CK Hutchison Holdings Limited (1) Earnings Call Transcript

Welcome to the live webcast of CK Hutchison 2026 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; Mr. Kwan Cheung, Group Chief Financial Officer of CK Hutchison. [Operator Instructions] Before I hand over to Mr. Sixt, please also pay attention to our disclaimer, which you can find on Page 2 of the presentation. We can start now.

Good. Thank you, Eva, and thanks, everybody. Welcome. Let's start straight into the slides on Slide 3, which I think is up in front of you right now. Let me do a little bit of a stage setting here for how this presentation is set up. This is the only page that uses the statutory numbers, that is to say the reported numbers after applying IFRS 16, right? As you know, we like to look at our businesses on a pre-IFRS 16 basis because we think that, that makes it easier to understand and analyze the actual underlying cash performances of the business, which we spend a lot of time trying to do. So once we get past this slide, everything that you'll be looking at will be on a pre-IFRS 16 basis. The other thing that you'll notice is that we make a lot of stress on underlying performance as opposed to the full reported performance. Why do we do that? It's essentially because when we look at the underlying, right, we are excluding the effect of very material one-off things like asset sales, which, of course, in the first half, we had the sale of UK Power Networks, and we had the sale of UK Rails, right, which are wonderful things to have, right? But you're not understanding your businesses if you're just looking at gross numbers that include onetime events such as those. The second thing that we had to do this year is to exclude all of the effects relating to the Telecoms business in the U.K. Frankly, the mathematics of comparing the first half last year when we had 3 UK on a stand-alone basis for several months. And then we had the merger impact coming in, which gave us a rather large noncash loss and a lot of cash that came in later on. We then proceeded from there and you get to looking at this first half of 2026. Our interest in MergeCo generated losses for us as they built out the combined business plan, which was expected. But nevertheless, by the time we get to the month of -- at the end of April, we've achieved certainty that the transaction to sell our interest, our remaining interest of Vodafone is going to complete, which basically means from that point on, right, we've treated our interest there as an asset held for sale. We've stopped equity accounting for the results. All of that noise makes a period-on-period comparison very, very, very messy. So we decided the best thing to do is simply to ignore and not take account of the impacts, right, of the UK Telecom business when looking at the first half of 2025 or the first half of 2026. So that's the scene setter or the background setter. And now I'll get into the meat of the slides and try and move as efficiently as I can. Starting with the revenue. Obviously, quite a healthy 7% revenue growth in underlying revenues. The one thing that I would point out, and this is a recurrent theme, is that we enjoyed, by comparison to the first half of 2025, some very favorable foreign currency headwinds. So for example, when you look at this revenue growth, actually 4% of that comes from positive ForEx movements compared to the January to June movements in 2025, right? So it's good, but we need to be realistic about what we're seeing underlying in the businesses and take account of fair winds or fall. And of course, they go into the results, but they don't have a whole lot to do with your operational management of the businesses. When we get to net earnings, I mean, again, we have a solid 6% pre-IFRS 16 growth, 7%, right, post. That's actually a very small numeric difference. And that translates into the reported EPS, obviously. And the dividend per share, the way that we did that was pretty well exactly the same way as we've been doing it for many periods now was to look at the underlying pre-IFRS growth, 6%, right, and take a slightly cautious approach in the first half. You know that last year, of course, in the second half, we made sure that the dividend for the whole year reflected the underlying earnings growth full year. And I wouldn't expect that we would do that again this year. If we go to the next page, okay, we're now in a world where everything is presented on a pre-IFRS 16 basis. You can think of that the major difference being that when you see EBITDA numbers, you're looking at EBITDA after lease expenses, and that is particularly important in businesses like our retail businesses. So we had very good underlying EBITDA growth. But again, 2/3 of that came from positive ForEx movements, pretty well the same pattern in terms of the underlying changes in EBIT. Once you go to operating free cash flow, that number looks a little bit disappointing because it's a decline compared to the first half of last year. But there's really nothing to be alarmed about. We'll go into this in a bit more detail in a later slide. But fundamentally, there were 2 significant investments made, right, in what are called associates and joint ventures in 2026 that were not there in 2025, and that's an equity investment that we made in Northumbrian Water. And you can just think of that as money good because that under the regulatory regime, all of this does is it makes sure that