CK Hutchison Holdings Limited

Okay. Hello, everybody, and this is where -- here we are here to give you the details of the 2023 results.

Let's turn to Page 4. Page 4 is the 2023 financial highlights, and you saw that the revenue of 2023 is HKD 461.6 billion compared to 2022 is a 1% increase.

And then the product -- the net earnings is HKD 23.5 billion. And compared to 2022, if you take away the exceptional profit that we made -- onetime profit in 2022, the record profit is minus 9%.

But if you increase the total profit versus total profit is minus 36%. Because in 2023, there were no onetime profit.

We have several transactions, but we are -- there is no completion -- no growth in 2023. Earnings per share, same thing, minus 9% on the regular business, but the inclusive of the onetime profit of -36% is HKD 6.14 in 2023 versus HKD 9.57 in 2022.

And then the dividend in 2023 is to HKD 2.531, a reduction of 13.5% from 2022. So this is taken into account of reduction of 36% in total profit.

However, record profit is [ 29% ] and then also take into account of the dividend payout ratio. So the payout ratio now is quite an improvement from 2022 stand at 41% versus 31%.

So this is the financial result of 2023. Turn to Page 5 and then we talk about the operation.

The EBITDA, if you -- the 2023 is HKD 104.9 billion and 2023 versus HKD 119 billion in 2022. So you see that the shaded line represented 1x EBITDA.

And so that it becomes a minus 1% on a regular operating level, but it's the total of what we have done in this minus 12%. And earnings per share is the same, minus 2% on a regular basis, but minus 20% on a total basis.

And operating cash flow because it is defined as only for regular business, is actually is quite encouraging. It's plus 20%.

And then the debt ratio, as a result, 2023 is 16.1% versus 2022 16.7%. So if you turn to page, Page 6, okay?

And then it's the EBITDA chart. And HKD 105 billion pre-IFRS basis.

You can see that this year, similar geographically 49% comes from Europe and then 23% comes from Asia. If you see that in Hong Kong, it's only 3%.

On the business-wise, it's quite evenly spread, both Infrastructure is producing 28% of EBITDA, followed by the Telecom business. And then if you see where the changes of EBITDA from last to this year, we go to the waterfall chart.

You can see that if you take away the one-off, the HKD 142 billion become the HKD 106 billion, okay? Then the HKD 142 billion is the IFRS 16 impact, but then we are talking about pre-IFRS HKD 119 billion to HKD 106 billion and then the HKD 12.1 billion [ 12.1 ] is represented by the onetime profit we're talking last year from the Tower business, which is in U.K.

and then from the Indonesian merger. And then -- so that we are comparing from an operating basis is the underlying EBITDA to the '23 and then you can see the waterfall chart.

And then part, [indiscernible] is basically. You see that in the Ports business, you will see in the later chart is that there was a drop of storage income, but to a large extent offset by the increase in the throughput income.

And then, of course, the one that we cannot produce is that we have invested in the shipping line and this year shipping line profit dropped. This is why it is affected.

Actually, we can see that the HKD 2.2 billion is solely come from the Ports. And then Retail business is doing very well.

And you saw that the growth, the Europe and Asia is doing very well. And this is -- but however, Hong Kong is not doing well.

And also in China is quite -- Mainland is quite stagnant. And so that -- but then we have a very, very good improvement in both Europe and Asia.

Infrastructure business is actually -- you saw HKD 741 million. It is a very, very good result because last year, they have a onetime income.

This year, they don't. And not only that they overcome the onetime income last year is HKD 1 billion, so that the improvement is to take away this HKD 1.7 billion.

They come -- they mostly come from operation and also from interest income, which they have. So well done on the Infrastructure Group.

On the -- and then on the Telephone side, you saw that there's a [indiscernible] of HKD 2.3 billion. Of course, our -- actually, basically, the revenue side is doing quite well.

Actually, it's almost offsetting the cost increase -- normal cost increase. But however, out of the HKD 2.3 billion, there's a HKD 1 billion come from -- HKD 1.1 billion come from the tower sale because last year, when U.K.

sold the tower, we recognized HKD 1.1 billion profit over there. And also -- and then in 2023, we are witnessing a huge gigantic inflation.

You saw that both in U.K. and Italy and in other places, actually, the revenue increase is quite good, but it's not enough to cover the increase in inflation.

Now this is actually just for energy inflation itself, it's HKD 1.2 billion. So that actually, I can just very simply say that the revenue is able to cover the cost increase -- normal cost increase but not able to cover the energy increase.

And of course, there's a nonrecurring item on the tower sale. And actually, HAT, Hutchison Asia Telephone has a good year.

This has a reduction because in Indonesia, and they have a onetime profit in 2022 to the extent of almost HKD 1 billion, which is nonrecurring this year. So otherwise, the business what I just said in the ports done extremely well, enough synergy and then profit increased, EBITDA increased, dividend 2 years of even a little bit more dividend this year.

And also, they are able to finance their own network, build out the network and then debt level actually come down. So that is a very, very good result from the Indonesia.

And then lastly, come back to the head office. So this year, you witnessed more interest income in the head office.

However, Cenovus does not perform as well as last year. For some extent, it is overcome by our sales of the warrants.

But actually, the deficit -- there is quite big from operations from year-on-year, but that covers to a certain extent by the warrant. But still, there's -- however, the interest income and also the income from Hutchison China, China produced quite a good profit so that we are able to produce the positive variance against last year in the head office.

