Good afternoon. My name is Gerald Ma. To my right, Mr. Simon Man and Mr. Yue Seng , two of my fellow exco members. We are your presenters for the CK Asset Holdings Limited 2026 interim results. We will also be taking on your submitted questions after the presentation. Let's get right to it. Interim results highlights.
Underlying profit up 5%, and the dividend per share increased to HKD 0.41 per share. If you take the HKD 6.6 billion of underlying profit or HKD 1.90 per share, setting off against various adjusting items, such as change in fair values in our REITs, change in fair values in investment properties, reduction in value of an associate, and disposal gains of UKPN and UK Rails will give you the profit attributable to shareholders of HKD 8.7 billion, or HKD 2.48, up 37.8%. Dividend per share up 5.1%, corresponding to the increase in underlying profit.
Net book value up almost 1% to HKD 114.31. Principal activities analysis. Property sales revenue gone up 3 x to HKD 21.6 billion. The profit contribution was only HKD 765 million. More on that later. If you look at all the other divisions, property rental, hotel, and service suite operation, property and project management, pub operation, infrastructure, and utility asset operations, revenues were all up, and profit contribution were all up with the exception of the infrastructure and utility asset operation division. Mainly because of the disposal of the two joint ventures that we had.
Total revenue was HKD 54.5 billion and profit contribution, HKD 9.5 billion. 60% of our revenue, or HKD 32.85 billion was current in the first half, and 92% of profit contribution or HKD 8.7 billion, is also deemed recurrent, in the first half. Profit contribution by region. Hong Kong was 35%, the U.K. almost 34%, Germany 9%, Australia and Canada and the U.S. 8% respectively. Other European countries, mainly our operations under ista, HKD 453 million, accounting for almost 5%, and the Mainland was 1.6%. Very well-diversified.
If we look at the individual divisions. Property sales, again, revenue HKD 21.6 billion, profit contribution HKD 765 million. The booking of Blue Coast I and II lifted revenue to over HKD 21 billion. Overall development margin was still quite low, 3.5% in the first half. If you look at the different regional contribution. Hong Kong gave us HKD 626 million of profit contribution. Margin was 3%. The Mainland was somewhat irrelevant in the first half. Very few bookings and very few projects sold. Only HKD 48 million of contribution. The U.K., namely Chelsea Waterfront, had HKD 300 million of revenue and almost HKD 100 million of contribution. Margin was healthy, 32.3%.
Others is really a agricultural land, mainly a piece of agricultural land in Queensland, Australia, which we sold at a slight negative margin. Major contribution or contributors from the Blue Coast, HKD 332 million. Borrett Road Phase One gave us HKD 130 million and Chelsea Waterfront just over HKD 100 million. We still have over HKD 6 billion of contracted sales not yet recognized, of which a little bit over half is scheduled for recognition in 2026.
Turning to the rental division. The performance in the first half was quite resilient. HKD 3 billion of revenue, profit contribution HKD 2.4 billion, and margin 78.5%. All three metrics went up a little bit. If you look at the revenue by use of property, retail, we still had a bit of negative reversion, was down 4.8%. Office, because of the contribution of Cheung Kong Center II, went up 4.8%.
Industrial buildings had a pullback as well, but more than compensated by our contribution from the social infrastructure sector, up 6.1% to HKD 712 million. Others are mainly the residential and car parks revenue or contribution. Major contributors from Cheung Kong Center, HKD 464 million, Hutchison Logistics Centre, HKD 308 million, and The Whampoa Retail Complex, HKD 299 million.
We have a total of 24 million sq f t of investment properties. We recorded a decrease in fair value of investment properties of HKD 2.1 billion. This is before tax and before MI. If you look at the change in fair value net of tax and MI, the numbers on the right, above HKD 1.5 billion. The bulk of that came from a write-down of Upper West Shanghai, both the office and commercial. So altogether, that is over HKD 900 million. Hotel and service suite operation.
We had a solid contribution from this sector in the first half. Room rate had a decent positive movement. The daily hotels went up by about 8% and service suites went up by about 4% in terms of average room rates. Occupancy was very steady, 88% for hotel rooms and 90% for service suites, giving us a good revenue increase of 6.3%.
Profit contribution went up by 7.9% and margin also improved slightly. Property and project management, 246 million square feet under management. Very steady revenue and profit contribution, and margins always a healthy 40%+ . Pub operation. We have a total of roughly 2,500 pubs. About 1,500 of them are what we call managed pubs under Pub Company. About 1,000 of them are under the Pub Partners division, what we call tenanted pubs or franchised pubs.