the company is not overly debt burdened, right, in order to spend, right, what it needs to spend over the course of the next 5 years. So Northumbrian Water will never be like [indiscernible] water. And that's just an equity investment that's going to give a very, very good regulated return, right, as we go forward. The other was a strange one. It's a timing difference. In 2025, we received a major return of capital from TPG, which is another associate in Australia. And we were always going to use that to repay loans, but we didn't get to do it in 2025. We did it in early 2026. So it's really a timing difference, right, rather than a real difference. If you take those 2 items out, which total HKD 3.7 billion, right? And then obviously, you get back to pretty well the same growth in operating free cash flow, as you see in EBITDA. The last thing that I would point out is the obvious, which is with the cash inflows, right, in the group. Our consolidated net debt to total capital dropped to 8.1%. And obviously, with the proceeds that we've now received, right, in the second half from the sale of our interest in VodafoneThree in the U.K., that drops to more in the area of 2%, right? So we have a very first world problem in terms of being overcapitalized, if you want to think of it that way. If we go to the next page, we take a look at EBITDA, right? First, looking at the circular charts on the left, I would not look at the reported charts because they're very distorted by the onetime elements. So looking at the underlying, really not much significant change. Important to note, as always, that this company is the multinational arm of the group. And so total of 5%, right, of our cash generation, if you want to think of it that way. It comes from Hong Kong and the Chinese Mainland. There's another slight distortion in here because of the EBITDA contribution from Cenovus, our share of Cenovus' EBITDA was really quite high. And that all lands in finance and investment, and you might have thought that it would land in Canada, but it doesn't, it lands in finance and investment. So that's why that's 24% compared to last year, 20%. If we go down and take a look at the mix by business, I mean, you've got the same sort of minor distortion in terms of finance investment and others relative to everything else. But other than that, not a lot, right, has changed, right, in the mix. I think now if we go to the waterfall on the right, the first thing that we have to do is go from the reported numbers in -- in the first half of 2025, right, and take out the onetime items, which I described, including all of the U.K.-related items. So that basically gives you an underlying EBITDA number, right, comparable for the first half of 2025 of $53.4 billion. And if we go through very quickly the -- how you get to this year's reported number of 79.6 ports, right, it's a little bit down. That's really quite unfair because that is after taking account of our 2 ports in Panama being stolen from us, which accounts for $450-some-odd million of lost EBITDA for the 4 months from February. And we also had a significantly lower contribution from some interest in shipping lines. So if you take those out, actually, we would have had good growth, right? But for the unlawful expropriation that took place of our Panamanian assets. So ports is operating very well underneath, and Dominic will be talking more about that later. Retail, healthy growth, right? Infrastructure, I can tell you right away that, that is entirely due to losing the contribution from the assets that were sold, UK Rails and UK Power Assets for the months that they were no longer owned by us. But everything else basically showed the appropriate amount of growth, right, year-on-year. So infrastructure results are actually very good despite being a little bit lower on the EBITDA front than in 2025. CKH Group Telecom, we'll be going into in more detail, not having the easiest of times, right? The cost structure, it doesn't go away, but some of the revenue opportunity did go away. And bingo, you get an adverse comparison to the first half of last year, and I'll let Kwan go through that later on. The contribution from finance and investment and others is significantly up. Now that's really because of 2 reasons. One is the contribution that we got from a very, very good performance from IOH in Indonesia, which is accounted for under this division. And also the Cenovus contribution, partially offset by a onetime gain that we had last year, which we didn't have this year. So if you go all the way over to the right, after the $56.5 billion of underlying EBITDA, you add back, right, the onetime items and VodafoneThree's results, you get to a $79.653 billion. And then you'll notice that the impact of IFRS 16 would take that to $92.9 billion. So that's actually a USD 1.7 billion difference between pre and post IFRS on the EBITDA line, which is precisely why we like to present it on a pre-IFRS basis rather than a post-IFRS basis. If we go to the next slide, operating free cash flow, right? Again, as I said before, it does look a little bit disappointing. But that is entirely due, if you look at the brown bar on the right-hand side of the first half 2026, $30.635 billion, right, in coming you'll see that $3.7 billion that I referred to in the investments in associates and joint ventures. That's what the light brown color is about. And of course, if you take that out, then you would