CTF Services (659) H2 2024 earnings summary

Executive summary

• Achieved resilient earnings and visible cash flow despite challenging economic conditions in China and Hong Kong, with attributable operating profit (AOP) up 21% year-over-year to HK$4,167.4 million and profit attributable to shareholders up 44% to HK$2,084.2 million, supported by a diversified business portfolio and strong parent company backing.

• Major disposals and portfolio optimizations are largely complete, with future disposals considered case-by-case for shareholder value; recent years saw acquisitions outpace disposals, especially in insurance and logistics.

• Maintains a progressive and sustainable dividend policy, increasing dividends in FY2024 due to stable cash flow and strong support from Chow Tai Fook Group, which holds a controlling stake of 76.17%.

• Total available liquidity stood at HK$26.8 billion as of 30 June 2024, with cash and bank balances of HK$14.8 billion and unutilized committed banking facilities of HK$12.0 billion.

Financial highlights

• Attributable Operating Profit (AOP) rose 21% year-on-year to HK$4,167.4 million; adjusted EBITDA increased 24% to HK$7,241 million; profit attributable to shareholders surged 44% to HK$2,084.2 million.

• Final ordinary dividend of HK$0.35 per share (up 13% YoY), total ordinary dividend HK$0.65, and a special dividend of HK$1.79, totaling HK$2.44 for FY2024; dividend yield reached 8.5%.

• Return on equity improved to 8% in FY24, with total assets at HK$155.1 billion.

• Revenue for FY2024 was HK$26,421.6 million, compared to HK$27,121.4 million in FY2023; basic earnings per share increased 39% to HK$0.56.

• Net debt/adjusted EBITDA at 2.1x and net gearing at 35%, both within target ranges.

Outlook and guidance

• Focus on enhancing returns from existing toll roads through expansions and increased stakes, with a prudent approach to new acquisitions; roads segment expects steady outlook with potential improvement as macroeconomic recovery fuels truck traffic.

• Insurance segment to leverage CTF Group synergies, expand agency force, and position as a wealth management platform with potential regional expansion, benefiting from strong Mainland demand.

• Logistics to pursue high-quality assets and modern logistics (e.g., data centers), capitalizing on robust demand in China, with mid- to long-term growth supported by e-commerce and government initiatives.

• Construction shifting focus to government and institutional projects, leveraging new E&M capabilities and digitalization for public sector growth, supported by land and housing initiatives.

• Facility management expects full recovery to pre-COVID levels by year-end, with hospital network expansion and new ventures underway.