CK Hutchison Holdings Limited

Welcome to the live webcast of CK Hutchison 2025 interim results presentation. Our speakers today are Mr. Frank Six, Group Co-Managing Director and Group Finance Director of CK Hutchison. Mr. Dominic Lai, Group Co-Managing Director of CK Hutchison and Chairman of A.S. Wilson Group. And Mr. Kwan Cheung, Group Chief Financial Officer of CK Hutchison. During the presentation, please feel free to put down your question in the chat box, which is at the lower right-hand side of the 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.

Good. Well, thank you, and welcome, everybody, to this interim results announcement. I'll go straight into it. We'll go to slide three. Now, these are the high-level financial highlights. Of course, these are the reported numbers, so they are on a post-IFRS 16 basis. As we get into the rest of the presentation, it's usually presented in pre-IFRS format, basically because we think that's a better view from management's point of view to see through to the underlying performance of our businesses. So if I can start on the left, you see that revenues are up a healthy amount, $8 billion plus. Having said that, fully $1.3 billion of that is due to the Forex movements that were favorable, but it's still a good performance. If we go over to net earnings, that's the headline number is, of course, the strong growth in underlying net earnings. And again, I will, as we go through this, point out why it's a very, very nice number for the first half, but when you look through it and you understand it and you correlate it to cash generation and so on, it's still a good number, but it's not quite as terrific as double-digit growth would sort of imply. And then, of course, as we go through this whole presentation, you have to look at the reported number, which takes account of a rather complex non-cash write-down impact or loss impact coming from the three U.K. merger, which Quan will be able to way better than I describe to you as we go through this. EPS obviously reflects on a reported basis and on an underlying basis exactly the net earnings. And we've pitched the dividend at 71 cents a share. That is an increase of 3.2%, which I hope you'll agree with me is reasonably and rationally thought through decision by our board earlier on today by the time we get through this presentation. So if we can go to the next page, these financial highlights and the rest, as I say, are in pre-IFRS 16 view, which is why the numbers are a little bit different. You first look at EBITDA. And there you've got a healthy underlying increase. It's around 3.7 billion, but again, about 13% of that, so a couple points of that are due to Forex movements, which were largely in our favor, largely from Sterling and from Euros during the period. compared to the first half of last year. Same observation for EBIT and again there about 13% of the movement on an underlying basis is attributable to strong GDPs, strong sterling and strong euros. Operating free cash flow you'll see is up by 2.1 billion compared to the first half of last year which is an 11% growth but we'll be parsing operating free cash flow and free cash flow very closely in the coming slides and you'll understand that what happened in the first half does not necessarily reflect what can be anticipated in the second half and of course we are taking as the chairman's statement points out a very conservative and cautious approach to the second half given Everything that's going on in the world. The good news is, of course, particularly with the cash inflow from the UK merger, our net debt ratio has declined quite a bit from 17% at the end of the first half last year down to 14.7%. It was 16.2% at year end. So the ship is solid from a debt-to-capital point of view. If I move to the next page where we look at EBITDA, a couple of observations. I mean, first on the pie charts on the left, I think the thing that stands out is the declining contribution from finance and investment compared to last year. But also, you notice that Hong Kong has shrunk from 3%, if you remember the end of last year, to 2%. So Hong Kong and China combined, 5%. The decline in Hong Kong, Dominic will be talking about. Park and Shop, I think, is looking a little bit better, but we have had some travails with Watson's, and Dominic will be dealing with that later on. If you go now to the right-hand side where we build up from 2024 first half EBITDA to the results that we're announcing here, as you can see, First, ports made a substantial incremental contribution. Happy to say that that is essentially all operations, and it's reflected in cash flow. When we get to it, you'll see that the ports... earnings delivery is matched by almost the same growth in terms of operating cash flow and including the dividends received from its associates. So, Ports is a very good news story in the first half. which we hope will see some continuity in the second half, but we will see. We live in an uncertain world. Retail, very, very, very good contribution. And again, that's an almost remarkable performance from almost everything except the health and beauty business in the mainland, which Dominic will be talking about in more detail. Infrastructure, again, good growth. in EBITDA contribution coming from everything from power assets to UK power networks to the new stuff that we acquired in the second half of last year like Phoenix Energy and so on. And so that's good, solid stuff. So we're very, very pleased. Obviously, infrastructure make their own announcements, so they will have provided the market with quite a bit more detail than we have in this presentation. The CKH Group Telecom, again, looks very good. It looks like a roughly 9% gain before Forex, so that's a billion Hong Kong dollars. The thing to bear in mind is that that is a little bit skewed because it includes at the CKH Group Telecom Group level, fairly hefty gains that we made in treasury. So basically 60% of that is treasury gains. The rest is real, is improved operations in the UK to some extent, in Italy, in Sweden, in Denmark. in Ireland. In fact, everything is somewhat improved except Austria, if I'm remembering right. But we shouldn't get carried away with what looks like such a high growth rate in EBITDA contribution because you don't get to make a lot of profits buying back bonds every day. And we bought back the ones that would give us the profits in the first half. The disappointment, of course, is finance and investments, and we'll be going through that. in more detail when we look at operating free cash flow and free cash flow. But the main drivers are, of course, Synovus was a major underperformer in the first half compared to the first half of last year, and that correlates to their own reported results, commodity prices, and the amount of downtime