CK Hutchison Holdings Limited

Thank you very much for attending the live webcast of CK Hutchison 2021 In-Champ Results Presentation. Today our speakers are Mr. Victor Lee, our Chairman and Group Co-Managing Director, Mr. Kevin Ford, Group Co-Managing Director Mr. Frank Six, Group Finance Director and Deputy Managing Director Mr. Dominic Lai, Deputy Managing Director and Group Managing Director of A.S. Watson Group and Melina Ai, 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 Kenny, please also pay attention to our disclaimer, which you can find on page two of the presentation. We can start now, Kenny.

Okay, thank you, Carl. So good afternoon, everybody, and good morning to those in Europe, and good morning to Frank, he's in Europe. So I think the first half of the year for CK Hutchison is quite pleasing. If you turn to page four, revenue went up by 12%, and at $212.4 billion, and EBITDA went up by 18%, it's $55.6 billion, and EBIT went up by 23%, 32.8 billion. Of course, we got some, it's about time, we got some help from Foreign Exchange. If you take out the Foreign Exchange, revenue went up by 4%, and EBITDA by 10%, and EBITDA by 15%. And net earning for the six-month period is 18.4 billion. recorded a 40% increase. If you just take away the foreign exchange, and it's 32% increase. And of course, earning per share, 4.75, a 41% increase. So I'm very pleased to say that the board resolved to pay an increased dividend, which is 80 cents per share represented. a 30% increase from the same period last year. And of course, one of the more pleasing results is that in the first half, we were able to complete a few of our tower transactions. And then we received the cash, it's in our pocket. And then our debt ratio now is 19.9, which is lowest for a long time. and we are very happy that it goes down into 10 figures. If you go to page five, we talk about the EBITDA and EBITDA went up by 18% at $55.6 billion. And if you talk about local currency and it's 10% in, you know, take away the foreign exchange gain. If you look at the figure, the circles in the far left, you saw that the circle have two rings. And actually, the outer ring is where does the profit come from, because we have the power transactions. So 70% come from come from UK and Europe and then but then if you take away this one off and you know if it's 59% from Europe and 6% from mainland China and 5% from Hong Kong China and then 20% from Asia, Australia and Canada and then of course you know because we classify Husky our oil company, Sinova, now changed to as a head office. It's no longer one of our core business. It's classified as a head office, so head office has become bigger at 8%. So, you know, if you, and then you go to the right-hand side, in the middle of the page, more to the right-hand side, you saw the waterfall chart, and, you know, go from last year to this year to 46%. $9 billion to $55.5 billion. How you make up of? Of course, last year we have a one-off from the merger of the TPG. If you take that away and then you become $41 billion, the blue color. And then if you look at that, the pot went up by $1.1 billion. actually in the port side, which I will go through that in the detail, but it went up everywhere. So port has an excellent time in the first half. And retail went up by 1.6 billion. actually you know it's also went up everywhere except that parking shop in the normal time uh doesn't doesn't do as good as a coffee time because people go one more often than stay home so otherwise you know it's went up everywhere against against last year and then infrastructure uh EBITDA actually went down by $556 million. The reason being that a lot of the projects is under reset. And so it's in the new reset. But however, they just announced yesterday, actually, their net profit after tax actually went up in the first six months. Okay. And on the... And then on the free group, actually free group has a very, I won't say stable, but I have a, you know, everywhere is more or less the same, more or less the same as last year in terms of business with Italy fell behind because this year, It's the first time that we witness a change in one of our MVNO, that is Elliott. And then because they have built their network and then they start using the network, we saw that the income come less. I will go into more detail in the telecoms and also, you know, on heat, it's more or less the same with Indonesia. It's under quite severe COVID-19 situation so that, you know, there's a shortfall in in revenue. However, you know, even in Vietnam and Sri Lanka, these two small operations is doing quite well. They all improve and shows positive figures. And so that is a very small figure. And then, of course, the finance and investment represented the major increase represent that we turned from a major loss from Husky last year into a profit no loss in the Sanova situation for some profit so this is why you showed that to almost 2.5 billion positive and so The foreign exchange, you know, as I said, you know, comprised of 3.9 billion. So this year, we have, you know, we got a strengthening of our European currencies, you know, everywhere, you know, the currency went up against US dollar. So it's quite happy. And of course, you know, and then that gave up to the 49 billion. and then this year we recorded a major gain from the finalization of the of the town transaction in Italy and so what we did is that we took a profit and then we actually did not recognize all the profit we actually make a provisions against the goodwill of Italy so that we only recognize 6.2 billion finally So that is how the EBITDA waterfall chart. And so before I go further, we have to go for the page six on the operating fee cash flow. I will ask Frank to go through the detail.

