Welcome. Thank you very much to attend the live webcast of CK Hutchison 2023 interim 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; Mr. Dominic Lai, Deputy Managing Director of CK Hutchison and Group Managing Director of AS Watson Group; and Malina Ngai, CEO of Asia and Europe of AS Watson and Group COO of AS 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. Good afternoon, or good morning for those in Europe. Welcome to our presentations for the first half of 2023. It has been not an easy year. We just see that in the first half of the year, we are doing without those mega, one-time earning. As a result, it shows we have a reduction of net profit. If you look at the revenue point of view, on operation, it is quite balanced. If you look at the revenue, it's -3% on a reporting basis, if you look at the local currency without the exchange, it is +1% in local currency.
The net earnings, HKD 11.2 billion, versus HKD 19.1 billion last year, less 41%. Basically, last year, we have HKD 6.2 billion of extraordinary income, which we don't have today. If you take that away, then it is -13%, and it basically reflect, you know, the energy costs and a lot of the costs increased, especially in Europe, and where the revenue is. There's a timing difference for the revenue to catch up. Earnings per share is HKD 2.93, versus HKD 4.98 and 41% reduced, because of the, you know, there was lack of extraordinary, one-time income, as compared to 2022.
Dividend, -10%, HKD 0.756, versus HKD 0.84. I think, this reflected the board's confidence in the company, also because, later on, Frank will present the cash situation, is the strong financial situation of the group. That, you know, and then we look at the business as a whole, and then we feel that, you know, there are pressure about 10% on the ordinary business. This is why the board come to a conclusion. They do not pay attention to the lack of extraordinary income and, reduce the dividend by only 10%. That is page three of the presentation. Move on.
If you look at page four, and this is the pre-IFRS, it is only looked at as our P&L on a pre-IFRS 16 basis. That is that, you know. Then you can see that the EBITDA in local currency is -14%, and the underlying is only under 3%. The EBIT is -20%. The underlying is -40%. Of course, if you move forward to the right-hand side, the operating cash flow is +26%, and the debt is -3.5% versus first half of 2022. That the financial position of the group is very, very strong.
The ordinary earnings of the group is actually, you know, is quite okay in my view. If you go to page five, if you look at the EBITDA on a pre-IFRS basis, is HKD 49.9 billion, almost HKD 50 billion, -14% in the reporting package. If you look at in the local currency, it's -11%. Geographically, it comes most, almost 47% from Europe and 23% from Asia and the rest of the world, 20% from the financial income side. China and Hong Kong only represent 5% and 3% respectively. That's reflected the recovery is not, you know, as strong as in Europe, in both places.
If you look at the business side, of course, you know, Infrastructure produce 29% of our EBITDA, followed by the Telecom. Actually this, you know, the Head Office division is doing not too bad, 20%, followed by Retail and the port. If you go to the right-hand side of the chart, you can see that the waterfall of the EBITDA. Of course, you know, this famous one-off from last year, that basically is the income from in, from the earning that we came from, from Indonesia. This is not happening this year.
We go from the last year's first half to accepting that to the third, third bar. The first half underlying EBITDA is HKD 53 billion. If you go across the page, you see port. Basically, you know, there's a HKD 1.7 billion differences there. Basically, it's about HKD 0.7 billion, is the reduction of the storage income after they were... Of course, there was a HKD 1.1 billion reduction from investment in an associate company, which is a shipping company. The profit of that associate company dropped by more than 70%. It is on equity accounting basis, we have a reduction of income from there.
Retail, everything is good. I think Dominic will explain that, you know, you know, every cylinder is firing. You know, even China is doing better than last year. It's just that not as good as our expectation, but it is doing well. Infrastructure, on the EBITDA basis, they are doing quite well. Actually, every cylinder is firing again. They, they can even cover the disposal of the 25% in Northumbrian, and then disposal of the interest in Equinix, which account for HKD 500 million. Actually, you know, is the operation is very solid in the Infrastructure side. Of course, you come to the Telecom division, you show a HKD 2.2 billion reduction.
Actually, you know, it looks, it looks much higher than it really is. Let me explain to you. How was the HKD 2.2 billion reduction? HKD 1 billion is basically come from FX, foreign exchange. Basically, there's HKD 0.7 billion of this HKD 1 billion, is actually an accounting issue, not a business issue. We have found ourself in a situation where U.S. dollar is sitting on the European book. When they close the, when they close the accounting, then we reflect $700 billion difference between this year. Losses between this year and last year's. Although in the holding company, we report in U.S. dollar, in Hong Kong/U.S. dollar, however, we are not allowed to reverse that entry.
There's quite of a peculiar accounting situation. That is HKD 1 billion. We received the tower money for U.K. in the last quarter of last year. Of course, this year we got to pay tower fee, which is about HKD 0.6 billion. This year, we see a huge escalation in, especially in the first three months of energy costs in Europe, that account for another HKD 0.6 billion. That roughly account for, you know, this HKD 6.6 billion, HKD 2.2 billion dollars of differences. The operation, you know, actually later, when you come to the last session, you will show that the operation is quite encouraging, actually. We will deal with that.