have completely restored growth. If you look at the circular chart, right, really not much to comment there. Although, again, the finance and investment contribution here has actually shrunk, which is interesting because the EBITDA has gone up. But because that is largely due to Cenovus, right? The fact that the EBITDA goes up by our attributable share doesn't mean that the cash necessarily comes into operating free cash flow. It goes into operating free cash flow, it's the dividend that we receive. And so when you take that into account, the contribution is quite a bit lower. I think as we move to the right-hand chart, what's probably most interesting is to understand what this is telling you in terms of the reinvestment profile of these businesses, how much money goes back into them out of the cash that they generate. So if you look first at ports, right, it was 21% of EBITDA, right, in the first half. If you look at Retail, an extraordinarily earnings-efficient business, right, the reinvestment rate is 12%, right, of EBITDA in the first half. If you look at Infrastructure, it's 25%, right? When you get to Telecoms, right, of course, it's 43%. So our highest rate of reinvestment or requirement to keep capital at work is in the Telecoms business, which is precisely why it makes it quite painful if you have constraints on revenue and margin growth at the same time. And in finance and investments, we've got this, as I say, monstrous leap, right, in terms of the share of EBITDA, that was actually $8.7 billion coming from Cenovus. But when you get down to what we actually got by way of dividends, right, it's not $13.5 billion, it's $2-point-some-odd billion, right? And very, very low reinvestment. That's the loan repayment that I talked about that was actually done through an associated company, which is why it's in that little light brown color there. If we go then down and we'll get through this, I promise, from operating free cash flow to actual free cash flow, the bar on the left-hand side, the graph on the left-hand side just takes you through from operating free cash flow on an actual basis. So these are the sums. So interest and taxes paid, $7.4 billion. That's actually lower than in the first half of last year. Working capital changes are also lower than the first half of last year. Telecoms licenses, minor, minor spending in Austria and on the license in Hong Kong. And others, really nothing of great importance in there. Most of that relates to noncash customer acquisition cost capitalization in the Telco businesses. But nevertheless, that gets you down to free cash flow of $7.705 billion, right, which looks a little bit lean compared to the first half of last year, which was $10.697 billion. So to understand that, you have to go to the graph on the right-hand side and walk through the year-on-year comparison. So you start by stripping the proceeds of the U.K. merger that were in the first half out of the reported free cash flow for the first half of 2025. You also take out, and this is really quite interesting, there was a very favorable foreign exchange movement on inventories in the first half of last year for exchange rate movements between January 1, 2025 and June 30, 2025. This year's movement actually was the reverse, right, for the same period in 2026. So you've got to take that out to get to the comparable number. So that's the comparable underlying first half. Free cash flow last year was actually $10.7 billion. And then we go through the attribution of that. The EBITDA of subsidiaries. It seems to be contributing very little, and that is not really a correct assessment. I mean, ports EBITDA was actually up. A.S. Watson was up significantly. Infrastructure was up on an underlying basis. But it, unfortunately, got eaten up by declines, right, in the contribution from the subsidiaries in Telecoms. Dividends from associates and JVs are up for the year, and that is particularly true in A.S. Watson and Infrastructure and of course, the dividends that we received in finance and investment from Cenovus and IOH. The working capital changes, as I say, was a little bit better than last year. The CapEx on Telecoms licenses was a little bit worse. You're seeing a bit more spending in ports. I think Dominic will talk about that. We've got some catch-up ball to play in terms of some of the older facilities. So we will be spending more in CapEx in ports this year than we were last year, and you'll see that again in the second half, actually. But again, the investments in associates, the next column, the $3.2 billion, that's what I was talking about on those 2 investments that we made that drove that big difference. And so that fundamentally is how you get down to $7.7 billion, right, of underlying free cash flow. The items to the right that are negative, the advances to UK Telecoms businesses were basically commitments that have been made at the time of the merger, and then were paid in the first half of this year that weren't made -- that didn't exist in the first half of last year. And the exchange impact, as you can see, negative this year. Then you add in all of the net proceeds from the one-off disposals, and you end up, right, with the reported number of free cash flow, which is $58.3 billion, which is 88% ahead of last year. So we've gotten through that. I will turn you over and stop droning on. I'll turn you over to Kwan, who will give you a quick snapshot of our financial profile.

