Investor Centre

Investor Centre

(Extracted From Annual Report 2020)

In 2020, the world shipping trade was largely shaped by the COVID-19 pandemic. In the first half of the year, global supply chains and business activities were severely disrupted by government-imposed lockdowns and border control measures, and the suspension of factory production. This resulted in a slump in cargo volume. In contrast, the second half of 2020 brought welcome improvements as global cargo trade rebounded with the help of pent-up demand following lockdowns. Facing these unprecedented challenges, HPH Trust proved its resilience and competitive edge by driving much of this resurgence.

To navigate through the turbulence of the year, HPH Trust embraced the ever-changing cargo trends with resilience and agility, exercising robust financial control, being disciplined in keeping costs down, and improving efficiency through co-operation and alliances. This versatility in the face of fast-changing situations and a dedication to providing the best customer service form the basis for the continued success of the Trust.

A Strong Rebound Offset COVID-19 Early Disruption

Throughput for the ports of HPH Trust decreased in the first half of 2020 as the pandemic took hold. Kwai Tsing terminals’ throughput slowed with the reduction in intra-Asia, US and transshipment cargoes. As the pandemic dented global supply and demand for goods, outbound cargoes from YANTIAN to the US and Europe in first half of 2020 slid 17% and 10% respectively, compared to 2019 results.

However, in the second half of the year, pent up demand following lockdowns and a rebound in global trade enabled HPH Trust to recover much of the lost throughput. Demand from the US and Europe began to pick up at the end of May, driving a resurgence in exports from South China, with YANTIAN being the preferred export gateway for these markets. Outbound cargoes from YANTIAN to the US and Europe in the second half of 2020 improved markedly on 2019 figures, by 24% and 18% respectively. Meanwhile, Kwai Tsing terminals continued to hold its status as a key transshipment hub.

With both YANTIAN and Kwai Tsing terminals posting year-on-year throughput growth, overall throughput for HPH Trust in 2020 reached 23.7 million TEU, a rise of 2% compared to 2019.

Average revenue per TEU for both Hong Kong and China slid slightly below the 2019 levels. This was mainly attributed to a greater transshipment mix at both ports and an increased empty mix at Hong Kong.

As a result, revenue and other income for the year under review was HK$10,705.8 million – a decrease of 4% compared to HK$11,120.9 million in 2019.

Strengthening Operating Results Through Cost Savings

The cost of services rendered for the year under review was HK$3,568.4 million, down 8% on a result of HK$3,881.6 million last year. This decrease in costs was attributed to efficiencies created by HKSPA and other cost-control initiatives, as well as lower fuel costs and a reduction in operating costs due to the PRC government’s supportive measures to COVID-19. These were partially offset by the increase in throughput and external contractors’ costs.

Staff costs dropped by 11% to HK$256.4 million. Contributing factors included a lower headcount, a reduction in employee activities and the PRC government’s measures to support businesses during the pandemic.

Depreciation and amortisation remained relatively stable at HK$3,054.0 million.

Other operating income was around double that of 2019, at HK$193.2 million. The increase was largely due to the wages subsidy from the Hong Kong Government’s anti-epidemic Employment Support Scheme and a higher gain on disposal of fixed assets. Other operating expenses totalled HK$513.3 million, marking a 4% reduction on last year’s HK$537.1 million. This was attributed to savings in general overheads and depot rental at HIT but were partially offset by the government’s rates refund to HIT received in 2019.

Total operating profit was HK$3,506.9 million, representing a HK$76.0 million or 2% increase on 2019 results. Profit for the year was HK$2,012.5 million, up HK$190.8 million or 10% compared to the previous year. The increase was mainly due to higher operating profit, and a 29% decrease in interest and other finance costs, to HK$766.3 million, resulting from a lower LIBOR applied on bank loan’s interest rates. However, these were offset by a 50% increase in taxation, caused by higher profit, and an increase in the tax rate following the expiry of the High and New Technology Enterprise status at YANTIAN Phase III at the end of 2019.

Profit attributable to HPH Trust unitholders posted a noteworthy growth of 57% from 2019, increasing by HK$303.2 million to HK$831.4 million.

Consolidating Foundations Through Disciplined Capital Management And Prudent Spending

Despite the challenges brought on by the pandemic, the Trust has persisted with its long-term capital management efforts and continued to maintain a healthy financial position. As of 31 December 2020, the Trust had a total cash balance of HK$7,766.6 million, or HK$726.4 million more than the previous year. This resulted in net debt of HK$21,653.4 million by year end, a 8% decrease against the previous year.

With a strategic commitment to reduce overall indebtedness, the Trust has been diligently implementing a five-year debt repayment plan since 2017, to repay a minimum of HK$1 billion of debt annually. Total borrowings dropped to HK$29,420.0 million as of 31 December 2020, down from HK$30,678.9 million a year ago. During the year, the Trust obtained a new bank loan of approximately HK$3,870.8 million, and repaid bank loans of approximately HK$5,159.3 million.

The Trustee-Manager has approved a total payout of HK$1,045.3 million for 2020, which translates to a distribution per unit of 12.0 HK cents. Based on the US$0.198 market price as at 31 December 2020, the distribution yield is approximately 7.8%.

Outlook

As the impact of COVID-19 continues to evolve, the backdrop for the port and cargo shipping industry will continue to be reshaped in 2021 and onwards. HPH Trust will embrace the challenges and opportunities of the new year with renewed purpose. Most importantly, it will continue to build on its strengths while maintaining prudent financial management. The Trust has the agility to seize emerging opportunities and the right foundations in place to continue building a long-term sustainable business.

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