CK Hutchison Holdings Limited

Good afternoon and good morning. Welcome to the live webcast of CP Hutchison 2021 Final Results Presentation. Today our speakers are Mr. Victor Lee, our Chairman and Group for Managing Director, Mr. Kenny Fogg, Group for Managing Director, Mr. Francis, Group Finance Director and Deputy Managing Director, Mr. Dominic Lai, Deputy Managing Director and Group Managing Director of A.S. Watson Group and Madina I, 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 Frank, please also pay attention to our disclaimer, which you can find on page two of the presentation. We can start now, Frank.

Okay, well, welcome everybody. I'll take you straight away to page four of the presentation, which is the summary of our financial highlights. They pretty well speak for themselves. with a healthy growth in revenues, healthy growth in EBITDA, healthy growth in earnings before interest and tax, healthy growth in net earnings. Of course, we have benefited during 2021, among other things, from fair winds in terms of currency fluctuations. And so you see that the numbers are still good in local currencies, but just a little bit lower. That's led us to a 15% increase in earnings per share. and that's reflected in a final dividend of 186 per share, which takes the total dividend for the year to 266, which is a 15% increase and the same payout ratio as we've applied for the last several years. Our net debt to net total capital ratio improved over the course of the year by 1.9 percentage points, And of course, for net debt ratios, because, and we'll go through this in more detail later on, but because we have a higher proportion of euro-denominated and sterling-denominated debt than we do euro and sterling cash and liquid assets, basically favorable currency wins on the earnings side go against us on the net side, the net debt side, and that is already reversing it. If we can go to the next page, which is a focus on EBITDA, just a reminder that all of the numbers that we use are on a pre-IFRS basis, because we think that gives you a better proxy for real underlying performance, not distorted by the difference between cash and accounting, lease accounting. So EBITDA up a healthy percentage. 15% reported, 10% in local currencies. The attribution, both in terms of geographies and sectors is in the two circles on the left-hand side. And just to recall, the inner circle gives you the recurring picture. The outer circle gives you the reported picture. And they are, once again, different as they have been for a number of periods because of the movements associated with major... What you have to call one-offs, which we'll be going through in a few minutes, but that include things like the Synovus and Husky non-cash write-downs, the non-cash write-down in Italy, and of course all the cash proceeds and earnings impacts from the Towercoat sales. So, not really much to observe in terms of geographic spread. The only thing that I would say is that our earnings in Hong Kong and in the mainland have been a little lower in proportionate terms than in prior years. And I think that will be explained when we go through the divisional reporting. It's a fairly natural consequence of trends in the ports and retail division. If we go over to the right-hand side, which basically just looks at year-on-year changes by division, you start by taking out the one-off component in 2020 so that you get to an underlying 2020 EBITDA of 95 points. 2 billion Hong Kong dollars. As you can see, the contributors on the upside, obviously, ports, a very healthy contribution year on year. Retail, also a very healthy growth year on year. You've got CKI showing a decline year on year. That is essentially because of the way that we're accounting for our share. Of course, if you remember when CKI announced their results, they made it perfectly clear that if you exclude the one-time Iverman Portrait was wind assets last year and you take out the non-cash deferred tax effects right in both years actually their profit increased by 22% and what they look at which is funds from operations which is Associated Companies, plus the dividends that they get from their joint ventures. That was up to a record $8.4 billion and up 8% on the year. Turning then to CKH Group Telecom, as you can see on the EBITDA level, there's a relatively minor year-on-year decline, and we'll be talking about operating performance in detail. But suffice it to say that, broadly speaking, the UK was up in terms of its EBITDA contribution. Italy, as we all know, was soft in terms of its EBITDA contribution. And when you adjust year on year for the impacts of TowerCo contributions and the costs as TowerCo transactions have closed, of paying historical lease payments, you end up with a relatively modest reported impact year on year. HAT, I think there's really not a lot to say there. The real underlying story is, of course, the merger in Indonesia and its impacts, and we'll be speaking to that later on in the presentation. And of course, the net one-offs this year, some pretty big moving pieces. The gains reported from the Towerco sales that were completed in 2021 are 25.3 billion Hong Kong dollars. We took an impairment of $15.5 billion on the carrying value. Of course, that's a non-cash impairment, but it is reflected in EBITDA. And we recorded the Husky Exchange reserves loss as a result of the merger that took place on January 1st with Synovus. And then, of course, we also recognized our share of a write-down that Synovus took in 2020. in relation to their refining assets. But in the U.S., our share of that was $1.5 billion. We can go to the next slide. As usual, we drill down on operating cash flow. and here what we're looking at is stripped of any exceptional or one-time items. So we're trying to look at real operating cash flow and real spending in businesses. As you can see, the balance of $35.3 billion is $4.5 billion down. from last year. But of course, the actual cash generation at 69.9 billion, which is the second bar on the right, is higher than it was in 2020. But that was offset by higher capex and investment to the tune of just under HK$5 billion. And of course, we incurred HK$7.5 billion and in Hong Kong in 2021 than we did in 2020. If I can take you across to the right-hand side of the