We have two breweries, one in Scotland, one in England, producing and distributing our beers. On the back of still very tough macro conditions in the U.K., the division actually delivered a decent performance in the first half, mainly because we had a one-off brand disposal. We sold a brand called Old Speckled Hen to a Spanish brewer which gave us a bit of a boost as well as a few asset disposal. So the profit contribution went up 14.3% compared to the first half of 2025. The next few pages I will defer to my colleague, Yu e Seng.
Thank you, Gerald. We have delivered a very solid performance across our infrastructure business. The profit contribution, it is essentially flat to 2025, and it comes in at about HKD 4.6 billion. This is despite we only have four months of contribution from UK Power Networks, which was disposed during the year. Also bearing in mind that we have not captured in this number the interest income that we earned on the proceeds that we got from UKPN and also from Eversholt Rail Group's disposal.
Overall, I think most of our businesses actually has performed very well and as planned, benefiting really from the positive inflation environment and also we have positive foreign exchange movement in our favor also during this period. Talking a little bit more on the disposal of Eversholt Rail Group U.K. Rails and also UK Power Networks. Both were done obviously in the first half.
For Eversholt, which is our rail leasing business in the U.K., we sold the whole business for GBP 1.1 billion, of which our share is 20%, and that result in a gain of HKD 826 million from the transaction. For UK Power Networks, as you all know, it's a major transaction for the group. The overall equity value that we disposed at was close to HKD 11 billion, of which GBP 2.1 billion, it's CKA's share.
That result in our profit of disposal from the transaction 8.9, almost HKD 9 billion. There's no really any further update on other divestment at this point. We obviously did both of these deals to realize shareholder value from these investment and also bring us proceeds that we're looking to invest, obviously subject to meeting our return requirements.
Simon will go through the next few pages for us.
Okay. At 30th of June 2026, the group's interest in the three listed real estate investment trusts remain about the same. 35.1% in the Hui Xian REIT, which own and manage 11.8 million sq ft of hotel and service suites, office and retail properties on the mainland. 25.5% in the Fortune REIT, which own and manage 3 million sq ft of retail properties in Hong Kong and Singapore. 17.2% in the Prosperity REIT, which own and manage 1.3 million sq f t of office, retail, and industrial properties in Hong Kong.
Our Hui Xian REIT is an associate, and the group share a net rental profit of HKD 96 million for the first half in 2026. It was HKD 77 million for the same period last year, and received a distribution of HKD 7 million this year, whereas only HKD 3 million in the first half of 2025.
Distribution received from Fortune REIT and Prosperity REIT amounted to HKD 104 million this year. It was HKD 107 million in the first half 2025, and were all recognized as investment income. For gearing and maturity profile, at the interim period end day, the group's bank and other loans balance amounted to HKD 43.8 billion, a decrease of HKD 7.6 billion when compared with the balance at the year-end date of 2025.
Maturity spread was HKD 10.1 billion repayable within one year, HKD 29 billion between two to five years, and HKD 4.7 billion beyond five years. Taking into account the gross bank balance and deposit of HKD 65.7 billion on hand, the group had a net cash position of HKD 21.9 billion. We have credit rating from Moody's A2 stable, and from S&P Global Ratings single A stable. The group has a total land bank of 125 million sq ft
63 million sq ft was under development, of which 6 million sq ft located in Hong Kong, 54 million sq ft on the mainland, 3 million sq ft overseas. 24 million sq ft was held for rental, of which 13 million was in Hong Kong and 6 million on the mainland, 5 million overseas. 9 million sq ft was held for hotel and service suite operation, with 8 million sq ft in Hong Kong and 1 million sq ft on the mainland. 26 million sq ft was held for pub operation in the U.K. Overall, we have 27 million sq ft of land bank in Hong Kong and 61 million sq ft of land bank on the mainland, and 34 million sq ft overseas, mainly in the U.K.
That's the formal presentation that we've done. Thank you, Simon Man and Yu e Seng for helping out. We now will begin our Q&A session. Again, the three of us will divide the work, and I know Sophia has been organizing the questions. It would be Sophia, you ask the questions to the three of us, and I will try to direct traffic if I'm not answering the questions myself.
Thank you very much, Gerald. While I collate the question, may I start with the first one? How would you comment on your first half 2026 results?
I guess overall, we can say that the group is in a very strong position from a balance sheet perspective. However, macro trends and geopolitical developments are really becoming increasingly unpredictable. This really calls for caution in our approach to everything, from how we manage our existing businesses to how we assess any and all new opportunities. It really seems like abrupt changes in the macroeconomic environment and political environment, it's the only constant at the moment.
Personally, I would say at times I do feel quite helpless. How can one plan for the future? How do we run our businesses and project forward? It's very difficult. We will manage our privilege position very carefully while we continue to look for ways to enhance value for shareholders. Having said that, the underlying profit for the group increased by 5% year-over-year.
