| To: Business Editor | 29th February 2000 For immediate release |
The following announcement was today issued to the London Stock Exchange.
JARDINE STRATEGIC HOLDINGS LIMITED
1999 PRELIMINARY ANNOUNCEMENT OF RESULTS
Results
* Based on the market price of the Company's holdings at year end
"Asian markets are expected to improve in 2000 and the effect this has in stimulating consumer spending will be key in the performance of the Group's businesses in the near term."
Henry Keswick, Chairman
29th February 2000
The final dividend of US?.90 per share will be payable on 7th June 2000, subject to approval at the Annual General Meeting to be held on 1st June 2000, to shareholders on the register of members at the close of business on 24th March 2000. The ex-dividend date will be on 22nd March 2000, and the share registers will be closed from 27th to 31st March 2000, inclusive.
JARDINE STRATEGIC HOLDINGS LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31ST DECEMBER 1999
PERFORMANCE
Jardine Strategic Holdings Limited today announced that the Group's underlying businesses saw some improvement in Asian markets during 1999, but profits were affected by negative rent reversions in Hongkong Land's property portfolio and a disappointing performance from Dairy Farm. These more than offset improvements in other areas, notably in Robert Fleming.
The Company recorded a profit for 1999, excluding non-recurring items, of US$140 million, a decrease of 37% from 1998. The overall result benefited from gains arising on disposals within Jardine Matheson. After non-recurring items, a profit of US$157 million was recorded, compared with a loss of US$32 million in 1998 which had suffered from provisions for asset impairment and reductions in property values.
Excluding non-recurring items in both years, earnings per share declined 36% to US?5.68. Including non-recurring items, earnings per share were US?7.52, compared with a loss per share of US?.56 in 1998.
The net asset value per share, based on the market price of the Company's holdings, recorded an increase of 24% to US$3.99 in 1999.
The Board has recommended an increased final dividend of US?.90 per share, which, together with the interim dividend of US?.60 per share, gives a dividend for the full year of US?4.50 per share compared with US?2.50 in 1998.
GROUP REVIEW
Turning to the operations, the Chairman, Henry Keswick, said that considerable progress has been made in concentrating the Group's businesses on areas where profitable market leadership can be achieved in clearly defined sectors. This has been in response to the shift in the business environment caused by globalisation and, more recently, the growth of e-business.
There have also been a number of initiatives specifically designed to enhance shareholder value within Group companies. The introduction of value added measurement tools and cost reduction programmes, including shared services initiatives, has encouraged the Group's businesses to concentrate on their core skills and their most profitable activities.
There are a wide range of internet and e-business initiatives in progress across the Group companies designed to increase revenues, improve customer service and rationalise cost structures. These individual initiatives are being undertaken within a Group framework that will enable the expertise to have a wider application.
Throughout this process of change, the Group continues to maintain a sound financial position, with the strong cash flows generated in the businesses supporting a high level of investment, both in enhancing their existing operations and in expansion. The Group has also increased its shareholding in most of its core investments.
The Group's policy is that the capital base of each business should match its strategic goals. In the second half of the year, Dairy Farm returned some US$180 million to shareholders by way of a special dividend to create a more efficient balance sheet. On the other hand, Mandarin Oriental is helping fund its expansion programme with a recently announced US$150 million rights issue of shares and convertible bonds, which Jardine Strategic is supporting.
BUSINESS OPERATIONS
Jardine Matheson produced an underlying profit of US$176 million in 1999, a decline of 8%. A strong performance by Robert Fleming and more positive results from Jardine Pacific's businesses were offset by losses in Jardine International Motors' United Kingdom operations and a lower contribution from Jardine Strategic itself.
Considerable progress was made during 1999 in introducing value-based management techniques to Jardine Pacific's decision-making and financial reporting processes and to incentive structures. These systems are designed to enhance the group's performance in the years to come.
Jardine International Motors' Hong Kong operations held up well in a challenging market with strong demand for new models helping it to maintain its market leadership. Preliminary discussions have taken place with DaimlerChrysler regarding their distribution of Mercedes-Benz vehicles in Hong Kong. The group expects to arrive at a mutually satisfactory arrangement, although there will be an impact on future profitability. The UK business has suffered both from problem franchises and from adverse market sentiment arising from the controversy over new car pricing. In the short term additional costs are being incurred in the reorganisation of the UK retail network and combined with the poor trading results these charges, which included lease provisions, have produced a significant loss in 1999.
