Risk Factors

The The Group’s business, financial condition and results of operations are subject to various business risks and uncertainties. The factors set out below are those that the Group believes could result in the Group’s financial condition or results of operations differing materially from expected or historical results. There may be other risks in addition to those shown below which are not known to the Group or which may not be material now but could turn out to be material in the future.
 

 

Global Economy
As a global business, the Group is exposed to the developments in the global economy as well as developments in the industries and geographical markets in which it operates. As a result, the Group’s financial condition and results of operations may be influenced by the general state of the global economy or the general state of a specific market or economy. Any significant decrease in the level of economic growth in the global or regional or a specific economy could adversely affect the Group’s financial condition or results of operations.

Industry Trends, Interest Rates and Currency Markets
The Group’s results are affected by trends in the industries in which it operates, including the ports and related services, retail, infrastructure, energy and telecommunications industries. While the Group believes that its diverse operations, geographical spread and extensive customer base reduce its exposure to particular industry cycles, its results have in the past been adversely affected by industry trends. For example, the Group’s results have been negatively impacted by depressed oil and gas prices, cyclical downturn in the business of shipping lines, declines in retail consumer sentiment, decline in the value of securities investments, and volatility in currencies and interest rates. There can be no assurance that the combination of industry trends, currencies and interest rates experienced by the Group in the future will not adversely affect its financial condition and results of operations.

In particular, income from the Group’s finance and treasury operations is dependent upon interest rates, the currency environment and market conditions, and therefore there can be no assurance that changes in these conditions will not materially and adversely affect the Group’s financial condition and results of operations.

COVID-19 Pandemic
In January 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on 11 March 2020 it was declared a pandemic. Between January 2020 and the date of this Annual Report the COVID-19 disease has spread to many countries, with significant number of reported cases and related deaths. Several countries’ governments and numerous companies have imposed increasingly stringent restrictions to help avoid, or slow down, the spread of the pandemic, including, for example, restrictions on international and local travel, public gatherings and participation in meetings, as well as closures of universities, schools, stores and restaurants, with some countries imposing strict curfews and lockdowns. There can be no assurance that these restrictions will not be extended further on one or more occasions. These measures have led to lockdowns in areas where the Group has operations, and is expected to have an adverse effect in the short to medium term on the Group’s operations, particularly the ports and related services and retail operations, among others.

The Group continues to monitor developments closely as the pandemic develops. The impact of the pandemic on the Group’s business will depend on a range of factors which the Group is not able to accurately predict, including the duration, severity and scope of the pandemic, the geographies impacted, the impact of the pandemic on economic activity globally, and the nature and severity of measures adopted by governments. These factors include, but are not limited to:
 

  • the deterioration of socio-economic conditions leading to disruptions to the Group’s operations, such as reduction in the Group’s ports operation’s throughput as a result of factory closures in the Mainland or reduced demand in Europe and the US, or mandatory store closures and a decline in footfall in the Group’s retail stores;
 
  • reductions or volatility in consumer demand for the Group’s products due to quarantine or illness, or other travel restrictions, economic hardship, or retail closures, which may impact the Group’s revenue and market share;
 
  • significant volatility in financial markets (including interest rate and foreign currency rate volatilities) and commodities market (including slump in crude oil prices) and measures adopted by governments and central banks, which may limit the Group’s access to funds, lead to shortages of cash or increase the cost of raising such funds; and
 
  • an adverse impact on the Group’s ability to engage in new, or consummate pending, strategic transactions on the agreed terms and timetable or
    at all.

These impacts can also threaten the Group’s facilities and transport of the Group’s products, cause disruption of operational activities, environmental harm, loss of life, injuries and impact the wellbeing of the Group’s employees, and could have a material adverse effect on the Group’s results of operations, cash flows and financial condition.

As of the date of this Annual Report, there is significant uncertainty relating to the severity of the long-term adverse impact of the pandemic on the global economy and global financial markets, and the Group is unable to accurately predict the long-term impact on its business. To the extent that the pandemic adversely affects the Group’s business and operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

The aforementioned risks may also be applicable to the outbreak of any highly contagious diseases on the economies of the affected countries.

