Welcome to attend the live webcast of CK Hutchison 2023 Final Results Presentation. Today our speakers are Mr. Victor Li, our Chairman and Group Co-Managing Director; Mr. Canning Fok, Group Co-Managing Director; Mr. Frank Sixt, Group Finance Director and Deputy Managing Director; and Mr. Dominic Lai, Deputy Managing Director of CK Hutchison and Group Managing Director of A.S. Watson Group. During the presentation, please feel free to put down your question in the chat box. The Q&A session will follow the presentation. Before I hand over to Canning, please also pay attention to our disclaimer, which you can find on page two of the presentation. We can start now.
Okay. Hello everybody, and this is where we are here to give you the explanation, you know, the details of the 2023 results. Let's turn to page four. Page four is the FY 2023 financial highlights, and you saw that, you know, the revenue at 2023 is HKD 461.6 billion, you know, compared to 2022 is 1% increased. And then the profit, the net earning is HKD 23.5 billion, and compared to 2022, if you take away the exceptional one-time profit that we made in 2022, the regular profit is -9%, but if you include the total profit versus total profit, it's -36%. Because in 2023, there were no one-time profits. We had several transactions, but there was no completion, no closing in 2023.
Earnings per share, same thing, you know, minus 9% on the regular business, but inclusive of the one-time profit is minus 36%. It's $6.14 in 2023 versus $9.57 in 2022. And then the dividend in 2023 is $2.531, a reduction of 13.5% from 2022. So this is a take into account, you know, account of a reduction of 36% in total profit. However, regular profit is only 9%. And then also take into account of the dividend payout ratio. So the payout ratio now is quite an improvement from 2022 stand at 41% versus 31%. So, you know, this is the financial result of 2023. And if you page turn to page five, and then we talk about the operation. The EBITDA on 2023 is $104.9 billion in 2023 versus $119 billion in 2022.
So you see that the shaded line represented the one-time EBITDA, and then, you know, it become a -1% on a regular operating level, but it's a total of every what you have done, and it's -12%. And earnings per share is the same, -2% on a regular basis, but -20% on a total basis. And the operating cash flow, because it was defined as only for regular business, is actually quite encouraging. It's +20%. And then the debt ratio as a result, 2023 is 16.1% versus 2022, 16.7%.
So if you turn to page six, okay, and then it's the EBIT, EBITDA chart, and, well, HKD 104.105 billion, the pre-IFRS 16 basis, you can see that this year, similar, you know, drop geographically, 49% come from Europe, and then 23% come from Asia. If you stay in Hong Kong, it's only 3%. On the business-wide, it's quite evenly spread with infrastructure is producing 28% of EBITDA, followed by the telecom business. And then, if you see where the changes of EBITDA from last to this year, if we go to the waterfall chart, you can see that, if you take away the one-off, the 142 become 10, become the 106, okay?
Then the 142 is the IFRS 16 impact, but then we are talking about pre it's 199 to 106, and then the 12 one. The 12 connects with, you know, is represented by the one-time profit we talked last year from the tower business, which was in the U.K., and then from the Indonesia merger. So that we are comparing, on an operating basis, you know, it's the underlying pro EBITDA to the 23, and then you can see the waterfall chart. Then ports, the profit is basically you see that in the port business, we will see it in the later chart, is that if there was a drop in storage income, but to a large extent offset by the increase in the throughput income.
And then, of course, the one that we cannot reproduce is we have invested in a shipping line, and this year shipping line profits drop. This is why it's affected. Actually, you can see that the HKD 2.2 billion is solely come from the port. And then retail business is doing very, very well, and, you know, you saw that the group, Europe and Asia is doing very well, and, this is but, but however, you know, Hong Kong is not doing well, and also Mainland China is quite stagnant. And so, but then we have a very, very good improvement in both Europe and Asia.
The infrastructure business is actually, you know, you saw HKD 741 million, you know, it is a very, very good result, you know, because last year they have a one-time income. This year they don't. And not only that they overcome the one-time income last year is HKD 1 billion, so that the improvement is take away this HKD 1.7 billion. It come from it mostly come from operation and also from interest income, which they have. So well done on the infrastructure group. On the telephone side, you saw that there's a retreat of HKD 2.3 billion. Of course, actually, basically, the revenue side is doing quite well. Actually, you know, it's almost offsetting, the cost increase, normal cost increase.
However, you know, you know, out of the HKD 2.1 billion, HKD 1.3 billion, there's a HKD 1 billion come from HKD 1.1 billion come from the tower sale, you know, because last year when UK sell the tower, we recognized a HKD 1.1 billion profit over there. And also, and then you in 2023, you are witnessing a huge, gigantic inflation. You saw that both in U.K. and Italy and other places. Actually, the revenue increase is quite good, but it's not enough to cover the increase in inflation. You know, this actually, you know, just for energy inflation itself is HKD 1.12 billion Hong Kong. So that actually, you know, I can just very simply say that, you know, you know, the revenue is able to cover the cost increase, normal cost increase, but not able to cover the energy increase.
Of course, there's a non-recurring item on the tower sale. And actually, you know, now they, the Hutchison Asia Telecom has a good year. He has a reduction because that from Indonesia, and they have a one-time profit in 2022 to the extent of almost HKD 1 billion, which is non-recurring this year. So otherwise, that the business worked ex- as I just said in the press con extremely well, [with] enough synergy, and then the profit increase, EBITDA increase, dividends, you know, two years of even a little bit more dividend this year. And also they are able to finance their own network, build out their network, and then the debt level actually came down. So it's a very, very good result from Indonesia.
