Earnings Call: H1 2021

Aug 5, 2021

Thank you very much for attending the live webcast of C. K. Hutchison 2021 Incheon Results Presentation. Today, our speakers are Mr. Victor Li, our Chairman and Group Co Managing Director Mr. Kenning Ford, Group Co Managing Director Mr. Fran Sicks, Group Finance Director and Deputy Managing Director Mr. Dominic Lai, Deputy Managing Director and Group Managing Director of AS WASSON Group and Melina Hai, CEO of Asia and Europe of AS Wossen and Group COO of AS Wossen Group. During the presentation, please feel free to raise your question in the chat box, which is at the lower right hand side of your screen. The Q and A session will follow the presentation. Before I hand over to Kenneth, please also pay attention to our disclaimer, which you can find on Page 2 of the presentation. We can start now, Kenneth. Okay. Thank you, Carl. So good afternoon, everybody, and good morning to those in Europe and good morning to Frank, he is in Europe. So I think the first half of the year for CK Hutchison is quite pleasing. If you turn to page 4, revenue went up by 12% and at $212,400,000,000 and EBITDA went up by 18% is $55,600,000,000 and EBIT went up by 23%, 32,800,000,000. Of course, we got some it's about time, we got some help from foreign exchange. If you take out the foreign exchange revenue went up by 4% and EBITDA by 10% and EBITDA by 15%. And net earning for the 6 months period is $18,400,000,000 recorded a 40% increase. And if you just take away the foreign exchange, it's 32% increase. And of course, earning per share 4.75%, a 41% increase. So, I'm very pleased to say that the Board resolved to pay an increased dividend, which is $0.80 per share represent a 30% increase from same period last year. And of course, we one of the more pleasing result is that in the first half, we are able to complete a few of our tower transactions and then we receive the cash is in our pocket and then our debt ratio now is 19.9%, which is lowest for a long time. We are very happy that it goes down into teens figure. If you go to Page 5, we talk about the EBITDA and EBITDA went up by 80% at 55,600,000,000 and then if you talk about local currency and it's 10% in take away the foreign exchange gains. And if you look at the figure, the circles between in the far left. You saw that the circle have 2 rings and actually the outer ring is where does the profit come from because we have the tower transactions. So 70% come from UK and Europe. And then but then if you take away this one off, it is 59% from Europe and 6% from Mainland China and 5% from Hong Kong China. And then 20% from Asia, Australia and Canada. And then of course, because we classify Husky, our oil companies, Cinnova now changed to as a head office is no longer one of our core business is classified in head office, so head always become bigger at 8%. So if you and then you go to the right hand side in the middle of the page, right hand more to the right hand side, you saw the waterfall chart and go from last year to this year to $46,900,000,000 to $55,500,000,000 or how you make above. Of course, last year, we have a one off from the merger of the TPG. If you take that away and then it become $41,000,000,000 the blue color for and then if you look at the port went up by $1,100,000,000 Actually in the port side, which I will go through that in the detail, but it went up everywhere. So part has an excellent time in the first half. And retail is 1 went up by $1,600,000,000 Actually, it also went up everywhere except that parking shop in normal time doesn't do as good as COVID time because people go on more often than stay home. So otherwise, it went up everywhere against last year. And then infrastructure, EBITDA actually went down by $566,000,000 The reason being that a lot of the projects is under reset. And so it's in the new reset. And but however, if you they just announced that they actually their net profit after tax actually went actually went up in the 1st 6 months. Okay. And then on the free group, actually Free Group has a very I won't say stable, but I have a everywhere is more or less the same more or less the same as last year in terms of business with Italy fell behind because this year is the first half that we've witnessed a change in one of our MVNO that is the Allian and then they because they have built their network and then they start using their network. We saw that the income the income come less. I will go into more detail in the telecom sections. And also on heat is more or less the same with Indonesia. It's under quite severe COVID-nineteen situation. So that there is a shortfall in revenue. However, even in Vietnam and Sri Lanka, these two small operation is doing quite well. They all improved and shows positive figures. And so that is very small figure. And then of course, the finance and investment represented the major increase represent that we turned from a major loss from Husky last year into a profit no loss in the Sanovo situation with some profit. So this is why you show that almost $2,500,000,000 positive. And so the foreign exchange, as I said, comprised of $3,900,000,000 dollars So this year, we have we got a strengthening of our European currencies everywhere. The currency went up against U. S. Dollar. So it's quite happy. And of course, and then that gave up to the $49,000,000,000 And then this year, we recorded a major gain from the finalization of the TAO transaction in Italy. And so what we did is that we took a profit and then we actually did not recognize all the profit. We actually make a provisions against the goodwill of Italy so that we only recognize $6,200,000,000 finally. So that is how the EBITDA work for the full charge. And so before I go further, we have to go for the Page 6 on the operating free cash flow. I will ask Frank to go through the detail. Yes. So at the operating level, cash flow management continued to be pretty solid during the year. Obviously, operating free cash flow, which is here presented as the EBITDA of our subsidiaries, the dividends received from our associates, less