Hope you enjoy the video. May I now invite Guy, Martin, and Adrian to please take us through the details of the interim results of 2024?
Good evening, and thank you for joining us. I see these interim results as a very solid set of results, especially when one considers the challenging operating environment that we've all been working under for the last six months, and notwithstanding, of course, the impacts on the comparisons from the disposal of Swire Coca-Cola USA in the second half of 2023. The aviation division was the main driver for our underlying profit performance, with continued robust demand for travel, and their confidence in the future of that sector was demonstrated when they announced yesterday a commitment of HK$100 billion in investments over the next seven years. I think it's a tremendously strong statement of confidence from Cathay Pacific.
Talking of HK$100 billion investment plans, on the property side, you probably just heard if you're in the property briefing that in terms of their commitment to HK$100 billion over 10 years, we've now achieved a 65% commitment rate on that scale, which I think, again, is an incredible testament to the pace at which Swire Properties has been investing in both Hong Kong, Southeast Asia, and the Chinese mainland. I'll give you some details about some of those investments in a later slide, but moving on to beverages, we were very excited in February this year to take an interest, a 39% interest, in the share capital of the ThaiNamthip Beverage Corporation Limited, which is essentially the Thailand franchise for Coca-Cola and the Laos franchise, and we have a conditional agreement to move that stake up to majority in phases.
So some good highlights, I think, for the first six months. So all that translated into a 2% drop in recurring underlying profit to HK$4.8 billion, but given our progressive dividend policy, we're raising our dividends per A-share by 4%. One other thing to highlight in this slide, I think, is down at the bottom right, is the performance in 2024 of HAECO, who've had a good six months and a big improvement on prior year, and we're very happy about that too. In terms of the business performance, obviously, you heard Tim talking earlier about the reduction in Hong Kong office rents on the property side. Part of that is obviously due to the rental loss from the sale of nine floors in One Island East last year. Part of that's due to just the softening of the Hong Kong office market.
We think that in the first half, that market remained subdued, and the retail market remained extremely challenging for reasons that I think we all understand. In the Chinese mainland, retail sales started to normalize, but they remain ahead, comfortably ahead of the levels that they were at pre-pandemic. And so, again, I think you can see a sort of certain flight to quality in terms of our best-in-city locations for our retail premises in the Chinese mainland. And the exciting news, I think, today at the Swire Properties level was the announcement of a share buyback program of up to HKD 1.5 billion running through to May 2025. On the beverages side, a mixed picture. You saw profit increases in Hong Kong, in Taiwan, and in Southeast Asia.
We had a significant contribution, actually, from Thailand and Laos, and that was slightly offset by a decrease in profit from the Chinese mainland, which was largely due to currency impacts. On aviation, as I mentioned, the results were driven by an ongoing robust demand for travel, both on the passenger and then on the very solid cargo business. And then HAECO, again, showing its recovery, achieved a growth of 535% in recurring profit on the back of last year. So very creditable performance across all the core divisions, I think, given the conditions under which we're all operating. I will just turn to Martin to take you through the financial performance, and I'll come back and talk about some of the operations.
Thank you, Chairman, and good afternoon. We're having a bit of a technical issue here because I'm out of sync with all your. If I press this button with my. This is not in sync. I can use your screen. So yeah, the first half summary report that you can see on the screen, which I can't see in front of me, I do believe these are very good results given the current economic environment and after making adjustment for the like-for-like comparisons year-on-year. On the top left-hand side, you see the statutory profit, which mainly reflects the adjustments in respect of fair value of investment properties, which was down 7%. There's no impact on operating cash flows, not on underlying profit attributable to shareholders, which remained flat at HK$6.6 billion.
The recurring underlying profit of HK$4.8 billion was only marginally down in 2023, despite the impact of the disposal of Swire Coca-Cola US in the second half of last year. The absence of Swire Coca-Cola US on our results impacts the revenue and the cash generated from operations, as you can see on the left-hand side. Also, as previously mentioned, in terms of improving the returns on shareholders, we continue our progressive dividend policy and declare a first-interim dividend up 4% on prior years. We also continue our HK$6 billion share buyback program, which will continue through to May 2025. This slide, again, highlights the non-recurring items included in the underlying profit year-on-year. The gain on disposal of investment properties highlights the increase in the sale of Taikoo Shing Car Parks.