So there are very small foreign exchange movement, so that you can see the EBITDA on a real basis is go from HKD 106 billion to HKD 104 billion. The light blue color is the IFRS 16.

Now go to Page 7. I ask -- this is cash flow I will ask Frank to talk about.

Frank, please.

Thank you, Canning. So operating cash flow on Slide 7 for 2023 was really quite favorable.

If you look at the upper left pie chart, the number one driver was coming out of finance and investments and others, right, which as Canning described, includes things like interest income, includes some trading profits, includes some fair value gains last year, not this year. And of course, it includes a very good performance coming from Hutchison China, Chi-Med because of -- which we will get into later on.

The second biggest contributor was the Retail group and then the third was actually the Ports group. Interestingly, what's happening if you go down to the chart below, you see that there's been a very substantive growth in the EBITDA that's coming from subsidiaries as opposed to coming from associates.

And so even though in something like Ports, EBITDA is down for the year, actually, the contribution from subsidiaries cash flow that we control was significantly higher, and that's because the relative weakness, I think, as Canning described it, was in Hong Kong and in the Mainland Port. So the ports that are in the Hutchison Port Holdings Trust, whereas the relative strengths, we're in places like Mexico and a few other places.

And so at the end of the day, more controlled EBITDA in subsidiaries and, of course, a very substantial reduction in CapEx across the board. That's like HKD 2.5 billion less, right?

And so you put that together, and you have a very healthy growth in straight operating free cash flow from HKD 33 billion to HKD 39.5 billion. The attribution on all of that is on the charts to the right, where you look at all of the components and look at CapEx and investment.

I think by and large, they're pretty self-explanatory, and there's stuff that we'll be talking about as we go through the various core divisions. But again, as I say, solid performances in terms of cash management really across the board.

And we'll see that again on the next page, which is Page 8, when we take operating cash flow down to free cash flow. So if you start on the left, you start with our HKD 39.45 billion (sic) [ HKD 39.5 billion ] of operating free cash flow.

Take away interest and taxes paid, that was a total of HKD 13.5 billion, interestingly enough, that is as much tax as it is incremental interest. So it's -- the year-on-year is not anything near as unfavorable as the lump sum would look.

And then particularly, when you remember that in operating free cash flow, you had the drive of additional interest income. The impact of higher interest rates on us.

there is still happily fairly marginal. Obviously, working capital changes, that's quite interesting because that doesn't really have to do so much with operating working capital management, which was really, frankly, as solid and cash conversion was as solid as we ever see it.

We had an anomaly in that we refinanced an U.S. dollar loan that was swapped into Aussie dollars that had to do with TPG Telecoms.

And so we ended up taking the mark-to-market loss on the Aussie dollars because we refinanced the U.S. dollar loan in Aussie dollars.

That's actually probably the biggest driver and that on some movements in working capital relating to hedge movements. But again, on the operating side of managing, the plain vanilla working capital, it was really a pretty solid year and in any event, favorable year-on-year.

Number three, obviously, we've talked about the tower asset disposal. There was a spillover, which is that we had a bill for VAT in the U.K.

that we paid, that was HKD 3.9 billion. We bought some telecoms licenses in Ireland and in Sweden.

That was another HKD 1.9 billion in total. Italy completed what's called with Zefiro joint venture with Iliad and received proceeds of HKD 2.6 billion, right?

And then we received some loan repayments from associated companies, primarily that was working capital loans that were repaid in 2023 that related to the terms of the merger with IOH. So there were major repayments coming from the Indosat Ooredoo.

So if you go across to the chart at the right, I mean you basically see the reported free cash flow for '22, stripping out the tower disposal proceeds of HKD 28.5 billion. That took you to an underlying cash flow for 2022 of HKD 19.3 billion.

As we talked about EBITDA of subsidiaries, we talked about dividends from associates. We talked about interest and taxes paid.

As you can see, that's a HKD 3 billion variance in total, about 2/3 interest, about 1/3 tax. I remember, right.

CapEx was a huge improvement across the board of HKD 2.5 billion. Investments -- new investments in associates and JVs significantly lowered.

The telecoms licenses that we've already talked about, the proceeds coming from the formation of the Italian JV. We've also already talked about -- and the loan repayments we've talked about.

Other miscellaneous and it takes you to a HKD 21.5 billion free cash flow for the year. So that, if we go to the next slide, leaves us with a very healthy profile overall.

First of all, our net debt on the chart on the upper left, it continued to decline from 16.7% at the end of 2022 to 16.1% of total capital at the end of 2023, and I'm happy to say that, that trend is continuing as we go into -- as we look at the first couple of months of this year. So we are continuing to reduce the net debt.

We're also continuing to reduce the gross debt, which is also quite important. In terms of our exposure to interest rates, well, we have an average, as you can see on the lower chart, 5 years maturity, which is actually a little bit longer than it was at the end of last year.

We've only got 22% of our debt maturing this year. So although interest costs are, of course, going up, which we saw on the previous chart, so is interest income and our average cost of debt as a result is only going up by 1.2% to 3.2%.

It will continue to creep up a bit during the course of 2024. But again, with only 22% of the debt repayable in 2024 and most of the fixed rate debt repayable in the second half, that's not going to have a huge effect, right, in terms of the average cost of debt.

