Good afternoon, everyone. Welcome to CTF Services Limited Financial Year 2025 Entering the Sales Analysis briefing. I am Silvia, the Head of Group Investor Relations. We understand it is quite late now, at 5:45 P.M. Hong Kong time. Thank you so much for coming over to HKCEC to join us on-site. Thank you for those dialing in online through the video broadcast and also virtual channel. Today, our management will walk you through the highlight of the results, and also the outlook of the five business segments, and also the strategy moving forward. A Q&A session will follow. For those joining us online, there will be a questionnaire icon on the left-hand side of your panel. You can click that and key in your questions, and our senior management can read it from the iPad.
Without further ado, may I now invite our Executive Director and CEO, Mr. Gilbert Ho, our Executive Director, COO and CFO, Mr. Jim Lam, to kick start the briefing. Thank you.
Thank you, Silvia. First of all, thank you very much for everyone coming to HKCEC today. I do not think that we have been trying different format over these years, like whether we did this analyst preview should be the day after the launch, be it right after the press conference. It seems that there is no perfect way. We are still trying. Hopefully it will not cause too much inconvenience to all of you. Secondly, I need to apologize as well that I will need to leave early to catch a flight. But I will try to go through the presentation first, then I will dial in to answer all the Q&A. Sorry about that. Let me start with our first page on our investment business. I think this investment piece is very, very good change over these years.
No matter as anybody asks for CTFS, we have been categorized. We have a very strong and predictable cash flow. Over the last 22 years, since we were listed on 2003, we have been continuing our distributing dividends, so it is very sustainable. Obviously, this is supported by our operational excellence across all different business portfolios. That has the resilient earnings. Needless to say, all of this can have a very strong cash flow generation and visibility. We did not stop there with our old business portfolio. The last five years, we have been on a journey of portfolio optimizations. We have done quite a bit, which I will describe in the next few pages, what we have done. The objective, obviously, is to enhance our shareholders' long-term return. In terms of the financial management, our team has done a very good job.
We have been very proactive in our financial management and maintaining diversified sources for our funding. We actually keep the timing quite timely on the different bond issuance. Again, on our dividend policies. Since we changed our dividend policy in 2019 to a sustainable and progressive dividend policy, our dividend distribution has been maintaining on a very visible and predictable trend. As you can see, over the last two years, when we have available cash, and we know that we do have enough for our operation and our investments, public investments, we will not hesitate to return the dividends to shareholders to maximize the return for our shareholders. Last but not least, we continue to have the strong support from our parent company, CTF Group. Obviously, coupled with a seasoned management team with very solid execution capability. Next page.
I will not go into details, but as you can understand, since 2023, we have been acquired or our main shareholder changed from New World Development to Chow Tai Fook Enterprises. Again, I need to emphasize that our controlling shareholder now is Chow Tai Fook Enterprises, which they hold 75.61% in our company, which you will see in our different business portfolio, especially in the insurance segment. This is actually a very important concept where we can actually leverage on the different businesses within the CTF Group of companies, including Chow Tai Fook Jewellery, including our hospitality like Rosewood, our media services, i-CABLE Communications, and also our [aerospace] services. Talking about CTF Services, our own company. Our operating business, the AOP, up by 8% year-on-year. What do I mean by operating business?
Operating business, that includes our cargo business, our insurance business, our construction business, our logistic business, as well as the facility management business. But exclude the Free Duty business. Because the Free Duty business, although the operating result has been included in our current result, but the disposal was actually completed on 18th of December. For the sake of clarity, we have included in our presentations, our AOP excluded the effects of Free Duty. So if you include the effects of Free Duty, the AOP was up by 4%. That means Free Duty was a lost business which we disposed of. So excluding that, our operating business AOP actually increased by 8%.