The gain on disposal of property, plant, and equipment was mainly driven by asset sales on a hangar reallocation and a joint venture in HAECO, and the disposal of shares in Cathay. The deemed disposal gain from the sale in shares of Air China was significantly down from the gain recorded in 2023. We also incurred lower impairment charges on the acquisition of DeltaHealth over the impairment of New Life Plastics back in 2023. This slide shows the waterfall chart in the movement of underlying profit. So in Swire Properties, again, from the presentation that was done earlier, performed very well despite the weak office environment in Hong Kong and the impact of higher interest rates regarding their investment pipeline.
In beverages, this shows the HK$913 million decline relating to the sale of Swire Coca-Cola USA, which was partly offset by the investment in Thailand and Laos, the new bottling franchise. The business was also impacted by weakness in the currency in the Chinese mainland and Vietnam. In aviation, it continues to recover off Cathay Pacific and the strong performance of HAECO. Cathay benefited from the increased capacity, which also flows through to the cargo business and much better results from their associates. We'll go deeper into the performance of the core divisions in later slides. In slide 12, this shows how the non-recurring items impact each of the divisions. So in Swire Props, it shows the sale of the Taikoo Shing Car Parks. Beverages shows the impact of the sale of Swire Coca-Cola USA. Aviation at Cathay, the impact of the deemed disposal of Air China shares.
In aviation and HAECO, the sale of assets on the relocation of the hangar and the joint venture company. Here we highlight some of the key balance sheet and financial metrics. As of the 30th of June, our net debt increased to HK$63.5 billion, with capital expenditure of HK$9 billion and HK$2 billion spent on the share buyback program. Gearing is very healthy at under 20%, with our weighted average cost of debt of 4%, with 68% being covered on a fixed rate basis. The group's committed available liquidity increased to HK$46.8 billion. We have a solid maturity profile and a good mix of bank financing and bonds. In June, Swire Pacific successfully priced a HK$500 million five-year bond at a very tight spread and after swapping at a 4.5% rate. Swire Props has benefited from tapping the dim sum bond market and benefited from lower interest rates.
33% of its debt is in RMB. With that, I'll pass back to you, Chairman.
Thank you.
Taking the property division first, the pipeline of property projects continued in the first half. In the Chinese mainland, we just recently actually successfully bid via public auction for 387 Tianhe Road in Guangzhou, which allows us to increase the scale of existing Taikoo Hui Guangzhou. In Beijing, phase two, we increased our shareholding in that project, which is still under construction by just under 15%. And in Guangzhou, the second major project after Taikoo Hui, namely Julongwan, we announced a 50% joint venture to develop the retail portion of that mixed-use development on the banks of the Pearl River. All of that in the Chinese mainland in February. We also got the occupation permit for Six Pacific Place here in Hong Kong.
So Swire Properties had a 9% drop in recurring underlying profit year-on-year for the first half, somewhat offset by sales of Taikoo Shing car parking spaces, which led to a 2% decline in underlying profit on a 100% basis. That's shown in the slide number 2. In terms of the HKD 100 billion commitment, which was made only in 2022, it was a 10-year commitment, and two years later, we've managed to commit 65% of it. And this chart shows the breakdown of that commitment: HKD 44 billion, of course, in the Chinese mainland, HKD 11 billion in Hong Kong, and HKD 10 billion in trading projects, and particularly in Southeast Asia. And I just think this speaks to the confidence that we have in those markets.
Going forward, the pace at which we've been able to commit the capital really does reflect the quality of the locations that we're in and we're choosing, and the confidence that we have in those locations going forward. This chart just demonstrates that we're increasing our footprint in all our major markets: Hong Kong, the Chinese mainland, and Southeast Asia. We currently, actually, if you look at the Chinese mainland part, we have six projects of scale under construction at once in the Chinese mainland in tier-one cities and what we call emerging tier-one cities. I don't think there's ever been a point in time where we've been constructing so much at the same time in one of our major markets. So a very impressive achievement by the team. On the Hong Kong portfolio, as Tim said earlier, the malls are pretty much full.
On the retail side, our office malls, whilst not full, are close to being full, and they are clearly outperforming the submarkets in which they're in or they're competing. And I think this is, again, testifies to what we call in a time like this, a flight to quality, whether it's on the retail or the office side. Tenants tend to want to be in buildings that they perceive to be in the best locations with the best specs. And I think we're gaining because of that at this point in time. So I'm very pleased about that. In the Chinese mainland, 41% now over the last 10 years has become the contribution from the Chinese mainland to our gross rental income, which is a tremendously quick rate of growth. And we're very happy about that.