Bearing in mind, of course, that after interest rate swaps, 68% of our total debt today -- sorry, at year-end is in fixed rates and only 32% is in the floating rates. The other nice thing that we have going for us is that obviously with HKD 143 billion of liquid assets in an inverted yield curve environment, right?

We have an advantage in terms of the yield on cash as opposed to the cost of longer-term maturities and then noting significant balance. So all in all, I think we are in a pretty nice position actually to deal with either higher for longer.

Obviously, we're going to be happy in terms of the overall operating environment, right, if we get lower sooner. Time will tell.

That's not for us to divine, right? But obviously, there does appear to be a bias emerging towards lower inflation and ultimately, lower interest rates, particularly in the U.S.

So I think that's all that I have to say on our financial profile and it takes us to Slide 10, which is the performance of the Ports group. And I hand you back to Canning.

Actually, in this year, the Ports Group is doing quite well. And actually -- because of our geography of our ports, actually, it was kind of an offsetting effect.

As the Chairman has said in his press conference, if you see that, Hong Kong did not -- was actually not doing so well this year. But however, Mexico is doing very well.

And so that if you look at the EBITDA TEU, 82.1 million. And so it is minus 3% -- the TEU -- the containers is 3% less than last year.

But if you -- what happened is that we have 1 port less, which is Tanzania against last year. And then we have -- if we take away Tanzania, which we don't have anymore and also take away the Trust -- basically, the Trust deficit is basically Hong Kong and a little bit of Yantian.

Actually, the 2 -- the business on transporting of the containers is actually the same. So that -- and then another phenomenon that you will see is that there is a huge -- because everything is more efficient this year, there's a huge drop in storage income.

And however, in most of the cases or a lot of the cases, it was a large extent and offset by the container business because that we do have some price increase in tendering container. So if you go to the waterfall chart, you see that from 2022 EBITDA to 2023 EBITDA, you see that Hong Kong -- the Trust basically, the HKD 286 million, HKD 200 million is due to -- is still HKD 200 million plus and HKD 10 million is due to a record storage income.

And then only about HKD 17 million, something like that, is because of the TEU. So Trust is the only -- is a case of actually the negative variant mostly comes from Hong Kong.

And on the Mainland China, again, similar things happen, is doing quite well on the TEU, but it is affected by the -- offset by the handling charge and it's the same thing. It's mostly due to storage income and then offset it by TEU income.

And then the same thing in Europe, you saw that 400 -- HKD 379 million actually. If you look at the storage income, deficit is above HKD 700 million.

It's about HKD 1.1 billion. And then -- but the TEU business is better than HKD 700 million so that it come up with almost HKD 379 million deficit.

So that you see that the business is doing okay. It's just -- there's a change.

And then the storage income go down and it could shift to profit. But however, it is offset by the increase in TEU.

And then we see this trend, the TEU business is doing quite well. And then, of course, the last but not least, this is the one that the corporate side, is all -- is affected us the most, which cannot be replaceable is the equity income from our investment in a shipping company.

And hopefully, this year things happening around the world, tariff increase, we should have more income from this investment this year. Exchange rates is almost flat, okay?

So this is -- I think this is all about. It's about -- from our business standpoint is the shipping income investment from a shipping company less and then the storage income less but offset by the increase in TEU.

And then if you go to South Asia, Asia and other [indiscernible] Mexico, everything is good, TEU is good, storage is good. Same thing happened in Pakistan.

In Pakistan, TEU is good and the storage income is good. So actually, it's quite a balanced picture.

Now I would -- I think I finished on Page 10. 11 is Retail.

I think Dominic is a [ professor ] on this. And Dominic, do you want to talk about it.

Okay. Thank you, Canning.

Let's go to Page 11 -- Slide 11. Overall, it's a good story with store portfolio of 16,491 stores and a very strong loyalty member base of 159 million members.

The Retail division remains the world's largest international health and beauty retail, operating in 28 markets under 12 retail brands. And then the number of markets will be increased or expected to increase by another 2 before the year-end.

The main market that we are entering will be in Bahrain and Kuwait. On store number, which you see, we continue to carry out our store expansion programs, whereby we have opened 878 new stores, out of which 254 is in China, while closing down 529 nonperforming stores upon lease expiry.

So as a result, our store numbers stood at 16,491 at year-end, an increase of 2% or 349 stores. So this simple calculation.

And then the store portfolio splits between Asia and Europe is about 50-50. And the average payback period on new CapEx invested remain very healthy at 11 months.

So that level of fast payback period has been maintained over the years. And then we have no intention of getting it longer.

On EBITDA, EBITDA generated for the year is reported at HKD 16.23 billion, representing an increase of 13% in reported currency or 11% in local currency. And then the EBITDA split is 31% from Asia and 69% from Europe.

Now let's move to the right. Let's move to the EBITDA waterfall chart, which shows the year-on-year EBITDA change of each division in Hong Kong dollars.

So starting from an EBITDA base of HKD 14.31 billion, on the left, in 2022, we see across-the-board increase in all the Health and Beauty divisions. You can see all favorable increases.

So for example, the first little increase, HKD 22 million is from Health and Beauty China. So despite the challenging consumer and customer traffic as a result of soft economy and decreased consumer confidence, the China division managed to still report a HKD 22 million increase or 2% on its EBITDA.