Elsewhere in the group the businesses are making good progress, including a shared services initiative in the UK and the development of e-commerce initiatives, which are led by the French operations.
JLT's recent reorganisation into three core businesses: Risk Solutions, Corporate Risks and Services, has proved to be an effective method of managing the group. Being the only significant quoted UK broker is proving beneficial for JLT in terms of new business achieved. Insurance rates are also rising modestly in certain sections of the market, although it is too early to predict the effect on JLT's business.
The integration of Jardine Fleming has enabled the group to continue the globalisation of its asset management businesses, which will provide a solid platform for further expansion and growth. The creation of a global investment banking operation comprising securities, corporate finance, capital markets and banking has also enabled the group to develop a comprehensive and more efficient business structure, and enhance its services to clients.
Dairy Farm, the economic upturn in Asia Pacific remains uneven, and lacklustre consumer spending in Hong Kong has led to deflation which was compounded by a severe price war in the supermarket sector. For Dairy Farm, this and a setback in the recovery of Franklins in Australia in the second half have had a material effect on results. The retail businesses in New Zealand and Southeast Asia and drug and convenience stores in Hong Kong all performed well, however, and the new shared services initiative in Hong Kong has also contributed positively.
Dairy Farm's sales from its subsidiaries of US$5,918 million, were up 3%, with growth in Australia, Southeast Asia and New Zealand offset only in part by the decline in Hong Kong. The group's recurring EBITDA of US$205 million was 26% below last year, and its consolidated net profit was US$37 million compared to US$157 million in 1998. In November, Dairy Farm returned US$178 million to shareholders by special dividend. The resulting year end gearing ratio of 24% has enhanced the efficiency of the balance sheet.
In 1999 the group continued its investment programme opening 194 new stores, principally in Hong Kong, Australia and Singapore, and refurbishing others. Capital investment, including acquisitions, amounted to US$407 million, and further investment of US$300 million is planned for 2000. Dairy Farm, now market leader in food retailing in the fast growing Asia-Pacific region, also made several acquisitions in Malaysia, Singapore and India, and further investment opportunities are being actively considered.
Hongkong Land's key market began showing signs of recovery in 1999 as most of the excess capacity of new Grade "A" office space in Hong Kong's Central business district had been let by mid-year and rents stabilised. The improved outlook for Hong Kong was reflected in modestly rising commercial property values, and strengthening business conditions elsewhere in the region has led to an improved outlook for Hongkong Land's other investments.
Hongkong Land's net profit for the year excluding exceptional items declined by 28% to US$265 million, mainly due to the effect of negative rent reversions. The annual valuation of the group's investment properties produced a surplus of US$160 million, and shareholders' funds at the year end were up 3% at US$5,226 million.
The redevelopment of 11 Chater Road, at the heart of the group's Central portfolio, continued satisfactorily and completion is expected in mid-2002. The group's development properties at One Raffles Link, Singapore and 1063 King's Road, Hong Kong were completed and are letting well. Hongkong Land's progress on the development of an infrastructure portfolio was slow, but its investment in Hong Kong's Container Port has moved forward and construction of the new terminal is to commence shortly.
Mandarin Oriental has responded well to the challenging trading environment in Asia and most group hotels maintained or enhanced their competitive position. Occupancies improved in some regional markets, particularly in the latter part of 1999, although price competition remained intense.
Mandarin Oriental's profit before interest and tax for 1999 was US$43 million, down 11%, excluding non-recurring items. The decline was primarily due to lower room rates in Hong Kong, the cost of the renovation of its London hotel and higher infrastructure costs to support an expansion programme. Reduced interest and tax charges led to a smaller decline in net profit excluding non-recurring items of 10% at US$17 million. Net asset value per share rose 21% to US$1.17, reflecting improved values of its Hong Kong properties.
A US$150 million share and convertible bonds rights issue has been launched to fund an accelerated development programme. In this regard, the company is currently in negotiations for the possible acquisition of The Rafael Group.
