Swire Pacific Limited (19) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the live webcast of the Swire Pacific 2021 Interim Results Analyst Briefing. May I first introduce our panel speakers. With us here today are Merlin Swire, Chairman of Swire Pacific; Martin Murray, Finance Director of Swire Pacific; Guy Bradley, Chief Executive of Swire Properties; and Karen So, Managing Director of Swire Coca-Cola. The panelists will first take us through a presentation of the interim results of 2021 to be followed by a Q&A session. You are most welcome to submit questions at any time during the briefing. Please be reminded to provide your questions in English and ask no more than 2 questions at a time. Now may I hand over to our Chairman, Merlin Swire, to start the presentation. Merlin, please.

Okay. Well, thank you, Cindy. I'm just going to kick off. Can we get the agenda up here? Okay. Well, we're trying to get the presentation up to you. But in essence, I'm going to start with some remarks on group strategy and how we've been executing on that in recent times. And I'll talk in a certain amount of detail about our new dividend policy and then hand over to Martin, and then we'll get to some divisional detail. Hopefully, the presentation will be about 30 minutes. So can we get the presentation up? Or is it up already? I mean, I just need to know whether it's not. Okay, it is up. All right. Okay. Got it. Thank you. Well, I'm just going to limit my comments on strategy to these 4 areas: our investment focus, capital recycling, repositioning of our Aviation business and the divestment of noncore assets, all of which has been keeping us busy in the last few years. And I think -- I mean, the point to note, which is kind of self-evident, is that it's been a pretty challenging time. There's been an awful lot going on operationally and in other ways that we have to be dealing with, and I think we've dealt with that well whilst also not allowing it to distract us from pursuing our long-term strategic goals. So on investment focus, what we say is that we focus on Asia, principally Greater China because of its strong growth potential and because it is where the group has long experience and knowledge and strong relationships. That's what we say, and that's what we've been doing. And I would add that I think the long experience, deep knowledge and strong relationships have proven to be extremely valuable during these very difficult times. In terms of the focus on Greater China, a lot of the activities on the property side, I would say that Taikoo Li and Taikoo Hui as our core property brands in China have gone from strength to strength in recent years and have really gained traction with luxury retailers and also local governments, and we see lots of opportunity to deploy more capital behind those brands in expansions in China in the years ahead. In Hong Kong, our focus on the investment property side is very much on Taikoo Place and Pacific Place, and our office portfolio there continue to invest for growth to strengthen those locations. And you will have noticed from the [ props' ] briefing that our residential trading pipeline is beginning to fill up steadily, and we intend to build that up more substantially over the next several years. Beverages, well, after the refranchising of 3 or 4 years ago now, it's really been all about execution, and we've been investing in capability in those franchises and we'll continue to do so. And I think we're seeing the results now in terms of consistent revenue growth and expanding margins. And on Healthcare, we've taken our first steps. And we do intend to keep investing in that sector, building our knowledge and experience and for it to be a significant business for us by the middle of the decade. Aviation, I'll talk separately on the repositioning in the Aviation division. Okay. So this slide is really just a quick summary of the major projects we've got in progress in Asia and the Chinese Mainland. You're familiar with all of these, but it's a program of HKD 39 billion worth of investment and hopefully more to come. And I've also noted here some of the smaller divestments we've made in our noncore businesses outside Asia. So capital recycling. What we say is that we recycle capital within our core businesses where we see better opportunities and potential. And this slide summarizes for you the very significant program of noncore and aging property assets that we've sold over the last 3 or 4 years. Again, total disposal of HKD 39 billion. I think looking back at this program, we feel very good about it. I think we were disposing of assets at exactly the right time in the cycle. I think we sold at very good valuations, and it's created the war chest that Swire Pacific is now. Swire Properties is now redeploying in a more accelerated way into new assets. So on the Aviation business, well, I mean, clearly, a lot of the attention has been on the operating performance and the finances of Cathay Pacific, rightly and understandably. But I think that could risk obscuring really quite fundamental progress that has been made in changing the underlying business model over the last 2 or 3 years. I mean, first of all, on the cost side, going back to 2018, Cathay was already well through what was a major transformation program, reducing cost, creating shorter reporting lines and making the management of the business more efficient and effective. And obviously, that program was accelerated by the events of COVID-19, and the restructuring that we did to the business last year was very significant. And again, this is not just about downsizing in response to the market, but there was also a very fundamental re-basing of costs within Cathay's cost structure that will make it much more competitive and much more cost-efficient when we come out of this. And again, I would say that Cathay is going to come out looking very different and much better for purpose in terms of the shape of the group. So in 2019, we bought Hong Kong Express. We're very happy to have done that. Aggressively in 2020, we had to close Dragonair in response to the COVID crisis. But it does mean that the Cathay Group will come out with a very, very clear 2 brand positioning, a premium carrier in Cathay, a low-cost carrier in Hong Kong Express, and