Good afternoon, everyone. Thank you for joining CTF Services Limited Financial Year 2026 Interim Results Analyst briefing. I am Silvia, the Head of Group Investor Relations. Today, our management will go through the financial and operational results for the period, giving you an update on our five key business segments, and also have a further elaboration on our strategic initiative. There will be a Q&A session following the presentation. For those joining us through the webcast, you may click on the question mark on the left-hand side of your screen, and then submit a question anytime. Our management can receive the question on the iPad. Without further ado, may I now invite Executive Director, Group Co-CEO, Mr. Gilbert Ho, Executive Director, Group CFO, Mr. Jim Lam, to kickstart the meeting. Thank you.
Thank you, Silvia. I first will give a brief introduction on our results, and then I will pass on to Jim to give the financial updates, as well as some updates on our business operations. Okay. First of all, on the first half of results, I give some highlights. Overall, we have delivered a solid earnings. We have steady growth. Mainly on the financial services segment, we deliver very strong growth. Later on, I will go through the numbers. It is remaining as a core earning driver for our company. We continue on our portfolio optimization by streamlining our selling assets to strengthen the financial flexibility and support growth initiatives in our financial segment, as well as our logistics segments.
Throughout the period, we have successfully restored our public float to over 25% via the CB issuance, and also the subsequent conversions, which enhance the market liquidity of our stock. With effects on 9th of March, our re-inclusion into the Hang Seng Composite Index will make us eligible to go to the Stock Connect, and will further enhance the company's investor outreach. On the portfolio optimizations, we have done a number of acquisitions. First of all, we have completed the acquisitions of 13% in uSmart in November 2025. uSmart is a leading technology-driven financial service provider. We also announced the acquisitions of 65% in Blackhorn Group, which is an external asset manager. The acquisition is still pending the approval from the relevant regulators.
These two acquisitions which profitable on its own, will expand the entire financial services platform beyond insurance, which give our customers a more full-scope financials offerings, and will target on high-net-worth individuals, to give them more products that they can actually choose from our platform. On the logistics side, we have completed two acquisitions. The first one is in December 2025. We acquire a logistic property in Dongguan. Second, we have completed three logistic properties in Shanghai, Ningbo, and Changzhou in January 2026.
All of these properties are completed logistic properties which will start contribute AOP immediately. With all these acquisitions, we expand our logistic portfolio to 12 logistics properties with the total GLA to around 14.5 million square feet, strengthening the entire growth presence in key economic region in Chinese mainland as well as Hong Kong. At the same time, we also divest some of our investment.
Most notably is our issuance of exchangeable bond in Shoucheng Holdings of HKD 2.2 billion, 0.75 exchangeable bond due 2028. We also disposed various investments in our strategic investment segments worth over HKD 300 million. Our investment thesis continues to be a diversified business to drive strong cash flow, as well as enhance the long-term shareholders return. With a number of initiatives. Firstly is disciplined capital stewardship to pursue growth in strong fundamentals cash flow businesses. Second is about the financial flexibility to navigate market uncertainties, and we will continue to do portfolio optimizations in terms of divestment as well as investments. We will continue to expand in our financial as well as our logistics segments to strengthen earning growth as well as recurring income and cash flow durations. With a consistent dividend track record, we will uphold our sustainable and progressive dividend policies.
In terms of numbers, here is the AOP for the last six months. As you can see, our road segments has increased 1% in terms of AOP. Financial services segments increased 19%. Logistics segments has a decrease of 14%. Constructions decreased 21%. Facility management, which include , KTSP, as GHK, increased 360%. Last but not least is our strategic investment segments, increased 78%. On business strategies as well as our outlook. For the road segments, we will continue to drive operational agility to manage changing traffic patterns. As I said in the last analyst presentations, we are not pursuing new projects. We will continue to optimize our existing portfolio as well as to look for enhancement of our earning portfolio within the road segments.