And the next is Health and Beauty Asia and a lot of good story. It grew strongly as a result of increase in store footfall as well as store network expansion.

So we are opening quite a number of stores in Asia. So the EBITDA increase is 23% or HKD 708 million, with Thailand, Malaysia and Philippines being the main contributors.

For Western Europe, Health and Beauty Western Europe with strong growth in comparable store sales. We are talking about review with the annual report, we're talking about double-digit comparable store sales, primarily in the U.K., Germany and the Benelux.

The EBITDA for Western Europe actually grew HKD 931 million or 13%. For Eastern Europe, Health and Beauty Eastern Europe, we see good trading performance in Rossmann, Poland as well as the Drogas business in Latvia.

So as a result, the EBITDA growth in distribution, although smaller, but this growth is registered at 17% or HKD 372 million increase. So in summary, for our Health and Beauty business, which accounted for 87% of the Retail division's revenue, the total EBITDA has reported a strong 15% growth over previous year in local currency.

So if you look at the Health and Beauty division, the growth is 15% in local currency. So lastly, for Other Retail, which mainly comprises our supermarket business, PARKnSHOP in Hong Kong, our electrical retail, Fortress, again, in Hong Kong and our manufacturing division, which manufacture water and beverage products in Hong Kong and China, the combined EBITDA registered a decrease.

Instead of a increase in the previous in the Health and Beauty business, here, we registered a decrease of HKD 410 million. So this is mainly attributed to PARKnSHOP Hong Kong, whose business is being adversely affected by the change in consumer behavior of doing grocery shopping across the border in Shenzhen when people traveled there for leisure and entertainment.

So it's an ongoing trend that people travel north on weekends, which is a traditional important shopping days for PARKnSHOP. So the main shortfall comes from PARKnSHOP.

So overall, all these positive and negative bring the underlying EBITDA to HKD 15.93 billion, a year-on-year increase of 11%. And with our favorable average translation gain of HKD 294 million.

The total reported EBITDA for the year has increased 13% to HKD 16.23 billion, with an EBITDA margin percentage of 10% versus last year's 9.6%. So in terms of EBITDA margin percentage, it also has a bit of an improvement.

As for the outlook for this year, last year was quite good, as I just mentioned. Outlook for this year.

We expect Health and Beauty Europe to continue to deliver a solid performance. Health and Beauty Asia is expected to continue to show strong growth, while Health and Beauty China and Other Retailer in Hong Kong should continue to deliver improved performance through store network optimization, and we have done a number of initiatives and various productivity enhancement activities.

So in the meantime, overall, for the Retail division, we'll continue to drive our strategic pillars, including own brand and exclusive, which now account for 30% of the sales of the group and O+O, online, off-line, and CRM to enhance customer engagement and customer lifetime value. And while we will continue our store network expansion, we plan to open 1,100 stores in this new year and then the payback period actually justified and supported this fast expansion.

So this is all for Retail. Now I would like to pass to Frank to talk about our Infrastructure business.

Here to you, Frank.

Yes. Thanks, Dominic.

Again, I mean, as Canning said, Infrastructure, just a real pillar in this group and had a very, very solid year in a relatively turbulent global environment as we've been seeing as we started looking at all the other businesses that we're in. So they announced their results yesterday, they were very well received.

Obviously, reported earnings up by 4% to just over HKD 8 billion. EBITDA up 3% in local currencies, 1% in reported currency.

So a bit of favorable -- unfavorable exchange movements. But yes, HKD 29 billion, very, very satisfactory.

The comparable earnings, I think Canning mentioned this, it's important to understand, we did a partial sale last year of Northumbrian Water. So that reduces the base, right?

But also there was an exceptional element in last year's numbers. So if you strip those things out, actually, earnings on a normalized basis for the year were up by 12%, which is really very, very impressive, considering absorbing the impacts of the partial sale of Northumbrian Water.

That leads you to a very nice, and I think well received dividend growth, as you can see from the chart, so it's been consistently resuming growth since the onset of the pandemic, which is good news. Earnings per share, pretty well the same thing, also growing rather nicely.

Net debt ratio is essentially flat. It's up a little bit from last December, but at 7.7% net debt to net total capital is certainly not anything that's going to keep anybody awake at night.

It translates into a very stable A rating from Standard & Poor's. And of course, the good news is we had a number of resets in 2023.

We have none in 2024 for the regulated asset base, which means that 2024 is a reasonably predictable year, and Infrastructure should continue to act as a real pillar for group earnings. I think that's all I would say about Infrastructure, and I'll hand it back to Canning to go through the more detailed slides on Telecoms.

I think the next 2 pages is about Telecom, just read out the figures, HKD 80 billion on revenue, increased by 3%; EBITDA, HKD 21.3 billion minus 11%. If you look at the chart, you just have to look at the operation alone, it is -- EBITDA was reduced by 9%, okay?

And if you look at how waterfall from one year to the other, you go from the far left in the middle chart, 2022 EBITDA, HKD 23.8 billion EBITDA in 2022. Inclusive of that is the HKD 1 billion from tower sales.

So if you take -- it is just one time. So if you take it, then it become HKD 22.8 billion.

Now from that, we go to the 2023 underlying EBITDA, which is HKD 20.8 billion. Actually, this reduction come from U.K.

