太古股份公司B(00087) - 2023 - 中期业绩

Corporate Statement Swire Pacific is a Hong Kong-based international conglomerate committed to long-term shareholder value growth, guided by core values and strategic focus on key Asian markets and emerging sectors Company Overview and Objectives Swire Pacific is a Hong Kong-based international conglomerate with diversified, market-leading businesses, focused on long-term shareholder value growth and sustained dividend increases, with strategic emphasis on property, beverages, and aviation in Greater China and Southeast Asia - Swire Pacific is a Hong Kong-based international conglomerate with diversified, market-leading businesses, renowned in Greater China for over 150 years[3] - The company aims to achieve sustained shareholder value growth through long-term ideal equity returns and maintain continuous general dividend growth to reward shareholders[3] - Strategic focus is on Greater China and Southeast Asia, dedicated to developing core property, beverages, and aviation divisions, while exploring new areas like healthcare and sustainable food[3] Core Values and Principles Swire Pacific upholds values of integrity, endeavor, excellence, humility, teamwork, and long-term development, with core principles including Asian market focus, flexible resource allocation, prudent financial management, talent development, robust partnerships, sustainable investments, and high corporate governance standards - Company values include integrity, endeavor, excellence, humility, teamwork, and long-term development[4] - Business concentrated in high-potential Asian regions, particularly Greater China, with years of experience and solid business relationships[4] - Flexible allocation of capital and talent within the group, fostering idea exchange and increasing investment opportunities[4] - Adopting prudent financial management to ensure long-term investment plans are unaffected by short-term financial market fluctuations[4] - Recruiting top talent, investing heavily in training and development, and prioritizing employee well-being[4] - Building mutually beneficial, stable, and lasting relationships with business partners[4] - Investing in sustainable development, believing it helps the group maintain long-term growth through innovation and efficiency improvements[4] - Committed to maintaining high corporate governance standards, preserving and developing the Swire brand and reputation[4] - Investment objective is to build a business portfolio capable of consistently providing stable dividends[5] - As a long-term investor, focusing on holding controlling interests in businesses and managing them for long-term growth[5] - Concentrating on developing businesses where expertise can contribute and create value[5] - Investing in businesses that offer excellent products and services and hold leading market positions[5] - Divesting from businesses that have fully realized their potential, reallocating capital into existing or new ventures[5] Performance Summary The company reported significant profit growth for H1 2023, driven by strong recurring underlying profit, despite a decline in operating profit due to investment property fair value changes, with increased net debt Key Financial Data For H1 2023, profit attributable to shareholders surged 121% to HKD 4,221 million, with recurring underlying profit up 284% to HKD 4,879 million, revenue grew 15% to HKD 51,544 million, but operating profit fell 25% due to investment property fair value changes, and net debt increased 52%, raising the net debt to capital ratio to 21.4% Key Financial Data for the Six Months Ended June 30 | Indicator | 2023 (HKD million) | 2022 (HKD million) (Restated) | Change (%) | | :--- | :--- | :--- | :--- | | Profit attributable to company shareholders | 4,221 | 1,914 | +121% | | Underlying profit | 5,594 | 1,752 | +219% | | Recurring underlying profit | 4,879 | 1,272 | +284% | | Revenue | 51,544 | 44,808 | +15% | | Operating profit | 5,079 | 6,794 | -25% | | Operating profit excluding fair value changes of investment properties | 6,409 | 6,091 | +5% | | Fair value changes of investment properties | (1,330) | 703 | -289% | | Cash generated from operations | 7,206 | 6,147 | +17% | | Net cash outflow before financing | (3,493) | (2,243) | -56% | | Total equity (including non-controlling interests) | 312,933 | 321,421 | -3% | | Net debt | 66,915 | 43,911 | +52% | | Net debt to capital ratio (excluding lease liabilities) | 21.4% | 13.7% | +7.7 percentage points | Per Share Data for the Six Months Ended June 30 | Indicator | 2023 (HKD) | 2022 (HKD) | Change (%) | | :--- | :--- | :--- | :--- | | Earnings per share ('A' shares) | 2.91 | 1.28 | +127% | | Earnings per share ('B' shares) | 0.58 | 0.26 | - | | Underlying earnings per share ('A' shares) | 3.86 | 1.17 | +230% | | Underlying earnings per share ('B' shares) | 0.77 | 0.23 | - | | Dividend per share ('A' shares) | 1.20 | 1.15 | +4% | | Dividend per share ('B' shares) | 0.24 | 0.23 | - | | Equity attributable to company shareholders per share ('A' shares) | 177.89 | 175.80 | - | | Equity attributable to company shareholders per share ('B' shares) | 35.58 | 35.16 | +1% | Chairman's Statement The Chairman's report highlights a strong rebound in H1 2023 performance, driven by aviation, strategic investments in Asia, and the planned divestment of Swire Coca-Cola USA, while maintaining a robust financial position and commitment to sustainability Overall Results and Strategic Development In the first half of 2023, Swire Pacific's core divisions saw a comprehensive recovery, primarily driven by the strong rebound in the aviation sector, with the company continuing its long-term investment strategy in Hong Kong, mainland China, and Southeast Asia, and announcing the sale of Swire Coca-Cola USA, expected to yield significant shareholder returns and strengthen the balance sheet - In the first half of 2023, the Group's core divisions experienced a comprehensive recovery, with the aviation division being the main driver[8] - The company continues to steadfastly execute its strategic long-term plans for continuous investment in Hong Kong, mainland China, and Southeast Asia[8] - Announced the sale of 100% equity interest in Swire Coca-Cola USA for approximately HKD 30.4 billion, expected to bring immediate and substantial returns to shareholders and strengthen the Group's balance sheet[8] 2023 H1 Profit Attributable to Company Shareholders | Indicator | 2023 H1 (HKD million) | 2022 H1 (HKD million) | | :--- | :--- | :--- | | Consolidated profit | 4,221 | 1,914 | | Underlying profit (excluding fair value changes of investment properties) | 5,594 | 1,752 | | Recurring underlying profit | 4,879 | 1,272 | - Recurring underlying profit significantly increased, primarily due to the continued recovery of Cathay Group's business, higher profits from Swire Coca-Cola, and increased profits from Swire Properties, while HAECO Group was affected by increased losses in cabin design and refurbishment solutions business[10] Divisional Performance Overview The Property division's recurring underlying