we'll be able to serve all sectors of the market effectively. And we're continuing to move forward. You will have seen in recent weeks, Cathay Pacific has launched the new Cathay brand, the master brand, which is a new premium travel and lifestyle brands in which we hope to engage our lower customers in more aspects of their life, and this will be a complementary business stream to the airline operations of Cathay Pacific. So I think it's been a very good piece of work to reposition the airline. The market is still tough, but we are beginning to see some green shoots. On HAECO, all I'd say is that we remain very happy that we prioritized the business in 2018. If we move the redundant listing, I think the price at which we privatized it still looks good, taking a medium-term view of what is a very cash-generative business and a high-quality one. Well, divestment of noncore assets, just to review what's happened in the last few years, you'll be familiar with all of this. The latest disposal in this category is our share in Hong Kong United Dockyards. We've been in the dockyard business for 150 years. And it seems like the right time to be moving on to focus more closely on our core divisions. So in terms of the performance, we're obviously very pleased to be back in profit at a recurring level, a decent swing and my Chairman's statement explains the drivers of that. a big swing on the underlying profit basis, very considerable reduction in impairments. And we've also had some gains on sale of some parking spaces in Taikoo Shing. So how to put that in context? Well, you've seen both of these slides before. On the left, well, it's been a bit of a roller coaster, but we're heading in the right direction now. Notwithstanding the profit at a recurring and underlying basis -- on a statutory basis, we're still very marginally loss-making. And the reason for that is evident in the waterfall chart on the right, and it comes down to the section on property valuations in the third bar there. And we have seen negative valuation movements in our Hong Kong portfolio in Property, HKD 2.7 billion, of which the majority is -- the large majority is due to downward revaluation of Pacific Place offices. It's obviously a tough market. In the context of the market, I'm very satisfied with this very small reduction. We're well positioned defensively and with very good occupancies. Okay. In terms of the balance sheet. Well, we continue to be feeling pretty robust, gearing at 12.2%. Underlying cash interest cover improved to 6.6x. And for these reasons and others, we felt confident to increase the dividend per share by 43%. And I'm going to talk in a bit more detail about this. We all know that in the last 5 years, the Swire Pacific dividend has been very volatile and generally trending downwards, and this has been very unsatisfactory and disappointing for shareholders. And we certainly haven't delivered on our stated goal of sustainable increases in the dividend. I think in an era of extremely volatile earnings, our stated policy has led us down this path. But what it's meant is that the dividend payouts that we've been making have been less and less correlated to the quality of the core cash flows in our business, and we need to rectify that. And so we have a new policy that we think will do that and will be helpfully clear for shareholders. So I'm just going to go through the slide in some detail, and we're happy to take questions later. So what our previous policy said was that we would pay out approximately half of our underlying profits in ordinary dividends over time. What our new policy says is that we will pay out not less than half of our recurring underlying profit, excluding our share of the results of Cathay Pacific Airways, but including all dividends received from that company by way of ordinary dividends over time. So what this does is it introduces a clear minimum dividend payment over the cycle derived from our core subsidiaries. And of course, our largest subsidiaries are Swire Properties and Swire Beverages, which are businesses for which the earnings trajectory is relatively more stable and predictable than other parts of our portfolio in the past. It's a policy that removes for shareholders the volatility and uncertainty in dividend that comes through the earnings of our associate, Cathay Pacific. Though as I say, whenever Cathay Pacific pays the dividend in the future, we will pass it straight on to shareholders. It removes the volatility and uncertainty that's caused from time to time by the impairment of underperforming assets. But it doesn't prevent us from paying a special dividend if we make a very significant capital disposal and feel that we don't have a better use for the money. So that's the policy. I think one other point of guidance is to make a point: a, that it's going to be implemented immediately; and b, that it's forward-looking from 2021. So in terms of calculating payout ratios over 1 year or 3 years or 5 years, the cycle starts now, and you should ignore what has come before 2021. Just assess where we are and where we're heading. In other words, it's a clean slate. Well, this shows the volatility in recent years. I just wanted to focus on the numbers on the left here, which show for the first half the recurring underlying profit, excluding Cathay's earnings, which was HKD 3.9 billion. On a per share basis, that's HKD 2.60. So mathematically, obviously, half of that, 50% is HKD 1.30. We're paying out HKD 1 at the interim, partly because we tend to be more cautious at the interim than at the final and also because the operating environment still contains some uncertainty. Okay. So in summary, I think we're in good shape in our businesses and well positioned for the recovery. We've streamlined things in such a way that we can focus our investment in time very much on our 3 core divisions of Property, Beverages and Aviation. Property and Beverages are having a tremendous run, and we feel very optimistic about those businesses. And I think the Aviation division has been well repositioned and is going to be a much better help in the future. In addition, as I said, we've been disposing of noncore assets, and we are now in the Healthcare sector and intend to stay there. So I will pause there and hand over to Martin.

