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Edited Transcript of 19.HK earnings conference call or presentation 8-Aug-19 9:10am GMT

Half Year 2019 Swire Pacific Ltd Earnings Presentation

Queensway Aug 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Swire Pacific Ltd earnings conference call or presentation Thursday, August 8, 2019 at 9:10:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Cindy Cheung

Swire Pacific Limited - Manager Group Public Affairs

* Mei Shuen Low

Swire Pacific Limited - Finance Director & Executive Director

* Merlin Bingham Swire

Swire Pacific Limited - Chairman of the Board

* Patrick Healy

Swire Pacific Limited - Executive Director of the Beverages Division

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Conference Call Participants

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* Anil Jeevan Daswani

Citigroup Inc, Research Division - MD and Head of Global Gaming Research & Hong Kong Country Research

* Jonathan Galligan

CLSA Limited, Research Division - Head of Research, Strategy, Conglomerates, Consumer

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Presentation

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Cindy Cheung, Swire Pacific Limited - Manager Group Public Affairs [1]

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Hello, everyone. Welcome to Swire Pacific 2019 interim results analyst briefing. Before we start, may I kindly remind everyone that today's event is being live webcasted.

Now let me introduce the management team we have here today: Mr. Merlin Swire, Chairman of Swire Pacific; Ms. Michelle Low, Finance Director of Swire Pacific; and Mr. Patrick Healy, Managing Director of Swire Coca-Cola.

Please note that we will have a presentation, followed by a Q&A session. Without further ado, may I now invite Mr. Merlin Swire to start the presentation?

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [2]

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Okay, thank you. Good afternoon, everybody. Thank you so much for coming. Thank you for your interest. We will be relatively brief and then be ready to take questions. How does this work? Okay.

Just a bit of background here on the first slide about the business environment and the external factors that we were dealing with in the first half of the year. Clearly, the global trade tensions were intensifying for that period. The business of ours that is most directly affected by that is Cathay Pacific. So that provided a certain amount of a headwind to Cathay's results and notwithstanding that headwind, they did really pretty well. We've been in a stronger U.S. dollar environment, which is also unhelpful for a number of our businesses. And in the first half, the weakness in demand in Hong Kong and in the retail sector that we were beginning to see last year continued through the first half.

Notwithstanding that, we're really pretty happy with the results we're reporting here today. It's a substantial improvement on where we were. I've got two sets of headline numbers here. The top left-hand number is the underlying profit. That's obviously a very big figure that includes the gain on disposal of Cityplaza Three and Cityplaza Four, which closed in the first half. So it's a very distorted year-on-year comparison. The figure we're more interested in is the bottom right-hand figure, the recurring underlying profit from sort of core operations and at HKD 4.2 billion, that's a 40% increase on where we were in the first half last year. A lot of that is driven by the turnaround in Cathay Pacific.

Okay, well I've included this slide again at the interim for consistency purposes. You may have seen it when we were looking at the year-end results. In truth, it's more informative I think at the year-end than at the interim, but I just wanted to put it up again. To remind you, what this shows is the long-term history of our return on equity at a statutory level and the sort of dark color bars, as opposed to the shaded bar, represents the position at the interim in previous interim years. So if you look at the right-hand column there, the right-hand bar, you can see that the return on equity derived from property valuations was much smaller in the first half of this year than in previous years. But the element that comes from our recurring underlying profit, 1.6% is the number, is definitely heading in the right direction. The average in the last 5 years was 1.4% and that figure is the highest we've seen since 2015.

Again, this is a slide I showed at the year-end with the history of our dividend payments and what we're doing at the interim. You'll recall that we made it clear we weren't intending to pay any special dividends on the sale of disposals from our non-core assets last year. We have good reinvestment plans for those, but we are committed to sustainable growth in the ordinary dividend and over time to returning the dividend to the sort of levels we were seeing 5 or 6 years ago. So we've got a 13% increase here. That may seem relatively conservative in the context of the 40% increase in recurring underlying profits. But as you'll see from our statements and as we all know, we're in a very uncertain, unpredictable time. So we'll see where are at the year-end.