Then, lastly, come back to the head office. So, this year, you witnessed an increase, you know, in interest, more interest income from the head office. However, you know, Cenovus does not perform as well as last year. To some extent, it is overcome by our sales of the warrant, but, you know, actually the deficit, you know, is quite big from operation, from year on year, you know. But it covers to a certain extent by the warrant, but still, however, the interest income and also the income from Hutchison China produced a, you know, quite good profit. So, that we are able to produce a positive variance against last year in the head office.
So that there are very small foreign exchange movement, so that you, you can see that, you know, the EBITDA on the real business is go from 106 to 104. Okay. The light blue color is the post IFRS 16. Now go to page seven. I asked, this is cash flow on money side. I will ask Frank to talk about it. Frank, please.
Thank you, Canning. So operating cash flow on slide seven for 2023 was really quite favorable. If you look up the upper left, the pie chart, the number one driver was coming out of finance and investments and others, right, which, as Canning described, includes things like interest income, includes some trading profits, includes some fair value gains last year, not this year. And of course, includes a very good performance coming from Hutchison Whampoa (China), Chi- Med, right, because of which we'll get into later on. The second biggest component contributor, right, was the retail group, and then the third was actually the ports group. Interestingly, what's happening, if you go down to the chart below, and you see that there's been a very substantive growth in the EBITDA that's coming from subsidiaries as opposed to coming from associates.
And so even though in something like ports, EBITDA is down for the year, actually the contribution from subsidiaries, so cash flow that we control, was significantly higher. And that's because the relative weakness, I think, as Canning described it, was in Hong Kong and in the mainland ports, so in the ports that are in the Hutchison Port Holdings Trust, whereas the relative strengths, right, were in places like Mexico, right, and a few other places. And so at the end of the day, more controlled, right, EBITDA in subsidiaries, and of course, a very substantial reduction, right, in Capex, right, across the board. That's like $2.5 billion less, right? And so you put that together, right, and you have a very healthy growth, right, in straight operating free cash flow, from HKD 33 billion to HKD 39.5 billion.
The attribution on all of that is on the charts to the right, you know, where you look at all of the components and look at CapEx, right, and investment. I think, you know, by and large, they're pretty self-explanatory, and there's stuff that we'll be talking about, right, as we go through the various core divisions. But again, as I say, you know, solid performances, right, in terms of cash management, right, really across the board. And we'll see that again, right, on the next page, right, which is page eight, when we take operating cash flow down, right, to free cash flow. So if you start on the left, you start with our HK$39.45 of operating free cash flow, take away interest, right, and taxes paid.
That was a total of HKD 13.5 billion, interestingly enough, that is as much tax as it is incremental interest. So, it's the year-on-year, right, is not anywhere near as unfavorable, right, as the lump sum would look. And then, particularly when you remember that in operating free cash flow, you had the drive of additional interest income. The impact of higher interest rates on us is still happily fairly marginal. Obviously, working capital changes, that's quite interesting because that doesn't really have to do so much with operating working capital management, which was really, frankly, solid, and cash conversion was as solid as we ever see it. We had an anomaly in that we refinanced, right, a US dollar loan, right, that was swapped into Aussie dollars that had to do with TPG Telecom.
So we ended up taking the mark-to-market loss on the Aussie dollars because we refinanced the US dollar loan in Aussie dollars. That's actually, probably the biggest driver, and that and some movements, right, you know, in working capital, relating to hedge movements. But you know, again, on the operating side of managing the plain vanilla working capital, it was really a pretty solid year, and in any event, you know, favorable year-on-year. Number three, obviously, we've talked about the tower asset disposal. There was a spillover, which is that we had a bill for VAT in the U.K., right, that we paid. That was HKD 3.9 billion. We bought some telecoms licenses, right, in Ireland and in Sweden. That was another HKD 1.9 billion in total.
Italy completed what's called the Zefiro joint venture with Iliad and received proceeds of HKD 2.6 billion, right? And then we received some loan repayments, right, from associated companies. Primarily, that was working capital loans that were repaid, right, in 2023 that related to the terms of the merger with IOH. So there were major repayments coming from Indosat, Ooredoo. So if you go across to the chart at the right, and then you basically see the reported free cash flow for 2022 stripping out the tower disposal proceeds of HKD 28.5 billion. That took you to an underlying cash flow for 2022 of HKD 19.3 billion. As we talked about EBITDA of subsidiaries, we talked about dividends from associates. We talked about interest and taxes paid.
As you can see, that's a $3 billion variance in total, about two-thirds interest, about one-third tax, if I remember right. CapEx was a huge improvement, right, across the board of $2.5 billion, right? Investments, new investments in associates and JVs, significantly lower. The telecoms licenses that we've already talked about, the proceeds coming from the formation of the Italian JV, we've also already talked about, and the loan repayments we've talked about, other miscellaneous, and it takes you to a $21.5 billion free cash flow for the year. So that, if we go to the next slide, right, leaves us with a very healthy profile overall. You know, first of all, our net debt, on the chart on the upper left, right, continued to decline from 16.7% at the end of 2022 to 16.1% of total capital at the end of 2023.
I'm happy to say that that trend is continuing, as we go into the, as we look at the first couple of months of this year. So, you know, we are continuing to reduce, right, the net debt, but also continuing to reduce, right, the gross debt, right, which is also quite important. In terms of our exposure to interest rates, well, we have an average, as you can see on the lower chart, right, five years maturity, which is actually a little bit longer than it was at the end of last year. We've only got 22%, right, of our debt, right, maturing this year.