In fact, sales, as I said earlier, in the first half in the Chinese mainland were significantly greater than they were in pre-pandemic, although they were cycling a very strong number in the first half of 2023 with the post-COVID rebound. That's the property side. I'll ask my colleague Adrian Choy to take you through what's happening with beverages.
Thank you, Chairman. The first half of 2024 marks another significant expansion for Swire Coca-Cola in the Southeast Asian market. As Chairman said, in February, we acquired a 39% interest in the franchise business in Thailand and Laos through ThaiNamthip. A little bit more about that ThaiNamthip is that in Thailand, ThaiNamthip has five modern bottling plants with a combined production capacity of more than 450 million unit cases per year, serving 63 provinces across the country. Our NARTD market share is about 18%, and we are the clear leader in the carbonated soft drink category. This acquisition underscores the immense growth potential that we see in the Southeast Asian market. This not only provides a positive contribution to our bottom line, but also strengthens Swire Coca-Cola as the fifth largest bottler in the Coca-Cola system, serving more than 900 million consumers worldwide.
We are also continuing our investment in Chinese mainland, Hong Kong, and Taiwan. In Chinese mainland, we have three new bottling plants under construction, one in Suzhou, one in Zhengzhou, and also the latest one in Guangdong that we recently broke ground. We believe that all these will drive our long-term growth and profitability. Despite that, we have disposed of our U.S. business last year. As for our financial results, EBITDA dropped mainly because of the disposal of the U.S. business. However, our overall performance remains stable. The market in Chinese mainland is challenging given the subdued domestic consumer spending, but we still manage the EBITDA at the same level as last year in local currency terms. In Hong Kong, the volume and revenue source slightly decreased, but EBITDA increased by 15% because of the better cost control.
The Taiwan market is performing strongly, with growth in both revenue and EBITDA. In the Southeast Asian market, excluding the results from Thailand and Laos, our EBITDA was similar to last year, with better performance in Cambodia, although we faced challenges in Vietnam compounded by the depreciation of the Vietnamese dong. Our overall attributable profit was HKD 878 million compared to HKD 1.4 billion last year or HKD 1.6 billion recurring profit last year. This reduction is mainly because of the loss of contribution from our US business. But if we're excluding all the impact of the disposal and also the new acquisitions, our profit was a modest decline of 2% only. In terms of our category mix, sparkling remains our main revenue and also profit driver, and we are also making good progress in expanding our portfolio across multiple categories, especially in tea, coffee, and energy drinks.
In terms of our margin, our overall EBITDA decreased to 11.7% because of the distortion of the disposal of US business. If we look more closely by region or by market, it's actually encouraging that we have improved margin across all regions, reflecting our continuous effort in revenue growth management and also driving productivity. With that, I hand over back to Chairman to talk about aviation.
Thank you, Adrian. I won't dwell on the Cathay Group this session. It was the subject of a lot of detail yesterday. I think this chart I want to highlight the performance of HAECO. Particularly at the attributable profit line, you can see in June 2024, they delivered HK$597 million versus prior year HK$63 million. So it gives you an idea of the extent of the recovery of the HAECO results. This, again, borrowed from yesterday, just demonstrates that yields aren't normalizing in aviation. It also shows on the right-hand side the improved performance of associates versus prior year. I'd say those yields are normalizing both in the passenger and cargo sectors, but both have had a very strong first half. So hence the contribution from aviation to the Swire Pacific results in the first half.
Financially, you can see on the right that Cathay Pacific is in better shape, both in terms of liquidity, adjusted net debt, and gearing. The exciting news, I think, going forward was the investment in the fleet that was announced yesterday, which was the agreement to purchase 30 Airbus A330-900 aircraft. And again, that, I said earlier, demonstrates a great deal of confidence in Hong Kong and the GBA for Cathay Pacific and its strategy going forward. And on the financial front, you'll have seen last week that Cathay Pacific bought back the remaining 50% of the preference shares and unpaid preference share dividends, totaling HK$9.98 billion from the Hong Kong government. They've also declared an interim dividend of HK$0.20 per share to be paid. And finally, again, that HK$100 billion commitment over the next seven years speaks volumes, I think, in terms of the recovery.
