CK Hutchison Holdings Ltd Aktie

Welcome to the live webcast CK Hutchison 2025 Annual Results Presentation. Our speakers today are Mr. Victor Li, our Chairman, who will join us later; Mr. Frank Sixt, our Group Co-Managing Director and Group Finance Director; Mr. Dominic Lai, Group Co-Managing Director of CK Hutchison and Chairman of AS Watson Group; Mr. Kwan Cheung, our group CFO.

[Operator Instructions]

Before I hand over to Frank, please also pay attention to our disclaimer, which you can find on Page 2 of the presentation. We can start now.

Very good. Thank you for being with us. Let's move straight through to Slide 3, we'll go through the usual explanatory deck as expeditiously as we can, but hopefully comprehensively. So starting on the left-hand side as you can see revenues for 2025 were well above 2024 levels, which is very good news. In fairness, that 6% increase came as to 2%, right, from ForEx differences. We were in a very strong sterling and euro environment in 2025 compared to 2024. But nevertheless, the remaining 4% underlying, and that's close to HKD 19 billion of incremental revenue.

Looking at net earnings in the middle. On an underlying basis, we are up 7%, that's by about HKD 1.5 billion compared to 2024. The underlying, of course, leaves out in both years, the onetime largely noncash items, a write-down in 2024 relating to our assets in Vietnam and the noncash charges that arose out of the Vodafone merger transaction that we explained during the first half.

If you look at decline in the reported change, that's about HKD 5.2 billion, and the difference is entirely the difference between those 2 large one-off items, which was about HKD 6.7 billion, in HKD 1.5 billion of improvement, right, on the underlying items and the difference is HKD 5.247 billion, which is the -- which accounts for the reported change. EPS, I think self-explanatory as well as dividends per share. And as you can see, we've related dividends per share, far more to the underlying performance for the year than to the reported performance for pretty obvious reasons.

If we can go to the next slide. From this point on, we're actually starting to focus more towards cash generation and understanding the group's cash flows. So that's why we use pre-IFRS numbers on these slides, which someday, Kwan will explain to you the chapter first, but basically means that when you look at EBITDA, you're looking at EBITDA after leases, after actual lease expenses and then you are ignoring notional balance sheet depreciation of lease assets as well as notional financing costs associated with IFRS 16 lease accounting. So those are the key differences.

So again, you look at EBITDA, the underlying change was HKD 9.4 billion, which is approximately 9%. And again, 7% of that is fully underlying and 2% out of that, it was driven by favorable ForEx tailwinds during the year. I should just make the point in case anybody is wondering, obviously, the underlying at HKD 115.7 billion does not include the noncash charge, right, for the year, but it also doesn't include the cash proceeds, right, which show up in a different part of the cash flow analysis.

EBITDA, I'm not going to dwell on. I think it's quite self-explanatory. Operating free cash flow, we will have a detailed slide on that. But as you can see, a healthy improvement. And not surprisingly, a very significant improvement in our debt profile. At the end of the year, we were at 13.9% consolidated total net debt to net total capital as opposed to 16.2% when we exited 2024. And I can assure you that, that has continued to improved as we've seen the consolidated effects early on this year of good performance as well as, of course, the completion of the U.K. Rails transaction by CKI.

Okay. The next slide deserves a bit more of a dwell, right? And this is understanding EBITDA on the left-hand side, right, we're looking at, as I say, HKD 104.8 billion of reported as against an underlying of HKD 115.7 billion, and we'll explain how you get the differences between those in detail on the right-hand side. It's, I think, always best to focus on the underlying. And first of all, in terms of geographical distribution, interestingly, not really all that much change year-on-year. And likewise, in terms of the splits between the contributions, a bit of an uptick, right, in terms of telecoms year-on-year, which is nice to see, significant uptick in terms of infrastructure and the rest is kind of breaking down pretty well in line, right, with last year's breakdown. So the diversification and the spread remains very strong, both between businesses and geographically.

So turning to the graph on the right, we're going from left to right from 2024's reported EBITDA to 2024's underlying EBITDA. I think that's relatively simple. That's just taking out the impact of the write-down on our Vietnam asset. So that takes you to a comparable underlying for 2024 of HKD 106.3 billion. And we look at what contributed to this year's increases, and you start with ports. We'll have a detailed discussion of ports in the later slide. But obviously, we've seen a very good performance over the year, in particular, from our European assets and from our assets in the Americas. Dominic will be taking you through that in detail.

We've also started to see with the ructions in trade policy having the usual impact when there's disruption in this business, it results in an increasing level of storage charges, and we started seeing that in 2025, and we are continuing to see it for pretty obvious reasons today as we sit here. For A.S. Watson, again, a good healthy growth in EBITDA contribution, largely coming from the growth in the Health and Beauty Asia footprint and in Western and Eastern Europe, Eastern Europe being largely Poland, and Dominic will take you through chapter and verse of that. Infrastructure reported yesterday. And I would say just very well-distributed growth right across the board across almost all of their assets and all of their asset classes. So a very, very solid performance for CK Infrastructure.

When you get to CKH Group Telecom, a very healthy uplift. Now one thing that we need to understand, though, is that out of that HKD 2.4 billion, of uplift, about HKD 1 billion of that, right, is the increased contribution, right, from our share of VodafoneThree's EBITDA in the U.K., right? So leaving that aside for a moment, if you look at all of the other businesses, I would say that they all experienced moderate increases in growth. And what did contribute a lot was the comparison year-on-year of corporate expenses because we had a lot less transaction costs booked in '25 than in '24. And we also had some very healthy gains on trading in CKHGT's pound sterling notes, right, which gave us a nice contribution.

Lastly, finance investments and others, right? Again, you see a reasonably healthy lift. That's coming from good performances from things like IOH on an underlying basis. Obviously, TPG had quite a remarkable year, and I'm sure Kwan will be talking about that actually later on, but it gave us a very good contribution, right? And we also in financial investment and others, we recognized the proceeds from the sale of a noncore asset in Chi-Med, as an associate. And we had a better contribution from Cenovus, and we were dragged back a little bit, right, by continuing difficult contribution from Marionnaud Group in France and in Europe. So that plus the foreign currency translations that I already mentioned to take you to an underlying EBITDA of HKD 115.7 billion, from which to get to the reported, you take out the HKD 10.9 billion of onetime largely noncash movements relating to the VodafoneThree merger and you end up with HKD 104.8 billion.

Okay. So now that we've got that behind us, we can go to the next slide, which is how do you get to operating free cash flow. And this, of course, starting on the left-hand side, it basically starts with the underlying EBITDA of HKD 115.7 billion, and then you back out, right, the portion of EBITDA that is the share of EBITDA of associated companies and you replace that with the actual dividends, right, or distributions that you got from associated companies and, of course, the same treatment for joint ventures. So that's how you get from HKD 115 billion down to HKD 62.9 billion on the first bar.

And then you look at CapEx, right, and investment, right, on the right-hand side, the brown bar, and that's how you then get down to the operating level free cash flow, right, which, as I say, is HKD 40.5 billion, an increase of 4%, right, on the year. Again, in the circle diagram at the top, not really much to highlight in terms of changes, although infrastructure was a pickup in contribution as was telecom, as was retail year-on-year.

Now if you go to the right-hand side, we do exactly the same analysis, but we do it by division. So if you look at ports, right, long and the short of it, year-on-year, you are looking at CapEx and investment having increased, right, but you're looking at a somewhat more significant increase, right, year-on-year, that is of earnings from subsidiaries and associates. So basically, it washes out and you've got a couple of hundred million dollar difference in operating free cash flow from ports over the course of the year. So slightly higher reinvestment, but higher operating contribution as well, right, to fund that CapEx investment. On the retail side, again, Dominic can take you through that, but we had a year-on-year overall increase of HKD 900 million. So that's operating free cash flow of HKD 11.3 billion, which I think if I remember right, was HKD 10.4 billion last year. And that HKD 900 million comes in part from very, very disciplined capital management and very solid overall management.

And of course, the EBITDA increase, right, that we talked about right for retail earlier on. Infrastructure, right, again, a strong lift, right? And that is despite some incremental spending in CapEx and investment by comparison to last year. CKH Group Telecom, well, there, you see the big difference, right, between the EBITDA growth for the year, right, and the operating free cash flow growth, and that's simply because the EBITDA lift is not reflected in operating free cash flow. And indeed, probably will not be meaningfully anyway for the next year or 2 as the company is in the full implementation stage of its combination plan, and that means no scope for dividends, right, or distributions likely, right, in the near term. So that really explains the profile for CKH Group Telecom, better year-on-year, nevertheless, right? And that is in part due to the reduction in capital spending, right? And that in itself is also partially due to the deconsolidation of the capital spending in 3 U.K. for the 7 months after the merger.

Lastly, we go to the next slide, and we get down to free cash flow, right, an increase, right, of 102%. But this is where we do include the cash proceeds from the VodafoneThree merger in the U.K. So if you exclude those, it's still a very good performance. We're still up 29%, right, for the year. Just going through the waterfall, I'm quite sure what you call that on the left-hand side, right? So you start, obviously, with the operating free cash flow that we just went through. Then you look at interest and taxes, and you'll find that interest interestingly was lower, and Kwan will explain that later when he goes through the financial profile of the company. Taxes were a little bit higher, largely because governments are looking for more taxes just about everywhere, but not a meaningfully higher amount.