So although interest costs, right, are, of course, going up, which we saw on the previous chart, right, you know, so is interest income and our average cost of debt as a result, right, you know, is only going up by 1.2%-3.2%. It'll continue to creep up a bit during the course of 2024. But again, you know, with only 22% of the debt repayable in 2024 and most of the fixed-rate debt repayable in the second half, right, that's not going to have a huge effect, right, in terms of the average cost of debt. Bearing in mind, of course, that after interest rate swaps, right, 68% of our total debt today, oh, sorry, at year-end, right, is in fixed rates, right, and only 32%, right, is in floating rates.
The other nice thing that we have going for us is that obviously, with $143 billion of liquid assets, right, in a inverted yield curve environment, right, we have an advantage, right, in terms of the yield on cash as opposed to the cost of longer-term maturities, and on a not insignificant balance. So all in all, I think we are in a pretty nice position, actually, to deal with either higher for longer. Obviously, we're going to be happy anyway in terms of the overall operating environment, right, if we get lower sooner. You know, time, time will tell. That's, that's, that's, that's not, not for us to divine, right? But obviously, there does appear to be a, you know, bias emerging towards lower inflation and ultimately, lower interest rates, particularly, right, in the U.S.
I think that's all that I have to say on our financial profile. It takes us to slide 10, which is the performance of the ports group. I hand you back to Canning.
Actually, you know, in this year, you know, the port group is doing quite well. And actually, because of our geography of our port, actually, you know, it was kind of an upsetting effect. As the chairman had said, in his press conference, if you see that, you know, Hong Kong was actually not doing so well this year. But however, you know, Mexico is doing very well. And so that if you look at the EBITDA, TEU 82.1 million, and so it's -3%, the TEU, the containers, is 3% less than last year. But if you, you know, what happened is that, you know, we have one port left, which is Tanzania, against last year.
If you take away Tanzania, which we don't have anymore, and also take away the trust, you know, basically, the trust deficit is basically Hong Kong and a little bit of the Yantian. Now, actually, the two years, the business on transporting of the containers is actually the same. So that, and then another phenomenon that you will see is that there's a huge drop in storage income because everything is more efficient this year. However, in most of the cases, a lot of the cases, it was to a large extent offset by the container business because, you know, we do have some price increase in handling containers.
So if you go to the waterfall chart, you see that from 2022 EBITDA to 2023 EBITDA, you see that Hong Kong, the trust, basically, you know, the HKD 286 million, you know, HKD 200 million is due to HKD 200 million plus HKD 10 million is due to a lack of storage income. And then only about, you know, HKD 17 million, something like that, is because of the TEU. So the trust is the only case of actually, you know, the negative variant mostly comes from Hong Kong. And on the Mainland China, again, similar things happen.
Everything is doing quite well on the TEU, but it is affected by the, you know, offset by the handling charge. And it's the same thing. It's almost due to storage income and then offset by TEU income. And then the same thing in Europe. Now, you saw that, you know, HKD 379 million, actually, if you look at the storage income, a deficit is that it's about HKD 700 million. You know, it's about HKD 1.1 billion. And then, you know, but the TEU business is better than HKD 700 million. So that, you know, it comes up with this almost a HKD 379 million deficit. So that you see that the business is doing okay. It's just there's an exchange rate. And then the storage income goes down, and it goes straight to profit.
But however, it is offset by the increase in TEU. And then we see this trend. The TEU business is doing quite well. And then, of course, the last but not the least, this is the one that the corporate side is all affected as the most, which cannot be replaced, is the equity income from our investment in a shipping company. And then but hopefully, this year, with the things happening around the world, tariff rate increase, we should have more income from this investment this year. Exchange rate is almost, you know, almost flat, okay? So this is, I think, all about it, you know, from our business standpoint, is the shipping income investment from a shipping company less, and then the storage income less but offset by the increase in TEU.
And then, you know, you know, if you go to South Asia, you know, Asia and other, you know, you saw that Mexico, everything is good. TEU is good. Storage income same thing happened in Pakistan. In Pakistan, TEU is good, and then, and then storage income is good. So actually, it's quite a balanced picture. Now, I would I think I finished on page 10. 11 is retail. I think Dominic is a professor on this chair. Dominic, you want to talk about it?
Okay. Thank you, Canning. Let's go to page 11, slide 11. Overall, it's a good story. With a store portfolio of 16,491 stores and a very strong loyalty member base of 159 million members, the retail division remains the world's largest international health and beauty retailer, operating in 28 markets under 12 retail brands. And then the number of markets will be increased or expected to increase by another two, before the year-end. The main market that we are entering will be in Bahrain and Kuwait. On store number, which you see, we continue to carry out our store expansion programs, whereby we have opened 878 new stores, out of which 254 is in China, while closing down 529 non-performing stores upon lease expiry. So as a result, our store number stood at 16,491 at year-end and increased of 2% or 349 stores. So this simple calculation.
Then the store portfolio split between Asia and Europe is about 50/50. And the average payback period on new Capex invested remained very healthy at 11 months. So that level of fast payback period has been maintained over the years. Then we have no intention of getting it longer. On EBITDA, you know, EBITDA generated for the year is reported at HKD 16.23 billion, representing an increase of 13% in reported currency or 11% in local currency. Then the EBITDA split is 31% from Asia and 69% from Europe. Now, let's move to the right. You know, let's move to the EBITDA waterfall chart, which shows the year-on-year EBITDA change of each division in Hong Kong dollars. So starting from an EBITDA base of HKD 14.31 billion on the left, in 2022, we see across the board increase in all the health and beauty divisions.