For the financial services, we will continue to capture demands from the Chinese mainland visitors, as well as other overseas markets, to capture the cross-border wealth flows. For the logistics segments, we will continue to pursue acquisitions in stable assets in GBA, the Yangtze River Delta, as well as major metropolitan areas in Western China. For constructions, we definitely will leverage on the Hong Kong government initiatives in the Northern Metropolis. We will definitely benefit on the continued warming of the property market in Hong Kong.
On the facility management segments, HKCEC, we will continue to attract high-value mega events. GHK, you will see later on in Jim's presentations, which turned from an AOL in the previous year to an AOP. We will continue these expansions in the clinics as well as its growth in the hospitals. KTSP, needless to say, we will capture on the initiatives from the governments of Hong Kong being the events capital of Asia, and continue the operational ramp-up and the development of the strategic partnerships with various segments. I will pass it on to Jim on the financial updates.
Thank you, Gilbert. On our first half fiscal 2026 financial results, AOP was up 3% to HKD 2.3 billion. Adjusted EBITDA was up 1% to HKD 3.6 billion. Net profit was up 15% to HKD 1.3 billion. The stronger growth in net profit than AOP was mainly due to the high exceptional loss in relation to the Free Duty disposal last year.
The Board announced an interim ordinary dividend of HKD 0.28 per share, which was up 3% year-on-year compared with the last period on a comparable basis. The total available liquidity of the group was HKD 31 billion as of 31st December, 2025, which comprised of cash on hand of close to HKD 21 billion and committed undrawn banking facility of close to HKD 10 billion. The net debt balance was HKD 13.8 billion, which translate into a likelihood ratio of 34%, and net debt to adjusted EBITDA of 1.9x .
It is worth noting that the net debt balance of HKD 13.8 billion exclude the exchangeable bond that we issued in September 2025. This exchangeable bond is now treated as financial liability at fair value through P&L. But we are actually quite hopeful that the EB will eventually be exchanged into Shoucheng shares before its maturity. As of 31stDecember, 2025, our renminbi debt to total debt ratio stood at 61%, and renminbi liability to renminbi asset ratio stood at 76%. Since the risk of renminbi depreciation against Hong Kong dollar, U.S. dollar is now considered low compared with a few years ago, we have been reducing our exposure to renminbi borrowing since the beginning of this year.
We target to lower the renminbi debt to total debt ratio to about 40%-50% by June this year, and to lower the renminbi liability to renminbi asset ratio to about 50%-60% by June this year. Fixed rate debt to total debt was 76%. We have been seeing a consistent decline in our average borrowing cost since fiscal 2024. We further reduced our average borrowing cost from 4.2% a year ago to 4% in the current period. We project the average borrowing cost for full year fiscal 2026 to be similar to first half fiscal 2026, as HIBOR was abnormally low in July to August 2025, which was below 1%. As of 31st of December, 2025, we have totaled debt of close to HKD 35 billion, of which about 19% or HKD 6.8 billion will fall due within the next 12 months.
If you compare this figure to the HKD 9.4 billion of short-term debt as of June 2025. We managed to reduce our short-term debt that will mature within one year by 28%. We have diversified funding channels, which include onshore and offshore banking facilities. U.S. dollar bonds are offshore U.S. dollar bonds, onshore Panda Bonds, and also offshore convertible bonds. We maintained our A+ offshore credit rating with GCR and an onshore triple A credit rating with China Lianhe. Just a quick recap on the EB that we issued in September last year. The issue size is HKD 2.2 billion, and we issued the bond at a 3% premium to the principal value. So the total proceeds we received is HKD 2.3 billion. Coupon is 0.75%, tenor is three years. It is exchangeable into shares of our Shoucheng stake, which comprise of about 10% of the issued capital of Shoucheng.