Working capital changes are very interesting and quite complex. Working capital is generally well managed. But you have to remember that there are huge FX impacts, right, on the inventory components and other components of working capital, particularly with the strength of the euro last year. So in that improvement of HKD 3.3 billion, right, you actually had favorable exchange movements, right, of almost HKD 6 billion right? And the same exchange movements give you negatives such as in our consolidation of CKI, the cash flow impact of mark-to-market collateral requirements, right, under currency swaps, that they -- or currency hedges rather that they go into, which I'm sure they've explained many times in their own results announcements.

So that kind of explains the working capital changes. The changes to others, it's mainly the deconsolidation of cash, right, and the consumer acquisition costs that are capitalized when you look at EBITDA, but are still cash going out. And those are, by and large, the main drivers with some disposals in terms of listed investments during the year, right, and some new investments during the year. That takes you down to the underlying free cash flow. That's up 29%, as I said at the outset, at HKD 26.3 billion. And then you add to that the cash proceeds that we took in from the VodafoneThree merger and you end up with the HKD 41.201 billion.

If I just take you then across the division-by-division contribution, right, to that movement from HKD 20.4 billion to HKD 26.3 billion underlying, right? We've already talked about the EBITDA differences. We've talked about the dividends from associates and JVs. We've talked about interests and taxes. Working capital, you will find -- this is the year-on-year comparison. So it's actually a bit of a reduction, but part of the reason is that when you look at A.S. Watson in particular, right, there was -- again, I mean, a year-on-year comparison is not just the actual close to HKD 6 billion, right, in the year. It's also that in 2024, right, we had a negative profile in terms of foreign exchange movements on working capital of another HKD 2 billion. So that's how you get to the roughly HKD 8.6 billion upside for A.S. Watson's free cash flow compared to 2024.

Infrastructure, I think, just goes with the performance of the businesses and CKH Group Telecom, again, that includes the deconsolidation impact of about HKD 2.4 billion of CapEx, and the other cash flow improvements that I referred to earlier on. So all of that, right? Others, I think we've basically talked about that is the proceeds on some sales of some investments, right? And it's year-on-year less proceeds coming out of -- remember that in 2024, we sold almost HKD 7 billion worth of Cellnex stock. Now we didn't have anything of that comparable scale in 2025. So that's how you get to your HKD 26.3 billion, add in the cash proceeds and you're back up to the underlying at HKD 41.2 billion. And with that, I'll take a breath and hand you over to our CFO to take you through the group's resulting financial profile.

Thanks, Frank. So on Slide 8, I'm happy, very happy to report, of course, as Frank has alluded to, the group's financial profile continues to improve. Net debt as of 31st December 2025, was approximately HKD 113 billion, a reduction of around HKD 16 billion from 2024 and represent a net debt to net total capital ratio of just under 14% on a pre-IFRS 16 basis. The group's gross debt of HKD 263 billion is very well laddered, as you can see on the chart with average maturity of 4.8 years. Approximately 37% of the gross debt is from banks and 63% is from issuance of bonds and notes. After swaps, 65% of the gross debt carry fixed interest rates and 35% is floating.

The average cost of debt has reduced from 3.6% for 2024 to 3.3% for 2025. The group's cash and liquid assets holding of HKD 151 billion as of 31st of December 2025 provides a lot of comfort in today's very volatile financial markets. So we're very happy to have such a high liquidity. And with the recent upgrade from Fitch following a change in Fitch's rating methodology, the group is now rated single A by all 3 credit rating agencies of A2 from Moody's and A from both S&P and Fitch.

I can then hand to Dominic perhaps you talk about the ports business.

Okay. Now we talk about or we look at each division, respectively. On Slide 9, we start with the Ports division. The Ports division actually has delivered a very respectable year. It has a footprint in 24 countries, 53 ports and 295 booths. And revenue for 2025 reached HKD 48.9 billion, representing an increase of 8% over that of 2024. In terms of throughput, throughput increased 3% to 90.1 million TEUs and the throughput growth was supported by a 3% increase in HPH Trust, a 6% growth in Chinese Mainland and other Hong Kong, a relatively stable Europe and a 3% growth in Asia and Australia.

And on EBITDA, you can see on the chart there on the -- in the center, EBITDA increased 8% in reported currency or 7% in local currencies to HKD 17.4 billion, with major contribution of 27% from Europe and the rest from Asia, Australia and others. If you go down on the EBITDA year-on-year change chart below, we can see the following, starting from the left. 2% or HKD 21 million increase in HPH Trust mainly attributed to good performance in Yantian, where throughput increased 7%. For Chinese Mainland and other Hong Kong, we see a HKD 43 million or 6% increase. And Shanghai Port is doing well, in particular, with 10% throughput growth and HKD 67 million increase in EBITDA. This is Shanghai. Shanghai is doing well.

And then for Europe, EBITDA increased 12% or HKD 465 million. This is mainly due to the increase in storage income, which is quite good under the circumstances in the U.K., Barcelona and Rotterdam. Now for Asia, Australia and others, EBITDA increased 15% to reach almost HKD 1.3 billion. This is mainly attributed by the increases in storage income in Mexico and good underlying improved performances in Mexico, Pakistan, Panama and Alexandria in Egypt. And then when you look at the column for corporate costs and other port-related services, we see a decrease of HKD 764 million, mainly due to one-off items in 2024, which did not recur in 2025.

And on Slide 10, basically, all these are put together to show a track record of sustained growth, both in terms of revenue and EBITDA, even amid a complex global trade environment and it also demonstrates a speedy recovery from the COVID. If you look at the COVID period and then we illustrate that we have a good and speedy recovery during that period, illustrating the resilience of the port business.

As for the outlook for port business this year, of course, the global trade growth is expected to slow down amid geopolitical risk and China-U.S. trade tensions, which we hope will improve. The current conflict in the Middle East region, of course, if prolonged, will also shift trade routes away from the region. However, with the ports division's geographically diversified portfolio, the impact is expected to be mostly mitigated as other ports in the division may benefit from the trade route diversions. So Middle East, prolonged, we see some trade route shift. But given the footprint of the ports operation, we hope that we will see that the business will be picked up by other ports. At the same time, the group in the earlier section on Panama, which aroused, I'm sure, interest from the media as well as the analysts, we will continue to work to resolve these legal disputes with the Panamanian state and other related parties in a way that is fair, in a way that protects the interest of the shareholders of the group.

So now let's turn to retail on Page or Slide 11.

Your own domain.

I hope so, getting a little bit rusty. The Retail division has a solid year in 2025 with a revenue growth of 10% to reach HKD 209.3 billion. As for the store number, the division continues to carry out its store expansion program, whereby we have opened 988 new stores while closing down 749 underperforming stores in the year. As a result, the store number stood at 17,114 at the end of 2025. That's the number that you saw on the slide, representing a 2% store number growth over 2024.

And the store portfolio split is about 48 and 52 between Asia and Europe. So Asia, 48%; and Europe, 52% of the store network. On EBITDA, as you can see again, at the center of the slide, EBITDA for the year is about HKD 18.2 billion, an 11% increase over previous year in reported currency or 5% in local currencies. And the EBITDA split is 24% from Asia and 76% from Europe.

Now let's move to the EBITDA waterfall chart, which shows the year-on-year EBITDA change of each subdivision. First, you can see Health and Beauty China. This subdivision, as we all know, is under a lot of pressure as a result of subdued consumer spending and investing profit margins to promote sales for the business. So as a result, EBITDA decreased 73% to -- or decreased by HKD 341 million, 73% dropped.

Next, for Health and Beauty Asia, EBITDA increased HKD 304 million or 8%. And then the growth is primarily driven by good trading performances in the Philippines and Malaysia. Then we move to Western Europe, Health and Beauty. EBITDA increased $377 million or 4% and then the increase is mainly driven by good sales growth in the United Kingdom and the Benelux countries. So in U.K., we have Superdrug, we have Savers. And in Benelux, basically, we have the Kruidvat and Trekpleister. They're very well-established home brands for the population.

If we move to Health and Beauty Eastern Europe, EBITDA increased by 9% or $301 million, and then the growth is predominantly attributed to the good and robust trading performance in Rossmann Poland. For other retail, which comprises our supermarket and electrical retail business in Hong Kong as well as our Manufacturing division, the EBITDA has increased by HKD 254 million, primarily attributed to a much improved performance in our PARKnSHOP Hong Kong supermarket business and also our beverage business in Hong Kong and China. So all in all, the underlying EBITDA of the Retail division increased 5% to reach HKD 17.3 billion. And of course, with a HKD 948 million foreign exchange translation tailwind, the EBITDA or the reported EBITDA for 2025 is HKD 18.24 billion.

And for this business, looking ahead for 2026, for Health and Beauty Europe and Health and Beauty Asia, we think we are well poised to maintain a healthy growth momentum despite economic headwinds. For Health and Beauty China, I'm sure all of you are very interested to see what happened. In fact, in our business in China, we're aiming and also working to mitigate the challenging market conditions through assortment enhancement, focusing on key things like own brand products, developing new products and then working with suppliers on exclusives and also optimizing the existing store network quality and enhancing online capabilities so that we can drive more on the online plus off-line traffic.