I'll skip that slide and move on to HAECO. The strong growth that I mentioned earlier in recurring profit was driven by a continuous recovery of line maintenance activity commensurate with the recovery of operations at Hong Kong Airport, but also growth in the demand for engine overhaul at HAECO and also at HAECO engine services business in Xiamen. Moving on to healthcare, the highlights of the first half were in DeltaHealth, our heart specialist hospital in Shanghai. We completed the control acquisition of that business. It's now become the first business in the healthcare portfolio that we have gained a majority control. We did that in April 2024. And then in July, very exciting news, we managed to close the first tranche of the investment that we'd announced in the Indonesian Healthcare Corporation. And there were those two of the hospitals in question on that slide there.
A couple of charts on sustainability, Martin.
Sure.
Come back and do a final outlook.
Thank you. Yes, so Swire Pacific and all our group companies have a long-standing commitment to sustainability. We report under what we call the Swire Thrive strategy, where we focus on five significant areas being climate, waste, water, people, and communities, as you see that down the left-hand side. In 2020, we set an ambitious target to the commitment to net zero, waste neutral, and zero waste to landfill by 2050. We remain steadfast to that commitment. You can see our target set on the left-hand side of the slide, and on the right-hand side, our progress to these targets. We're well on track to meeting all our short-term targets in 2030. This slide I'm trying to just show some of the significant progress that we've made across the group.
Of course, you can look at the detailed sustainability reports that can be viewed online for all our core businesses and Swire Pacific. But some specific highlights: in Swire Pacific, we are the adopter of the Taskf orce on Nature-related Financial Disclosures. We also continue to pilot our internal carbon pricing mechanism. In Swire Properties, which you heard earlier, sits number 2 globally on the Dow Jones Sustainability Index and has already adopted the task force on nature-related financial disclosures. Taikoo Place is first development in Hong Kong to obtain the LEED Communities Gold certificate. Swire Coca-Cola has nine sites that are now 100% renewable energy and have introduced the first 100% renewable PET beverage bottles in the Hong Kong market.
Cathay Pacific is seeking 10% use of SAF by 2030 and zero by 2050, and is also very much focusing on single-use plastics, targeting to reduce single-use plastic items on board from 15 touch pieces to less than 7.7. HAECO's solar panels in Hong Kong make it one of Hong Kong's largest solar energy producers and has increased its electric cars to over 50 this year. With that, back to you.
Thank you. In outlook, we remain confident on the medium-term outlook for all of our core businesses. We're well positioned to cope with any immediate adversity and economic challenges. I think you've seen from the health of our balance sheet that we can continue to invest in our core markets going forward, and that's the plan. With that, thank you. We'll be happy to take questions.
Thank you. As the Chairman says, I'm going to take some questions. Gentlemen in front.
Microphone, please.
Hi. Thanks for taking my question. Fan Tso from Bank of America. I have two questions. First question on beverages. I see that Hong Kong and Taiwan have a very nice margin improvement. Adrian did mention that you have very good cost control. Can you elaborate a little bit more what kind of measure you guys have done and whether the margin improvement is sustainable? And also on mainland China beverages outlook, we've seen a consumption slowdown, particularly in the second quarter in June. So what are you seeing on the ground and the outlook? Second question we asked earlier to Tim and Fanny, but they've asked us to redirect to you is about the Swire Properties share buyback plan. And Swire Props free flow is not very high to begin with.
Would you have any plan or consider distributing some of your existing shares in specie to shareholders to improve the liquidity? Thank you.
You take the first.
Thank you. Thank you for the question. Taiwan is actually a very strong market for the first half. So in terms of the volume and also the top line, we see a strong consumption. And also in terms of the cost, we also manage to implement different cost measures. But in fact, Taiwan is actually up to their full capacity. So basically, that is a very good market at the moment. In terms of Hong Kong, we have a number of good initiatives, for example, better reach to market, increase our outlets, and also in terms of other cost measures, we also try to maintain better control in terms of cost spending. The top line is not very good in Hong Kong, but we still will try our best to maintain our bottom line on that front.
In terms of China, you are right that the market is challenging because of the subdued consumer spending. But given the stable raw material costs and also our effort in revenue growth management and effective cost management, we believe that this will also help our bottom line. If you look at our volume, it's actually decreased in the first half, but our revenue, the quantum of the decrease is less than the volume. So you can see our effort in how we manage improving our price and in terms of our revenue growth management.
Thank you. I thought you might have gone home after the last. Yeah, look, the discount to net assets in both properties and Swire Pacific does get this question asked a lot in terms of major restructuring. We'd get a lot of visits from investment banks proposing lots of different proposals. I think what we can do as management is the mandate of the AGM, which is the share buyback. It's great to see management in Swire Properties introducing a share buyback as Swire Pacific has done. I think the fact that we're doing a share buyback does suggest that at the moment, the major shareholder has no plans in terms of major restructuring.