Then, you know, HAT, which is the, the, the Asia Telecom division, actually, you know, basically, is Indonesia, they have shown a much, much improved, you know, in operation, in their basic business, in the ordinary business. The difference is only the last year, they have the, you know, they, they sold their data center and recognized that they a huge profit. This year, you know, they, they only have to sell some towers. The, the profit is very small compared to the data center. Actually, the operation is good, then the profit is all, you know, ordinary profit is seven, 7 x, what they do in last year. That this, you know, and, and, and you will see that, you know, this business is doing well.
Of course, on it, we go to the Finance & Investment division. This first half year, you witnessed, we witnessed that at the, you know, a decline again last year, quite a material significant in the, you know, the Cenovus performance, and it is all offsetted by some trading profit and then by the, and also by interest income from our China division, the medical company. So that, you know, that is quite an effort to reach that HKD 1.1 billion positive against last year. Of course, you, you saw the foreign exchange impact is HKD 1.6 billion at the worst.
I think this summarize the, the operations on, on page, on page five. On the next page, is about operating free cash flow. I will invite this Group CSO, Mr. Frank Sixt, to take us through.
Thank you Mr. Fok. Well, I think the picture on operating free cash flow, and we'll get to the picture as well on free cash flow in a couple of pages, is reasonably good, simply because of course, strong cash generation contribution coming from Retail, but quite a bit of spending discipline, right? Significant reduction in spending in CKH Group Telecom, HAT, right? Not spending as much as it did last year. Remember last year when we did the merger in Indonesia, we invested additional funds, right, to get to an equalization situation there
In Finance & Investments, we just went through the EBITDA side. Interestingly, the interest income that we generate, right, in the end, is significantly higher than the incremental interest expense cost that we're paying due to rates changes. We'll get into that in a little bit more detail. Operating free cash flow on the left-hand side, right? You'll notice a couple of things. One is that the contribution from ports, right, the contribution from Infrastructure, right? Ports, right, significantly down from where it was. Infrastructure, also down from where it was last year. Everything else about the same, same, right?
The reason why the Finance & Investment and others looks better than it does, right, on the previous slide, just on the EBITDA basis, right, is, of course, that the share of EBITDA of Cenovus is not what we take into account from a cash flow point of view. What we take into account is the dividends distributed to us, which have been going up, and of course, the warrant sale, which was, in effect, the return of capital, right, also. With all of that, Finance & Investment was able to, from a cash flow point of view, significantly offset, right, any of the adversities, right, relative to the first half of last year. I don't think I'm gonna go through it in detail. I can certainly answer any questions.
If you look on the right-hand side, as usual, you know, you have the graphic illustration of what the divisions are killing and what they're eating. What is their real operating cash flow profile right after CapEx and investments? You see right away the lower profile Ports this year. That's coming from two reasons. I mean, one is that Ports is actually spending quite a bit more by way of CapEx this year than it has in prior years, and certainly in the first half of last year, and that's because of the investment phase that we are in in Egypt, which no doubt Canning will be talking more about. Retail, huge contribution to operating free cash flow. Infrastructure, likewise, quite solid.
CKH Group Telecom, I think we've basically talked about and we'll be talking about in greater detail later. HAT, as I say, better, but simply because it's not spending as much as we did in the first half of last year. Finance & Investments we have basically covered. If we go to the next page, which takes you from operating free cash flow, down to free cash flow. The first thing that you find is obviously, you take away from the operating free cash flow, interest and taxes. The interest was about HKD 4.4 billion. The taxes were about HKD 1.8 billion, out of that HKD 6.2 billion. Working capital changes, this is kind of interesting. Basically, working capital was quite stable all around the group.
There was 1 major movement, right, relating to some net equity hedges in CKI, which were in the money in the first half of last year and out of the money in the first half of this year. These are, these are, things that affect cash flow because you post collateral, right, against the, against the hedges, or you release collateral from the hedges, but at the end of the day, it's all just mark-to-market stuff. It's not, you know, real cash going 1 way or the other. Similarly, the tower asset disposal VAT settlement, you know, was, was not a surprise. We had actually received that money, right, from the buyers, from Cellnex in Q4. It's just that we paid it out, right, in Q1.
Again, you know, that's not really as adverse as it looks. We did buy some telecom licenses. We bought licenses in Ireland, right? Which I'm sure Canning will go through with you, but that was basically accounts for the HKD 1 billion odd dollars, right, of cashflow movement on telecoms licenses. Then we received proceeds of around EUR 300 million, which is the HKD 2.6 billion, right, when we formed the joint venture in Italy with Iliad. If you look at the year-on-year changes, right, generally, we have a little bit more EBITDA from our subsidiaries. We have a little bit less dividends coming up from associates and so on, right?