Initial exchange price is HKD 2.66. If the exchangeable bond is fully exchanged into Shoucheng shares, we will be able to book a disposal gain of HKD 1.2 billion. This chart shows the movement of our gearing ratio since fiscal 2019. The gearing ratio increased from 0% to 31% in fiscal 2020 after the acquisition of CTF Life Insurance for almost HKD 22 billion. Since then, it has been on a steady declining trend, down to 8% in fiscal 2023, thanks to the strong cash flow generation and the Long Court disposal proceed, despite a series of acquisition that we made during these years. In fiscal 2024, we announced a sizable special dividend, the aim of which is to optimize the capital structure and to boost our ROE. The gearing ratio increased to 35% as a result. Since then, it has been maintained at around the same level.
Our target gearing ratio remain unchanged at 40%-45% in the near to medium term. Over the past several years, despite the challenging market condition, we have been able to consistently grow our AOP, net profit, as well as ROE. We have been committed to a sustainable and progressive dividend policy since fiscal 2019, the first year that we adopted this dividend policy. Since then, we have been gradually increasing our dividend per share from HKD 0.58 in fiscal 2019 to HKD 0.65 in fiscal 2025. As you know, we completed a one-for-10 bonus issue in December 2025. As such, all the per share data will need to be adjusted retrospectively to account for the enlarged share capital because of the bonus issue. The HKD 0.30 interim DPS for fiscal 2025, therefore, should be adjusted to HKD 0.273 after the adjustment.
The interim DPS that we announced for fiscal 2026 represent a 3% increase year-on-year. We estimate the total interim ordinary dividend for the first half of fiscal 2026 would amount to about HKD 1.268 billion, which translates into a growth rate of 6%. Again, this demonstrated our commitment to the sustainable and progressive dividend policy. The reason why the total interim dividend growth is stronger than the DPS growth is mainly due to the increase in capital base because of the CB conversions. We are glad to report that our company will be included back into the Hang Seng Composite Index, effective from 5 of March 2026. As a result of that, we will be eligible to participate in the Stock Connect program, pending final approval from the Shanghai and Shenzhen Stock Exchange.
We believe this will further boost our stocks trading turnover by attracting a broader base investor from the Chinese mainland. It is also worth highlighting that our average daily trading volume has increased by 51% for full year 2025. If you look at the more recent data, in January 2026, our average daily trading volume actually increased by almost 4.8x compared with January 2025. Next, I will briefly discuss the performance of each of our five segments during the current period. We have a total of 13 road projects with a total length of 880 km, spanning six provinces. During the period, the AOP of the road segment increased by 1% year-on-year to HKD 771 million. The daily traffic flow and toll revenue for our road portfolio was down 1% year-on-year during the period because of the partial closure on two expressway currently undergoing expansion program.
However, the AOP of the road segment actually increased by 1%, as I just mentioned. That was driven mainly by the lower finance cost of the onshore project loans. For the financial services segment, the segment AOP increased strongly by 19% year-on-year to HKD 729 million. That was driven mainly by the increase in CTF Life CSM released, which is supported by the new business growth and also favorable financial market conditions. The CSM release grew by 17% year-on-year to HKD 665 million. The CSM balance also increased strongly by 18% from 30th of June 2025 to HKD 10.8 billion as at 31st December 2025. This increase is actually very significant. Investment income on its fixed income portfolio grew further to 4.7% as compared with 4.6% a year ago.
We think this return figure is actually very high as compared with our peers in Hong Kong market. The overall APE growth during the period increased by 48% year-on-year to HKD 2.3 billion. VUNB increased by 39% year-on-year to HKD 733 million. VUNB margin also recovered from 27% in the second half of fiscal year 2025 to 32% in the current period. Embedded value, which is the most important valuation benchmark for life insurers, increased by 10% year-on-year to HKD 27.8 billion. CTF Life maintained an A- rating with Fitch Ratings and A3 credit rating with Moody's. The solvency ratio remained very high at 282%, despite the strong APE growth payment of the dividend to the list code, thanks to its strong asset and liability management efforts. The agency force of CTF Life performed exceptionally well during the period.