Division-wise, so we are also focusing on expanding and nurturing our 183 million loyalty member base, which is a lot as well as expanding our physical store network, which now stands at over 17,000, as I just mentioned. And then the new store CapEx payback period has been kept at less than 12 months. And then the Slide 12, basically, similar to the port division, the slide is put together to demonstrate our history of resilient growth through economic cycles, through COVID and driven by the division's geographic diversity. So from here, I pass it back to Frank to talk about our infrastructure business.

Yes. Just before we go there on that last slide on retail, I mean, I think that's a picture of what resilience looks like because if you look very closely, you have the externalities hitting you like COVID and changes in economic circumstances. You also have Mainland China going from a very high growth contributor to the more difficult stage that it is in today. And yet despite that, the growth offsets from Asia and even from Europe, give you a very, very large-scale business that has an extremely resilient and solid, both revenue, and EBITDA margin performance, which is, I think it's quite unique in the world actually.

On the infrastructure side, I'm not going to dwell for too long because CKI, a, has announced their own results; and b, hold their own investor conference. So I'm sure that most of the questions have been answered. Just to point out that the -- at the parent company level, CKI is obviously very modestly geared. So not like some infrastructure investors who will remain nameless, having geared to the max at the asset level and gear up to the max at the holding company level. That's just not in the nature of the beast. And actually, if you look through to the underlying financing at the asset level and its various associates and joint ventures, you'll typically find a net debt ratio closer to 50%, right, which is very reasonable given that I think 75-some-odd percent of the asset basis is regulated asset value.

So the regulated -- the ratings for obvious reasons, are still very stable. Regulated businesses are generating returns that are supporting now steady dividend growth since 2006. And I think we've talked a lot about the impact of the disposal of U.K. Power Networks. Again, I think that is a very, very good development for the group as a whole and actually should give you some insight as to the value in the world that we live in today of these kinds of very long life, very stable, very yielding, right, cash yielding assets, of which despite the sale of UKPN and the smaller sale of Rails, CKI and its partners still have a lot of assets of the same nature and quality. So that -- their reported numbers end up making a very, very nice contribution to CKH's EBITDA. That's down at the bottom on the right-hand side. That was up 6% year-on-year, 5% in local currencies. So we treasure our investment in CK Infrastructure for as long as we can.

Kwan is going to talk to you about the Telecommunications Group.

Okay. So we can go to Slide 14. The Free Group Europe division has had a very steady performance for 2025 with underlying EBITDA growing by 6% in local currency. In the U.K., Free U.K. merged Vodafone U.K. at the end of May 2025. And the numbers you see represent Free U.K. stand-alone numbers from January to May and 49% of the merged entity's performance from June to December. From an EBITDA point of view, the U.K. merged entity, of course, has benefited from the enlarged scale from the merger. Just want to also point out to you in Sweden, the increase in EBITDA also includes an exchange gain on an intercompany loan. However, even after excluding this gain, Free Sweden's EBITDA grew 7% year-on-year. The one-off item of negative HKD 774 million represents transaction-related expenses incurred for the U.K. merger, so that you end up with a growth of 6% before the one-off gain and still a growth year-on-year after the one-off -- negative one-off expense.

Going forward, the division is expected to deliver stable underlying performance through growing customer base, expanding beyond the core offering, which I'll go through a little bit more in detail later on and implementing cost efficiency initiatives. Slide 15 provides a year-on-year comparison of the individual business units in local currency for the Free Group Europe division. Frank has already mentioned the performance of the businesses, so I won't go through it in detail. But one particular point I'd like to highlight is whilst U.K. operations EBITDA grew 19% year-on-year, EBIT has turned from positive to negative as the merged entity is incurring significant depletion charges as it integrates the 2 legacy company networks and systems. This is expected to continue in the near term as the integration work continues.

Now we can quickly turn to Slide 16. This slide focuses on the U.K. operations. Upon completion of the merger, Frank has already mentioned that the group received approximately GBP 1.3 billion from the transaction. And whilst the merged entity will not be providing much earnings or cash flow contribution to the group in the near term as it proceeds with the integration task in hand, is providing, of course, value accretion as it works to deliver the GBP 700 million of synergies on an annual basis by the fifth year following merger completion. I'm happy again to report here that the integration is progressing well and is on track to deliver on plan. So this is progressing in line with the plan that we put together for the merger.

On Slide 17, this slide provides a bit more detail where the growth, earnings and cash flow growth in this division will come from. First is beyond the core where the division is providing new services to its customers based on this trusted brand. As new services get piloted and successfully tested in one market is rolled out to other markets. For example, in utilities, Wind Tre has moved from a white label provider of gas and electricity to a full integrated offering. The division, of course, also continues to look at improving costs by leveraging on group scale and leveraging on new technology with the potential to use AI across the operations. A working group with participants from the different operations have been formed to share learnings and also to look for some cost-sharing opportunities. And this work is ongoing to try to drive more earnings and more cash flow from this division. And of course, on the last pillar, there's a continued focus on investments, both in terms of investment amount, but also the reinvestment cycle and revenue opportunities. Clearly, M&A activities like the merger in U.K. could provide the benefit of increased scale and the group continues to look for opportunities in this area as well. And if I can then now hand back to Frank.

Good. Well, this is quite a happy slide. These are four associated companies, all of which did very well in 2025, starting on the left-hand side, of course, with Cenovus Energy. And I mean, as you can imagine, the impact of the current oil price, gas price and refined products environment for Cenovus is very, very positive. And we grew the company this year with the acquisition of MEG Energy, which adds barrels that would take us to close to 1 million barrels a day of oil equivalent this year. And that's been reflected very significantly in the current share price. It was moving very favorably all across the end of last year and has continued to move favorably. As we sit here today, our 16.4% interest was at the low point in 2024, which was in April, was worth CAD 15 a share. It's now worth CAD 32-some-odd a share. The difference there is between a valuation on our holding, right, that was under CAD 5 billion to today just slightly over CAD 10 billion. So the hedge benefit associated with Cenovus is terrific from a value hedge point of view. Indosat Ooredoo Hutchison staged a very good recovery during the course of last year. I think the slide pretty well speaks for itself because I have to move quickly because our Chairman has arrived.

Sorry, I have to finish the CKA Analyst Meeting first.

TPG in Australia actually had a phenomenal year, maintained a very solid operating profile in the businesses that it has retained, but also disposed of, right, a very material set of assets at, we think, very good value, bringing in AUD 4.7 billion in net cash, of which AUD 3 billion was in effect distributed to shareholders by way of return of capital and dividend. And at the same time, it repaid AUD 2.7 billion of debt to really result in a very, very strong financial position for the company going forward. Part of that was through a very innovative structure, right, to handle handset receivable financing so that, that financing is being done by third parties to put handsets in people's hands, not just by us, which is a very good thing. And of course, we also had a reinvestment plan put in place, which enabled the float to be enlarged, which was very important because the liquidity in the stock, right, was subpar just because of the size of the public float.

And then lastly, HUTCHMED, again, this speaks for itself, but encouraging stuff in terms of sales of existing drugs, a very, very interesting ATTC platform advances, which they will be -- have announced and will be continuing to announce, and the divestment of a noncore asset, which I referred to in the financials.

I'll go to the next Slide 19, which is on sustainability. And I won't read it. I think you can read it for yourself. I think we're making very good progress. We're dealing with an increasingly complex regulatory disclosure requirements, but it's in hand. And our green spending, as you can see, is very elevated about USD 1.9 billion of what we spend in any year, or what we spent in 2025, it counts as green spending. And that's quite natural because as you go through the replacement cycles in our very capital-intensive industries, you're almost always replacing whatever with something that is greener by its nature, right, whether that's sourcing power, whether it's managing power and telecoms networks, whether it's electrifying cranes, whether it's electrifying trucks or tractors in the ports. So it's very natural for us to have a very substantial green spend, and we do.

So I will stop there. And I think we turn you over to Q&A.

[Operator Instructions] It seems that CK Hutchison has signs of more corporate actions in the past 12 months. What are the drivers? And what does the group want to achieve through these exercises? Are there any priorities?

Well, our recent corporate actions reflect a consistent strategy rather than a shift in directions. One of the group's key objective is to unlock value of our assets and strengthen our financial position. We're responding to opportunities that allow us to recycle capital efficiently and reinforce the group's long-term resilience. One recent example is the disposal of UKPN at a very good premium to RAV, which will result in attractive return crystallization with significant cash flow and disposal gain to the group upon completion. We have always tried to convince the market that our stock is undervalued by engaging in value-accretive corporate transactions and improving earnings prospect.

We believe the market will acknowledge our efforts and ability to continue creating value for shareholders while maintaining a strong financial profile, which ultimately should lead to a gradual narrowing of the discount to NAV of our stock. If you look closely, you'll see that by their nature, most of our businesses benefit from achieving and growing scale in their sector and markets. Conversely, they are disadvantaged in cases where they are subscale. This will be increasingly true as we move into the age of AI.

Productivity and cost improvements on AI will be more valuable the more they are implemented at scale. Subscale players will be increasingly at a competitive disadvantage. This is why generally when we buy businesses, it is to increase the scale of our existing businesses. For example, Cenovus' recent acquisition of MEG. I mean, we're finally over 1 million barrels a day of production. Conversely, when we sell businesses, this is generally because we're being paid an attractive premium by a buyer who wants to increase scale at a price higher than we would be prepared to pay for it. For example, a recently announced sale of UKPN. It works on both sides. Thank you.

The next question, what are the group's latest thoughts of this stake in Cenovus? Is there any desire to sell down further as earnings from the energy segment are inherently much more volatile compared to most of the rest of the group's businesses?

