition reserves | 3,854 | 197 |
102,448 | 101,619 | |
Amounts due from (net with amounts due to) joint ventures (a) | 39,017 | 41,936 |
141,465 | 143,555 |
(1,902)
Profits less losses after tax
(22,085)
2,205
1,351 (18,529)
2,564
Other comprehensive income (losses)
230
(318)
1,775 1,687
460
289
Total comprehensive income (losses)
(21,855)
1,887
3,126
(16,842)
(1,442)
2,853
No provision for credit loss was made at 31 December 2020 and 31 December 2019 in respect of the amounts due from joint ventures as they were considered to be of low credit risk. The expected credit loss was minimal as the amounts were due from companies which the Group has joint control, and where applicable, including participation in their financial and operating policies, and which are subject to the Group's financial and investment requirements. These amounts had no recent history of default. There was no unfavourable current conditions and forecast future economic conditions at the reporting date that would require the Group to make a provision for expected credit loss in respect of these assets.
There are no material contingent liabilities relating to the Group's interests in the joint ventures, save as for those disclosed in note 37.
(a) Amounts due from (net with amounts due to) joint ventures 2020 2019
HK$ million HK$ million
Amounts due from joint ventures (i) | ||
Interest free | 2,145 | 2,101 |
Interest bearing at fixed rates (ii) | 17,402 | 21,345 |
Interest bearing at floating rates (iii) | 19,850 | 18,896 |
39,397 | 42,342 | |
Amounts due to joint ventures (iv) | ||
Interest free | 380 | 353 |
Interest bearing at floating rates (v) | - | 53 |
Amounts due from (net with amounts due to) joint ventures | 39,017 | 41,936 |
18 Interests in joint ventures (continued)
(a) Amounts due from (net with amounts due to) joint ventures (continued)
(i) At 31 December 2020 and 2019, the amounts due from joint ventures are unsecured and have no fixed terms of repayment except for HK$69 million which are repayable within one to five years (2019: HK$448 million which are repayable within one to two years).
(ii) At 31 December 2020, HK$17,402 million (2019: HK$21,345 million) bear interests at fixed rates ranging from approximately 4.4% to 11.0% (2019: 4.4% to 11.0%) per annum.
(iii) At 31 December 2020, HK$19,850 million (2019: HK$18,896 million) bear interests at floating rates ranging from approximately 1.7% to 14.1% (2019: 2.0% to 14.1%) per annum with reference to Australian Bank Bill Swap Reference Rate, Euro Interbank Offered Rate, Hong Kong Interbank Offered Rate, Hong Kong Prime Rate and London Interbank Offered Rate, as applicable.
(iv) At 31 December 2020 and 2019, the amounts due to joint ventures are unsecured and have no fixed terms of repayment (2019: HK$53 million which are repayable within one year).
(v) At 31 December 2019, HK$53 million bear interests at floating rates ranging from approximately 1.2% to 1.4% per annum with reference to Australian Bank Bill Swap Reference Rate and London Interbank Offered Rate, as applicable.
(b) Set out below are the aggregate amount of the Group's share of the following items of joint ventures:
2020 | 2019 | |
HK$ million | HK$ million | |
Profits less losses after tax (i) | 4,954 | 7,404 |
Other comprehensive income (losses) | 1,720 | (68) |
Total comprehensive income | 6,674 | 7,336 |
Capital commitments | 1,880 | 1,879 |
(i) During the period from the second half of 2012 to 26 June 2020, VHA underwent a shareholder-sponsored restructuring under the leadership of the other shareholder pursuant to the applicable terms of the shareholders' agreement. HTAL's share of VHA's results from 1 January 2020 to 26 June 2020 is a loss of HK$301 million (2019: HK$552 million) and is reported under "Other expenses and losses" in the consolidated income statement. See note 7(f).
As at 31 December 2020 and 2019, no interests in joint ventures are individually material to the Group. Particulars regarding the principal joint ventures are set forth on pages 131 to 133.
19 Deferred tax
2020 | 2019 | |
HK$ million | HK$ million | |
Deferred tax assets | 19,926 | 20,353 |
Deferred tax liabilities | 17,672 | 16,819 |
Net deferred tax assets | 2,254 | 3,534 |
Movements in net deferred tax assets (liabilities) are summarised as follows: | ||
2020 | 2019 | |
HK$ million | HK$ million | |
At 1 January | 3,534 | 3,619 |
Relating to subsidiaries disposed (see note 34(d)) | (1,991) | 24 |
Transfer to current tax | 31 | 2 |
Net credit to other comprehensive income | 178 | 136 |
Net credit (charge) to the income statement | ||
Tax losses | (1,164) | (1,153) |
Accelerated depreciation allowances | 1,002 | 217 |
Fair value adjustments arising from acquisitions | (561) | (211) |
Withholding tax on undistributed profits | 59 | 41 |
Other temporary differences | 347 | 116 |
Exchange translation differences | 878 | 743 |
Transfer to assets classified as held for sale (see note 25) | (59) | - |
At 31 December | 2,254 | 3,534 |
Analysis of net deferred tax assets (liabilities): | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Tax losses | 15,446 | 16,778 |
Accelerated depreciation allowances | (3,700) | (4,018) |
Fair value adjustments arising from acquisitions | (11,191) | (10,030) |
Revaluation of investment properties and other investments | 39 | 30 |
Withholding tax on undistributed profits | (335) | (400) |
Other temporary differences | 1,995 | 1,174 |
2,254 | 3,534 |
The Group is subject to income taxes in numerous jurisdictions and significant judgement is required in determining the provision for income taxes. To the extent that dividends distributed from investments in subsidiaries, branches and associates, and interests in joint ventures are expected to result in additional taxes, appropriate amounts have been provided for. No deferred tax has been provided for the temporary differences arising from undistributed profits of these companies to the extent that the undistributed profits are considered permanently employed in their businesses and it is probable that such temporary differences will not reverse in the foreseeable future.
The deferred tax assets and liabilities are offset when there is a legally enforceable right to set off and when the deferred income taxes relate to the same fiscal authority. The amounts shown in the consolidated statement of financial position are determined after appropriate offset.
At 31 December 2020, the Group has recognised accumulated deferred tax assets amounting to HK$19,926 million (2019:
HK$20,353 million) of which HK$16,856 million (2019: HK$17,535 million) relates to 3 Group Europe.
Note 43(b)(v) contains information about the estimates, assumptions and judgements relating to the recognition of deferred tax assets for unutilised tax losses carried forward.
19 Deferred tax (continued)
The Group has not recognised deferred tax assets of HK$37,268 million at 31 December 2020 (2019: HK$27,876 million) in respect of unutilised tax losses, tax credits and deductible temporary differences totalling HK$163,468 million (2019: HK$115,009 million).
These unutilised tax losses, tax credits and deductible temporary differences can be carried forward against future taxable income. Of this amount, HK$120,370 million (2019: HK$101,435 million) can be carried forward indefinitely and the balances expire in the following years: 2020 2019
HK$ million HK$ million
In the first year | 1,294 | 5,015 |
In the second year | 2,413 | 1,753 |
In the third year | 5,815 | 2,586 |
In the fourth year | 3,357 | 1,144 |
After the fourth year | 30,219 | 3,076 |
43,098 | 13,574 | |
20 Liquid funds and other listed investments | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Financial assets at amortised cost | ||
Managed funds - cash and cash equivalents, outside Hong Kong (c) | 50 | 42 |
Financial assets at FVOCI (d) | ||
Listed equity securities, Hong Kong (e) | 3,423 | 2,293 |
Listed equity securities, outside Hong Kong (e) | 198 | 213 |
Managed funds - listed equity securities, outside Hong Kong (e) | 226 | 202 |
Managed funds - listed debt securities, outside Hong Kong (b) (f) | 6,691 | 4,933 |
10,538 | 7,641 | |
Financial assets at fair value through profit or loss - listed equity securities | - | 39 |
10,588 | 7,722 |
(a) At 31 December, liquid funds and other listed investments totalling HK$10,588 million (2019: HK$7,722 million) are denominated in the following currencies:
2020 | 2019 | |||||
Financial | Financial | |||||
Financial | Financial | assets at fair | Financial | Financial | assets at fair | |
assets at | assets at | value through | assets at | assets at | value through | |
amortised cost | FVOCI | profit or loss | amortised cost | FVOCI | profit or loss | |
Percentage | Percentage | Percentage | Percentage | Percentage | Percentage | |
HK dollars | - | 32% | - | - | 30% | - |
US dollars | 69% | 65% | - | 50% | 66% | 100% |
Other currencies | 31% | 3% | - | 50% | 4% | - |
100% | 100% | - | 100% | 100% | 100% |
20 Liquid funds and other listed investments (continued)
(b) At 31 December, listed debt securities totalling HK$6,691 million (2019: HK$4,933 million) presented above are analysed as follows:
(c) No provision for credit loss was made at 31 December 2020 and 31 December 2019 in respect of the "Managed funds - cash and cash equivalents". These amounts were held with reputable financial institutions. The Group controls the credit risk to non-performance by the counterparties, where applicable, through monitoring their equity share price movements and credit ratings as well as setting approved counterparty credit limits that are regularly reviewed. Accordingly, these assets are considered to be of low credit risk.
(d) The fair values are based on quoted market prices.
(e) These equity securities are strategic investments and not investments held for trading purpose. The Group made an irrevocable election at initial recognition to recognise these investments in this category so the Group considers this category to be the most appropriate classification.
(f) Managed funds - listed debt securities comprised predominately US Treasury notes and government and government guaranteed notes. 99% of the carrying amount of these assets at 31 December 2020 and 31 December 2019 were rated at Aaa / AAA or Aa1 / AA+. These assets are considered to be of low credit risk and no provision for credit loss was required at 31 December 2020 and 31 December 2019 in respect of these assets.