Thanks, Frank, and I promise to be very quick. So the group financial profile remains very strong. Liquidity further improved in the period to approximately $187 billion, so resulting in a net debt of approximately $64 billion. The net debt to net total capital ratio of 8.1%. Now this is before accounting for the proceeds from our UK Telecom business transaction, which Frank has alluded to, of GBP 4.3 billion, approximately HKD 45 billion. So if we take this into consideration, our pro forma net debt at the end of June would be under HKD 20 billion and our pro forma net debt to net total capital ratio will be approximately 2.5% at the end of June. Now the group's debt maturity profile remains very well landed with the refinancing requirement for the remainder of 2026, very manageable, you can see from the chart. The group's average cost of debt for the period of 3.3% is consistent and in line with the average cost of debt for 2025. And as of the 30th of June, 63% of our total debt is from -- is on the fixed interest rates after swaps and 61% from bonds and notes. So again, we are very well positioned for fund refinancing. On that, I will hand over to Dominic to talk about Ports.

Okay. Well, thank you, Kwan. Actually, thank you, Frank and Kwan, who actually gave the breakdown and explanation of the various financial metrics, the EBITDA, cash flow. Now what I start is to look at the various operations of the group. First, we talk about the Ports division, Slide #9. Well, with a challenging geopolitical environment, the Ports division had a decent yet mixed first half with an overall drop in throughput and a flat EBITDA in local currencies. However, in reported currencies, EBITDA still registered a 4% growth. The division has a footprint in 24 countries, 53 ports and 300 [indiscernible]. Throughput-wise, throughput decreased by 1% to 43.6 million TEUs in the first half. And the overall drop in throughput was mainly attributed to the reduced volume following the cessation of operations in the Panama port. Excluding Panama, overall throughput actually grew by 3% year-on-year, mainly driven by a 5% growth in Yantian, 6% increased volume in the Chinese Mainland and other Hong Kong segment, particularly in Shanghai ports, as well as a 2% volume growth in Asia, Australia and others. Throughput in European port was marginally lower against the same period of last year. The impact of the significant disruptions in the Strait of Hormuz on the division's Middle East segment was, in fact, slightly favorable as the halt in quayside activities at the ports in the UAE was more than offset by additional ad hoc transhipment volume at Sohar, a deep seaport located in Oman. On EBITDA, EBITDA increased 4% to $9.03 billion in reported currency and flat in local currency. This EBITDA includes Panama. Excluding Panama, the underlying EBITDA would have increased 10% in reported currencies and 6% in local currencies. EBITDA distribution-wise, 27 of the division's EBITDA was from Europe and the rest from Asia, Australia and others. If you look at the EBITDA year-on-year chart, change chart below, you can see the following, starting from the left. A 12% or $80 million increase in HPH Trust, mainly attributed to good performance in Yantian where throughput increased 5%, as mentioned. For Chinese mainland and other Hong Kong segment, we see a $91 million or 29% increase. Shanghai ports is doing well in particular with throughput increase of 8%. For Europe, EBITDA increased 2% or $51 million, mainly due to favorable results at Rotterdam from higher landside revenue and higher storage income at Barcelona in Spain. For Asia, Australia and others, excluding Panama, EBITDA increased 9% or $397 million, driven by favorable results in Mexico from cost efficiency and higher ancillary service income. But including Panama, there was a slight drop of 2%. The adverse EBITDA impact because we are trying to talk about Panama, so I will give a glimpse of the impact of Panama. The adverse EBITDA impact from Panama amounted to HKD 496 million. So you can see the sizable impact of Panama with what's happened in that place, which we suffered consequently. For corporate costs and other port-related services, we see an EBITDA decrease of $153 million due to cost inflation and reduced contribution from a shipping line associated company. So all these factors, both the underlying EBITDA for the first half of 2026 to HKD 8.69 billion, and with a favorable FX translation impact of $343 million, first half EBITDA was recorded as was mentioned at $9.03 billion. As for the outlook for the rest of the year, the Middle East situation remains highly unpredictable, and trade tensions are expected to continue, affecting global trade. However, with the division's geographically diversified portfolio, favorable mix of operations in gateway and transhipment ports and continued focus on productivity and cost efficiency, the division is expected to achieve earnings growth in 2026 as a whole. Meanwhile, the Ports division continued to advance its decarbonization strategy to the electrification of equipment and trucks. This, together with the increased adoption of renewable electricity, which is already accounting for over 50% of the division's total consumption supports continued progress towards the division's long-term net zero ambition. Slide 10, the next slide. In fact, this slide is just put together to show a track record of sustained growth, both in terms of revenue on the upper side and EBITDA on the lower chart, even amid a complex global trade environment throughout this period. So this is so much for Ports. Now we move to Slide 11, Retail. The Retail division has had a solid first half with a 9% increase in revenue, EBITDA and EBIT in reported currency or 5% increase in local currencies. Store number, as indicated in the chart, at the end of June increased 1% and stood at 17,042 stores with a portfolio split of 48-52 between Asia and Europe. As mentioned, EBITDA for the first half is HKD 8.68 billion, a 9% increase in reported currency or 5% increase in local currency. So 9% increase in revenue, 9% in EBITDA, and 9% in and EBIT. So the EBITDA split is 30% from Asia and 70% from Europe. This is usually typical for the interim. And then the second half will actually gear towards more Asia. So that is a balanced 50-50 at the end of the year as in the past. So now let's move to the EBITDA waterfall chart below, which shows the year-on-year EBITDA change of each subdivision. So you can see the EBITDA chart and the numbers. First, Health and Beauty China, with the store portfolio optimization program well in place, we saw a healthy comparable store sales growth of 4.3% in the first half. And as a result, EBITDA increased by $57 million or 49% to HKD 184 million. Next, for Health and Beauty Asia, EBITDA increased $103 million or 5%. This is supported by continued growth in Malaysia, Philippines and a turnaround in Hong Kong. For Health and Beauty Western Europe, EBITDA decreased 2% or $68 million. The decrease is mainly in our luxury business in Europe due to market demand a drop in our Health and Beauty business in U.K. where we encounter during the year, the first half, some supply chain issues, which have since been resolved. The Health and Beauty business in the Benelux countries continue its EBITDA growth. For Health and Beauty Eastern Europe, EBITDA increased 5% or $80 million. The growth is attributed mainly due to good trading performance of the Rossmann businesses. 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 222 million, primarily attributed to a much improved performance in our PARKnSHOP supermarket business and the strong profit growth momentum in our electrical retail as well as our beverage business in China. So all in all, the underlying EBITDA of the Retail division increased 5% in local currencies to reach HKD 8.37 billion, and with a tailwind of $313 million in terms of foreign exchange translation impact, the EBITDA for the first half of 2026 was reported and recorded at $8.68 billion. Looking ahead, we expect to maintain modest growth for the year despite softening consumer sentiment as we see now across some major markets. Meanwhile, we will focus on expanding the loyalty member base, which is a very important success factor of the business. And the member base now currently stand at 183 million members. And at the same time, we expand our -- continue to expand our online platforms and off-line store network. At the same time, the cultivation of the Retail division will continue to develop and invest in industry-leading technologies, including AI tools and agents. So we have to use technologies to better engage with the customer supplies. So the AI tools and agents are very important and useful. The division has also advanced its sustainability efforts in the first half of this year through the increased use of renewable energy and expanded range of sustainable product choices for its customers. Next slide, Slide 12, similar to the Ports division. This slide is just put together to demonstrate a history of resilient growth throughout economic cycles driven by the division's geographic diversity. So I think that's the summary of the Retail division. And now I'll pass back to Frank to talk about the Infrastructure.