CapEx, less investments at $17,700,000,000 is lower than in 2020's first half, but that is entirely due to increases in spending. And bear in mind that these numbers are presented on underlying operations, so they're not taking account of the cash inflows from, for example, a towers transaction or anything else that's a one off. And so the spending increase really is has been driven by the sensible need to deploy capital. We'll go to that in a little bit more detail in the subsequent slides. So I don't take anything adverse from that. And indeed, I look at it the other way, which is that you have healthy increases in the EBITDA from subsidiaries, right, as well as in the dividends that we've received, right, from our associates. The circles on the right just split that out by contribution by division, pretty self explanatory, right? The retail contribution, if you look at it year on year, if you look at last year's slide presentation, obviously, it's significantly up in free cash flow terms as well. And that is, of course, because the early stages of the pandemic hit the mainland very hard with a very major part of retail's businesses in the first half last year, and they've had some standard recovery as we've gone through the first half of this year. Moving to the next slide, right, this just splits it by division, right, in exactly the same way. So you have on the far right, the totals, you have exactly the same numbers as you saw on the previous page, right, the important ones being the $32,800,000 right, of really cash available from ordinary operations, right, and the $15,200,000 of spending and another $4,700,000 of discretionary spending on licenses. As you go through it, it's pretty obvious just from the pictures, right, that everybody is living well within their means, right? The real investment increases are coming from the telecoms businesses, right? And HAT has been a bit of a consumer this year, right, as it has rolled out network and so on in pretty difficult operating environments in Indonesia. But all in all, everybody is living within their means. And actually, if you parse the financial statements, you'll find that everybody is pretty well living within their CapEx envelope sorry, their depreciation envelope as well, with the exception of CKH Group Telecom and Hutchison Asia Telecom, where we are investing above our current depreciation rates. And then finally, moving from operating cash flow to real free cash flow, right? In doing that, you have to take away interest paid, right? You have to take away working capital, right? You have to take away things that we decided to do. So we decided to voluntarily prepay some license fees that would have been due in subsequent years in order to save effectively interest costs associated with those balances. And we bought some new telecoms licenses. So that gets you down to an underlying free cash flow of $1,400,000,000 right? But then, of course, you add on to that the cash from the tower proceeds, right, which is 30 $8,425,000,000 So the cash generation in the first half, obviously, very healthy. And what's quite interesting, if you look at the waterfall, on the right hand side, you quickly find that working capital management was very good. And again, I'd single out the retail group here for having done a superb job in the first half of continuing to manage working capital tightly. And that's not easy as businesses are opening and closing and partially opening and partially closing all around the world, which Dominic will no doubt be talking a lot more about. But working capital changes year on year have actually been positive. All of the stuff which is driving the negative bars is, by and large, discretionary stuff. It's the prepayment that we made on the license. It's how much more CapEx we decided to invest, and we'll get to that, but that's primarily in the telecoms businesses and indeed how much we decided to buy in terms of new licenses supporting our telecoms businesses. So overall, I think a very healthy cash management profile, which leads me to the next page, right? And that is reflected in a pretty healthy debt maturity profile, dollars 190,000,000,000 of cash and cash equivalents against a total outstanding principal debt of $351,100,000,000 That, as Kenny mentioned, takes our net debt to net total capital ratio down to 19.9%, which is certainly a recent memory low and a very good thing, I think, in still, to some extent, uncertain times. A good, I think, maturity profile. We have an average maturity of 4.9 years. Our cost of debt has continued to decline, so it averages, right, at 1.6 percent, right? Our return on treasury assets is low because most of those have been kept in liquid deposits, right, so 40 basis points return. So there is a spread between our cost of debt and our liquidity, but it's still a very manageable number overall. And the only other thing that I would say is that we have changed the mix of our debt, right, after swaps so that we are much less in floating rates and much more in fixed rates for that 4.9 years duration than we were at the end of last year. So I think I'll stop there. And Ken, send it back to you to talk about ports. Well, as I said before, ports goes up everywhere. So if you look at the TEUs and then it went up by 11%. And if you look at the EBITDA, it went up by 26%. Even if you take away the foreign currency gain, even by 20% 21%. So it's quite a happy first half following the good business from the last half in the second half of twenty twenty. So if you look at the waterfall chart on the right hand column, top column, and then you see that go from last year's EBITDA and to this year. So you can see that everywhere is blue color except the mainland one. Why it is red color? Because we actually we have less ownership in Shanghai part. So that we have 20% less and so that it become so we have less earning when you own less. We sold 20% last year. And another worth mentioning is Asia, Australia is really good improvement. Why do I mention that? Because this year we lost the demand part. So that with