Frank?

Sure. I mean I've covered a lot of that already in the presentation. So I'm not going to repeat the value hedge effect that Cenovus has for us. Look, we've been in the energy sector in Canada now for 40 years, believe it or not. And it has always been a good asset despite the so-called volatility. If you look at Cenovus post MEG with the levels of production that we're talking about, when MEG was priced oil $58 a barrel. And I'm sure Cenovus has said on many occasions that they're breakeven price for producing a barrel of oil in WTI terms is less than $45 a barrel. So volatility is volatility, but if you look at history, not very often have the WTI prices sunk below that threshold. So this is a company that has such a level of scale and of course, very integrated production along with refining and transportation assets that enable it to take quite a bit of the volatility out of the picture. And it's -- they're bad days from time to time when WTI goes way down, and the elevator can go down fast. But you look at it over a period of time, and this has been a tremendous value to the group.

Yes, a lot of producers, of course, face around $60. So when prices drop below $60, those producer will leave the table.

Next question, a lot of people asking this one. What are the HPH's operations from escalating conflict in the Middle East?

Dominic? Can you help me answer that?

Okay. Operationally, we expect the vessel calls at our port in UAE will reduce, as major carriers have paused sailings to the Strait of Hormuz. On the other hand, to compensate, there has been an increase of requests for ad hoc calls at our other ports outside the strait, such as Sohar and Pakistan, for cargo diversion. We lose some here, and then we got new business in other ports because of the diversity of the portfolio. However, if you look at the overall things, the contribution of the Middle East ports in the conflict zone accounts for less than 0.5% of our group's overall throughput. If we look at the Red Sea disruption, which started in 2023, you know, its figures prove that the impact to HPH overall was not significant. As I said, you know, some ports have benefited from the increase in transshipment volume from the route of diversion. The geographical spread of our portfolio is very important in mitigating this downside or any regional disruptions. Thank you.

Next question. Also a lot of investors are asking this one. Given the latest development of PPC Panama, could you provide an update on the progress of the larger transaction?

Frank, your favorite topic.

My favorite topic. Yes. Well, obviously, there's 2 aspects to this. I mean, in terms of the situation in Panama itself, we've been issuing regular updates, and we'll continue to issue regular updates on a number of very serious and very substantial legal proceedings that we have underway to try and make sure that we are not in the long run unfairly treated or harmed in economic terms, at least by what we consider to be a completely unlawful expropriation of our franchise and confiscation of our working assets in Panama. These developments have not materially affected our ongoing discussions with counterparts on the bigger transaction. And those are still ongoing. But some people may think it's taking long and that's not a good thing actually as a practical matter. The business is getting better, right? Not getting worse and has all the way through '25. So we were not at all unhappy to be holding the business through '25 or indeed to be holding it today.

The next question. What is the group's capital allocation strategy, especially if net debt comes down significantly after asset sale? Will the company consider increasing dividend payout ratio or conducting share buybacks.

Well, we're living in a world in turmoil today. So allow me to report is that our free cash flow was up 102% to HKD 41.2 billion in 2025, mainly due to receipt of approximately GBP 1.3 billion net proceeds upon completion of the U.K. merger as well as continued cash flow generation from the measured capital spending and disciplined working capital management. Net debt to net total capital ratio on a pre-IFRS 16 basis improved to 13.9% at the end of 2025, demonstrating our strong resilience in navigating under an extremely volatile macro environment.

With the recent row in the Middle East and its repercussions to the market, the group's businesses will undoubtedly face some new and perhaps some foreseeable challenges in 2026. It is therefore very important for us to maintain more financial resilience. We continue to manage our assets and businesses with a focus on delivering sustainable growth in the underlying value while maintaining our current investment-grade ratings. We'll also maintain our long-term objective of exploring value accretive transactions for our shareholders, and looking for earnings and cash flow accretive opportunities that fit into our existing expertise. I think it's quite obvious. We've been doing exactly that.

Dividend payout and share buybacks remain a board decision. However, the management believe that share buyback is not the only means of capital return, recurring earnings growth that enables consistent dividend return is another compelling way to reward shareholders. Overall, we aim to achieve a competitive total return for our shareholders over the long term.

Next question is on retail. How does CK Hutchison think about retail division's current geographical exposure?

Retail is definitely Dominic's turn.

Okay. Let me try to answer that. As you see, A.S. Watson has a diversified business portfolio, operating 12 retail brands in the U.K. and then Netherlands and others in Asia with over 17,000 stores in 31 markets worldwide. And we think it is already a very good geographical spread. We are also second to none in terms of our online offerings and fulfillment capabilities. So based on this, all the business in this division benefit from the most advanced retail technology including AI to improve our customers' experience, increase productivity and of course, reduce costs. So we are also helping or protected by the group-wise cybersecurity capabilities. That's, again, second to none. So we have technology and then the technologies is well protected.

If you look at how our geographies have performed over the past 10 years, as I show in one of the earlier slide, you can see that the U.K. and Europe, providing leading sales and margin growth and competitive earnings return on a steady basis over a very long term. So that's the resilience and a succession of the business. Health and Beauty Asia, on the other hand, has provided a very large opportunity for higher growth rates. If you exclude China and Hong Kong, the Health and Beauty Asia represent 20% -- 22% over the Retail division. EBITDA and 34% of its year-on-year EBITDA growth. So Asia is important for the future growth of ASW.

China, in particular, has been the crucible of development. Of course, when people talk about China, people are talking about the issues. But one thing I can always say is never bet against China. Because if you look at the development of our offerings online and fulfillment capabilities, actually, we capitalized on our China experience so that all these developments accrued benefit of all our Retail business around the world. So this is a practice when we have something in one country or one district, we always try to pick it up and then try to benefit the entire group.

We have a very strong brand in China.

Oh, yes. We have.

And the recognition is trans-generation. And we will see better times in China. I'm quite confident. Thank you.

Next question is on telecom. Are the expected synergies from the U.K. merger on track?

Frank?

Yeah. Actually, we've already answered that question in Slide 16 that Kwan took you through in our presentation, so I'm not gonna dwell on it. We think, yes, right? The integration work is progressing well. We think it's on track. We've had a number of wins which are listed on that Slide 16. And as we look forward, well, we think that we are on track to get to the targeted GBP 700 million of operating and CapEx synergies by the fifth year post-merger. The only thing that I would add is that, you know, it is early days. The merger was completed, right, in the month of May, if I remember right.

As we watch through 2026, right? It's quite a crucial year for really understanding whether we have the right momentum, right, in terms of both synergy capture, but also avoiding major dyssynergies as we go through and major cost issues. I have no reason to think that we won't, but it's gonna be a very seminal year to watch whether we're tracking to, ahead of, or hopefully never behind what our aspiration was and our combined business plan to get to that synergy level.

The next question is also on telecom. When will VodafoneThree start to appraise the enterprise value of the business, how far are you from the current level to the threshold of GBP 16.5 billion for exercising the H put option?

Frank, It seems Vodafone is your -- it's always the topic.

All right. Happy to take that one, Chairman. Well, look, I mean, first of all, right, the option structure, right, the put and call option structure is only exercisable after three full financial years post-merger, which is obviously still some time away. You know, the current focus just has to be on the execution of the integration plan, which was agreed jointly between us and Vodafone and delivering the target synergies within the expected timeframe. You know, if you ask me whether we've made progress, of course we have. I mean, I think that there's value in our 49% interest, right, in VodafoneThree, right? And that it has certainly not deteriorated since the day that we agreed to it.

The next question is on CKI. What are the expected returns in the upcoming tariff resets for CKI's Australian portfolio in 2026?

Victoria Power Networks and United Energy should receive their final determinations in April 2026. And the new regulatory period will start on first of July 2026. Based on the draft determinations, allowable returns are set to increase with allowed ROE increasing from 5.04% in current period to 7.97% in the next period.

The next question. Three Group has seen solid earnings recovery since 2023. What is the future strategy for the business?

Frank?

Okay. I mean obviously, we've been talking a lot about VodafoneThree, and that is to get it right and get hopefully ahead of our aspirations on the merger integration plan, both in terms of time and in terms of quantum. For the rest of the businesses that we have operating control of, I think, again, Kwan has taken you through all of the multidimensional things that we are doing, all of which are directed to expanding revenues and margins from new areas right to a very big customer base that can be targeted for them. Targeted in the nicest way that can take benefit from it.

But also Kwan himself is responsible for running a very significant overall review and implementation as to how we can enhance free cash flow generally from these businesses. And that includes what do we do in terms of AI tools, what are the implications of introducing those AI tools at many, many levels at customer-facing levels, at network management levels at, frankly, IT levels, one of the most significant uses of artificial intelligence today is to reduce the number of people you need to execute programming. And so it may be that there will be some substantive changes in our IT departments. We're looking across the board at that and I think that's the most -- probably the most -- one of the most important things that we can do, right, over the next 12 to 18 months.

Next question is on retail. How have H&B China and other retail as a whole performed in the first 2 months of 2026?

All right. The answer could be short and simple. Both businesses, Watsons China and other retail and Hong Kong actually delivered good results in the first 2 months of this year, 2026 as compared to same period last year. So good news, but we have to bet a lot. Yes.

The next question is also on retail. Foreign retailers, including Mannings, IKEA, Harrods, Zara Home, et cetera, are increasingly exiting or reducing the footprint in Chinese Mainland. What are the latest thoughts on the market from H&B China's perspective?

