| To: Business Editor | 17th September 1998 For immediate release |
The following announcement was today issued to the London Stock Exchange.
JARDINE MATHESON HOLDINGS LIMITED
INTERIM REPORT 1998 HIGHLIGHTS
Results
"The severity of the current economic downturn across Asia presents a challenging environment for all our businesses, and the second half of 1998 is not expected to show any improvement. While the Group's results will continue to feel this impact for the foreseeable future, our prudent financing policies and strong underlying businesses enable us to face the current recession in Asia with confidence."
Henry Keswick, Chairman
17th September 1998
The interim dividend of USą7.80 per share will be payable on 24th November 1998 to Shareholders on the register of members at the close of business on 2nd October 1998 and will be available in cash with a scrip alternative. The share registers will be closed from 5th to 9th October 1998, inclusive.
JARDINE MATHESON HOLDINGS LIMITED
INTERIM REPORT 1998
PERFORMANCE
Jardine Matheson Holdings Limited today announced that the Group's net profit for the first half of 1998 was US$103 million, compared with US$280 million in 1997. Excluding non-recurring items from both periods, profit declined by 33% to US$101 million, with most of the Group's markets suffering from reduced demand as a result of deep recession.
Earnings per share for the period were USą17.59, compared to USą48.37 in the first half of 1997. Excluding non-recurring items, earnings per share were USą17.13, down 34%.
The Board has declared an unchanged interim dividend of USą7.80 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 Asia's economic downturn intensified during the first half of 1998, and consumer confidence is at a low ebb in most of the Group's markets, leading to pressure on sales and margins. The structural changes necessary for any recovery in the Asian economies are only now beginning to be implemented, and the Group expects markets to remain depressed for some time. While this will continue to affect its revenues, the Group has taken firm measures to reduce costs and to ensure that its businesses remain soundly financed.
The recessionary environment has also had a sharp impact on property values across Asia, and this will be reflected in a significant decline in the year-end valuations of the property portfolios of Hongkong Land and other Group companies.
Against this difficult economic background, the Group has made good progress in furthering its strategy of greater focus on core businesses in the Asia-Pacific Region. A number of small or poorly performing operations have been disposed of by Jardine Pacific and Dairy Farm, and the Group's priority is now on strengthening the market position of its continuing businesses.
Hongkong Land continues to upgrade the quality of its Central Hong Kong property portfolio where preparations continue for the redevelopment of a new 650,000 sq.ft office building at 11 Chater Road. Dairy Farm has made significant investments in upgrading its stores and in building a strong central infrastructure which will support its growth in the Region. Despite the impact of depressed Asian markets on Jardine Fleming's results, the company has successfully maintained its market position as one of the Region's leading investment banks.
Mandarin Oriental is refurbishing its London hotel, will shortly open its new hotel in Kuala Lumpur and has commenced construction of its latest development in Miami. Jardine International Motors is undertaking the reorganization of the recently acquired Appleyard business and it is now one of the leading motor dealership groups in the United Kingdom. Jardine Lloyd Thompson is achieving the expected synergies from its merger last year and has increased profit despite a very competitive market.
CORPORATE EVENTS
Subject to market conditions, the Company intends to utilise the powers granted by Shareholders to introduce a share repurchase programme with the purpose of enhancing Shareholder value.
YEAR 2000
As reported in the 1997 Annual Report, the Group has a programme in place to address its exposure to the Year 2000 issue. Work is progressing to ensure that millennium compliance is achieved for all business critical systems, and the Board continues to monitor progress on a regular basis. Costs are expensed as incurred.
OUTLOOK
In conclusion, Henry Keswick said, "The severity of the current economic downturn across Asia presents a challenging environment for all our businesses, and the second half of 1998 is not expected to show any improvement. While the Group's results will continue to feel this impact for the foreseeable future, our prudent financing policies and strong underlying businesses enable us to face the current recession in Asia with confidence."
OPERATING REVIEW
Jardine Pacific recorded a profit before non-recurring items of US$25 million in the first half, a decline of 40%. The company has now largely completed its programme of divesting non-core activities with the disposal of The Optical Shop and Matheson InvestNet during the first half and the subsequent sale of its interests in Reliance and Republic Cement in the Philippines.
The difficult economic environment in the first six months has taken its toll. Marketing & Distribution was severely impacted, with Wines & Spirits, JOS Technology, IKEA and Jardine Davies all recording declines in profit. Restaurants, however, continued to perform well. Engineering & Construction produced a steady performance.
Despite a satisfactory first half, the profitability of Airport Services will be affected by the cost of the move to the new Hong Kong International Airport, where there has been a significant investment; and there may be some impact from the problems experienced after the start-up in July. Jardine Transport Services showed steady improvement, although the Hong Kong Mid-Stream activities saw a decline in throughput. In Property Services, Jardine Securicor produced a lower profit in the face of difficult market conditions. The volatile financial markets and an increase in non-performing loans affected the instalment finance business.