Jim will go into details of each different segment, but as you can see from here, our terminal business, the AOP dropped by 6%, which is pretty consistent because we lost a few [growers] during the period, which the main one being the Guangzhou City Northern Ring Road. Our insurance business grew very significantly, grew by 49% of our AOP. The logistics business also increased by 9%. Construction business is flat. Facility management, excluding the Free Duty again, decreased by 32%, which mainly is attributable to two factors. First one was the increase in the pre-opening expense of Kai Tak Sports Park, which due to its grand opening this Saturday. Also the effect of HKCEC, which we experienced a drop in our F&B business, which mainly because of the banquet business.
I go to the portfolio optimization. As I mentioned, since 2018, we have gone through a series of portfolio optimizations. As you can see from this chart, we have actually acquired and also disposed of many businesses since 2018. If you put it into perspective, we acquired the terminal business, we acquired the insurance business, and recently we also acquired the constructions, the E&M business, which total, I think it is about HKD 30 billion. At the same time, we also disposed of many businesses, which include the buses and ferries, container terminals, our development business, as well as the recently the Free Duty business and Hyva business.
You can see we have continued on different stages, trying to maintain the visibility of our cash flow and trying to grow the quality of our cash flow visibility, and also to maintain we have a long-term growth of each of our business sectors. In terms of the business outlooks, the terminals which is not easy obviously because of the current situation in demand, the economic situations. But we will definitely maintain our agility and efficiency in our daily operations to try to optimize our operating results. We will not be very active in acquisitions in the terminal business, for a few reasons which Jim will talk about. But we will also capture opportunities to enhance the shareholders' return, such as we have been doing the expansion of our existing terminals or acquisitions of the minority interest of our existing terminals return. Secondly is our insurance business.
As I said, we will increase our synergies with the entire CTF Group, which we will leverage on the different businesses and also the customer base of CTF Group, including the general business as well as our hospitality business. I think one of our important differentiations about our insurance business as compared to other competitors is the vast services that we can actually provide within our own ecosystem, which obviously, other competitors does not have such a vast hotel, such as Gleneagles Hospital Hong Kong. We do have within our own ecosystem, which we can have value-added service to our customers.
On the insurance business itself, we have maintained a very strong solvency ratio of over 200%. I think it is 266%, which is well above the 100%, but we are doing fine. You can see in our operating results in that APE. The agency channel, the APE actually increased by 35%.
That is deliberate actions by us to increase the quality of our agency in terms of the productivity of our agency, and also the persistence of policies that agency can create. And obviously the duties our agency fellows to leverage on our own ecosystem to how to monetize the other customer base of our own ecosystem. I think we will also leverage on the existing success of our insurance business. We are trying to expand to become a more holistic wealth management platform. From our perspective, insurance is just one kind of wealth management product. And within our own customer base, we definitely believe we can keep our customers, our policyholders, redeem us, and we can leverage on that and expand to provide more products and more services to our customers.
In our logistic business, ATL is the main contributor for our logistic business, and continue to maintain a very strong positions in the Hong Kong warehouse business. CUIRC, as you can see the breakdown in our logistic business. CUIRC actually the AOP increased by 25%, so it's been a very, very strong contributor to our logistic business. We will continue to support the growth of CUIRC. For the warehouses in the PRC, although currently is experiencing a very tough market, there's also opportunities for us to acquire quality warehouses in mainland China, where we see actually price is location, where we can actually get great value in our acquisition for the warehouses in China. Construction business. We increased our resources to procure more projects from the Hong Kong government institutions in the meantime, to counteract the slowdown in the private sectors.
Our current backlog or contract at hand has more than 50% actually coming from the Hong Kong government as well as the institutions. With our technicality and our strong premium brand, we do have a very strong belief we will continue to maintain our market leading positions, especially after the completion of Hsin Chong Aster as our lead and E&M provider, so we can provide a more holistic profile services to our customers.
Northern Metropolis, as you can hear from the government this afternoon, there will be more strong emphasis from the government on the Northern Metropolis. With that, we can definitely see more constructions contracts will be coming out from the Northern Metropolis expansions. We have definitely captured a majority of that, or we hope to capture a majority of the construction contracts coming out from the Northern Metropolis. Last but not least, is our facility management business. The HKCEC continue to do well. We believe we have a very strong foothold in the convention sector. Although, the government today announced that they were looking to the establishment of another convention center in the Northern Metropolis. We believe with the infrastructure that we have in HKCEC, it's not only about our infrastructure, but also the peripheral infrastructure, the traffic, and also the hotels that we have.
