| To : Business Editor | 19th September 1997 For immediate release |
The following announcement was today issued to the London Stock Exchange.
JARDINE MATHESON HOLDINGS LIMITED
INTERIM REPORT HIGHLIGHTS 1997
Results
"Progress continues to be made in improving the operational performance of our businesses. While the economic outlook for China and the Hong Kong SAR appears positive, the prospects for other Asian economies are mixed and difficulties in Thailand in particular have affected our businesses there. This, together with reduced earnings from Jardine Fleming, will mean that the 1997 underlying profit will not reach the previous year's level, though the overall result will be enhanced by the gain on the sale of our life insurance business."
Henry Keswick, Chairman
19th September 1997
The interim dividend of US˘7.80 per share will be payable on 25th November 1997 to Shareholders on the register of members at the close of business on 3rd October 1997. The share registers will be closed from 6th to 10th October 1997, inclusive.
JARDINE MATHESON HOLDINGS LIMITED
INTERIM REPORT 1997
RESULTS
Jardine Matheson Holdings Limited today announced that the Group's net profit for the first six months of 1997 was US$281 million, which included a gain of US$130 million from the sale of Jardine Pacific's life insurance interests, representing a 32% increase over the prior year. While most of the Group's businesses performed steadily during the period, the underlying profit was 17% lower due mainly to a reduced contribution from merchant banking, the absence of investment gains and higher financing charges.
Earnings per share for the period were US˘48.60, compared with US˘36.35 in 1996. Excluding non-recurring items, earnings per share were US˘26.00, down 16%.
The Board has declared an unchanged interim dividend of US˘7.80 per share, which is payable in cash with a scrip alternative at Shareholders' option.
BUSINESS DEVELOPMENTS
Turning to the operations of the Group, the Chairman, Henry Keswick, said that Hongkong Land's development programme in Asia made good progress. The company recently announced its first property joint venture in China and the US$300 million redevelopment of Swire House, the oldest office building in the company's Hong Kong Central District portfolio. The first half of the year also saw an encouraging uplift in capital values in Hong Kong.
Mandarin Oriental made a good start to the year, though the forecast decline in tourist arrivals in Hong Kong is likely to affect the second half performance.
Despite its disappointing results, Jardine Fleming continues to build its market position as one of Asia's leading finance houses, with the introduction of new products around the Region supported by good investment performance and strengthened management and systems.
Jardine International Motors expanded its operations in the United Kingdom with the acquisition of a major distribution network, making it one of the leading Ford dealers in that country.
Following its merger at the beginning of the year, our insurance services affiliate Jardine Lloyd Thompson is now beginning to benefit from the integration of its two former constituent businesses.
Elsewhere in the Group action taken to address a number of specific issues is achieving results. Dairy Farm has begun to show the benefit of repositioning its Australian supermarkets, although the same process of restructuring is not equally advanced in Europe. Dairy Farm has also announced the sale of its manufacturing joint venture interest in Nestlé Dairy Farm, which will have a positive effect on earnings.
Recent disposals of underperforming operations by Jardine Pacific will also enhance profitability, and this company continues the process of refining its businesses in order to concentrate on those with critical mass and potential for long-term growth.
Other initiatives have been taken to enhance Shareholder value, with both Jardine Strategic and Hongkong Land undertaking share repurchase programmes. Jardine Strategic acquired some 2.3% of its share capital in July and Hongkong Land has announced its intention to repurchase up to 5% of its shares.
OUTLOOK
In conclusion, Henry Keswick said, "Progress continues to be made in improving the operational performance of our businesses. While the economic outlook for China and the Hong Kong SAR appears positive, the prospects for other Asian economies are mixed and difficulties in Thailand in particular have affected our businesses there. This, together with reduced earnings from Jardine Fleming, will mean that the 1997 underlying profit will not reach the previous year's level, though the overall result will be enhanced by the gain on the sale of our life insurance business."
GROUP REVIEW
Jardine Pacific achieved a profit of US$40 million before non-recurring items for the half year, marginally ahead of 1996. The company sold its life assurance business, providing an exceptional profit of US$130 million, and disposed of its loss-making Sizzler restaurant chain in Australia. Marketing & Distribution achieved strong growth with good performances at JOS Technology Group, IKEA and Pizza Hut in Hong Kong. Results from Jardine Davies in the Philippines were held back by weak sugar and cement prices and the additional costs relating to new ventures. In Engineering & Construction, Gammon and Jardine Engineering Services were both adversely affected by the troubled Thai property market, but Jardine Schindler recorded profit growth.
Aviation Services performed steadily, but Jardine Transport Services' result was impacted by weakness in its feeder services shipping operations. Improved results from Jardine Securicor and Reliance were more than offset by a slow start at Colliers Jardine, leading to a reduced contribution from Property Services. In Financial Services, Pacific Finance continued to grow both assets and earnings, and Central Registration saw a modest increase in profit.