profit grew 6%, driven by strong recovery in Hong Kong retail and hotel businesses and improved retail sales in mainland China, while the Beverages division's recurring profit increased 41%, benefiting from strong US performance and new Vietnam acquisitions, and the Aviation division achieved a significant turnaround to profit, with Cathay Group's attributable profit reaching HKD 4.268 billion and HK Express recording its first profit 2023 H1 Key Divisional Recurring Underlying Profit | Division | 2023 H1 (HKD million) | 2022 H1 (HKD million) | Change (%) | | :--- | :--- | :--- | :--- | | Property Division | 3,188 | 2,994 | +6% | | Beverages Division | 1,627 | 1,152 | +41% | | Aviation Division (Cathay Group attributable profit) | 4,268 | (4,999) | Turned to profit | | HAECO Group attributable profit | 63 | 166 | -62% | - Property division's performance improved, primarily driven by the strong recovery of Hong Kong's retail and hotel businesses and mainland China's shopping mall retail sales exceeding pre-pandemic levels[11] - Beverages division's profit significantly increased, with strong performance in the US business and new acquisitions in Vietnam beginning to contribute substantial profits[12][13] - Aviation division's Cathay Group achieved a significant turnaround to profit, with HK Express recording its first profit, reflecting the recovery of Hong Kong's international aviation hub[14][15] - Trading & Industrial division's recurring profit increased, mainly due to increased visitor arrivals in Hong Kong and improved local market sentiment[16] Dividends, Financial Strength, and Sustainability Swire Pacific declared a first interim dividend of HKD 1.20 per 'A' share and HKD 0.24 per 'B' share, a 4% increase from the prior year, having completed a HKD 4 billion share repurchase program and planning a special dividend post-Swire Coca-Cola USA sale, while maintaining a robust financial position with a 21.4% net debt to capital ratio and a commitment to sustainability through its SwireTHRIVE strategy 2023 First Interim Dividend | Share Class | Dividend per Share (HKD) | Change from 2022 First Interim Dividend (%) | | :--- | :--- | :--- | | 'A' shares | 1.20 | +4% | | 'B' shares | 0.24 | +4% | - Completed a HKD 4 billion share repurchase program and plans to distribute a special dividend after the sale of Swire Coca-Cola USA (HKD 8.120 per 'A' share and HKD 1.624 per 'B' share)[17] Financial Strength Indicators | Indicator | As at June 30, 2023 | | :--- | :--- | | Net debt to capital ratio | 21.4% | | Available liquidity | HKD 35.9 billion | | Estimated net debt to capital ratio after US bottling business sale | 14.9% | - The company has set specific goals through its SwireTHRIVE sustainability strategy, including reducing environmental footprint, promoting an accessible and inclusive corporate culture, and implementing impactful community work[19] Outlook Despite an uncertain economic outlook for the remainder of 2023, Swire Pacific anticipates the H1 performance rebound to continue into H2, driven by Cathay Group's recovery, with Swire Properties' flagship brands in mainland China and Hong Kong expected to remain popular amid ongoing market recovery, Swire Coca-Cola's business projected to be stable with substantial full-year contributions from new Vietnam acquisitions, and Cathay Pacific's passenger capacity expected to reach 70% of pre-pandemic levels by year-end and 100% by end-2024, while HAECO anticipates stable base maintenance demand and increased demand for line maintenance and engine overhaul services - The H1 2023 performance rebound is expected to continue into H2, primarily driven by the recovery of Cathay Group's business[20] - Swire Properties: Flagship brands in mainland China and Hong Kong will continue to be highly sought after, various development projects are ongoing, and core markets are expected to continue their recovery[20] - Swire Coca-Cola: Business is expected to remain stable, new acquisitions in Vietnam will contribute substantially for the full year, and Cambodia's business is anticipated to improve in H2[20] - Cathay Pacific: Business continues to recover, with passenger capacity expected to reach 70% of pre-pandemic levels by year-end, serving 80 destinations, and 100% by end-2024[21] - HAECO: Base maintenance demand is expected to be stable in H2 2023, with increasing demand for line maintenance and engine overhaul services[21] Business Review This section provides a detailed review of the performance and strategic developments across the Property, Beverages, Aviation, Healthcare, and Trading & Industrial divisions for the reporting period Property Division Swire Properties' business encompasses property investment, hotel investment, and property trading, primarily in Hong Kong, mainland China, and Miami, USA, with the division's attributable recurring underlying profit growing 6% to HKD 3.188 billion in H1 2023, driven by strong recovery in Hong Kong retail and hotel businesses and significant improvement in mainland China retail sales, despite a weak Hong Kong office market, as the company executes a HKD 100 billion investment plan with multiple major development projects underway - Swire Properties' business comprises three main areas: property investment, hotel investment, and property trading, with primary markets in Hong Kong, mainland China, and Miami, USA[23][24][25] Property Division 2023 H1 Financial Summary | Indicator | 2023 H1 (HKD million) | 2022 H1 (HKD million) (Restated) | | :--- | :--- | :--- | | Total Revenue | 7,297 | 6,910 | | Total Operating Profit | 2,871 | 4,892 | | Attributable Profit | 2,222 | 4,347 | | Profit attributable to Swire Pacific | 1,822 | 3,563 | | Underlying profit attributable to Swire Pacific | 3,195 | 3,401 | | Recurring underlying profit attributable to Swire Pacific | 3,188 | 2,994 | - In H1 2023, the Property division's attributable recurring underlying profit was HKD 3.188 billion, an increase of 6% compared to H1 2022, primarily reflecting the strong recovery in Hong Kong's retail and hotel businesses and increased rental income from mainland China's retail properties[11][31] - Swire Properties is executing a HKD 100 billion investment plan, having committed approximately HKD 39 billion to property development and residential trading projects in Hong Kong, mainland China, and Southeast Asia[32] Hong Kong Properties Despite subdued demand in the Hong Kong office market, resulting in a 2% decrease in gross rental income, Swire Properties' office portfolio remained resilient with a 90% occupancy rate, while the retail property portfolio saw a significant rebound, with gross rental income increasing 17%, driven by tourism recovery and eased anti-pandemic measures, with some mall sales returning to pre-pandemic levels, and residential property occupancy at approximately 77%, with several development and planning projects underway Hong Kong Properties 2023 H1 Gross Rental Income | Property Type | 2023 H1 (HKD million) | 2022 H1 (HKD million) | Change (%) | | :--- | :--- | :--- | :--- | | Office | 2,778 | 2,835 | -2% | | Retail | 1,230 | 1,050 | +17% | - Hong Kong office portfolio was 90% leased as at June 30, 2023, or 94% excluding Two Taikoo Place, demonstrating resilience[34] - Retail sales at Pacific Place shopping mall, Cityplaza, and Citygate Outlets increased by 60%, 12%, and 62% respectively in the first half[35] - One Taikoo Place is expected to be completed by the end of 2023, while Wah Ha Factory Building and仁孚工業大廈 (Yan Foo Industrial Building) in Quarry Bay will be redeveloped for office and other commercial uses[36][37] Mainland China Properties Mainland China's retail properties experienced significantly improved footfall and retail sales well above pre-pandemic levels after the easing of anti-pandemic measures, leading to a 30% increase in gross rental income, with substantial growth across major retail properties, while office gross rental income decreased 6% but increased 1% excluding RMB currency fluctuations, and several development projects are in progress - Mainland China retail properties saw significant improvement in footfall, with retail sales well exceeding pre-pandemic levels, and Swire Properties' attributable retail sales increasing by 41%[39] Mainland China Key Retail Properties 2023 H1 Retail Sales Growth | Property | Retail Sales Growth (%) | | :--- | :--- | | Taikoo Li Sanlitun, Beijing | +29% | | Sino-Ocean Taikoo Li Chengdu | +27% | | Taikoo Hui, Guangzhou | +16% | | INDIGO, Beijing | +34% | | HKRI Taikoo Hui, Shanghai | +72% | | Taikoo Li Qiantan, Shanghai | +169% | - Mainland China retail properties' gross rental income increased 30% to HKD 2.042 billion, or 37% excluding rental support and RMB currency fluctuations[40] - Office gross rental income decreased 6%, but increased 1% excluding RMB currency fluctuations, with occupancy rates of 90% at Taikoo Hui, Guangzhou, 92% at INDIGO Phase 1, Beijing, and 98% at HKRI Taikoo Hui, Shanghai[40] - Major development projects include INDIGO Phase 2, Taikoo Li Xi'an, and a retail landmark project in Sanya, expected to be completed in phases starting from 2025[40] US Properties and Hotel Business Miami's Brickell City Centre shopping mall achieved a 90% occupancy rate and a 7% increase in retail sales in H1, with Swire Properties planning to develop the luxury residential project One Island Drive on Brickell Key, while hotel businesses in Hong Kong and mainland China saw strong recovery due to eased anti-pandemic measures, and US hotels performed well, with Swire Properties-managed hotels recording an operating profit before depreciation of HKD 59 million, reversing a loss from the prior year - Miami's Brickell City Centre shopping mall had a 90% occupancy rate as at June 30, 2023, with retail sales increasing by 7% in the first half[43][44] - Swire Properties plans to develop the luxury residential project One Island Drive on Brickell Key in Miami, including private luxury residences and a new Mandarin Oriental hotel[32][54] - Hong Kong and mainland China hotel businesses experienced strong recovery, and US hotels performed well, with Swire Properties-managed hotels recording an operating profit before depreciation of HKD 59 million in H1 2023, compared to a loss of HKD 74 million in H1 2022[46] - Hong Kong hotel business is expected to recover further, mainland China hotel business to grow, and US hotels to continue performing well[47] Property Trading and Capital Commitments Property trading operations include residential development projects in Hong Kong, Indonesia, Vietnam, and Thailand, with 33 units sold at EIGHT STAR STREET in Hong Kong and 48 units pre-sold at the Blue Coast project in Wong Chuk Hang, while the Group's total capital commitments as at June 30, 2023, amounted to HKD 24.875 billion, with HKD 9.613 billion in Hong Kong and HKD 15.235 billion in mainland China, and the Hong Kong residential market is expected to remain cautious in the short term but stable in the medium to long term, with optimistic outlooks for Southeast Asia and Miami - Of the 37 units in the EIGHT STAR STREET residential building in Hong Kong, 33 have been sold, and 48 out of 432 units in the Blue Coast residential project in Wong Chuk Hang have been pre-sold[49] - Residential development projects are underway or planned in Jakarta, Indonesia, Ho Chi Minh City, Vietnam, and Bangkok, Thailand[51][52][53] Investment Properties and Hotel Capital Commitments Overview (As at June 30, 2023) | Location | Total Commitment (HKD million) | | :--- | :--- | | Hong Kong | 9,613 | | Mainland China | 15,235 | | USA | 27 | | Total | 24,875 | - The Hong Kong residential market is expected to see cautious buyer sentiment in the short term but stable market sentiment in the medium to long term, while residential property markets in Jakarta, Indonesia, Ho Chi Minh City, Vietnam, and Bangkok, Thailand, are performing steadily, and the luxury residential property market in Miami has an optimistic outlook[52] Beverages Division Swire Coca-Cola holds Coca-Cola product franchises in mainland China, Hong Kong, Taiwan, Vietnam, Cambodia, and the western USA, covering a population of 877 million, with the division's attributable recurring profit significantly increasing 41% to HKD 1.627 billion in H1 2023, total revenue growing 14% to HKD 30.442 billion, and sales volume up 18%, driven by strong US performance and substantial contributions from new Vietnam acquisitions, and the company has signed an agreement to sell its entire interest in Swire Coca-Cola USA, expecting to record over HKD 22 billion in disposal gains - Swire Coca-Cola holds Coca-Cola product franchises in mainland China, Hong Kong, Taiwan, Vietnam, Cambodia, and the western USA, covering a population of 877 million[56] Beverages Division 2023 H1 Financial Summary | Indicator | 2023 H1 (HKD million) | 2022 H1 (HKD million) | | :--- | :--- | :--- | | Revenue | 30,446 | 26,331 | | Operating profit | 2,014 | 1,603 | | Attributable profit (including non-recurring items) | 1,423 | 1,152 | | Recurring profit | 1,627 | 1,152 | - In H1 2023, the Beverages division's attributable recurring profit was HKD 1.627 billion, an increase of 41% compared to H1 2022, with total revenue rising 14% to HKD 30.442 billion and sales volume increasing 18% to 1.055 billion standard cases[12][61] - An agreement has been signed to sell the entire interest in Swire Coca-Cola USA for a total consideration of USD 3.9 billion, with an expected consolidated disposal gain of over HKD 22 billion[62] Regional Performance Mainland China operations saw a 5% increase in attributable profit, with sales volume and business returning to normal and revenue growing 6% in local currency, while Hong Kong's attributable profit decreased 10% due to rising raw material costs and increased operating expenses, and Taiwan's attributable profit fell 11% despite sales growth, impacted by unfavorable exchange rate movements, with Southeast Asia's attributable profit at HKD 70 million driven by strong Vietnam performance, and US operations' attributable profit surged 65%, with revenue up 13% in local currency due to price adjustments and improved product mix, despite