Also the location, which is very close to our central trade center of the Central and Wan Chai. We believe we have a very strong foothold with the government support to continue to develop our exhibition business in the HKCEC city. Our Gleneagles Hospital continue the upward trend. As Jim will explain later, our AOP decreased by 18.1%. So more or less is a [peer network unit] now. We do hope that this upward trend will continue. As you can see, our inpatient, outpatient, as well as daycases increased significantly over the last six months. We do see this trend, coupled with our expansion in different clinics around Hong Kong, we will continue to contribute very significantly to our healthcare business. Last but not least, Kai Tak Sports Park. We are all looking forward to the grand opening this Saturday.
The government is pushing on the venue demands that our Kai Tak Sports Park is one and the only one venue that can house more than 50,000 audience in one seating. We believe this will be the start going forward in the community event space. We very much look forward to the opening of Kai Tak Sports Park. We hope that it will continue to do well. The pipeline of different concerts and sports event is piling up. We will announce later on the different pipelines once it's grand opened after this Saturday. I will pass it on to Jim on the financial updates.
Thank you. Okay. During the six-month period ended 31st of December 2024, our overall AOP increased by 4% year-on-year to HKD 2.2 billion. As Gilbert mentioned, excluding the strategic investment and disposal of the. Sorry. And affiliated business, which was disposed of in December. Our operating business's AOP increased by 8% year-on-year to also HKD 2.2 billion. Adjusted EBITDA, which is a measure of our operating cash flow, decreased slightly by 5% year-on-year to HKD 3.6 billion. The small decline was driven mainly by the accounting difference of the dividend that we collected from [Ourjea & Associate] of the [root] projects in particular. Profit attributable to shareholders increased by 15% year-on-year to HKD [1.2 billion]. Board declared an interim ordinary dividend of HKD 0.30 per share, which is flat year-on-year.
On top of that, the board has declared a special dividend of HKD 0.30 per share, which is underpinned by our desire to return and maximize the value to our shareholders following the disposal of core asset and legacy investment, and also that successfully recuperate of the insurance settlements by Goshawk. The total proceeds for the disposal and also the issue settlement amounts about HKD 2 billion. So we pay approximately 60% of the total proceeds from the disposal as special dividend. The total available liquidity of the company stood at HKD 30 billion as at 31st December 2024, which comprised of cash on hand, HKD 18.6 billion and committed undrawn banking facility, HKD 11.3 billion. The net debt to adjusted EBITDA stood at 2.3x. Net debt balance was HKD 16.1 billion, which translated to a net gear ratio of 35%.
Read the back. Good.
We continue to follow a strategy of replacing the more expensive Hong Kong dollar and U.S. dollar debt by the cheaper RMB debt. As a result, the RMB debt to total debt ratio increased slightly to 63% at the end of 31st of December, in fact, 2024. This helped us to reduce our average financing cost from 4.8% a year ago, to 4.2%. So, 60 basis points reduction. This also helped to increase our RMB liability to RMB asset ratio further to 78%, which effectively contained the potential RMB appreciation risk, in view of the upcoming U.S. tariff policy. Since most of the RMB debt that we borrowed are fixed rate, the fixed rate debt to total debt ratio increased further to 68%.
Of the HKD 35 billion of total debt at the end of 2024, only 7% or about HKD 2.5 billion were falling due within the next 12 months. If you compare the amount of debt that will fall due in the next 12 months of HKD 2.5 billion with our total liquidity of HKD 30 billion, the group will be in a very sound liquidity and financial position.