The agency APE grew by 32% year-on-year to HKD 612 million, driven mainly by the improvement in agency productivity, which was up 24% year-on-year. Agency persistency was up 13% year-on-year to well over 90%. The MDRT number also increased by 29% year-on-year. In order to diversify its reliance on the CMB business, CTF Life has been expanding its overseas business in order to create a new engine for growth. During the period, the overseas business APE increased by 86% year-on-year to HKD 191 million, which is supported by closer broker engagement and by leveraging on the broader CTF Group ecosystem. It's now expanding its customer footprint in the Southeast Asian country and also among the high net worth customers through its new Bermuda operations. Its investment portfolio is now close to HKD 100 billion, of which about 68% is allocated to bond and 19% is allocated to equity investments.
In terms of geographical distribution, the investment is actually very well diversified among Asia, North America, as well as Europe. The vast majority of the bond portfolio with investment-grade bonds. Moving on to the logistics segment, which comprised of ATL Logistics Centre with a gross leasable area of 5.9 million square feet, eight logistic properties in Chengdu, Wuhan, Dongguan, and Suzhou, with a total gross leasable area of 6.9 million square feet, and also CLSC with 13 large-scale well-located terminals in the Chinese mainland. For ATL, the occupancy rate as of 30th of June 2025 was 80.7%, and as of the 31st of December 2026, it was 75.2%. The average rental rate increased by 3% year-on-year.
In order to further improve its occupancy rate, the ATL has been diversifying its tenant base, intensifying its marketing and branding efforts in order to attract new customers, and also upgrading the amenities and facility in order to enhance the service quality. For the logistic properties in Chinese mainland, for the seven logistic properties in Chengdu, Wuhan, and Suzhou, it increased from 87.5% six months ago to 90.9% in December 2025. Occupancy of our Suzhou logistic property also improved markedly to 75.7% from 40.7% in June 2025 after we terminate the lease with a subtenant. In December, the group further acquired a logistic property in Dongguan, which marked its first expansion into the GBA area. Overall, the average occupancy rate for the eight logistic property in Chengdu, Wuhan, Suzhou, and Dongguan stood at 91.2% in December 2025.
Post the period end in January 2026, the group further completed the acquisition of three premium logistic properties in Shanghai, Ningbo, and Changzhou, with a cap rate of 6% and total leasable area of 1.7 million square feet. The group will continue to explore potential investment in the next generation of digital infrastructure, i.e., in our data center. For CLSC, thanks to the strong demand for multimodal transportation services, its AOP increased by 19% year-on-year, throughput increased by 10%, and the TEU number reached 3.84 million.
For the construction segment, the AOP was down 21% year-on-year to HKD 310 million, due mainly to the lower profit margin of the revenue recognized during the period and the absence of expected credit loss provision reversals in the prior period. The gross value of contract on hand was HKD 65.4 billion. The backlog was HKD 39.6 billion, and the newly awarded contract was HKD 5.7 billion.
The newly awarded contract represented a year-on-year growth of 115%, which demonstrated the strong reputation of CTF's Construction Group in the industry. In terms of the split of our existing orders, 67% of the contract came from government institution and 33% came from the private sector. CTF's Construction Group, as a quick recap, includes Hip Hing Group, which is a building construction project management company; Vibro, which is a foundation company; Cheung Hing, which is one of the largest concrete producers in Hong Kong; and Hsin Chong Aster, which is a leading E&M specialist. Going forward, we believe there's early signs of recovery in the private residential market, which should lead to a pickup in market activity in the next 12- 24 months.
While the government institutional project remain the major growth driver in the near term, we are hopeful that there will be more project opportunity coming from the Northern Metropolis, especially given the pilot tenders, which has just been launched by the Hong Kong government. With a strong reputation and proven technical capability, CTF's Construction Group is well-positioned to capture the emerging opportunities in this sector. Facility management.