one part less, they are still doing good. So we are quite happy with that. And then the least the last thing I would like to mention in the port business is that they we strike a partnership with we make a partnership with Costco because they are one of our biggest customer and then we invested in the company and then that give us very, very good return and that is reflected in the $412,000,000 in the corporate cost and other part. So it's a good stress out. So I will turn over the page to page 11 and then I will ask Dominic. He is our Head Office Dominic Lai, our Head Office Director, but he is in charge of the retail. So I would like him to report. This is all his work. Okay. Well, thank you, Kenny. Retail. The Retail division has staged a robust recovery year on year and reported a solid first half with active management of the pandemic impact continuing. Total sales for first half was $82,600,000,000 a 12% increase in reported currency or 5% in local currency. The core health and beauty business reported an 8% sales increase in local currency with strong growth of 17% also in local currency in the 2nd quarter. With over 16,200 stores, the division remains the world's largest international health and beauty retailer, operating in 27 markets with a strong loyalty member base reaching 140,000,000 and member sales participation high at 66%. That means 66% of total sales came from loyalty members, indicating the strong stickiness of our loyalty programs. Exclusive sales, which include our own brands and exclusive from A Brands, the sales participation increased 2 percentage points to reach 36%, creating strong differentiation for the retail business. Next, on our O plus O business model, I. E, offline plus online, it is working out nicely to help build market position and brand uniqueness. For your information, our CRM data shows that customers who shop with us both offline and online buys 3x more than the customers who shop with us only in our physical stores. So these observations form the business case for our O plus O strategy. On store numbers in the middle chart, we continue to open new stores during the epidemic and 317 net new stores have been added year on year, bringing the total store numbers to 16,206 as end of June. And around 80% of new stores opened are in China and Asia. Average payback period for the new health and beauty stores, which represent the great majority, remains healthy at 12 months. So we have a short payback. And the split of these 16,000 odd stores is fifty-fifty between Europe and Asia. On EBITDA, EBITDA is reported at RMB 6,725,000,000, representing an increase of 45% in reported currency or 35% increase in local currencies. And the EBITDA split is 54% in Europe and 46% in Asia. The EBITDA growth chart on the top right shows a very healthy EBITDA growth of 35% from RMB 4,630,000,000 in the first half of last year to RMB 6,730,000,000 this year. And this number also includes a favorable foreign exchange translation gain of RMB 4.81 million. If you look across the bar chart, all divisions saw positive growth except other retail, like what Kenning said, predominantly representing the Park and Shop Supermarket business in Hong Kong, which had an exceptionally strong first half last year due to panic buying, which does not recur this year. For the core Health and Beauty business, which account for 94% of the total division's EBITDA, the year on year growth rate is a strong 52% in local currencies. Now let me go through it 1 by 1. First, for Health and Beauty China, the first half sales achieved a growth of 21% versus China's retail market sales growth of 11%. So we are doing better than the market. In the meantime, online sales continue its growth momentum at 80%, eight-zero, versus the market growth of 23%. So this increase in sales has resulted in year on year EBITDA increase as shown of RMB494 million, a strong 53% growth in local currency. Next for Health and Beauty Asia. Despite the resurgence of the epidemic in recent months in some countries, this division also recorded an EBITDA increase of RMB170 1,000,000, a growth of 19% in local currencies, with Malaysia, Thailand and the Philippines as our key contributors amid movement restrictions, demonstrating resilience of the Asia businesses. For Health and Beauty Western Europe, this division's major operations are considered essential retail by the government, which allows stores to remain open during the lockdown period. This has enabled the Western Europe division to deliver a very strong EBITDA increase of $1,040,000,000 representing a very high growth rate of 82% in local currency, primarily from the Benelux countries and Germany. For Health and Beauty Eastern Europe, it also reported a RMB276 1,000,000 EBITDA increase, reporting a growth of 39%. The predominant contributor to this EBITDA increase is Rosman Poland, which also enjoyed the essential retail status and have its stores remain open during lockdowns. So with all these good contributing results, the total Health and Beauty business reported a strong EBITDA increase of almost $2,000,000,000 if you add all the increases together, representing a year on year growth of 52% in local currencies, as I mentioned earlier. Now we turn to the EBITDA margin chart on the bottom right. With the increase in EBITDA, the EBITDA margins also increased correspondingly. For Health and Beauty China, the EBITDA margin increased 2 percentage points year on year from 11% last year to this year's 13%. For Asia, the EBITDA margin also increased from 7% in the first half last year to 8% this year. And for Western Europe, from 4% to 7%, so it's quite a respectable increase. And for Eastern Europe, from 10% to 12%. So as a result, the overall EBITDA margin for the core health and beauty business has increased 2 percentage points year on year from 7% last year to 9% this year. So in summary, the robust year on year recovery of the retail division under the pandemic has attributed to the successful strategic decision to drive further digital transformation in accelerating the integration of its