Yes. I would just say one thing on that last slide that I think is important to understand is we're presenting Retail on the pre-IFRS 16 basis. Interestingly, that's not the way that analysts in Europe, right, look at retail businesses. The multiples that you see are usually being applied to post-IFRS businesses. And as I said before, that is most important, right, in Retail because if you look at, for example, the number for 2025, post IFRS -- pre-IFRS was $18.2 billion. Post, it was actually $27.9 billion. So that's very, very large $9.7 billion swing. So when you're thinking around the valuation of this kind of business, right, please make sure you're applying the multiple to the right EBITDA. Okay. I'll go on to the Infrastructure business, not much to say. They obviously announced very positive results outcome yesterday. The most satisfactory thing, right, is that the underlying performance, right, of all of the businesses was actually very solid, right? And as a result, they increased their dividend by close to 3% to $0.75, marking, I think, the 30th year in a row that we managed to grow and grow dividends in the Infrastructure businesses. Just to cut right through it, what you're looking at here is, on the left-hand side, what CKI reported. And on the right-hand side, $15.071 billion, you're looking at what our -- what it contributes into CKH, right? And that decline of 3% really is all due, as I said before, to the contribution that we're not getting from the assets that were disposed of. If you strip those out and just look at the contribution that we're getting from the assets that remain in CKI, they grew by close to $500 million of EBITDA, which is roughly 3%. So it's very important to understand that the underlying performance of those businesses remains really very strong and very predictable and very long term. That takes us to Telecoms, and I'll let Kwan take you through that because he spends quite a bit more time with them than I do these days.