It does highlight the resilience of our recurring income. Amidst all the uncertainties that we see and demonstrates that our conservative and diversified approach is shielding us from excessive volatilities. The focus is on maximizing the performance of all of our group businesses and cautiously move forward. Next question.
Okay. I'll now start by asking a question on the property division. Given the group's net cash position, what are your current thoughts on your preferred use of capital or choice of investments?
Yue Seng, maybe help.
Sure. First of all, I think having, as Gerald Ma mentioned in his previous answer, we have a privileged position of having that cash, but at the same time, I think there's a lot of uncertainty right now in the market. I think we look at the cash and want to put it into good use and at the same time maintain our financial and investment discipline.
I think that's very important. I think we continue to look for investment with recurring income stream. I think that's investment mainly asset heavy investments, long contracted cashflow, developed market, and with a stable legal environment. That always has been our investment discipline. On top of it, I think opportunistically, we will try to proactively evaluate kind of opportunities in Hong Kong and Hong Kong properties, land bank in Hong Kong as well as in China.
I think all being said, I think with the uncertainty in the overall environment, we just need to try to make sure the investment that we make meets our risk profile and also meets our return expectation.
Thanks, Yue Seng. I see the next few questions, if I may, the next three questions, maybe let Simon Man help me out a little bit. Go ahead, Sophia.
Okay. Going into our principal activities. What is your view on Hong Kong's property market?
Well, we have seen a solid improvement in both volume and price for residential transaction in the first half of 2026. There is still good demand for high-end projects, like the one at Borrett Road, which continues to set record price. While the market has been supported by strong local demand and purchases from the mainland, the momentum may slow down if the price of oil continues to be volatile and the level of interest rates stays high or further increase.[Non-English content]
Thank you, Mr. Man. Continuing on with questions on the property division. Your development profit has dropped by 57%, even though revenue almost doubled with development margins at 3.5%. How should we think about this, and what are your expectation on margins going forward?
For the first half year results, the overall development contribution and margin were impacted by the low margin of Blue Coast I and Blue Coast II, which were acquired at a high land cost. Projects like Borrett Road continue to give heavy margins. The margin for other projects under development may be less than what we previously anticipated if prices stay at the current levels.
Could you comment on your mainland property sales activities?
The mainland property market was still difficult in the first half. We have launched Regency Garden, phase V-B in the second quarter, and the market response was positive. Well, we will continue to promote our projects with incentives to encourage sales. Somehow it is still a purchaser's market.
Okay. Next question is a very interesting one. Do you have any comment on the potential impact on the property market from the recent announcements related to tax on offshore income from the mainland?
Maybe I will take on this one and the next one. I think at a high level, these rules and regulations have always been there, so it is not something new. The recent announcement, I think, really provided a very clear guidance on compliance. That is what I would say on that. The next question, please.
Okay. The next question is about our rental portfolio. The rental portfolio seems to be quite resilient. Any further comments on that? Also, the Hong Kong office market sentiment seems to be improving. What is the current occupancy rate for Cheung Kong Center phase II, CKC 2? What are the trends in relation to central Grade A office rents?
The strength of this division, it is mainly due to, in the past two, three years, due to our expansion and investment into the social infrastructure sector overseas, mainly in the U.K., Germany and Sweden. For Cheung Kong Center II, our balance sheet strength and lower cash cost for this project have allowed us to be a bit more patient than others in the last couple of years when the market was not in a good place, the Central market was not in a good place.
I know a lot of you might have seen articles commenting on Cheung Kong Center II's latest occupancy being over 60%. I guess we can confirm that we are seeing decent demand and Cheung Kong Center II is beginning to provide a solid contribution to our rental income. Hopefully, in Central, for Cheung Kong Center II, better days are ahead.
In general, there is a bit of momentum in Central and landlords of quality buildings are beginning to be able to be more selective on the mix of tenants and asking rent. Having said that, outside Central, it is still a very difficult market. Depending on the inflationary pressure movement of interest rates, let's see if it can get better or not.
The next question is about our social infrastructure portfolio. How has your social infrastructure portfolio performed? Are there plans to expand in the social infrastructure center in other countries?
Yue Seng, please.
Sure. I think when we say social infrastructure portfolio, these are basically in contrast to the Hong Kong rental segment, that these are very long-dated contracts with inflation-linked rental adjustment every year. We do benefit from the now higher than normal inflation in these different markets.
Overall, the segment now contribute more than HKD 750 million in the first half, which is a positive for us because it does help offset some of the weaknesses we see in Hong Kong. We have been looking for more opportunity, obviously, in the sector, and we look at different types of assets in different countries. We try to stick to our investment thesis of trying to invest in triple net lease portfolio. However, I would say overall, from my experience, is that it is a difficult market. A lot of uncertainty.