Cashflow and Liquidity
From time to time, the Group accesses short-term and long-term capital markets to obtain financing. The availability of financing with acceptable terms and conditions may be impacted by many factors which include, among others, liquidity in the capital markets and the Group’s credit ratings. Although the Group aims to maintain a capital structure that is appropriate for long-term investment grade ratings, actual credit ratings may deviate from these levels due to economic circumstances or other factors such as how the Group formulates, implements and integrates its sustainability strategies in relation to its core businesses. If liquidity in the capital markets declines and/or credit ratings of the Group decline or other factors, such as sustainability considerations, the availability and cost of borrowings could be affected and impact the Group’s financial condition and results of operations, liquidity and cash flows.

Currency Fluctuations
The Group reports its results in Hong Kong dollars but its subsidiaries, associated companies and joint ventures around the world receive revenue and incur expenses in over 50 different local currencies. The Group’s subsidiaries, associated companies and joint ventures may also incur debt in these local currencies. Consequently, the Group is exposed to potential adverse impact of currency fluctuations on translation of the results and balance sheet items of these subsidiaries, associated companies and joint ventures and also on repatriation of earnings, equity investments and loans. Although the Group actively manages its currency exposures, depreciation or fluctuation of the currencies in which the Group conducts its operations relative to the Hong Kong dollar could have a material adverse effect on the Group’s financial condition and results of operations.

Crude Oil and Natural Gas Markets
The results of operations and financial condition of the energy operation are dependent on the prices received for its refined products, crude oil, natural gas liquids (“NGL”) and natural gas production. Lower prices for crude oil, NGL and natural gas could adversely affect the value and quantity of the oil and gas reserves of the energy operation. Prices for refined products, crude oil, NGL and natural gas are based on local and global supply and demand as well as availability and costs of transportation. Supply and demand can be affected by a number of factors including, but not limited to, actions taken by the Organisation of the Petroleum Exporting Countries (OPEC), non-OPEC crude oil supply, social conditions in oil producing countries, the occurrence of natural disasters, general and specific economic conditions, technological developments, prevailing weather patterns, government regulations and policies and the availability of alternate sources of energy. The fluctuation in refined products, crude oil and natural gas prices are beyond the Group’s control and could adversely affect the Group’s financial condition and results of operations.

Highly Competitive Markets
The Group’s principal business operations face significant competition across the diverse markets in which they operate. New market entrants, intensification of price competition by existing competitors, product innovation or technological advancement could adversely affect the Group’s financial condition and results of operations. Competitive risks faced by the Group include:
 

  • continued consolidation and vertical integrations of international shipping lines that are major clients of the Group’s port operations. Shipping lines are increasingly investing in seaports and in their own dedicated terminal facilities and may not require the use of the Group’s terminal facilities;
 
  • significant competition and pricing pressure regularly experienced by the retail business of the Group from both online and brick and mortar retail competitors, which may materially and adversely affect the financial performance of the Group’s retail operations;
 
  • new market entrants and intensified price competition among existing market players of the Group’s non-regulated infrastructure businesses could adversely affect the financial performance of the Group’s non-regulated infrastructure businesses;
 
  • risk of competition with respect to gaining access to the resources required to increase oil and gas reserves and production and gain access to markets. The Group’s ability to successfully complete development projects could be adversely affected if it is unable to acquire economic supplies and services due to competition;
 
  • aggressive tariff plans and customer acquisition strategies by telecommunications competitors may impact the Group’s pricing plans, customer acquisition and retention costs, rate of customer growth and retention prospects and hence the revenue it receives as a major provider of telecommunications services; and
 
  • risk of competition from disruptive alternate telecommunications or energy technologies and potential competition in the future from substitute telecommunications or energy technologies being developed or to be developed or if the Group fails to develop, or obtain timely access to new technologies and equipment.