2020 | 2019 | |
Financial | Financial | |
assets at | assets at | |
FVOCI | FVOCI | |
Percentage | Percentage | |
Credit ratings | ||
Aaa / AAA | 30% | 25% |
Aa1 / AA+ | 69% | 74% |
Other investment grades | 1% | - |
Unrated | - | 1% |
100% | 100% | |
Sectorial | ||
US Treasury notes | 67% | 70% |
Government and government guaranteed notes | 19% | 20% |
Financial institutions notes | - | 1% |
Others | 14% | 9% |
100% | 100% | |
Weighted average maturity | 1.2 years | 2.3 years |
Weighted average effective yield | 1.62% | 1.79% |
21 Other non-current assets
2020 | 2019 | |
HK$ million | HK$ million | |
Investment properties (see note 22) | 396 | 398 |
Customer acquisition and retention costs (a) | 4,095 | 2,985 |
Contract assets (see note 24(b)) | 3,345 | 3,482 |
Unlisted investments | ||
Financial assets at amortised costs - debt securities (b) | 179 | 174 |
Financial assets at FVOCI - equity securities (c) | 2,347 | 1,825 |
Financial assets at fair value through profit or loss - equity securities | 2,614 | 3,042 |
Financial assets at fair value through profit or loss - debt securities | 358 | 304 |
Pension assets (see note 30) | 158 | 101 |
Derivative financial instruments | ||
Fair value hedges - Interest rate swaps | 108 | 46 |
Cash flow hedges | ||
Cross currency interest rate swaps | - | 523 |
Other contracts | 13 | - |
Net investment hedges | ||
Forward foreign exchange contracts | 85 | 498 |
Cross currency swaps | 40 | 609 |
Other derivative financial instruments | 823 | 44 |
Lease receivables (d) | 383 | 245 |
14,944 | 14,276 |
(a) Customer acquisition and retention costs primarily relate to incremental commission costs incurred to obtain telecommunications contracts with customers. The amount of customer acquisition and retention cost shown above is after deducting the amortisation charged to the current year's income statement of HK$2,723 million (2019: HK$1,571 million). Further, there was no impairment loss in relation to the cost capitalised. The Group applies the practical expedient in paragraph 94 of HKFRS 15, and recognises the incremental costs of obtaining contracts as an expense when incurred if the amortisation period of the costs that the Group otherwise would have recognised is one year or less.
(b) The carrying value of the debt securities approximate their fair values as these investments bear floating interest rates and are repriced within one to six-month periods at the prevailing market interest rates.
No provision for credit loss was made at 31 December 2020 and 31 December 2019 in respect of the "Financial assets at amortised costs - debt securities" as they were considered to be of low credit risk. The expected credit loss was minimal as these debt securities are subject to the Group's financial and investment requirements. There was no unfavourable current conditions and forecast future economic conditions at the reporting date that would require the Group to make a provision for expected credit loss in respect of these assets.
(c) These equity securities are not investments held for trading purpose. The Group made an irrevocable election at initial recognition to account for these investments at FVOCI. Fair value for these investments are determined by using valuation techniques, including discounted cashflow analysis.
(d) No provision for credit loss was made at 31 December 2020 and 31 December 2019 in respect of the lease receivables as they were considered to be of low credit risk. The expected credit loss was minimal as lease receivables are from entities which are subject to the Group's lease acceptance requirements. There was no unfavourable current conditions and forecast future economic conditions at the reporting date that would require the Group to make a provision for expected credit loss in respect of these assets.
22 Investment properties
Investment properties are included in "Other non-current assets" (see note 21) in the statement of financial position.
2020 HK$ million
2019 HK$ million
Valuation | ||
At 1 January | 398 | 382 |
Increase (decrease) in fair value of investment properties | (2) | 16 |
At 31 December | 396 | 398 |
Investment properties have been fair valued as at 31 December 2020 and 31 December 2019 by DTZ Debenham Tie Leung Limited, professional valuers.
As at 31 December 2020 and 2019, the fair value of investment properties which reflects the highest and best use was arrived at by reference to comparable market transactions and also taking reference of capitalising the rental income derived from the existing tenancies with due provision for the reversionary income potential of the properties.
There were no transfers among Level 1, Level 2 and Level 3 during the year. The Group's policy is to recognise transfers into / out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer.
As at 31 December 2020 and 2019, the Group's aggregate future minimum lease receivable under non-cancellable operating leases is not material.
23 Cash and cash equivalents
2020 | 2019 | |
HK$ million | HK$ million | |
Cash at bank and in hand | 36,463 | 30,606 |
Short term bank deposits | 119,488 | 106,521 |
155,951 | 137,127 | |
The carrying amounts of cash and cash equivalents approximate their fair values. |
Cash and cash equivalents were held with reputable financial institutions. The Group controls the credit risk to non-performance by the counterparties, where applicable, through monitoring their equity share price movements and credit ratings as well as setting approved counterparty credit limits that are regularly reviewed. Accordingly, cash and cash equivalents are considered to be of low credit risk and no provision for credit loss was made at 31 December 2020 and 31 December 2019 in respect of these assets.
24 Trade receivables and other current assets
2020 | 2019 | |
HK$ million | HK$ million | |
Trade receivables (a) | 19,537 | 18,673 |
Less: loss allowance provision | (2,639) | (1,810) |
16,898 | 16,863 | |
Other current assets | ||
Derivative financial instruments | ||
Fair value hedges - Interest rate swaps | - | 2 |
Cash flow hedges - other contracts | 50 | - |
Net investment hedges | ||
Forward foreign exchange contracts | 347 | 1,375 |
Cross currency swaps | - | 77 |
Contract assets (b) | 5,654 | 3,903 |
Prepayments | 18,680 | 18,353 |
Other receivables (c) | 13,998 | 15,136 |
Current tax receivables | 182 | - |
55,809 | 55,709 |
(a) Trade receivables are stated at the expected recoverable amount, net of any provision for estimated impairment losses where it is deemed that a receivable may not be fully recoverable. The carrying amounts of these assets approximate their fair values.
Trade receivables exposures are managed locally in the operating units where they arise and credit limits are set as deemed appropriate for the customer. The Group's operating units have established credit policies for customers. The average credit period granted for trade receivables ranges from 30 to 45 days. Trade receivables which are past due at the end of the reporting period are stated at the expected recoverable amount, after netting of provision for estimated impairment losses. Given the profile of the Group's customers and the Group's different types of businesses, the Group generally does not hold collateral over these balances.
The Group's five largest customers contributed less than 7% of the Group's revenue for the year ended 31 December 2020 (2019: less than 6%).
At 31 December, the ageing analysis of the trade receivables presented based on the invoice date, is as follows:
2020 2019
HK$ million HK$ million
Less than 31 days | 12,854 | 9,948 |
Within 31 to 60 days | 1,824 | 2,183 |
Within 61 to 90 days | 665 | 753 |
Over 90 days | 4,194 | 5,789 |
19,537 | 18,673 |
24 Trade receivables and other current assets (continued)
Movements on the loss allowance provision for trade receivables are as follows:
2020 | 2019 | |
HK$ million | HK$ million | |
At 1 January | 1,810 | 1,136 |
Additions | 1,577 | 1,587 |
Utilisations | (861) | (902) |
Write back | (7) | (10) |
Exchange translation differences | 120 | (1) |
At 31 December | 2,639 | 1,810 |
The Group applies the simplified approach to provide for expected credit losses prescribed by HKFRS 9, which permits the use of the lifetime expected credit loss provision for trade receivables. The expected credit loss provision rates for trade receivables are based on historical payment profiles and historical credit loss experience, adjusted to reflect, where relevant and appropriate, current and information specific to the debtors, future economic and market conditions and forward-looking information on macroeconomic factors affecting the ability of the debtors to settle the receivables that the Group considers are reasonable and appropriate. To measure the expected credit losses, trade receivables have been grouped based on the days past due. The gross carrying amount of the trade receivables and the loss allowance provision analysed by aging band are set out below.
2020
2019
Gross | Loss | Expected | Gross | Loss | Expected | |
carrying | allowance | loss | carrying | allowance | loss | |
amount | provision | rate | amount | provision | rate | |
HK$ million | HK$ million | Percentage | HK$ million | HK$ million | Percentage | |
Not past due | 12,142 | 148 | 1% | 9,335 | 311 | 3% |
Past due less than 31 days | 2,311 | 220 | 10% | 2,274 | 98 | 4% |
Past due within 31 to 60 days | 726 | 136 | 19% | 725 | 73 | 10% |
Past due within 61 to 90 days | 370 | 98 | 26% | 414 | 58 | 14% |
Past due over 90 days | 3,988 | 2,037 | 51% | 5,925 | 1,270 | 21% |
19,537 | 2,639 | 18,673 | 1,810 |
(b) As at 31 December 2020, contract assets of HK$5,654 million (2019: HK$3,903 million) and HK$3,345 million (2019:
HK$3,482 million) are included in "Trade receivables and other current assets" (see above) and "Other non-current assets" (see note 21) respectively. These assets are stated at the expected recoverable amount, after netting of provision for estimated impairment losses of HK$1,512 million (2019: HK$1,052 million). Movement on the provision for estimated impairment losses are as follows:
2020 | 2019 | |
HK$ million | HK$ million | |
At 1 January | 1,052 | 581 |
Additions | 1,024 | 1,042 |
Utilisations | (377) | (408) |
Write back | (257) | (166) |
Exchange translation differences | 70 | 3 |
At 31 December | 1,512 | 1,052 |
Contract assets primarily relate to the Group's rights to consideration for delivered services and devices but not billed at the reporting date.
Contract assets are transferred to receivables when the rights become unconditional. This usually occurs when the Group issues an invoice to the customer. The Group's historical credit loss experience does not indicate a substantial different loss pattern for contract assets as compared to trade receivables for similar customer bases. The Group makes reference to the expected credit loss provision rates for trade receivables to measure the contract asset's expected credit losses. The rates are adjusted to reflect information specific to the contract assets that may affect the recovery of the carrying amount of the contract assets.
(c) No provision for impairment loss for other receivables was made as at 31 December 2020 and 2019 as the financial assets were considered to be of low credit risk and the expected credit loss was minimal.
25 Assets and liabilities classified as held for sale
2020 | 2019 | |
HK$ million | HK$ million | |
Assets classified as held for sale | ||
Disposal group held for sale (a) | 1,251 | - |
Non-current assets held for sale (b) | - | 149 |
1,251 | 149 | |
Liabilities directly associated with assets classified as held for sale (a) | 284 | - |
(a) In November 2020, CK Hutchison Group Telecom entered into agreements to dispose interests in its European telecommunications tower assets in six countries. Disposals of interests in tower assets in Denmark, Austria and Ireland were completed in December 2020. Completion of disposals in Italy and the United Kingdom require relevant regulatory approvals and shareholders' approvals in which only the requisite shareholders' approvals have been obtained as at the reporting date. The Sweden transaction is not subject to regulatory or shareholders' approval. Accordingly, tower assets in Sweden have been reclassified for accounting purpose as disposal group as at the reporting date. There is no gain or loss recognised in the income statement on reclassification. See note 7(e).
(b) In 2018, the Group acquired the remaining 50% interest in the telecommunications businesses in Italy operated by Wind Tre and became the sole shareholder of Wind Tre. Wind Tre has a pre-existing commitment to sell certain telecommunications assets, including sites and frequencies to an external third party which was completed in 2020.