Cycle & Carriage's profit for 1999, excluding non-recurring items, was S$98 million, down 8% on the previous year. Earnings from motor operations increased 196% in 1999 with improved performances by all major activities, but underlying property earnings declined 57% due to fewer development projects. The net profit increased significantly to S$113 million with the writeback of property provisions and profits from disposals.
In the motor sector Cycle & Carriage benefited from the encouraging improvements in the Singapore car market and a good recovery in Malaysia. In Australia, Astre Investments, which is now wholly-owned, produced a strong turnaround, countering a 6% decline in the market. Following successful negotiations with DaimlerChrysler in respect of the sale of Mercedes-Benz vehicles in Singapore, from January 2001 Cycle & Carriage will continue its exclusive dealership for the retail sales and the after sales aspects while DaimlerChrysler will undertake the wholesale activities.
Other Investments
The trading environment for Edaran Otomobil Nasional, in which the Group holds 19%, showed a significant improvement over 1998. The Malaysian car market rebounded and EON's new car sales increased by 67% in 1999 to over 110,000, while its financial services business also saw much better conditions.
The performance of Connaught Investors, which is held 45% by the company, 45% by Hongkong Land and 10% by Jardine Matheson, has shown further improvement, with its indirect investment in LVMH posting significant gains. At the year end the value of its investments was up 91% at US$1,033 million. Some 8% of its portfolio consisted of interests in Group companies, 70% was invested in other companies and 22% was held in cash or equivalent.
Tata Industries, in which the Group has a 20% interest, is the principal investment vehicle of the Tata Group for new ventures in India. Tata Industries' investments are mainly in the areas of telecommunications and auto-components.
OUTLOOK
In conclusion, Henry Keswick said, "Asian markets are expected to improve in 2000 and the effect this has in stimulating consumer spending will be key in the performance of the Group's businesses in the near term."
1 ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information contained in this announcement has been based on the audited results for the year ended 31st December 1999 which have been prepared in conformity with International Accounting Standards.
In 1999 the Group implemented IAS 1 (revised 1997) - Presentation of Financial Statements, IAS 10 (revised 1999) - Events After the Balance Sheet Date, IAS 14 (revised 1997) - Segment Reporting, IAS 16 (revised 1998) - Property, Plant and Equipment, IAS 17 (revised 1997) - Leases, IAS 19 (revised 1998) - Employee Benefits, IAS 22 (revised 1998) - Business Combinations, IAS 28 (revised 1998) - Accounting for Investments in Associates, IAS 31 (revised 1998) - Financial Reporting of Interests in Joint Ventures, IAS 35 - Discontinuing Operations, IAS 36 - Impairment of Assets, IAS 37 - Provisions, Contingent Liabilities and Contingent Assets, and IAS 38 - Intangible Assets.
With the exception of IAS 10 (revised 1999), IAS 19 (revised 1998), IAS 37 and IAS 38, there are no changes in accounting policy that affect profit or shareholders' funds resulting from the adoption of the above standards in these financial statements, as the Group was already following the recognition and measurement principles in those other standards.
In accordance with IAS 10 (revised 1999), dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date. In previous years dividends proposed or declared after the balance sheet date were recognised as a liability at the balance sheet date. The effect of this change has been to increase shareholders' funds at 1st January 1998 and 1999 by US$90.5 million and US$71.9 million respectively.
In accordance with IAS 19 (revised 1998), pension accounting costs for defined benefit plans are assessed using the projected unit credit method. Under this method, pension obligations are measured as the present value of the estimated future cash outflows by reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms of the related liability. Plan assets are measured at fair value. This is a change in accounting policy as in previous years pension accounting costs were assessed using the attained age normal method and pension obligations were discounted at the expected rate of return on plan assets. The comparative figures for 1998 have been restated to reflect the change in policy. The effect of this change has been to increase net profit for the year ended 31st December 1998 by US$3.6 million, and shareholders' funds at 1st January 1998 and 1999 by US$34.9 million and US$38.5 million respectively.