And then U.K. is simply a basis that I think it's still -- and this is why we do the merger.

We try to do the merger because the revenue is just not enough to cover the cost increase. Basically, U.K.

has 2 cost increase. One is the network cost increase because we have to build out the 5G and the IT and all those, it cost us really HKD 1.2 billion more.

And then this year, you got the inflation. You got the inflation just on expenses, on energy and other things, it's about HKD 500 million plus.

So that the increase of revenue is -- if you see the next page, it's quite meaningful, but however it cannot cover the cost. This is why we wanted -- we agreed to do a merger with Vodafone.

We got to get into critical mass, okay? So this is what happened.

The revenue reasonable increase because we have price. Actually, we have repricing in U.K.

for inflation and the roaming income come. But however, all this income cannot offset the cost increase, which is the inflation cost plus the network cost and gradually go out [indiscernible] more costs.

And in Italy, the situation is quite pretty better in the sense, although it's still a bit tricker, HKD 800 million. You saw that Italy income is more or less the same as last year and except the cost really went up actually -- what had Italy in [indiscernible] is the energy cost.

Actually -- because we have been -- the energy costs are factored by the tune of almost 7 -- HKD 800 million. And so then if you see that this HKD 800 million, actually, I can see this mostly come from the energy inflation costs, which they are not able to cover by the revenue.

Actually, the operating cost in Italy is doing quite well. Actually, with the network joint venture with Iliad and actually, we have some cost saving as well.

So on the cost side, Italy is doing well. It's just the inflation come at total -- electricity cost went up 5x, not in Hong Kong [Indiscernible] percentage in Europe, we talk about a few hundred percent.

So that is quite... And then -- and if you go to the Nordics, Sweden and Denmark, Sweden, in particular, is doing so well.

They also have the problem of energy cost increase and all those. But however, they are fighting hard and then they are able to have revenue increase to cover those.

So in fact, they showed increase in EBITDA. And whereas Austria and Denmark is almost breakeven.

They are all doing quite well in those countries. And especially, in Austria, the inflation is very high just on the official and salary, it's about 8%, 9% increase in salary.

So it's very high. But however, they are doing quite well.

They are able to do price increase and then so that the business into -- I expect 2024, they will do better. In Ireland, it's the same case.

And then hopefully, they think that -- again, they have a stagnant revenue and then the if the cost increase there, they show a deficit in the EBITDA. So I think this is the picture.

If you go to Page 14, I think it's more or less I just covered it. So that -- revenue side, if you look at the total, total margin is positive, okay?

Plus 3% in local currency, plus 5% in reported. But however, this is cost, they are not able to cover.

But if you look at this page, the good thing I would like to point out the things that we have achieved is in the reported EBITDA, less -- on the bottom line comparability and CapEx. Actually, finally, you saw a positive HKD 323 million, actually is more or less the same because we have HKD 300-odd million more depreciation in U.K.

For write-off U.K. so minus 6 -- actually, this should be HKD 300-odd million more because the depreciation is increased by GBP 13 million something like that by way of something.

So -- but more even if you take that into account, take that out, I think the EBITDA minus CapEx is positive. So that we still have negative event.

If you look at that in terms of EBITDA and minus CapEx in Sweden because they have to compensate for the -- for -- as we broke up our network joint venture with [indiscernible] and then so that it has been going separately. So we have [indiscernible] also.

The change of the Huawei equipment into averaging increment also assessment, but this phase will be finished in this -- I think in the next 2 years, so that you will see the Sweden should go back to more closely to depreciation and so on the other. So I think this is what we have achieved in 2023.

And then into 2024, as I have said in the press conference, you will see that the repricing effect, which only have been a couple -- a few months or half a year into 2023, we have a full year effect in 2024. And then the inflation is not as severe in 2024 as is 2023.

So that I can say that the operation will be better and then with the control CapEx so that if we can do it to the CapEx, it will depreciate, the expense will not increase and that will give us the financial performance and free cash flow that we have been working for. So you saw that a big drop this year, but however, it's not all bad news.

You see that we have -- we can control the CapEx. And then you see the people working hard on revenue.

And of course, the most important is the U.K. merger with Vodafone because this is the case -- a classic case we can demonstrate that we, as a stand-alone company, it's difficult to build more network.

As you build more network, which is good for the consumer. And then you suffer losses -- how much losses can we continue to suffer.

So this is why our network has already in the smallest. And this is why we go for merger.

So this is my case -- treating case. Thank you.

And then we go to Page 15, which has a 4-part split between Frank and I. Since I've been doing the talking, so maybe, Frank, you take up yours first and then after you finish, I will take up mine.

Okay. That sounds perfectly fair.

First, on the far left, Cenovus Energy. That's a very important position for us.

Under the CKHH around 16.9% of Cenovus, which closed at [ HKD 25.95 ] a share last night. So that's CAD 8.2 billion mark-to-market as of last night.

Now I think we all know that the fourth quarter last year was quite buyer and indeed did weigh year-on-year on the contribution -- the earnings contribution right from Cenovus. But behind that, they have been working very hard and in a very disciplined way to balance growth, but also put themselves in a position to increase shareholder returns.

The annual base dividend did go up by 50% from year-to-year, from 2022 to 2023. And today, it represents about a 2% yield.

They got a credit rating upgrade, marking real progress towards achieving their much lower net debt target. They've announced they want to get net debt down to below CAD 4 billion.