Our interest bill, right, as I say, was, was higher, but it's, it, it is less than the, than the, than the interest income contribution, right, on our treasury assets, which is very pleasing. We, we are benefiting from a period of some immunity, you know, against rate hikes, right, because of, because of the way the books balance. Working capital changes, as I say, you know, most of the group totally under control, some impact coming from, the derivative settlements. Well, the, the, the, the, the collateral requirements, right, in CKI, mark-to-market movements. CapEx overall, right, less than in the first half of 2022, right?
The big number on investment in associates and joint ventures is basically coming, right, from the fact that we paid last year, right, some $3 billion odd dollars, right, to equalize, right, with Ooredoo, our interests, right, in Indonesia, in the Telecoms business in Indonesia, right? The telecoms licenses we've talked about, that's effectively all Ireland, right? The proceeds we've talked about, right? That was on the Iliad joint venture, right, and the VAT settlement we've talked about. In the others, right, we also got a significant loan repayment, $200 and some odd million U.S. dollars from IOH, from the Indonesian Telecom subsidiary, right?
Now, we have set up, though, a receivable for the Cenovus warrant proceeds, which will be coming in in the second half or at the latest in Q1 of 2024. Finally, if you put all of that together and we go to the next slide, our financial profile looks pretty attractive. I'll just give you a few data points. Obviously, on the top, the net debt improvement relative to the first half is a modest deterioration relative to the second half, but that is entirely because of volatility, particularly in the euro and sterling exchange rates. Remember that from a net debt point of view, our debt is weighted towards euros, whereas our cash is weighted towards U.S. dollars.
At June 30th, right, the number worked out to 17%. Last week, right, given the favorable movements on the U.S. dollar, between June 30th and last week, we were at 16.7%. The currency volatility gets reflected in here and, and the, and the sensitivities, right, you'll find spelled out, in the statement of liquidity, and that's, that's attached to the results announcement. In terms of our treasury operations, as I said, we really did benefit quite a bit, right, from the increase in rates. On our managed funds, which include a slightly longer duration, right, treasury portfolio, we had a return of 2.45% versus 1.07% in the first half of 2022.
On, of course, our deposit base, which is much larger than the managed fund base, we had a 4.73% return versus 0.7%, right, in the first half of 2022. All in, right, a very significant yield pickup, right, on our liquidity portfolios, which is good to see. In terms of debt maturity, right, you know, not much to say. We've been refinancing on a fairly routine basis. It is ticking up our average cost of debt, which was 1.8% at June 30th last year, 2% at the end of last year, that is now 2.9%. And our maturity is relatively steady. It was 4.8 years, at the end of December 2022.
The average maturity now is 4.2 years, right? Our liquid assets, not much to comment on there. Rating's stable. And I think we're, again, you know, we will feel the impact of increased rates gradually over time as we refinance per the maturity profile that you're looking at, right on the left. But for now, you know, we are still 70% in fixed rates and 30% in floating rates, so the impact is gradual. And I would say we have something of a safe harbor, right, to deal with the rising rates environment. With that, I'd give it back to Canning to discuss ports.
Well, Ports in the first half year, you are witnessing, you know, the overstocking of inventory, of the well situation. As a result, you know, the container movement actually have, have recorded a 7% downward movement from last year to 39.3 million TEU. If you look at the top left chart, you will see that everything is, is, is quite negative, except for the box in China. Basically, you know, that reflect the situation in China in the first half of last year, where in Shanghai, in the Shanghai part, where the whole Shanghai was almost stopped for two months.
actually, you know, the container movement in the first half is actually quite, you know, quite slow against last year. Of course, you see the EBITDA part of is, you know, HKD 6.5 billion and 21% reduction from last year, and 20% if you take away the fluctuation. Again, is the EBITDA mostly come from Europe and Asia, and then more far at the trust and the China side make up only 9% and 5%. Let's move to the right-hand side to see the waterfall actually is all negative. Basically, it's based on two things.
This year, the TEU movement, although it's negative, however, we witnesses a increase in tariff. That's. This is why on the, on the container part, it doesn't really have. Except for the trust, you know, it doesn't really affect the business so much. If you go to the waterfall chart, you know, you know, the, on, on the trust, trust side, you know, you, you, you saw the EBITDA changes of, you know, HKD 199 billion, our share of it. Now, on that, basically, storage income come to play a lot. About 60% of that is storage income, and 40% is, is on the traffic. On the mainland side, it's almost the same, because the improvement come from Shanghai.
That you, you can see almost the same as last year in the mainland China side. On the Europe, you see a HKD 317 million negative against last year's EBITDA. Basically, this is due to a storage income. You know, the traffic is actually quite the income from the TEU, although is lower, but is because of the increase in tariff, so that is quite okay. You know, because the storage income, you know, which comprise of 10% of our revenue, saw a 28% drop. Now, if you move to Asia, Australia, and then what you see is that Mexico continues to do well. They have a lot of landside income, although the traffic did drop a little bit.