Assets | ||
Fixed assets | 923 | - |
Right-of-use assets | 269 | - |
Deferred tax assets | 59 | - |
Assets classified as held for sale | 1,251 | - |
Liabilities | ||
Lease liabilities | 283 | - |
Other non-current liabilities | 1 | - |
Liabilities directly associated with assets classified as held for sale | 284 | - |
Net assets directly associated with disposal group | 967 | - |
2020 | 2019 | |
HK$ million | HK$ million | |
Cumulative amounts included in other comprehensive income: | ||
Exchange reserve surplus | 20 | - |
Reserves of disposal group classified as held for sale | 20 | - |
The major classes of assets and liabilities classified as held for sale at the reporting date are as follows:
2020 2019
HK$ million HK$ million
Disposal group held for sale is presented within total assets and total liabilities of "3 Group Europe" segment in note 5(b)(vi), 5(b)(vii) respectively and total assets of "Europe" in note 5(b)(xii).
The balance as at 31 December 2019 represented fixed assets and was presented within total assets of "3 Group Europe" segment in note 5(b)(vi) and "Europe" in note 5(b)(xii).
26 Bank and other debts
2020 | 2019 | |||||
Current | Non-current | Current | Non-current | |||
portion | portion | Total | portion | portion | Total | |
HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
Principal amounts | ||||||
Bank loans | 27,222 | 94,078 | 121,300 | 32,565 | 96,392 | 128,957 |
Other loans | 4 | 270 | 274 | 4 | 255 | 259 |
Notes and bonds | 20,800 | 205,384 | 226,184 | 9,100 | 204,642 | 213,742 |
48,026 | 299,732 | 347,758 | 41,669 | 301,289 | 342,958 | |
Unamortised fair value adjustments | ||||||
arising from acquisitions | 23 | 3,861 | 3,884 | - | 4,539 | 4,539 |
Subtotal before the following items | 48,049 | 303,593 | 351,642 | 41,669 | 305,828 | 347,497 |
Unamortised loan facilities fees and | ||||||
premiums or discounts related to debts | (28) | (2,562) | (2,590) | (1,675) | (1,230) | (2,905) |
Adjustments to carrying amounts | ||||||
pursuant to unrealised gains (losses) | ||||||
on interest rate swap contracts | - | 19 | 19 | 1 | (33) | (32) |
48,021 | 301,050 | 349,071 | 39,995 | 304,565 | 344,560 |
Details of the bank and other debts by principal amounts are as follows:
2020 | 2019 | |
Current Non-current | Current Non-current | |
portion portion Total | portion portion | Total |
HK$ million HK$ million HK$ million | HK$ million HK$ million | HK$ million |
Bank loans | 27,222 | 94,078 | 121,300 | 32,565 | 96,392 | 128,957 |
Other loans | 4 | 270 | 274 | 4 | 255 | 259 |
Notes and bonds | ||||||
HK$500 million notes, 4.3% due 2020 | - | - | - | 500 | - | 500 |
HK$500 million notes, 4.35% due 2020 | - | - | - | 500 | - | 500 |
HK$300 million notes, 3.9% due 2020 | - | - | - | 300 | - | 300 |
HK$400 million notes, 3.45% due 2021 | 400 | - | 400 | - | 400 | 400 |
HK$300 million notes, 3.35% due 2021 | 300 | - | 300 | - | 300 | 300 |
HK$260 million notes, 4% due 2027 | - | 260 | 260 | - | 260 | 260 |
US$1,000 million notes, 2.25% due 2020 | - | - | - | 7,800 | - | 7,800 |
US$750 million notes, 1.875% due 2021 | 5,850 | - | 5,850 | - | 5,850 | 5,850 |
US$1,500 million notes, 4.625% due 2022 | - | 11,700 | 11,700 | - | 11,700 | 11,700 |
US$1,000 million notes, 2.875% due 2022 | - | 7,800 | 7,800 | - | 7,800 | 7,800 |
US$500 million notes, 3.25% due 2022 | - | 3,900 | 3,900 | - | 3,900 | 3,900 |
US$750 million notes, 2.75% due 2023 | - | 5,850 | 5,850 | - | 5,850 | 5,850 |
US$750 million notes, 3.25% due 2024 | - | 5,850 | 5,850 | - | 5,850 | 5,850 |
US$1,500 million notes, 3.625% due 2024 | - | 11,700 | 11,700 | - | 11,700 | 11,700 |
US$500 million notes, 2.75% due 2026 | - | 3,900 | 3,900 | - | 3,900 | 3,900 |
US$309 million notes - Series C, 7.5% due 2027 | - | 2,410 | 2,410 | - | 2,410 | 2,410 |
US$500 million notes, 3.25% due 2027 | - | 3,900 | 3,900 | - | 3,900 | 3,900 |
US$800 million notes, 3.5% due 2027 | - | 6,240 | 6,240 | - | 6,240 | 6,240 |
US$500 million notes, 2.75% due 2029 | - | 3,900 | 3,900 | - | 3,900 | 3,900 |
US$750 million notes, 3.625% due 2029 | - | 5,850 | 5,850 | - | 5,850 | 5,850 |
US$750 million notes, 2.5% due 2030 | - | 5,850 | 5,850 | - | - | - |
US$1,039 million notes, 7.45% due 2033 | - | 8,107 | 8,107 | - | 8,107 | 8,107 |
US$25 million notes-Series D, 6.988% due 2037 | - | 196 | 196 | - | 196 | 196 |
US$750 million notes, 3.375% due 2049 | - | 5,850 | 5,850 | - | 5,850 | 5,850 |
US$750 million notes, 3.375% due 2050 | - | 5,850 | 5,850 | - | - | - |
EUR1,500 million notes, 1.375% due 2021 | 14,250 | - | 14,250 | - | 13,005 | 13,005 |
EUR750 million notes, 3.625% due 2022 | - | 7,125 | 7,125 | - | 6,502 | 6,502 |
EUR1,350 million notes, 1.25% due 2023 | - | 12,825 | 12,825 | - | 11,705 | 11,705 |
EUR1,500 million notes, 0.375% due 2023 | - | 14,250 | 14,250 | - | 13,005 | 13,005 |
EUR600 million bonds, 1% due 2024 | - | 5,700 | 5,700 | - | 5,202 | 5,202 |
EUR1,000 million notes, 0.875% due 2024 | - | 9,500 | 9,500 | - | 8,670 | 8,670 |
EUR750 million notes, 1.25% due 2025 | - | 7,125 | 7,125 | - | 6,503 | 6,503 |
EUR1,000 million notes, 0.75% due 2026 | - | 9,500 | 9,500 | - | 8,670 | 8,670 |
EUR650 million notes, 2% due 2028 | - | 6,175 | 6,175 | - | 5,635 | 5,635 |
EUR1,000 million notes, 1.125% due 2028 | - | 9,500 | 9,500 | - | 8,670 | 8,670 |
EUR500 million notes, 2% due 2030 | - | 4,750 | 4,750 | - | 4,335 | 4,335 |
EUR750 million notes, 1.5% due 2031 | - | 7,125 | 7,125 | - | 6,502 | 6,502 |
GBP303 million notes, 5.625% due 2026 | - | 3,180 | 3,180 | - | 3,078 | 3,078 |
GBP500 million notes, 2% due 2027 | - | 5,250 | 5,250 | - | 5,080 | 5,080 |
GBP300 million notes, 2.625% due 2034 | - | 3,150 | 3,150 | - | 3,048 | 3,048 |
JPY15,000 million notes, 2.6% due 2027 | - | 1,116 | 1,116 | - | 1,069 | 1,069 |
20,800 | 205,384 | 226,184 | 9,100 | 204,642 | 213,742 | |
48,026 | 299,732 | 347,758 | 41,669 | 301,289 | 342,958 |
Further analysis of the principal amount of bank and other debts are set out below:
(a) By year of repayment
2020 | 2019 | |||||
Current | Non-current | Current | Non-current | |||
portion | portion | Total | portion | portion | Total | |
HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
Bank loans | ||||||
Within a year | 27,222 | - | 27,222 | 32,565 | - | 32,565 |
After 1 year, but within 2 years | - | 42,356 | 42,356 | - | 24,864 | 24,864 |
After 2 years, but within 5 years | - | 51,722 | 51,722 | - | 71,528 | 71,528 |
27,222 | 94,078 | 121,300 | 32,565 | 96,392 | 128,957 | |
Other loans | ||||||
Within a year | 4 | - | 4 | 4 | - | 4 |
After 1 year, but within 2 years | - | 4 | 4 | - | 4 | 4 |
After 2 years, but within 5 years | - | 191 | 191 | - | 178 | 178 |
After 5 years | - | 75 | 75 | - | 73 | 73 |
4 | 270 | 274 | 4 | 255 | 259 | |
Notes and bonds | ||||||
Within a year | 20,800 | - | 20,800 | 9,100 | - | 9,100 |
After 1 year, but within 2 years | - | 30,525 | 30,525 | - | 19,555 | 19,555 |
After 2 years, but within 5 years | - | 72,800 | 72,800 | - | 91,884 | 91,884 |
After 5 years | - | 102,059 | 102,059 | - | 93,203 | 93,203 |
20,800 | 205,384 | 226,184 | 9,100 | 204,642 | 213,742 | |
48,026 | 299,732 | 347,758 | 41,669 | 301,289 | 342,958 | |
(b) By secured and unsecured borrowings | ||||||
2020 | 2019 | |||||
Current | Non-current | Current | Non-current | |||
portion | portion | Total | portion | portion | Total | |
HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
Secured borrowings | 1 | 1,510 | 1,511 | 1 | 1,275 | 1,276 |
Unsecured borrowings | 48,025 | 298,222 | 346,247 | 41,668 | 300,014 | 341,682 |
48,026 | 299,732 | 347,758 | 41,669 | 301,289 | 342,958 | |
2020 | 2019 | |||||
Current | Non-current | Current | Non-current | |||
portion | portion | Total | portion | portion | Total | |
HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
20,834 | 205,653 | 226,487 | 9,112 | 204,897 | 214,009 | |
27,192 | 94,079 | 121,271 | 32,557 | 96,392 | 128,949 | |
48,026 | 299,732 | 347,758 | 41,669 | 301,289 | 342,958 |
(c) By borrowings at fixed and floating interest rate
Borrowings at fixed rate Borrowings at floating rateFurther analysis of the principal amount of bank and other debts are set out below (continued):
(d) By borrowings at fixed and floating interest rate (adjusted for the effect of hedging transactions)
2020
2019
Current | Non-current | |||||
portion | portion | Total | Total | |||
HK$ million | HK$ million | HK$ million | HK$ million | |||
Borrowings at fixed rate | 22,550 | 215,741 | 238,291 | 24,972 | 205,995 | 230,967 |
Borrowings at floating rate | 25,476 | 83,991 | 109,467 | 16,697 | 95,294 | 111,991 |
48,026 | 299,732 | 347,758 | 41,669 | 301,289 | 342,958 |
HK$ million HK$ million
Current Non-current portion portionDerivative financial instruments are principally utilised by the Group in the management of its foreign currency and interest rate exposures.