And on the current outlook, that is something that I think we all expect happens in 2024. Now that's an important milestone because under their announced dividend policy, regardless of what they do to base dividends, excess free cash flow until they've met their CAD 4 billion debt target, is only 50% allocated between share buybacks and variable dividends.

And once they've met the debt target, right, that goes under their announced policy to 100%. So there's scope for a very significant improvement in the cash contribution performance from Cenovus for our group going forward.

The second one that I've been asked to say a few words on is HUTCHMED. Again, a very good year.

We own 38.17% of HUTCHMED. It closed at USD 17.30 per EDR last night, which is a total market cap of USD 3-odd billion.

So our position mark-to-market last night was worth USD 1.145 billion. So it's not an insignificant associated with the group.

They had a very, very good year. They've realized significant upfront cash proceeds from licensing outside of Hong Kong and the Mainland to Takeda.

That closed in March of last year. They had good revenue growth coming off of licensing income, and of course, the oncology businesses which they've retained, and the drug distribution businesses, which they retained in the mainland, earlier than expected milestone on their fruquintinib oncology drug, received their first U.S.

FDA approval in November of 2023. And they also completed building a new flagship manufacturing facility, right, in Shanghai that started operations in 2023.

So HUTCHMED has definitely been on an upward trend. And we really do hope and believe that, that continues in 2024.

Canning?

Okay. And then actually, these 2 are Indosat and TPG.

In Indosat, I think it is a classic case of success in the merger. So everything worked well as I -- you got all the figures in the presentation.

But why I'm saying is that the synergy work as a result, the EBITDA increased from [indiscernible]. The net profit increased.

Actually, actual net profit showed a decrease because last year, there is some significant tower sales and onetime profit. If you take that away, the net profit increased very nicely.

And then, obviously, this is the second year they proposed to pay dividend and there's a nice dividend increase. And also the network continues to improve very nicely.

And then -- but then they are able to finance everything themselves. Actually, not only they're able to finance, they are able to reduce the debt -- the debt go from 2022 of USD 774 million equivalent to [indiscernible] So it's very, very, very good financial performance coming of course, is some more not reflected all yet in the share price.

And the share price has increased 80% since merger. So these are all good story.

And the TPG, this year, they have a reduction in Australia of progress because, again, last year, they have the onetime profit, and this year, they don't show that -- onetime profit is quite significant last year. It's about HKD 400 million within the quarter.

And this year, they have none. This is why there's a 90% reduction because last year's profit was HKD 500 million.

This year, profit was [ HKD 410 million ] So there was a HKD 90 million deduction. However, the EBITDA increasing.

It goes from HKD 1.8 billion to HKD 1.9 billion plus from 2024 and 2023. And also, the company is quite in its confident position, decided to pay the same dividend to the shareholder.

So that -- but in the course of this year, they already build up their 5Gs. So that they have about 3,000 plus site at the end -- and then we just remember 2, 3 years ago, we had nothing when we merged.

So that is a solid progress. And again, we don't have to put any more cash into -- in the Australia.

Instead, we are getting dividend up. So we are looking and then no more losses.

We are taking profit, and this will continues to create value for Hutchison. Thank you.

Now we go to Page of 17, Sustainability. And the professor is Mr.

Frank Sixt. So it's all yours.

Thank you, Canning. I'm not going to spend a lot of time on this because I think the page is pretty self-explanatory.

And I would point you towards the Chairman's statement because in each of the divisions and he also talks about the progress that they've made in terms of their sustainability objectives in 2023. So the material is very well covered.

Just some additional anecdotal stuff. Obviously, we are rated from a sustainability point of view by Sustainalytics and MSCI and ISS.

In 2023, we continued to improve our rating with Sustainalytics, which is not the easiest thing in the world to do. If you're a multinational conglomerate because of the category ceiling that you find yourself in.

But nevertheless, we continue to progress. But something of an upgrade, we're still considered a medium risk MSCI.

There was no change. They basically maintained our rating, which was upgraded by 2 notches in 2022, ISS gave us a 2-notch upgrade in September of 2023.

So what we're doing in terms of sustainability and sustainability reporting is clearly having an impact and is translating into favorable movements on our sustainability ratings. I'm not going to spend time on anything else on this page other than just something that we haven't done before is to disclose how much of our spend in any given year, right, qualifies as green spend under the analytic framework that you use for green bond financings, right?

And that totaled USD 1.8 billion, right, last year. And the breakdown is there.

I think it's the first time that we've reported this kind of number publicly. And it just shows you, I mean, in some sense, is how much sustainability is just -- is embedded in the nature of the businesses.

A very substantial part of this comes from the infrastructure businesses. Electricity grids, they're spending a lot.

Natural gas grids, they're are spending a lot. Water distribution businesses, they're spending a lot that qualifies as green spend as does what we do in our Ports division as does certainly what we do in our Telecoms division.

So when you add it up, we're a pretty hearty contributor in terms of spending to the greening of the planet. And we will be releasing our sustainability report towards the end of April, I believe.

And I would encourage everybody to read it. Among other things, we announced a new biodiversity policy this year, which, of course, we've been very respectful of biodiversity in all of our industrial-type divisions for a very, very long time.

And it makes a fascinating read as to just how much we do to protect the natural environment and little tiny critters and you name it. It was -- it's a very gratifying read because we've never collated it before.