Jardine International Motors reported a net profit for the six months of US$45 million, an increase of 31% over 1996. Excluding an exceptional profit of US$12 million arising from a property disposal, profit declined by 5%. The group sold and delivered some 36,500 new and used vehicles, and turnover was US$1,101 million, an increase of 12%. Significant growth was recorded in the luxury car market in Hong Kong, but Zung Fu's turnover and margins were lower due to a change in model mix. The group's joint venture in mainland China saw improved demand and a higher contribution. Its 25%-owned Indonesian affiliate, P. T. Tunas Ridean, benefited from a stronger market and new model launches, while 13%-held Cycle & Carriage Bintang in Malaysia had a good start to the year. The market was also buoyant in the United Kingdom, where Lancaster recently expanded its operations and enjoyed improved margins. In France, the ending of government subsidies significantly affected the market, resulting in a lower contribution from Cica. In the United States, the overall result was held back by increased operating costs at a new facility in Honolulu.
Jardine Fleming recorded a reduced net profit after tax of US$29 million in the first half. Mixed performances of the Asia-Pacific markets and tighter margins made trading conditions difficult, while increased costs were incurred in new technology and in strengthening internal controls. Funds under management at 30th June were little changed at some US$20 billion and new funds were successfully launched in Taiwan, Hong Kong and Japan. Rowe-Price Fleming International, its 25% -owned associate in the United States, performed well and its funds under management increased to US$34 billion. Stock broking benefited from higher volumes in Hong Kong and Taiwan but the performance in other regional markets was affected by volatile economic conditions and currency uncertainty. Corporate finance and capital markets were active with the company participating in equity and equity-linked issues to a total value of some US$6 billion. The management restructuring, which began in the second half of 1996, is now effectively complete.
Jardine Lloyd Thompson recorded turnover of US$191million for the six months to 30th June, compared with US$177 million in 1996. The net profit before exceptional items was US$27 million, compared to US$26 million on a comparable basis in 1996 for the enlarged group. These results were the product of success in winning new business offset by exceptionally soft markets, reduced investment income and the effect on costs of the strong pound. An exceptional charge of US$14 million was made in respect of merger-related costs and the group has made a good start in integrating its operations, a process scheduled to be completed in the first half of next year. Overall, progress in trading and in achieving the benefits anticipated from the merger has been encouraging.
Jardine Strategic took measures to enhance earnings and net asset value per share by extending its share repurchase programme, which resulted in the cancellation of some 2.3% of its ordinary shares. In September, Jardine Strategic announced the conversion of its 7˝% preference shares into fully-paid ordinary shares which will improve cash flow.
Dairy Farm's sales, including associates, for the six months rose 5% to US$6,671 million. Trading profit increased by 27% to US$67 million, benefiting from an improvement in the performance of Franklins in Australia. Earnings per share were US˘2.17, up 76%, helped by lower interest costs from reduced working capital. In Australia, the "Fresh" formats are now well established, accounting for some 45% of sales. The disposal of the group's interest in the Nestlé Dairy Farm manufacturing joint venture has been agreed. This will enable the group to focus on its core retailing operations, and this year will improve trading profit and produce an exceptional gain of US$24 million. The group continues to develop in Asia and to adapt its businesses to meet changing retail environments. In Taiwan, preparations continue to enter the hypermarket sector. 50%-owned Maxim's restaurants continued its excellent performance in a highly competitive Hong Kong market. Kwik Save in the United Kingdom is preparing to implement a fundamental repositioning programme with the launch of own label products and the testing of a new store format. In Spain, Simago showed a modest improvement despite poor consumer demand.
Hongkong Land reported a net profit for the first half of 1997 of US$207 million. Excluding an exceptional gain in 1996, the result showed a 9% decline, attributable largely to the absence of investment gains from the company's 45% stake in Connaught Investors. Occupancy remained strong in the group's Hong Kong commercial portfolio and income was maintained despite generally negative rental reversions. Construction has commenced at its King's Road property in Hong Kong, and plans have been announced for the redevelopment of one of its prime Central District office buildings, Swire House, with completion scheduled for 2003. The group has taken a 40% interest in its first property joint venture in China, which plans to invest in a luxury residential development, while The China Water Company joint venture is progressing two new projects. Construction has also begun on the Marina Square site in Singapore and on a luxury apartment building in Manila. The group continues to seek property and infrastructure projects in the Region.