Thank you. Any next question, please? Yes, gentlemen in front, if we could take your name and organization as well.
Sure, thank you. So this is John Lam from UBS. So I have two questions. The first one is regarding, I think in June, your company has signed a strategic agreement with Shenzhen government. Not sure if you can share more details regarding on what you plan to do in Shenzhen. My second question is probably also related on the share buyback of Swire Properties, which is assuming you are not going to dispose of your shares in Swire Properties because of the buyback, so you are indirectly increasing the stake in the Swire Properties. So would that also mean that you are also turning more positive on the property business? Thank you.
For the Shenzhen question, yeah, we signed a group-level MOU with the government of Shenzhen. In terms of our tier-one strategy in the Chinese mainland, you'll be aware that Shenzhen's probably the one tier-one city that we have the lightest level of investment. It's certainly somewhere that we believe very strongly in and want to heavy up on the investment side. So the MOU covered a broad range of businesses that Swire Pacific are involved in. But you get no prizes for guessing that the biggest one that we were chasing is in the real estate side. We'd be delighted if we could find an absolutely super prime downtown retail-led opportunity in Shenzhen. That's something that we're looking at very hard.
Yeah, I think with the second question, I think the strength of our balance sheet in both Swire Properties and Swire Pacific allows us to keep a long-term focus. We had many long-term plans in terms of the HKD 100 billion in Swire Properties and a new franchise in Southeast Asia, a movement into healthcare and Cathay Pacific's, even Cathay Pacific's investment. So we're very, very bullish in Greater China in the medium term. Our strength of our balance sheets allows us to do many things in terms of capital allocation. So share buyback is very small. HKD 1.5 billion is a small part of that. It doesn't make too big an impact on the free float in that sense, nor the gearing, etc. So it's just one of many pieces on that piece. The dividend yield in Swire Properties is now 8.4%.
70% discount to NAV, I think, is a very attractive stock for the outlook that we have in Swire, yes.
Thank you. Any further questions, please? Yes, gentlemen at the back, microphone, please.
Thank you. Evan Li from HSBC. I see that on your outlook slide. There hasn't really been too much focus on the healthcare business. Just like to know what's the profitability overall for that segment in the first half, and what is your strategy overall in the future, whether or not that will account for a significant share of profit in the near future. And then second of all, also back to the question about share buyback overall, I see that gearing for Swire Pacific overall has been quite resilient in some way. Are we comfortable with the current gearing, so to speak? And how do we balance between gearing, dividend distribution, and also share buyback of Swire Pacific overall in the future? Thank you.
Martin, you take both of those.
Sure. Well, in healthcare, again, as we've said a long time, this is a long-term strategy in terms of a new division that we're learning all the time. So the big movement here, we started off taking a minority stake in a board position in three hospitals to learn the business, so to speak. We want to build platforms in tier-one cities in the mainland and in Southeast Asia. So the big step is taking control and seeing how they operate. The new builds, they're small. It takes a long time to get into profitability. So in terms of impact on the bottom line, you're a few years away from seeing healthcare being a significant part of Swire Pacific's profit. So again, marginal loss-making continues last year and this year in terms of our subsidiary in Delta Health. But we're learning a lot in terms of building that platform.
We're very excited about what we can do in Indonesia in terms of the size of the scale of what we'll learn there again through the transformation process. The second question was related to the buyback again, was it? Oh, sorry, in terms of the overall.
Gearing, dividend distribution, share buyback.
Yeah, look, again, gearing levels are less than 20%. We've demonstrated in the past when we started the HK$ 100 billion project, etc., that we could go up to 30% in terms of gearing itself. We also look at credit metrics and where we sit in that. We've said all along we recycle, Fanny showed earlier, the HK$ 50 billion plus that's been recycled in Swire Properties in terms of its expansion plans. So we make long-term plans, we do strategy. And what we've said all along is the strength of our balance sheet allows us to maximize shareholder returns by having a progressive dividend policy, by continuing a share buyback program if that's what we want. But it will not deter us from our long-term investment plans, which again can ride through economic cycles. So again, I think we're in a very strong position.
Just on the Indonesian Healthcare Corporation, it is currently profitable, but we see significant upside in making it even more profitable.
Thank you. We are perhaps at one time for one more question. Any more questions coming, please? Thank you. In that case, we'll now wrap up our analyst briefing. Thank you once again for joining us.
Thank you very much.