In August last year, we issued our second senior note, a $400 million note due 2028, with a coupon of 6.375%. We have swapped the entire $400 million into Hong Kong dollar debt, resulting in an after swap cost of 5.77. Sorry, 5.775%. We have almost zero exposure to U.S. dollar debt as of today. During the past two years, we have issued three tranches of panda bond in Mainland China, with a total amount of CNY 3.6 billion. We will continue to look for opportunity to finish issuing the remaining CNY 1.4 billion. We have also received the approval from China Securities Regulatory Commission, to issue panda perp in the Shanghai Stock Exchange, in January 2025. We have two years to issue the entire quota of 5 billion. We would expect to issue the first tranche in the first half of 2025.
This chart shows the movement of the company's net gear ratio over the past several years. The slight increase from 35% in the first half of fiscal. Sorry, in June 2024 to December 2024, is because of the partial repayment of a private perp issue to a government investor of HKD 268 million.
[inaudible]
The net debt adjusted EBIT remained healthy at 2.3x. Going back to the gear ratio chart.
Back to the next one. Action.
Going back to the gear ratio, the 35% is still within the target set by the company of 40%-45% EBITDA for several future. As the 2.3x net debt to adjusted EBITDA, we have a target of 3x.
This chart shows the historical dividend payment record of the company. We have been paying dividend consistently for almost 21 years, and we have started to adopt the progressive and sustainable dividend policy since fiscal 2019. Since then, we have gradually increased our ordinary dividend per share from HKD 0.58 all the way to HKD 0.65 in fiscal 2024. That translated into dividend yield of almost 8.5% based on today's closing price. As we mentioned earlier in the board meeting this morning, the board has declared an interim dividend of HKD 0.30, which is paid year-on-year. On top of that, we have declared a special dividend per share of HKD 0.30 per share. In January, we have issued a CB with a notional amount of HKD 1,780 million. The primary purpose of that CB is to restore the public float of the company.
As you might note, our public float following the general offer by [Central Deposit] which is Chow Tai Fook Enterprise, is 23.3%, which is below the requirement of the Stock Exchange of Hong Kong of 25%. We estimate that upon full conversion of this CB, our free float will be restored to 25.6%, which is at the 25% requirement under the listing rule. The initial conversion price of the CB is HKD 8.04, which represents a 5% premium to the closing price of the stock on the point of issues. The [10 out of] CB, six months. I will pass over to Silvia to go over the operation, to go over operational performance of each of the segment.
[inaudible] I can't check.
Thank you, Jim. First of all, is the road segment. We own 14 toll roads in mainland China. The total length is over 900 km. They are located in southern strategic locations. This year, road segment AOP dropped 6% year-on-year to HKD 767 million. The main reason is the Guangzhou City Northern Ring Road, the concession period expired in March 2024. It used to contribute 10% of the AOP. This is the main reason to have the 6% drop AOP this year. Other than that, our portfolio has been very stable and steadily growing. As you can see from the length of wide average daily traffic flow, it go up 2% year-on-year. However, among that, a lot of that is short distance traveling traffic. That's why the length of wide average daily toll revenue goes down 3% year-on-year.
Our overall average remaining concession period of the group's road portfolio was 11.5 years, and we are still expanding the length on two roads. One is Beijing-Zhuhai Expressway, Guangzhou-Zhuhai Section, and the other is Guangzhou- Zhaoqing Expressway. By the end of 2027 or 2028, when the expansion is done, we'll be able to apply for the extension of concession period. The second segment is insurance. So we have been rebranded as Chow Tai Fook Life Insurance Company Limited in July 2024. Capitalized on CTF Group's established brand, including the Chow Tai Fook Jewellery's 95 year of history within the Asian communities. This provide a very strong foundation for the CTF Life's growth. As you can see from this slide, it shows the brands and companies within the Chow Tai Fook ecosystem, which the life company would like to leverage on it and do some cross-selling and also referral programs.
We are the only insurance company backed by Hong Kong [REIT]. The life has launched a CTF Life CIRCLE membership program, which offer diverse experience, lifestyle privileges for our policy holders. We would like to further build a stronger agency force. So currently, we have 2,000 agents, and we would like to expand this number. Also, we would like to increase the agency channels productivity. We have been doing very well in the past one year, and we would like to continue.