If we include the Free Duty, which was disposed of in December 2024, the segment AOP was up 360% year-on-year to HKD 43 million. If we exclude the Free Duty contribution, then the segment AOP was down 12% year-on-year. For GHK, it turned around from AOL in the last period to AOP in the current period. EBITDA grew by 11% year-on-year, and the number of inpatient, outpatient, as well as day cases all grew steadily by 1%, 2% and 8%, respectively. We have a broad, extensive network of clinic in order to feed the patients to GHK. Also to direct the lower valued added services from GHK to such clinic. For the HKCEC, the AOP declined due to increased depreciation and higher capital expenditure, as well as subdued F&B revenue because of the fewer events.
The number of events fell slightly from 426 in the prior period to 378 in the current period. Total tenancy was down 4% year-on-year to 4.4 million. KTSP, it recorded AOL because it's still under development phase. Since its grand opening in March 2025, KTSP has already become the flagship venue under the Sports Plus Mega Events initiative. During the six-month period ended December 2025, the KTSP hosted 39 sports events as well as 11 entertainment events, with a total of 7 million visitors.
KTSP actually ranked third globally and first in Asia in terms of ticket sales for 2025, despite KTSP was only open in March, while the other venues actually reported full year of operation. For our Kai Tak Mall within the KTSP, the occupancy rate was 90% in December 2025. I will pass on to Karen to talk about our ESG achievement during the period.
Thank you. Thank you, Jim. For the ESG update, I would like to start with recognition we have received. They highlight the strength of our ESG strategy and dedication of our teams. We maintain strong rating across key benchmarks such as Hang Seng Corporate Sustainability Index, the S&P Global ESG Score, and MSCI ESG Rating. For the first time, we were honored with both the Distinction Award of the Hong Kong Sustainability Award and the ESG Excellence Award at the Hong Kong Corporate Governance and ESG Excellence Awards 2025.
This achievement validates our progress and shows the impact of our collective efforts across the group. Beyond recognition, we have also advanced our ESG strategy through greater integration and sustainability investment. CTF Life released its first voluntary ESG disclosure report at the business unit level. Enhancing credibility and strengthening alignment with group-wide reporting practices. Importantly, this disclosure also prepares to align with Hong Kong roadmap on sustainability disclosure, help us stay ahead of evolving standard, and provide more transparent information for our investor.
We also acquire industrial logistic property in East China, all of which achieve LEED Gold Certificate, reinforcing our long-term sustainability ambitions under Breakthrough 2050. Community engagement remains a cornerstone of our ESG journey. This year, we were honored with the Hong Kong Volunteer Award 2025 Outstanding Corporate Award, as well as Caring Company and Caregiver-Friendly Company accolades. This achievement reflect our sustained commitment to volunteerism and community care, while also underscoring our dedication to creating a supportive and inclusive working environment for our colleague. Together, these recognition highlight the strength of our values and our ongoing effort to foster both social impact and workforce well-being.
Looking ahead, we will continue to build on this momentum, strengthening disclosure practices, expanding coverage, investing further in sustainable asset and innovation, and forging meaningful partnership across our value chain to support a just and effective transition. In particular, we will deepen our focus on climate and nature, not only by enhancing transparency in our disclosure, but also embedding this priority into our operation. Our ESG journey is ongoing, and this income result reflects strong progress. More importantly, they demonstrate our shared commitment to shaping a resilient and sustainable business and operating model for the future. Thank you.
Thank you, Karen, Jim, and Gilbert. Now we are moving to the Q&A session. Please state your name and organization you work at before asking the question. Friendly reminder, for those joining us through webcast, please click on the question mark icon, and then you can key in your question as well. Zoë from HSBC.
Thank you for the opportunity. I have three questions. First, I would like to ask, because I saw company has multiple acquisition deals ongoing. I would like to know if there is any update and if there's a timeline when the deal will be completed and these companies will be integrated. The second question is regarding the margin of the construction segment. As mentioned, the margin is lower this period, and I would like to ask for the second period margin, and also for the newly awarded contract, the margin compared to the existing contracts. The third question is the guidance on CapEx, if there's any update. Thank you.