You can see, you know, all favorable increases. So for example, you know, the first little increase, HKD 22 million, is from health and beauty, China. So despite the challenging consumer and customer traffic as a result of soft economy and decreased consumer confidence, the China division managed to still report a HKD 22 million increase or 2% on its EBITDA. And the next is health and beauty, Asia. You know, a good story. It grew strongly as a result of increase in store footfall as well as store network expansion. So we are opening quite a number of stores in Asia. So the EBITDA increase is 23% or HKD 708 million, with Thailand, Malaysia, and Philippines being the main contributors.
For Western Europe, health and beauty, Western Europe, with strong growth in comparable store sales, you know, we're talking about if you read the annual report, we're talking about double-digit comparable store sales, primarily in the UK, Germany, and the Benelux. The EBITDA for Western Europe actually grew HKD 931 million or 13%. For Eastern Europe, health and beauty, Eastern Europe, we see good trading performance in Rossmann, Poland, as well as the Drogas business in Latvia. So as a result, the EBITDA growth in this division, although smaller, but this growth is registered at 17% or HKD 372 million increase. So in summary, for our health and beauty business, which accounts for 87% of the retail division's revenue, the total EBITDA has reported a strong 15% growth over previous year in local currency.
So if you look at the health and beauty divisions, the growth is 15% in local currencies. So lastly, here for other retail, which mainly comprises our supermarket business, PARKnSHOP in Hong Kong, our electrical retail Fortress, again, in Hong Kong, and our manufacturing division, which manufactures water and beverage products in Hong Kong and China, the combined EBITDA registered a decrease instead of an increase in the previous, you know, health and beauty business. Here, we registered a decrease of HKD 410 million. So this is mainly attributed to PARKnSHOP Hong Kong, whose business is being adversely affected by the change in consumer behavior of doing grocery shopping across the border in Shenzhen when people travel there for leisure and entertainment.
So it's a, you know, an all-ongoing trend that people travel north on weekends, which is a, you know, traditional important, important shopping days for PARKnSHOP . So the main stock fall, you know, comes from PARKnSHOP . So overall, you know, all these positive and negative bring the underlying EBITDA to HKD 15.93 billion, a year-on-year increase of 11%. And with our favorable average translation gain of HKD 294 million, the total reported EBITDA for the year has increased 13% to HKD 16.23 billion, with an EBITDA margin percentage of 10% versus last year's 9.6%. So in terms of EBITDA margin percentage, it also has, you know, a bit of an improvement. As for the outlook for this year, you know, last year was quite good, as, you know, you just mentioned.
Outlook for this year, we expect health and beauty Europe to continue to deliver a solid performance. Health and beauty Asia is expected to continue to show strong growth, while health and beauty China and other retail in Hong Kong should continue to deliver improved performance through store network optimization. We have done a number of initiatives and various productivity enhancement activities. So in the meantime, you know, overall, for the retail division, we'll continue to drive our strategic pillars, including on-brand and exclusive, which now account for 30% of the sales of the group, and O+O, the online, offline, and CRM to enhance customer engagement and tie customer lifetime value. While we all continue our store network expansion, we plan to open 1,100 stores this new year, and then the store payback period actually justify and support this fast expansion.
So this is all for retail. Now, I would like to pass to Frank to talk about our infrastructure business. Here to you, Frank.
Thank you. Yeah, thanks, Dominic. Again, I mean, as Canning said, infrastructure, just a real pillar, in this group and, had a very, very, solid year in, in a relatively turbulent global environment, as we've been seeing, as we've started looking at all of the other, businesses that we're in. So, you know, they announced their results yesterday. They were very well received, obviously reported earnings up by 4% at just over HKD 8 billion EBITDA, up 3% in local currencies, 1% in reported currency. So a bit of unfavorable exchange movements. But, yeah, HKD 29 billion, very, very satisfactory. The, comparable earnings I think Canning mentioned this, but it's important to understand we did a partial sale, last year of Northumbrian Water. So that reduces, right, the, the base, right? But also, there was an exceptional element in last year's numbers.
So if you strip those things out, actually, earnings on a normalized basis for the year were up by 12%, which is really very, very impressive considering absorbing the impacts, right, of the partial sale of Northumbrian Water. That leads you to a very nice, and I think well-received, dividend growth, as you can see from the chart. So it's been consistently resuming growth since the onset of the pandemic, which is good news. Earnings per share, pretty well the same thing, also growing rather nicely. Net debt ratio, right, is, you know, essentially flat. It's up a little bit from last December, but at 7.7% net debt to net total capital, you know, is certainly not anything that's going to keep anybody awake at night. Translates into a very stable A rating from Standard & Poor's.
Of course, the good news is we had a number of resets, right, in 2023. We have none, right, in 2024 for the regulated asset base, which means that 2024 is a reasonably predictable year, right? Infrastructure should continue to act as a real pillar, right, for group earnings. I think that's all I would say about infrastructure, and I'll hand it back to Canning to go through the more detailed slides on telecoms.
I think the next two pages is about telecom. You know, just read out the figures. HKD 80 billion on revenue, increased by 3%. EBITDA HKD 21.3 billion -11%. If you look at the chart, if you just look at the operation alone, it is, you know, EBITDA was reduced by 9%, okay? If you look at how all those waterfall, how from one year to the other, you go from the far left and then in the middle chart at 2022, EBITDA HKD 23.8 billion. EBITDA in 2022, you know, the inclusion of that is the HKD 1 billion from tower sale. So that if you take it, it is it takes a one time. So you take it and then it becomes HKD 22.8 billion. Now, from that, you go to the 2023 underlying EBITDA, which is HKD 20.8 billion.