Well, we will not comment on other retailers. They have the strategy, they have their own views. But as far as we are concerned, ASW's concerned, CK is concerned. China remains hugely important to our group as a whole, not least because it is one of the most advanced economies in the world in terms of rapidly changing customer behavior and trends. It is also one of the most advanced countries in the world in terms of retail technology. If you go to China, the technology in retail is just amazing. And particularly, they're using and implementing AI in retail. And then not to mention the innovation in robotics and in delivery and fulfillment.

So in that sense, China is the innovator, okay? So it is also -- we learn most, how to improve the customer experience, increase productivity and reduce costs. A key to success, not just in China, but in all businesses around the world. So yes, as I said just now, regarding China, people are a bit pessimistic on China given what's happening. But on the other hand, we look at China as very important. Although consumption is sluggish, but we don't see it as a prolonged negative because if you look at the statistics, China has huge untapped consumption capacity. Household deposits alone over RMB 168 trillion, is not RMB 168 billion, its RMB 168 trillion. So we'll be there at scale to meet demand when it's unleashed. So we have confidence in China. Thank you.

Next question. How resilient is your business model under different climate policy and demand scenarios? And what is your plan to manage transition and physical risk?

On this one, it's a pretty complex area, and we are responding to a lot of new regulatory requirements that address precisely these kinds of areas, how resilient is the business model, et cetera. I would say, in general, we're in pretty good nick. We do conduct the TCFD-aligned climate scenario analyses, and additional analyses are underway. If you read our sustainability report, which will come out with our annual report, you'll see that we've completed some. We're in the process of completing some others, right? As to the major risks and the major mitigations across the businesses. We do what are called double materiality assessments across all of the divisions.

And we have pretty strong governance. I mean, we have a board sustainability committee, divisional working groups, sustainability working group across all of the businesses. Our transition strategy, specifically in terms of carbon, right, is supported with Science Based Targets initiative, validated target, and 10 specific net zero opportunities. At this point, which go to renewable energy, energy efficiency, electrification, supply chain decarbonization, climate adaptation, and so on. I think all of this keeps us on track to meet our carbon reduction targets, which are set out in detail, as is the performance to date in our sustainability report.

Actually, the next question is on CKI. CKI is actively pursuing growth opportunities with a strong financial position. What will be the geographical focus for CKI in terms of M&A projects going forward? Will CKI consider investing more in unregulated businesses rather than regulated ones going forward. What are the IRR hurdles for project acquisition?

Okay. This is many, many questions. I'm not making a division between regulated versus unregulated business. I'm looking at the stability of the cash flow. So that's not where I draw the line. It's mainly on the stability of cash flow. But CKI will continue to look for new M&A opportunities. And we'll focus on locations that have -- that we already have presence and create synergies and scale, such as U.K., Continental Europe, Australia and Canada will evaluate each opportunity on a deal-by-deal basis and open to both, as I said earlier, both regulated and unregulated business, but mainly with the emphasis on predictable cash flow. And an IRR that fits our criteria. Now I'm not going to give a number because if that number goes to my competitor, I should lose my job. So thank you.

Due to time constraints, we have to conclude our webcast today. Our IR team will respond to the unanswered questions. Thank you very much.

Thank you. But can I just add that given how the world looks today, I think both CKHH and the other members of our group are at a good place. At a good place. And we feel fortunate that the plans that we did a couple of years ago. Now it's, we're getting the fruits. We're enjoying the fruits. Thank you.

Thank you.

Thank you.

Thank you

Welcome to the live webcast of CK Hutchison 2025 Interim Results Presentation. Our speakers today are Mr. Frank Sixt, 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. Watson Group; and Mr. Kwan Cheung, Group Chief Financial Officer of CK Hutchison. [Operator Instructions] Before I hand over to Frank, please also pay attention to our disclaimer, which you can find on Page 2 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 3. 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 the revenues are up a healthy amount, HKD 8 billion plus. Having said that, fully HKD 1.3 billion of that is due to ForEx movements that were favorable, but it's still a good performance.

If we go over to net earnings, right? 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 noncash write-down impact or loss impact coming from the 3 UK merger, which Kwan 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 HKD 0.71 a share. That is an increase of 3.2%, which I hope you will agree with me is a 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 HKD 3.7 billion, but again, about 13% of that. So a couple of 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 are about 13% of the movement on an underlying basis is attributable to strong GBPs -- strong sterling and strong euros.

Operating free cash flow, you'll see is up by HKD 2.1 billion compared to the first half of last year, which is an 11% growth, but we will 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 statement outlook 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, with the -- particularly with the cash inflow from the U.K. merger, our net debt ratio has declined quite a bit from 17% at the end of the first half last year down of 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, the -- I think the thing that stands out is the declining contribution from Finance & Investment compared to last year, right? 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. PARKnSHOP, I think, is looking a little bit better, but we have had some travails with Watsons 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, I mean, 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 a very -- 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 we'll 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 U.K. power networks, to the new stuff that we acquired last -- 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, I mean, looks very good. I mean, it looks like a roughly 9% gain before ForEx. So that's HKD 1 billion. 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 U.K., 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 the -- 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 those profit in the first half.

The disappointment, of course, is Finance & 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, Cenovus 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 any number of their upstream and downstream facilities relating to turnaround, legitimate maintenance, but it's still a bit into the first half for Cenovus.

We also are continuing to bear some losses out of things like the Marionnaud 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 Whampoa's China division, of an interest in an asset that HUTCHMED had in Shanghai Pharmaceuticals, right? So that's kind of -- 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, a wonderful headline, HKD 21.8 billion, up 11%. You find right away that when you look at cash flow, Finance & Investment is way down, down 7 points, right? It was 14% of the group's cash flow in the first half 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, that it's a HKD 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 -- sorry, 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 and 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, I mean, it is fundamentally operating performance, a little bit less in terms of dividends from our associated companies, but very strong nonetheless and a 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 the treasury operations, is nevertheless stacked into the first half and will probably recur in the second half.

Lastly, Finance & Investment, as I said, really quite burdened from an EBITDA point of view, and Kwan will take you through this. Interest income was lower than in the first half of 2024. The Marionnaud loss was quite a bit higher than in the first half of last year. And then, of course, with Cenovus, 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 heavy number of HKD 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, but not too much to report there. They almost -- the increase in interest received is almost exactly offset by the increase in taxes paid and 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, as 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 or 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 HKD 16.1 billion this year of recurring earnings, smack in the middle, you can see the year-on-year exchange impact on working capital. That was about HKD 5 billion positive this year and last year at the same time was about HKD 2 billion negative. So that's where that HKD 7 billion comes up. So you'll understand right away that if you don't assume fair winds or foul winds on a ForEx point of view in the second half, you're not going to look like [ HKD 16.1 billion versus HKD 8.9 billion, ] you're going to look modestly up, of course. But because the underlying working capital changes at HKD 795 million just reflect very good working capital management, which I think the group continues to stay focused on and do a good job on, but nevertheless, you should not expect it to be has dramatically improved. And then, of course, you add to that the incoming proceeds from the U.K. 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 Kwan, who's going to take you through how that all adds into our financial profile.

Thanks, Frank. And the group financial profile remains very strong and definitely improved and benefited from the net proceeds we received on the U.K. merger. As the audience will see our liquidity improved with total liquid assets as of June totaling HKD 137 billion, significantly up against the same period last year and also against the year-end. Net debt has reduced to HKD 119 billion and net debt to net total capital reduced to 14-point-some percent, a very low number.

You can see also from the table that the group's debt maturity profile is very well laddered with no significant refinancing requirement needed in the remainder of 2025. The group's average cost of debt for the 6 months has reduced to 3.4%, directly in line with the drop in 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 Ports.

Okay. Well, now you have heard from Frank and Kwan on the financial highlights, financial profile and the overall financial position of the group. Now I would like to start by going into the individual businesses. So first, on Slide 9, we look at the Ports division. As Frank said, they are doing very well. In fact, the Ports division has delivered a very solid first half. Throughput increased 4% to 44 million TEUs, and the throughput growth was supported by a 7% increase in HPH Trust, a 3% growth in Mainland China and other Hong Kong, a stable Europe and a 5% increase in Asia and Australia. So the throughput grew 4% into 44 million TEUs.

On EBITDA, you see it in the middle, EBITDA increased 10% in reported currency or 8% in local currency to HKD 8.72 billion with major contribution of 26% from euro and 57% from Asia, Australia and others, as you can see in the pie chart.

So let's go into the lower chart, EBITDA year-on-year change. You can see the following. Starting from the left, HPH Trust, a 6% or HKD 38 million increase, mainly attributed to good performance at now YANTIAN port, where throughput increased 13%. Next, for Mainland China and other Hong Kong, we see a HKD 29 million or 8% decrease, and this is due to mainly a nonrecurring onetime insurance claim in last year 2024, which doesn't occur or recur this year.

If you move further on the right, for Europe, EBITDA increased 20% or HKD 375 million. This is mainly due to the increase in storage income in the U.K., Rotterdam and Barcelona. So storage income now play, I would say, a very meaningful role in our Ports P&L. Now for Asia, Australia and others, EBITDA increased 12% of HKD 514 million. This is mainly attributed as I mentioned, increase in storage income in Mexico and, of course, good underlying performance in Pakistan, Panama, Thailand and Middle East port. So all the ports are doing actually quite well operationally and also income-wise.