Retail Product Liability
The Group’s retail operations may be subject to product liability claims if consumers are injured or otherwise harmed by the products purchased from them. Customers count on the Group’s retail operations to provide them with safe products. Concerns regarding the safety of food and non-food products that are sourced from a wide variety of suppliers could cause shoppers to avoid purchasing certain products from the Group’s retail operations, even if the basis for the concern may be outside of the Group’s control. Claims, recalls or actions could be based on allegations that, among other things, the products sold by the retail operations are misbranded, contain contaminants or impermissible ingredients, provide inadequate instructions regarding their use or misuse, include inadequate warnings concerning flammability or interactions with other substances or in the case of any handset and other electrical devices that the retail operations sell, are not fit for purpose or pose a safety hazard. While the Group maintains product liability insurance coverage in amounts and with deductibles that the Group believes are prudent, there can be no assurance that the coverage will be applicable and adequate to cover all possible adverse outcomes of claims and legal proceedings against the Group. Any material shortfall in coverage may have an adverse impact on the results of the Group’s retail operations. In addition, any lost confidence on the part of the Group’s customers would be difficult and costly to re-establish. As such, any material issue regarding the safety of any food and non-food items that the Group sells, regardless of the cause, could materially and adversely affect the business, and results of the Group’s retail operations.

Strategic Partners
The Group conducts some of its businesses through non-wholly-owned subsidiaries, associated companies and joint ventures in which it shares control (in whole or in part) and has formed strategic alliances with certain leading international companies, government authorities and other strategic partners. There can be no assurance that any of these strategic or business partners will wish to continue their relationships with the Group in the future or that the Group will be able to pursue its stated strategies with respect to its non-wholly-owned subsidiaries, associated companies and joint ventures and the markets in which they operate. Furthermore, other investors in the Group’s non-wholly-owned subsidiaries, associated companies and joint ventures may undergo a change of control or financial difficulties, which may negatively impact the Group’s financial condition and results of operations.

In addition, following the conclusion of agreements for the disposal of the Group’s interests in tower assets supporting the Group’s mobile businesses in, respectively, Austria, Denmark, Ireland, Italy, Sweden and the United Kingdom, to Cellnex, the Group’s ability to provide telecommunications services in such jurisdictions upon completion of disposal of such tower assets will depend, in part, on Cellnex, which through its operating subsidiaries will have entered into master services agreements with subsidiaries of the Group operating the Group’s telecommunications business in the relevant jurisdictions. While each master services agreement will provide for Cellnex to provide infrastructure and built-to-suit services to the Group’s telecommunication business in such jurisdictions, such agreements may be terminated for cause by either party and may be partially terminated in respect of part of the telecommunications infrastructure services which are affected by any material failure to meet service levels. Should any of these arrangements be terminated, this could result in delays or disruptions to the Group’s telecommunications operations in the relevant jurisdictions and could result in the Group incurring additional costs. There can be no assurance that changes in the relationship or rearrangements between the Group and Cellnex will not materially and adversely affect the Group’s financial condition and results of operations.

Future Growth
The Group continues to cautiously expand the scale and geographic spread of its businesses through investment in organic growth, as well as undertaking selective mergers, acquisitions and disposal activities if appropriate opportunities in the market arise. Success of the Group’s mergers and acquisitions will depend, among other things, on the ability of the Group to realise the expected synergies, cost savings and growth opportunities upon integration of the merged or acquired businesses. These businesses may require significant investment and the commitment of executive management time and other resources. There can be no assurance that a failure to operate the merged or acquired businesses successfully, or a longer than projected period to realise the expected synergies, will not have a material adverse effect on the Group’s financial condition, results of operations and prospects.

The Group has made substantial investments in acquiring telecommunications licences and developing its mobile networks and growing its customer bases in Europe, Hong Kong and Macau, Asia, and Australia. The Group may need to incur more capital expenditure to expand, improve or upgrade its mobile networks, acquire additional spectrum licences, and incur more customer acquisition and retention costs to retain and build its customer bases. There can be no assurance that any additional investments will further increase customer levels and operating margins, and consequently, additional investments may materially and adversely impact the Group’s financial condition and results of operations.