You know, the landside income covered, and they have a good year and better than last year. However, it is offset by the reduction of business in Australia, and also, you know, we exiting Tanzania. We finished our concession, and we are not able to renew it. Also, we saw some, you know, storage income from, from, from Panama and all those ports. It's a little bit less. Not that much, but a little bit. All in all, you, you see that this division showed a HKD 236 million negative. Then the last, but not the least, in the corporate cost, that's reflected our share of EBITDA in an associate company which we invested in.
Of course, you know, that particular company is a shipping company, and you, you witnessed that the tariff of shipping them drop in a big way. Of course, it's reflected in the EBITDA, and then therefore, it reflected in our financials. This division is doing quite well. We still have 293 berths in 52 ports. You know, we will have new facilities in Egypt, and then we'll be open. It is forecasted that we feel that a little bit more optimistic in the fourth quarter. We would hope to see that the TEU will pick up, and you will see better results in the second half.
Let's go to the Retail session, and then I will ask Dominic to report on this.
Okay. Well, thank you. Thank you, Canning. We are on slide 10, Retail. Here, first, we talk about the store numbers. Our store number stood at 16,164 at the end of June, 1% decrease year-on-year and flat versus end of December 2022. We continue to open new stores in good and strategic locations, and close those non-performing stores without a future upon lease expiry. This is our store rationalization strategy, which has gone on for a number of years now. For the first six months of this year, we have opened 282 new stores, while closing 260. The store network split between Asia and Europe is about 50/50, and the average payback period of the new store open is around 11 months.
It's a very quick payback versus an average lease length of, say, five to eight years. On EBITDA, EBITDA for the first six months is reported at HKD 7.06 billion, representing an increase of 17% in reported currency, or 20% in local currencies. That the EBITDA split is 38% from Asia and 62% from Europe. Let's move to the EBITDA waterfall chart on the right, which shows the year-on-year EBITDA change of each division in Hong Kong dollars. First, for Health & Beauty China, here we see HKD 185 million or 30% increase, which represents a good recovery from the pandemic restrictions in China. Next, for Health & Beauty Asia, the increase of 27% or HKD 372 million, mainly comes from Thailand, Philippines, and Malaysia.
These businesses are doing well in terms of footfall and all the operational metrics. For Health & Beauty Western Europe, the increase is 19% or HKD 529 million. This mainly come from U.K., Rossmann, Germany, as well as Kruidvat in the Netherlands, so it's mainly from U.K., Germany, and the Netherlands. For Health & Beauty Eastern Europe, the 16% or HKD 152 million increase mainly comes from good trading results in Rossmann, Poland. Overall, the Health & Beauty business is growing nicely, with EBITDA growth of 22% in local currencies for the first half of this year.
For other Retail, we see a drop of HKD 38 million, which represent a very challenging half year for PARKnSHOP, the supermarket business, versus last year, when people last year dine at home and work from home because of the fifth wave of the COVID. Nevertheless, the EBITDA drop in PARKnSHOP was partially offset by a strong recovery in our China beverage businesses. The first half underlying EBITDA is HKD 7.23 billion, a 20% increase over the same period of last year. However, with a strong Hong Kong dollar, which Canning also mentioned, we recorded a foreign currency translation loss, not a cash loss, translation loss of HKD 174 million, resulting in a reported EBITDA of HKD 7.056 billion, a 17% increase over first half of last year.
As for the outlook for the rest of the year, Health & Beauty Asia is expected to show strong growth, while Health & Beauty China will continue its recovery. Health & Beauty Europe is expected to continue delivering strong performance. Meanwhile, we continue to drive our three important strategic pillars, namely, O+O, enhancement of our CLM programs, and also increase exclusive sales, i.e., our own brand products, as well as exclusive products. We want to increase its sales participation. That's the general picture on Retail. Now I pass to Frank to talk about our Infrastructure business.
Yeah, there's obviously not much to say about Infrastructure, solid as a rock, and you see that in the performance on slide 11. You know, honestly, the variances in terms of reported NPAT, reported EBITDA, are marginal, and I'm sure will have been covered in the results announcement. I think the two important messages were that, well, the major regulatory resets were completed, right, in 2023, so the regulatory certainty for coming years is very high. And that means that inflation, right, benefits both on the revenue side and also on the asset base side, under the regulatory schemes that have now been reset. Expect good stability, right, from the existing base of assets.
I think the key message was the continued increase, right, in dividend that was announced with CKI's results. I think that says everything, right, about the confidence that we all have in this business. I'll pass it back to Canning to talk about Telecommunications.
