UK assets power strong growth at CKI

Cheung Kong Infrastructure, the Hong Kong-based infrastructure investment firm owned by business tycoon Li Ka-shing (pictured), has posted an 18% increase in profits over the last six months, driven by a 45% uplift in the value of its UK portfolio.

Cheung Kong Infrastructure (CKI), the largest publicly listed infrastructure company in Hong Kong, has unveiled a strong set of results for the first half of 2012 on the back of particularly impressive performance from its UK assets.

Hailing “continued upward momentum”, the firm said unaudited profits attributable to shareholders for the six months ended 30 June 2012 increased by 18 percent to HK$4.686 billion (€494 million; $604 million). The firm’s board of directors declared an interim dividend for 2012 of HK$0.40 per share, a 10 percent increase over the same period last year.

In its results statement, CKI reveals the profit contribution from seven different areas. Of these, the UK portfolio showed easily the best performance with a 45 percent increase in profits compared with the same period last year, up from HK$1.879 billion to HK$2.721 billion.

CKI described the contribution from its UK businesses as “outstanding”. It said that Northumbrian Water, the utility which it acquired for £2.4 billion (€2.7 billion; $3.9 billion) in August 2011, had “exceeded the group’s expectations” with a HK$538 million contribution to profits during the period.

Meanwhile, profits at UK Power Networks, the electricity distribution network operator, increased 21 percent over the same period last year; while Northern Gas Networks, the gas distributor serving the north of England, “also performed well” with a 16 percent jump in profits. CKI said its other UK operations, including Seabank Power Station, were delivering “in accordance with budget”.

The good performance of the UK portfolio comes against the backdrop of a flatlining UK economy. In the results statement, CKI chairman Victor Li Tzar Kuoi observed: “A challenging economic landscape may…create opportunities. Acquisition prospects for quality assets often arise during periods of instability.”

Of the other six areas of investment broken down in the report, CKI’s assets in Canada and mainland China delivered profits growth of 21 percent and 11 percent respectively; while the worst performers were the New Zealand portfolio (a 27 percent decline) and the Australia portfolio (a 16 percent decline).

The decline in Australia was attributed to a one-off gain in 2011 from the sale of CKI’s interest in Australian fund manager Spark Infrastructure; while the drop in New Zealand was put down to an increase in interest expense from a refinanced non-recourse new loan, plus a reduction in interest deductibility for tax purposes.