Mandarin Oriental achieved a net profit of US$34 million for the first half, an increase of 18%, though the second half is looking more difficult. Strong first half performances in Hong Kong and Manila together with an initial contribution from Mandarin Oriental Hyde Park, London produced a 25% growth in group turnover. Improved margins by the company's subsidiary hotels also contributed to a 33% increase in operating profit. Of its associates, The Oriental, Singapore improved its profit contribution and The Oriental, Bangkok did well in a difficult market. The group's hotels in Macau and Jakarta, however, suffered from lower visitor arrivals. The two new hotels in Hawaii and Indonesia are building their markets and have reduced losses. Mandarin Oriental's new hotel in Kuala Lumpur will be fully opened in 1998, and further opportunities in Asia and other selective international locations are being sought.
Cycle & Carriage recorded an interim profit of US$69 million compared with US$68 million in 1996. Earnings from its Singapore motor operations fell sharply due to the impact of intense pressure on margins in a contracting new car market, although the company achieved a significant growth in market share. In Malaysia, Cycle & Carriage Bintang continued to perform well with improvements in both sales volumes and margins, and the group's Australian motor business traded strongly. Cycle & Carriage's property interests made an increased contribution to earnings due to progress on a number of Singapore residential property developments.
Jardine Matheson Holdings Limited
Notes
1 BASIS OF PREPARATION
The unaudited half-year results have been prepared in conformity with International Accounting Standards. There have been no changes to the accounting policies described in the 1996 Financial Statements.
2 SHARE OF PROFITS LESS LOSSES OF ASSOCIATES
Results for the six months ended 30th June 1996 included US$70.2 million share of profit on disposal of Trafalgar House by Hongkong Land. The profit attributable to the Group, after taxation and outside interests, amounted to US$38.3 million.
3 SALE OF LIFE ASSURANCE BUSINESS
This represents the profit on disposal of Jardine Pacific's interest in Jardine CMG Life. The profit attributable to the Group, after taxation and outside interests, arising from the disposal amounts to US$130.3 million.
4 TAXATION
Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates and includes United Kingdom tax of US$12.3 million (1996: US$10.4 million).
5 PROFIT AFTER TAXATION AND OUTSIDE INTERESTS
6 NON-RECURRING ITEMS
7 DIVIDENDS
8 EARNINGS PER SHARE
Earnings per share are calculated on the profit after taxation and outside interests of US$281.1 million (1996: US$212.5 million) and on the weighted average number of 578.4 million (1996: 584.6 million) shares in issue during the period. The weighted average number excludes the Company's share of the shares held by subsidiary undertakings and the shares held by the Trustee under the Company's Senior Executive Share Incentive Schemes.
Earnings per share excluding non-recurring items are calculated on the profit after taxation and outside interests after adjusting for non-recurring profits of US$130.7 million (1996: US$30.7 million).
Full exercise of the options granted under the Senior Executive Share Incentive Schemes would not result in a material dilution of the earnings per share.
9 ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings includes US$36.8 million relating to the acquisition of motor dealerships in Jardine International Motors and US$11.3 million for increased interests in Dairy Farm and Mandarin Oriental.
Purchase of associates and other investments includes Jardine Strategic's increased holding in Edaran Otomobil Nasional and Hap Seng Consolidated of US$76.2 million and US$20.4 million respectively.
Sale of associates and other investments includes part proceeds on disposal of Jardine Pacific's interest in Jardine CMG Life of US$42.8 million.
10 INTERIM REPORT
The Interim Report will be posted to Shareholders on or about 13th October 1997. Copies may be obtained from Butterfield Corporate Services Limited, P.O. Box HM 1540, Hamilton HM FX, Bermuda; Independent Registrars Group Limited, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England; Coopers & Lybrand, Level 8, 580 George Street, Sydney NSW 2000, Australia and M & C Services Private Limited, 16 Raffles Quay #23-01, Hong Leong Building, Singapore 048581.
The interim dividend of US˘7.80 per share will be payable on 25th November 1997 to Shareholders on the register of members at the close of business on 3rd October 1997 and will be available in cash with a scrip alternative. The share registers will be closed from 6th to 10th October 1997, inclusive. Shareholders will receive their cash dividends in United States Dollars, unless they are registered on the United Kingdom branch register where they will have the option to elect for Sterling. These Shareholders may make new currency elections by notifying any one of the Company's registrars or the United Kingdom transfer agent in writing by 6th November 1997. The Sterling equivalent of dividends declared in United States Dollars will be calculated by reference to a rate prevailing ten business days prior to the payment date. Shareholders holding their shares through The Central Depository (Pte) Limited ("CDP") in Singapore will receive United States Dollars unless they elect, through CDP, to receive Singapore Dollars or the scrip alternative.
- end -
For further information, please contact:
| Jardine Matheson Limited Norman Lyle |
(852) 2843 8388 (office) |
| Ludgate Asia Limited Martin Spurrier |
(852) 2543 5413 (office) |
Full text of this announcement can be accessed through the Internet at "http://www.irasia.com/listco/sg/jm" and is also available through "First Call".
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