For the corporate cost and other port-related services, we see a decrease of HKD 224 million, predominantly due to, again, the nonrecurring one-off item in 2024. And of course, we are seeing an increase in efficiency in operation. So that's why it will bring down the corporate cost and other port-related service costs down.

Looking ahead in the second half, despite volatile global trade and consumer demand, the Ports division is expected to deliver good earnings growth in 2025 as a whole through organic growth, contribution from expanded facilities because we have -- for example, in Egypt, we have expanded facilities there. And of course, last but not least, cost efficiencies.

So let's go to the next slide, Slide 10, and Retail. Okay. The Retail division also like Ports have a solid first half, as Frank mentioned, and I'm going to share with you some numbers as you can see on the chart. First, on store number. The Retail division continues to carry out the store expansion program whereby, in the first half, they opened 415 new stores and closed 355 underperforming stores. So as a result, there's a net gain, and then the store number increased 2% over last year and stood at 16,935 stores at the end of June, as you can see on the store number chart there. The portfolio -- the store portfolio split is about 51-49 between Asia and Europe. It used to be 50-50. And then now it's just a sway, just 1 percent point. On EBITDA, as you can see on the center right, EBITDA for the first half is about HKD 8 billion, a 12% increase over last year in reported currency. The EBITDA split is 27% from Asia and 73% from Europe, as you can see in the chart.

Again, now let's move to the EBITDA waterfall chart below, which shows the year-on-year EBITDA change of each subdivision. First, the Health and Beauty China. This division, Health and Beauty China is under a lot of pressure as a result of subdued consumer spending and business investing profit margin to promote sales, though that has an impact on the profitability and as measured by EBITDA. So you can see that in Health and Beauty China, we see a decrease of 133% (sic) [ HKD 133 million ] and a hefty 53% decrease versus same period last year.

Next, Asia, Health and Beauty Asia, EBITDA increased HKD 163 million or 9%. And then this growth is primarily driven by good trading performance, particularly in the Philippines and Malaysia. For Western Europe, Health and Beauty Western Europe, EBITDA increased HKD 174 million or 5%, as you can see, if we go from left to right. And then the increase in EBITDA in Western Europe is driven by good sales growth in the U.K. represented by Superdrug and Savers brand and also the Benelux countries under the Kruidvat brand.

If you move right, again to the Health and Beauty Eastern Europe, the EBITDA increased by 25% or HKD 334 million. The growth is predominantly attributed due to good trading performance in Rossmann, Poland, which actually make up the big proportion of the earnings in Eastern Europe. For other retail, which comprises our supermarket and electrical retail business in Hong Kong as well as our manufacturing division, the EBITDA combined has increased by 63%. So as Frank said, the supermarket business in Hong Kong is still under a lot of pressure because of competition, because of people moving on north to do the grocery. But I think the business has done a lot of things in terms of optimizing the store portfolio and reducing costs. So at least we can be competitive in some major items versus that's available in the Mainland.

Electrical business under the Fortress name, they are doing well and then has reported good growth and then also manufacturing. So all in all, the underlying EBITDA of the Retail division increased 8% to HKD 7.69 billion and with a favorable FX translation impact of HKD 284 million, that EBITDA for the first half is about HKD 8 billion.

Looking into the second half of this year, like the Ports and the Retail side, we expect the operation in Health and Beauty Europe and Health and Beauty Asia to maintain the growth momentum despite economic headwinds. At the same time, various initiatives are being implemented to improve the performance of Health and Beauty China and also Health and Beauty Hong Kong. We will also focus on expanding and nurturing our 175 million loyalty member base. And at the same time, we would continue to expand our physical store network portfolio, which has a very short CapEx payback period of less than 11 months. So the CapEx payback is fast, and then that we have plans to continue the store expansion programs.

So from here, I think I'll pass it back to Frank and talk about the structure.

Okay. I think we can move pretty quickly through Slide 11 because CKI announced their results yesterday. So most of this is already, to some extent, old news. You do notice on the upper left-hand side, that the net debt to net total capital ratio did go up somewhat in the half. That is going to come down in all likelihood in the second half as you see the completion of the sale of Eversholt U.K. rails, which in terms of enterprise value is around HKD 28-plus billion. So there's really no need to worry about debt increasing in CK Infrastructure. In fact, the war chest is getting stronger.

And most importantly, they talk about this, and we always reported the see-through net debt ratio. So if you go down to the asset level and you say how much leverage is there against the underlying infrastructure assets, most of which are held in associated companies. The short answer is 49%, which by any measure in infrastructure investing world is very low. That's why there's a A stable rating from S&P that remains very unchanged.

Our regulatory resets this year have all been quite good, although in the water business, which is -- there are troubled waters in the water business in the U.K. I think that's still in front of the CMA in testing the regulators' determination. But overall, there are no adverse resets. And I think looking forward, we don't particularly expect any adverse resets. We've had a couple of quite reasonable ones in Australia, there's a couple more coming in Australia. So it's really steady on as it goes.

And as you can see, the reported NPAT, which is on a post-IFRS 16 basis was up by 1%. And EBITDA was up about 6%, right, in local currencies, which is good. The result is that the company is very comfortable in maintaining its now very long established tradition of always increasing the dividend, and this is probably the only company that I can think of, certainly in this part of the world that has increased its dividend every period for the last 18 years since it started in 2006.

So on the next slide, I'm going to let Kwan who'll also be leading the CKH Group Telecom call later on this evening, take you through the fundamentals on telecoms.

Okay. Thanks, Frank. This slide shows the 3 Group Europe, which actually is only focusing on the European OpCos and doesn't include the head office CKHGT, CK Hutchison Group Telecom. So you don't see the treasury gain that Frank mentioned in the numbers. So it's important to bear that in mind.

On a division basis, the 3 Group Europe has delivered a very steady underlying EBITDA performance with a 4% growth for the division as a whole in local currency. The one-off item you see on the right, the negative HKD 774 million, it represents the fees and expenses relating to the merger of 3 UK with Vodafone UK completed end of May this year, which, of course, brought in, as mentioned earlier, a significant net proceeds of GBP 1.3 billion. So the group and the team at VodafoneThree, the new merged entity, is, of course, working very hard and very focused to execute the investment plan and to deliver the planned OpEx and CapEx synergy target. So that's something which we'll be focusing on that we'll be reporting on as we developed along the way. But the rest of the 3 OpCo is not taking it easy either and is undergoing a comprehensive review exercise to identify major opportunities to increase positivity and reduce costs over the next 5 years. Again, I hope to give you more update on that as this develops over the course.

I can now turn over to the next page. This slide provides a lot more detailed information for each of the 3 OpCos. And for U.K., the number for 2025, represent 5 months of 3 UK stand-alone results and 1 month of the group's share of the merged entity's results. For U.K.'s underlying results, it is important to exclude the GBP 75 million of merger-related expenses that is showing there. And underlying EBITDA, you can note is actually 13% improvement year-on-year. I also like to highlight that the 3 Sweden's results benefited from a foreign currency gain of SEK 114 million on the translation of intercompany loan with 3 Denmark. So that's flattering the results a little bit.

However, even excluding that, 3 Sweden is still delivering an improvement year-on-year. The only one to highlight, which is the one showing a little bit red for the period is 3 Austria which has -- with the competition there, the competitive landscape have been affected in this gross margin. And you can see total margin has taken a 5% drop. 3 Austria management team is working very hard on this, and we hope to see an improvement, hopefully, as soon as the second half of this year, but this is something that is work in progress.

And on that, I shall now hand back to Frank.

Okay. It remains to cover what we call the other operations. This is all stuff that you find in Finance & Investment rather than in the sector columns where they operate. The first on the left-hand side is Cenovus Energy, difficult first half, as I mentioned before, and they've reported it, and it's well absorbed by the marketing, but there was both lower commodity pricing overall. And of course, as I said, significant maintenance and turnaround activity, which won't be repeated in the second half. So I think that commodity prices depending, they are set to hopefully look better in the second half than they did in the first half.

The output of that from our point of view is that the dividends were subdued. There was obviously no excess cash flow dividend to be distributed. They were slightly better than last year, but relatively small amounts and on a weaker Canadian dollar. So from a cash flow point of view, less of a contribution to CK Hutchison.

Having said that though, we do have a program of selling Cenovus stock to match the dilution -- or the accretion impact actually of their ordinary course share buyback program. If you know North American companies, this is very, very common that shareholder returns are structured in part in dividends, but in a much larger part, particularly in the low price environment in share buybacks. It's very difficult for a major shareholder to participate in the share buyback by an issuer in Canada and the U.S. So the alternative is really just to match the sales to the buybacks, which is what we have been doing. So that brought in another HKD 926 million in proceeds in the first half. So I don't want you to leave with the impression that Cenovus is by any stretch of the imagination not a good asset for us. It is a very good asset. It improved its credit profile a bit by redeeming some preferred shares during the year. And as a result of that, it actually got a credit upgrade to Baa1 in March of this year. And as I say, the outlook looks reasonably positive for the second half, and we'll see what happens there.