I won't talk to this slide. It just shows a very, very brief summary of what's going on in each business. So why don't we move on because we're going to take in more detail?

This is a slide that just shows the cash in from the asset disposals. There's only one element in here that's really new from year-end, which is the other non-core properties in Hong Kong. I'm right about that, aren't I? I think that's King's Road, is it? Yes, so we sold our 50% stake in 65 King's Road. We're happy to have done that and the main settlement for that will come in the second half. And this program of disposals has put us in a pretty strong position and our debt levels are well down and we're feeling good about that, particularly in the current environment.

Again, here's a list of sort of committed capital and investments in our core businesses. In the Property side here, there's not much in here that is new. You will have seen most of this at the final results briefing. But at the bottom, we have two projects in Southeast Asia which we announced. In truth, they'd been in planning and processing for some time: EDEN in Singapore, which is a small, very high-end residential project and then a joint venture in Jakarta, our first project there, 50-50 JV with a local partner. I think it's about 400 units of high-end flats. And whilst the bulk of our focus and capital investment is going to be in Hong Kong and China, we are doing a few small things in [ASIAN] just to get a better feel for those markets, as very long-term potential of activity for us. But they're not going to consumer very much capital in the near term.

So on the Aviation side, the acquisition of Hong Kong Express has closed. We announced that in March. The long stock date was the end of December, but we've been able to get that deal done quickly and we're very excited about that. I think it's a really good addition to Cathay's stable of brands and they've got good plans to grow that business and improve that business as a pure low-cost carrier, very much standing alone from the rest of the Cathay business. Cathay's order book is pretty substantial, 67 new aircraft on order, and I think all of those are due to deliver within the next 5 years. So by Cathay's standards, there's a lot of capital committed in the fleet. A lot of it is replacement of older aircraft, but there's also a substantial amount of growth there.

On HAECO, we don't have any committed CapEx on here, but just to let you all know that we have a very successful aircraft maintenance joint venture in Xiamen which is 20-25 years old. And for some time there has been a plan from the local government to build a new airport, a 2-runway airport north of Xiamen, which would entail a closure of the current airport. That plan has now got central government approval and the city is moving forward to build a new airport, which I think is due to open in 2024. So clearly for our business there to continue, we're going to need to move to the new airport and invest in new facilities, new hangars, and we've been in close discussion with the local government for quite a while to discuss the terms and conditions under which it would make sense for us to do that. We're still in discussion and we don't have anything to announce at the moment.

On the Beverages side, as you know, this has become a much, much bigger business for us and there's continuing steady organic CapEx within the business manufacturing facilities, distribution centers and on the sort of cold drink equipment, full-service vending and digital capabilities that are much closer to the consumer.

Okay, I'll hand over to you now, Michelle.

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Mei Shuen Low, Swire Pacific Limited - Finance Director & Executive Director [3]

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Yes. If you just look at this chart, all the numbers are going in the right direction. Merlin has just reviewed our underlying profit, and also more recent focus on the recurring underlying profit and we'll run through the results of each division later. And in terms of the revenue, we had a slight increase in the revenue mainly due to the Property rental income and also Beverages increased, whereas Trading division there is some slight decrease.

Cash generated from operations, in fact, this is a relatively misleading comparison because we have had some deposits which we received for the Cityplaza Three and Four that's according to the accounting center, classified as payables. So stripping the impact of these other, cash generated would be around HKD 7.8 billion for the year, which is broadly on par with last year. And with the net proceeds that we have been receiving over the past 18 months, we have a good story.