Thank you, Merlin. Well, I'll just briefly go through the highlights of the interim accounts, and then we'll go through the divisions in a little bit more detail. Given the difficult economic environment caused by COVID-19, it is very pleasing to see returns to profitability, both at the recurring underlying level and at the underlying profit level, particularly as we predicted in March that we would probably be making a recurring underlying loss at that time. Next slide goes into detail on the recurring and underlying. So on the statutory loss, we still make a statutory loss. That principally adjusts for net asset movements in the investment properties. As Merlin said, in Hong Kong, we did have a net asset loss of HKD 3.4 billion. But it was pleasing to see that in the Chinese Mainland, the net asset gain was HKD 1.2 billion. Doubling of our cash generation from operations at HKD 10.6 billion. And as Merlin noted there, 43% increase in our dividend. Given the change in dividend policy, we have disclosed the underlying profit and the recurring underlying profit in tabular form. On the underlying profit, that adjusts for the nonrecurring items, So in Property, we had in 2021 in the first half the sale of some car park spaces, Taikoo Shing. And you'll see the big change in the Marine Services, we had a HKD 4.3 billion impairment in Swire Pacific Offshore in the first half of 2020. And also in Cathay Pacific, they had lower impairments in 2021, 11 -- at the 100% level, 11 aircraft were impaired at HKD 0.5 billion compared to the first half last year where there was 16 aircraft impaired at HKD 1.2 billion and impaired some subsidiaries at HKD 1.2 billion. At the recurring level, which we put more focus on, it's fantastic to see beverages up 55% at HKD 1.47 billion. Property is flat, but again, very encouraging on the higher retail rental coming from the Chinese Mainland and also the lower losses from Cathay Pacific. As Merlin said, we have a very strong balance sheet. I highlight here gearing at a low 12.2%, net debt at HKD 39 billion, I mentioned that cash from operations had doubled to 10.7%. The other thing to note here, the weighted average cost of debt at 3.1%. We have very significant liquidity. You'll see that the line there, group liquidity -- sorry, group committed liquidity has grown. We took out more during COVID in the uncertainty. We're now bringing that back a little bit, but we've still got HKD 54.6 billion of group committed facilities there. And we've got a good spread of maturity profile. We pushed some of the loans expiring in 2023 out there to 2025, so a very healthy liquidity position. And then finally, on the capital commitment side, again, as Merlin alluded to, it does show where the focus has been in terms of our core businesses of Property, Aviation and Swire Coca-Cola, where all the investment has been divesting out of the Marine Services and the T&I division. And with that, I'll pass over to Merlin, Guy and Karen to go through the business units in more detail.