The Group has entered into interest rate swap agreements with banks and other financial institutions to swap fixed interest rate borrowings to floating interest rate borrowings to manage the fixed and floating interest rate mix of the Group's total debt portfolio. At 31 December 2020, the notional amount of the outstanding interest rate swap agreements amounted to HK$5,460 million (2019: HK$6,760 million) (See note 44(i)(i)).
The Group has also entered into interest rate swap agreements to swap floating interest rate borrowings to fixed interest rate borrowings to mainly mitigate interest rate exposures to certain infrastructure project related borrowings. At 31 December 2020, the notional amount of the outstanding interest rate swap agreements and cross currency interest rate swap agreements amounted to HK$5,408 million and
HK$11,856 million respectively (2019: HK$6,558 million and HK$17,160 million respectively) (See note 44(i)(ii)).
(e) By currency
(f) By currency (adjusted for the effect of hedging transactions)
2020 | 2019 | |||||
Non-current | Current | Non-current | ||||
portion | Total | portion | portion | Total | ||
Percentage | Percentage | Percentage | Percentage | Percentage | ||
36% | 41% | 9% | 32% | 41% | ||
36% | 42% | - | 42% | 42% | ||
2% | 3% | 1% | 3% | 4% | ||
5% | 5% | 2% | 3% | 5% | ||
8% | 9% | 1% | 7% | 8% | ||
87% | 100% | 13% | 87% | 100% | ||
2020 | 2019 | |||||
Non-current | Current | Non-current | ||||
portion | Total | portion | portion | Total | ||
Percentage | Percentage | Percentage | Percentage | Percentage | ||
US dollars | 3% | 29% | 32% | 4% | 27% | 31% |
Euro | 8% | 43% | 51% | 5% | 47% | 52% |
HK dollars | 1% | 2% | 3% | 1% | 3% | 4% |
British Pounds | - | 5% | 5% | 2% | 3% | 5% |
Other currencies | 1% | 8% | 9% | 1% | 7% | 8% |
13% | 87% | 100% | 13% | 87% | 100% |
Current portion Percentage
Current | |
portion | |
Percentage | |
US dollars | 5% |
Euro | 6% |
HK dollars | 1% |
British Pounds | - |
Other currencies | 1% |
13% | |
As at 31 December 2020, the Group had currency swap agreements with banks to swap US dollar principal amount of borrowings equivalent to HK$31,356 million (2019: HK$36,660 million) (see note 44(i)(ii)) to Euro principal amount of borrowings to reflect currency exposures of its underlying businesses. The amounts include the cross currency swap agreements disclosed in (d) above with notional amounts of HK$11,856 million (2019: HK$17,160 million).
27 Trade payables and other current liabilities
2020 | 2019 | |
HK$ million | HK$ million | |
Trade payables (a) | 25,042 | 27,539 |
Other current liabilities | ||
Derivative financial instruments | ||
Cash flow hedges | ||
Cross currency interest rate swaps | 481 | 318 |
Forward foreign exchange contracts | 4 | - |
Other contracts | - | 51 |
Net investment hedges | ||
Forward foreign exchange contracts | 1,023 | 345 |
Cross currency swaps | 7 | - |
Other derivative financial instruments | 4 | 364 |
Interest free loans from non-controlling shareholders | 380 | 380 |
Contract liabilities | 6,160 | 6,188 |
Provisions (see note 28) | 3,185 | 2,637 |
Other payables and accruals | 67,595 | 61,536 |
103,881 | 99,358 | |
2020 | 2019 | |
HK$ million | HK$ million | |
16,155 | 19,932 | |
3,769 | 3,444 | |
2,375 | 1,742 | |
2,743 | 2,421 | |
25,042 | 27,539 |
(a) At 31 December, the ageing analysis of the trade payables is as follows:
Less than 31 days Within 31 to 60 days Within 61 to 90 days Over 90 days
(b) The Group's five largest suppliers accounted for less than 16% of the Group's cost of purchases for the year ended 31 December 2020
(2019: less than 21%).
28 Provisions
Provision for | |||||
commitments, | |||||
onerous | Assets | ||||
contracts and | Closure | retirement | |||
other guarantees | obligation | obligation | Others | Total | |
HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
At 1 January 2019 | 31,188 | 79 | 1,774 | 1,462 | 34,503 |
Additions | - | 206 | 472 | 493 | 1,171 |
Interest accretion | - | 1 | 23 | - | 24 |
Utilisations | (2,645) | (17) | (296) | (673) | (3,631) |
Write back | - | (27) | - | (93) | (120) |
Exchange translation differences | (485) | (16) | 12 | (31) | (520) |
At 31 December 2019 and 1 January 2020 | 28,058 | 226 | 1,985 | 1,158 | 31,427 |
Additions | - | 36 | 225 | 387 | 648 |
Interest accretion | - | 1 | 27 | - | 28 |
Utilisations | (5,617) | (92) | (114) | (221) | (6,044) |
Write back | - | (87) | - | (49) | (136) |
Relating to subsidiaries disposed (see note 34(d)) | - | - | (64) | - | (64) |
Exchange translation differences | 1,072 | 8 | 105 | 127 | 1,312 |
Transfer to liabilities directly associated with | |||||
assets classified as held for sale (see note 25) | - | - | (1) | - | (1) |
At 31 December 2020 | 23,513 | 92 | 2,163 | 1,402 | 27,170 |
Provisions are analysed as: | |||||
2020 | 2019 | ||||
HK$ million | HK$ million | ||||
Current portion (see note 27) | 3,185 | 2,637 | |||
Non-current portion (see note 31) | 23,985 | 28,790 | |||
27,170 | 31,427 |
The provision for commitments, onerous contracts and other guarantees represents the unavoidable costs of meeting these commitments and obligations after deducting the associated, expected future benefits and / or estimated recoverable value. Following the completion of the merger of VHA and TPG Corporation Limited in June 2020, HK$4,567 million provision for commitments and guarantees made in prior year in relation to VHA's telecommunications operations has been released as it is no longer required for the Group to settle the related obligations. The credit is included in the calculation of the HK$10,186 million gains arising from the dilution (see note 5(b)(xix) and note 7(f)). The provision for closure obligations represents costs to execute integration plans and store closures. The provision for assets retirement obligations represents the present value of the estimated future costs of dismantling and removing fixed assets when they are no longer used and restoring the sites on which they are located.
29 Interest bearing loans from non-controlling shareholders
2020 | 2019 | |
HK$ million | HK$ million | |
Interest bearing loans from non-controlling shareholders | 798 | 728 |
At 31 December 2020, these loans bear interest at rates at EURIBOR+2.0% (2019: EURIBOR+2.0%) per annum. The carrying amounts of the borrowings approximate their fair values.
30 Pension plans
2020 | 2019 | |
HK$ million | HK$ million | |
Defined benefit assets (see note 21) | 158 | 101 |
Defined benefit liabilities | 3,804 | 3,123 |
Net defined benefit liabilities | 3,646 | 3,022 |
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held independently of the Group's assets in trustee administered funds.
(a) Defined benefit plans
The Group's major defined benefit plans are in Hong Kong, the United Kingdom and the Netherlands. The plans are either contributory final salary pension plans or contributory career average pay plans or non-contributory guaranteed return defined contribution plans. No other post-retirement benefits are provided.
The principal actuarial assumptions used for the purpose of the actuarial valuation were as follows: 2020 2019
Discount rates | 0.3% - 1.5% | 0.58% - 2.0% |
Future salary increases | 1.0% - 3.5% | 1.4% - 4.0% |
Interest credited on two principal plans in Hong Kong | 5.0% - 6.0% | 5.0% - 6.0% |
The amount recognised in the consolidated statement of financial position is determined as follows: | ||
2020 | 2019 | |
HK$ million | HK$ million | |
Present value of defined benefit obligations | 24,502 | 21,431 |
Fair value of plan assets | 20,859 | 18,412 |
3,643 | 3,019 | |
Restrictions on assets recognised | 3 | 3 |
Net defined benefit liabilities | 3,646 | 3,022 |
30 Pension plans (continued) |
(a) Defined benefit plans (continued) |
Movements in net defined benefit liabilities and its components are as follows: |
obligations |
HK$ million |
Fair value | Net defined | |||
of plan | Asset | benefit | ||
assets | ceiling | liabilities | ||
HK$ million | HK$ million | HK$ million | ||
At 1 January 2020 | 21,431 | (18,412) | 3 | 3,022 |
Net charge (credit) to the income statement | ||||
Current service cost | 608 | 18 | - | 626 |
Past service cost and gains and losses on settlements | (60) | - | - | (60) |
Interest cost (income) | 353 | (305) | - | 48 |
901 | (287) | - | 614 | |
Net charge (credit) to other comprehensive income | ||||
Remeasurements loss (gain): | ||||
Actuarial gain arising from change in demographic | ||||
assumptions | (121) | - | - | (121) |
Actuarial loss arising from change in financial | ||||
assumptions | 1,783 | - | - | 1,783 |
Actuarial gain arising from experience adjustment | (10) | - | - | (10) |
Return on plan assets excluding interest income | - | (1,032) | - | (1,032) |
Exchange translation differences | 1,185 | (954) | - | 231 |
2,837 | (1,986) | - | 851 | |
Contributions paid by the employer | - | (839) | - | (839) |
Contributions paid by the employee | 109 | (109) | - | - |
Benefits paid | (699) | 699 | - | - |
Transfer from (to) other liabilities | (77) | 75 | - | (2) |
At 31 December 2020 | 24,502 | (20,859) | 3 | 3,646 |
Present value of defined benefit
Present value of | Fair value | Net defined | ||
defined benefit | of plan | Asset | benefit | |
obligations | assets | ceiling | liabilities | |
HK$ million | HK$ million | HK$ million | HK$ million | |
At 1 January 2019 | 18,337 | (15,897) | 3 | 2,443 |
Net charge (credit) to the income statement | ||||
Current service cost | 509 | 25 | - | 534 |
Interest cost (income) | 454 | (401) | - | 53 |
963 | (376) | - | 587 | |
Net charge (credit) to other comprehensive income | ||||
Remeasurements loss (gain): | ||||
Actuarial loss arising from change in demographic | ||||
assumptions | 71 | - | - | 71 |
Actuarial loss arising from change in financial | ||||
assumptions | 2,751 | - | - | 2,751 |
Actuarial gain arising from experience adjustment | (37) | - | - | (37) |
Return on plan assets excluding interest income | - | (2,027) | - | (2,027) |
Exchange translation differences | 44 | (39) | - | 5 |
2,829 | (2,066) | - | 763 | |
Contributions paid by the employer | - | (779) | - | (779) |
Contributions paid by the employee | 106 | (106) | - | - |
Benefits paid | (694) | 694 | - | - |
Relating to subsidiaries disposed (see note 34(d)) | (25) | 24 | - | (1) |
Transfer from (to) other liabilities | (85) | 94 | - | 9 |
At 31 December 2019 | 21,431 | (18,412) | 3 | 3,022 |
The net defined benefit liabilities presented above represent the deficit calculated in accordance with Hong Kong Accounting Standard 19 "Employee Benefits" ("HKAS 19") and is the difference between the present value of the defined benefit obligation and the fair value of plan assets. Management appointed actuaries to carry out a valuation of these pension plans to determine the pension obligation and the fair value of the plan assets that are required to be disclosed and accounted for in the financial statements in accordance with HKAS 19 (the "accounting actuarial valuations"). The realisation of the deficit disclosed above is contingent upon the realisation of the actuarial assumptions made which is dependent upon a number of factors including the market performance of plan assets. The accounting actuarial valuations are not used for the purposes of determining the funding contributions to the defined benefit pension plans. Contributions to fund the obligations are based upon the recommendations of independent qualified actuaries for each of the Group's pension plans to fully fund the relevant schemes on an ongoing basis. Funding requirements of the Group's major defined benefit pension plans are detailed below.