Well, on the Telecommunication, you will witness that our first half year is basically a, you know, a run of a cost increase. You know, there's, you know, you, you know, first of January, you witnessed that, you know, human resource costs increase, energy cost increase, and then because of inflation, you got a lot of rental increase on, on the sites and all those. It's, it's a, is a, is, is a change between a cost increase happened right, right from the, you know, first of January, versus, you know, the, all the repricing effort we put, we put in, try to catch up with, with the costing.
If, if you see that as a result, the revenue, actually, you know, we saw that it is a 1% increase, in, in, you know, in local currency, in the operations. And.
If you take into foreign exchange account, it's -2%. The EBITDA is HKD 10.26 billion, which is 12% less than last year, and 10% increase in the local currency. If you go to the waterfall chart, the first item, you know, is contribution from tower asset, because we sold the tower last year. In order to make a comparison, we take away the tower expense we pay in U.K., which is not existing last year, to make it comparable. That is extra HKD 613 million of expenses.
If you look in all across, then it is basically a chase of revenue versus expense, because this year you witnessed inflations in the first time, especially in Western Europe, that the inflation really go, especially in energy. You are talking about going up several times in several months. You know, in U.K., actually is, you know, you will see that in the U.K., the revenue actually go up quite nicely. You know, the, you know, the, the cost of inflation actually starts right from the beginning of the year, so that our, our, our price, repricing effort actually come in April, which you will see in the later page. The same thing happened to Italy.
You know, you, you saw that Italy even make a slight increase because the base is doing very well, the repricing is doing well. Of course, you know, we, you know, we have to overcome. Actually, Italy is a different problem. The, the problem is that our, our, our roaming, our marketing income, so-called, is the roaming income from Iliad, continues to reduce. Then we have to make that up and then catch up with the roaming. However, Italy have a strong year, strong half year, and then they recorded a positive EBITDA growth. Sweden is the same thing, and, you know, it's going quite strongly, and then you saw the positives there.
Of course, it is on Denmark and Austria and Ireland, you saw that, you know, the repricing effort come later in the first half, and it cannot cover the cost increase, and they show the negative EBITDA. Of course, as some, you know, there's a translation loss of HKD 200 million in foreign currency exchange. Let's go to page 13. You see the, you know, the active customer is still progressing well against last year, you know. 0.5% increase. On this, on this year, I think the important part is the middle column.
On this year, we see because of inflation, because of energy prices, so that, you know, you know, that pose a huge cost increase to us. One of the main thing we do, is to do the repricing on our base, and then so that, you know, we have, you know, revenue increase, to offset those costing. If you can see that U.K., we do it in April. In Italy, I mean, we started in February and end in April. In Sweden, you know, we increased the price on the handset. On Denmark, Austria and Ireland, we start repricing.
You can see the time lag between what we can do on price increasing versus the energy versus the cost increase. That, I think this column, you know, explain to you that the story of the first half of the Telecom. Of course, we continues to build out 5G, and you will see that, actually, the 5G build out has slowed down, and then you can, you can witness that the CapEx on the next page is being lower than last year. Let's go to page 14. It's, it's a whole chart, a lot of figures. I, I just want to highlight several lines for you. On the EBITDA line, you saw that there, there, you know, there's a decrease in U.K., and then decrease in Denmark.
Although you can see that as we described last year, actually, there are some good things happening. If you look at the margin line, actually, you saw good increase in the U.K. from 743 last year to 808. Actually, you know, 60% of the increases come from repricing from rate increase, which is very, very happy about that. Italy, you saw that a reduction in margins by about HKD 30 million. Actually, you know, this is mostly due to a reduction of income from Iliad. Okay.
It's to the extent of about HKD 40-ish million, but it was make up by some repricing and then some, you know, some, we are working very hard on the basis to be able to produce other income. If you go across the line, and then, and then is, you know, Sweden, you saw a nice increase in, in, in, in margin, and then in Denmark, and so that there is some nice thing happening. Of course, the thing that I am quite happy about is you go to report the DNA, and less CapEx line, you saw that, you know, it is a positive. Okay? We have been trying to work towards that, CapEx towards depreciation.
I think this is the first time for a long while that we can contain our envelope within the depreciation figure. Of course, you know, if you go down the next line, EBITDA less CapEx, you know, it's a positive figure. Okay. With that, I will go to page 15. You know, I will cover the telephone side, and then I'll let Frank cover the energy and the Chi-Med side. Then, and then I think Hutchison already do Indosat already do Hutchison. Very good thing happening. The synergy is happening well, and then this year, profit is not as high as last year because of one-time item.
If you take away the one-time item, you know, the profit is actually 7 x what we have last year. The gearing is getting lower, and actually continues to pay a dividend to us. The dividend is similar in level to last year, which is very good. Last, but not the least, you know, the share price actually increased, increased quite well after we when we, when we came together, it's about IDR 5,000-6,000. Now, it's about IDR 9,000, so in Indonesian money. That it is working. The merger, the magic of merging is happening. On TPG, I think it is a company, you know, again, is doing quite well, continues to pay dividend.