Despite our net cash position, we try to be actually very cautious, even when we are looking at this relatively more stable segment. There are new opportunities, but we just need to continue to be very careful.
Okay, the next question is around our hotel and service suites. Hotel and service suites contribution have increased by 8%. What were the main growth drivers and would you consider converting some of your rooms to student accommodation like other peers have been doing?
Yue Seng, please.
Sure. I think Gerald Ma mentioned in the presentation that the occupancy of our hotel and service suite segment is actually very stable, approximately 88%, 90% respectively. It obviously has achieved very steady growth in average room rate during this period. I think specifically on the whole student accommodation, it seems like it's a fashion kind of trend that a lot of people are converting existing properties to meet the increased demand.
We have actually been serving this education sector overall with our service suites offering for a long period of time. Especially you can imagine our portfolio around the Hong Kong area, that's squarely right next to a lot of the schools. I think overall, I think we are seeing this segment, I guess indirectly also benefiting from the student accommodation demand, and we're happy to see that the division overall is performing very well.
Thank you. Onto the pub operation division. The pub division recorded an increase in contribution of 14%. What is your outlook for the pub industry, and should we expect more impairment at the end of the year?
I'll take on this one. This division had a decent result in the first half, again, because we had some one-off gains. The market environment in the U.K. continues to be very challenging for Greene King. There's inflationary cost pressures, softer market volume, dropping or lowering of level of disposable income, and changing policies. We have to commend the team.
Our cost rationalization and estate optimization programs and efficiency programs had improved our overall standard and the level of efficiency across the entire group. But there's more work to be done. We're nowhere near the finish line. While if you look on the policy front, we recently announced 20% reduction in business rates will definitely help the sector.
But on the other hand, what other people may not be paying attention to, there are other policy changes that were announced much earlier, coming into effect, I think very soon, I think in April, such as deposit return scheme. We have to return our used bottles or cans, or else we can't get our deposit back. There's a cost to it, there's administrative burden and cost to it. And there are changes made to the Employment Rights Act, which will put further cost pressure on the industry again. We are really hoping there will be more good news in the coming budget announcement. And this is a good example of what I meant earlier by unpredictability.
New policies in, not just in the U.K., but many countries trying to manage the national debt burden, the cost of living issue, and also how to increase investments in the U.K. You also have other geopolitical events that are happening. It's very hard to draw up a medium-term plan to run the business right now. In terms of impairment, which was your other question, we'll know in a few months after discussing with our auditors regarding the long-term outlook for the sector and the level and direction of travel of the U.K. gilt rate, which is the issue for the sector and the country.
Thank you. Please comment on the result of your infrastructure portfolio. What are your longer-term plans for the sector, and would you consider selling other assets in your portfolio?
Yue Seng ?
Yeah, sure. I think I cover in the when we go through the slides, the key message is that the infrastructure portfolio, it's performing very well, very resilient. HKD 4.6 billion in profit contribution despite only having four months of UKPN and not including the impact of the interest income from the cash we received. So it's actually, the portfolio is performing very well.
On the question on whether we'll be selling other assets, I think as a group, we always will look for the best value for shareholder. If we, like UKPN, like UK Rails, if we receive a good offer that delivers shareholder value, we will definitely consider. But at this point, we don't have any kind of further update in terms of any divestment. On the flip side, obviously as I mentioned, we are looking at whether it's social infrastructure or core infrastructure.
We're looking at trying to deploy new capital to these investment while being, as I mentioned, I feel like I've said it three times already, that we try to be very disciplined despite our net cash position. We're definitely looking at new things, but being very careful at the same time.
I see that we have two more questions relevant to the proceedings. I'll invite Simon to answer the last two questions for us.
Right. The next question is about write-down. A write-down of HKD 6 billion was recorded in relation to Hui Xian REIT. Could you please explain the rationale for this, please?
The booking of the impairment was majorly because the market value of Hui Xian units has been well below the group's book carrying amount. After our assessment, it was determined that a write-down was necessary, but it was a non-cash item.
Thank you, Mr. Man. The next question. CKA's interim dividend per share increased by 5.1%, while no special dividend was declared. What are your comments on capital return to shareholders and any share buyback on the horizon?
The increase in interim dividend per share is consistent with our stated approach to link dividend payout to the overall financial results and outlook. Considering the interim results reported, the board has not decided to make a special dividend on the back of the disposal gain of the two U.K. joint ventures. As for buyback of shares, it is one of the ways to deliver long-term value to shareholders, and we will remain opportunistic in our approach.
I believe we've answered most of, if not all of the questions submitted. We thank you for joining our presentation and Q&A session. As usual we will see you next time. Thank you very much.