physical store portfolio and online channels to offer a seamless O plus O experience to the customers, resulting in good increases in sales and margin. And this crucial O plus O strategy is working out well and will continue. So from here, I pass it back to Frank to talk about infrastructure. Thanks, Dominic. I'm not going to dwell too much on Slide 12. Obviously, CKI announced their results yesterday and will have done a very good job of explaining the puts and the takes. But obviously, the major sort of anomaly in the first half was the deferred tax charges and deferred tax credits, and so which related to changes in U. K. Tax rates, which will be introduced in 2022, I believe, and involve a substantial increase. But nevertheless, even including that showed a 5% increase in earnings, which is very healthy. And obviously, if you exclude the effect of deferred tax charges and credits, a double digit level increase in earnings. And that's quite satisfying when you consider that the company is already taking in the impact of resets that took place in 2019, let's say, in 2020 and in the Q2 of this year. And I think it's about 5 of the assets. The chart on the lower right hand side shows you where reset effects will come into play, right? And some of those have already been absorbed, obviously, in the results announced for the first half. So I think overall, very steady as she goes and very happy results from CK Infrastructure, right? And of course, a debt ratio and a credit rating that are completely supportive of CK HH's own debt ratios and credit ratings. So I'll stop there and pass it on to Kenning to talk about telecoms. Okay. So the telecom side has a solid first half and revenue went up by 7%. And then although the subscriber, actually active subscriber went down by 2% to 38,000,000, but then the hand pull is doing quite well. Not only it can pull you back up by 1% and because data usage is quite a lot, so plus 30% that gives us solid foundation to the business. And the EBITDA for the year for the first half is 14.7 $700,000,000 And so if you look where does it come from, so I would like to refer to the left hand side and the right hand side of the page, then you got the $220,000,000 EBITDA and then you take off in order to make the 2 half year comparable, you take off the tower contributions, the tower expenses. So to make the 2020 figure comparable to the 2021 figures. And you saw that UK has a small increase and then Sweden have a small increase and then Denmark, Austria and Ireland, they all have a small decrease. I would say that is that it's all due to margin. I expand a little bit higher here and there and you will see in the next page. And then the thing that we showed a bigger figure is Italy. Basically, if you look at Italy for the last few years, the strategy was to take the income from the wholesale business and then especially with the Elliott and then let them take away our low ARPU customers because that you earn more money from the wholesale business than keeping those subscriber. So as a result, you saw that the result in the last few years was very solid. Our strategy worked very well. The gross margin for all those year, while the market has been so competitive, we have been able to stable and increase a little bit. And on this year, it is the 1st year we saw that now Elliott has built the network then they channeled a portion of the business back to the network, especially in the cities. And as we saw that the first time that we saw that the wholesale income from earlier has reduced. However, and we are quite ready because that and our second brand has actually take off from the second half of last year to this year. And we have a quite a substantial base now. And so that actually if you've seen in our second quarter result, our base performance is actually quite pleasing. Not only is stable, we increased a little bit and then so that but then the first half results shows the financial effects of less wholesale income and then to a certain extent offset that by our cost saving and also we won some settlement with another competitor. So that saw our EBITDA drop by RMB 564,000,000. And of course, and if you go to the far right and then we have a foreign exchange gain in this division because the European currency has performed quite flatly. And so and then the EBITDA percentage change that shows the picture And the margin is quite healthy. Italy is still 45%, with Sweden and Denmark at 32% and Austria 43%. So that I can you can move to Page 14. And this Page 14 shows the detailed calculation that this is simple, that's a representative of what we are just described. So with this, I turn to Page 15, Frank and you? Yes. Just an update on the tower sales. So just to recap, in 2020, we completed the sales in Austria, Denmark and Ireland, which brought in proceeds of EUR 2,200,000,000 and gains on the disposals of €1,700,000,000 in the first half of this year. We completed Sweden and we completed Italy for total proceeds of €4,100,000,000 and total gains, I'd included in the numbers that we're looking at today, of €2,600,000,000 So that leaves the U. K. To be done. It is in the CMA regulatory process, right? As everybody knows, it has gone into Phase II. And for those who don't know the competition process in the U. K, it's really very different from the competition process in Europe. Put in a nutshell, in Europe, if you go into Phase 2, you essentially have to convince the same team who put you into Phase 2 that they were wrong, right, in their conclusions on Phase 1. But you're always dealing with the same team and you're dealing with the same decision makers, right? In the UK, in Phase 2, a panel is empaneled of independent, right, experts that are brought in. And both the CMA and Cellnex will make their case to that panel. And we think that in that context, the position that Cellnex is in is very solid. So we remain kind of confident that approval will be forthcoming. I suppose the only thing that it does is leave some question as to whether approval comes before the end of this year or whether