The Group operates two principal pension plans in Hong Kong. One plan, which has been closed to new entrants since 1994, provides pension benefits based on the greater of the aggregate of the employee and employer vested contributions plus a minimum interest thereon of 6% per annum, and pension benefits derived by a formula based on the final salary and years of service. An independent actuarial valuation, undertaken for funding purposes under the provision of Hong Kong's Occupational Retirement Schemes Ordinance ("ORSO"), at 30 June 2019 reported a funding level of 134% of the accrued actuarial liabilities on an ongoing basis. The valuation used the attained age valuation method and the main assumptions in the valuation are an investment return of 5% per annum, salary increases of 4% per annum and interest credited to balances of 6% per annum. The valuation was prepared by Tian Keat Aun, a Fellow of The Institute and Faculty of Actuaries, and William Chow, a Fellow of the Society of Actuaries, of Towers Watson Hong Kong Limited. The second plan provides benefits equal to the employer vested contributions plus a minimum interest thereon of 5% per annum.
As at 31 December 2020, vested benefits under this plan are fully funded in accordance with the ORSO funding requirements. During the year, forfeited contributions totalling HK$10 million (2019: HK$20 million) were used to reduce the current year's level of contributions and HK$1 million forfeited contribution was available at 31 December 2020 (2019: HK$2 million) to reduce future years' contributions.
The Group operates three contributory defined benefit pension plans for its ports operation in the United Kingdom. The plans are all final salary in nature and they are not open to new entrants. Of the three plans, the Port of Felixstowe Pension Plan ("Felixstowe Scheme") is the principal plan. An independent actuarial valuation, undertaken for funding purposes under the provision of the Pensions Act 2004, at 31 December 2018 reported a funding level of 89% of the accrued actuarial liabilities on an ongoing basis. The sponsoring employers have since made additional contributions of GBP7.5 million in 2019 and GBP8.5 million in 2020 and will make further aggregate additional contributions of GBP33.7 million until 31 January 2024 to eliminate the shortfall by 31 January 2024. The valuation used the projected unit credit method and the main assumptions in the valuation are a pre-retirement discount rate of 5.3% per annum; post-retirement discount rate of 2.3% per annum; pensionable earnings increases of 2.65% per annum; Retail Price Index ("RPI") inflation of 3.4% per annum; Consumer Price Index ("CPI") inflation of 2.4% per annum; and pension increases of 1.9% to 3.3% per annum.
The valuation was prepared by Rhidian Williams FIA, a Fellow of the Institute and Faculty of Actuaries, of Quantum Advisory.
The Group's defined benefit pension plans for its ports and retail operations in the Netherlands are guaranteed contracts undertaken by insurance companies to provide defined benefit payable under the plans in return for actuarially determined contributions based on tariffs and conditions agreed for the term of the contracts. As the risk of providing past pension benefits is underwritten by the insurance companies, the Group does not carry funding risk relating to past service. The annual contribution to provide current year benefits varies in accordance with annual actuarial calculations.
The Group operates a defined benefit pension plan for certain of its retail operation in the United Kingdom. It is not open to new entrants. With effect from 28 February 2010, accrual of future defined benefits for all active members was ceased and the final salary linkage was also severed. An independent actuarial valuation, undertaken for funding purposes under the provision of the Pensions Act 2004, at 31 March 2018 reported a funding level of 79% of the accrued actuarial liabilities on an ongoing basis.
A schedule of contributions was agreed with GBP18.5 million to pay in 2019 and 2020, and GBP2.7 million in 2021 to eliminate the shortfall by February 2021. The valuation used the projected unit credit method and the main assumptions in the valuation are investment returns of 1.08% to 4.44% per annum and pension increases of 1.28% to 3.68% per annum. The valuation was prepared by Paul Jayson, a Fellow of the Institute and Faculty of Actuaries, of Barnett Waddingham LLP. The sponsoring employers have since made additional contributions of GBP18.5 million in 2020 (2019: GBP20.5 million which included GBP2.0 million additional voluntary contribution).
(i) Plan assets
Fair value of the plan assets are analysed as follows:
2020 | 2019 | |
Percentage | Percentage | |
Equity instruments | ||
Consumer markets and manufacturing | 6% | 7% |
Energy and utilities | 2% | 2% |
Financial institutions and insurance | 5% | 6% |
Telecommunications and information technology | 7% | 6% |
Units trust and equity instrument funds | 4% | 6% |
Others | 8% | 8% |
32% | 35% | |
Debt instruments | ||
US Treasury notes | 1% | - |
Government and government guaranteed notes | 15% | 13% |
Financial institutions notes | 5% | 5% |
Others | 5% | 6% |
26% | 24% | |
Qualifying insurance policies | 36% | 36% |
Properties | - | 3% |
Other assets | 6% | 2% |
100% | 100% | |
The debt instruments are analysed by issuers' credit rating as follows: | ||
2020 | 2019 | |
Percentage | Percentage | |
Aaa / AAA | 6% | 9% |
Aa1 / AA+ | 19% | 15% |
Aa2 / AA | 29% | 37% |
Aa3 / AA- | 8% | 2% |
A1 / A+ | 3% | 5% |
A2 / A | 4% | 5% |
Other investment grades | 22% | 24% |
No investment grades | 9% | 3% |
100% | 100% |
The fair value of the above equity instruments and debt instruments are determined based on quoted market prices.
Fair value of plan assets of HK$20,859 million (2019: HK$18,412 million) includes investments in the Company's shares with a fair value of HK$18 million (2019: HK$26 million).
The long term strategic asset allocations of the plans are set and reviewed from time to time by the plans' trustees taking into account the membership and liability profile, and the liquidity requirements of the plans.
(a) Defined benefit plans (continued)
(ii) Defined benefit obligation
The average duration of the defined benefit obligation as at 31 December 2020 is 19 years (2019: 18 years).
The Group expects to make contributions of HK$770 million (2019: HK$848 million) to the defined benefit plans next year.
HKAS 19 "Employee Benefits" requires disclosure of a sensitivity analysis for the significant actuarial assumptions, used to determine the present value of the defined benefit obligations, that shows the effects of a hypothetical change in the relevant actuarial assumption at the end of the reporting period on defined benefit obligations.
The effect that is disclosed in the following assumes that (a) a hypothetical change of the relevant actuarial assumption had occurred at the end of the reporting period and had applied to the relevant actuarial assumption in existence on that date; and (b) the sensitivity analysis for each type of actuarial assumption does not reflect inter-dependencies between different assumptions.
The preparation and presentation of the sensitivity analysis for significant actuarial assumptions is solely for compliance with HKAS 19 disclosure requirements in respect of defined benefit obligations. The sensitivity analysis measures changes in the defined benefit obligations from hypothetical instantaneous changes in one actuarial assumption (e.g. discount rate or future salary increase), the amount so generated from the sensitivity analysis are "what-if" forward-looking estimates. The sensitivity analyses are for illustration purposes only and it should be noted that in practice actuarial assumptions rarely change in isolation. Actual results in the future may differ materially from the sensitivity analyses due to developments in the markets which may cause fluctuations in actuarial assumptions (e.g. discount rate or future salary increase) to vary and therefore it is important to note that the hypothetical amounts so generated do not present a projection of likely future events and profits or losses.
If the discount rate is 0.25% higher or lower, the defined benefit obligation would decrease by 3.0% or increase by 3.3% respectively (2019: decrease by 2.9% or increase by 3.1% respectively).
If the future salary increase is 0.25% higher or lower, the defined benefit obligation would increase by 0.6% or decrease by 0.6% respectively (2019: increase by 0.6% or decrease by 0.5% respectively).
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the statement of financial position.
(b) Defined contribution plans
The Group's cost in respect of defined contribution plans for the year amounted to HK$1,314 million (2019: HK$1,407 million) which has been charged to the profit or loss for the year. Forfeited contributions of HK$14 million (2019: HK$15 million) were used to reduce the current year's level of contributions and no forfeited contribution was available at 31 December 2020 (2019: nil) to reduce future years' contributions.
31 Other non-current liabilities
2020 | 2019 | |
HK$ million | HK$ million | |
Derivative financial instruments | ||
Cash flow hedges | ||
Interest rate swaps | 436 | 328 |
Cross currency interest rate swaps | 1,956 | - |
Net investment hedges | ||
Forward foreign exchange contracts | - | 24 |
Cross currency swaps | 773 | 26 |
Other derivative financial instruments | 499 | 171 |
Obligations for telecommunications licences and other rights | 7,666 | 10,001 |
Other non-current liabilities (a) | 14,638 | 12,362 |
Liabilities relating to the economic benefits agreements (b) | 2,166 | 2,166 |
Provisions (see note 28) | 23,985 | 28,790 |
52,119 | 53,868 |
(a) Includes equipment purchase payables of HK$7,426 million (2019: HK$6,149 million).
(b) In October 2018, the Group completed the divesture of an aggregated 90% economic benefits in Australian Gas Networks. As part of the arrangement, upon the occurrence of certain events, the Group is required to return the consideration. The Group recognises liabilities measured by reference to the amount of consideration it received under this arrangement from entities outside the Group.