You know, actually, where does this reduction come from? In U.K. And then U.K. is simply a basis, that you know, I think it's still this is why we do the merger. We try to do the merger because that, you know, the revenue just not enough to cover the cost increase. Basically, U.K. has two cost increases. One is the network cost increase that, you know, because we have to build out the 5G and the second IT and all those. It costs us, you know, really, HKD 1.2 billion more. And then this year, you got the inflation. You got the inflation or just on expenses on energy and on other things, about HKD 500 million plus.
So that the increase of revenue is, if you see the next page, it's quite meaningful. But however, it cannot cover the cost. This is why we want to, you know, we agree to do a merger with Vodafone. We got to get into critical mass, okay? So that's what happened. You know, the revenue increase reasonable increase because we have price actually, you know, we have, you know, repricing, in the U.K., you know, for inflation and then the roaming income come. But however, all this income cannot offset the cost increase, which is the inflation cost plus the network cost. Because as you go out the network, you need more cost.
In Italy, you know, the situation is actually quite, it's quite pretty, you know, better in a sense, although it's still a big figure, HKD 800 million. You know, you saw that Italy income is more or less the same as last year. And then except that the cost really might not actually in what Italy what hurt Italy in 2023 is the energy cost, actually, because we have been, you know, the energy cost affected is by the tune of almost 7,800 million. And so that if you see that it is this HKD 800 million, actually, I can see that it's mostly come from the energy inflation cost, which they are not able to cover by the revenue.
Actually, you know, the operating cost, Italy is doing quite well, actually, with the synergy with the network, joint venture with Iliad. And then actually, we have some cost saving as well. So on the cost side, Italy is doing well. It's just that, you know, the inflation come at the total, you know, electricity cost went up by, you know, by times. Not in Hong Kong, we talk about percentage. In Europe, we talk about one, you know, few hundred percent. So that is quite, and then if you go to the Nordics, Sweden and Denmark, Sweden in particular is doing so well. They also have the problem of energy cost increase and all those.
However, you know, they are fighting hard and then they are able to have revenue increase to cover those. So in fact, they saw an increase in EBITDA. And whereas Austria and Denmark is almost break-even. They are all doing quite well in those countries. And they are especially in Austria, the inflation is very high. You know, just on the official on salary, it's about 8%-9% increase in salary. So it's very high. But then, however, you know, they are doing quite well. They are able to do price increase. And then, so that the, you know, the business in two, I expect, you know, 2024, they will do better. In Ireland, it's the same case.
Then hopefully, you know, they think that, you know, again, you know, they have a stagnant revenue and then, of course, they show a deficit in the EBITDA. So I think this is the picture. If you go to page 14, I think it's more or less, you know, I just cover it. So, so that, you know, revenue side, you know, if you look at the total margin, you know, it's positive, okay? You know, plus 3% in local currency, plus 5% in reported. But however, it's the cost they are not able to cover.
But if you look at this page, the good thing that I would like to point out, the thing that we have achieved, is in the reported EBITDA less the on the bottom line, comparable D&A and less CapEx. Actually, finally, you saw a positive HKD 323 million. Actually, it's more or less the same because we have HKD 300-odd million more depreciation in U.K. for write-off. U.K. saw a minus six. Actually, this should be a HKD 300-odd million more because the depreciation is increased by GBP 30 million, something like that, by write-off something. So but more even if you take that into account, take that out, I think the EBITDA minus CapEx is positive.
So that, you know, we still have a negative event, if you look at that, in terms of EBIT depreciation minus CapEx, in Sweden, because, you know, they have to compensate for the, for, for as we, you know, we've broken up our network joint venture with Telenor. And then so that it has been going separate ways. So we have been per CapEx on there. And also, they changed the Huawei equipment into Ericsson equipment. Also, it costs us money. But this phase will be finished in this, I think, in the next two years. So that you will see that Sweden should go back to more closely to depreciation. And so are the other ones. So I think this is what we have achieved in 2023.
And then, in 2024, you know, as I have said in the press conference, you will see the repricing effect, which only have the effect for a few months or half a year in 2023. We have a full-year effect in 2024. And then the inflation is not as severe in 2024 as it's 2023. So that I can say that the operation will be better. And then with the controlled CapEx, so that, you know, if we can do it through the CapEx within depreciation, the expense will not increase. And that will give us the financial performance and free cash flow that we have been working for. So it's not you know, you saw that a big drop this year. But however, it's not all bad news.
You know, you see that, you know, we can control the CapEx. And then, you know, you see the people working hard on revenue. And of course, the most important is the UK merger with Vodafone because this is a classic case that demonstrates that we as a standalone company, you know, it's difficult to build more network. As you build more network, which is good for the consumer, and then you suffer loss. How much losses can we continue to suffer? So, you know, this is why our network has always been the smallest. And this is why we go for merger. So this is my key case. Thank you.
And then we go to page 15, which have a four-part split between Frank and I since I have been doing the talking. So maybe, Frank, you take up yours first and then I and then after you finish, I will take up mine. How about that?
Okay. That sounds perfectly fair. First on the far left, Cenovus Energy. That's a very important position for us. The CKHH owns 16.9% of Cenovus, which closed at 25.95 a share last night. So that's CAD 8.2 billion marked to market as of last night. Now, I think we all know that the fourth quarter last year was quite dire and indeed did weigh year-on-year on the contribution, the earnings contribution, right, from Cenovus. But behind that, they have been working, you know, very hard and in a very disciplined way, right, to balance growth but also put themselves in a position to increase shareholder returns. The annual base dividend, right, did go up, right, by 50%, from a year to year, from 2022 to 2023. And today represents about a 2% yield.