And you can now see how much attention we pay to protecting biodiversity and the footprint of our industrial activities, if you want to think of it that way. So I will end on that note.

And I believe our Chairman has joined us, and it takes us to Q&A.

Thank you. We will now begin the Q&A session.

The first question is as follows, will the company increase shareholder returns through share buyback or higher dividend distribution in 2024 in light of improvement in underlying fee cash flow generation in 2023?

Our dividend payments are usually a Board decision. And the dividends for recent years included payout decisions relating to various one-off items each year.

And in 2023, we don't have any one-off gains resulting in a gross earnings decline of 36%, but it's really an operational level, a 9% decline in recurring earnings and approximately 5% decline in operating cash flow. We have already increased our payout ratio to over 40%.

That's why we have a full year dividend reduction of about 13.5%. We believe this is a fair prudent balance between our objectives.

And to share buyback, where -- we remain quite open-minded. In 2023, we chose not to execute buybacks in order to maintain the more conservative financial profile in a relatively uncertain time.

Thank you.

Thank you, Mr. Chairman.

The second question is on the Ports division. What is the impact of Red Sea and Panama Canal prices to HPH?

Of course, there are supply chain disruptions. But the impact to HPH is really not significant.

Some ports throughput may be temporarily affected, but the cargo still arrive at those ports despite some delays. Maybe we focus in the Middle East area.

The Red Sea crisis actually pushed many shipping lines to divert vessels around the Cape of Good Hope and skipping the Suez Canal transit. Though smaller carriers and feeders are still operating in the area, this diversion will strengthen the typical Asian Europe trade by bulk [indiscernible] the trade by bulk 10 days and have absorbed the excess vessel capacity.

So that's why the freight rates going up. We currently do not expect a significant impact to our terminals in the Middle East.

You take, Alexandria, for example. It mainly carries -- handles cargoes in the Mediterranean area.

And therefore, not much affected by the Red Sea situation. You mentioned the Panama Canal.

We operate 2 ports there [indiscernible] on the Pacific and Chris Bevan at the Atlantic [indiscernible] has benefited actually by the drought due to the more ad hoc [ force ] in particular, it's got the sole access to the railway, connecting the Pacific and Atlantic. So we're okay.

Thank you.

Thank you, Chairman. The next question, what are the major growth drivers in 2024?

We believe that our operating businesses have good prospects in 2024, despite some, I would say, macro headwinds. The Ports division should resume throughput in 2024, some growth in 2024, as we have observed some improved trends in the second half of 2023.

And it seems U.S. retailers are planning for a stable ramp up in purchase orders in 2024.

For Retail, Asia and Europe have already emerged with significant earnings contributors, typically pave for some good growth in 2024 for A.S. Watson.

For Mainland and Hong Kong, we expect improvement from store network optimization and enhancing profitability through cost savings and productivity enhancement initiatives. Now Infrastructure division, let me see, I think the regulated business will continue to drive a good, steady and recurring income.

And even the nonregulated businesses will be good probably contributors. Telecom.

Telecom should deliver improvement in underlying performance with easing in inflation pressures. And possible upside from various pricing initiatives.

We are also very disciplined in our cost management and possible improvement also from stabilizing depreciation charges. Thank you.

Thank you, Mr. Chairman.

The following question is on our financial position. With excess payment relatively low-cost borrowing due to mature as elevated interest rates pose risk to CK Hutchison earnings?

Maybe, Frank, can you help me answer that question?

Sure. And I'll go very quickly because we actually went over this in the slide presentation.

But basically, we've got 68% of our debt in the group after swaps is in fixed rates, and it is an average 5-year maturity. This year, only 22% of our debt matures.

So obviously, we're in a very nice position to capture the benefit of rate reductions going forward just because of our refinancing profile. Our average cost of debt, of course, it will gradually move up, but it's from a very low basis.

It was 3.2% for 2023. And most of the movement will happen in the second half of the year just because of the timing of the refinancing requirements.

And lastly, as I think I mentioned, we have HKD 143.1 billion in liquidity and cash and marketable securities in effect. And that gives us a very significant ability to capture the benefit of yield curve inversion, which is what we've been having for the last little while, at least, and it obviously acts as a pretty significant hedge against increased interest rate and financing costs as we go forward.

We seem to pay okay on this timing, right?

Yes.

Okay. Thank you.

Thank you, Frank. The next question, yes, is on Telecom.

Has there been any update in the evaluation of the proposed Three U.K. Vodafone merger?

Are you confident that this will pass this transaction?

Canning, how many times have you answered this question?

Okay. I think the situation, we have filed our merger notifications to the CMA late January.

And then according to the CMA [indiscernible] April. I think the deadline to tell us whether we got it in Phase I or we have been moving to Phase 2 is tomorrow.

Though today we don't know the result yet. But if we don't know the result, we have to go to Phase 2.

That means that this it is -- from our experience, it is not any factor. So that is not something -- that means -- that Phase 2 means there is more detail review of the order everything, we made that is the case.

And we have several mergers in the past. We have successful merger in Ireland, in Austria, in Italy.

they're all going into Phase 2. So that -- so they're going to Phase 2.

If you can get in Phase 1, that's great. If you can't get in [indiscernible] going to Phase 2, [indiscernible] then we have to do more work.

