| To: Business Editor | 3rd August 2000 For immediate release |
The following announcement was today issued to the London Stock Exchange.
Jardine Strategic Holdings Limited
Interim Report 2000 Highlights
Results
*Based on the market price of the Company's holdings at the period end
"The more vibrant economic environment in Asia is expected to continue for the remainder of the year providing a positive trading platform for our business interests. Dairy Farm's Australian operations are still experiencing difficulties, and Hongkong Land's results do not yet reflect the improved rental market. While, therefore, we do not expect a significant improvement in underlying profitability in the second half, we will benefit from non-recurring profit on disposals and we are confident that the Company is poised to show good growth over the next few years."
Henry Keswick, Chairman
3rd August 2000
The interim dividend of US¢4.60 per share will be payable on 18th October 2000 to shareholders on the register of members at the close of business on 25th August 2000. The ex-dividend date will be on 23rd August 2000, and the share registers will be closed from 28th August to 1st September 2000, inclusive
Jardine Strategic Holdings Limited
Interim Report 2000
Performance
Jardine Strategic Holdings Limited today announced that the trading environment for the Group's underlying businesses continued to improve as Asian markets saw further recovery. The results, however, have yet to fully reflect this improvement due mainly to losses in Dairy Farm, where the Hong Kong supermarket price war continues and difficulties persist in repositioning its Australian business. In addition, the leasing cycle in Hongkong Land has meant that improved rental levels will take time to feed through to profit, while the cost of investment in future growth by Mandarin Oriental is impacting current earnings.
Net profit for the period excluding non-recurring items decreased 43% to US$49 million, compared with US$84 million for the same period in 1999. Including non-recurring items, net profit fell 17% to US$71 million. Earnings per share excluding non-recurring items were US¢5.48, compared to US¢9.37 in the first half of 1999. Including non-recurring items, earnings per share decreased 16% to US¢7.98. An unchanged interim dividend of US¢4.60 per share has been declared.
Business Developments
Turning to the developments, the Chairman, Henry Keswick, said that the Group companies continue to be reshaped to realise value created by past investment and to direct resources to areas of growth. In May, Mandarin Oriental acquired The Rafael Group for US$143 million, adding six new hotels that will provide critical mass in the United States and Europe and will enhance Mandarin Oriental's brand. The acquisition, which brings to 19 the number of hotels under management, followed a rights issue at the start of the year that was underwritten by Jardine Strategic.
In March, Cycle & Carriage acquired a 25% interest in Astra International which has since been increased to 31% for a total investment of some US$380 million. Astra International is one of Indonesia's largest conglomerates with a dominant presence in the automotive sector and interests in agribusiness, heavy industry, information technology and financial services.
In June, Jardine Matheson announced proposals for the privatisation of the 25% minority interest in Jardine International Motors through a scheme of arrangement. Upon acceptance by the minority shareholders, the scheme will become effective by the end of September at a cost to Jardine Matheson of approximately US$63 million.
The Group is committed to shareholder value through improving its focus on its core businesses and enhancing the efficiency of its use of capital. This year Jardine Strategic has increased its holdings in Mandarin Oriental by 6% and Hongkong Land by 1%. In addition Jardine Matheson has increased its stake in Jardine Strategic by 5% and bought back its own shares.
Jardine Strategic will shortly be receiving net proceeds of some US$250 million from the sale of its interest in Robert Fleming. These proceeds will be largely used to increase its stakes in Group companies and to initiate a share repurchase programme.
Jardine Matheson has also undertaken a comprehensive review of the options open to it for utilising the proceeds from the sale of its interest in Robert Fleming, and has concluded that the best interests of its shareholders would be served by giving them the opportunity to receive a substantial return of capital. Jardine Matheson shareholders are being invited to tender their shares for repurchase at prices between US$4.80 and US$5.50 per share, and Jardine Matheson will repurchase of up to 12% of its outstanding share capital. There is an option to increase to 20% should there be sufficient demand and shareholder approval is given. The Board of Jardine Strategic has determined that, in the current market conditions, it shall retain all of its shares in Jardine Matheson as a long-term investment.
Outlook
In conclusion, Henry Keswick said, "The more vibrant economic environment in Asia is expected to continue for the remainder of the year providing a positive trading platform for our business interests. Dairy Farm's Australian operations are still experiencing difficulties, and Hongkong Land's results do not yet reflect the improved rental market. While, therefore, we do not expect a significant improvement in underlying profitability in the second half, we will benefit from non-recurring profit on disposals and we are confident that the Company is poised to show good growth over the next few years."
Business Operations
Jardine Matheson
Jardine Matheson produced a net profit for the period, excluding non-recurring items, of US$117 million, an increase of 32% over for the same period in 1999. Including non-recurring items, net profit rose 94% to US$180 million. There were improved performances from the Jardine Pacific companies and from Robert Fleming, while Jardine Lloyd Thompson showed further growth. Jardine International Motors suffered from continuing difficulties in its United Kingdom operations.