Jardine International Motors reported a net profit for the six months of US$28 million, a decrease of 12% excluding the exceptional item in 1997. The group sold and delivered some 69,200 new and used vehicles. Turnover was US$1,860 million, a 69% rise, principally due to the BPW and Appleyard acquisitions in the United Kingdom in 1997. The delivery of a substantial order backlog sustained Zung Fu's business in Hong Kong in the first half, but the market has declined in an economy suffering from severe recession. An improved performance from the group's Mainland China joint venture also weakened by mid year. In the United Kingdom the group benefited from a strong new vehicle market, but the result was affected by higher than expected reorganization costs in Appleyard and lower used car values in its vehicle finance business. Some improvement was seen in Cica in France, and there was a significant growth in profit in the Californian dealership. The poor Asian markets and reorganization costs in the United Kingdom will depress the full year's performance to below that of 1997, and a decline in the value of its Hong Kong properties will be recognised in its year-end balance sheet.
Jardine Fleming recorded a pre-tax profit for the first half of US$13 million, breaking even after tax and minority interests. Asia-Pacific markets continue to reflect the deepening economic problems of the Region with stock markets and currencies experiencing significant volatility. Funds under management and advice at 30th June were US$19.7 billion, including for the first time US$2.4 billion of assets invested in Japan from London, and were little changed since the start of the year. The fund management businesses in Taiwan and Japan raised significant amounts of new money during the period, and Rowe Price Fleming International, Jardine Fleming's 25%-held United States associate, continued to perform well. Jardine Fleming Securities increased its share of the markets in which it operates, and the international seat on the Singapore Stock Exchange was activated in June, thus completing the group's membership of all major stock exchanges in Asia. Corporate Finance and Capital Markets saw a significant reduction in the flow of new issues but benefited from a growing number of advisory mandates. The group's position in its markets remains strong, but the difficult operating environment is expected to continue to affect profitability for the foreseeable future.
Jardine Lloyd Thompson recorded turnover of Ł119 million for the six months, compared with Ł117 million in 1997. The pre-tax profit before exceptional items for the period was Ł30 million, compared to Ł27 million in the prior year. The benefits and cost savings arising from the merger of JIB Group and Lloyd Thompson Group at the beginning of 1997 have enhanced the results. Insurance markets continue to be exceptionally weak, and the progress that has been achieved against this background is encouraging.
Jardine Strategic's 17%-held investment, Edaran Otomobil Nasional, in Malaysia is facing an extremely difficult operating environment in its two main businesses, motor car distribution and finance, and the company is taking steps to rationalise its operations. Jardine Strategic's carrying value of its investment is currently substantially higher than the market value and will be reviewed at the year end.
Dairy Farm's sales from continuing activities for the six months were US$2,889 million, a 10% decrease over 1997 being due to adverse currency movements offsetting underlying growth. Net profit from continuing activities rose 6% to US$47 million, while gains from disposals enabled the overall net profit to increase by 118% to US$87 million. Good performances were achieved in Australia and New Zealand, although currency declines reduced their contribution. There was steady growth in Hong Kong, and a single management structure is being introduced to improve the efficiency of the retail operations. In Taiwan, the group's first joint venture hypermarket is to open by the year end. Dairy Farm has increased its investment in organizational structure and core competencies to support the growth of its retail businesses in the Asia-Pacific Region. The quality of Dairy Farm's major businesses continues to improve, and its financial strength will allow it to take advantage of investment opportunities.
Hongkong Land's interim profit was US$169 million, an 18% decline over the first half of 1997 due largely to a provision of US$30 million against certain Southeast Asian assets. Underlying earnings per share were steady at USą7.87. Occupancy levels remain high in its Hong Kong portfolio despite the increasing competition. But market rents have fallen sharply, which will impact results increasingly during the course of the three-year rent review cycle. Upgrading of the group's properties in Hong Kong continues, and preparations are under way for the redevelopment of 11 Chater Road. Good progress is being made on its developments in Hong Kong, Singapore and Manila, although market conditions have weakened considerably. A decrease of some 35% in the value of its Hong Kong investment properties is believed to have taken place so far this year, in line with the Grade 'A' market, and further declines are likely. The group will revalue its investment properties at the year end, at which time it may also review the values of its development properties. Hongkong Land retains the financial capacity to undertake its current development programme, but a cautious approach is being taken to further new projects.
