To:    Business Editor                                                                          2nd August 2019

                                                                                                             For immediate release

 

The following announcement was issued today to a Regulatory Information Service approved by the Financial Conduct Authority in the United Kingdom.

 

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2019

 

Highlights

·    Underlying profit down 1%

·    US$0.9 billion gain on JLT sale

·    Lower contribution from Astra

·    Jardine Motors, Hongkong Land and Dairy Farm deliver profit growth

 

"The Group's profit decreased by 1% in the first half.  While most businesses delivered resilient performances, the car market in Indonesia was weaker.  In the second half of the year we expect to benefit from further growth in Hongkong Land and Dairy Farm, but the Group's overall results will depend to a large extent on consumer sentiment in our key markets."

 

Ben Keswick, Chairman and Managing Director

 

Results

(unaudited) Six months ended 30th June
	2019 US$m	2018 US$m Restated†		Change %
Gross revenue including 100% of Jardine Matheson, associates and joint ventures	50,274	44,348		+13
Revenue	15,999	16,939		-6
Underlying profit* attributable to shareholders	779	789		-1
Profit attributable to shareholders	1,657	945		+75
	US$	US$		%
Underlying earnings per share*	1.38	1.38		-
Earnings per share	2.93	1.66		+77
Net asset value per share#	61.10	68.46		-11
	US¢	US¢		%
Interim dividend per share	10.50	10.00		+5
* The Group uses 'underlying profit' in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more fully described in note 9 to the condensed financial statements.  Management considers this to be a key measure which provides additional information to enhance understanding of the Group's underlying business performance. #   At 30th June 2019 and 31st December 2018, respectively.  Net asset value per share is calculated on a market value basis, details of which are set out in note 15 to the condensed financial statements. † The accounts have been restated due to changes in accounting policies upon adoption of IFRS 16 'Leases', as set out in note 1 to the condensed financial statements.

The interim dividend of US¢10.50 per share will be payable on 17th October 2019 to shareholders on the register of members at the close of business on 23rd August 2019 and will be available in cash with a scrip alternative.

 

 

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2019

 

Overview

 

The Group's profit in the first half was impacted by a slow start to the year by Astra, while Hongkong Land and Dairy Farm both saw increases in profit.  The Group faced challenging conditions in the period, primarily caused by weaker consumer sentiment in Indonesia.

 

Results

 

The Group's underlying profit for the first six months of 2019 was US$779 million, US$10 million or 1% below the corresponding period last year, and underlying earnings per share were flat at US$1.38.  The revenue of the Group for the period was 6% lower at US$16 billion, while revenue, including 100% of Jardine Matheson, associates and joint ventures, was up 13% at US$50.3 billion.

 

Within Jardine Matheson's directly-held businesses, there was a loss of earnings from Jardine Lloyd Thompson with the sale of its stake completed in April 2019.  Jardine Pacific saw lower overall results, mainly due to the timing of project completions in Gammon.  There was a stronger contribution from JEC and steady performances in Jardine Schindler and Jardine Restaurants, but lower results from Hactl.  Jardine Motors saw its earnings increase overall, benefitting from a higher contribution from its investment in Zhongsheng and an improved result from Zung Fu in mainland China, partially offset by lower earnings at Zung Fu in Hong Kong.

 

Hongkong Land's profits rose modestly, as its results benefitted from increased contributions from both Investment Properties and Development Properties, partially offset by higher financing costs due to land acquisitions. There were continued positive rental reversions in the Hong Kong office portfolio and the Hong Kong retail portfolio remained effectively fully occupied, while the profit contribution from development properties in mainland China increased in the first half of the year compared with the equivalent period last year.

 

Dairy Farm saw a strong performance from its Health and Beauty business and solid sales performances from Convenience, Home Furnishings and Restaurants.  The group's underlying profit benefitted from higher contributions from Yonghui and Robinsons Retail, partially offset by continuing business transformation costs.  The Food business continued to face challenges, but is beginning to see signs of growth in underlying sales performance in Southeast Asia as the transformation plan is implemented.

 

At Mandarin Oriental, underlying profit was lower during the first half of the year, primarily due to the closure of The Excelsior in Hong Kong and reduced earnings from the Bangkok hotel, which was largely closed in March 2019 for a major renovation.  Overall results across the rest of the group's properties were broadly flat.

 

In Southeast Asia, JC&C saw lower contribution from Truong Hai Auto Corporation in Vietnam.  Astra's performance was weaker in the period, with lower contributions from its automotive business and agribusiness, offsetting improved performances from its financial services and heavy equipment, mining, construction and energy businesses.