a decline in sales volume Beverages Division 2023 H1 Regional Attributable Profit and Change | Region | 2023 H1 Attributable Profit (HKD million) | 2022 H1 Attributable Profit (HKD million) | Change (%) | | :--- | :--- | :--- | :--- | | Mainland China | 616 | 586 | +5% | | Hong Kong | 56 | 62 | -10% | | Taiwan | 47 | 53 | -11% | | Southeast Asia | 70 | - | - | | USA | 913 | 554 | +65% | - Mainland China: Sales volume and business returned to normal, with revenue increasing 6% in local currency, and growth across sparkling, water, juice, energy, coffee, and tea beverages[62] - Hong Kong: Sales volume recovered, but raw material costs, operating expenses, and depreciation increased, leading to a decrease in EBITDA margin from 14.6% to 13.1%[63] - Taiwan: Sales volume and business continued to grow, but unfavorable exchange rate movements impacted profit, with EBITDA margin decreasing from 11.4% to 10.4%[64] - Southeast Asia: Vietnam operations performed strongly, while the Cambodian beverage market remained challenging[65] - USA: Revenue growth reflected price adjustments and a better product mix, with EBITDA margin increasing from 10.8% to 13.9%[66][67][68] Aviation Division The Aviation division, comprising Cathay Group and HAECO Group, recorded an attributable profit of HKD 1.796 billion in H1 2023, reversing a loss from the prior year, with Cathay Group performing exceptionally well, achieving an attributable profit of HKD 4.268 billion driven by strong passenger demand post-reopening of Hong Kong and mainland China borders, and HK Express recording its first profit, while HAECO Group's attributable profit decreased to HKD 63 million due to increased losses in cabin business and reduced unrealized exchange gains, and Cathay Pacific is actively rebuilding its flight network, expecting passenger capacity to reach 70% of pre-pandemic levels by year-end and 100% by end-2024 - The Aviation division comprises associate company Cathay Group and wholly-owned subsidiary Hong Kong Aircraft Engineering Company (HAECO) Group[71] Aviation Division 2023 H1 Financial Summary | Indicator | 2023 H1 (HKD million) | 2022 H1 (HKD million) | | :--- | :--- | :--- | | HAECO Group attributable profit | 63 | 166 | | Cathay Group attributable profit/(loss) | 1,796 | (2,236) | - In H1 2023, the Aviation division's attributable profit was HKD 1.796 billion, reversing a loss of HKD 2.236 billion in H1 2022[76] - Cathay Group's attributable profit was HKD 4.268 billion, primarily benefiting from strong passenger demand following the full reopening of Hong Kong and mainland China borders, with HK Express recording its first profit[14][77][79] - HAECO Group's attributable profit decreased to HKD 63 million, mainly due to increased losses in the cabin business and reduced unrealized exchange gains at HAECO Xiamen[15][91] Cathay Group Cathay Pacific's passenger revenue surged 1,110% to HKD 25.013 billion in H1 2023, carrying 7.8 million passengers with an 87.2% load factor, while cargo revenue decreased 12% to HKD 10.741 billion due to a weak global air cargo market, and total fuel costs increased 148%, with the airline's fleet totaling 225 aircraft, and the Cathay Group remains confident in Hong Kong's long-term future as an international aviation hub, expecting passenger capacity to reach 70% of pre-pandemic levels by year-end and 100% by end-2024 Cathay Pacific 2023 H1 Passenger Data | Indicator | 2023 H1 | 2022 H1 | Change (%) | | :--- | :--- | :--- | :--- | | Passenger revenue (HKD million) | 25,013 | 2,068 | +1109.5% | | Revenue passenger kilometers (million) | 32,308 | 1,810 | +1685.0% | | Revenue passengers carried (thousand) | 7,816 | 335 | +2233.1% | | Passenger load factor (%) | 87.2 | 59.2 | +28.0 percentage points | Cathay Pacific 2023 H1 Cargo Data | Indicator | 2023 H1 | 2022 H1 | Change (%) | | :--- | :--- | :--- | :--- | | Cargo revenue (HKD million) | 10,741 | 12,148 | -11.6% | | Cargo revenue tonne kilometers (million) | 3,886 | 2,123 | +83.0% | | Cargo carried (thousand tonnes) | 651 | 526 | +23.8% | | Cargo load factor (%) | 63.8 | 75.8 | -12.0 percentage points | - Cathay Pacific's total fuel costs (before fuel hedging impact) increased by HKD 6.085 billion (or 148%) compared to H1 2022[81] - Cathay Group's total fleet comprises 225 aircraft with an average age of 10.7 years, and passenger capacity is expected to reach 70% of pre-pandemic levels by end-2023 and 100% by end-2024[82][84][86] HAECO Group HAECO Group, providing aircraft maintenance and repair services, reported an attributable profit of HKD 63 million in H1 2023, a decrease from the prior year, primarily due to increased losses in the cabin business and reduced unrealized exchange gains at HAECO Xiamen, while airframe business losses decreased and line maintenance services handled 52% more flights, and the components business's attributable profit surged 252% to HKD 81 million, with engine business attributable profit increasing 5% driven by strong demand for engine overhaul services at HAECO Engine Services (Xiamen), and stable base maintenance demand is anticipated for H2, with rising demand for line maintenance and engine overhaul services - HAECO Group provides aircraft maintenance and repair services, with core businesses including airframe maintenance and modification, engine support, and overhaul engineering[87] HAECO Group 2023 H1 Attributable Profit | Business Segment | 2023 H1 Attributable Profit (HKD million) | 2022 H1 Attributable Profit (HKD million) | | :--- | :--- | :--- | | Airframe | (1) | (18) | | Cabin | (214) | (49) | | Components | 81 | 23 | | Engine | 263 | 250 | | Others | (66) | (40) | | Total | 63 | 166 | - The decrease in profit was primarily due to increased losses recorded in the cabin business and reduced unrealized exchange gains at HAECO Xiamen[91] - Airframe business: Losses decreased, with line maintenance services handling 52% more flights and base maintenance service hours increasing 7%[92] - Components business: Attributable profit increased 252% to HKD 81 million, with significant improvement in component repair and overhaul business performance[96] - Engine business: Attributable profit increased 5%, primarily driven by strong demand for engine overhaul services at HAECO Engine Services (Xiamen)[97] - Outlook: Base maintenance service demand is expected to be stable in H2, line maintenance services will continue to rebound, and engine overhaul service demand is projected to be higher than in H1[98][102] Healthcare Swire Pacific's healthcare involvement is primarily through associate investments in the Yangtze River Delta and Greater Bay Area, including Columbia China, Shenzhen New Frontier United Family Hospital and C-Mer Medical Group, and DeltaHealth, with the Group's share of losses from healthcare companies decreasing to HKD 80 million in H1 2023 as hospitals began to recover from the pandemic, and the Group has invested HKD 1.7 billion and is actively expanding its service platform, seeking investment opportunities in major city clusters across mainland China and Southeast Asia - The Group holds