Okay. Thank you, Martin. Well, we move on to Property. I know that most of you have already been at the [ props' ] analyst briefing. So Guy, I don't know how much you want to add to that.

Thank you. I'll just keep it brief for those that weren't at the previous meeting. Obviously, in the last 2 or 3 years, the main new projects that we've invested in the Chinese Mainland have been in Taikoo Li Qiantan, which reflects our great confidence in Pudong as a district. And the very large extension to INDIGO, which we call INDIGO Phase Two, which is a HKD 23 billion project on a 100% basis, essentially creating a new decentralized office location near the fourth ring road in Northeastern Beijing, potentially sort of future Taikoo Place-type product. So very exciting and big-scale, new developments there. We continue to reinforce the asset base that we do have, most notably this year with the addition to Taikoo Li Sanlitun of what we call Taikoo Li Sanlitun West, which will be opening later in the fourth quarter. And we've also just signed a cultural incorporation agreement with the Chaoyang District for a further extension potentially to Taikoo Li Sanlitun to the north. Moving down to Shanghai. Another exciting piece of news recently was the joint venture agreement that we signed with the Jing’an District government to revitalize the historic Zhangyuan compound, which is pretty much adjacent to our existing asset, HKRI Taikoo Hui. So some really, really interesting place-making opportunities that we've managed to surface in the last couple of weeks. And this has obviously been a product of a lot of conversations and a lot of work and a very good sort of relationship that we have with these districts. Meanwhile, back in Hong Kong, our home base, of course, we do continue to invest primarily in the 2 clusters at Pacific Place and Taikoo Place. We've, in the last 3 years, invested over HKD 20 billion in those 2 areas, mostly building and reinforcing our Hong Kong office base. But at the same time, we're concentrating on replenishing our residential pipeline with Wong Chuk Hang MTR stage 4 investments in a consortium. We have a future project down in Chai Wan and another joint venture with Henderson in Quarry Bay. So some exciting residential projects in the future. And all of this has been done by a pretty good capital recycling program, which the Chairman mentioned previously, where in the last few years, we managed to raise approximately HKD 39 billion to allow us to recycle that capital into new projects. Very quick look at the numbers on the first half overview. These are on 100% property-level basis. On an underlying profit basis, we grew at 18%, primarily due to the sale and the divestment of the Taikoo Shing car parks. We were pretty flat at a recurring level versus the prior year same period. Just on the right-hand side of this chart, it shows the movement. And the big numbers to look at there are HKD 152 million decrease in property investment. That came from the loss of income from the sale of Cityplaza One primarily, a rather pleasing decrease in losses from our hotel division as they start to pick up as the pandemic seems to be easing slightly in various geographies in which we're in. And lastly, you see the HKD 746 million number there, which is the Taikoo Shing car park divestment, representing an increase in profit from the sale there. Lastly, just on the Chinese Mainland, I do want to emphasize that at the moment now it's grown so well, I think, in the last few years that it now represents 36% of Swire Properties' attributable gross rental income for the first half and is actually the second largest rental contributor after our Hong Kong office sector. So really encouraging performance in the Chinese Mainland, primarily in the retail sector, and we look forward to continuing that momentum going into the second half. With that, I think it's Beverages.

Okay. Karen, we'll hand over to you if you want to work with slides.