The CTF Life delivered a solid set of operating metrics. As you can see, the VONB margin goes up to 34%, and the contractual service margin balance has been growing at 19% CAGR to HKD 9.2 billion. This denotes the future profits that can be booked in the coming 8-10 years. This also led to the robust CSM release this time, which is HKD 570 million. It went up 52% year-on-year. For our fixed income investment portfolio, the yield is 4.6%. Other important metrics, which is to measure the value of our insurance company, is the embedded value. It has been grow up at 14% CAGR to HKD 23.5 billion now. We are very well capitalized. As you can see from the HK RBC solvency ratio is 266%, which is way above the 100% minimum requirement.
For the life segment, it accounts for 23% of the group's AOP. This time, the AOP goes up 49% year-on-year to HKD 614 million. It's mainly due to the CSM release. The APE dropped 26%. This is because of the very high base last year, due to the release of the pent-up demand from the mainland Chinese visitors post-border opening in the last period. Also, partnership at Premier Business Channel has been performing weaker this time. This is partially mitigated by the robust performance of the agency channel. Value of new business dropped 22%, but margin goes up to 34%. Mainland Chinese visitor still very keen to come to Hong Kong to buy insurance policy, and it accounts for 37% of our APE. There are four major reasons.
First one is there is a higher expected return for the policy in Hong Kong compared to those in mainland. Second is when there is RMB depreciation, they will like to look for currency diversification, which is to buy some USD denominated policies. Third is, they will like to look for universal medical coverage that is provided by the insurance policies in Hong Kong. The fourth one is the superior services that the Hong Kong insurance provided, especially on the claim process. Currently, CTF Life ranked 11th among the Hong Kong Life Insurance companies by APE in the first nine months of 2024. Also, CTF Life is rated at A- by Fitch Ratings, and also A3 by Moody's. These are three key products offered by the CTF Life Insurance company. The left one is the saving product.
The key features is the value accumulation switching option, also currency switching option, and policy split option. The middle one is the medical plan, and the right one is the FamCare 198 Critical Illness Protector. For the FamCare 198, it actually is the top three finalist of the Hong Kong Most Innovative Insurance award.
Our investment portfolio has been going up at 21% CAGR to HKD 82 billion. We have been very prudent in our asset allocation, with 72% allocated to the bonds.
That's good.
All of that, around 95% is investment graded. Also, our investment is well diversified among geographical areas, 50% is in Asia, 40% is in North America, and 10% in Europe. The third segment is logistics segment. It accounts for 17% of our AOP. There are three parts for the logistics segment. The first one is the ATL Logistics Centre. This is located in the center of Hong Kong, Kwai Chung, where our tenants can deliver their goods to all the parts in Hong Kong within one hour. Also, it is next to the port, and within half-hour drive to the airport. With this unparalleled location, that is why its rental growth this year is 10%, and the occupancy is 93.6%.
Second is logistic warehouses in Mainland. The one in Suzhou is remaining 100% fully let. Also, those six logistic properties in Chengdu and Wuhan, their occupancy is around 85%. There is a 9% rental drop, but that is mainly due to match to market when the new contract is signed. The third part is China United International Rail Containers Company Limited. This is a JV with the China State Railway Group, and it owns 13 large-scale rail container terminals in the Mainland.
The AOP growth of the CUIRC is 25% year-over-year, and also the throughput growth is 6% year-over-year, to 3.5 million TEUs. Overall, this logistics segment, the AOP growth is 9%. Going forward, we expect ATL to continue to be the best-in-class asset and also to beat our competitors. On the CUIRC, because of the Chinese government policy, it will benefit us because we see that there will be more robust demand on the rail containers. On the Mainland side, we are continued to be vigilant to explore the priceless location on the high standard logistic warehouse in strategic location of Greater Bay Area, which hopefully to bring us above average return. The fourth segment is construction. It accounts for 18% of our AOP, and the AOP is flat year-over-year.