Thanks, Frank. The 3 Group Europe's EBITDA for the period declined 5% year-on-year in local currency, but flat in reported currency due to a beneficial foreign exchange translation impact. The biggest contributor to this adverse variance is from Wind Tre, where Wind Tre's EBITDA performance was down mainly due to the loss of wholesale revenue resulting from Fastweb's consolidation with Vodafone Italy. Wind Tre has made some inroads though to partially offset the decline in wholesale revenue and margin by growing its customer service margin and beyond the core margin. So that would be something that we'll continue to focus on. And in fact, we made some good progress in stemming the loss of customer that they had in the last few years. 3 Austria's adverse EBITDA performance is mainly due to a very price-intensive competitive landscape. And that's actually hit the customer service margin to some degree. However, Sweden, Denmark and Ireland all made good progress to increase and grow the EBITDA in the period. 3 Group Europe continues to focus on reducing costs to improve profitability and sustainable cash flow improvements in the second half, including, of course, adopting and developing industry-leading AI tools and AI agents to increase productivity and to reduce costs. As Frank said, the group is very much focused to ensure the delivery of these initiatives, and I've been spending a bit of time, as Frank alluded to, to follow up on the delivery of this initiatives. So we hope to see a little bit more results coming through in the second half. In addition, of course, the businesses continue to target improvements in profitability and cash flow by growing customer base and expanding product offerings. In 3 Austria's case, this actually also meant the launch of a second brand, [ Herby ] in the first half of this year. The next slide, Slide 15 just provides more detailed information on each of the 3 opcos. And there's nothing particular I'd like to highlight. Actually, I could just hand back to Frank onto the rest.