Sure. Thank you, Merlin, and thank you, Guy. I would talk through our Beverages Division's performance. So in 2017, we expanded our franchise territory in the Chinese Mainland. And now we are serving in 11 provinces in the municipal city of Shanghai and serving a population of over 600 million population. Since the refranchising, we grow strongly on our revenue and expand our margin. In this period, our revenue CAGR has grown by 8% and EBITDA margin expansion of 3 percentage points. The Chinese Mainland is our biggest, fast-growing market. The group growth of revenue and the margin expansion is due to our relentless effort in developing a powerful route-to-market capability and also our execution power on the ground. We have increased both our controlled third-party distributor and our own distribution center in the Chinese Mainland by 50% post-franchise expansion. At the same time, our business in the U.S. has also gone through franchise expansion. After the franchise expansion, we are serving a population of 30 million consumers and following by a revenue CAGR growth of 9.5%. We are investing on digitalization, which is one of our core pillar strategy for Beverages division. Through our very unique digital tools, we are able to connect directly with the retailer which are typically served by our third-party distributor. And our very unique digital program allows us to connect with millions of consumers, driving revenue growth. Divisional EBITDA grew from HKD 3.9 billion to HKD 5.9 billion, which is showing our Beverages division is a very strong cash-generating business. And we are also very excited about our projects for plastic recycling partnership with ALBA Group in Asia. So this is showing our 2021 first half figures. Attributable profit is HKD 1.471 billion, which is a 55% growth versus the same period last year. Majority of the growth is driven by the Chinese Mainland and the U.S. market. And our smaller market, Hong Kong and Taiwan, has also delivered incremental profit as well. By looking at the chart on the top right, it's showing our revenue mix by market. The Chinese Mainland is our fastest-growing market, and right now it is contributing 59% of our total revenue for Beverage division. So looking at the financial data, overall, we are very pleased to see very healthy financial data. What I would want to draw your attention is to looking at high revenue growth. At the same time, we are able to expand our profit EBITDA margin by 0.7 percentage points in the same period. So this is showing our revenue growth by region. So if you can see, the revenue growth by region has all been on double digit. Taiwan is slightly affected by the COVID outbreak in the first half of the year. And I would like to draw your attention to look at the revenue growth, it's faster than our volume growth, which is showing the results of our revenue growth management initiatives. EBITDA margin by region, all of our regions except Hong Kong has expanded our EBITDA margin. So I think right now, I will pass it on to Guy for Healthcare Division.

All right. Thank you, Karen. Just a quick word on Healthcare here. It's obviously the new kid on the block for us. It's an exciting long-term prospect, we think, for future growth for the company. We're very focused on healthcare in the major city clusters where we have a presence in the Chinese Mainland. And specifically, as you can see from our 2 first investments, those are going to be in the Greater Bay Area in the Yangtze River Delta at the moment. We've spent with those 2 investments a total of HKD 1.1 billion to date. But I think by the time we get to 2030, our plan is to have invested at least HKD 20 billion in the sector, where we focus will primarily on the premium specialty hospitals, clinics, wellness and elderly care homes. So we're not going to take on the entire sector, but those are the areas that we see the greatest opportunity for the strengths that Swire brings. Thank you.