The net debt, in fact, has decreased from HKD 72 billion from the end of 2017, with a gearing ratio of 23-24% and now down to 14.7% and net debt of HKD 49 billion. And because of the accounting center change, we need to book operating leases as a lease liability on the balance sheet and that's adding another HKD 5-6 billion of liability on this front. And including that, our gearing ratio is 16.4%, which is still relatively healthy. Per share equity, each share has now increased to HKD 182 per share.

And this is a waterfall chart movement in the underlying profit. You'll see except Trading division, which had weaker recurring profits, all other divisions are faring relatively well, particularly the turnaround of the Aviation division, Cathay, and also HAECO has also been doing a good job for the first half.

I mentioned the net debt reduced from HKD 72 billion over the course of 18 months down to HKD 48 billion or HKD 49 billion by end of the year. And the total proceeds that we had generated during the period was around HKD 33 billion and for this first half, HKD 18 billion. And in terms of the CapEx, this is still relatively small for the first half and we are hoping that we'll be able to get into more investments as time progresses. Gearing ratio I mentioned, we have been trending down the gearing ratio with the reduction of the debt from the peak in 2017 trending in the right direction and giving us the financial flexibility for further investments.

Gross borrowing in terms of fixed rates, we are at 76% which is relatively same as last year, the cost of debt, a relatively good number at 3.6%.

This, I would just like to draw your focus to the HKD 48 billion number liquidity that we have. This is the [headroom] number that we have in case there's any major or big investment coming up, we're ready to get into new investment. And in terms of the maturity profile, it's relatively well spread and we'll be having some loan facilities, and also the bond issuance which are maturing and we are in the process of refinancing some of these debts or facilities. And just perhaps I'll give a little bit of the [theory truck]. If we're going to do a 10-year bond today, given the treasury number is now back to historical low again, we are expecting that with the bankers here that it will be very much short of 3% for the 10-year bond.

And next on the capital commitment...

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [4]

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This is a very good tactic. I don't think we've seen this before. You can queue up outside while we're waiting.

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Mei Shuen Low, Swire Pacific Limited - Finance Director & Executive Director [5]

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For the capital commitment, we have around HKD 19 billion end of the year. Therefore, Property division is always the main contributor of the capital commitment number. But for this half year, there's no new commitment. And a bigger commitment comes from Beverages and Pat will go through all the initiatives that Beverages has been undergoing and it's very exciting. And HAECO is also expanding to increase its range of capability and also the depth of the product range that it's offering. And unlike Property division, the commitment number is the number that they will be spending quite a long-term period, whereas for the other divisions relatively these are the numbers which are relative short term. And so you should be expecting that in terms of the CapEx that we'll be spending, even for Beverages likely will be a bigger number than what we have shown here.

And Marine, as well we are just containing costs and so we just spend only when it's absolutely necessary. Trading is mainly, we are still rationalizing the source in China and there are also some expenditures that we'll be spending on both the retail business and also the Motors business as well. Going into Property, there will be a briefing by Guy and Cindy after this section. So they will be running through with you all the details of the things that they have achieved in the first half. But in terms of the stories, it's a good story and they have strong performance in the first half with underlying profits and rental income had a 7% good growth. And China has been good. In terms of hotels, the good news is hotels, we record a profit this year for the first half and Trading we are relatively thin on Trading portfolio.

And this chart shows the future developments and so this Cindy and Guy will run through with you what will be happening and also in terms of the CapEx as well.

Aviation, yes, we are very pleased that Cathay had quite a good first half against the challenging scene and they report at 100% level HKD 1.3 billion profit versus last year roughly HKD 200 million loss and that's a good story. And in terms of HAECO as well, we had 14% on a 100% basis because the company was privatized last year in November and like-for-like it's a 14% increase on our level. Cathay, they also had an analyst briefing yesterday, which they had a detailed run-through of the numbers. If I just recap a few messages that they have been telling us, passenger services revenue has an increase of 6%. That is against the background of a capacity increase and you had downward pressure. Cargo services, in fact, have been impacted by the trade war and they have seen a decrease both in tonnage handled and also a difference in yield. The good story is that the fuel cost, the net fuel cost, they have seen an 8% reduction in the fuel cost. And overall the number is HKD 1.34 (sic) [1.24] billion profit.