Contracts on hand is HKD 49 billion, backlog is HKD 28 billion. We strategically shift the focus towards procuring projects from the institutional clients as well as the Hong Kong government. Now, this accounts for 53% of our projects. It used to only account for 30%. We expect the acquisition of Hsin Chong Aster Building Services, a leading [land company], will complete by the end of this quarter. This will help us to better contain our costs and our margins. Here are some recent iconic project of CTF Construction Group. This is comprised with Hip Hing, which it has been in the industry for 60 years and provides comprehensive project management on construction. Vibro is the oldest foundation contractor in Hong Kong. Also Quon Hing, which is one of the largest concrete product suppliers in Hong Kong.
Kai Tak Sports Park , it actually this comprehensive project actually got several international awards. The middle one is the Tseung Kwan O Immigration Headquarters , which is one of the projects that we have been doing, one of the many projects that we have been doing for the government. Also The Henderson, as you can see, the curved facade, and you can tell that this is quite difficult to build, but we have done it nicely. The Northern Metropolis, this is a government initiative in the coming 10-15 years. There will be lots of residential projects to be built, which expect to house 2.5 million of residents. Also there will be university town, data center, public hospital.
With our strong track record and also successful delivery for the complex and iconic projects in Hong Kong, we believe we are well-positioned to stand out to the contractors wishing to secure new projects. Last but not least is the facilities management. It goes down 32% this year for the AOP, especially due to HKCEC. As you all know, the sluggish economy is quite tough to operate the banquet business. This is the major reason. However, we are very diligent in sourcing more exhibitions to coming to HKCEC to host it. On the [Congress Square], which is going to open and grand opening this Saturday, we worked on design, build, and operate contract by the Hong Kong government in 2018, and this will be the key venue for hosting local and national large-scale and vibrant events.
Free Duty leases has turned loss-making this year, but we have already disposed it in December last year, and also we have already got the process. GHK Hospital. It has been doing very well and we have seen consistent progress. As you can see, [in the guide] growth is 35% year-on-year, and also the day cases growth is 20% year-on-year. In September 2024, we have opened the first private hospital clinical trial center in Hong Kong in the partnership with the University of Hong Kong, Faculty of Medicine. This can help us to raise the profile among the patients. Also we have opened a new clinic in western Hong Kong Island and also a dermal surgical center in Central, and also an ambulatory care center will be open by the end of 2025.
This is a snapshot of the robust medical network that we have built to support the development and also the expansion of GHK Hospital. I will pass the time to Karen to briefly talk about ESG.
That is good. Thank you, Silvia.
Thank you.
I am Karen from CTF Services ESG, and I am happy to share some updates about our ESG initiatives tonight. First, I want to highlight our performance on various ESG rating and awards. Our commitment to being responsible and sustainable has been recognized by several respected organization. One big achievement is that our S&P rating have improved by 8 points, which put us in a strong position among industrial conglomerates. This improvement is mainly due to our focus on climate strategy, occupational health and safety, and product stewardship. These efforts show our commitment to managing climate-related risk, improving energy efficiency, and addressing health and safety related to climate change in our operations. We are not just focused on risk. We are also looking for new opportunities by enhancing our products and services.
We not only protect our operation, but also position ourselves to take advantage of new market trends, demonstrating our commitment to sustainable growth and innovation. One example is our construction segment, which widely adopts the use of Building Information Modeling, BIM, in our construction site, which greatly improve our planning and design process, making our construction sites safer and more environmentally friendly. Last year, Hip Hing introduced our mobile BIM case system, which helps streamline the complex processes involved in fabrication and construction for MiC and multi-trade integrated mechanical, electrical, and plumbing. We also perform well in MSCI and Hang Seng Corporate Sustainability Index, achieving an A and AA+ rating respectively, making us a top performer in our category. This award reflect our strong commitment to sustainability and good governance.