it slips into the first half of next year. Given the strictures on the regulatory process in the U. K, it can't go past the first half of next year. But of course, given all of the ruckus and so on that the pandemic has caused, it may be a little slower than it might otherwise be. So we will see what the timing is. I continue to believe that the outcome will be good. And under our contracts, right, assuming that the regulatory approvals are obtained, which they were in all the other countries where we needed to obtain them, including Italy, we would be getting proceeds of €3,600,000,000 sorry, euros 3,700,000,000 and looking at a gain of €2,600,000,000 to go into the numbers either for the second half or for the first half of twenty twenty two. One of the things that you start to see in the telecoms reported figures is that we are normalizing, right, when we do period comparisons. So when compared to the prior year's quarter for the impact, right, on EBITDA, right, of the tower sales because, obviously, they are paying money to Cellnex, and it's important to understand how much that is. And of course, they were not paying money to Cellnex in the first half of last year. And that will continue to be the case as we look forward. So we look at the normalized numbers to get fair period on period comparisons for the telecom operations. The impact in the first half of twenty twenty one was really very small. It was about 50,000,000 euros across all of the countries that had been completed in December 2020. And of course, Italy completed on the 30th June, so had no impact but will have in the second half. No change at all to the original announcement in terms of the use of proceeds, but obviously, we have applied some of these funds already to reduce gross debt and net debt. So with that, I would turn it back to Kaning to talk about HAT. Well, HAT has a difficult environment to work on. We are basically HAT is Indonesia, Sri Lanka and Vietnam. As I think most of you must well know, this in the first half of total 'twenty one, these three places are really hit quite hard by COVID-nineteen. And so that we have about 60,400,000 active mobile subscriber. And then in the first half, we show a reduction in EBITDA from $872,000,000 to $800,000,000 Basically, if you look at the Vietnam and then Sri Lanka actually is survived quite well and then they actually do a little bit better than last year, similar period. And Indonesia, actually the performance is quite well, in spite of the fact that revenue and margin went down. Actually, we did very good controlling costing and we make it back by tighter operations and orders, so that it shows $100,000,000 difference between this year and last year similar period. So I would say that is a good result in a difficult situation. I think everybody want to know about our discussions with Hindustat on emerging. I must say that we have a deadline in middle of August and I am cautiously optimistic. And so that we I hope that we can have an announcement by that time. Okay. So now what is sustainability? Frank, can you do this? Yes. This is an area which has been over the last several years gaining focus and prominence across the group and I must say very satisfactorily. If you go to Page 18, right, we released our 2020 Sustainability Report. I really do hope that you have had the chance to read it and that you will read it because I think it's very revealing about just how much is going on, on all fronts across all of the divisions and geographies in this group in various coherent directions in terms of sustainability. And just to put a rough number on that, if you exclude because it's very difficult to allocate what we're spending in 5 gs development, right, we've spent about US1.8 billion dollars in the last 3 years across the board on sustainability initiatives around the group. And that's a number that we're going to be tracking going forward because it is very important. So if you look at what ports are doing, right, they're deploying smart port technology, all sorts of electrification, which is reducing their carbon footprint quite rapidly and quite successfully. Self driving trucks are now part of the state of the park Newport development approach, trialing hydrogen powered port equipment. And indeed, in the U. K, where the port has been designated as a free port, it's also part of the green agenda, the government's green agenda, and with a view to becoming an in effect showcase for hydrogen powered ports operations, which would be extremely environmentally friendly and might set a standard, right, for port operations going forward. In retail, right, you see just a plethora of efforts and commitments in the areas of, in particular, the circular economy, getting stuff on the shelves, right, that doesn't just consume resources but that consumes resources that can be brought back into the world's resource base, which is a goal and objective that is probably right up there with the urbanization and the initiatives relative to climate change that you're seeing across the board. Infrastructure, CKI Group, I mean, is really leading edge in terms of what they're doing, particularly in terms of the hydrogen economy. So trialing delivery through natural gas pipelines of hydrogen offtakes and trialing hydrogen based energies in homes to substitute for natural gas, trialing, as I understand it, a hydrogen powered train. About 50% of the trains in the UK are electrified. And so there's scope potentially for hydrogen powered rail, but it's really quite remarkable. And then in terms of the EV universe, but planning ahead in the electricity distribution businesses for when and where it will be necessary to provide additional grid capacity to support charging points and so on. So really, across the board, what CKI is doing in sustainability is, I think when you read the report, you find very, very impressive. And then of course, in telecoms, we are part of the CDP, right? We publish every year. We have targets in terms of our own emissions and decarbonization targets. But we're also involved in a lot of