associate investments in Columbia China, SHH Core Holding Limited (which owns Shenzhen New Frontier United Family Hospital and C-Mer Medical Group), and DeltaHealth China Limited (which operates Shanghai Delta Hospital and DeltaWest Clinic)[103][104] Healthcare Business 2023 H1 Share of Loss | Indicator | 2023 H1 (HKD million) | 2022 H1 (HKD million) | | :--- | :--- | :--- | | Share of loss | 80 | 95 | - The reduction in loss was mainly due to hospitals beginning to recover from the pandemic, with patient numbers and revenue expected to continue rising[105] - The Group has invested HKD 1.7 billion in healthcare businesses and is actively expanding its service platform, continuing to seek investment opportunities in major city clusters across mainland China and Southeast Asia[106] Trading & Industrial The Trading & Industrial division, comprising Swire Resources, Swire Motors, Swire Foods, and Swire Waste Management, recorded an attributable profit of HKD 185 million in H1 2023, reversing a loss from the prior year, with Swire Resources' revenue increasing 27% benefiting from border reopening and consumption voucher schemes, Swire Motors' sales volume growing 21% and revenue up 25%, Swire Foods' loss significantly narrowed, while Swire Sugar's profit decreased, and Swire Waste Management's attributable profit remained stable, with H2 recurring profit expected to be lower than H1 Trading & Industrial 2023 H1 Financial Summary | Indicator | 2023 H1 (HKD million) | 2022 H1 (HKD million) | | :--- | :--- | :--- | | Revenue | 5,393 | 4,534 | | Operating profit | 245 | (255) | | Attributable profit/(loss) | 185 | (311) | | Recurring profit | 185 | 113 | - In H1 2023, the Trading & Industrial division's attributable profit was HKD 185 million, reversing an attributable loss of HKD 311 million in H1 2022[109] - Swire Resources: Attributable profit increased to HKD 65 million, with revenue up 27%, benefiting from border reopening and consumption voucher schemes[110] - Swire Motors: Attributable profit increased to HKD 118 million, with sales volume rising 21% to 10,065 vehicles and revenue up 25%[111] - Swire Foods: Attributable loss narrowed to HKD 9 million, with Qinyuan Bakery's loss decreasing, while Swire Sugar's profit decreased[112] - Swire Waste Management: Attributable profit was HKD 22 million, similar to the prior year[113] - Recurring profit for the Trading & Industrial division is expected to be lower in H2 2023 than in H1, with Swire Motors facing intensified market competition and Qinyuan Bakery continuing to integrate its retail network[113][114] Financial Review The financial review details the reconciliation of profit, departmental contributions, and key financial adjustments for the reporting period Profit Reconciliation and Divisional Contributions In H1 2023, profit attributable to company shareholders was HKD 4.221 billion, adjusted to an underlying profit attributable to company shareholders of HKD 5.594 billion after accounting for investment property valuation changes and related deferred tax, and further adjusted to a recurring underlying profit of HKD 4.879 billion after excluding significant non-recurring items, with the Property division contributing HKD 3.188 billion in recurring underlying profit, Beverages HKD 1.627 billion, Aviation (Cathay Group) HKD 782 million, and Trading & Industrial HKD 185 million Reconciliation of Profit Attributable to Company Shareholders to Underlying Profit (For the Six Months Ended June 30, 2023) | Indicator | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Profit attributable to company shareholders | 4,221 | 1,914 | | Valuation loss/(gain) on investment properties | 1,646 | (757) | | Deferred tax on investment properties | 347 | 213 | | Realised valuation gains on disposal of interests in investment properties | 29 | 299 | | Depreciation of investment properties for own use | 14 | 14 | | Amortisation of right-of-use assets reported under investment properties | (41) | (42) | | Remeasurement gain on interests in joint ventures becoming subsidiaries upon acquisition completion | (306) | - | | Adjustments attributable to non-controlling interests | (316) | 111 | | Underlying profit attributable to company shareholders | 5,594 | 1,752 | Reconciliation of Recurring Underlying Profit to Significant Non-Recurring Items (For the Six Months Ended June 30, 2023) | Indicator | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Underlying profit attributable to company shareholders | 5,594 | 1,752 | | Significant non-recurring items: | | | | Gains on disposal of interests in investment properties and properties held for sale | (7) | (407) | | Gains on disposal of property, plant and equipment, intangible assets and other investments | (853) | (79) | | Impairment of property, plant and equipment, right-of-use assets, intangible assets and investments | 145 | 424 | | Remeasurement gains and disposal of assets classified as held for sale | - | (418) | | Recurring underlying profit | 4,879 | 1,272 | Recurring Underlying Profit by Division (For the Six Months Ended June 30, 2023) | Division | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Property | 3,188 | 2,994 | | Beverages | 1,627 | 1,152 | | Aviation (Cathay Group) | 782 | (2,385) | | Aviation (HAECO Group and others) | 52 | 149 | | Trading & Industrial | 185 | 113 | | Head Office, Healthcare and Others | (955) | (768) | | Total Recurring Underlying Profit | 4,879 | 1,272 | Financing This section outlines the company's cash flow, financing activities, debt structure, and financial strength, including capital commitments and net debt ratios Cash Flow and Financing Changes In H1 2023, Swire Pacific's cash generated from operations was HKD 7.206 billion, with net interest paid at HKD 1.336 billion, and net cash used in investing activities amounted to HKD 8.646 billion, resulting in a net cash outflow before financing of HKD 3.493 billion, while net cash generated from financing activities was HKD 4.126 billion, primarily from increased borrowings, leading to a HKD 633 million increase in cash and cash equivalents during the period, with total borrowings and bonds rising to HKD 80.355 billion and lease liabilities to HKD 4.957 billion 2023 H1 Cash Flow Summary | Indicator | 2023 H1 (HKD million) | 2022 H1 (HKD million) | | :--- | :--- | :--- | | Cash generated from operations | 7,206 | 6,147 | | Net interest paid | (1,336) | (915) | | Cash used in investing activities | (8,646) | (6,504) | | Net cash outflow before financing | (3,493) | (2,243) | | Net cash generated from/(used in) financing activities | 4,126 | (6,922) | | Increase/(decrease) in cash and cash equivalents | 633 | (9,165) | 2023 H1 Financing Changes Analysis | Indicator | As at June 30, 2023 (HKD million) | As at December 31, 2022 (HKD million) | | :--- | :--- | :--- | | Borrowings and bonds (period-end balance) | 80,355 | 68,373 | | Lease liabilities (period-end balance) | 4,957 | 4,916 | | Drawdown of borrowings and refinancing | 13,508 | 25,676 | | Repayment of borrowings and bonds | (4,556) | (18,866) | | Principal portion of