And the transformation program, if I would just say, we are very pleased with the progress that they have been tracking. It's a 3-year program. Well, they named it 3 years. But in fact changes, transformation what we call, it will continue. It's a dynamic process, so we'll never stop just at the end of 3 years. It's ongoing stuff that we are challenging ourselves to do better.

HAECO, perhaps I hand over to Merlin.

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [6]

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Thanks, Michelle. I was supposed to talk about the HAECO results at the final results briefing, but Michelle carried on at this point, so I had to remain silent. I don't have a great deal to say, actually. But I think we're pretty happy with the HAECO results since the privatization at the end of last year. You can see in this box on the bottom left here that in all elements of the business, we've seen some growth in profits as compared to the first half of last year and particularly in Hong Kong. The HAECO Hong Kong growth is built largely around line services at the airport and the airport being very busy in the first half and our customers needing lots of work there. And HAESL, which is our engine overhaul shop for Rolls Royce engines has been very, very busy. Some of Rolls' engine types have been experiencing difficulty and at that stage engine shops become very busy. So it's been a relatively good first half.

HAECO America, as you can see, still substantially loss-making. It's an improvement, but a very marginal one. In truth, I think we had hoped to make more progress in the first half than we did. But that's not to say that we are losing confidence in the plan we had to turn that business back to profitability. I think it's heading in the right direction and we're relatively confident about the direction of travel.

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Patrick Healy, Swire Pacific Limited - Executive Director of the Beverages Division [7]

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Okay, so for Swire Coca-Cola, recurring profit in the first half of the year was 2% up on prior year at HKD 748 million. And EBIT actually increased by 5% to HKD 1.377 billion. Actually, if you look at EBIT across the different regions in local currency terms, China's EBIT grew by 14%. U.S.A. was basically flat. Taiwan was up 37% and Hong Kong was a decline of 8%. And in attributable profit, in China we saw a 35% increase for the first year. You'll see a bit later that's a combination of pretty healthy revenue growth, so 7% revenue growth in renminbi terms at a sort of fair clip basically in line with the growth that we saw in 2018 also combined with good cost control, generating that EBIT growth of 14% and then coupled with additional savings in central costs which drove that 35% increase in attributable profit.

Now I think I'll just go down the list on the previous slide, if whoever's managing the -- there we go, thanks. Recurring profit from Taiwan improved. Hong Kong declined. This next point about revenue I think is really key because this comes to the heart of the strategy that we're executing across all our territories and that is that we're now consistently growing revenue substantially faster than volume across all our territories, except Hong Kong. And that reflects really successful execution of the revenue growth management strategies that we put in place in recent years. So it's basically a combination of effective price increases and then a conscious shift to a favorable and more profitable packaging product mix.

Next on the list there, continued investment, we're still very much in a growth business. And so we will continue to have significant investments, as Michelle touched on in the capital slide, in manufacturing facilities, cold drink equipment, full-service vending and a whole range of digital capability to keep pace with that side of the business, especially in China. And finally, we remain absolutely committed to the continued expansion of the portfolio, which means innovation in premium offerings in particular across multiple categories and multiple packages.

Okay, the next slide, please? So just to point out, the HKD 144 million at the top of the 2018 bar chart there represents the gain on the sale of our Kaohsiung facility in Southern Taiwan in the first half of 2018. So discounting that as a non-recurring item, recurring profit for the first half was 2% up, as we mentioned.

And on the next slide, a closer look at revenue growth; so in local currency terms, I think a pretty healthy picture with the exception of Hong Kong, so 7% revenue in both Mainland China as well as the U.S.A. and even higher 9% in Taiwan. And we're driving an overall improvement in EBITDA margin up to 10.0% now across the division.