32 Share capital, share premium, perpetual capital securities and capital management
(a) Share capital and share premium
Number of shares
Share capital HK$ millionShare premium HK$ million
Total HK$ million
Authorised:
Ordinary shares of HK$1 each
8,000,000,000
8,000
-
8,000
Issued and fully paid: Ordinary shares
At 31 December 2019 and 31 December 2020
3,856,240,500
3,856
244,377
248,233
32 Share capital, share premium, perpetual capital securities and capital management (continued)
(b) Perpetual capital securities
2020 | 2019 | |
HK$ million | HK$ million | |
US$1,000 million issued in 2017 | 7,842 | 7,842 |
EUR500 million issued in 2018 | 4,573 | 4,568 |
12,415 | 12,410 |
In May 2017 and December 2018, wholly owned subsidiary companies of the Group issued perpetual capital securities with nominal amount of US$1,000 million (approximately HK$7,800 million) and EUR500 million (approximately HK$4,475 million) respectively for cash.
These securities are perpetual, subordinated and the coupon payment is optional in nature. Therefore, perpetual capital securities are classified as equity instruments and recorded in equity in the consolidated statement of financial position.
(c) Capital management
The Group's primary objectives when managing capital are to safeguard the Group's ability to continue to provide returns for shareholders and to support the Group's stability and growth. The Group regularly reviews and manages its capital structure to ensure optimal capital structure to maintain a balance between higher shareholders' returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.
At 31 December 2020, total equity amounted to HK$630,063 million (2019: HK$596,963 million), and consolidated net debt of the Group, excluding loans from non-controlling shareholders which are viewed as quasi equity, was HK$185,103 million (2019: HK$202,648 million).
The Group's net debt to net total capital ratio decreased to 22.7% from 25.3% at the end of last year.
As additional information, the following table shows the net debt to net total capital ratios calculated on the basis of including loans from non-controlling shareholders and also with the Group's investments in its listed subsidiaries and associated companies marked to market value at the end of the reporting period.
Net debt / Net total capital ratios (i) at 31 December: 2020 2019
A1 - excluding interest-bearing loans from non-controlling shareholders from debt | 22.7% | 25.3% |
A2 - as in A1 above and investments in listed subsidiaries and associated companies | ||
marked to market value | 25.0% | 27.8% |
B1 - including interest-bearing loans from non-controlling shareholders as debt | 22.8% | 25.4% |
B2 - as in B1 above and investments in listed subsidiaries and associated companies | ||
marked to market value | 25.1% | 27.9% |
(i) Net debt is defined on the consolidated statement of cash flows. Total bank and other debts are defined, for the purpose of "Net debt" calculation, as the total principal amount of bank and other debts and unamortised fair value adjustments arising from acquisitions.
Net total capital is defined as total bank and other debts plus total equity and loans from non-controlling shareholders net of total cash, liquid funds and other listed investments.
33 Reserves
Attributable to ordinary shareholders Retained Exchange Hedging profit reserve reserve Others (a) Total HK$ million HK$ million HK$ million HK$ million HK$ million
At 1 January 2020 | 592,705 | (30,760) | (1,513) | (344,380) | 216,052 |
Profit for the year | 29,143 | - | - | - | 29,143 |
Other comprehensive income (losses) (c) | |||||
Equity securities at FVOCI | |||||
Valuation gains recognised directly in reserves | - | - | - | 1,211 | 1,211 |
Debt securities at FVOCI | |||||
Valuation gains recognised directly in reserves | - | - | - | 44 | 44 |
Valuation losses previously in reserves recognised in income | |||||
statement | - | - | - | 89 | 89 |
Remeasurement of defined benefit obligations | |||||
recognised directly in reserves | (511) | - | - | - | (511) |
Losses on cash flow hedges recognised directly in reserves | - | - | (21) | - | (21) |
Losses on net investment hedges recognised directly in reserves | - | (1,687) | - | - | (1,687) |
Gains on translating overseas subsidiaries' net assets | |||||
recognised directly in reserves | - | 11,802 | - | - | 11,802 |
Losses (gains) previously in exchange and other reserves related to | |||||
subsidiaries, associated companies and joint ventures disposed | |||||
during the year recognised in income statement | - | 2,040 | 1 | (3) | 2,038 |
Share of other comprehensive income (losses) of associated | |||||
companies | (420) | 2,801 | (848) | 32 | 1,565 |
Share of other comprehensive income (losses) of joint ventures | (1,386) | 3,642 | (947) | 5 | 1,314 |
Tax relating to components of other comprehensive income (losses) | 133 | - | 7 | - | 140 |
Other comprehensive income (losses), net of tax | (2,184) | 18,598 | (1,808) | 1,378 | 15,984 |
Transfer of losses on disposal of equity securities at FVOCI to | |||||
retained profit | (39) | - | - | 39 | - |
Transaction with owners in their capacity as owners: | |||||
Dividends paid relating to 2019 | (8,870) | - | - | - | (8,870) |
Dividends paid relating to 2020 | (2,368) | - | - | - | (2,368) |
Unclaimed dividends write back of a subsidiary | 7 | - | - | - | 7 |
Relating to purchase of non-controlling interests (b) | (3,943) | - | - | - | (3,943) |
Relating to partial disposal of subsidiary companies | - | - | - | 58 | 58 |
At 31 December 2020 | 604,451 | (12,162) | (3,321) | (342,905) | 246,063 |
Attributable to ordinary shareholders
Retained Exchange Hedging
profit reserve reserve Others (a)TotalHK$ million HK$ million HK$ million HK$ million HK$ million
At 1 January 2019 | 564,569 | (31,979) | (2,138) | (344,346) | 186,106 |
Profit for the year | 39,830 | - | - | - | 39,830 |
Other comprehensive income (losses) (c) | |||||
Equity securities at FVOCI | |||||
Valuation losses recognised directly in reserves | - | - | - | (228) | (228) |
Debt securities at FVOCI | |||||
Valuation gains recognised directly in reserves | - | - | - | 104 | 104 |
Valuation losses previously in reserves recognised in income | |||||
statement | - | - | - | 29 | 29 |
Remeasurement of defined benefit obligations | |||||
recognised directly in reserves | (625) | - | - | - | (625) |
Losses on cash flow hedges recognised directly in reserves | - | - | (692) | - | (692) |
Losses on net investment hedges recognised directly in reserves | - | (414) | - | - | (414) |
Losses on translating overseas subsidiaries' net assets | |||||
recognised directly in reserves | - | (582) | - | - | (582) |
Losses (gains) previously in exchange and other reserves related to | |||||
subsidiaries, associated companies and joint ventures disposed | |||||
during the year recognised in income statement | - | 2,787 | 1,108 | (45) | 3,850 |
Gains previously in other reserves related to subsidiaries, | |||||
associated companies and joint ventures disposed | |||||
during the year transferred directly to retained profit | 297 | - | - | (297) | - |
Share of other comprehensive income of associated companies | 230 | 21 | 87 | 42 | 380 |
Share of other comprehensive income (losses) of joint ventures | 433 | (599) | 107 | (5) | (64) |
Tax relating to components of other comprehensive income (losses) | 130 | - | 88 | - | 218 |
Other comprehensive income (losses), net of tax | 465 | 1,213 | 698 | (400) | 1,976 |
Hedging reserve gains transferred to the carrying value | |||||
of non-financial item during the year | - | - | (73) | - | (73) |
Transfer of gain on disposal of equity securities at FVOCI | |||||
to retained profit | 49 | - | - | (49) | - |
Transaction with owners in their capacity as owners: | |||||
Dividends paid relating to 2018 | (8,870) | - | - | - | (8,870) |
Dividends paid relating to 2019 | (3,355) | - | - | - | (3,355) |
Share option schemes and long term incentive plans of | |||||
subsidiary companies | 4 | - | - | 32 | 36 |
Unclaimed dividends write back of a subsidiary | 6 | - | - | - | 6 |
Relating to purchase of non-controlling interests | - | - | - | (200) | (200) |
Relating to partial disposal of subsidiary companies | - | 6 | - | 590 | 596 |
Gains previously in other reserves related to partial disposal of | |||||
subsidiary companies during the year transferred directly to | |||||
retained profit | 7 | - | - | (7) | - |
At 31 December 2019 | 592,705 | (30,760) | (1,513) | (344,380) | 216,052 |
(a) Other reserves comprise revaluation reserve and other capital reserves. As at 31 December 2020, revaluation reserve deficit amounted to HK$1,712 million (1 January 2020: HK$3,111 million and 1 January 2019: HK$2,985 million), and other capital reserves deficit amounted to HK$341,193 million (1 January 2020: HK$341,269 million and 1 January 2019: HK$341,361 million). Included in the other capital reserves account is a deficit of HK$341,336 million, relating to the fair value of shares of Cheung Kong (Holdings) Limited, the former holding company of the Group, cancelled as part of the reorganisation completed in 2015. Revaluation surplus (deficit) arising from revaluation to market value of listed debt securities and listed equity securities are included in the revaluation reserve.
(b) During the year, the Group had acquired the remaining 40% attributable interests in the telecommunications tower assets in Sweden and
Denmark from the Group's telecommunications partner in these countries. The acquisition is accounted for as a transaction with equity participant and the economic effect is recorded in equity.