projects looking at how 5 gs technology can support smart technologies, smart city technologies and so on that will have meaningful environmental impacts. So for the group as a whole, we've adopted for 2021 and 2022. Of course, we've endorsed the UN Sustainable Development Standards, but we've also adopted out of those 4 key actions for this year. One is to continue to up our game on climate change, so make progress in terms of understanding our Scope 3 emissions, as they're called, but also make progress in terms of target setting division by division, right, and over time. The second is seizing the opportunity of sustainability. That's really what I've been talking about in terms of investing in new technology that either works towards decarbonization or new technology that supports the circular economy. Creating great places to work, that's very important. The work environment has been really highlighted during the pandemic. How you deal with your people is the starting point, I think, of what kind of company you are. And one of the things that's happening there is that the workplace metrics are starting to be woven into short term and long term incentive calculation metrics, right, for managers. So we're really taking seriously the need to make sure we're achieving the right things in terms of diversity and inclusion and the way that we handle our workplaces. And then lastly, of course, as we did from the beginning of the pandemic, and we will continue to do just a whole plethora of things to support employees, support communities, support stakeholders, right, through the pandemic. And that's happening in all of our divisions and will continue in 'twenty the rest of 'twenty one and into 'twenty two. So as I say, I'd encourage you to read our sustainability report and keep an eye on this area because I think it's an area that is necessary, both from a capital markets point of view and a customer facing point of view, but it is also an area that is rich in opportunity potentially for our group for the future across all of our lines of business. So I'll stop there, and I think that takes us to Q and A. Thank you very much. We will now begin the Q and A session. Once again, please feel free to raise your question in the chat box, which is at the lower right hand side of your screen. The first question is, is there more specific information about the breakdown of proceeds from power sales among share buyback, debt reduction, others in any? Well, we've started the share buyback plan and we've started paying down the debt. But remember, the biggest part of the cash proceeds just from the completion of the Italian tower sale, which only took place at the end of June. So we don't exactly have a lot of time to use those yet. So I think all of them will be active pursuing. Thank you, Chairman. The next question is what is the priority of the company's capital allocation? Well, it's a couple of things. The top priorities, I think the if we engage in earnings and cash flow accretive telecom deals, hopefully engaging in end market consolidation, That would be very good for the group. The second one would be retail stores because they have a pretty good payback period. And continuing new investment in recurring income in CKI, be it utility or steady income project, that would also be a priority. But the 2 new areas would be debt repayment and share buyback. So those 2 are together with the earlier 3, the 5 priorities will be our focus. Thank you, Chairman. The following question is, what is a comfortable gearing level that will prompt increased return to shareholders? Well, the world is pandemic and political issues are continuing and uncertainty seems to be the word in the next coming 1 year. And I think the only guidance I have is that we have to maintain our gearing ratios to make sure that we can maintain our credit rating and we intend to stay in A class for our credit rating. Thank you, Chairman. The next question is about telecom. What should we expect to see commencement of the revenue source for 5 gs? Kenny, can you You're on mute, Kenny. Am I? We can hear you. Yes. Okay. So we are now building up 5 gs infrastructure everywhere, UK, Italy, Hong Kong, Sweden, Denmark and Austria. So we are building all this out and actually the one that we I think this the result that we saw is they provide exceptional speed. And I think what we have we see that as a one of the best weapon to provide consumer with what we call the wireless fixed wireless asset and it is for just a thing to a device to produce Wi Fi at home at a speed even faster than fixed wire. Actually, I use it myself, so that we are selling this fixed wireless asset and started selling it and the result is pretty very pleasing. So that the income for the auto was still building, but we are also able to derive revenue from this new infrastructure. Thank you, Kenny. The next question is on retail. Do you expect AS Lawson will maintain double digit year on year growth rates in EBITDA and EBIT in the second half? Jimmy? Well, last year, 2020, the recovery of the retail business was pretty good. And then we have a very good second half in 2020 against 2019. And then this year, I think we will continue to have good business. And of course, we hope that the COVID-nineteen in Asia in the recent outbreak in the mainland will be over pretty soon. And then we still have strong, strong disease that we can maintain growth against last year. So I think I would like to be a little bit more conservative, but this business has been going strong since the beginning of this year. Yes. Thank you, Kenneth. The following question is on sustainability. With the process noted in your recently issued sustainability report, will sustainability be the key focus of the group in this area going forward? I think, we've covered already quite a lot. I mean, Frank have mentioned a lot and also in the Chairman's statement, we've said a lot about our focus in the sustainability area. But one thing I maybe want to highlight is that for a lot of other companies, sustainability may be a compliance