Okay. Thanks, Guy. I will just briefly talk about Aviation. I'm not going to cover much on this slide already, but just to focus on the third bullet here on the financial situation of Cathay. Despite the fact that we're kind of 18 months into this crisis, Cathay has carried very few passengers during that time. The liquidity on the balance sheet is very strong. And at the end of June, Cathay had almost HKD 33 billion of liquidity and is saying that it's targeting to keep its cash burn below HKD 1 billion per month for the remainder of the year. So I think it's very well placed now to navigate its way out of whatever the remainder of the COVID crisis will bring. And since the start of this crisis, Cathay has raised HKD 50 billion of extra capital in the form of rights issue, preference shares from the government, convertible bonds, a loan from the Hong Kong government, U.S. dollar bond. I mean, it's been a tremendous achievement in very difficult circumstances. They've raised HKD 50 billion and, of course, Swire Pacific contributed to that to the tune of about HKD 5 billion as part of the rights issue last year. Clearly, the business has lots of liquidity to see it through this year and next. Okay. This shows the year-on-year movements in results of the Aviation Division as a whole. I'm just going to speak very briefly on HAECO, which have the darker green bars here. You'll see that HAECO's profits declined this year versus last year from HKD 534 million to HKD 310 million. I mean this, more than anything, reflects the lag effect in aircraft maintenance that came from the collapsing in aviation demand last year. I think we're now seeing -- we're in a situation where line maintenance in Hong Kong Airport is still very weak and has continued to be weak. Our engine overhaul business remained strong for a while last year, has softened, but appears to be bottoming out. And our airframe maintenance business, which was weak for a while, is showing some signs of recovery. Okay. Just briefly on Marine Services and Trading & Industrial. While we've continued to reduce the size of the fleet at SPO's offshore oil and gas business, and we're selling older boats where we can. And there is signs that the market is beginning to strengthen. certainly to the extent that the fleet that we have left is expected to be EBITDA positive in 2021. As I mentioned earlier, we've sold our 50% stake in HUD. And the windfarm business that we listed as Cadeler has traded very, very well, is well up on the listing price, and we now hold 28% of that business. T&I division, clearly smaller than it was previously. I think all I'd say is that the remaining businesses are either cash-generating or businesses that require very little investment such as Swire Resources, Taikoo Motors, Taikoo Sugar. And those are businesses that give us an interesting window into sectors of the economy that we might not otherwise see. Qinyuan remains problematic, but we do see potential upside in that business. Okay. Just briefly on the sustainable development. I think we're doing good things in this space, and I think we're communicating it clearly through our Sustainable Development Report, which I hope you've all been able to see. Our SwireTHRIVE strategy focuses on environmental issues and people issues and communities. And on the environmental issues, we've set ourselves some very hard targets. I mean, obviously, our 2050 targets are completely in line with the goals of the Paris Accord. But we've set ourselves some accelerated reduction targets for 2030 from a 2018 baseline, and we're making good progress towards those targets. We're investing behind what needs to happen. And I think we will continue to do a good job in this space and try to make sure we can explain what is a complex area well to various stakeholders. Well, TrustTomorrow, I mean, just to say that as you've probably seen, we've been in Hong Kong for 150 years now. We expect to be here for the long term. And we are stepping up our corporate citizenship activity at this time of difficulty for the city. And we've contributed HKD 150 million additional to our philanthropic trust, the Swire Trust, to fund the TrustTomorrow initiative. And this is funding 30 projects in education, in marine conservation and in the arts, all with a youth focus. And we think they're going to make a real and lasting difference in the areas where they're involved. So we feel good about that. Okay. So I'm going to hand over to Guy in all sorts of different ways right now. I'm delighted that Guy is taking over for me as Chairman. Guy's been with the group for 34 years in a number of geographies across a number of industries. He has a really great experience and a proven track record. And I think he will lead the business strongly and that the business will have some very exciting times under his leadership. So I'm going to pass over to Guy and quite soon we'll take questions. But Guy, why don't you make some remark?

Thank you, Merlin. Well, obviously, it's a very exciting time to be taking over. As you can see, the balance sheet is in tremendous shape, the recycling of the capital and the sale of the noncore assets over the last few years has really allowed us to focus now on the pipeline of growth opportunities for our core businesses, primarily in the Properties and the Beverage businesses. Aviation looks positioned now for growth, and the Healthcare sector looks like being a new high-potential sector for us for future growth. So I think the strategy is clear. It's going to be -- there will be some challenges due to the uncertainties, like the pandemic. But once we can emerge from those challenges, I think we're in great shape to take the business forward. With that, I might just talk about the outlook for the second half before we go to questions and answers. I would say for the Property division, the outlook for the retail market is strong in the Chinese Mainland and remains fairly mixed in Hong Kong. Demand for office space is expected to pick up gradually in Hong Kong, but to improve in the Chinese Mainland. The outlook for Hong Kong hotels remains difficult. But as you saw in the presentation previously, the hotels in the Chinese Mainland and the U.S. are continuing to recover nicely. At Swire Coca-Cola, we expect revenue in the Chinese Mainland and the USA to grow strongly in the second half, whereas Hong Kong is expected to be less affected by COVID-19. On the Aviation side, I think dependent on the operational and passenger travel restrictions being lifted, and I emphasize dependent on that, Cathay Pacific hopes to operate up to 30% of its pre-COVID passenger capacity by the fourth quarter. Cargo operations are expected to continue to perform strongly in the second half. Whilst at HAECO, demand for base maintenance is expected to be stable. Line maintenance work is expected to recover slowly, and demand for engine services in the second half is expected to increase gradually for HAECO Engine Services in Xiamen and to be similar to that in the first half of 2021 for HAESL. With that, we'd all be happy to take questions.