IOH, Indonesia, battling a very difficult market in the first quarter, very much intensified competition. And then, of course, from our point of view, also a lower rupiah year-on-year. So you put all of that together, and it was a weaker contribution to us. Having said that, their average revenue per user and the data usage that they're seeing are all very solid. They have some extremely interesting initiatives in AI data centers in partnership with NVIDIA, which I think is very creative in terms of looking towards the future and not just towards the past as a telecom operator. And they have increased their dividend payout. As I say, that's not reflected in the first half because it got paid in July, but they've taken the payout ratio up to 55%. So this is, again, a very good associated company. There aren't all that many telecom companies or facilities-based telecoms operators that actually have profits and distribute dividends, and this is one of them.

TPG in Australia, and it has really gone through, I think, a very transformational period. Again, you don't see it in the contribution to our financial performance, partly because of the weaker Australian dollar overhanging everything and partly because although revenues have been growing, they've also been absorbing some of the costs of the expansions that they've been doing. So they -- the most -- probably the most significant transaction they did last year was to get into a what's called a MOCN arrangement with Optus, which gives them essentially the same coverage in the outlying territories as Optus has which was significantly more than TPG had. So TPG does not have a coverage disadvantage at all anymore. And as a result, we're starting to see significant improvement in terms of both customer acquisition and pickups in revenues. It's just that you don't see that yet being reflected in earnings contributions because there's some costs associated with implementing that agreement.

They've done a major brand refresh. And of course, most recently, they've announced a very, very important transaction with Vocus where they sold assets which I guess you would consider them as noncore to the ongoing TPG story and the ongoing TPG opportunity that brings in AUD 4.7 billion of net proceeds. A significant chunk of that they've, I think, already announced, is planned to be returned to shareholders, which is good news because, obviously, the return on investment is going to look a lot better with the investment being materially lower.

And they're also offering a very creative reinvestment program, which will only be taken up by minority shareholders or whoever they assign their rights to reinvest to. What that does is very important. It increases the liquidity in the stock because as you probably know 50-plus [ spec ] percent is owned by Vodafone and ourselves and then you have the TO family and you have this whole HAT Group as major shareholders. The company has too small a float. So they've used this opportunity, I think, very, very wisely, start moving down the path of expanding the float, which basically means that they should trade better because it's one of the reasons that they have not traded as well as they could is simply because there wasn't enough shares to buy for significant players and institutional investors.

Lastly, HUTCHMED. HUTCHMED made their own announcement a few weeks ago, and they did reset some guidance somewhat down from where it had been. That is not by any stretch of the imagination a company disaster. Everybody knows, on the commercial side, pharmaceutical sales in China that the government has changed a lot of the rules and that has resulted in a level of instability, which has resulted in a little bit less sales. It's not the end of the world. It will find its appropriate level.

In the U.S., the U.S. government has insisted on lowering drug prices to, I think, public hospitals and a few other. I'm not quite sure what programs. But again, that's impacted on sales into the U.S. And then they had one operations related issue with not getting out to market a drug that they manufacture, which was expected to start contributing in the second half and will be delayed by, I'm not quite sure, a year. They announced it in their revised guidance. But on the plus side, I think this is one of the most cash-rich biopharma companies ever, right? So it has the ability to continue to grow quite aggressively. And with USD 1.4 billion, right? So they're accelerating their own R&D, looking at potential complementary targets. And most interestingly, leading in terms of the antibody targeted therapy conjugates, which is really a mouthful.

They're quite fascinating because those target cancer medicines specifically to the patient's cancer by riding in effect on the behavior of their antibodies. And the distinction with HUTCHMED that is quite fascinating is that HUTCHMED's cancer drugs are almost all small molecule drugs. So they're not battleships like chemotherapy usually is and so on. They're very, very precise. So the ability to get them even more precisely to the target cancers looks really quite promising. That's in preclinical trials now. I think they have announced that, and we would expect clinical trials to start following quite shortly. So again, not the best half for HUTCHMED, but by no means, is there anything to fret about in terms of the solid underlying value of that company.

I'll take you last to Slide 15, which is sustainability. I think in the interest of time, I will leave you to read it. The good news is we're just continuing to make progress, whether it is on emissions reductions. We're now, in effect, Scope 1 and 2, 20% down against our 2020 baseline. That's real stuff. Our disclosure processes have continued to move with the time. So whether it's the CSRD in Europe or whether it's the International Financial Reporting Standards, we've done the work and we can meet them. You see that in our sustainability report, which I would urge you all to read.

We talk about the allocation of the green bond proceeds that we -- from the bond that we issued in 2024 as a green bond. And you can see that we easily spend -- in fact, I think our spend that would qualify as green spend this year overall is going to be in the area of USD 2.3 billion out of our total group's spending. So we are not on the back foot by any stretch of imagination when it comes to sustainability. And that's reflected by and large, in reasonably good ratings. We got sustained analytics from when we started with them being a severe risk down to at least being a fairly steady medium risk. With MSCI, we're steady as of the reset in July at BB and that's a scale that goes from CCC to AAA. So it's not a bad place to be at all.

With ISS, we're a C plus on a scale that goes from D minus to A plus. On the Hang Seng Corporate Sustainability Index, we're at AA and that's a typical D to AAA index. So that is good news as well. And on the Carbon Disclosure Project, we are really quite on the front foot there, and we have a B from them in a D to A rating system on climate. We have a C on forest and a C on water security, which are their areas, and this is the first time participation. Those were issued in February of this year. So I think we'll stop there, and we'll move to questions and answers.

[Operator Instructions] The first question, will future dividends be based on reported or recurring earnings?

Well, dividends are always a Board decision for the period. They do take into account underlying performance. They take into account financial fundamentals. So they take into account balance sheet cash flow, debt ratios, credit ratings, et cetera, and shareholder returns. I think the one thing that I can say quite positively is that we will generally not take into account noncash accounting earnings losses. For the very simple reason that if you stop and think about it, when you have a noncash earnings loss, it's basically because the cash was spent in some prior period and is being carried on a balance sheet at a higher cost than what you're realizing or what you're valuing. So it would not make sense because basically, the cash flow effect has already been recognized in prior period results.

The next question, what are the strategic actions on store planning and product portfolio H&B China is taking in order to improve performance?

Well, we talked about the Health and Beauty China business, of course, is under pressure for reasons that I mentioned. But at the same time, we are doing a lot of actions, taking a lot of actions and planning so that we can really improve the performance of this division. So we are transforming the business with a robust strategy that integrates our 3,600 stores across 500 cities with these dark stores of fulfillment centers. So these dark stores of fulfillment centers are those very simple structure, the small units, which helped to deliver at a very short notice, the goods that's ordered online from the customer. And at the same time, our loyalty member base is moderately increasing with high retention rates, high loyalty among the customers, so that we are happy.

The transition to dark stores, as I mentioned, has temporarily impacted margin because, as you know, the online sales model on takeaway platform is with a lower margin. So if we do more of that, that will affect the margin adversely. But this strategic initiative ensure remain aligned with the customers' expectations such as delivery within 30 minutes. This is almost a norm. We try to shorten it. And as our O plus O strategy applies, physical stores remain core to this strategy, which has been proven to effective and allow our stores to provide differentiated customer experience. So I think as the economy recovers, we are confident that this approach will drive long-term growth and position us as a leader in the retail industry.

The next question, it has been mentioned in the EGM circular in 2024 that the group is required to reclassify from equity to P&L, a FX loss previously recognized and accumulated in other comprehensive income included in equity estimated to be HKD 8.6 billion upon completion of the U.K. merger. Why is the nature of the onetime loss different from previous disclosures?

That's such a simple accounting question. I think we'll get Kwan to explain it.

Thanks, Frank. Both the HKD 1.7 billion loss on disposal as well as the HKD 8.6 billion exchange loss just mentioned. So in the September 2024 circular, I saw a total loss of HKD 10.3 billion were based on information available at the time and inherently subject to change. The difference was mainly due to the group's transition from Hong Kong FRS to International Financial Reporting Standards, which impacted the exchange reserves to be recycled as well as the final valuation for the merged entity at today's value and actual exchange -- foreign exchange rate at the time of completion at the end of May. So all this came up to this number.

Next question, what is the group's investment strategy, especially if net debt comes down significantly? Given mature profile of the group's businesses, would the group invest in more new areas to jump start growth or return more capital to shareholders?

Yes. I think we'll continue to stick to our knitting, and I think a way that we're pretty well known for, we are interested in investing in growth and value-accretive transactions. We've, I think, done quite a bit of that over the years. And we've, I think, overall managed to deploy capital in ways that deliver good returns on invested capital. We'll continue looking to do that. We will be staying close to our own businesses. I would say that most of the opportunities in new areas actually come out of our own businesses. If you look at the reinvestment profile going forward for the infrastructure businesses in the U.K. or in Australia or whatever, there's a tremendous opportunity at very attractive returns to continue to deploy capital into the evolving needs. One of the reasons why the water industry is so controverted right now is, of course, because the infrastructure is old. There are more people. There's different weather patterns, things need investment, and those investments attract very attractive returns.

You see that CKI is in the frame on many significant potential investments. I'm sure they were talking about that yesterday. From time to time, we also divest the things that bring in cash that strengthen the war chest. On balance, it's always the same. We will be looking for accretive growth opportunities largely emerging from our own businesses, but we'll always do it in a way that is consistent with our prudential financial profile and a cautious approach, both the CapEx and the new investment and rigorous cash flow discipline, to maintain the strong financial profile that underpins all of our businesses.

The next question, is regulatory or antitrust approval from China required for the proposed ports transaction?