Very good, well done. Okay. So we'll go now then to Slide 16, right, which is other operations. It's really a rather very happy slide because the other operations, right, all had pretty good first half. So obviously, Cenovus Energy made a contribution to our earnings, right, of HKD 4.2 billion, right? And its market cap, when I looked this morning, was at USD 56 billion. So obviously, it is a superb value hedge as well as an earning hedge for the group in a point -- in a period when there are inflationary pressures coming from cost of energy all around the world. So that's really good news. Of course, they benefited from strong commodity prices, but their operations in the first half were very, very steady on. There were just no meaningful adverse operating incidents, which is very important. They, of course, increased the base dividend by 10%. They reduced with very, very good cash flows in the first half. Their net debt, right, down to -- by $2.9 billion, down to $5.4 billion. And I can be pretty comfortable that in this second half, they will have repaid all of the debt financing that they took on to acquire MEG just last year. And of course, they've also been doing some share buybacks. So that's increased our effective interest from 16.36% at the end of last year to 16.66% this year. And what that means is that they have almost eliminated the dilution from the equity that they issued to buy MEG. So MEG is bought and paid for and contributing, I think it's well over 100,000 barrels a day to production. So that is really very, very good news. I think I'll stop there on Cenovus. Obviously performing very well as we've headed into the second half. And nobody has a crystal ball, but we're reasonably optimistic for the rest of this year. They, of course, crossed a very major threshold when they announced that they, on a sustainable basis, are producing more than 1 million barrels of oil equivalent a day. If you exclude the national oil companies, so the government oil companies around the world, there are only 15 companies in the world, right, that produce more than [ $1 billion ] a day. So they're really into a very different league, which I think translates into a very different valuation paradigm as well. IOH, as I said, had a superb half. They sold some noncore fiber assets, but of course, retained their access to the fiber as needed for their businesses. But even if you exclude the one-off gain that they got from that, they grew earnings by 49%, if I remember right, right, which is a spectacular turnaround from the first half of 2025. Their balance sheet is in very, very good shape. Their dividend payout was increased. It was one of the reasons why our performance in finance and investments was better. And you may have read recently that they have just launched a company called Zankore, which is a joint venture between IOH, NVIDIA, Ooredoo and Nokia that will be providing on an initial basis about 200 megawatts of computing power, right, all based off of NVIDIA GPUs, and they target to get to at least 1 gigawatt capacity over the course of the next few years. And that's all in an associated company that IOH owns a significant percentage of. But if I'm remembering right, it's somewhere in the 40-odd percent. But none of the financing for the GPU rental business, right, is with any kind of recourse to the business of IOH, which is very important because they're a very different risk profile business, and you wouldn't want to be mispricing the cost of capital to the one business because of relying on the other business. So we're very pleased with what they've managed to achieve there. TPG had a great year last year, returned a lot of capital to its shareholders, reset its balance sheet, reset its rating, right, and is in a very, very good position, performing as expected this year. So reasonable growth in terms of revenue and margin and still committed to a significant cost savings plan between now and full year 2029. So that supports a very strong cash flow headroom, lots of headroom for borrowing. So when they do have to eventually fund future spectrum license renewals, which I think happens in 2028-ish time frame, they'll be in a very good position to do it without jeopardizing their financial position, right, or frankly, their ability to pay progressive dividends over time. Then lastly, HUTCHMED. HUTCHMED will make its own announcements and makes them from time to time. But I think has had very good first half. It has the distinction of being one of the few medtech startups, if you want to think of it that way, that is actually very cash rich. They have over USD 1 billion in net cash, right? And some very interesting new product development cycles underway, in fact, moving very, very quickly, what are called ATTCs, which are antibody targeted therapy conjugates, which are a very interesting new category of delivery -- precision delivery, right, of cancer-fighting drugs to specific tumors. So again, the position there is looking good. The sales on the existing products are looking solid. And we await more good news. If we go to the last slide, I think I'm going to just leave you to read it. I mean it's just a summary of what we've been doing in terms of group initiatives on greenhouse gases, the deepening of the climate-related assessments across the whole group and measurement of those risks, right, integrating more sustainability practices into the businesses, including performance metrics at the right places in short-term incentive plans and long-term incentive plans. And probably most importantly, a very increased focus on cybersecurity management and consistency across the whole of the group, right, given that this is an area where risk is rising everyday that if you read a new story in the paper about some new development in cyber risk, we are not going to be caught napping. So group-wide, we're bringing a lot of attention to cybersecurity. So I think I'll stop there, and we'll go to Q&A.

[Operator Instructions] I've already seen many questions from our online audience. I'll consolidate some of your questions into one. The first question, the group significantly strengthened its balance sheet following asset divestment, ending the half with a record low net debt to net total capital ratio of 8.1%, which is expected to decline further following the completion of the VodafoneThree transaction. How is the group going to deploy capital? At what level would the Board consider increasing payout or conducting share buybacks?