And then the next slide, basically a bit of a breakdown by category. I just wanted to highlight 3 things I think on this slide. The first is we're still seeing a healthy growth in the sparkling category, which is incredibly important for the profitability of our business. So despite the fragmentation of the industry and the growth in innovation we need to drive across multiple categories, the core sparkling category is still showing very solid growth, which is extremely important for our profitability. Secondly, as you read along those 2 bottom lines, you'll see that in pretty much every case revenue is growing significantly faster than volume. So it's pretty much across all territories or categories. And thirdly is pretty dramatic growth in that other box, so other stills, and that I think is evidence of the fact that we're continuing to work successfully with our partners at the Coca-Cola Company to generate innovations in multiple categories and to truly become a total beverage company and to fulfill the Coca-Cola Company's vision of beverages for life.

Okay, thank you.

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [8]

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Okay, so Marine Services, in terms of the operating results we have seen a slight reduction in losses in the first half as hoped for, we still have quite a long way to go. I mean what we are seeing and there's no question about this, is the oil majors are beginning to spend significant capital investment again in exploration and this is what we've been waiting to see for some time. So there is an increase in rig count in the market and an increase in demand for boats. And the impact to date on our business has been an increase in utilization for our core oil and gas vessels but without a corresponding increase in rates. So there's still a lot of capacity chasing that work, but logically one would expect rates to start to recover as a result of this renewed level of activity.

In the bottom right-hand box there, we've broken down the charter hire rates and the fleet utilization rates, as between the core fleet which is our oil and gas fleet and the construction specialist vessels which are much fewer in number and do a variety of different tasks. The reason I've split them out is to give you greater visibility on what's going on in the oil and gas business, which is the more important one to us. And so you can see that the utilization of those vessels was up 6.4 percentage points to 79.9% in this half. But the average daily charter hire rates, $10,800 a day, were basically flat or marginally down. So the key figure for us is that $10,800 and the extent to which it can move up from here.

The construction specialist vessels tend to have relatively lumpy employment and the relatively disappointing figures here represent one big contract coming to an end. And indeed, one of our vessels was out of action for a significant period of time because of a damaged crane. So that's where we are with SPO. It's still very hard. We're disposing of older vessels where we can and being very, very tight on costs. And there's no change to our previous guidance on the direction for the business.

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Mei Shuen Low, Swire Pacific Limited - Finance Director & Executive Director [9]

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For the Trading division, profit decreased across businesses due to various reasons. Within Swire Retail earlier this year, we disposed of the Columbia business. So it's not exactly like-for-like comparison. But even stripping that impact, there is a slight decline in profit for the Swire Retail business and that's mainly because of the slowdown of the retail sales and a lot of discounting has to be carried out to drive sales or top line.

And for Motors, there is a decrease in the number of vehicles. But in fact in terms of their margin, there is a relatively favorable sales mix.

Swire Foods, you will recall that we acquired Qinyuan Bakery chain in China and lots of work has been done to rationalize the business. Work is still ongoing, so there are stores which we opened to expand and there are also non-performing stores which we are closing. And so this in progress.

And Swire Environment Services includes a green business which we have invested in and we have made a write-off in that green business this year.

And on a recurring basis, we have a profit of HKD 60 million. But including the exceptional items because of the write-off and also there's a write-back of last year's the cold storage disposal of HKD 110 million. And the net-net number is a loss of HKD 114 million for the first half.

Sustainable development, we have published the sustainable report in July this year. It's quite a thorough report which I would encourage every one of you to take a look at the good work that we have achieved last year. And there has been good progress in reducing the impact that we have had on the environment and also in terms of climate change as well. And we are in the process of trying to set our 2030 carbon waste and water target. And within Swire Property, in fact, they also had their 2030 strategy which they will be sharing with you later.