Okay. I will take the first two, and Jim can take the last one. On the acquisitions, I assume you're referring to the Blackhorn and the uSmart, as well as the acquisitions of the logistic properties, right? All of them already completed, save and except Blackhorn. For Blackhorn acquisition to 65%, it's still waiting for the approval from SFC. Pending that, there will be no further CPs that we will complete after we get the approval from SFC. The second question is about the margin of the construction business. Yes, it's because of the competitions, obviously, and also the few projects in Hong Kong, that the margin has been quite squeezed. I would say that the second half, I do not expect there will be further downtrend on the margin, but I wouldn't expect a lot of uptrend either on the margin for the construction business.
Sure. On CapEx, in the first half of fiscal 2026, we spent about HKD 1.5 billion on CapEx. The major investment was made with uSmart acquisition, the expansion of the Tiu Expressway, acquisition of the logistic property in GBA. We also put down some deposit for the acquisition of the three logistic warehouses that we acquired in Yangtze River Delta. On the other hand, we also received a disposal proceed of over HKD 500 million from the disposal of the Long Court asset.
Moving into the second half of this fiscal year, the committed CapEx was about HKD 850 million, which include mainly the acquisition of the three logistic warehouses in Yangtze River Delta, which was already completed in January, and also the ongoing expansion project of the Tiu Expressway. Whether or not the actual CapEx will be higher than HKD 850 million would depend on the potential investment opportunities. On the other hand, we also think there will be over HKD 800 million of disposal proceed from the Long Court asset disposals.
Okay. Thank you. We received a question online asking about ATL. Does management have any guidance on the outlook of the ATL regarding the occupancy and also the expected rental change? Thank you.
Okay. I think first of all, as you can see, the occupancy has dropped from 80% to 75%. We do expect that will be stabilized. We do see some new inquiries and new tenants coming to ATL. Obviously due to the better economic environment. We have seen some new retail tenants, I mean, retail business tenants, as well as some e-commerce tenants inquiring and actually confirming some of the new leases. I think the guidance will be that hopefully the occupancy rate will increase for the second half of this year.
Okay. Thank you. Is there any question on the floor? I received another question online regarding dividend. Will there be any stock dividend in the second half? Also, will the dividend per share go back to HKD 0.65 like before?
Sorry, what was the second part?
Okay. HKD 0.65 is the last time—
Oh, okay.
—the dividend. Yep.
Okay. The first question, whether there will be any bonus issues, I assume the question he is asking. I think we will look at it on a case-by-case basis. I think we will decide closer to time, in the final result coming September. We do not have any guidance on that. There is no confirmation that there will definitely be a bonus issues. But we do hope that there will be more increase on the return to the shareholders. On the second question, I think first of all, the HKD 0.65 was based on the old number of shares. After the bonus issues last year. The share base was in March. I would say—
HKD 0.59.
Yeah.
It became HKD 0.59.
It becomes HKD 0.59. First of all, it is not HKD 0.65. It is HKD 0.59. As we always do, we have been committed to the sustainable and progressive dividend policy, and we always say that the meaning of a sustainable and progressive dividend policy is we will commit to the dividend payout, and we will not lower the dividend after the declarations of the dividend. We do hope that we will continue to pay HKD 0.59.
HKD 0.59.
HKD 0.59.
It will not be less than HKD 0.59.
It won't be HKD 0.59, yeah, at the very least. This time, if we use a comparable basis, the last interim dividend was HKD 0.27. We increased to HKD 0.28 already. Hopefully it will be more than HKD 0.59.
HKD 0.05.
HKD 0.59. Yeah.
To clarify, because there is another question related to the same topic. Our progressive and dividend policy means total amount is of DPS. Is that the case?
Yes.
Is there any questions on the floor? Okay. That concludes today's analyst briefing. If you have any questions, feel free to reach out to the group investor relations team. We are happy to assist anytime. Have a good evening.
Sure. Thank you for all these people who joined today.