Yeah, so at the operating level, cash flow management continued to be pretty solid during the year. Obviously, operating pre-cash flow, which is here presented as the EBITDA of our subsidiaries, the dividends received from our associates, less capex, less investments, at $17.7 billion is lower than in 2020's first half. but that is entirely due to increases in spending. And bear in mind that these numbers are presented on underlying operations, so they're not taking account of the cash inflows from, for example, a powers transaction or anything else that's a one-off. And so the spending the sensible need to deploy capital. We'll go into that in a little bit more detail in the subsequent slides. So, I don't take anything adverse from that. And indeed, I look at it the other way, which is that you have healthy increases in the EBITDA from subsidiaries, right, as well as in the dividends that we've received, right, from our associates. The circles on the right just split that out by contribution by division pretty self-explanatory the retail contribution if you look at it year on year if you look at last year's The slide presentation, obviously, is significantly up in free cash flow terms as well, and that is, of course, because the early stages of the pandemic hit the mainland very hard with a very major part of retail businesses in the first half last year, and they've had some standard recovery as we've gone through the first half of this year. Moving to the next slide, right, this just splits it by division, right, in exactly the same way. So, you have on the far right for the totals, you have exactly the same numbers as you saw on the previous page, right, the important ones being the 32,890, right, of really cash available from ordinary operations, right, and the 15.2 of spending. and another 4.7 of discretionary spending on licenses. As you go through it, it's pretty obvious just from the pictures, right, that everybody is living well within their means, right? The real investment increases that are coming from the telecoms businesses, right? And HAT has been a bit of a consumer this year, right, as it has. rolled out network and so on, pretty difficult operating environments in Indonesia. But all in all, everybody's living within their means. And actually, if you parse the financial statements, you'll find that everybody is pretty well living within their capex envelope, sorry, their depreciation envelope as well, with the exception of CKH Group Telecom and Hutchison Asia Telecom, where we are investing above our current depreciation rates. And then finally, moving from operating cash flow to real free cash flow, right? In doing that, you have to take away interest paid, right? You have to take away working capital, right? You have to take away things that we decided to do. So we decided to voluntarily prepay some license fees that would have been due in subsequent years in order to save effectively interest costs associated with and we bought some new telecoms licenses. So that gets you down to an underlying free cash flow of $1.4 billion. But then, of course, you add on to that the cash from the tower proceeds, which is $38.425 billion. So the cash generation in the first half, obviously very healthy. And what's quite interesting, if you look at the waterfall, on the right-hand side, you quickly find that working capital management was very good. And again, I'd single out the retail group here for having done a superb job in the first half of continuing to manage working capital tightly. And that's not easy as businesses are opening and closing and partially opening and partially closing all around the world, which Dominic will no doubt be talking a lot more about. But working capital changes year on year have actually been positive. All of the stuff which is driving the negative bars is by and large discretionary stuff. It's the prepayment that we made on the license. It's how much more CapEx we decided to invest, and we'll get to that, but that's primarily in the telecoms businesses, and indeed how much we decided to buy in terms of new licenses supporting our telecoms businesses. So overall, I think a very healthy cash management profile, which leads me to the next page, and that is reflected in a pretty healthy debt maturity profile, $190 billion of cash and cash equivalents against a total outstanding principal debt 1.1 billion. That, as Kenny mentioned, takes our net debt to net total capital ratio down to 19.9%, which is certainly a recent memory low and a very good thing, I think, in still, to some extent, uncertain times. A good, I think, maturity profile. We have an average maturity of 4.9 years. Our cost of debt has continued to decline, so it averages at 1.6%. Our return on treasury assets is low because most of those have been kept in liquid deposits. So 40 basis points return. So there is a spread between our cost of debt and our liquidity, but it's still a very manageable number overall. And the only other thing that I would say is that we have changed the mix of our debt right after swaps so that we are much less in floating rates and much more in fixed rates for that 4.9 years duration than we were at the end of last year. So I think I'll stop there. And Kenny, send it back to you to talk about ports.