In last June 2024, we launched our first, our ESG framework, Breakthrough 2050, which focuses on five key areas. We have set ambitious goals to guide our transition effort. Today, I will take the time, particularly take the time to talk about our net zero progress. Since our last meeting in 2024, both our subsidiaries, Hip Hing and CTF Life, have committed to SBTi near-term target, and CTF Life near-term target has just got validated last month. As mentioned before, we are taking the phased approach for our net zero journey. We first started by laying out the what by setting our ambition last year, and we then conducted a series of feasibility analysis for our different business segment.
We aim to consolidate all the result and develop a reduction pathway for CTFS Group by end of March, allowing us to plan our resources to address hotspots within our businesses. Once we identify key areas for improvement, we are now moving into implementation phase. This includes creating a detailed action plan that assign responsibility and allocates resources for each business unit. We also plan to set specific goals for each business sector to better address the nature of these sectors. We also enhancing the internal monetary mechanism by including carbon accounting in our financial planning and enterprise risk management system. As a conglomerate, we do not have a playbook for all the business units, so we have to support them in building their capacity and carry out their action plan by offering capacity building activities, resources, and tools to integrate their ESG strategy to their operation.
We understand that you would like to have more details for now, but we will share more in a couple of months later. To wrap up my session, I would like to give you an overview on our contribution to the community. Leveraging the resources of CTFS Group, we continue to support the communities we serve. Our effort not only help us reach our corporate goals, but also create a positive impact on society. Thank you very much.
Thank you. We will now open the floor for questions.
[inaudible] [Jeff] from CLSA.
Hi. Thank you for the presentation. [Jeff] from CLSA. Two questions from me. The first one is about the comment that I gave earlier about the toll roads, which, if I caught it correctly, the future investment will be mostly by and of the minority, if I hear it correctly. It seems quite different from what we hear in the past. Just trying to figure out how the thinking process has changed at this time. That's the first bit, first question. The second question is about, is there any residual insurance settlement from Goshawk in the future? Just trying to ensure that we is there any future process from that side? Thank you.
[inaudible] water. The team.
Okay. Can you guys hear us?
Yes.
Can you hear me? Okay. I will answer the first question. It is about the toll roads. First of all, the toll roads is actually very simple. The toll roads business has been our business for the last 30 years. Obviously, the economy in China has changed quite a bit over the last 30 years, and the group network has become more and more mature. It is actually not easy to find toll roads, which has very great growth potential. I think it is a risk adjustment we took when we make the decisions, especially now the cost of capital is actually quite high offshore. We see that a more prudent way to expand our toll road portfolio is more about expanding of our existing toll roads and by that, extending the concession period. Also find out some of the minority interests of our existing toll roads.
We just chose toll roads which were fairly convenient, and we know the performance quite well. Instead of taking [engineer] toll roads, which we have to forecast how the toll roads performance is going to be over the next 5-10 years. This kind of investment will have more visibilities in terms of the return and also the cashflow contributions. The next question is about the Goshawk insurance settlements. First of all, I think we have recovered over 80% of our previous written off value of the six aircraft stuck in Russia. I am a little bit skeptical whether we can actually get more.
I think.
Hello, Gilbert.
With respect to GC, what we can do. Yep. Look. Hello?
You are breaking up a little bit. Maybe you can just repeat what you just said.
Yeah. No, for the insurance settlement, I am saying that. Can you hear me?
Yes.
Can you hear me? Got it. For the insurance settlement, I was saying that we recovered already over 80% of our written off value of the six aircraft. We will see what we can do for the remaining sum. But I think overall we achieved quite a part of our expected on the insurance recovery.
Okay.
Okay. Is there any other questions from the floor then? [Jeff].
This is probably a bigger picture question about the sister company New World Development. Some clients that I have spoken to is about, it is actually I worry not about the direct financial impact, but it is more about whether the available credit line for the entire group in the future might never be in light of the difficulties in the sister company. Just trying to see how is your conversation with the bank is going or anything you can share with their [families. That would be very helpful. Thank you.
Shall I take the question?
Yep, go ahead.