Of course, they have an announcement recently about some-- we have some approach from a fund about our, our fixed line, our fiber-based business, and then we are still studying that. So that all these two company after merge has been very successful, from a loss situation to a profit situation, and then no need, no need more cash and get dividend and the business improving. Okay. Frank, can you take?
Sure. Well, I mean, obviously, both HUTCHMED and Cenovus report their own results, so I'm not going to dwell on them. I think significant events in HUTCHMED was a successful out licensing, right? For optimum cash proceeds of $400 million, of an exclusive license for the fruquintinib, right, discovery drug, right? Which they licensed for sale outside of China, and that closed in March of this year. I think that was a very, very good news. I think they're very much on a plan to, you know, becoming a self-sustaining business as opposed to a business that's always looking for the next round of capital raise in one form or another, or whatever non-dilutive capital is available. I think that's also good news.
I think they're being well run and have shown good success and are on the way to developing as a fully self-sustaining business. For Cenovus, you know, of course, you'll recall, Cenovus had a bad quarter at the end of last year, and those travails persisted through the first half. Nothing significant to note, right, in the upstream, although prices were just way below what they were last year. Some significant issues, which they'd reported on, in terms of their downstream assets, including delays in bringing on the Superior Refinery, some unfortunate operating issues and indeed, fatalities at the Toledo facility.
Turnaround issues earlier on in the year at the other facility, Lima in Ohio. Then, you know, to add insult to injury, in the non-operated refineries, there were also some issues. I think the, I think the good news there is that, as far as we can see, and they've certainly taken the view, that those issues in the downstream are pretty well behind them at this point. We can have a reasonable, I think, expectation that the refining complex will be running at its nameplate capacity in the second half, which should give us a significant boost. I mean, year on year, Cenovus' contribution to our earnings, right, was reduced, right, by HKD 2.5 billion.
That, I think by the time we look at it at the end of the year, should be significantly less. Of course, they have increased their base dividend, which we're very pleased with. We had a return on capital on the sale of the Cenovus warrants to Cenovus, right, during the first half. In addition to that, they look on track as well, and I think they've announced this, to reach their debt threshold, to reduce their net debt to CAD 4 billion by the end of the year. That being the case, that will open the door for variable dividends, right? As well as share buybacks going forward.
Hopefully, we are through the worst of it there, and we get a better contribution from an earnings point of view, and an opportunity to continue to get better contributions from a cash flow point of view. I'll move on very quickly to slide 17, right, which is our efforts on sustainability. I think you've all seen, right, that we have announced our commitments in terms of greenhouse gas emissions reductions. The one thing that I would say is that, is that everything that we announce, right, is backed by plans that make us believe that it is imminently achievable, and we are definitely on track, right, as at this hour, right, to meet that commitment.
Reducing scope one and two emissions by 50% by 2035 against our 2020 base, right? And, you know, over time, we believe that we will be able to find the right path, right, to a net zero target. The rest of our sustainability efforts, I think, are going really very, very well. You know, circular economy, you know, good places to work, et cetera. And indeed, we got an upgrade from MSCI, right, in July. We kept our triple B rating, and they moved us up from a score of 4.4 to 5.4. I think, you know, everything in terms of the company's efforts on sustainability is on the right track and, unfortunately, being recognized.
Just by way of reference, right, you know, we, during 2022 full year, we spent over $1 billion on stuff that qualifies, right? $1 billion on stuff that qualifies as green spend. A lot of that in CKI, of course, a lot of it in the Ports division, where everything that moves in the Ports that gets replaced, gets replaced by something, you know, electric or better, and that will be the case for the foreseeable future. That's all I would say on the sustainability front, and I think that takes us to the Q&A session.
Our chairman has joined us. Victor, can you take over?
Yeah. Thank you. We will now begin the Q&A session. Once again, please feel free to put down your question in the chat box. The first question is as follows: There was a lot of hope for business as the world emerged from the pandemic restrictions, but geopolitical tensions and inflationary pressures have persisted for quite an extended period. How is the group dealing with such adverse situations?
Our group is actually built for dealing with such adversity and volatility. Because of the diversity of our portfolio, actually allows us to ride out such turbulences. Business diversification enables us to maintain a more stable financial performance during cyclical times. It is actually a basic investment principle to not put all your eggs in one basket. While the group is vigilant in managing the short-term issue with diligence and pragmatism, we're also maintaining our long-term objective of pursuing value-accretive transactions for our shareholders. These transactions takes time, and because of the group's stability and strength, we can and will continue to pursue such initiatives. In local currencies, actually, most of our business units are performing well. They are making healthy year-on-year progress while managing volatile commodity prices and inflationary pressures.
