CK Hutchison Holdings Limited

Ladies and gentlemen, thank you very much for attending the live webcast of C.K. Hutchison's 2022 Interim Results Dissertation. Today, our speakers are Mr. Victor Lee, our Chairman and Group Co-Managing Director, Mr. Kenning Fock, Group Co-Managing Director, Mr. Francis, Group Finance Director and Deputy Managing Director, Mr. Dominic Lai, Deputy Managing Director of C.K. Hutchison and Group Managing Director of A.S. Watson Group, and Ms. 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 Mr. Falk, Please also pay attention to our disclaimer, which you can find on page two of the presentation. We can start now.

Okay, this is Kenan Fock. Okay, let me start with the result. Let's turn to page three. It is about our interim result, our net earnings. In summary, our net earnings for the first half of the year is Hong Kong dollar $19.1 billion and then our earning per share is $4.98 which represents a 5% increase from 2021 and then the net debt is at $168.4 billion which represents 20.5% giving ratio However, when a major cash has not come in that it will come in what we estimate to be in sometimes each month so that if that cash come in and that gearing will be reduced to 17.5% and then the more important the dividend per shares is 0.84 cents and represented by 5% increase and it's the same as as the increase in earnings per share in the property so with this we can turn to page four and then we'll give you the operational performance of the company which is quite in our opinion is quite resilient given this quite a quite a challenging six month revenue up eight percent at two $222.6 billion. If you just because of the currency actually go against us. So, but if you looked at the global currency actually represented 13% increase in local currency. And then Nibida $58.2 billion plus 5% and then operating cash flow $16 billion. and the EBITDA has fallen 5%. And then the operational cash flow for last year, last first half was 17.7. And EBIT is 34.5 billion plus 5%. And also if you use the local currency is 9%. So it has quite a, good result in my opinion for the first six months. And if you go to page four, I would like to take you up and down how this increase in EBITDA comes from. And if you look at the left-hand side, and then the above part is showing you, left-hand side, the above circle is showing you where does this come from and then the below circle is showing you at what businesses come from and it can be very clear that it will come from 49% come from Europe and UK and within the 49% and 21% is from the UK then of course the next biggest one is the Asia and Australia and North America which is 29% and Hong Kong is only 3% and China is 6% and if you look at the business you saw that the pot actually came up 16% this time and the infrastructure and telecom at 28% one thing that I want to put you to notice is the finance by the orange color, which is 17%. First this year, we classify Sanova in finance, and then of course the contribution is huge to Sanova, the first half of this year. So if you look in detail where it comes from, so we start the chart with the post ILOFS 16, and then going to the pre-IRS which is 58 billion and end up in the pre-IRS 16 EBITDA and then go back to the post-IRS so give you a full reconciliation you can see that we take away the one off last year was 6.2 billion which comes from the tower sale and less right off of our investment in Italy. So it will give us a net positive. So we take that off the current underlying EBITDA was 49 billion. We saw that this year, the pot is doing very well. 1.5 billion more than last year. And then basically come from some good performance in North America. That is from Mexico. and also good performance in Europe. You know, it doesn't really come from GEU, but it comes from storage income. And then of course, and then a very good performance investment in OECF. And then the retail part, we saw that, negative 231 million I think that now we will go into detail and it basically comes from a reduction of EBITDA from mainland China because of the lockdown situation in China but then it is all overcome by the overcomes by the European and then of course the foreign exchanges there's a lot of deal with that as well and now infrastructure they have announced yesterday they can 846 million positive actually this company quite average company everything so it's quite a good improvement in the infrastructure side and then you got this negative from from the telecom side, from the European telecom, Europe plus Hong Kong, and then actually the other are quite stable, and then Hong Kong is very small, and then actually basically all come from Italy, $2.3 billion. However, it got to take away $500 million from the Tower deal because which we will go into details when we come to the Tetherhomes area. And then this time, you know, they are the staff, they overcome the shortfall in Europe and give a 1.6 billion improvement. This is the result of the merger and then we will go into details when we come to the HAT area. And of course, on the finance side, you know, saw that 4.9 billion and then there's a shaded area it's 4.7 billion company improvement over last year so that has been a very nice return for us and one currency impact and 2.5 billion and you end up with 53 billion as a recurring dividend in the first half first half of 2022 and then of course you got the one one-off game and this majorly comes from the merger increasing value in the merger in Indonesia of India and Indonesia and of course some of course something happened in Sri Lanka and then we chose to write down significant amount in Sri Lanka to come up with $5.9 billion, and then the total EBITDA is $5.58 billion. And then add back all the IRS system stuff, and go to $70 billion. So this is roughly the summary on page five. Now we go to page six, which is the operating cash flow. I would ask our group CFO, Francis, to take us through all the cash flows and that situation.