Honestly, a different bank will have different consideration. I do strongly believe that the bank will be very supportive of CTFS. As we explained earlier, we have altogether HKD 30 billion of total liquidity, and the total amount of debt that will fall due within the next 12 months is about HKD 2.5 billion. From this angle, I do not see any reason why banks will be hesitant to continue to do business with CTFS.
Okay. Are there any questions? We received some questions online. They want to ask the outlook of the insurance sector.
[inaudible]
Gilbert Ho, would you like to take this question?
Sorry, can I have the question again?
The outlook of the insurance segment.
I think first of all, with the very strong behavior of the insurance segment, as you can actually see here by our APE. Although the APE has dropped a little bit over the last year, our agency force has actually built up to much stronger level than 20 years ago. We are very happy with the current trend of the agency channel. The drop in the APE on the other channels, some of it is because some of our competitors actually launched very impressive products. The advantage of it, I understand, IA is currently considering to put some guidelines on the industry to ensure that the product can be offered. That will actually monopolize the industry to make their analytic much more level playing field.
With our strong branding, CTF, which obviously is the world of open chat artist community, I think we have a very unique edge over our other competitors to capture growth in the entire insurance sectors.
Just to supplement a little bit. If you look at the historical APE trend of CTF Life back in FY 2022, the APE is HKD 1.8 billion. That may increase to HKD 2.6 billion in FY 2023, and it jumped to HKD 4.5 billion in FY 2024. So 2024 is really an exceptional year, given the sudden release of the pent-up demand. So in the first half of this fiscal year, we have achieved HKD 1.5 billion. I think for the full year, we will still be able to achieve HKD 3 billion-HKD 3.5 billion. So that is still going to send a fairly healthy 35% growth year-on-year compared with FY 2023 APE. So don't over-read into year-on-year decline for the APE in the first half of this year.
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Is there any question?
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I have got a question online. Can you comment on your acquisition plan and what segments are you looking for? Also, how do you prioritize the capital allocation among acquisition, debt reduction, dividend payment, et cetera?
I will talk about the acquisitions, and maybe Jim, you can talk about the actual management. I think, first of all, our target sectors will definitely be the logistics segment as well as the insurance sectors. By that, as we mentioned before, for the insurance sectors, we have no intention to acquire another insurance company. But we will leverage on the insurance business to build up a more holistic wealth management platform. So we will consider to acquire out of the banking insurance business, so that we can actually leverage on the existing platform of the insurance business. On the logistics side, we are looking into acquisitions in the warehouses in China. We do believe it has a very strong demand, will continue long term. It is a sector relatively important. The logistic warehouses are very important. So we have to characterize this location.
We think there are some quite attractive targets that we might like to pursue. But we currently will focus on the more prime area, like the GBA, and also the Grade A warehouses. Then Jim can take on top of the actual management.
Okay, on the second question. As you know, the cash flow generation ability of our existing portfolio is very strong, and we also have to generate very stable operating cash flow. We have a pretty strong confidence that we will be able to uphold the progressive and sustainable dividend policy, which based on the existing ordinary dividend account for about 50% of the net operating cash flow. The remaining 50% of the net operating cash flow will be used to acquire asset or to reduce debt if we want to.
Ask them.
Okay. Is there any question on the floor? Okay. [Joe] from UBS.
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Could I ask about for the logistic property business and also the toll business, given the falling interest rate in the mainland China, would there be any plan to spin off as C-REIT? Because I see that the C-REIT as a price has been growing the past year. Thank you.
Very good. I think on this front, we won't rule out any of these options. Currently, there's no plans. I think we do need to see the different regulations about the C-REIT. Currently, the C-REIT has I think over the last three years, the C-REIT has undergone a number of different changes in terms of how to get a proper listed as well as how the use of proceeds can be used. I think in the end, we need to see whether there's any potential risk to the shareholders of how we just figure it out as a C-REIT, and whether to use the proceeds will be for us to explore different options according to our strategies. Again, I wouldn't rule out anything, but currently there's no plans.
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Is there any question from the floor? If not, then this is the end of our presentation. I thank you so much for joining us today. Thank you.