As of 31 December 2020, the Group had a total deferred tax asset balance (1) of HK$18,015 million, of which HK$16,780 million were attributable to the CK Hutchison Group Telecom mobile operations. The ultimate realisation of deferred tax assets recognised depends principally on these businesses achieving profitability and generating sufficient taxable profits to utilise the underlying unused tax losses. In each of the countries and locations that CK Hutchison Group Telecom operates, taxation losses may be carried forward indefinitely. In addition, in the UK, the Group benefits from the availability of group relief in relation to taxation losses generated by its telecommunications operations to offset taxable profits from its other businesses in the same period. It may be necessary for some or all of the deferred tax assets recognised to be reduced and charged to the income statement if there is a significant adverse change in the projected performance and resulting projected taxable profits of these businesses. Judgement is required to determine key assumptions adopted in the taxable profit and loss projections and changes to key assumptions used can significantly affect these taxable profit and loss projections. If there is a significant adverse change in taxation rates and legislations, or in the projected performance and resulting cash flow projections of these businesses, some or all of these deferred tax assets may need to be reduced and charged to the income statement, which could have a material adverse effect on the Group’s financial condition and results of operations..

Competition risk of mergers and acquisitions
The Group may from time to time engage in mergers, acquisitions, joint ventures, other consolidation transactions between its businesses and certain third party companies (including competitors), or disposals. Such transactions are typically subject to merger, anti-trust and other regulatory approvals by the competent authorities who may only approve the transaction subject to conditions, or who may prohibit the transaction. There can be no assurance that such approvals or other conditions would be obtained or satisfied and even if such approvals are obtained, third parties may initiate proceedings to appeal against such approvals. If a proposed transaction is prohibited or the relevant approvals are revoked and the transaction cannot be completed, the Group will have incurred significant legal, accounting and other costs in connection with the transaction without realising its anticipated benefits, which may have included increased earnings, scale, competitive strength and market share. As a consequence, the Group’s financial position and results of operations could be negatively impacted. In the case of potential mergers or acquisitions, such third party companies may also choose to merge with or be acquired by another of the Group’s competitors, which could result in a new competitor with greater scale, financial strength and other resources. As a result, if a transaction is prohibited by a competent authority or if a transaction is approved but such approval is subsequently revoked, it could have a material adverse impact on the Group’s business, financial condition and results of operations.

Impact of National, European Union and International Law and Regulatory Requirements
As a global business, the Group is exposed to local business risks in several different countries, which could have a material adverse effect on its financial condition and results of operations. The Group operates in many countries around the world and may increasingly become exposed to different and changing government policies, political, social, legal and regulatory requirements at the national or international level, including but not limited to those required by the European Union (“EU”) or the World Trade Organisation (“WTO”) or national authorities. These include:
  

  • changes in tariffs and trade barriers, including changes which may result from the UK’s withdrawal from the EU, as well as government-determined tariff resets of the Group’s regulated infrastructure assets;
  
  • changes in taxation regulations and interpretations;
  
  • competition (anti-trust) laws applicable to the Group’s activities, including the regulation of monopolies and the conduct of dominant firms, the prohibition of anti-competitive agreements and practices, and laws requiring the approval of certain mergers, acquisitions and joint ventures which could restrict the Group’s ability to own or operate subsidiaries or acquire new businesses in certain jurisdictions and/or result in imposition of fineson the relevant operations;
  
  • changes in the process of or the conditions or criteria to obtaining or maintaining licences, permits and governmental approvals necessary to operate certain businesses;
  
  • conditions or criteria to obtaining or maintaining assets that may be viewed by governments or regulatory authorities as critical assets for national security purposes, for example in the telecommunications, ports and energy sectors; and
  
  • environmental, safety, employee and consumer protection laws, rules and regulations.

There can be no assurance that the European institutions and/or the regulatory authorities of the countries in which the Group operates will not makedecisions or interpret and implement regulations in a manner that materially and adversely affects the Group’s financial condition and results of operations in the future.

Ports are often viewed by governments as critical national assets and in many countries are subject to government control and regulations. Regime or sentiment changes in less politically stable countries may affect port concessions granted to foreign international port operations including the Group’s port operations.