And on the social front, we formalized our human rights and also flexible working policies, which in fact it's quite a good thing because there have been different flex policies. And now we encourage the direction that the group companies will be heading to.

And in terms of the board structure, we have added in August a new director, independent non-executive director, a female. And the representation of the female board directors increased from 18% to 25%.

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [10]

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Thank you, Michelle. Well, we'll go to questions in a minute. I mean this is a summary of the outlook. In the Property business, there's clearly less demand for office space in central and greater central, given the reduction in demand from China. And that's putting pressure on rents. But we're pretty fully leased in Admiralty and not in a bad position. And in Quarry Bay, there's still good resilience and I think our product is really speaking for itself.

No surprises, retail spending in Hong Kong is down and not expected to strengthen any time soon. We're seeing effects particularly in the Pacific Place Mall, less so in Cityplaza. But in Mainland China, we are expecting retail sales growth to continue to be relatively robust.

As Cathay said in their statements, they are expecting a better performance in the second half than the first half, despite all of the headwinds and other uncertainties, which is encouraging. I think we commented more detail in the statements on the prospects for HAECO's different businesses. But broadly speaking, it's relatively positive.

On the Beverages side, as Pat has said, the key focus is on continuing to drive revenue faster than volume growth and we're confident that we can go on doing that. But we are expecting some increases in costs. SPO I've spoken to, and in the T&I division the overall results are expected to be better in the second half than in the first.

So I think that's what we've got in terms of presentation and we're now ready and happy to take questions.

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Cindy Cheung, Swire Pacific Limited - Manager Group Public Affairs [11]

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Thank you, Mr. Swire. (Operator Instructions)

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Questions and Answers

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Anil Jeevan Daswani, Citigroup Inc, Research Division - MD and Head of Global Gaming Research & Hong Kong Country Research [1]

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I'm Anil Daswani from Citi. Could you please give us some color on the margin pressure that you guys are facing in the Beverage business? And also the withholding tax issue in the U.S., how much of that is going to be going forward and how much of that is just a one-off for the first half?

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Patrick Healy, Swire Pacific Limited - Executive Director of the Beverages Division [2]

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Sure. Thanks, Anil. I think in terms of margin, there's really two markets, as you can see from the announcement. One is the U.S. and the other is Hong Kong, with Mainland China and Taiwan really performing I think quite acceptably in terms of margin improvements. The U.S. is basically a number of factors. One is raw materials, cost increases most especially PET, which has had quite a significant impact in the first half. The second is the impact of the very tight labor market. So our costs are up as a result of that. But then also we're still in the process of really spending and building out infrastructure post acquisitions in the U.S. So you look at building out new distribution centers in areas we felt were underserved under the previous owners, modernizing fleet of delivery trucks which we felt were not up to the standard they should have been under the previous, et cetera. So there's quite an element of buildout post acquisition in the U.S. market.

Hong Kong has been a challenging half year, to be frank, as you can see. First quarter was a story of some challenges in the modern trade. Second quarter was, as we all know, was sort of a long, wet, cold quarter. But also in Hong Kong, I think those of you who were at the Capital Markets Day in May will recall we spoke at length about the need to really restructure our business in Hong Kong in terms of we've made a decision that we're going to invest for the long term in that facility in Shatin and that means putting in a new can line, putting in a new aseptic PET line, putting in a new glass line in order to really modernize the portfolio and to be able to compete much more effectively in the premium segment in multiple channels in Hong Kong. And those of you who've been to Shatin know it's incredibly disruptive to take out lines and put in lines in a facility like that and to build out the logistical capability to manage all of that stuff.

And so there is quite a bit of disruption in the short to medium term, frankly, in Hong Kong as we work our way through that. But it's the right thing to do for the medium to long term and we'll be in much better shape for it in Hong Kong in due course. Withholding tax in the U.S. is very lumpy. So it's we remit dividends from time to time based on overall cash management and when we do remit those dividends, then there are large withholding tax payments as a result of that. I guess I won't really have anything else to say on that.