issue, whereas for Hutch and C. K. Hutch and also the subsidiary, it's a new business opportunity. And we've always been doing that. So if you look at, for example, I use something close to home, Hong Kong Electric. I mean the change from coal to gas and hopefully later on to renewable energies and the transmission of it is our active business. We're no longer only in the business of generating electricity. We're in the business of generating cleaner air. So it's a new opportunity. It's a new product. So that's Hong Kong Electric. If you look at CJI, we've been in solar, we've been in wind turbines and we're looking at wind turbines that potentially can compete with gas. We are in the business of generation of hydrogen, looking at it as a hydrogen is like a battery, storing the power from be it nuclear or wind or solar that is not being used at the time of generation. And if you look at electrical vehicles, most people look at the cars. I look at all the charges that are necessary to charge up all the vehicles. And if you have to charge up all the vehicles, you have to build a whole new distribution network with transformers and everything to charge so many vehicles. That's wonderful business for CGI and Hutch. So we're not looking at it only as compliance. We're looking at it as good business. Thank you, Chairman. Okay. The next two questions are about retail. What is the progress of the O plus O strategy and what is the sales participation of the O and O shoppers in Boston's China and ASW as a whole? Can I refer that question to Dominic then? Okay. Well, thank you, Victor. In fact, the O plus O strategy has been working out very well. Because to just to remind everybody, our O plus O strategy is not O2O. In fact, within that physical network that we have built together with the technology on the online capabilities, we have incremental business when a customer shop with us both offline and online. So on our offline side, we promote the online products and categories and vice versa on the online, we introduce, for example, coupons that they can use in physical stores. So we are talking about incremental. This is a retail model for the future for AS Watson. So the right now, I think the O plus O sales participation is around, say, 18% for the group and for health and mobility is 21%. So we are growing. Just imagine that we have identified this 3x more spending for OPUS old customers than the physical store customers. So the room for growth is tremendous. So this is something that we are working on and is working out very well with feedback from the customers, with feedback in our CRM data. Well, just one more point. Today, we're only around 9% of our base doing OO plus O and then the growth year was about 30% or 30 plus percent. So that I think one of our strategy is to work on our CLM. So to make sure or try to increase the participant, increase the participant of our CRM and base to do not only shop in our shops, but also shop throughout our online channels. I think this will is a way that can increase our sales revenue quite drastically. We are looking forward to This is a model that the customer wants. We are not imposing on them. That's why we have this 34% growth, Kenny mentioned. So the Opusol model is working out fine with good increase in growth. And also, Kenny mentioned that the member, for example, in our entire portfolio, AS Watson, we have only 9% of our customer base is OPUSO. So there's huge potential to convert them to do OPUSO. Marina, what is our latest number on the total customers on CRM? At the moment, it's RMB140 million, which is RMB 4,000,000 more than last year same time. So this is a clear indicator of the good progress of our O plus O strategy because the more members we recruit, the more opportunities we can get. If I may also mention about China, I think the question also covered China. In terms of China, all sales participation reached 40%. So the opportunities is again, as Kenning said, we are going to recruit more of the members. The current base is only 12% base of the 63,000,000 members that we have in China. They are shopping offers old. So we continue to confirm more of them and there's huge opportunities ahead of us. Thank you. Thank you. The other question about retail is what is the payback period of opening new stores in China and are you still considering opening new stores in China? Jenny, do you want to pick up that question? Okay. Actually it's more for Dominic, but let Dominic correct me. Okay. I think our job is to opening store. So we use opening store and then the payback. Now from head office, I only look at the return point of view. So it has been because of the COVID-nineteen has been a slower payback, but still 17 months payback, which is a damn good on our capital employed. So do more Dominic. Yes. Well, in fact, it's very rewarding. Even under the pandemic, the payback period is only 17 months. For the health and duty as a whole is 12 months. So we got some quick payback in, for example, in Asia and say Eastern Europe. So this is a good investment if you look at the return on capital. But it's not only China. We're achieving similar results in Southeast Asian countries also. Yes, yes, yes. Yes. I don't want this I mean China is wonderful market, but it's not China only. Actually, you're taking to other countries, the payback is only 12 months, okay. Other companies is better. So Dominic, can you comment? Yes. The payback definitely on average health and beauty is 12 months. China, 17 months and Asia is 9 months Eastern Europe was 9 months and then Western Europe is less than a year. So all these payback shows that we select the size correctly. And then the O plus O model also helps the footfall of customers coming to our physical stores and our conversion rate on our online. Okay. Other questions? Thank you. Thank you. The next question is on infrastructure. What are the opportunities to acquire new assets from CPI? Sorry, I couldn't hear that last sentence. What are the opportunities to acquire new assets by CPI? Well, we're looking at new assets all the