In accordance with IAS 38, pre-operating costs are expensed as they are incurred. This is a change in accounting policy as in previous years pre-operating costs were capitalised and amortised over a period of three to five years from the date of commencement of operation. The comparative figures for 1998 have been restated to reflect the change in policy. The effect of this change has been to decrease net profit for the year ended 31st December 1998 by US$1.2 million, and shareholders' funds at 1st January 1998 and 1999 by US$2.7 million and US$3.9 million respectively.
Following the implementation of IAS 37 on provisions, shareholders' funds at 1st January 1998 have increased by US$1.6 million and net profit for the year ended 31st December 1998 has decreased by US$1.6 million.
Other than described above, there have been no other changes to the accounting policies described in the 1998 financial statements. The comparative figures for 1998 have been adjusted or extended to conform with changes in presentation in the current year to take into account the disclosure requirements of the revised or new International Accounting Standards which the Group implemented in 1999.
2 REVENUE
3 OPERATING PROFIT
4 TAX
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$6.5 million (1998: US$7.5 million).
5 NET PROFIT/(LOSS)
6 NON-RECURRING ITEMS
Gross non-recurring items are shown before net financing charges and tax. Net non-recurring items are shown after net financing charges, tax and outside interests.
7 EARNINGS PER SHARE
Earnings per share are calculated on the net profit of US$156.8 million (1998: loss of US$32.4 million) and on the weighted average number of 895.2 million (1998: 910.1 million) shares in issue during the year. The weighted average number excludes the Company's share of the shares held by an associate and, in 1998, the shares held by a wholly-owned subsidiary undertaking.
Earnings per share excluding non-recurring items are calculated on the net profit after adjusting for non-recurring profits of US$16.4 million (1998: losses of US$256.0 million).
8 LONG-TERM BORROWINGS
9 DIVIDENDS
A wholly-owned subsidiary undertaking has waived the interim and final dividends on the ordinary shares held by it.
A final dividend in respect of 1999 of US?.90 (1998: US?.90) per share amounting to a total of US$114.4 million (1998: US$91.3 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting. The net amount after deducting the Company's share of the dividends payable on the shares held by an associate of US$26.5 million (1998: US$19.4 million) will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2000.
10 CORPORATE CASH FLOW AND NET DEBT
Corporate cash flow and net debt comprises the cash flows and net cash or debt of the Company and of its investment holding and financing subsidiary undertakings.
11 NOTES TO CONSOLIDATED CASH FLOW STATEMENT
Purchase of subsidiary undertakings
Purchase of subsidiary undertakings includes the Company's increased interest in Dairy Farm and Mandarin Oriental of US$46.3 million, and Dairy Farm's acquisition of Giant in Malaysia of US$58.4 million and stores in Australia and Singapore of US$17.8 million and US$17.7 million respectively.
Purchase of associates, joint ventures and other investments
Purchase of associates, joint ventures and other investments includes the Company's increased interest in Hongkong Land of US$34.2 million, and Dairy Farm's additional investment in DFI Géant in Taiwan of US$15.8 million.
Sale of associates, joint ventures and other investments
Sale of associates, joint ventures and other investments includes the repayment of loans from Mandarin Oriental's associate hotel in Singapore of US$20.9 million.
12 MARKET VALUE BASIS NET ASSETS
Net assets based on the market price of the Company's holdings:
13 ANNUAL REPORT
The Annual Report will be posted to shareholders on or about 25th April 2000. Copies may be obtained from Jardine Matheson International Services Limited, P.O. Box HM 1068, Hamilton HM EX, 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 final dividend of US?.90 per share will be payable on 7th June 2000, subject to approval at the Annual General Meeting to be held on 1st June 2000, to shareholders on the register of members at the close of business on 24th March 2000. The ex-dividend date will be on 22nd March 2000, and the share registers will be closed from 27th to 31st March 2000, inclusive. Shareholders will receive their dividends in United States Dollars, unless they are registered on the Jersey 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 19th May 2000. 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.
For further information, please contact:
| Jardine Matheson Limited Norman Lyle | (852) 2843 8216 (office) |
| Forrest International Limited David Dodwell Sue Gourlay | (852) 2522 6475 (office)|
Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 1999 can be accessed through the Internet at "http://www.irasia.com/listco/sg/jsh1".
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