Certain infrastructure investments of the Group (for example, water, gas and electricity distribution) are subject to regulatory pricing and strict licensing requirements, codes and guidelines established by the relevant regulatory authorities from time to time. Failure to comply with these licensing requirements, codes or guidelines may lead to penalties, or, in extreme circumstances, amendment, suspension or cancellation of the relevant licences by the authorities. Furthermore, certain regulated operations of the Group’s investments are subject to price control by government regulatory authorities.

The relevant government regulatory authorities will periodically review and reset the price control terms for certain projects in accordance with a predetermined timetable. There can be no assurance that such events or price resets will not have a material adverse effect on the Group’s financial conditions and results of operations.

The energy operation is subject to inherent operational risks with respect to safety and the environment that require continuous vigilance. The energy operation seeks to minimise these operational risks by carefully designing and building its facilities and conducting its operations in a safe and reliable manner. However, failure to manage these operational risks effectively could result in potential fatalities, serious injury, interruptions to activities or use of assets, damage to assets, environmental impact, or loss of licence to operate. Enterprise risk management, emergency preparedness, business continuity and security policies and programmes are in place for all operating areas and are adhered to on an ongoing basis. The energy operation, in accordance with industry practice, maintains insurance coverage against losses from certain of these risks. Nonetheless, insurance proceeds may not be sufficient to cover all losses, and insurance coverage may not be available for all types of operational risks.

New policies or measures by governments, whether fiscal, regulatory or other changes, may pose a risk to the overall investment return of the Group’s infrastructure and energy businesses and may delay or prevent the commercial operation of a business with a resulting loss of revenue and profit.

The Group is only permitted to provide telecommunications services and operate networks under licences (including spectrum licences for mobile telecommunications) and/or authorisations granted under the national laws of each country in which it operates. Some spectrum licences have historically been issued for fixed terms and subsequently renewed and/or reauctioned. There can be no assurance, however, that any application for the renewal or participation in any auction of one or more of these licences will be successful or granted on equivalent or satisfactory terms. Governments and/or regulatory authorities may also impose auction rules and/or licence conditions relating to national security, which could result in an operator being denied access to the spectrum and/or revocation of a licence.

In addition, the Group may not be successful in obtaining licences for spectrum bands enabling new mobile technologies that may be developed in the future (including 5G) and will likely face competition for any such licences. Due to changes in legislation, the Group’s mobile telecommunications licences in the UK and Italy effectively provide for perpetual renewal rights. Telecommunications licences (including spectrum licences) and authorisation may contain regulatory requirements and carrier obligations regarding the way the operator must conduct its businesses (such as price controls and nondiscrimination obligations), as well as network quality and coverage. Failure to meet these requirements could result in damage awards, fines, penalties, suspensions or other sanctions including, ultimately, revocation of the licences. Decisions by regulators with respect to the granting, amendment or renewal of licences to the Group or other parties (such as spectrum allocation to other parties or relaxation of constraints with respect to the technology or specific service that may be deployed in the given spectrum band), or changes to the process of or the conditions or criteria to, obtaining or maintaining spectrum or other licences necessary for the Group’s mobile telecommunications business, could result in the Group facing unforeseen competition and/or could materially and adversely affect the Group’s financial condition and results of operations.

The Group’s overall success as a global business depends, in part, upon its ability to succeed in different economic, social and political conditions. There can be no assurance that the Group will continue to succeed in developing and implementing policies and strategies that are effective in each location where it conducts business.

Accounting
The Hong Kong Institute of Certified Public Accountants (“HKICPA”) is continuing its policy of issuing Hong Kong Financial Reporting Standards (“HKFRS”), amendments and interpretations that fully converge with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). HKICPA has issued and may in the future issue more new and revised standards, amendments and interpretations, including those required to conform to standards, amendments and interpretations issued from time to time by the IASB. Such factors may require adoption of new accounting policies. There can be no assurance that the adoption of new accounting policies or new HKFRS will not have a significant impact on the Group’s financial condition and results of operations.

