CK Hutchison Holdings Ltd Stock

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?

Well, as I mentioned in the presentation, there's a small reduction in store number for the first half. It's less than 1%, to be exact it's 0.6%. So the reduction in store numbers actually during the first half reflect our disciplined approach to portfolio management rather than any change in our long-term expansion strategy.

For example, in China, now the business continued to rationalize their store network by closing down stores and locations with low store traffic. So we have to look at each business, each location separately and then decide if the store has no future, we are actually easy to conclude that we need to close.

Looking ahead, we expect store openings to accelerate in the second half with positive net store growth for the full year. So this is the ambition for the group. Expansion, we'll remain focused in Health and Beauty, our core business and our investment decisions are always guided by disciplined capital allocation. For example, in terms of our payback, cash SOP over the CapEx we spend is a good indicator. And then that metric stands around, say, 12 to 13 months. So basically, the CapEx we invested, we got paid back in about a year. And of course, we look at the long-term return on a sustainable basis. Thank you.

Thanks, Mr. Lai. Next question. With the disposal gains coming in, what is the time line for redeployment into new acquisitions for CKI? Would the management consider a formal capital return framework if the disposal proceeds significantly exceed reinvestment requirements? Should investors expect CKI to prioritize M&As, special dividends, share buybacks or debt reduction?

Yes. I think -- first of all, it's a question for CKI, which is best left for them to answer. I mean you know how they look for investments. You know that they take pride in having a strong balance sheet and even in regulated asset categories being under rather than overleveraged, right, and playing for a very long-term, very stable returns.

So I think I really answered the question in the sense of the group as a whole in the first question that you asked, and that is everybody is giving thought to how these proceeds can, should be deployed, where they should be heading, right, in terms of the expected IRR on new investments, in terms of EPS dilution and accretion, in terms of cash flow per share accretion and dilution and ultimately, credit metrics as well and shareholder returns. And I think I'm, in effect, asking for your patience to let us give you more information on that thinking when we've had a bit more time to do it when we announce our results in 6 months' time.

Thanks, Mr. Sixt. Next question. Does the management think the group is slow in investing into new economy?

No, no. I mean I think that's silly. I mean we're not a day trader and we're not a [ FOMO ] trader by any stretch of the imagination, but we see technology, including AI tools and agents as very important resources that we can use, right, in our business to enhance operational resilience. You heard Dominic talking about the many uses that we're making of this in the retail businesses. There are applications in all of our businesses. And in fact, I think most people don't know this, we have an in-house, right, AI development organization called CKDelta, have had for a few years now, which, among other things, I mean, builds AI agents, right, off the appropriate models and they've deployed several of them, mainly in the infrastructure businesses, right, including things like network management and customer care management and so on and so forth that they're live working and producing meaningful cost structure and customer satisfaction improvements in the infrastructure businesses. We're now in the course, and Kwan is very involved in this of reading those across, right, and using CKDelta to create our own agents in the Telecoms businesses. And again there, with a focus on customer service, network ops, predictive maintenance, field service management, right?

And I think we're careful adopters, and we will not rush, right, our AI decisions. But don't think for a second that we're being slow about adoption, right? We're just being, hopefully, wise about adoption getting the results.

Thanks, Mr. Sixt. Our next question. In light of the forced termination of the Panama terminal operations in late February, is the group considering whether an impairment of PPC may be required?

Our Chief Financial Officer.

Yes. Okay, Frank. Happy to do so. Look, we really don't believe an impairment is required. We, of course, strongly disagree with actions taken by the Panamanian State and the group and PPC continue to work our legal advisers, and we're actively pursuing legal avenues and recourse through national and international proceedings so as to protect the group's legal rights. We believe on the advisor council that our legal cases are strong, and therefore, as a result of that, we don't believe an impairment is required as a whole.

Thanks, Mr. Cheung. Next question. What is the management's latest assessment of telco in-market consolidation opportunities in Europe? Are there more opportunities to crystallize value?