For instance, we expect revenue increases from pricing initiatives in the Telecom division in Europe, and quite robust performance in the Retail division are expected to contribute to better recurring operational results in the second half. I'm sure you understand that in inflation, there's quite a bit of time lag between inflation effect on cost and the ability for us to charge more in revenue. There's usually about a six months to up to one and a half years, depending on the regulation on this time lag. Going back to that question, looking back over the last two years, we have faced actually quite unprecedented business challenges. I think we can say that we have weathered the storm well.
We have maintained a strong liquidity and financial profile, if not even stronger, and continue to make progress. Thank you.
Thank you, Chairman. The next question is on our capital allocation. What are the focus area of the group's capital allocation? Is shareholders return one of the considerations?
We'll continue to explore long-term value accretive transactions for our shareholders and deploy capital in a way that can enhance earnings per share. Cash flow, cash flow per share, while maintaining our financial profile and liquidity. We did not have any major acquisition in the first half of 2023. Capital was mainly allocated towards organic growth of the businesses, which provide a creative return to the company. Examples are, we have extended our 5G population coverage, at the same time, Telecom CapEx was lower than last year. We have spent higher CapEx for Ports and Retail, as we're investing in new port in Egypt and opened about, correct me if I'm wrong, Dominic, about 300 new retail stores globally.
We'll also closely monitor the macro environment in making our investment decisions, to determine the appropriate returns to our shareholders. Thank you.
Thank you, Chairman. The next question is about Retail. What drives the strong double-digit EBITDA growth for health and beauty in Europe, despite the cost of living crisis?
I should let Dominic answer that.
Okay. Thank you, Chairman. Yes, you know, Europe is doing quite well. If you look at Europe, the consumer spending for our product lines remain very strong, and the cost of living crisis actually, actually has benefited our own brand and exclusive sales. For example, in the U.K., our own brand sales growth was more than 20% in the first half. Because we are a market leader, and we have a broad range of mass health and beauty products, including our exclusive products, which are competitively priced and nicely packaged to meet customer demands in this more challenging economic cycle. All these initiatives led to a 10.3% store sales growth in Western Europe. At the same time, we drive productivity.
We continue to drive margin improvement, leveraging our CRM programs, accelerating our own brand development and sales, and focus on productivity improvement across all area of the business, because inflation is with us, so we have to manage the cost very carefully, because not always that we can pass, you know, all the cost increases to the to the the consumers, although we try to, and so, so far, successful. Thank you. Europe is doing well.
Yeah. Thank you, Dominic. The next question: Do you think that the recent EU Court of Justice scrapping of the general cost anomaly decision on the Three U.K. O2 case will have adverse impact on the proposed Three U.K. Vodafone merger?
Canning, do you mind taking that question?
Sure. Not at all, actually. You know, the joint venture between Three U.K. and Vodafone is subject to approval by the U.K. Competition and Market Authority, which we call them CMA. Decision in Europe has no bearing on CMA's review of U.K. Vodafone, is completely a different transaction. The CMA will examine the transaction in light of current market circumstances, which have changed substantially since 2016. Actually, you know, Ofcom's most recent public statement say that mergers should be examined in light of the specific circumstances and not the number of operator, and this is a total change of position from Ofcom. What do we do?
We have begun to engage with the CMA on the transaction, and we are confident that they will see the benefit that this merger will deliver for our customers and for competition and for U.K. as a whole. Thank you.
Thank you, Canning. Next question: Is the 19% decline in CapEx, compared to first half of 2022, a good proxy for the full year spending?
Canning, maybe you can continue on the Telecom questions.
Okay. Actually, as I said before, you know, the, the, the 5G spending and investment spending was peaking in 2022 for some of our operation. Actually, you know, with our asset light strategy, disposition of the tower asset and rural network sharing in Italy, we expected the CapEx for 2023 will continue to reduce as compared to 2020. Thank you.
Thank you, Canning. The next question. CKI announced an increase of dividend. Are you confident in the future of the Infrastructure business?
Maybe I'll take that question. I cannot do proper forecasts, but in the age of high inflation and uncertainties, Infrastructure assets with their steady income and cash flow are more valuable than ever.
Thank you, Chairman.
Thank you.
The next question is on Retail. How do you see the sales performance in China in the first half? Do you consider that, Watson's China store network is saturated in light of the current customer shopping behavior?
Well.
Actually, Dominic, Dominic, why don't you take all the questions on, on the Retail? You are the expert.
Okay. Okay. Thank you, Chairman. Okay, in the first half, there was a decline of footfall in China. Understandably so, but offset by strong online sales, leading to almost flat sales performance in local currency, which we reported. Our strategy, you know, regarding our sales online and offline, we continue to grow online sales. At the same time, we need to provide excellent service in stores such as spa service, skin testing, and all these services, which make us, you know, very unique in the eyes of the customer for the shopping experience. As far as the network is concerned, yeah, we have almost 3,800 stores in China.