lease payments | (445) | (880) | Funding Sources and Debt Structure As at June 30, 2023, Swire Pacific's committed borrowing facilities and debt securities totaled HKD 102.953 billion, with 22% unutilized, and the Group held bank balances and short-term deposits of HKD 13.44 billion, while total borrowings and lease liabilities amounted to HKD 85.312 billion, with 57% repayable within 2 to 5 years, and the currency mix showed 85% in HKD and 10% in RMB, with 64% of total borrowings at fixed rates, and the net debt to capital ratio stood at 21.4%, rising to 28.7% when including net debt of joint ventures and associates Funding Sources as at June 30, 2023 | Category | Total Available (HKD million) | Utilized (HKD million) | Total Unutilized (HKD million) | | :--- | :--- | :--- | :--- | | Total committed facilities | 102,953 | 80,470 | 22,483 | | Total uncommitted facilities | 8,969 | 222 | 8,747 | | Total | 111,922 | 80,692 | 31,230 | - The Group held bank balances and short-term deposits of HKD 13.44 billion as at June 30, 2023[121] Total Borrowings and Lease Liabilities Repayment Schedule (As at June 30, 2023) | Period | Borrowings and Bonds (HKD million) | Lease Liabilities (HKD million) | Total (HKD million) | | :--- | :--- | :--- | :--- | | Within one year | 9,004 | 750 | 9,754 | | Between one and two years | 14,857 | 614 | 15,471 | | Between two and five years | 45,442 | 1,200 | 46,642 | | Over five years | 11,052 | 2,393 | 13,445 | | Total | 80,355 | 4,957 | 85,312 | Total Borrowings and Lease Liabilities Currency Mix (As at June 30, 2023) | Currency | Borrowings and Bonds (%) | Lease Liabilities (%) | Total (HKD million) | | :--- | :--- | :--- | :--- | | HKD | 85% | 58% | 71,068 | | USD | 5% | 4% | 4,510 | | RMB | 10% | 23% | 8,785 | | Others | 0% | 15% | 949 | | Total | 100% | 100% | 85,312 | - 64% of the Group's total borrowings are at fixed rates, and 36% are at floating rates[126] Net Debt to Capital Ratio and Interest Cover | Indicator | As at June 30, 2023 | As at December 31, 2022 | | :--- | :--- | :--- | | Net debt to capital ratio (excluding lease liabilities) | 21.4% | 18.0% | | Net debt to capital ratio (including lease liabilities) | 23.0% | 19.5% | | Interest cover | 4.8 | 8.3 | | Cash interest cover | 3.6 | 6.0 | | Underlying cash interest cover | 4.7 | 6.1 | - If the net debt of joint ventures and associates were added to the Group's net debt, the net debt to capital ratio would increase to 28.7% as at June 30, 2023 (December 31, 2022: 27.6%)[129] Review Report on Condensed Interim Financial Statements PwC's review concludes that the condensed interim financial statements for H1 2023 are prepared in all material respects in accordance with HKAS 34, without expressing an audit opinion Review Conclusion PricewaterhouseCoopers has reviewed Swire Pacific Limited's condensed interim financial statements for the six months ended June 30, 2023, conducted in accordance with Hong Kong Standard on Review Engagements 2410, and while the scope is less than an audit, no matters were identified that would lead the auditor to believe the statements are not prepared in all material respects in accordance with HKAS 34 - PricewaterhouseCoopers has reviewed Swire Pacific Limited's condensed interim financial statements for the six months ended June 30, 2023[131] - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, with a scope less than an audit, thus no audit opinion is expressed[132] - The review concluded that no matters were identified that would lead the auditor to believe the condensed interim financial statements are not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[133] Condensed Interim Financial Statements This section presents the company's consolidated income statement, comprehensive income, financial position, cash flows, and equity changes for the interim period Consolidated Income Statement For the six months ended June 30, 2023, Swire Pacific reported revenue from continuing operations of HKD 51.544 billion and operating profit of HKD 5.079 billion, with profit for the period at HKD 4.867 billion, of which HKD 4.221 billion was attributable to company shareholders, and earnings per share (A shares) were HKD 2.91 Consolidated Income Statement Summary (For the Six Months Ended June 30, 2023) | Indicator | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Revenue | 51,544 | 44,284 | | Gross profit | 19,208 | 16,936 | | Operating profit | 5,079 | 6,297 | | Net finance expenses | (1,057) | (683) | | Profit before tax | 6,516 | 3,912 | | Profit from continuing operations | 4,867 | 2,582 | | Profit for the period | 4,867 | 3,029 | | Profit attributable to company shareholders (from continuing operations) | 4,221 | 1,472 | | Profit attributable to non-controlling interests (from continuing operations) | 646 | 1,110 | | Earnings per share ('A' shares) | 2.91 | 0.98 | | Earnings per share ('B' shares) | 0.58 | 0.20 | Consolidated Statement of Comprehensive Income For the six months ended June 30, 2023, Swire Pacific's profit for the period was HKD 4.867 billion, with a net other comprehensive loss of HKD 3.447 billion, primarily due to net exchange differences on overseas operations and cash flow hedge losses, resulting in a total comprehensive income for the period of HKD 1.420 billion, of which HKD 1.285 billion was attributable to company shareholders Consolidated Statement of Comprehensive Income Summary (For the Six Months Ended June 30, 2023) | Indicator | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Profit for the period | 4,867 | 3,029 | | Items that will not be reclassified to profit or loss (net) | (453) | (356) | | Items that may be reclassified subsequently to profit or loss (net) | (2,994) | (2,270) | | Other comprehensive loss for the period, after tax | (3,447) | (2,626) | | Total comprehensive income/(loss) for the period | 1,420 | 403 | | Total comprehensive income/(loss) attributable to company shareholders (from continuing operations) | 1,285 | (608) | | Total comprehensive income/(loss) attributable to non-controlling interests (from continuing operations) | 135 | 526 | - Net exchange differences on overseas operations recognized a loss of HKD 1.481 billion during the period, and cash flow hedges recognized a loss of HKD 175 million during the period[139] Consolidated Statement of Financial Position As at June 30, 2023, Swire Pacific's total assets were HKD 451.83 billion, comprising HKD 397.45 billion in non-current assets and HKD 54.38 billion in current assets, while total liabilities amounted to HKD 138.897 billion, with HKD 46.29 billion in current liabilities and HKD 92.607 billion in non-current liabilities, resulting in net assets of HKD 312.933 billion, and equity attributable to company shareholders of HKD 256.386 billion Consolidated Statement of Financial Position Summary (As at June 30, 2023) | Indicator | As at June 30, 2023 (HKD million) | As at December 31, 2022 (HKD million) | | :--- | :--- | :--- | | Non-current assets | 397,450 | 394,027 | | Current assets | 54,380 | 40,739 | | Total Assets | 451,830 | 434,766 | | Current liabilities | 46,290 | 41,532 | | Non-current liabilities | 92,607 | 77,298 | | Total Liabilities | 138,897 | 118,830 | | Net Assets | 312,933 | 315,936 | | Equity attributable to company shareholders | 256,386 | 258,456 | | Non-controlling interests | 56,547 | 57,480 | | Total Equity | 312,933 | 315,936 | - The carrying amount of investment properties was HKD 283.963 billion, accounting for 71.4% of non-current assets[140] - Bank balances and short-term deposits amounted to HKD 13.44 billion[141] Consolidated Statement of Cash Flows For the six months ended June 30, 2023, Swire Pacific's net cash generated from operating activities was HKD 5.153 billion, while net cash used in investing activities amounted to HKD 8.646 billion, primarily for additions to investment properties and purchases of property, plant and equipment, and net cash generated from financing activities was HKD 4.126 billion, mainly from drawdowns and refinancing of borrowings, with cash and cash equivalents at the end of the period totaling HKD 11.117 billion Consolidated Statement of Cash Flows Summary (For the Six Months Ended June 30, 2023) | Indicator | 2023 (HKD million) | 2022 (HKD million) | | :--- | :--- | :--- | | Net cash generated from operating activities | 5,153 | 4,261 | | Net cash used in investing activities | (8,646) | (6,504) | | Net cash outflow before financing | (3,493) | (2,243) | | Net cash generated from/(used in) financing activities | 4,126 | (6,922) | | Increase/(decrease) in cash and cash equivalents | 633 | (9,165) | | Cash and cash equivalents at end of period | 11,117 | 12,862 | - Net cash used in investing activities was primarily for the purchase of property, plant and equipment and right-of-use assets (HKD 1.721 billion) and additions to investment properties (HKD 1.332 billion)[142] - Net cash generated from financing activities mainly came from drawdowns and refinancing of borrowings (HKD 13.508 billion), partially offset by repayment of borrowings and bonds (HKD 4.556 billion) and dividends paid (HKD 3.697 billion)[142] Consolidated Statement of Changes in Equity As at June 30, 2023, Swire Pacific's share capital was HKD 1.294 billion, with equity attributable to company shareholders decreasing from HKD 258.456 billion at the beginning of the year to HKD 256.386 billion, primarily due to the combined effect of increased profit for the period, other comprehensive losses, share repurchases, and dividend payments, while non-controlling interests decreased from HKD 57.48 billion to HKD 56.547 billion Consolidated Statement of Changes in Equity Summary (For the Six Months Ended June 30, 2023) | Indicator | Balance as at January 1, 2023 (HKD million) | Balance as at June 30, 2023 (HKD million) | | :--- | :--- | :--- | | Share capital | 1,294 | 1,294 | | Retained earnings attributable to company shareholders | 255,167 | 256,039 | | Other reserves attributable to company shareholders | 1,995 | (947) | | Total Equity attributable to company shareholders | 258,456 | 256,386 | | Non-controlling interests | 57,480 | 56,547 | | Total Equity | 315,936 | 312,933 | - Profit for the period was HKD 4.221 billion, and other comprehensive loss was HKD 2.942 billion[143] - During the period, HKD 680 million was paid for share repurchases, and HKD 2.675 billion was paid for dividends[143] Notes to the Condensed Interim Financial Statements This section provides detailed notes on segment information, accounting policies, financial risk management, revenue, expenses, taxation, dividends, earnings per share, and asset movements Segment Information Swire Pacific's business is segmented into Property, Beverages, Aviation, and Trading & Industrial, with the Head Office also considered a reportable segment, and for H1 2023, the Property division reported external revenue of HKD 7.276 billion and operating profit of HKD 2.871 billion, Beverages HKD 30.445 billion and HKD 2.014 billion, Aviation HKD 8.464 billion and HKD 175 million, and Trading & Industrial HKD 5.355 billion and HKD 245 million, with total Group assets at HKD 451.83 billion and total liabilities at HKD 138.897 billion - The Group's business is segmented into Property, Beverages, Aviation, and Trading & Industrial divisions, with the Head Office also considered a reportable segment[161] 2023 H1 External Revenue and Operating Profit by Division | Division | External Revenue (HKD million) | Operating Profit (HKD million) | | :--- | :--- | :--- | | Property | 7,276 | 2,871 | | Beverages | 30,445 | 2,014 | | Aviation | 8,464 | 175 | | Trading & Industrial | 5,355 | 245 | | Head Office, Healthcare and Others | 4 | (226) | | Total | 51,544 | 5,079 | Group Total Assets Analysis (As at June 30, 2023) | Division | Segment Assets (HKD million) | Joint Ventures (HKD million) | Associates (HKD million) | Bank Deposits (HKD million) | Total Assets (HKD million) | | :--- | :--- | :--- | :--- | :--- | :--- | | Property | 307,719 | 33,580 | 535 | 4,247 | 346,081 | | Beverages | 45,822 | 1,072 | 534 | 4,732 | 52,160 | | Aviation | 16,419 | 4,757 | 20,349 | 2,631 | 44,156 | | Trading & Industrial | 4,416 | 43 | - | 640 | 5,099 | | Head Office, Healthcare and Others | 1,101 | - | 2,043 | 1,190 | 4,334 | | Total | 375,477 | 39,452 | 23,461 | 13,440 | 451,830 | Group Total Liabilities and Non-controlling Interests Analysis (As at June 30, 2023) | Division | Segment Liabilities (HKD million) | External Borrowings (HKD million) | Lease Liabilities (HKD million) | Total Liabilities (HKD million) | Non-controlling Interests (HKD million) | | :--- | :--- | :--- | :--- | :--- | :--- | | Property | 9,938 | 33,098 | 653 | 47,472 | 52,476 | | Beverages | 19,435 | 88 | 653 | 27,212 | 433 | | Aviation | 4,284 | 42 | 2,552 | 9,534 | 1,784 | | Trading & Industrial | 1,770 | 92 | 1,099 | 2,985 | - | | Head Office, Healthcare and Others | 1,091 | 47,025 | - | 41,292 | - | | Total | 36,518 | 80,355 4,957 | 138,897 | 56,547 | Basis of Preparation The condensed interim financial statements are prepared in accordance with HKAS 34 "Interim Financial Reporting" and the HKEX Listing Rules, using consistent accounting policies and methods as the 2022 annual financial statements, except for certain revised standards adopted from January 1, 2023, which had no significant impact on the Group's consolidated financial statements or accounting policies, and the Group has retrospectively applied accounting policy changes due to "Lessor Forgiveness of Lease Payments" and restated comparative figures for H1 2022 - The condensed interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" and the Listing Rules of The Stock Exchange of Hong Kong Limited[162] - The accounting policies and methods of computation used are consistent with those in the 2022 annual financial statements, except for certain revised standards adopted from January 1, 2023, which had no significant impact on the Group's consolidated financial statements or accounting policies[162][163] - The Group has retrospectively applied the accounting policy changes due to "Lessor Forgiveness of Lease Payments" and restated the comparative figures for H1 