(c) Set out below are the before and after related tax effects of other comprehensive income (losses) for the years:
2020
Before- | Net-of- | ||
tax | tax | ||
amount | amount | ||
HK$ million | HK$ million | ||
Equity securities at FVOCI | |||
Valuation gains recognised directly in reserves | 1,461 | 1,461 | |
Debt securities at FVOCI | |||
Valuation gains recognised directly in reserves | 44 | 44 | |
Valuation losses previously in reserves recognised in income | |||
statement | 89 | 89 | |
Remeasurement of defined benefit obligations recognised directly in | |||
reserves | (664) | (495) | |
Losses on cash flow hedges recognised directly in reserves | (65) | (56) | |
Losses on net investment hedges recognised directly in reserves | (2,229) | (2,229) | |
Gains on translating overseas subsidiaries' net assets recognised | |||
directly in reserves | 13,004 | 13,004 | |
Losses previously in exchange and other reserves related to subsidiaries, | |||
associated companies and joint ventures disposed during the year | |||
recognised in income statement | 2,093 | 2,093 | |
Share of other comprehensive income of associated companies | 1,687 | 1,687 | |
Share of other comprehensive income of joint ventures | 1,720 | 1,720 | |
17,140 | 17,318 | ||
2019 | |||
Before- | Net-of- | ||
tax | tax | ||
amount | Tax effect | amount | |
HK$ million | HK$ million | HK$ million | |
Equity securities at FVOCI | |||
Valuation losses recognised directly in reserves | (323) | - | (323) |
Debt securities at FVOCI | |||
Valuation gains recognised directly in reserves | 104 | - | 104 |
Valuation losses previously in reserves recognised in income | |||
statement | 29 | - | 29 |
Remeasurement of defined benefit obligations recognised directly in | |||
reserves | (899) | 170 | (729) |
Losses on cash flow hedges recognised directly in reserves | (808) | 103 | (705) |
Losses on net investment hedges recognised directly in reserves | (547) | - | (547) |
Losses on translating overseas subsidiaries' net assets recognised | |||
directly in reserves | (813) | - | (813) |
Losses previously in exchange and other reserves related to subsidiaries, | |||
associated companies and joint ventures disposed during the year | |||
recognised in income statement | 4,535 | - | 4,535 |
Share of other comprehensive income of associated companies | 340 | - | 340 |
Share of other comprehensive income (losses) of joint ventures | (68) | - | (68) |
1,550 | 273 | 1,823 |
34 | ||
(a) | ||
Profit after tax | 37,397 | 47,777 |
Less: share of profits less losses of | ||
Associated companies | 18,529 | (1,524) |
Joint ventures | (4,954) | (7,404) |
50,972 | 38,849 | |
Adjustments for: | ||
Current tax charge | 3,985 | 4,891 |
Deferred tax charge | 317 | 1,129 |
Interest expenses and other finance costs | 10,850 | 14,305 |
Depreciation and amortisation | 41,658 | 38,129 |
Others | 301 | 552 |
EBITDA of Company and subsidiaries (i) | 108,083 | 97,855 |
Loss on disposal of fixed assets | 181 | 170 |
Dividends received from associated companies and joint ventures | 10,241 | 9,097 |
Profit on disposal of subsidiaries, associated companies and joint ventures (see note 7) | (18,090) | (7,293) |
Gains arising from dilution (see note 7) | (10,186) | - |
Customer acquisition and retention costs capitalised in the year | (3,498) | (3,045) |
Other non-cash items | 341 | (1,493) |
87,072 | 95,291 | |
(i) Reconciliation of EBITDA: | ||
2020 | 2019 | |
HK$ million | HK$ million | |
EBITDA of Company and subsidiaries | 108,083 | 97,855 |
Divesture of infrastructure investments | - | (69) |
108,083 | 97,786 | |
Share of EBITDA of associated companies and joint ventures | ||
Share of profits less losses of | ||
Associated companies | (18,529) | 1,524 |
Joint ventures | 4,954 | 7,404 |
Adjustments for: | ||
Depreciation and amortisation | 22,658 | 21,008 |
Interest expenses and other finance costs | 8,741 | 7,225 |
Current tax charge | 3,553 | 3,202 |
Deferred tax credit | (6,544) | (1,272) |
Non-controlling interests | 473 | 480 |
Others | (301) | (552) |
15,005 | 39,019 | |
EBITDA (see note 5(b)(ii)) | 123,088 | 136,805 |
(b) | Changes in working capital | |
2020 | 2019 | |
HK$ million | HK$ million | |
Increase in inventories | (148) | (1,252) |
Decrease (increase) in trade receivables and other current assets | 98 | (202) |
Decrease in trade payables and other current liabilities | (5,132) | (4,810) |
Other non-cash items | 5,698 | 687 |
516 | (5,577) |
Notes to consolidated statement of cash flows
Reconciliation of profit after tax to cash generated from operating activities before interest expenses and other finance costs, tax paid and changes in working capital 2020 2019
HK$ million HK$ million
(c) Purchase of subsidiary companies
The following table summarises the consideration paid and the amounts of the assets acquired and liabilities assumed recognised for acquisitions completed during the years.
2020 | 2019 | |
HK$ million | HK$ million | |
Purchase consideration transferred: | ||
Cash and cash equivalents paid | - | 41 |
Non-cash consideration | - | 16 |
- | 57 | |
Fair value | ||
Fixed assets | - | 41 |
Cash and cash equivalents | - | 11 |
Trade receivables and other current assets | - | 9 |
Inventories | - | 5 |
Trade payables and other current liabilities and current tax liabilities | - | (9) |
Net identifiable assets acquired | - | 57 |
Total consideration | - | 57 |
Net cash outflow (inflow) arising from acquisition: | ||
Cash and cash equivalents paid | - | 41 |
Cash and cash equivalents acquired | - | (11) |
Total net cash outflow | - | 30 |
The assets acquired and liabilities assumed are recognised at the acquisition date fair value and are recorded at the consolidation level.
For the year ended 31 December 2020 and 2019, acquisition related costs were not material.
For the year ended 31 December 2019, the contribution to the Group's revenue and profit before tax from the subsidiaries acquired during the year since the respective date of acquisition were not material.
(d) Disposal of subsidiary companies
2020 | 2019 | |
HK$ million | HK$ million | |
Consideration received or receivable | ||
Cash and cash equivalents | 20,783 | 223 |
Investments retained subsequent to disposal | - | 13,565 |
Total disposal consideration | 20,783 | 13,788 |
Carrying amount of net assets disposed | (4,361) | (6,254) |
Cumulative exchange gains (losses) in respect of the net assets of the subsidiaries and | ||
related hedging instruments and other reserves reclassified from equity to profit or | ||
loss on loss of control of subsidiaries | 337 | (16) |
Gain on disposal* | 16,759 | 7,518 |
Net cash inflow (outflow) on disposal of subsidiaries | ||
Cash and cash equivalents received as consideration | 20,783 | 223 |
Less: Cash and cash equivalents disposed | (3) | (1,745) |
Total net cash consideration | 20,780 | (1,522) |
Analysis of assets and liabilities over which control was lost | ||
Fixed assets | 1,876 | 270 |
Right-of-use assets | 1,929 | 743 |
Goodwill | 703 | 10,438 |
Brand names and other rights | 5 | 2 |
Interests in joint ventures | - | 1,129 |
Deferred tax assets | 1,991 | 9 |
Trade receivables and other current assets | 2 | 584 |
Inventories | 16 | 331 |
Trade payables and other current liabilities and current tax liabilities | (2) | (1,542) |
Loans from non-controlling shareholders | - | (5) |
Lease liabilities | (2,098) | (930) |
Deferred tax liabilities | - | (33) |
Pension obligations | - | (1) |
Other non-current liabilities | (64) | - |
Non-controlling interests | - | (6,486) |
Net assets (excluding cash and cash equivalents) disposed | 4,358 | 4,509 |
Cash and cash equivalents disposed | 3 | 1,745 |
Net assets disposed | 4,361 | 6,254 |
* The gains on disposal for the year ended 31 December 2020 and 2019 are recognised in the consolidated income statement and are included in the line item titled "Other income and gains".
Disposal of subsidiary companies for the year ended 31 December 2020 mainly related the disposal of interest in tower assets in Denmark, Austria and Ireland (see note 5(b)(xviii)) while for the comparative year ended 31 December 2019, they mainly comprise the disposal of former subsidiary, HUTCHMED (see note 5(b)(xix)).
Saved as disclosed for the effect arising from the gain on disposal, the effect on the Group's results from the subsidiaries disposed during the year are not material for the years ended 31 December 2020 and 2019.
(e) Changes in liabilities arising from financing activities
The following table sets out an analysis of the cash flows and non-cash flows changes in liabilities arising from financing activities:
Interest | Interest | Liabilities | ||||
bearing loans | free loans | relating to | ||||
from non- | from non- | the economic | ||||
Bank and | Lease | controlling | controlling | benefits | ||
other debts | liabilities | shareholders | shareholders | agreements | Total | |
HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | HK$ million | |
At 1 January 2019 | 351,382 | 92,130 | 752 | 385 | 14,308 | 458,957 |
Financing cash flows | ||||||
New borrowings | 207,349 | - | - | - | - | 207,349 |
Repayment of borrowings | (208,714) | - | - | - | - | (208,714) |
Capital element of lease liabilities paid (see note | ||||||
13(c)) | - | (15,969) | - | - | - | (15,969) |
Other changes | ||||||
Amortisation of loan facilities fees and premiums | ||||||
or discounts relating to borrowings | 303 | - | - | - | - | 303 |
Losses arising on adjustment for hedged items in a | ||||||
designated fair value hedge (see note 44(h)) | 169 | - | - | - | - | 169 |
Amortisation of bank and other debts' fair value | ||||||
adjustments arising from acquisitions | (953) | - | - | - | - | (953) |
Increase in lease liabilities from entering into new | ||||||
leases (see note 13(a)) | - | 17,851 | - | - | - | 17,851 |
Interest on lease liabilities (see note 8) | - | 3,642 | - | - | - | 3,642 |
Interest element of lease liabilities paid | ||||||
(included in "Net cash from operating activities") | - | (3,891) | - | - | - | (3,891) |
Remeasurement / write off of lease liabilities | - | 939 | - | - | - | 939 |
Relating to subsidiaries disposed (see note 34(d)) | - | (930) | - | (5) | - | (935) |
Derecognition | - | - | - | - | (12,142) | (12,142) |
Exchange translation differences | (4,976) | (84) | (24) | - | - | (5,084) |
At 31 December 2019 and 1 January 2020 | 344,560 | 93,688 | 728 | 380 | 2,166 | 441,522 |
Financing cash flows | ||||||
New borrowings | 44,391 | - | - | - | - | 44,391 |
Repayment of borrowings | (56,361) | - | - | - | - | (56,361) |
Capital element of lease liabilities paid (see note | ||||||
13(c)) | - | (18,010) | - | - | - | (18,010) |
Other changes | ||||||
Amortisation of loan facilities fees and premiums | ||||||
or discounts relating to borrowings (see note 8) | 320 | - | - | - | - | 320 |
Losses arising on adjustment for hedged items in a | ||||||
designated fair value hedge (see note 44(h)) | 60 | - | - | - | - | 60 |
Amortisation of bank and other debts' fair value | ||||||
adjustments arising from acquisitions (see note | ||||||
8(a)) | (702) | - | - | - | - | (702) |
Increase in lease liabilities from entering into new | ||||||
leases (see note 13(a)) | - | 20,008 | - | - | - | 20,008 |
Interest on lease liabilities (see note 8) | - | 3,703 | - | - | - | 3,703 |
Interest element of lease liabilities paid | ||||||
(included in "Net cash from operating activities") | - | (3,295) | - | - | - | (3,295) |
Remeasurement / write off of lease liabilities | ||||||
Rental concessions (see note 7) | - | (737) | - | - | - | (737) |
Others | - | (1,228) | - | - | - | (1,228) |
Relating to subsidiaries disposed (see note 34(d)) | - | (2,098) | - | - | - | (2,098) |
Exchange translation differences | 16,803 | 2,517 | 70 | - | - | 19,390 |
Transfer to liabilities directly associated with | ||||||
assets classified as held for sale (see note 25) | - | (283) | - | - | - | (283) |
At 31 December 2020 | 349,071 | 94,265 | 798 | 380 | 2,166 | 446,680 |
35 Share-based payments
The Company and its subsidiary companies do not have share option scheme as at 31 December 2020 and 31 December 2019. Certain of the Company's subsidiary companies and associated companies have issued equity-settled and cash-settled share-based payments to certain employees. The aggregate amount of the share-based payments recognised by these companies during the current and comparative years are not material to the Group's results.