Thank you, Guy. So we'll now move to the Q&A session. The first question is on dividend. It's from Karl Choi of the Bank of America. Swire Pacific previously had a goal of restoring its dividend per share to its peak level of HKD 3.90. Is this still a goal under the new dividend policy? If so, is there a time frame?

Well, of course, it's still a goal. And we very much hope that the growth of our recurring profit will allow us to get to that point. I wouldn't want to make a prediction at this point as to when that might take place.

Thank you, Merlin. The next 2 questions are on the Beverages business, from [ Joy Pan ] of [ Food Inc ]. First question, could you give more color about the growth engine of different categories in Mainland China? And the second question is, given the resurgence of COVID-19 in several cities in Mainland China, would that affect the Beverage business? And what's your priorities for the second half?

Sure. Thank you for the question. So let me talk about the Beverage growth in China. Overall, this year, especially in the first half of the year, we're seeing good growth of the Beverage category. But of course, it is comparing with a relatively low lower growth versus last year, which was adversely affected by the COVID-19. If you look at the category, what is pleasing to see is sparkling category is leading the trend of the growth. And particularly within the sparkling category, we're seeing the Zero series and the nonsugar -- no calorie category is leading the trend. And within this growth of the Zero series category, we are enjoying very, very good growth from our brand of Coke Zero. So overall, this is the category situation. And apart from the sparkling category, we are seeing also good growth of the smaller category like energy, coffee, which is in the premium segment. So regarding to the second question about the COVID-19 situation and how -- what's our plan in second half. Well, the COVID-19 situation continues to be uncertain. We are seeing recently outbreak of COVID-19 across several of the provinces in China. So we remain cautious on the situation. But at the same time, we think -- we believe our revenue growth is primarily driven by our strong capability in our route-to-market on the ground execution and also our continuous investment on the infrastructure. And we will continue to do that and develop our capability and also work very close with the Coca-Cola Company to develop portfolio expansion. So assuming the COVID-19 situation continues to be stable, we are confident of the growth trend in the second half.

Thank you, Karen. The second question is on Healthcare. Can you share how do you want to deploy the HKD 20 billion investment over time? And what's the expected return on earnings in the initial years and the longer run?

I did mention the HKD 20 billion is over the next -- essentially the next decade. We've started out focusing on specialty hospitals. But I could envisage that the focus will expand to areas such as wellness, more consumer-related healthcare clinics and elderly care facilities. Those are the target subjects, but we don't have a plan at this point for what sort of spread in terms of capital will be allocated across those different subsectors.

Thank you, Guy. The next question is on noncore asset disposal. It's from Sunny Zhuang of Fitch Ratings. What is the remaining scale of noncore assets to dispose in the future?

Well, we've got the situation -- you saw in the earlier slides, the strategy to divest the noncore businesses. What's left in Marine and in the T&I division are all sort of self-funding, self-sufficient now. So we don't expect to be taking any more impairments from those areas. And so, again -- so there'll be -- we know where our investment focus is going to be, and on the noncore issues, we're in a situation where they're all self-sufficient.

Thank you, Martin. So we have one last question here is on Cathay Pacific. It's also from Sunny Zhuang of Fitch Ratings. Will there be sort of capital injection to Cathay?

Well, as I said earlier, I mean, I think the liquidity position speaks for itself. CapEx of HKD 32 billion of liquidity and is expecting to burn less than HKD 1 billion in cash per month. So it's in a very strong position to sustain existing levels of activity for a really decent period of time. Of course, if things pick up, as we hope they will, we would expect the cash burn to reduce further. So there's no sign at this point of Cathay needing to return to its shareholders for more money.

Thank you, Merlin. And with that, we conclude our analyst briefing. Thank you once again for joining us.