Yes. We watch it very closely, and there are signs of a shift in the prevailing wins and there's been some actual policy statements that suggest that merger control regulators in Europe are going to be looking both at economic benefit, right, flowing to society as a whole from proposed in-market consolidation transactions, and not just focusing on the narrow potential impacts on consumers. So taking a more holistic approach. That may very well open up doors. It appears to be opening the door to a 4 to 3 consolidation in France as we speak.

But we get lots of proposals. We talk to lots of people, and we are -- we would be very interested, right, in further in-market consolidations in the markets where we're not already consolidated. And so we're open to it. But right now, we haven't seen any transaction or made any decision with respect to a transaction that we think we could go ahead with.

Thanks, Mr. Sixt. Next question. Can you provide the latest business trends under the current oil price environment?

Sure. I mean I think we've already seen the ports are able to mitigate, right, higher operating costs, among other things, through contractual tariff mechanisms and various surcharges charged to shipping lines and so on. I won't go into the details. But the impact on ports are quite mitigated.

Our Retail business is really focused on essential items rather than luxury products. So the inflationary pressures have limited margin impact, I think, is a fair assessment in the Retail businesses. CKI, of course, the RAV base tends to be adjusted, right, for inflation. So the return that you get, right, is adjusted for inflation. So that's a very protected business. It's almost like owning an inflation-adjusted bond with a known spread to inflation-adjusted returns. So doesn't really affect much of the Infrastructure businesses.

And our Telecoms operations, I mean, have more exposure. Some of them do edge, right? But most of the energy price inflation response, right, is to try and manage the energy usage more efficiently, particularly across the networks and the store base and so on. And needless to say, as I said many times, to the extent that it does adversely affect any of these operations as a whole, our interest in Cenovus is giving us a very effective earnings hedge and value hedge against energy cost inflation specifically.

Thanks, Mr. Sixt. Next question. Investors are encouraged by the good recovery in the retail operations in Hong Kong. What were the major drivers for the recovery?

So I'll take this one. Of course, we are very happy with the improving performance of our Hong Kong retail operation. I think it's long overdue, which we have, I would say, affected in the past few years, people moving for whatever reason. But I think the recent performance of Hong Kong actually has turned around and is improving. So the recovery, basically, if I have to define it is both markets stabilize or market stabilization, and of course, the actions we have taken to strengthen the business.

We have been doing a lot of work to strengthen the business, to attract the customer back, including product assortment changes, promotional effectiveness, connecting more and more effectively with the customers. growing our O+O, online and off-line business. And of course, we have to keep our stores fresh so that people are delighted to shop in a good environment. So a lot of actions have been taken. And then I'm happy to see the improvement of performance since the start of, I would say, end of last year, yes.

Thanks, Mr. Lai. Next question. Are the final decisions for Victoria Power Networks, United Energy and Australian Gas Networks in line with CKI's expectations?

Short answer is, yes. I mean, they started on 1st July of 2026, higher allowed rates of returns allowed capital investments based on the final determination. So I think CKI is very pleased with those outcomes and reported on that yesterday.

Thanks, Mr. Sixt. Next question. The 185th anniversary is an important milestone for A.S. Watson. Beyond the celebrations, what strategic opportunities does management see arising from this occasion? And how might it contribute to the business growth trajectory over the medium term?

Yes. Again, I will take this one. Of course, 185 is not a short time. It's a big event for the group. And then if you walk around Central or if you live in the mid-level, you can clearly see signage about our own property, Cheung Kong Center II, you can see the banner, the moving banner, celebrating the event.

And in fact, 185 years anniversary indicates the trust that we have built with our customers, suppliers and partners. And then they have the trust over many generations, not years, but generations. So of course, we will leverage this occasion to deepen our customers' engagement, accelerate loyalty member growth, strengthen our ecosystem in terms of O+O and also differentiate our own brands in this very -- still very competitive market. And then this anniversary also provides an opportunity for us to showcase our innovation agenda, the AI enabled customer engagement, so people understand and appreciate the amount of investment that we have spent in this area, the digital and because everything now is becoming, I would say, AI-driven, digital-driven. And of course, we don't forget about the sustainability aspect about our business across our markets. Thank you.

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

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