36 Pledge of assets
At 31 December 2020, assets of the Group totalling HK$1,411 million (2019: HK$1,260 million) were pledged as security for bank and other debts.
37 Contingent liabilities and guarantees
At 31 December 2020, CK Hutchison Holdings Limited, and its subsidiaries provide guarantees in respect of bank and other borrowing facilities to its associated companies and joint ventures of HK$7,022 million (2019: HK$6,960 million).
The amount utilised by its associated companies and joint ventures are as follows: 2020 2019
HK$ million HK$ million
To associated companies | 3,200 | 3,050 |
To joint ventures | 3,046 | 3,008 |
At 31 December 2020, the Group had provided performance and other guarantees of HK$7,868 million (2019: HK$2,817 million).
38 Commitments
The Group's outstanding commitments contracted for at 31 December 2020, where material, not provided for in the financial statements at 31 December 2020 are as follows:
Capital commitments
(a) Ports and Related Services: HK$263 million (2019: HK$150 million)
(b) 3 Group Europe: HK$3,482 million (2019: HK$8,955 million)
(c) Telecommunications, Hong Kong and Asia: HK$3,884 million (2019: HK$4,251 million)
39 Related parties transactions
Saved as disclosed elsewhere in these financial statements, transactions between the Group and other related parties during the year are not significant to the Group. The outstanding balances with associated companies and joint ventures are disclosed in notes 17 and 18. Transactions between the Company and its subsidiaries have been eliminated on consolidation.
No transactions have been entered with the directors of the Company (being the key management personnel) during the year other than the emoluments paid to them (being the key management personnel compensation).
40 Legal proceedings
As at 31 December 2020, the Group is not engaged in any material litigation or arbitration proceedings, and no material litigation or claim is known by the Group to be pending or threatened against it.
41 Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements to the extent they have not already been disclosed in the other notes elsewhere in these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
The financial statements of the Group include the financial statements of the Company and its direct and indirect subsidiary companies and also incorporate the Group's interests in associated companies and joint arrangements on the basis set out in notes 41(b) and 41(c) below. Results of subsidiary and associated companies and joint arrangements acquired or disposed of during the year are included as from their effective dates of acquisition to 31 December 2020 or up to the dates of disposal as the case may be. The acquisition of subsidiaries is accounted for using the acquisition method.
(a) Subsidiary companies
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and statement of financial position respectively.
(b) Associated companies
Associates are entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost.
(c) Joint arrangement
A joint arrangement is an arrangement of which two or more parties have joint control and over which none of the participating parties has unilateral control.
Investments in joint arrangements are classified either as joint operations or joint ventures, depending on the contractual rights and obligations each investor has. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. The Group recognises its direct right to the assets, liabilities, revenue and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement. The results and net assets of joint ventures are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under HKFRS 5, Non-current assets held for sale and discontinued operations. The total carrying amount of such investments is reduced to recognise any identified impairment loss in the value of individual investments.
(d) Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.
41 Significant accounting policies (continued)
(d) Non-current assets (or disposal groups) held for sale and discontinued operations (continued)
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the income statement.
(e) Fixed assets
Fixed assets are stated at cost less depreciation and any impairment loss. Buildings are depreciated on the basis of an expected life of 50 years, or the remainder thereof, or over the remaining period of the lease of the underlying leasehold land, whichever is less.
The period of the lease includes the period for which a right to renewal is attached.
Depreciation of other fixed assets is provided on the straight-line basis to write off their costs over their estimated useful lives. The principal annual rates used for these purposes are as follows:
Motor vehicles
20 - 25%
Plant, machinery and equipment
3 1/3 - 20%
Container terminal equipment
3 - 20%
Telecommunications equipment
2.5 - 20%
Leasehold improvements
Over the unexpired period of the lease or 15%, whichever is greater
The gain or loss on disposal or retirement of a fixed asset is the difference between the net sales proceeds and the carrying amount.
(f) Leases
(i) Group as a lessee
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the lease liability and interest on lease liability. The interest on lease liability is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the lease liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable.
• variable lease payment that are based on an index or a rate.
• amounts expected to be payable by the lessee under residual value guarantees.
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option.
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability.
• lease payments made at or before the commencement date less any lease incentives received.
• initial direct costs and restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of office furniture and certain IT-equipment.
Some leases contain variable payment terms that are linked to sales generated from a store. For individual retail stores, lease payments are on the basis of variable payment terms and there is a wide range of sales percentages applied. Variable payment terms are used for a variety of reasons, including minimising the fixed costs base for newly established stores. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
41 Significant accounting policies (continued)
(f) Leases (continued)
(i) Group as a lessee (continued)
Extension and termination options are included in a number of leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
(ii) Group as a lessor
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to the ownership of an underlying asset to the lessee. If this is not the case, the lease is classified as an operating lease.
However, when the Group is an intermediate lessor the sublease are classified as a finance lease or as an operating lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
(g) Investment properties
Investment properties are interests in land and buildings that are held to earn rentals or for capital appreciation or both. Such properties are carried in the statement of financial position at their fair value. Changes in fair values of investment properties are recorded in the income statement.
(h) Leasehold land
The acquisition costs and upfront payments made for leasehold land are presented on the face of the statement of financial position as leasehold land prior to 1 January 2019 and are grouped as part of right-of-use assets with effect from 1 January 2019. Leasehold land are expensed in the income statement on a straight-line basis over the period of the lease.
(i) Telecommunications licences, other licences, brand names, trademarks and other rights
Separately acquired telecommunications licences, other licences, brand names, trademarks and other rights are carried at historical cost. Telecommunications licences, other licences, brand names, trademarks and other rights with a finite useful life are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of these assets over their estimated useful lives:
Telecommunications licences and other licences Brand names, trademarks and other rights
2 to 20 years 2 to 45 yearsTelecommunications licences, other licences, brand names, trademarks and other rights that are considered to have indefinite useful lives to the Group are not amortised and are tested for impairment annually and when there is indication that they may be impaired.
(j) Customer acquisition and retention costs
Customer acquisition and retention costs ("CACs") comprise the net costs to acquire and retain customers, which are mainly mobile telecommunication 3G and LTE customers. CACs are expensed and recognised in the income statement in the period in which they are incurred, except (i) the costs are incremental of obtaining a contract and they are expected to be recovered; and (ii) the costs relate directly to the contract, generate resources used in satisfying the contract and are expected to be recovered, then they are capitalised and amortised over the customer contract period. Appropriate allowance are recognised if the carrying amounts of the capitalised costs exceed the remaining amount that the Group expects to receive less any directly related costs that have not been recognised as expenses.
41 Significant accounting policies (continued)
(k) Goodwill
Goodwill is initially measured at cost, being excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group's previously held equity interests in the acquiree over the fair value of the net identifiable assets acquired and liabilities assumed. Goodwill on acquisition of a foreign operation is treated as an asset of the foreign operation.
Goodwill is subject to impairment test annually and when there is indication that the carrying value may not be recoverable.
If the cost of acquisition is less than the fair value of the Group's share of the net identifiable assets of the acquired company, the difference is recognised directly in the income statement.
The profit or loss on disposal is calculated by reference to the net assets at the date of disposal including the attributable amount of goodwill but does not include any attributable goodwill previously eliminated against reserves.
(l) Contractual customer relationships
Separately acquired contractual customer relationships are carried at historical cost. These contractual customer relationships are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method from five to fifteen years over the expected useful life of the customer relationship.
(m) Deferred tax
Deferred tax is recognised, using the liabilities method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax losses and tax credits can be utilised.
(n) Liquid funds and other listed investments and other unlisted investments and other financial assets
"Liquid funds and other listed investments" are investments in listed / traded debt securities, listed equity securities and cash and cash equivalents. "Other unlisted investments", disclosed under other non-current assets, are investments in unlisted debt securities, unlisted equity securities and other receivables. These investments are recognised and de-recognised on the date the Group commits to purchase or sell the investments or when they expire.
(i) Measurement
Debt instrument financial assets subsequent to initial recognition are measured as follows:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets, impairment losses, foreign exchange gains and losses, and gain or loss arising on derecognition are recognised directly in profit or loss.
Financial assets at fair value through other comprehensive income ("FVOCI"): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment losses and reversals, interest revenue and foreign exchange gains and losses which are recognised in profit or loss.
When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to, and recognised in, profit or loss.
Financial assets at fair value through profit or loss ("FVPL"): Assets that do not meet the criteria for amortised cost or FVOCI, or designated as FVPL using fair value option, are measured at FVPL. A gain or loss on a debt instrument that is subsequently measured at FVPL is recognised in profit or loss in the period in which it arises.
Equity instrument financial assets are measured at fair value at and subsequent to initial recognition. Changes in the fair value of these financial assets are normally recognised in profit or loss. Dividends from such investments are recognised in profit or loss when the Group's right to receive payments is established. Where an election is made to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.
41 Significant accounting policies (continued)
(n) Liquid funds and other listed investments and other unlisted investments and other financial assets (continued) (ii) Impairment
Under the expected loss approach, the Group assesses on a forward looking basis the expected credit losses associated with its financial assets. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The impairment model under HKFRS 9 applies to debt instruments measured at amortised cost and at FVOCI, contract assets under HKFRS 15, lease receivables, loan commitments and certain financial guarantee contracts. The Group applies the simplified approach to recognise lifetime expected losses for trade receivables, due from customers and contract assets. As regards lease receivables, loan commitments, financial guarantee contracts, and certain other financial assets (which are presented under Liquid funds and other listed investments, and other unlisted investments) the Group considers that they have low credit risk and hence recognises 12-month expected credit losses for such items.
(o) Derivative financial instruments and hedging activities
Derivative financial instruments are utilised by the Group in the management of its foreign currency and interest rate exposures. Derivative financial instruments are recognised at fair value. At the end of each reporting period the fair value is remeasured. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss, except where the derivatives qualify for cash flow hedge accounting or hedges of net investment in a foreign operation, in which case recognition of any resultant gain or loss depends on the nature of the item being hedged.
For the purpose of hedge accounting, hedges are classified as:
• Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment.
• Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
• Hedges of a net investment in a foreign operation (net investment hedges).
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
At the inception of the hedging, the Group documents the economic relationship between hedging instruments and hedged items, including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedges items.
The Group documents its risk management objective and strategy for undertaking its hedge transactions.
The fair values of derivative financial instruments designated in hedge relationships are disclosed in note 44(i). Movements in the hedging reserve in shareholders' equity are shown in note 33. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit or loss as other expense. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit or loss as other expense.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the effective interest rate ("EIR") method. The EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss.
When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit or loss.
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original document
- Permalink
Disclaimer
CK Hutchison Holdings Limited published this content on 18 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 March 2021 08:33:03 UTC.