Jardine Pacific achieved a profit before non-recurring items of US$45 million in the first half, up 115%, with most businesses within its portfolio benefiting from the improved trading conditions in Asia. The result was further enhanced by a non-recurring profit of US$65 million, primarily from value released on the sale of a 50% interest in Chubb China. The restructuring undertaken last year has also produced significant savings in central overheads.
In marketing and distribution, Jardine OneSolution (JOS) increased its profit by 84%. JOS is developing its systems integration and application solutions business, and has increased its regional presence with a number of acquisitions in Singapore and Malaysia. Restaurants benefited from both stronger trading conditions, and IKEA in Hong Kong also achieved a marked turnaround. Jardine Engineering again did well, and Gammon produced improved profits. HACTL benefited from enhanced operating efficiencies and a significant increase in cargo volumes at Chek Lap Kok. Shipping services also achieved an excellent result. The contribution from the property and financial services businesses reduced following the sale of Central Registration at the end of 1999 and a reduction in the stake in UMF Singapore.
Jardine International Motors', including its associates and joint ventures, sales of motor vehicles in the first half increased by 14% over the same period in 1999 to some 88,500. Net profit for the six months was US$19 million, a decrease of 25%. The proposed privatisation of Jardine International Motors by way of a scheme of arrangement was announced in June. The scheme is expected to become effective by the end of September, and the cost of acquiring the 25% minority interest is some US$63 million. The group has reached agreement with DaimlerChrysler AG on the future arrangements for the distribution of Mercedes-Benz motor vehicles in the Hong Kong and Macau markets under which Zung Fu will continue as exclusive dealer in Hong Kong and Macau after June 2002. Overall the group's businesses performed well in the first half with the exception of the United Kingdom which is still being adversely affected by the controversy over manufacturers' pricing levels and where significant costs are being incurred in the reorganisation of the business.
Jardine Lloyd Thompson again announced record results with turnover for the six months increasing 9% to £138 million and pre tax profit, up 7% at £35 million. The results reflect further strong new business development across the entire group and an indication of a slightly hardening market in some areas of the business. There were also benefits arising from improvements in process efficiencies within Corporate Risks. Revenue growth of 12% has been achieved in Risk Solutions, 14% in Corporate Risks and 5% in Services. In the first six months there have been significant developments in the group's structure with the creation of Capital Risk Group in New York, a joint venture with The Blackstone Group; the acquisition of Burke Ford in the United Kingdom; and the launch of JLT InterActive, an e-commerce initiative in the United States aimed at the affinity group market.
Robert Fleming reported an extremely strong performance for its financial year ended 31st March 2000. The integration of Fleming Martin and Jardine Fleming enabled the group to deliver a more competitive service to its clients, which, together with the strong recovery in the Asian markets, contributed to significantly improved results. In April, The Chase Manhattan Corporation made an offer for Robert Fleming. It is believed that the businesses of Flemings and Chase are complementary both in terms of product range and geographic spread. It was felt that the sale gave Flemings the best opportunity for long-term growth, while releasing the significant value built up by Jardine Matheson through its original 50% stake in Jardine Fleming.
Dairy Farm
Dairy Farm's performance has been dominated by difficult operating conditions in its two largest businesses. In Hong Kong, there are some positive signs in the supermarket price war, with margins rising gradually, but it is expected that the effects will continue to be felt into 2001. In Australia, Franklins has experienced a decline in sales at a time when it is investing in repositioning its brand. While the current initiatives should deliver benefit, acceptable levels of financial performance are not expected until 2002. Dairy Farm's other businesses are performing at or above expectations, and of particular significance has been the successful integration of the Giant chain in Malaysia and the Tops stores in Singapore. Against this mixed background Dairy Farm made a loss of US$51 million in the first six months, and has therefore not declared an interim dividend. The second half of the year is expected to remain difficult as the company maintains its price position in Hong Kong and continues to invest in improved systems and stores at Franklins. This investment strategy is necessary to secure the group's longer-term performance and achieve its goal of becoming the leading food and drugstore retailer in the region.
Hongkong Land
A strong recovery in demand in Hong Kong's Grade A commercial property market, coinciding with tightening supply, has led to significantly increased rents. Vacancy was below 2% in Hongkong Land's office portfolio, and is likely to remain low in the absence of any significant new supply over the next two years. However, the reversion pattern of Hongkong Land's leases will delay the impact of this recovery on profit. Net profit for the first six months of 2000 was US$118 million, a decline of 21%. The positive impact on capital values of the recovery in rentals will be measured at the year end.
Hongkong Land's office development in Singapore, One Raffles Link, opened fully let in the first half, and the retail element was successfully launched. In Hong Kong, 11 Chater Road remains on track for completion in 2002. The 29%-owned associate, Asia Container Terminals, completed its debt financing and awarded the main construction contract for the new container terminal in Hong Kong. In Mainland China, the group's power and water infrastructure investments made progress, and a small investment was made in the India Project Development Fund. Sensibly-priced investment opportunities are becoming more common in Asia, which, despite the current impact on its earnings of negative rent reversions, Hongkong Land is well positioned to pursue.