2022[164] Financial Risk Management Swire Pacific is exposed to financial risks arising from interest rates, currency, credit, and liquidity in its normal business operations, and while the condensed interim financial statements do not include all financial risk management information and disclosures required by annual financial statements, the Group's financial risk management framework, policies, and procedures have not changed since year-end - The Group is exposed to financial risks arising from interest rates, currency, credit, and liquidity in its normal business operations[166] - The condensed interim financial statements do not include all financial risk management information and disclosures required by annual financial statements, but the Group's financial risk management framework, policies, and procedures have not changed since year-end[166] Revenue For the six months ended June 30, 2023, Swire Pacific's total revenue from continuing operations was HKD 51.544 billion, including gross rental income from investment properties of HKD 6.656 billion, revenue from sales of goods of HKD 36.078 billion, and revenue from aircraft and engine maintenance services of HKD 7.622 billion Revenue from Continuing Operations (For the Six Months Ended June 30, 2023) | Revenue Source | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Gross rental income from investment properties | 6,656 | 6,193 | | Property sales | 89 | 383 | | Hotels | 476 | 262 | | Sales of goods | 36,078 | 30,908 | | Aircraft and engine maintenance services | 7,622 | 5,883 | | Provision of other services | 623 | 655 | | Total | 51,544 | 44,284 | Net Other (Losses)/Gains For the six months ended June 30, 2023, Swire Pacific recorded a net other loss of HKD 104 million, compared to a net gain of HKD 103 million in the prior year, primarily driven by a HKD 551 million gain from the acquisition of an interest in a joint venture, but offset by a HKD 411 million loss from fair value changes of assets classified as held for sale, a net exchange loss of HKD 79 million, and a HKD 239 million provision for amounts due from a joint venture and other payables Net Other (Losses)/Gains (For the Six Months Ended June 30, 2023) | Item | 2023 (HKD million) | 2022 (HKD million) | | :--- | :--- | :--- | | Gain arising from acquisition of an interest in a joint venture | 551 | - | | Loss on disposal of property, plant and equipment | (18) | (3) | | Fair value changes of assets classified as held for sale | (411) | 49 | | Net exchange (loss)/gain | (79) | 159 | | Fair value loss on cross currency swaps transferred from cash flow hedge reserve | (99) | (82) | | Reversal of impairment losses recognised/(impairment losses) (property, plant and equipment) | 4 | (20) | | Reversal of impairment losses recognised/(impairment losses) (intangible assets) | (3) | (369) | | Provision for amounts due from a joint venture and other payables | (239) | - | | Government grants | 70 | 180 | | Total | (104) | 103 | Expenses by Nature For the six months ended June 30, 2023, Swire Pacific's total cost of sales, distribution costs, administrative expenses, and other operating expenses amounted to HKD 45.031 billion, including cost of goods sold of HKD 24.07 billion, staff costs of HKD 9.754 billion, and depreciation of property, plant and equipment of HKD 1.536 billion Expenses by Nature (For the Six Months Ended June 30, 2023) | Expense Item | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Direct lease expenses relating to investment properties | 1,483 | 1,382 | | Cost of goods sold | 24,070 | 20,380 | | Write-down of inventories and work-in-progress | 67 | 58 | | Impairment losses on trade receivables | 22 | 7 | | Depreciation of property, plant and equipment | 1,536 | 1,324 | | Depreciation of right-of-use assets | 483 | 414 | | Amortisation of intangible assets | 157 | 133 | | Staff costs | 9,754 | 8,907 | | Other lease expenses | 132 | 72 | | Other expenses | 7,233 | 6,014 | | Total | 45,031 | 38,793 | - Direct lease expenses relating to investment properties include impairment losses of HKD 13 million related to expected credit losses on waived operating lease receivables[169] Net Finance Expenses For the six months ended June 30, 2023, Swire Pacific's net finance expenses amounted to HKD 1.057 billion, including interest expenses on bank borrowings and overdrafts of HKD 700 million, other borrowings and bonds of HKD 719 million, and lease liabilities of HKD 102 million, partially offset by capitalized interest of HKD 340 million and interest income of HKD 226 million Net Finance Expenses (For the Six Months Ended June 30, 2023) | Item | 2023 (HKD million) | 2022 (HKD million) | | :--- | :--- | :--- | | Interest expense on bank borrowings and overdrafts | 700 | 72 | | Interest expense on other borrowings and bonds | 719 | 807 | | Fair value (gain)/loss on derivative instruments | (23) | (14) | | Amortisation of borrowing costs | 52 | 44 | | Interest expense on lease liabilities | 102 | 93 | | Other finance costs | 66 | 65 | | Capitalised (investment properties and properties held for sale) | (340) | (274) | | Less: Interest income | (226) | (133) | | Net finance expenses | 1,057 | 683 | Taxation For the six months ended June 30, 2023, Swire Pacific's total tax expense was HKD 1.649 billion, comprising current tax of HKD 1.373 billion (including Hong Kong profits tax of HKD 291 million and overseas tax of HKD 1.073 billion) and deferred tax expense of HKD 276 million, mainly from fair value changes of investment properties and the origination and reversal of temporary differences, with the Group's share of tax expense from joint ventures and associates being HKD 195 million and HKD 204 million, respectively Tax Expense (For the Six Months Ended June 30, 2023) | Item | 2023 (HKD million) | 2022 (HKD million) (Restated) | | :--- | :--- | :--- | | Current tax (Hong Kong profits tax) | 291 | 280 | | Current tax (Overseas tax) | 1,073 | 886 | | Under/(over) provision in prior years | 9 | (2) | | Deferred tax (fair value changes of investment properties) | 88 | (34) | | Deferred tax (origination and reversal of temporary differences) | 188 | 203 | | Total | 1,649 | 1,330 | - The Group's share of tax expense from joint ventures was HKD 195 million, and from associates from continuing operations was HKD 204 million[172] Dividends Swire Pacific's Board of Directors has declared a first interim dividend for the year ending December 31, 2023, of HKD 1.20 per 'A' share and HKD 0.24 per 'B' share, totaling HKD 1.73 billion, an increase from the 2022 first interim dividend, with payment scheduled for October 13, 2023, to shareholders registered as at September 15, 2023 Declared First Interim Dividend | Share Class | Dividend per Share (HKD) | Total (HKD million) | | :--- | :--- | :--- | | 'A' shares | 1.20 | 1,730 | | 'B' shares | 0.24 | | | Total | | 1,730 | - Dividends will be paid on Friday, October 13, 2023, to shareholders registered on the register of members at the close of business on Friday, September 15, 2023[174] Earnings Per Share (Basic and Diluted) For the period en