Okay. I guess I'll take that one. Look, as we look into the second half of 2026, obviously, we're in a highly unpredictable and challenging environment. And I won't go through the litany of risks, right, from continuing instability in the Middle East to the wars in Europe, right? But I would add to that, everything that is happening that is climate-related. And in addition to other inflationary pressures, God forbid, we may end up with food price inflation as a result of both the climate, right, and the constraints on things like fertilizer and things like diesel fuel hitting us in the second half and into 2027. So with all of that, we have to maintain a prudent view when we think about this subject. We think the good news is that in an uncertain environment, opportunities do tend to emerge where we can make good investments. But we'll always look at them in the same way through a long-term lens, focus on assets and businesses that can generate sustainable returns and strategic value over time. We're not going to be driven by short-term market movements. I'd really ask you to keep 2 things in mind with respect to this question specifically. I mean one, all the proceeds that we're talking about here were actually received in the last 7 months. That's not a lot of time to solve for a fairly unique movement in cash. Indeed, a good share of that was received in July. And if you look a little bit deeper, you'll find that the CK Group as a whole, right, these proceeds have been received in all different pockets. They've been received by CK Hutchison, by CKI, by Power Assets and by our sister company, CKA. So that means that the management of each of those companies and the Boards of these companies need to consider their own proposed uses for the proceeds and think them through in terms of the resulting EPS, cash flow per share, balance sheet, credit metric targets as well as their shareholder return objectives. So I hope that you will, in that sense, bear with us, and I hope that the group companies will be in a position to provide more guidance on these types of decisions when we announce our full year results in 6 months' time.

Okay. Well, in fact, just to supplement what Frank said, because our Chairman has asked me to use Cantonese to supplement. [Foreign Language]

Thanks, Mr. Sixt and Mr. Lai. How should investors think of positioning of CKH, CKI and CKA in the future? What are CKH's thoughts of privatization or restructuring with other CK Group companies down the road?

Well, look, I'll take that one. I mean the starting point is that, of course, we always have to act in the best interest of the shareholders and the stakeholders of each of the individual companies that's involved. That's a given. On the other hand, we can't be complacent and just assume that what we've achieved and how we are shaped as a group today is the best it can be for all of the stakeholders. So we are critically evaluating opportunities to enhance shareholder value through some levels of potential realignment, and that kind of thinking will always be right at the center of our ongoing thinking about trying to do the best job for all of the shareholders of all of the group of companies.

Thanks, Mr. Sixt. Next question. Has there been any progress on the progress -- sorry, proposed ports transaction?

Has there been any progress on the proposal. Yes, I got this. Actually, on the major transactions, there's absolutely nothing to report from a transaction point of view since we last spoke on the subject of our AGM in May. And of course, operationally, as Dominic has described, excluding Panama, we achieved a very reasonable performance in the first half. If we hadn't been robbed of those assets, we would have achieved a better performance.

Thanks, Mr. Sixt. Next question. What are the group's latest thoughts on its stake in Cenovus? Is the group considering monetizing a portion of your holdings to capitalize on the current high price environment?

Okay. Well, look, I mean, as I said at the outset, right, right now, this is probably the best value and earnings hedge that we have against inflationary risks going forward. So now does not seem to be the time to be thinking about reducing our interest. Indeed, if you think a little bit more deeply about it, in the current environment, there's going to be a realignment of valuation between various oil and gas producers around the world based on the risk profile of where they produce and how they ship their product. So being as Cenovus is in Canada with growing egress from Canada to the West Coast with all of the traditional, right, egress into the U.S. and into the U.S. refining complex in the Midwest, right, and with in addition to 1 million BOE a day of production, a 500,000 barrel a day capacity in refining, right? I think that this is probably in the category of more valuable as oil and gas companies go rather than less value. So I think enough said there.

Thanks, Mr. Sixt. Next question, what are CKH's thoughts on listing A.S. Watson and its global telco business?

Okay. Look, no change. I mean I think we said quite recently that it's something that we're giving consideration to, something that we've done quite a bit of preliminary work on. But we haven't reached a decision to go or not go public at this stage. It's under active consideration.

Next question. It's for Retail. Store numbers dropped from 17,114 at the end of December 2025 to 17,042 at the end of June 2026. In view of the development of macroeconomic environment and local consumer sentiment, what is the expected gross store opening and net store opening for A.S. Watson in the second half of 2026? And what is the geographical focus of the new stores?