 

There was a non-trading net gain in the first half of US$878 million, compared with a non-trading net gain of US$156 million in the first half of 2018.  The sale of the Group's interest in Jardine Lloyd Thompson produced a net gain of US$874 million.  There was also a net gain of US$52 million related to the fair value of other investments, offset by a net non-trading loss of US$44 million from revaluations of investment properties in Hongkong Land.   The Group's profit attributable to shareholders for the period was US$1,657 million, compared with US$945 million in 2018.  The Board has declared an increased interim dividend of US¢10.50 per share, 5% higher than last year.

 

Business Developments

 

The offer for Jardine Lloyd Thompson by Marsh & McLennan completed on 1st April 2019 and the Group received net proceeds of US$2.1 billion for the sale of its stake.  As a result of the sale, the Group did not recognise any profit from JLT in the first half of 2019, compared with a profit contribution of U$20 million in the same period in 2018.

 

WF CENTRAL in Beijing is performing in line with expectations and its hotel, Mandarin Oriental Wangfujing, opened in March 2019.  Planning of the prime commercial joint venture project in the central business district of Bangkok is well underway, with construction expected to commence in early 2020 and completion scheduled for 2025.  During the period, the group acquired a residential site in southwestern Wuhan.  The joint venture projects in the rest of Southeast Asia are progressing on schedule.

 

Dairy Farm is implementing a range of initiatives as part of its multi-year transformation programme aimed at improving business performance and achieving long-term sustainable growth.  Work is underway to transform one of the group's Giant hypermarkets in Indonesia into an IKEA store as a pilot scheme for the repurposing of Food space.  Maxim's acquired the Starbucks franchise in Thailand, adding 372 stores in Thailand to its existing stores in Singapore and Hong Kong.

 

Mandarin Oriental closed The Excelsior, Hong Kong, at the end of March and demolition work is underway ahead of the planned construction of a mixed-use commercial building.  The group opened four new hotels in the first half of the year, in Beijing, Doha, Dubai and Lake Como.  In addition, the group signed two new management contracts, for a second hotel and residences in Istanbul and new standalone residences in New York. 

 

In Astra, a 44.5% interest was acquired in the Surabaya-Mojokerto toll road for US$110 million, further strengthening Astra's portfolio in the Trans Java network.

 

People

 

Charles Allen-Jones stepped down from the Board on 9th May 2019.  We would like to express our gratitude for the significant contribution he made to the Group over many years.  We are pleased to welcome Lincoln Leong, who joined the Board on 2nd August 2019.

 

Outlook

 

The Group's profit decreased by 1% in the first half.  While most businesses delivered resilient performances, the car market in Indonesia was weaker.  In the second half of the year we expect to benefit from further growth in Hongkong Land and Dairy Farm, but the Group's overall results will depend to a large extent on consumer sentiment in our key markets.

 

Ben Keswick

Chairman and Managing Director

 

Operating Review

 

Jardine Pacific

 

Jardine Pacific reported an underlying net profit of US$56 million, compared with US$62 million in the equivalent period in 2018.  Improvements in business efficiency at JEC resulted in profit growth with its Hong Kong operations performing well, while Jardine Schindler and Jardine Restaurants each produced a steady contribution.  Gammon's earnings were, however, down due to the timing of project completions, although its order book remains strong at over US$4 billion. Hactl's results were impacted by a reduction in cargo throughput, slightly better than the market.  Greatview saw a softer sales performance in its China business.

 

Jardine Motors

 

Jardine Motors saw its underlying net profit for the first half increase by 23% to US$107 million.  There was a higher contribution from Zhongsheng as a result of the inclusion of a full six months' profit, for the period from July to December 2018, due to the timing of the reporting of its results.  In 2018 only two months of results were included.  Zung Fu in mainland China reported a higher contribution, with a good performance from its after-sales business.  In Hong Kong, however, profits were lower as a result of the timing of new car deliveries following delays in obtaining vehicle certifications, as well as weaker consumer sentiment. The United Kingdom business saw improved profit due to higher margins and growth in aftersales, but profit was lower than the corresponding period in 2018 due to the profit received last year on the sale of dealership land.

 

Hongkong Land

 

Hongkong Land's underlying profit attributable to shareholders for the first six months was US$466 million, up 2% from the equivalent period in 2018.  Profit attributable to shareholders was US$411 million after accounting for a net loss of US$55 million arising primarily on the revaluation of investment properties.  This compares with a profit of US$1,124 million in the first half of 2018, which included a net revaluation gain of US$669 million.