Thanks, Kenny. So the next few slides, I'm going to focus on operating free cash flow, moving through the free cash flow, and then the overall financial KPIs of the group. So we always start with operating free cash flow, which is basically EBITDA, right, but excluding one-offs and what we're calling these days EBITDA after leases or before IFRS 16. So as you can see, that was 16 billion compared to 17.7 billion in the first half of 2021. The one offs that are excluded were 5.1 billion in 2022, 6.3 in 2021. So these are the net comparisons of pre IFRS 16 outcomes. The main reason for the difference actually is the merger in Indonesia, where three in Indonesia was a subsidiary before the merger. And of course, we now hold a 40 some odd percent interest in effect in an associated company. So what you have is you have essentially EBITDA going out of the consolidation and investment being reflected. So there's a bit of a shift in categories, but nothing alarming in terms of the actual underlying cash flow profile. In fact, the overall impact of the Indonesian transaction is very healthily positive from a financial point of view. I think Kenny will be taking you through that later. So if you look over to the right-hand side, the thing that I suppose leaps out again is the very, very small contribution to operating free cash flow from telecom. And again, that's largely due to the deconsolidation of the free cash flow contribution, operating free cash flow contribution from three in Indonesia. And of course, as yet, we've not received dividends from Indosat Ori Bu Hutchison, operating performance of the merged company. Now, if we move on to slide seven, you're looking at the same operating free cashflow in capital spending in the first half, much of which may be made up in the second half. I'm not sure if anyone will be talking about that, but close to 20% increase in operating free cash flow as against the first half of last year. Retail we'll be discussing in detail, marginally down from the first half of last year, but again, certainly nothing that rings any alarm bells. Infrastructure contributions, very, very solid across under CKI and our co-owned infrastructure investments. Very good news on the infrastructure front. CKH Group Telecom, marginally down. Some of the EBITDA declines very much offset by reductions in capital spending compared to the first half of last year, which is a good trend. And then, of course, HAT, the effect of the deconsolidation 2021 and $16 million for 2022. And if you took out the deconsolidation effect, effectively, we would have been up 9% rather than down marginally. So again, at the operating free cash flow level, pretty solid performance and no real concerns emerging. We go to slide eight. We now take it from operating free cash flow and we take a look at interest working capital changes, investments in telecoms licenses, and others, which is things like capitalized customer acquisition costs and cash that went with the merger in Indonesia, for example. So you end up with a free cash flow, a real all-in free cash flow of just over 6 billion, 6.1 billion Hong Kong dollars, and then they That's a very actually healthy improvement on the profile in the first half of last year. So pretty good type cash management overall. And the right-hand side of the page reconciles that. You basically start with the reported first half 2021 pre-cash flow of 39.9 billion. Of that, 38.4 was the pre-cash flow So next, so really the underlying free cash flow generated by businesses was 1.446 billion in the first half of 2021. And then you waterfall that through to the 6.1 billion total for the first half of 2022. You first have to take out the, and again, this is the deconsolidation effect of Indonesia, 3.6 billion. Good increases in dividends from associates and joint ventures, you know, pretty well across the board. And that's a picture which we expect is going to be improving even further right in the second half with the likelihood of dividends from both IOH and from Synovus. Interest in taxes paid were lower. That's largely because of... Lower overall debt level. What we've been doing is gradually paying down gross debt, leaving net debt more or less unchanged. We'll talk a bit more about that on a later slide. Working capital changes. So working capital at $1.9 billion better in 2022. Satisfactory CapEx reduced by $3.7 billion compared to the first half of last year, offset somewhat by the, again, Indonesia merger effect of investments in associates and joint ventures, and telecom licenses, which we acquired in 2021, which were in the first half, which of course didn't require significant telecoms licenses this year, and miscellaneous other movements, which takes you to a free cash flow performance of 6.1, so a very good improvement for the first half. If we move to the next slide, which is slide nine, and this is really just the, I suppose, financial KPIs generally for the business. If you start on the far left, our cash was at just under 120 billion Hong Kong dollars, cash and cash equivalents, rather. and we've had some meaningful pickups on the cash managed balances out of that, which is about 70 some odd million of that pie. We've had a pickup generally of about 40 basis points on our return. So the spread against our average cost of debt, which is on the lower right-hand side at 1.8, which is up a little bit, is partially offset. by the returns that we're getting on our cash and cash equivalent assets, which is good. We have lengthened our maturity profile from 4.8 years to 5.2 years, and that's reflected in the maturity profile as it is shown. That debt has been reduced, of course, to $285.5 billion, and we also We redeemed a perpetual U.S. dollar bond of $1 billion principal during the half. Now, you'll notice that the net debt has stayed roughly the same. The gross debt significantly reduced. Net debt to net total capital ratio has ticked up to 20.5%. There are a couple of major reasons for that. One is, of course, total capital includes the perpetual that we redeemed. So obviously, total capital has been coming down and net debt has been staying stable. So that's part of the reason for the increase. The other reason is that in shareholders' funds, there's an adverse driver of about So you put those two together and you end up with a 20.5% net debt to net total capital ratio. But again, partly due to our preprediction and partly due to adverse foreign exchange movements overall on the balance sheet. Although the foreign exchange movements on debt itself were actually favorable. So again, I think as Kenny mentioned, sell next at some point during the course of this month. And that will take the net to net total capital ratio down right away to about 17 and a half percent. So I think that's pretty well all that I have to say on the financial profile of the sites. So Kenning, I think it's back to you to talk about ports.