The store network itself is a very important part of our open source strategy, where we offer our customers a seamless experience of shopping across both offline and online channels, which also provide customers convenience of click and collect, i.e., buy online, collect in the stores, or delivered directly from our store network. So, you know, the physical store or the offline stores are very important as part of the open source strategy. And we budget to open over 300 stores this year. You know, we based on the very stringent financial model payback and focusing on quality, not just quantity. Thank you.
Thank you, Dominic. The next question is on Telecom. What were the main drivers of the stabilization of Wind Tre's earnings?
Canning, can you take that question? Thank you.
Yep. Actually, in the first half, you know, we witnessed that a further decline of wholesale income, particularly from Iliad. However, which, which is quite significant. However, you know, EBITDA remain a similar level as last year. You know, how does that happen? It is because that we recorded an increased income from the customer base. Not only that, the base did not decrease, but increased basically from customer value management and also from repricing exercise that we do. Of course, you know, our joint venture announced in the beginning of the year with Iliad on the rural network give us, you know, some cost saving. Also we, you know, the team has been working very, very diligent on cost.
All this together contribute a 60% increase in Wind Tre's EBIT. Thank you.
Thank you, Canning. The next question is on the Port side. What is the outlook of container throughput performance in the second half of the year?
Hmm. I mean, the throughput decline in the first half was mainly due to the high inventory level in the U.S. and Europe, which was not cleared out as quickly as originally expected, and also the very low manufacturing operating levels in China. We expect the high inventory situation will gradually ease and higher throughput growth, possibly in Q4. Overall, 2023 full year throughput, I think we expect it to be quite flattish compared to last year. Thank you.
Thank you, Chairman. We have several questions on the retail side, so I just grouped them together. What was the sales participation of online sales in Health & Beauty China and ASW as a whole? How was the profit margin compared to offline sales? What is the expected growth store opening of, in 2023?
Yeah, we have an open source model, so we don't drive online separately from offline. We drive them together so that they have a seamless interface. What we measure is the open source sales participation. In terms of Health & Beauty China, the sales, the open source sales participation exceeded, you know, 50%. And also, you know, talking about the margin, with the increase on online and offline margin, we focus on the own brand and exclusive products, so that the margin of our online sales is similar to that of offline. Online and offline are similar margin. We also want to emphasize that we do manage our online margin, whereas many other few online operators may focus on sales.
We focus on top line, and we focus on bottom line for our offline and online sales. As far as the store opening plan this year, because this year we have to return to normality, so I would expect to return to our new store growth momentum to pre-COVID levels. You know, we used to open around, say, 1,000 new stores growth, you know, per year. This year, we expect to return to that level of new store opening. Thank you.
Thank you, Dominic. The next question is, what is the long-term plan on the Cenovus shares after the disposal of warrants ?
Have to be very careful. I mean, CK Hutchison is not the operator of our own gas business in Cenovus. Well, investment in Cenovus forms part of the diversification and provides us with a natural hedge for energy cost increases in other businesses. We're not planning to reduce our interest in Cenovus at this five minutes. The lockup period, which applies to our shares and did not apply to the warrant repurchase transaction, will fully expire in January 2026. Thank you.
Thank you, Chairman. This question, why did the company not buy back its shares in the first half?
Well, we wanted to conserve more cash in view of the uncertain macro environment. We may resume that in the second half. The pace of the actual buyback is opportunistic and will depend on market conditions. Thank you.
Thank you, Chairman. Due to the time constraint, maybe, we just have two more questions. This one, how was the performance of storage income and container shipping liner business in the first half?
Storage income dropped by 28% in the first half 2023, compared with the same period last year, due to the easing of supply chain disruptions and worldwide port congestion. This is within our expectation. Large storage income is not a normal, normal part of operation. First half of 2023, EBITDA contribution from the Ports, associated company in container shipping businesses dropped by 72% compared against the same period last year due to the sharp decline in freight rates, both of which were the reason for the reduction in performance. Thank you.
Thank you, Chairman.
I thought these should be, these should be quite obvious in the, in the numbers. I think, Frank, correct me if I'm wrong, if I mention any of these, numbers are, are different from, from our report. The basic numbers should be within, in our, in our earlier analysis. Thank you.
Yeah. We will have our last question. Our IR department will answer the remaining unanswered questions shortly. The last question is, how are you progressing towards your current greenhouse gas emissions reduction targets?
This question, I need Frank's help.
Thank you, Victor. Look, as I said before, our announced target in terms of decarbonization, is to reduce emissions by 50% by 2035 as against a 2020 baseline. You know, when we announce a target, it's basically because we have a plan that we believe in to achieve it. Just for information, for 2022, we reduced our emissions by 7% as against 2021, and 9% as against our 2020 baseline. I think we're progressing well and on track, and we are confident of the long-term trajectory, meeting our targets and indeed, in due course, revising those targets favorably.
Thank you.
Thank you. This concludes our live webcast today.
Thank you.