CK Hutchison Holdings Limited

Good afternoon, ladies and gentlemen. Welcome to the live webcast of CK Hutchison 2020 annual results presentation. Today, our speakers are Mr. Victor Lee, our chairman and group co-managing director, Mr. Kenning Fogg, group co-managing director, Mr. Francis, Group Finance Director and Deputy Managing Director Mr. Dominic Light, Deputy Managing Director and Group Managing Director of A.S. Watson Group and Melina Ahn, CEO of Asia and Europe of A.S. Watson and Group COO of A.S. Watson Group. During the presentation, please feel free to raise your question in the chat box, which is at the lower right-hand side of your screen. The Q&A session will follow the presentation. Before I hand over to Canning, please also pay attention to our disclaimer, which you can find on page two of the presentation. We can start now.

Okay. Good afternoon. And let's turn to page four of our presentation. so that, you know, this gives you a summary of our 2020 results. You know, revenue, you know, 2020 is a year plagued by COVID-19, and also the more significant is oil price drop, and that affects Husky Oil in a material way. And so all this result has been taken into account of all this problem. And you will see that revenue, the total group dropped 8%. And EBITDA dropped 13%. And EBITDA dropped 24%. and um earnings minus 27 percent and and that earning per share seven dollar 56 minus 27 percent and correspondingly uh dividend is mine minus 27 27 percent but however you know because of you know we have the operation has been operating very tight and then we have some mega transaction come through and then the debt ratio has dropped from 25 percent last year to 22 so that we considered this is a very excellent result because that what happened at the oil front is so difficult. And the figure come through negative against us is so big. But thanks for the VHA deal that we merged with TPG. And then thanks for the tower deal. And then we actually generated enough profit to overcome the mega losses incurred by Husky Oil. and also during this year we also fixed Husky which we will go into more detail by merging with Sinova and as the end result it's a much better animal and if you look at the today when we merged we were about three dollars and then now Sinova is over ten dollars and then if you go back to what we own in Husky the equipment is about 850 so that you know the result of the merger give us a lot of hope and then we can deal with it later. If you go to page five, okay it is that it gives you the libido because of husky oil all the country and percentage changes you know if you see that you know instead of one circle now we have two circles one is the outer one is that is the actual what it is because husky suddenly become negative so that every other thing become bigger and then the and then the inner one The outer one is the actual one, then the inner one is that. Right, Carl? And if you look at the graph, the chart on the right-hand side, you saw that, you know, you saw the waterfall of how the EBITDA dropped. So we go from 2019 underlying EBITDA and then the pot basically dropped $2.5 billion. Actually, you know, it mostly came from last year. as first half and the second half is dropped much less and it went to the fourth quarter actually you know it is quite a good performance and then the same thing is that on the retail and then with the retail is also suffered by the first half when the whole business dropped 50 percent But then the second half was doing quite good. Actually, the second half was better than last year. This is why. So the retail, you know, as a whole year, it only dropped $1.8 billion. It's mostly come from first half. And then the infrastructure, you know, doesn't really affect it by the COVID-19. So it shows the green color and husky. is the big casualty and which we will we will describe to you later and then the telephone group is basically, you know, although it showed that 3.3 billion Hong Kong negative, it's actually, it's doing quite good. Actually, it's, you know, if you look at the underlying performance, it's similar to last year. So what happened is that there was a non-recurring item or one-time item happened last year, which is which is 1 billion happened in Italy when we received some compensation from some vendor and then about 1.2 billion from the Free UK where we got some compensation, some benefit from the VAT and then there was $1 billion from the corporate side where some adjustment came through. Actually, from the operations inside, you will see later, it's quite stable. And the same thing happened to Asia, and then it is quite a stable operation. and so on the head office but I would basically interest I would let Frank talk more to it okay so this year you will see that most of the majority of the income come from come from Europe and Hong Kong become more now because of the husky oil doesn't contribute anything so the next page page six Frank on the cash flow side can you take over

The first sort of easy snapshot of what the cash flow profile of the group was like. So operating cash flow is just a very quick proxy. It's EBITDA from our subsidiaries plus distributions from our associates, less capex and investments. And so obviously on that measure, we had a meaningful decline from 2019. and you see that in the bars. Basically the result for this year at $39.8 billion is what you get by subtracting $29.7 billion from $69.6 billion on the columns on the right. And the distribution of that obviously speaks pretty well for itself. Interestingly, though, this rough measure tells a lot less of the story this year. So if we go very quickly to the next slide, there's really no important message to convey here, except that essentially everybody is living within their means. And in fact, everybody is living with CapEx and investment envelopes that are less than depreciation, except in the telecoms group and in HAT, where we are still in a meaningful investment phase. But obviously, the message is, even on the operating pre-cash flow measure, we're very well covered in terms of our spending profile. The next page, page 8, is actually quite a little bit more interesting this year because it looks at the whole free cash flow picture. And when you do that, you obviously have to take into account of what's happening to interest expenses and financing costs. You have to take account of what's happening in taxes. And you have to take account of what's happening in working capital. So it's a slightly complex chart. But to simplify it, if you go to the right-hand side, last year's free cash flow, underlying free cash flow after tax, after working capital movements, after financing costs, et cetera, was $21.7 billion. Now, we've just gone through the reduction in EBITDA that we suffered during the year of $10.9 billion. but we recovered significantly more than that in terms of the, believe it or not, overall level of dividends that we received from our associates, excluding Husky Energy, of course. But interest and financing costs and taxes paid were down very significantly in the aggregate by HK$6.1 billion. And working capital was managed very, very tightly all around the group. I have to, in particular, single out the retail division for their excellent job in managing working capital over the course of the year. So the swing from year to year is $9 billion. So the free cash flow underlying profile for 2020 is 27.1%. 9 billion, which is fully $6 billion plus better. And obviously, I think a very encouraging picture in terms of the group's financial profile. If we go to the next page, this is page 9. The group's financial profile, not surprisingly after everything that I've just said, is still very strong. Net debt, as we said, has reduced substantially in absolute dollars and has continued actually to – we've been continuing to reduce gross debt in the first two months of this year. Our net debt ratio is at 22.2%. One of the things that works against us there is the movement in sterling and euros over year on year, which increases net debt. And as a result, negatively affects the ratio. So you could argue on a like-for-like basis that the debt ratio is a little bit better than that. Our rating stayed stable. Our weighted average maturity at 4.7 years is very manageable. We are still further down in terms of the average cost of debt capital at 1.7%. We're now After swaps, 31% in floating rates and 69% in fixed rates. That's, again, less floating than last year. We were 33% last year and 67% fixed, so we've been taking some advantage of moving out along the curve a bit as medium and longer-term rates obviously have been at historic lows. I don't really have anything to say in terms of our debt maturity profile, except as I mentioned, we reduced gross debt already in Q1 by 1.6 billion euros, roughly 2 billion US. And CKI, of course, will have reported that they redeemed a perpetual 1.2 billion in full in February, I believe.