We have- if we go to the Phase 2, we will spend our time -- more time explaining to them the benefit of merger, as I suggested earlier. U.K.

by ourselves is very difficult, which you see the figures. You build up more network.

We have much more expenses, which is not sustainable, okay? So we will work with them.

We will produce evidence what -- why it is good to them. And of course, we hope that the outcome in the Phase 2 somewhere towards the end of this year as we hope.

So this is the situation. Thank you.

Thank you, Canning. And this question is still on the Telecom division.

Is better performance is better from Three Group Europe in 2024?

Canning, can you answer that question, please?

Okay. So actually, as I said in the presentation, 2024 should be better because that we have done some revenue -- a lot of revenue work on the business in 2023, like pricing and all those -- and then in 2024, we should have the full year effect.

And then by looking objectively into the market, the inflation costs will be much, much less than 2023 and we hope that -- the pressure on the debt side would become and also one of the major effect on us on revenue In the last 2 years is the government income from Italy is [indiscernible] networks. I don't -- we are of the opinion that they have [indiscernible] and let's see how it goes.

And so that the lower magnitude of all the cost increases [indiscernible] the revenue effect on the pricing. I think this will get us a better performance.

Of course, last year, we have achieved CapEx depreciation and then so that the pressure from debt side will be -- P&L will be less the depreciation just. And of course, we will continuously control CapEx, and so that we will produce more free cash flow for the company.

Thank you.

Thank you, Canning. The next question is on Retail.

What was the sales performance in major markets in the first 2 months of 2024, especially from China?

Dominic, I believe that's your question.

Okay. Thank you, Mr.

Chairman. We have definitely, as I mentioned earlier, a good 2023.

And then first 2 months of this year, 2024, look encouraging, particularly in Health and Beauty Asia and Health and Beauty Europe. Just to quote you some numbers, the comparable store sales growth, which is a very important indicator on how well is the trading.

In Health and Beauty Asia, we have recorded at 13.6%, double-digit for the first 2 months, and even for Europe, is a good 7% comp sales in this first 2 months of 2024. And in China, the sales performance remains challenging, stagnant store traffic and subdued consumer sentiment because of the consumer price index dropped and the level of household deposits increases so people are saving more rather than to spend.

So it's a challenge, but we expect improved performance over the next months and before the end of this year. For Hong Kong, of course, it's adversely affected, particularly in our PARKnSHOP business by people traveling across the border, to some turn for their grocery shopping and also off for international travel during the long holidays.

But we have been doing some countermeasures in terms of product range, improvement or enhancement by importing products that's not available in China so that people can only get it in Hong Kong. And also we undergo some cost rationalization programs initiative to improve the productivity of the business.

So we are doing everything we can in the businesses that we need attention to improve. And then we are seeing good results in the bigger business of Health and Beauty Asia and Europe.

Thank you.

Thank you, Dominic. Next question, why the [indiscernible] EBITDA reversed from 1% growth in the first half of 2023 to 15% decline in the second half of the year?

Will the weakness in second half be continued into 2024?

Canning, can you pick up that question?

Okay. I think in the second half in Italy -- of 2023 Italy, second half, the energy cost increase is more severe in the second half than the first half.

And also because when we do the [ net go ] we have a lot of the organization costs, legal costs and the costs. When we cannot close a deal, we have to write off.

And so that also can get a major cost write-off than expect. So these 2 factors affect the EBITDA in the second half.

Of course, the energy is a major figure. And then -- going into 2024, as I said, for the price increase -- price adjustment -- increase adjustment in 2023 will have a full year effect in 2024 and also that we see that, as I said, the reduction in income should be stabilized.

So we don't see the major step of the increase anymore. And so that -- I think on the revenue side, it should be very stable to increase.

And also we have done well in the B2B and also on the fixed wireless assets business. So all this together, and -- I think give us a positive outlook of 2024.

Thank you, Canning. Due to the time constraint, we will have the 2 last questions today.

The second last one is, what is the outlook of container throughput performance in 2024?

We have seen some improving trends in the second half of 2023. Container throughput growth was 1% in the second half of 2023 compared to a 7% decline in the first half.

With quite significant destocking of U.S. retailers in 2023, the outlook for 2024, I would say, is cautiously optimistic.

Throughput grew for about 9% in the first 2 months of 2024. We also see that large cross-border e-commerce companies have already started to ship more via ocean in 2024 due to increased volumes that are becoming either too large or too expensive for air.

Overall, trade from Asia to U.S. and Europe is expected to grow at, let's say, mid-single digit in 2024 and some secondary trades like the Indian subcontinent is expected to grow slightly faster than the expected average global trade growth.

Thank you.

Thank you, Chairman. The last question for today are also for the Ports division.

What is the expected CapEx level in 2024?

2024 CapEx is expected to be at a lower level than 2023, mainly because some of the construction, new container terminal at Egypt is completed. And Ports division continue to place stringent control on its CapEx spending, which will be only mainly on expansion and development projects in Mexico, Rotterdam, Thailand and Barcelona to enhance its bargaining position in the industry.

And replacement CapEx, for example, at Rotterdam is previously deferred during the pandemic.

Okay. Thank you, Chairman.

So due to the time constraint, we have to end the results presentation today. Thank you very much, Chairman, Directors and all the guests.

Thank you.

Thank you.

Thank you. Goodbye.