slide, not really much to note by way of operating free cash flow allocated as amongst various businesses, except to note that the contribution from retail is significantly enhanced, of course, by comparison to the 2020 performance. If we then go to the next slide, slide seven, I think it's worth spending a little bit of time on this because what it does is it looks at the same equation of operating free cash flow for each of the divisions. So it looks at the EBITDA for the division, the EBITDA minus the share of associates EBITDA, adds back the dividends, subtracts the capex and subtracts the investments. tracks the telecoms license investments. So if we go very quickly by division, it's interesting. I mean, Ports spent CapEx at more than twice the rate in 2020, so that's 3.630, as you can see there, but still showed a healthy increase, actually a 5% increase in operating free cash flow. We go across to the retail division. Again, CapEx and investments increased there, and I'm sure Melina and Dominic and the team will be talking about that. But quite a bit of investment in technology and so on. But nevertheless, the operating free cash flow advanced by 10%. for retail. Infrastructure, I think we've already talked about. Again, I would go back to funds from operations, which I think is the most important number for them. And you find the breakdown of that in note 32 to CKI's financial statements released yesterday. If we then go across to CKH Group Telecom, although you've got a decline in operating free cash flow for the year, that's against CapEx spending that was up by 15% and licensed spending that was 9.5 times what it was last year. So not really surprising that you have a roughly 16% decline in the operating free cash flow in CKH Group Telecom. As I say in HAT, the number here is partly reflective of, as we led into the merger in Indonesia, the group was very careful not to spend particularly on network capex that would be redundant in the assumption that the merger went ahead. And so the improvement is largely driven by the reduction in capital spending in Indonesia. And then, of course, lastly, the finance and investments performance has a lot of things moving in it, but most of finance and investments EBITDA improvement over the year came from the share of Synovus Energy, which is, of course, not reflected which is why the operating free cash flow movement looks less attractive than the EBITDA movement. But apart from that, I don't think any significant observations and all of those numbers sum up to the ones that we had on the previous page. Looking then from operating free cash flow to real free cash flow on the next slide, You start with our $35,260 from the last slide. Obviously, you take away the actual interest expense that we had in the year, which was an improvement year on year. You add in then the cash proceeds, which we received from the tower deals that closed during the course of the year but you take out an adverse working capital movement that reflects some concession extensions in the ports division and it also reflects clearing out some payables particularly in Hutchison Asia Telecom that related to Indonesia and that needed to be cleared before the merger part of which has actually been replaced post-merger by some receivables from the merged company. Other than that, I think if we go over to the right, I think I've pretty well explained all of the major variances. The 33.1 billion is summed on the left. and the elevator and waterfall on the right, I think, are self-explanatory, so I'll leave those to questions if anybody has any later on. Next slide, we take a look at our debt maturity and financial profile. I would start by saying still very healthy. on the left side cash and liquid assets at a strong level of 161.4 billion 9% of that is held in euros and 4% of it is held in GDP and the rest for the most part is in US dollars and Hong Kong dollars going across The return on our cash and liquid assets was significantly lower than it was last year, not surprising in terms of where interest rates have been over the course of the year. So we're 67 basis points behind on the return on liquidity. But I'll go straight across to the bottom on the right where we gained 10 basis points. in Hong Kong as well. So the spread between the two, although in slightly adverse period and certainly not anything to cause us concern. Turning to the total debt at 336.4 billion Hong Kong dollars. Again, there, 47% of that is denominated in euros, 5% is denominated in in sterling which is why in net debt terms a decline in euros gives us favorable profile so our net debt will already have improved as we sit here among other things because of that from the 20.3 percent level that it was at at the end of 2021 maybe not a bad idea to remind in terms of the mix, we've been continuing to move more towards fixed rate. So we ended the year 26% in fixed rate and 74% in floating rate, and that's as against 31% interest rate environment. Maybe a good idea to just recap some sensitivities, which you'll find in the group liquidity section of our reports. But basically, a 10% fluctuation in euros in particular will result in an EBITDA reduction of 3.1%. Now, again, those are all sensitivities that assume that the recurring cash flow and earnings profile from 2020, 21, sorry, is exactly the same in 2022. somewhat, but it is tested against the recurring earnings components. In terms of net debt, I think it's fairly self-explanatory and improvement from year end 2020. A little bit of a deterioration from the summer of 2021, but that is partially driven by currency. and also partially driven by the CapEx and license spends in the second half. And I can tell you, I can assure you that that is today stands at a significantly lower absolute amount and ratio amount. Other than that, no change in our credit ratings, average maturity profile for 28 years, just a snick longer than it was last year. The runoff of that on the left is self-explanatory. I think it's quite relevant to note that in terms of the near-term maturities, they are largely weighted in terms of bank maturities, bank market maturities rather than capital market maturities. issues around rolling those credits. So I think I'm going to stop there and ask whether Canning has joined us?

Yes.