Mandarin Oriental suffered from the effects of declining travel and tourism in Asia Pacific, with trading profit falling 52% to US$23 million. Net profit declined 72% to US$10 million with higher interest costs and a relatively larger tax charge. There was a significant reduction in visitor arrivals in Hong Kong, although the group's hotels did well to increase market share. In London, the extensive renovation programme of Mandarin Oriental Hyde Park is currently affecting results. Mandarin Oriental, Manila achieved profit growth through cost control and The Oriental, Bangkok had a good six months. However, the group's other Asian hotels made a reduced contribution. Kahala Mandarin Oriental, Hawaii reported increased revenues despite a decline in arrivals from Japan. Mandarin Oriental, Kuala Lumpur will soon open, albeit into a depressed market, while in the United States work has begun on the group's new 25%-held hotel in Miami. Declines in Hong Kong hotel values will be reflected in the revaluation of the group's assets at the year end. The group is maintaining a tight control over costs in the face of the weak markets in Asia, while ensuring that it does not compromise its standards.
Cycle & Carriage reported a net loss for the first half of S$21 million, after an exceptional charge of S$68 million against foreseeable losses on development properties, compared with a profit of S$99 million in 1997. Excluding the exceptional charge, earnings were S$47 million, down 53%. Earnings from its Singapore motor operations weakened due to the impact of lower volumes and continuing pressure on margins. In Malaysia, the non-national car market declined by 85%, and Cycle & Carriage Bintang's motor operations recorded a loss. The group's Australian motor business also suffered from adverse currency movements eroding margins. Further progress was made on a number of Singapore residential property developments and property earnings increased; however, the need for an exceptional charge produced an overall loss. There is unlikely to be any improvement in operating profit in the second half of the year.
1. BASIS OF PREPARATION
The unaudited half-year results have been prepared in conformity with International Accounting Standards. In accordance with the revised International Accounting Standard 12, deferred taxation is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values. This is a change in accounting policy as in previous years deferred taxation is provided to the extent that a liability or an asset is expected to be payable or receivable in the foreseeable future. The comparative figures for 1997 have been restated to reflect the change in policy. The effect of this change has been to decrease the profit after taxation and outside interests for the six months ended 30th June 1997 and for the year ended 31st December 1997 by US$1.3 million and US$4.5 million respectively, and the Shareholders' funds at 31st December 1997 by US$43.5 million. There have been no other changes to the accounting policies described in the 1997 Financial Statements.
2. EXCEPTIONAL ITEMS
The exceptional items in 1997 included a profit of US$136.7 million on the sale of Jardine Pacific's life assurance business in the six months ended 30th June and a provision of US$79.4 million against the Group's investment in Edaran Otomobil Nasional at the year end.
3. 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$7.8 million (1997: US$12.8 million).
4. PROFIT AFTER TAXATION AND OUTSIDE INTERESTS
5. NON-RECURRING ITEMS
The comparative figures have been restated to include the 1997 operating results of activities disclosed as discontinued in the current period.
6. DIVIDENDS
7. EARNINGS PER SHARE
Earnings per share are calculated on the profit after taxation and outside interests of US$103.4 million (1997: US$279.8 million) and on the weighted average number of 588.0 million (1997: 578.4 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$2.7 million (1997: US$129.7 million).
Diluted earnings per share are calculated on the weighted average number of 588.4 million (1997: 579.6 million) shares after adjusting for the number of shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes.
8. ACQUISITIONS AND DISPOSALS
Purchase of associates and other investments includes Jardine Pacific's increased funding of its air cargo terminal business in Hong Kong of US$22.4 million and Dairy Farm's acquisition of a 32% effective interest in P.T. Hero Supermarket of US$39.1 million.
Sale of subsidiary undertakings includes US$119.9 million relating to the disposal of Simago by Dairy Farm.
Sale of associates and other investments includes US$292.8 million arising on the disposal by Dairy Farm of its interest in Somerfield which it acquired in consideration for its interest in Kwik Save.
9. INTERIM REPORT
The Interim Report will be posted to Shareholders on or about 8th October 1998. Copies may be obtained from Butterfield Corporate Services Limited, P.O. Box HM 1540, Hamilton HM FX, Bermuda; IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England and M & C Services Private Limited, 16 Raffles Quay #23-01, Hong Leong Building, Singapore 048581.
The interim dividend of USą7.80 per share will be payable on 24th November 1998 to Shareholders on the register of members at the close of business on 2nd October 1998 and will be available in cash with a scrip alternative. The share registers will be closed from 5th to 9th October 1998, 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 the United Kingdom transfer agent in writing by 5th November 1998. 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.
For further information, please contact:
| Jardine Matheson Limited Norman Lyle | (852) 2843 8216 (office) |
| Ludgate Asia Limited Martin Spurrier | (852) 2543 5413 (office) |
Full text of this announcement can be accessed through the Internet at
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