 

Hongkong Land's investment properties benefitted from the continuing tight supply in the Hong Kong Central office leasing market.  While vacancy in the group's Central office portfolio was 2.8% at the end of June 2019, it would have been 1.6% taking account of new lease commitments.  At the end of 2018, office vacancy was 1.4%.  The retail portfolio remained effectively fully occupied.  In Singapore, there were positive rental reversions and vacancy in the group's office portfolio was 3.3% at the end of June 2019, although it would have been 0.9% taking account of new lease commitments.  Vacancy was 2.5% at the end of 2018.

 

In mainland China, the profit contribution from development properties in the first half of 2019 was higher than the equivalent period in 2018, as a result of more sales completions.  At 30th June 2019 the group had US$1,714 million in sold but unrecognised contracted sales, compared with US$1,358 million at the end of 2018.  Both sales completions and contracted sales are in line with expectations and are expected to be stronger in the second half of the year.

 

The profit contribution from the Singapore business was lower than the prior year.  In 2018 profits were recognised on completion of the 1,327-unit Sol Acres executive condominium development.  Pre-sales are progressing satisfactorily at the Margaret Ville and Parc Esta projects, the construction of both of which is scheduled to complete by 2021.  The group's joint venture projects in the rest of Southeast Asia are progressing on schedule.

 

Dairy Farm

 

Dairy Farm saw sales of US$5.8 billion for the period by the group's subsidiaries, 3% lower than the prior year, or 1% lower at constant rates of exchange.  Underlying profit, restated following the adoption of the new lease accounting standard, IFRS16, was US$177 million, 5% higher than the same period last year, benefitting from improved profit margins from Yonghui, the deconsolidation of its associate business Yunchuang and the additional profit contribution from the group's investment in the Robinsons Retail business in the Philippines.  Costs associated with the group's business transformation programme impacted overall profit growth, with continued investment in key areas including people capability, IT infrastructure and digital development, in order to support future business development. 

 

In the Food business, sales in supermarkets and hypermarkets were lower due to the de-consolidation of Rustan Supercenters following its sale at the end of 2018.  The implementation of a regional store optimisation plan as part of the transformation of the business also impacted sales in Southeast Asia.  Underlying sales performance has begun to show signs of growth, reflecting improvements in quality, availability, price competitiveness and general operating standards, notably in Southeast Asia.  In North Asia, sales in Hong Kong continue to grow, particularly in upscale stores, but Taiwan is increasingly under threat from the aggressive space expansion of local competitors.

 

Sales in all of the group's other formats continued to show positive growth in the first half.  The Group's Convenience store operations achieved higher sales in all markets, with the strongest growth coming from stores in mainland China.  Overall profits were slightly lower as improved profits in Hong Kong and Macau were exceeded by investment in further store space growth in the period.

 

In Health and Beauty, strong sales were reported in North Asia, against substantial sales growth in the same period last year, reinforcing the strength and resilience of the Mannings brand.  Guardian in Southeast Asia also reported an encouraging performance.

 

IKEA achieved sales growth in all markets, but profitability was lower due to the increased cost of goods and pre-opening expenses for new stores under development in Taiwan and Indonesia.  E-commerce activities are growing, with positive results in all markets.  In May, IKEA opened its sixth store in Taiwan in Greater Taipei City, with encouraging initial results. 

 

Maxim's delivered good performances across all key businesses, especially restaurants, where customers have shown strong engagement with new franchises.

 

Yonghui reported strong underlying sales and profit growth, mainly driven by the continuing expansion of its store network and healthy like-for-like sales growth, while also benefitting from the partial divestment of Yunchuang, its new technology format, at the end of 2018.

 

Robinsons Retail reported good sales growth.

 

Mandarin Oriental

 

Mandarin Oriental's underlying profit for the first half of the year was US$10.7 million, compared with US$22.2 million in the equivalent period in 2018.  The lower profit was primarily due to the closure of The Excelsior, Hong Kong and reduced earnings from the Bangkok hotel, which was largely closed in March 2019 for a major renovation. 

 

Performances were mixed across the group's owned properties. In Asia, a slow-down in corporate business reduced earnings at the group's flagship Hong Kong hotel.  Results in Tokyo were notably better, while in the rest of the region performances were broadly flat. 

 

In Europe, earnings were higher at the London hotel, which continued to include insurance coverage for loss of profits due to the fire in June 2018.  In the same period last year, the hotel was only partially open whilst undergoing a renovation programme.  In Paris, results were lower as city-wide demand was impacted by demonstrations in the city.  In America, Boston performed well but results were weaker in Washington D.C. 