They got a credit rating upgrade, marking real progress towards achieving their much lower net debt target. They've announced that they want to get net debt down to below CAD 4 billion. And on the current outlooks, that is something that I think we all expect happens in 2024. Now, that's an important milestone because under their announced dividend policy, regardless of what they do to base dividends, excess free cash flow until they've met their CAD 4 billion debt target is only 50% allocated between share buybacks and variable dividends. And once they've met the debt target, right, that goes under their announced policy to 100%. So there's scope for a very significant improvement, right, in the cash contribution performance from Cenovus, right, for our group, right, going forward. The second one that I've been asked to say a few words on is HUTCHMED.
Again, a very good year. We own 38.17% of HUTCHMED, closed at $1,730 per ADR last night, which is a total market cap of three-odd billion. So our position, marked to market last night, was worth $1.145 billion. So it's not an insignificant associate of the group. They had a very good year. They realized significant upfront cash proceeds from licensing outside of Hong Kong and the mainland, right, to Takeda. And that closed in March of last year. They had good revenue growth coming off of licensing income. And of course, the oncology businesses which they retain, right, and the drug distribution businesses which they retain in the mainland, right, earlier than expected, milestone on their Fruquintinib oncology drug, received their first US FDA approval in November of 2023, right.
They also completed building a new flagship manufacturing facility, right, in Shanghai that started operations in 2023. So, Hutch Med has definitely been on an upward trend. And we really do hope and believe that that continues in 2024. Kenny?
Okay. And then, actually, than these two, you know, Indosat and TPG, you know, Indosat, I think it is a classic case of success in a merger. So everything worked well as I keep you know, you got all the figures in the presentation. But what I'm saying is that the synergy work as a result, the EBITDA increased from year to year. The net profit increased. Actually, on the actual net profit, it saw a decrease because last year, there is some significant tower sales and one-time profit. If you take that away, the net profit is increased very nicely. And then, obviously, you know, this is the second year they do, you know, they propose to pay dividend. And now the, you know, there's a nice dividend increase.
And also, you know, the network continues to improve very nicely. But then they are able to finance everything themselves. Actually, not only they are able to finance, they are able to reduce the debt. The debt, you know, go from 2022 of $774 million equivalent until $730 million. So it's very, very, very good financial performance company, of course. It's all it's somewhat not reflected all yet in the share price. You know, the share price had increased 80% since merger. So it's an awful story. And then TPG, this year, they have a reduction of in Australia of profit because, again, last year, they have the one-time profit. And so that, you know, the one-time profit is quite significant. Last year, it's about AUD 400 million, which they recorded.
And this year, they have none. This is why there's a 90% reduction because last year's profit was HKD 500 million. This year, profit of HKD 49 million. So there was a HKD 90 million reduction. However, you know, the EBITDA keep on increasing. They go from HKD 1.8 billion to HKD 1.9+, from 2023. And also, you know, the company is quite in a, you know, confident position. This is why they pay the same dividend, which to the shareholder. So that but in the course of this year, they are they already built up their 5Gs. So that, you know, so that they have about 3,000+ site at the end. And then which just remember, two, three years ago, we had nothing when we merged. So that, you know, it's, it's a it's a solid progress.
Again, you know, we don't have to put any more cash into, into Australia. Instead, we are getting dividend out. So we are looking and then no more losses. We are taking profit. And then this will continue to create value for Hutchison. Thank you. Now, we go to page seven. Sustainability. And, you know, the professor, our presenter, is Mr. Frank Sixt. So it's all yours.
Thank you, Canning. I'm not going to spend a lot of time on this, because I think the page is pretty self-explanatory. And I would point you towards the chairman's statement because, in each of the divisions, right, he also talks about the progress that they've made in terms of their sustainability objectives, right, in 2023. So the material is very well covered. Just some additional anecdotal stuff. Obviously, we are rated from a sustainability point of view by Sustainalytics and S&P and ISS. In 2023, we continued to improve our rating with Sustainalytics, which is not the easiest thing in the world to do if you're a multinational conglomerate because of the category ceiling that you find yourself in. But nevertheless, we continued progress with something of an upgrade. We're still considered medium risk. MSCI, there was no change.
They basically maintained our rating, which was upgraded by two notches in 2022. ISS, right, gave us a two-notch upgrade, right, in September of 2023. So what we're doing in terms of sustainability and sustainability reporting, right, is clearly having an impact and is translating into favorable movements on our sustainability ratings. I'm not going to spend time, right, on anything else on this page, other than just something that we haven't done before is to disclose how much of our spend, right, in any given year, right, qualifies as green spend, right, under the analytical framework that you use for green bond financings, right. And that totaled $1.8 billion, right, last year. And the breakdown is there. I think it's the first time that we've reported this kind of number publicly.
And it just shows you, I mean, in some senses, how much, right, sustainability is just embedded, right, in the nature of the businesses. A very substantial part of this comes from the infrastructure businesses. You know, electricity grids are spending a lot. Natural gas grids are spending a lot. Water distribution businesses are spending a lot, right. That qualifies as green spend, as does what we do in our ports division, as does certainly what we do in our telecoms division. So when you add it up, you know, we're a pretty hearty contributor in terms of spending to the greening of the planet. And we will be releasing our sustainability report towards the end of April, right, I believe. And I would encourage everybody to read it.