Mandarin Oriental
Mandarin Oriental took a significant step forward in its development when it acquired the prestigious Rafael Group in May, increasing its room portfolio from 5,800 to 7,000. The US$143 million acquisition was funded by a rights issue. Operationally, there was a continued recovery in Hong Kong, but that was more than offset by costs associated with the closure of its London property, which reopened in May following an extensive renovation programme. The net profit for the period at US$3 million, compared with US$9 million in 1999. In the rest of Asia, poor markets affected the hotels in Manila and Jakarta; The Oriental, Bangkok did well, commencing a US$30 million room renovation programme; while the hotels in Singapore and Macau performed satisfactorily. Results from the group's North American hotels continued to improve. The strategy is to position Mandarin Oriental as one of the world's leading luxury hotel brands, with a growing presence in North America, Europe and Asia, increasing the number of rooms under management to 10,000. In the second half of 2000 the group will begin to benefit from the reopening of the London hotel and the continuing recovery in Hong Kong.
Cycle & Carriage
Cycle & Carriage has acquired a 31% interest in Astra International for an investment of some US$380 million. Astra International is one of Indonesia's largest conglomerates with a dominant presence in the automotive sector and further interests in agribusiness, heavy industry, information technology and financial services. The acquisition is a significant step in Cycle & Carriage's strategy of diversifying its earnings stream.
Cycle & Carriage's profit for the first half of 2000, excluding non-recurring items, was S$83 million, a 57% increase. Earnings from motor operations rose 164% with improved performances from both Singapore and Malaysia. Underlying property earnings declined by 67% due to fewer development projects. The overall improved trading was, however, largely offset by foreign exchange losses on the debt of Astra International. The good trading performance of Cycle & Carriage is expected to be sustained in the second half of the year, albeit at a slower rate. The performance of Astra International should also continue to improve, although the level of its contribution will depend upon the stability of the Rupiah.
Other Investments
Jardine Strategic's 19%-held investment, Edaran Otomobil Nasional continued to record an improved performance as the motor market in Malaysia strengthened. Connaught Investors saw modest gains as its net assets rose by some 3% during the half year to reach US$1,061 million.
1. Accounting Policies and Basis of Preparation
The unaudited condensed interim financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting. The accounting policies used in the preparation of the interim condensed financial statements are consistent with those used in the annual financial statements for the year ended 31st December 1999.
The Group's reportable segments are set out in note 2.
2. Revenue
3. Operating (Loss)/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$1.2 million (1999: US$2.4 million).
5. Net Profit
6. Non-recurring Items
7. Earnings Per Share
Earnings per share are calculated on net profit of US$70.6 million (1999: US$85.1 million) and on the weighted average number of 884.7 million (1999: 900.7 million) shares in issue during the period. The weighted average number excludes the Company's share of the shares held by an associate and, in 1999, also 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$22.1 million (1999: US$0.7 million).
8. Dividends
An interim dividend in respect of 2000 of US¢4.60 (1999: US¢4.60) per share amounting to a total of US$53.1 million (1999: US$53.1 million) is declared by the Board. The net amount after deducting the Company's share of the dividends payable on the shares held by an associate of US$13.9 million (1999: US$12.2 million) will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2000.
9. Notes to Consolidated Cash Flow Statement
Total consideration of US$147.7 million related to the acquisition of The Rafael Group by Mandarin Oriental.
(c) Purchase of associates, joint ventures and other investments
Purchase of associates, joint ventures and other investments included the Company's increased interest in Hongkong Land of US$37.5 million.
10. Corporate Cash Flow and Net Debt
Corporate cash flow and net debt comprises the cash flows and net cash/debt of the Company and of its investment holding and financing subsidiary undertakings.
11. Capital Commitments and Contingent Liabilities
(b) Various Group companies are involved in litigation arising in the ordinary course of their respective businesses. Having reviewed outstanding claims and taking into account legal advice received, the Directors are of the opinion that adequate provisions have been made in the financial statements.
12. Market Value Basis Net Assets
The Company's investment in Jardine Matheson has been calculated by reference to the market value of US$3,490.9 million (1999: US$4,104.9 million) less the market value of Jardine Matheson's interest in the Company.
Net assets per share are calculated on 853.0 million (1999: 890.0 million) shares outstanding at the end of the period which exclude the Company's share of the shares held by an associate and, in 1999, also the shares held by a wholly-owned subsidiary undertaking.
13. Post Balance Sheet Event
On 1st August 2000, the sale of the Company's interest in Robert Fleming to Chase Manhattan was declared wholly unconditional. The net proceeds of approximately US$250 million will be used to increase its interests in Group companies, and to initiate a share repurchase programme.
14. Interim Report
The Interim Report will be posted to Shareholders on or about 25th August 2000. Copies may be obtained from Jardine Matheson International Services Limited, P.O. Box HM 1068, Hamilton HM EX, Bermuda; Capita 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 US¢4.60 per share will be payable on 18th October 2000 to shareholders on the register of members at the close of business on 25th August 2000. The ex-dividend date will be on 23rd August 2000, and the share registers will be closed from 28th August to 1st September 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 28th September 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 |
| Forrest International Limited Anne Forrest David Dodwell | (852) 2522 6475 (852) 2501 7902 |
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