Sure. Look, a transaction of this scale has implications for many states, many regulators, and that includes China and the U.S., but also the U.K., the EU and several other countries. When we made our insider information filing on the 28th of July, we reiterated that we will not proceed with any deal that doesn't have the approval of all of the relevant authorities. Of course, with exclusivity having expired on the 27th of July, we are into a new stage of our deal, and that includes, as we have said, discussions with major strategic Chinese investor.

I believe that there is a reasonable chance that those discussions will lead to a deal that is good for all of the parties, ourselves included, and most importantly, that will be capable of being approved by all of the relevant authorities. Now it is taking much longer than we had expected when we announced in March. But frankly, that's not particularly troublesome. The ports group are having a very good year. They're generating stronger earnings and cash flow than we had expected when we set this year's budget.

And in any case, you need to understand that with a deal of this size and complexity, closing, which is the time at which you actually transfer the sold assets and you receive the purchase price, would not, in any case, occur this year, even if binding arrangements are agreed this year. And frankly, even if they had been agreed in the first half of this year.

Okay. Well, since I think a lot of you are very interested and also it's a very important message that we want to pass to the market. So that I will repeat or translate what has been said in English so that our Chinese and Cantonese-speaking audience will understand. So [Foreign Language]

What are the uses of the GBP 1.3 billion of cash that CKHGT received from the merger?

Well. Okay. Yes, Frank. CK Hutchison Group Telecom actually used some of the proceeds to buy back GBP 485 million of its owned sterling bonds. Clearly, the balance has further strengthened CK Hutchison Group Telecom's liquidity and financial profile. That offers flexibility for the group as well as for CK Hutchison Group Telecom to determine the best use of the liquidity to create the maximum value for both CK Hutchison as well as CK Hutchison Group Telecom, which clearly may include deleveraging by reducing the gross debt as CK Hutchison Group Telecom, keeping that as cash as a natural hedge for the outstanding sterling bonds or repatriation for CK Hutchison subject to, of course, our own promise to keep leverage ratio to the 2.5 for other corporate usage. So...

Yes, I think that's important. We've always said to CKHGT stakeholders or mainly bondholders that we would maintain effectively a mid-investment grade level rating. Right now, net debt to net total capital in CKHGT is down below 2%. So there's probably a good possibility that the repatriation option will be part of the picture, but there's no huge rush since it's a wholly owned subsidiary as we sit here today.

Next question, are the RIIO-3 draft determinations for NGN and WWU in line with CKI's expectations?

Yes. I think they will have discussed this yesterday, but yes, they are, right? And they reflect appropriately changes in parameters like interest rates and inflation rate assumptions and so on. So both of the gas companies will submit their revised proposal in August and the final determination will be released by the end year, but we think that the outcome is going to be very satisfactory.

When do we expect to see the cost synergies from the U.K. merger?

Well, I mean, I think some of them, particularly in the commercial areas start to come in, in relatively short order. For example, consolidation in the retail footprint, combined marketing efforts, albeit under different brands, but with the same, if you want to think of it, back office and buying power and all the rest of it that goes with it. Consolidation of networks and IT stacks takes a little bit longer, but it will happen over a relatively short period. That's all part of the undertakings to the CMA and to the regulator in the U.K. actually. And we expect that by the fifth year after completion, the combined business should be delivering operating cost and capital synergies of -- at a run rate of about GBP 700 million a year.

The only thing that I would add is that some of the noncost synergies are delivered very, very early. You're seeing that already with the improved coverage that all 3 customers and old Vodafone customers have just from the very preliminary network integration activity, which allows customers to use either network, whichever is best where they are, that relieves a lot of congestion or other notspots and all of that. So that's already happening. You can't really quantify it, but I think it is a significant enabler to make sure that VodafoneThree stays the largest mobile operator in the U.K.

What is the expected impact of Trump's reciprocal tariffs on HPH's operations?

Well, may I take this question?

Yes, please.

Yes. Of course, the Trump's -- President Trump's reciprocal tariff is attracting a lot of attention and discussion. Although I must say that the reciprocal tariffs have not been finalized at this point. However, as far as our Ports business is concerned, given the geographical diversification, we don't expect -- we do not expect any significant impact on the overall volume despite there may be a different impact on the U.S. export volume of different countries depending on what the final reciprocal tariffs turn out to be. So it's still in flux.

The volume of ports generally quite stable. For example, I can say that even during the COVID years, we have only a single-digit drop. This is evidence to the resilience of the operation. But I must warn that, other than the volume, more concern is on the supply chain disruption because it happened a few years ago that disrupt the trade, but we are the beneficiary in terms of increase in storage income, which we just mentioned, storage income is becoming, I would say, a meaningful part of the P&L. So because if there's any disruption in the supply chain, the containers will stay longer in the yard and then compensate for the drop in the throughput under a downside scenario.

I think I'd just add one thing to that, which is that the recent development with the new 90-day truce between China and the U.S. on trade, which expires on the 10th of November is, I think, probably a good augury for our Ports business because that falls right into the Christmas inventory goods, sort of shipment period between China and the U.S., so you might see some strengthening from that, which would be a good thing, not just for our business, but it would basically mean that the price of toys wouldn't go up so much in the U.S. and so kids will be happy and parents will be happy, which may have been part of the motivation for the deal anyway.

Next question, can you help us walk through H&B China's sales performance in Q1 and Q2 for us to better understand the momentum in the first half?

Yes. Again, on Health and Beauty China, I think that's a fair question to ask because people -- all of you, want to know about more Health and Beauty China. So I think the best way to describe sales performance in Q1 or in Q2 is to look at the comparable store sales growth. So in Q1, comparable sales growth was slightly positive. Yet, we have a single -- a low single-digit decline in Q2. So Q1 positive, Q2 is slightly negative. And also, there has been a downward trend in average weekly sales and sales growth against the same period last year.

As for the -- that's the first half. But at the same time, with the things that we are doing in the -- currently, we expect for the second half, we'll -- although we will continue to see headwinds, particularly with the consumer demand, but we are doing everything that we can in order to mitigate challenges and remain financially sound. So on the operations side, they're sharpening the value proposition, the product categories and optimizing the store footprint. So they are doing a lot of things to really address the challenges. Thank you.

Next question, CKI is actively pursuing growth opportunities. What will be the geographical focus for CKI in terms of project M&As going forward? Will CKI consider to invest more in unregulated businesses rather than regulated ones going forward.

Yes. I'm sure CKI will have talked about this at their results announcement yesterday. But one thing you have to remember about CKI is that it is an operator, not just an infra investor, right? And that means that the choice of opportunities includes looking at how they can create synergies, whether it's with our gas operations in the U.K. and our gas operations in Australia or whether it's with water operations or pipeline operations or whatever, you're always looking at opportunities to benefit from actually operating synergies from being operators in the business for the long term. We're not an infrastructure investment fund that has a time line on which to either buy or to sell assets. And of course, we consider both regulated businesses and unregulated, some of our very, very good businesses in CKI like ista, I mean, are unregulated, but they're very, very good business. So as long as it fits our investment criteria, we look at either.

Is the group considering a spin-off of its telco business in Europe?

I think we answered that last -- at the AGM. Look, I mean, we regularly look at all of the options, and we try to enhance the long-term value of businesses that our shareholders can touch and feel and benefit from. And these include options, of course, in the telco business. At present, we haven't made any decision to go down any particular transaction path with our telecoms assets. But I mean, look, I mean, when we announced the ports transaction, basically, the valuation that was put on the ports was greater than our equity market capitalization at the time. And today, it's like still 75%. That tells you that there is a lot of value in our underlying businesses and assets that is clearly not being reflected in our share price. So it is a big part of our job to figure out how to get tangible benefit of that over time to our shareholders and to rectify the fact that they own a lot of assets indirectly through their stock, which they're not getting value credit for in their share price.

Next question, how is the current competitive landscape in Italy following Fastweb's acquisition of Vodafone Italy?

Okay. I'm not going to elaborate too much on this because CKHGT is going to do its own interim results announcement presentation later on this evening. So I'm sure the Italian guys will go into much more detail. I think overall, less fragmented. Competition does mean that it's -- the opportunity to grow the B2B sector, for example, is probably quite a bit better than it was. And I know that they're hard at work at that. They're also developing a lot of associated businesses, which they call beyond the core, right? And I think that there's a level of stabilization in Wind Tre's customer base that reflects a level of stabilization in the market from having a less fragmented ownership structure amongst the operators. So I wouldn't say more than that.

Next question, could you provide insights into CKHH's incentive framework in relation to sustainability and ESG performance? How is target attainment linked to compensation outcomes?

Yes. This is important. It's something that we're just really at the beginning of, but most of our businesses have long-term incentive programs and short-term incentive programs that are programs. They're programmatic. They're based on achievements to targets. So what we are doing is we are building on the division appraisal system, if you want to think that we developed for ESG reporting purposes, and trying to translate that into some specific metrics that can become targets and that we will guide, what your opportunity is on a short-term incentive plan or a long-term incentive plan.

And so we will do that with things like, of course, GHG reduction targets. We'll do it with people-related metrics like training hours. We'll do it with diversity objectives like the percentage of women in leadership roles. So we're trying to come up with metrics that suit and that can be incorporated into the drivers of our short-term and long-term incentive plans across as many of our businesses as we can.

Due to time constraint, we have to conclude our webcast today. Our IR team will respond to the unanswered questions. Thank you very much.

Thank you.

Thank you.

Thank you.