You know, among other things, we announced a new biodiversity policy this year, which, of course, we've been very respectful of biodiversity in all of our industrial-type divisions for a very, very long time. It makes a fascinating read as to just how much we do, right, to protect the natural environment, and little teeny critters and you name it. It's a very gratifying read because we've never collated it before. You can now see how much attention we pay, right, to protecting biodiversity and the footprint of our industrial activities if you want to think of it that way. I will end on that note. I believe our chairman has joined us, and it takes us to Q&A.
Thank you.
Yes.
Yeah. Thank you. We will now begin the Q&A session. The first question is as follows. Will the company increase shareholder returns through share buyback or higher dividend distribution in 2024 in light of improvement in underlying free cash flow generation in 2023?
Well, dividend payments are usually a board decision. And the dividends for recent years included payout decisions relating to various one-off items each year. And in 2023, we don't have any one-off gains, resulting in a gross earnings decline of 36%. But it's really on operation level, a 9% decline in recurring earnings, and approximately 5% decline in operating cash flow. We have already increased our payout ratio to over 40%. That's why we have a full-year dividend reduction of about 13.5%. We believe this is a fair and prudent balance between our objectives. And to share buyback, we remain quite open-minded. In 2023, we chose not to execute buybacks in order to maintain the more conservative financial profile in a relatively uncertain time. Thank you.
Thank you, Mr. Chairman. The second question is on the ports division. What is the impact of the Red Sea and Panama Canal issues to HPH?
Of course, there are supply chain disruptions, but the impact to HPH is really not significant. Some ports throughput may be temporarily affected, but the cargo still arrives at those ports despite some delays. Maybe it will focus in the Middle East area. The Red Sea crisis actually pushed many shipping lines to divert vessels around the Cape of Good Hope and skipping the Suez Canal transit. So, smaller carriers and feeders are still operating in the area. This diversion will strengthen a typical Asian-European trade route, will lengthen the trade route, say, 10 days, and has absorbed the excess vessel capacity. So that's why the trade rates are going up. We currently do not expect a significant impact to our terminals in the Middle East. You take Alexandria, for example.
It mainly carries, handles cargoes in the Mediterranean area and, therefore, not much affected by the Red Sea situation. You mentioned the Panama Canal. We operate two ports there, Balboa on the Pacific and Cristobal at the Atlantic. Balboa is benefited, actually, by the drought due to the more ad hoc calls. In particular, it's got rail access to the railway connecting the Pacific and the Atlantic. So, we're okay. Thank you.
Thank you, Chairman. The next question. What are the major growth drivers in 2024?
We believe our operating businesses have good prospects in 2024 despite some, I would say, macro headwinds. The ports division should resume throughput in 2024, should resume some growth in 2024 as we have observed some improved trends in the second half of 2023. It seems US retailers are planning for a stable run-up ramp-up in purchase orders in 2024. For retail, Asia and Europe have already emerged to be significant earning contributors, paving the way for some good growth in 2024 for A.S. Watson. For Mainland China and Hong Kong, we expect improvement for store from store network optimization and enhancing profitability through cost savings and productivity enhancement initiatives. Now, infrastructure division let me see. I think the regulated business will continue to provide good, steady, and recurring income. Even the non-regulated businesses will be good profit contributors. Telecom.
Telecom should deliver improvement in underlying performance with easing inflation pressures and possible upside from various pricing initiatives. We are also very disciplined in our cost management and possible improvement also from stabilizing depreciation charges. Thank you.
Thank you. Thank you, Mr. Chairman. The following question is on our financial position. Will existing relatively low-cost foreign debt due to mature plus elevated interest rates pose risk to CK Hutchison earnings?
Maybe, Frank, can you help me answer that question?
Sure. And I'll go very quickly because we actually went over this in the slide presentation. But, you know, basically, we've got 68% of our debt, right, in the group after swaps is in fixed rates, and it is an average 5-year maturity. This year, only 22%, right, of our debt matures. So obviously, we're in a very nice position to capture the benefit of rate reductions, right, going forward just because of our refinancing profile. Our average cost of debt, of course, it will gradually move up, but it's from a very low base. It was 3.2% for 2023. And most of the movement will happen in the second half of the year just because of the timing of the refinancing requirements. And lastly, as I think I mentioned, you know, we have $143.1 billion in liquidity and cash and marketable securities in effect.
And that gives us a very significant ability to capture the benefit of yield curve inversions, which is what we've been having for the last little while, at least. And it obviously acts as a pretty significant hedge against increased interest rate and financing costs as we go forward.
We seem to play okay on this timing, huh?
Yes.
Okay. Thank you.
Thank you, Frank. The next question, yes, is on telecom. Has there been any update in the CMA's evaluation of the proposed Three UK Vodafone merger? Are you confident that they will pass this transaction?
Canning, how many times have you answered this question?
Okay. I think the situation is we have filed our merger notification to the CMA in late January. And then according to the CMA's published timetable, I think the deadline to tell us whether we will got it in phase one or we have to move into phase two is tomorrow. So today, you know, we don't know the result yet. But, you know, we don't know the result. If we have to go to phase two, that means that it is, you know, from our experience, it is not unexpected. So that is not something that means that phase two means a more detailed review of all the evidence related to the case. And, you know, we have several merger in the past that we successful merger in Ireland, in Austria, in Italy.