time, but other than the in terms of acquisitions. But in terms of the traditional infrastructure, we're looking also into building infrastructure. And one division that has been doing extremely well, especially during this pandemic, is all the water heaters in Ontario. And it's not the infrastructure that we traditionally see as roads or highways or electricity, but it is as essential as other infrastructure in other people's home. And I think we're the largest player in Ontario giving people hot water. Imagine in Ontario winter, you do have hot water for your bath. I think that is very good steady income. And now we're also moving into air conditioning. So we're again providing air conditioning to all these homes. Now that CKI is working together with CKA and CKH in doing this. In the meantime, we're also expanding in areas of meterings. So in Continental Europe, using our base in Germany, we're expanding into other countries. Now none of these are major sort of acquisitions like big deals that we're going to announce, but it's like every week or every 2 weeks, we're making new deals, buying sort of a small neighborhood there, another neighborhood there on market share. So in all of these markets, we're growing in market shares without making big announcements. But cumulatively, they are quite respectable. So infrastructure that doesn't look like traditional infrastructure will be something that we'd like to work more on. I can go on and on, garbage collection. Sorry, I shouldn't use that word, waste your energy. Yes. Thank you, Chairman. Okay. The next question is about port division. What is the outlook of throughput growth in the second half of twenty twenty one? Again, am I allowed to make profit projections, Brent? We can talk about throughput, I suppose, Chairman. I think I can talk about the first half. I think the growth in ports is clear and strong. And in the first half twenty twenty one, it's very strong momentum. I mean, you look at Yantian, it's a, if I'm correct, 21% year on year growth. Frank, correct me if I'm wrong on numbers. It's 21% growth year on year in throughput. And even during this time in June, I think they have a scary experience with COVID-nineteen. And given that it's still 21%, and I think I'm generally optimistic about second half. That's what I can say. The momentum seems to be continuing. Okay. Thank you, Chairman. Okay. Due to the time constraint, we are going to have the 2 plus passengers. They are all about telecom division. The first one is, how we will see KTH and CEREX address the competition concerns of CMA? Frank? Chairman, I think I already addressed that, right? This CMA process is a normal process. It's actually Cellnex's process, right, because they're the guys who are acquiring and need to get approval in light of the impact on their position overall in the market. It's a new situation in the sense that in the UK at least, nobody has owned as many towers as Cellnex owns today or indeed would own it on completion of this. I think that they make the case very, very visible right, that, that is not an adverse impact on competition, but actually, it's probably pro competitive in the sense that they are opening to the market assets that were off the market, right, when they were exclusively used by existing MNOs. But that's their case to make. And as I said before, the good news here is that the UK process is not like the European process. You are convincing, right, a new panel, right? The CMA staff make their case. Cellnex makes its case. We support that case in terms of facts relating to us that may be brought to bear. And I think overall, I'm quite optimistic that it's a process that we will get through. And as I say, we have gotten through it, right, in 5 other countries, including in Italy where the concentration is at least not dissimilar to the concentration that Sun Lakes would have in the UK. Thank you, Frank. The last question is about Indonesia. What is the current status on the merger with Intelsat? Kenny? I have reported earlier when Michael put Indonesian sessions so that we are positive about this merger. Is there anything that you want to add, Frank? Just to say that, I mean, most all sides actually, right, because it clearly involves Urdu, it involves EndoSat, which is a separate public company, and ourselves. And all sides are working towards meeting that August 15 deadline, and I share Canning's optimism. But nothing is ever done until it's done. So hopefully, we'll be in a position to make a good announcement on the 15th August. I think maybe to I can add my comment on this is the synergy is quite obvious. And I think there is good intent on both parties to conclude this. We're now really on the nitty gritty and the logistics of it. Now don't forget, I mean, Indonesia is now going through a really, really hard time during this pandemic. And staff safety and everything, I think we have to take a priority on this also. So Frank, on one hand, we want to deal. On the other hand, we have to look at it from a human level. And if it's we're talking about lives here. So and it's very difficult operating in Indonesia now. People cannot travel. People cannot even move between neighborhoods. So to conclude a deal in these circumstances, I think it's quite a challenge. Yes. Yes, I just want to share the human side with our investors that other than the numbers, which makes absolutely good sense. Maybe a couple of days earlier, a couple of days later, it's not the end of the world. I hope so too. Okay. Ladies and gentlemen, thank you very much for attending the presentation today. Due to the time constraint, we have to conclude our live webcast today. I'll advise our department to answer the remaining question very soon. Thank you very much for joining. No, I just want to say thank you to all the attendees. And I really look forward to seeing all of you in person in the not too distant future because if I can see you, that means this pandemic is gone and business is good. And so I really look forward to seeing all of you. Thank you. Good help. Thank you. Bye bye.