Impact of Regulatory Reviews
The Group and some of its subsidiaries and associated companies are listed on various stock exchanges around the world and are subject to regulatory reviews of their various filings by the respective stock exchange’s regulatory bodies and/or other regulatory authorities. While all the Group’s publicly listed companies endeavour to comply with all regulatory requirements of the various stock exchanges and other authorities in the countries in which they operate, and obtain independent professional advice as appropriate, there can be no assurance that the regulatory bodies’ review will not result in a disagreement with the Group’s interpretations and judgements and that any required actions mandated by the authorities will not have an adverse impact on the Group’s reported financial position and results of operations.

Natural Disasters
Some of the Group’s assets and projects, and many of the Group’s customers and suppliers are located in areas at risk of damage from earthquakes, floods and typhoons. The occurrence of any such damage could disrupt the Group’s business materially and adversely affect the Group’s financial condition and results of operations.

Although the Group has not experienced any significant structural damage to infrastructure projects or ports or other facilities from earthquakes to date, there can be no assurance that future earthquakes or other natural disasters will not occur and result in major damage to the Group’s infrastructure projects, ports or other facilities, or on the general supporting infrastructure facilities in the vicinity, which could materially and adversely affect the Group’s financial condition and results of operations.

Climate Change
Scientific evidence has shown that the Earth’s temperature is rising due to an increase in greenhouse gases. This has already created, and will continue to create, a number of negative effects to the environment including loss of sea ice, sea level rise, and more frequent and severe weather events.

Some of the Group’s assets, businesses and supply chain are located in areas that would be affected in the medium to long term by the physical effects of such climate change. Extreme weather events may also pose increased risk for the Group’s stakeholders such as the Group’s employees, customers and suppliers living and working in those locations. Further, as many countries seek to transition to low carbon economies, governments are increasingly introducing legislation to restrict emissions and incentivise environmental protection measures. Other market changes may also influence the Group’sbusiness such as changing consumer preferences in favour of companies that are more sustainable.

Together these physical and transition risks arising from climate change could have a material impact on the Group’s business and adversely affect the Group’s financial condition and results of operations.

Political Unrest and Terrorist Attacks
The Group has presence in about 50 countries around the world. There can be no assurance that all of these countries will remain politically stable or immune to terrorist attacks, and if any of these countries suffers from political unrest or terrorist attacks, it may have an adverse impact on the Group’s
financial condition and results of operations.

Impact of Possible Economic Sanctions on Busiess Partners, Suppliers or Businesses in General
Governments and multinational organisations (including the State Department and the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) of the US and the United Nations), from time to time administer certain laws and regulations that impose restrictions with respect to activities or transactions with certain countries, governments, entities and individuals that are the subject of economic sanctions. There can be no assurance that such sanctions or other restrictions will not affect the jurisdictions in which the Group conducts its business, any of the Group’s business partners or suppliers or otherwise. To the extent that any such sanction or restriction is imposed in any jurisdictions where the Group’s business operates, the Group may need to cease operations in those jurisdictions and suffer losses in that regard. If any of the Group’s business partners or suppliers is impacted by sanctions or restrictions, provision of goods, services or support by them may be disrupted or discontinued, which may affect the Group’s ability to continue to operate related businesses. If any of the Group’s business partners is affected by sanctions or restrictions, the continuation or disruption of strategic alliance with such business partners may also affect the Group’s ability to continue to operate related businesses and/or may result in suspension of operations. There can be no assurance that the Group will be able to obtain alternative goods, services, support or alliance it needs for the operation of its business, in a timely manner or at competitive terms, and no assurance that any compensation recoverable from business partners or suppliers for the discontinued or disrupted supply, service, support or alliance will be available or adequate. Any of these factors could have a material adverse effect on the Group’s financial condition and results of operations.