They all go into phase two. So that, you know, you know, you know, that we so they're going to phase two. If you can get in phase one, that's great. If you can't get into phase two, then, then, then we have to do more work. We have to if, you know, if we go to phase two, we, we will spend our time more time explaining to them the benefit of the merger, as I just said earlier. But, U.K. by ourselves is, is, is very difficult. If you see the figures, you build up more network, you have more much more expense, which is not sustainable. Okay? So we will work with them. We will produce evidence what why it is good to them.
Of course, we hope that, you know, the outcome in phase two will come towards the end of the year, as we hope. This is the situation. Thank you.
Thank you, Canny. The next question is still on the telecom division. Is better performance expected from Three Group Europe in 2024?
Canny, can you answer that question, please?
Okay. So actually, you know, as I said in the presentation, 2024 should be better because we have done a lot of revenue work on the business in 2023, like repricing and all those. And then in 2024, we should have the full year effect. And then by looking objectively into the market, the inflation cost will be much less than 2023. We hope that, you know, the pressure on that side will be gone. And also, one of the major effects on our revenue in 2020 in the last few years is the roaming income from Italy because of failure to bring up their own network is down from year to year. We are of the opinion that they have plateaued.
Then let's see how it goes. So that the lower magnitude of all the cost increase cut, the revenue effect on the repricing, I think this will get us a better performance. Of course, you know, last year we have achieved CapEx equal to depreciation. Then so that, you know, the pressure from that side will be less on the affecting P&L, the depreciation side. Of course, we will continue to control CapEx so that we will produce more free cash flow for the company. Thank you.
Thank you, Canning. The next question is on retail. What was the sales performance in major markets in the first two months of 2024, especially from China?
Dominic, we believe that's your question, huh?
Okay. Thank you. Thank you, Mr. Chairman. You know, we had definitely, you know, as I mentioned earlier, you know, a good 2023. And then the first two months of this year, 2024, look encouraging, you know, particularly in Health and Beauty Asia and Health and Beauty Europe. Just to quote you some numbers, you know, the comparable store sales growth, which is a very important indicator on how well is it trading. In Health and Beauty Asia, we have recorded at 13.6%, you know, double digit for the first two months. And even for Europe, it's a good 7% comp sales, in these first two months of 2024. And in China, you know, the sales performance remains challenging, stagnant store traffic, and subdued consumer sentiment, because of the consumer price index drops and the level of household deposits increases.
So people are saving more rather than to spend. So it's a challenge. But we expect improved performance, you know, over the next months and, you know, before the end of this year. For Hong Kong, of course, you know, it's adversely affected, you know, particularly in our PARKnSHOP business by people traveling across the border to some extent for their grocery shopping, and also other international travel during long holidays. But we have been doing some countermeasures, you know, in terms of product range, improvement or enhancement by importing products that are not available in China so that, you know, people can only get it in Hong Kong. And also, we undergo some cost personalization programs, initiatives to improve the productivity of the business.
So we are doing everything we can, you know, in the businesses that need attention to improve. And then we are seeing good results, you know, in the bigger business of Health and Beauty Asia and Europe. Thank you.
Thank you, Dominic. The next question. Why did Wind Tre's EBITDA reverse from 1% growth in the first half of 2023 to 15% decline in the second half of the year? Will the weakness in second half be continued into 2024?
Canny, can you pick up that question?
Okay. I think in the second half of 2023 in Italy, second half, you know, the energy cost increase is more severe in the second half than the first half. And also, you know, because when we do the NetCo , we have a lot of reorganization costs, legal costs, and budget costs. When we cannot close the deal, we have to write off. And then so that that also, you know, get a major cost write-off. And then expect so these two factors affect the EBITDA in the second half. Of course, the energy is major figure. And then going into 2024, as I said before, you know, the price, you know, the price increase.
The price adjustment, increased adjustment, we did in 2023 will have a full year effect in 2024. And also, we see that, as I said, the reduction in wholesale income should be stabilized. So we don't see a major step of decrease anymore. And then so that I think on the revenue side, it should be very, you know, very stable to increase. And also, we have done well in the B2B and also on the fixed wireless access business. So the audits together, and I think, you know, give us a positive outlook to 2024 of Italy.
Yeah. Thank you, Canny. Due to the time constraint, we will have the two last questions today. The second last one is, what is the outlook of container throughput performance in 2024?
We have seen some improving trends in the second half of 2023. Container throughput growth was 1% in the second half of 2023 compared to a 7% decline in the first half. With quite significant destocking of US retailers in 2023, the outlook for 2024, I would say, is cautiously optimistic. Throughput grew for about 9% in the first two months of 2024. We also see that large cross-border e-commerce companies have already started shipping more via ocean in 2024 due to increased volumes that are becoming either too large or too expensive for air. Overall trade from Asia to U.S. and Europe is expected to grow at, let's say, mid-single digit in 2024. Some secondary trades, like the Indian subcontinent, is expected to grow slightly faster than the expected average global trade growth. Thank you.
Thank you, Chairman. The last question for today, also, for the ports division. What is the expected CapEx level in 2024?
Well, 2024 Capex is expected to be at a lower level than 2023, mainly because some of the construction of new container terminals in Egypt is completed. Ports division continues to place stringent control on its Capex spending, which shall be only mainly on expansion and development projects in Mexico, Rotterdam, Thailand, and Barcelona to enhance its bargaining position in the industry. Replacement Capex, for example, at Rotterdam was previously deferred during the pandemic.
Okay. Thank you, Chairman. Due to the time constraint, we have to end the results presentation today. Thank you very much, Chairman, directors, and for all the guests.
Okay.
Thank you.
Thank you.
Thank you. Bye-bye. Bye-bye.