that they had in an even number of their upstream and downstream facilities. relating to turnaround, legitimate maintenance, but it's still a bit into the first half for Synovus. We also are continuing to bear some losses out of things like the Mariano Group, even TPG in Australia, although in Australian dollars it probably looks better when you look at the Australian figures, but when you look at our figures it looks partly worse because of the decline in the Australian dollar over the period. So TPG was a lesser contributor from our point of view. We did have one gain in there from the disposition by Hutchison Holdings' China division of an interest in and asset that Hutchman had, Shanghai Pharmaceuticals. So that's kind of, you know, it's recurring in one sense, but it's also all in the first half, not spread into the second half. So you're starting to see some of the reasons why I think we need to be cautious about the outlook for the second half against the strength of the performance in the first half. If we move to operating free cash flow, again, same thing, wonderful headline, 21.8 billion, up 11%. You find right away that when you look at cash flow, finance investment is way down, down seven points. It was 14% of the group's cash flow in the first quarter, half quarter. of last year, and this year it's 7%. And the pickups are in infrastructure and in telecoms. And one thing that you'll see as we go through the equation to the right is that it's a $2.1 billion increase over the first half of last year. Almost all of that correlates to lower capex and investment. and that's in CKH Group Telecom where CapEx was significantly down and it's also in the investment side because CKI made the investment in Phoenix Energy in the first half of last year I think I misspoke before and put it in the second half but it was in the first half so other than that operating free cash flow overall is a bit line ball. If you go through it, ports is great. The performance in cash terms, in operating cash flow terms, definitely matches whether you're looking at the contribution in subsidiaries or you're looking at the dividends received from associates. It matches the underlying operating performance, which was very, very strong. And CapEx was about line ball with last year. When you look at retail, again, it is fundamentally operating performance, a little bit less in terms of dividends from our associated companies, but very strong nonetheless, and very, very conservative capex, so less than in the first half of last year. Again, you look at infrastructure, I really already talked about it, the big swing factor is the difference in investments, so Phoenix Energy in the first half of last year, nothing similar in the first half of this year. You look at CKH Group Telecom, and I think we'll be going through that in much more detail. But again, I point out that we shouldn't be confused by the headline number, but some of it, regardless of the fact that it's recurring because it's a treasury operation, is nevertheless stacked into the first half and will probably recur in the second half. Lastly, finance and investment, as I said, really quite burdened from an EBITDA point of view. And Quan will take you through this. Interest income was lower than in the first half of 2024. The Mariano loss was quite a bit higher than in the first half. of last year and then of course with Synovus a much lower contribution TPG also a little bit lower IOH we're missing the dividend so it looks worse than it is the dividend actually will be I think it was paid in July so this will look a little bit better in the second half because we'll roll the dividend into that Moving on from operating free cash flow to free cash flow, you can see a very, very heady number of $31 billion. But as you go down the graph on the left, you start with the operating free cash flow, subtract the interest and taxes paid, not too much to report. Hutchison Holdings Limited increase in interest received is almost exactly offset by the increase in taxes paid in cash taxes, so not much to report there. On the other hand, when you get to working capital, that positive movement is very important to understand, and we'll go into that when you look at the waterfall diagram on the right, but it does include a very substantial element of exchange impact. One of the things that major forex movements do if you have a lot of assets for example and we do in sterling and in euros and they're in businesses that have lots of inventories or have lots of receivables the sheer movement of foreign exchange will result in a very very significant positive movement in terms of working capital and of course it's unsafe to assume that you have that same kind of movement by comparison to last year when we start looking at the second half and we look at the full year. So if we go to the diagram on the right, as you can see, although we got down to $16.1 billion this year of recurring earnings, smack in the middle you can see the year-on-year exchange impact on working capital. It was about $5 billion positive this year. This year and last year at the same time was about 2 billion negative, so that's where that 7 comes out. So you'll understand right away that if you don't assume fair wins or foul wins on a Forex point of view in the second half, you're not going to look like 16.1 versus 8.9. You're going to look modestly up, of course. But because the underlying working capital changes at 795 just reflect very good working capital management, which I think the group continues to stay focused on and do a good job on. But, you know, nevertheless, you should not expect it to be as dramatically improved. And then, of course, you add to that the incoming changes. Proceeds right from the UK merger and you have a very very nice free cash flow profile for the half So with that I'm going to turn you over to Kwon who's going to take you through how that all adds into our financial profile Frank Frank and Financial profile remained very strong and definitely improved and benefited from the net proceeds we received on the UK merger and

As the audience will see, our liquidity improved with total liquid assets as of June, totalling $147 billion, up against the same period last year and also against the year end. Net debt has reduced to $119 billion. and debt to net total capital reduced to 14.7%, a very low number. You can see also from the table that the group's debt maturity profile is very well-ladded, with no snickering refinancing requirement needed in the remainder of 2025. The group's average cost of debt for the six months is reduced to 3.4%, directly in line with the dropping interest rates. And the group's financial profile, as I said, remains very robust. So without further ado, I shall hand over to Dominic to talk about the report.