Cyber Security Risks
Cyber attacks, including through the use of malware, computer viruses, dedicated denial of services attacks, credential harvesting and other means for obtaining unauthorised access to or disrupting the operation of the networks, systems and data base of the Group or its suppliers, vendors and other service providers, could have an adverse effect on the Group’s business, operations and reputation. Cyber attacks may cause equipment failures, loss or leakage of data, including personal data of customers or employees and technical and trade information, as well as disruptions to the Group’s or its customers’ operations. Corporate cyber attacks have increased in frequency, scale and severity in recent years. Further, the perpetrators of cyber attacks are not restricted to particular groups or persons. These attacks may be committed by company employees or external parties operating in any geography, including jurisdictions where law enforcement measures to address such attacks are unavailable or ineffective, and may even be launched by or at the behest of nation states. The measures deployed by the Group may not be able to prevent, eliminate or minimise the risks associated with cyber attacks.

Any operational impacts caused by cyber attacks to the networks, systems and data base of the Group or its suppliers, vendors and other service providers, even for a limited period of time, may result in costly remedial expenses and/or a loss of business. The costs required to remedy a major cyber attack on the Group could include expensive incentives to certain existing customers and business partners, increased expenditures on cyber security measures and the use of alternate resources. The Group may also suffer a loss of revenue owing to business interruption and claims from regulators and other third parties. The potential costs associated with these attacks could exceed the insurance coverage the Group maintains. In addition, a compromise of security or leakage of data, such as personal data and technical and trade information, could result in third party claims and/or regulatory claims or investigations. Any of these occurrences could damage the Group’s reputation, adversely impact customer and investor confidence, and materially and adversely affect the Group’s financial condition and results of operations.

Compliance with Data Protection Legislation

In the ordinary course of its operations, various members of the Group collect, store and use data that is protected by data protection laws in the different countries in which they operate. As regulatory focus on privacy issues continues to increase and worldwide laws and regulations concerning the handling of personal information expand and become more complex, potential risks related to data collection and use within the Group’s business are expected to intensify. For example, the General Data Protection Regulation (2016/679/EU), which came into effect in May 2018, introduced a number of changes to EU data protection legislation such as permitting national supervisory authorities in the EU to levy administrative penalties of up to 4 per cent. of companies’ global annual turnover in cases of significant non-compliance and direct liability for breach by data processors.

In the event that any relevant member of the Group is unable to meet its obligations under applicable data protection laws, it may be subject to regulatory action or civil claims. The cost of regulatory or legal action, and any monetary and/or reputational damage suffered as a result of such action, could have a material adverse effect on the Group’s financial condition and results of operations.

The UK formally left the EU on 31 January 2020. As agreed in the withdrawal agreement, a transition period was implemented until 31 December 2020, during which time EU laws and regulations continued to apply broadly as before.

The UK-EU Trade and Cooperation Agreement (“TCA”) was finalised on 24 December 2020 and came into force from 1 January 2021. The TCA sets out all  aspects of the new UK-EU relationship, such as trade, security, areas of ongoing collaboration/cooperation and governance.

The long-term impact of the UK’s decision to leave the EU is not known and will depend on the implementation of the final terms agreed between the UK and the EU in the TCA as well as on the UK’s ability to secure favourable trade and investment terms with countries outside the EU. There is considerable uncertainty as to the impact of the UK’s exit from the EU on the general economic conditions in the UK or its wider impact in the EU. As such, no assurance can be given as to the impact of the UK’s departure from the EU and, in particular, no assurance can be given that such matters would not adversely affect the Group’s financial condition and results of operations.

Past Performance and Forward Looking Statements
The performance and the results of operations of the Group contained within this Annual Report are historical in nature, and past performance is no guarantee of the future results of the Group. Any forward-looking statements and opinions contained within this Annual Report are based on current plans, estimates and projections, and therefore involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forwardlooking statements and opinions. The Group, the Directors, employees and agents of the Group assume (a) no obligation to correct or update the forwardlooking statements or opinions contained in this Annual Report; and (b) no liability in the event that any of the forward-looking statements or opinions do not materialise or turn out to be incorrect.

Note 1: Under Post-IFRS 16 basis, the Group had a total deferred tax asset balance of HK$19,926 million, of which HK$16,942 million were attributable to the CK Hutchison Group Telecom mobile operations.