 

Jardine Cycle & Carriage

 

Jardine Cycle & Carriage reported an underlying profit for the period of US$407 million, down 1% compared with the equivalent period last year.  Profit attributable to shareholders increased by 147% to US$427 million, after accounting for net non-trading gains of US$20 million, which were principally unrealised fair value gains related to non-current investments.  

 

Astra's contribution to underlying profit fell 8% to US$326 million.  The group's Direct Motor Interests contributed an underlying profit of US$55 million, 22% below the previous year.  This was primarily due to a lower contribution from Truong Hai Auto Corporation in Vietnam due to pressure from competitors. There was an increase in overall vehicle sales in Cycle & Carriage Singapore but these were partly offset by lower margins.  There was a higher contribution from Tunas Ridean in Indonesia.  The results from Other Strategic Interests were broadly in line with the previous year.  There were lower contributions from Siam City Cement in Thailand and Refrigeration Electrical Engineering Corporation in Vietnam, while Vinamilk produced dividend income of US$28 million in the period, compared to US$24 million in the previous year. 

 

Astra

 

Astra reported net profit equivalent to US$691 million, under Indonesian accounting standards, 6% lower in its reporting currency, primarily due to lower contributions from its automotive business and agribusiness.  This more than offset increased contributions from the financial services and heavy equipment, mining, construction and energy businesses.

 

Net income from Astra's automotive business fell by 18% to US$244 million, with 6% lower car sales and increased manufacturing costs.  The overall wholesale car market declined by 13%.  Astra's market share increased from 48% to 53%, and 8 new models and 2 revamped models were launched.  Astra's Honda motorcycle sales were 8% higher, as the wholesale motorcycle market grew by 7% in the first half of 2019.  Astra's market share continued to be strong at 75%.  4 new models and 15 revamped models were launched.  Components business Astra Otoparts reported a 19% increase in net income at US$17 million, mainly due to higher revenue from the replacement market and export segments.

 

Net income from Astra's financial services division grew by 32% to US$199 million, mainly due to the recovery of non-performing loans, lower loan loss provisions and a larger loan portfolio.  Consumer finance businesses saw a 6% increase in the amount financed.  The net income contribution from car-focused finance companies increased by 39% to US$50 million, with lower non-performing loan losses, while the net income contribution from motorcycle-focused financing business increased by 10% to US$89 million, due to a larger loan portfolio.  Heavy equipment-focused finance operations saw a slight decrease in the amounts financed: the contribution to net income grew 32% to US$4 million, with lower loan provisions.  Permata Bank reported a significant increase in net income to US$50 million, mainly due to a higher level of recoveries from non-performing loans. General insurance company, Asuransi Astra Buana, reported net income growth of 9% at US$38 million, due to increased investment income.

 

Net income from Astra's Heavy Equipment, Mining, Construction and Energy increased by 2% to US$235 million, mainly due to the contribution from the new gold mining operation acquired in December 2018 and improved performance from mining contracting, partly offset by weaker heavy equipment sales.  United Tractors reported a 2% increase in net income to US$393 million.  Komatsu heavy equipment sales decreased by 20%, while parts and service revenues were stable.  Mining contracting operations saw a 5% higher overburden removal volume and a 7% higher coal production.  Coal mining subsidiaries achieved 11% higher coal sales, including 674,000 tonnes of coking coal sales.  Agincourt Resources reported gold sales of 194,000 oz. General contractor Acset Indonusa reported a US$28 million net loss, compared to a net income of US$5 million in the equivalent period last year, due to increased project and funding costs of several ongoing contracts.

 

Net income from Astra's Agribusiness division fell by 94% to US$2 million, mainly due to lower crude palm oil prices which offset higher crude palm oil and derivatives sales.  Average crude palm oil prices fell by 18% in the first half of the year compared to equivalent period in 2018.  Crude palm oil and derivatives sales increased by 19% to 1.2 million tonnes.

 

Net income from Astra's Infrastructure & Logistics division increased from a small profit in the first half of 2018 to US$6 million, due to improved earnings from operational toll roads with increased traffic volume.  Serasi Autoraya's net income decreased by 20% to US$6 million, due to a fall in the number of vehicles under leasing contract and lower used car sales.

 

Net income from Astra's Information Technology division fell by 35% to US$3 million, due to reduced revenue in IT solutions and office service businesses and higher operating costs.

 

Net income from Astra's Property division was 33% lower at US$2 million, mainly due to reduced development earnings from Anandamaya Residences following the completion of construction in 2018.