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Jonathan Galligan, CLSA Limited, Research Division - Head of Research, Strategy, Conglomerates, Consumer [3]

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Jon Galligan from CLSA. I had two questions on HAECO actually. The first is you talked a little bit about the plan to turn around the operations in the U.S. Can you give a little bit more color on that? And the second, this is a business you guys privatized not too long ago. Can you talk a little bit about your broader strategy post privatization? What are you trying to achieve by that privatization and is there anything structurally you want to change in the group as a result?

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [4]

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Okay, well in terms of the U.S. turnaround, we've got 2 businesses in the U.S. One is a cabin solutions business which is primarily a seat manufacturer, a seat designer, manufacturer and so on. And the other is a traditional aircraft business. And the focus for the cabin solutions business is to build a pipeline of orders and I think they're in a better place than they were because they've developed some really compelling products, some new products, lighter-weight, lower-cost seat products. They're beginning to get the attention of major airlines around the world and are having some very interesting discussions.

So we think they're in a place where the possibility of building their forward order book is becoming more real. But I can't report anything at this point and it would be wrong of me to do so. On the airframe side, I mean what I would say there is that there is some sign that supply and demand in the U.S. domestic airframe market is coming back into better balance and we're very happy with the management team we've got in that business that are continuing to manage the business pretty hard. On the HAECO strategy, I don't think you should see the privatization as part of a restructuring strategy here.

We did it because we felt, as I explained last time that there was little value in HAECO being listed and that it was a sensible time to privatize it that would suit all parties. So we've done that. I mean we are keen to grow the business. We think it has within it some businesses that are very strong and have opportunities to grow and we'll continue to work on that. I mean I would say the business that has the most momentum at the moment, and you see it in the results over the last 1 or 2 years, is our engine services business which has very high returns on capital, very high margins, is less labor intense but more skill intense than some of our other businesses. And I think HAECO is really world-leading in that area and seen to be world leading. So we're seeing if we can develop some more opportunities from that.

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Cindy Cheung, Swire Pacific Limited - Manager Group Public Affairs [5]

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Okay, if any last question? Anyone want to take a last one, otherwise -- okay, gentlemen in the third row.

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Unidentified Analyst, [6]

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(inaudible) from HSBC, just one question on the dividends actually. So it was communicated that the group would like to provide a sustainable growth on dividends and a 13% increase this interim is very nice. And the question being for 2019, the full year or maybe 2 or 3 years down the road, so would you say that the 13% is a good benchmark on how we should expect the dividend growth? If not, what are your comments on how we should expect dividends to be?

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [7]

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Yes. Well, I mean I think what we said about our dividend policy has 2 strands to it. One is to try and ensure that we can deliver sustainable growth in the dividend and avoid the need for reversals in the dividend as we saw a few years ago; and secondly, to ensure that we pay out around half of our underlying profits over time. And I would say that it has been the case for much of the last 4 or 5 years that we paid out more than half of our underlying profits during a difficult period. This year, I mean you could look at the numbers.

We got a very big underlying profit already at the interim as a result of that Cityplaza sale. We're not intending to pay a special dividend. So if you were try and project are sort of 5-year average payout ratio for this year, you'd probably see that we're getting back in line or likely to be back in line with our policy. So I mean I don't think you should take 13% as an indication of anything. It's just where we've got to in this cycle. The business is recovering from a pretty weak place and I think we have more to do to get back to a sort of stable growth path in the business from a strong and appropriate place. So that's all I can say at this point, I think.

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Cindy Cheung, Swire Pacific Limited - Manager Group Public Affairs [8]

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Okay. Thank you, everyone. Thanks for coming. This concludes our analyst briefing today.

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Merlin Bingham Swire, Swire Pacific Limited - Chairman of the Board [9]

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Thank you. Thank you, everybody.