| To: Business Editor | 22nd February 2000 For immediate release |
CYCLE & CARRIAGE LIMITED
1999 PROFIT AND DIVIDEND ANNOUNCEMENT
The following press release was issued today by the Company's 25%-owned associate, Cycle & Carriage.
For further information please contact:
| Forrest International Limited Sue Gourlay |
Tel: | (852) 2522 6475 (office) (852) 2501 7936 (direct) |
Full text of this and other Group announcements can be accessed through the Internet at "http://www.irasia.com/listco/sg/jshl".
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RESULTS
The Board of Directors announced today an unaudited consolidated profit attributable to shareholders of S$113.2 million for the year ended 31 December 1999. This follows the weak performance in 1998 which was due mainly to an exceptional charge of S$133.7 million for provision for foreseeable losses on development properties. The 1999 results which benefited from an earlier and stronger recovery of the region's economies from the 1997 crisis, included a writeback of S$9.9 million of the provision for foreseeable losses on development properties and an extraordinary profit of S$5.2 million from the sale of the Group's interests in Sri Temasek Limited and Guardian SEA. Excluding the exceptional and extraordinary items, earnings were S$98.1 million, down 8% on 1998.
The earnings per share were 41.9 cents, excluding the exceptional and extraordinary items, compared with 45.7 cents for the previous year.
The Group's net asset value per share increased by 6%, due primarily to the increase in profit attributable to shareholders.
DIVIDEND
The Directors recommend a final dividend of 15 cents or 15% (1998: 10 cents or 10%) per share, less income tax at 26% (1998: 26%), which, together with the interim dividend of 5 cents or 5% per share and a special dividend of 10 cents or 10% per share in celebration of the Group's centenary, will make a total annual dividend in respect of 1999 of 30 cents or 30% per share.
The final dividend, if approved, will be payable in cash on Monday, 5 June 2000 to shareholders whose registrable transfers are received by the share registrars, Barbinder & Co Pte Ltd, 9 Penang Road, #10-20 Park Mall, Singapore 238459 by 5.00 p.m. on Monday, 22 May 2000.
CORPORATE EVENTS
During the year, the Group restructured its interests in a number of its major investments.
In April 1999, the Company acquired an additional 20% stake in UMF (Singapore) Ltd for S$14.5 million, thus increasing its interest to 40%. The purchase of the additional stake is in line with the Group's plan to increase its participation in automotive financing in Singapore.
The Company increased its interest in Astre Investments Pte Ltd ("Astre") by 6.3% to 81.4% in April 1999 for a consideration of S$13.1 million and acquired the balance of 18.6% for S$25.4 million in July 1999, making it a wholly-owned subsidiary. Astre is the holding company for several Australian companies which handle the Hyundai and Audi franchises in Australia.
Following the completion of the acquisition of a further 20% stake in Selangor Ice Company Sdn Bhd ("SIC") from Cold Storage (Malaysia) Bhd, thereby raising its equity interest in SIC from 30% to 50%, the Company announced that it had entered into a conditional optional agreement with Guardian Investments (Malaysia) Pte Ltd ("GIMPL") giving GIMPL a 10-year option to purchase the Company's 50% interest in SIC. The Company had at the same time entered into an agreement with Guardian Pharmacy Holdings Ltd ("GPHL"), a wholly-owned subsidiary of Dairy Farm, to sell its 30% stake in Guardian SEA. The sale of the stake in Guardian SEA was completed on 31 December 1999, giving rise to the Group's extraordinary gain of S$3.3 million. GIMPL exercised its option with regard to SIC on 30 December 1999 and this transaction will be completed in 2000.
Changes to the Mercedes-Benz Wholesale Business
In December 1999, a memorandum of understanding was signed with DaimlerChrysler AG ("DaimlerChrysler"), the manufacturer and master franchise holder of Mercedes-Benz vehicles worldwide in respect of the distribution and sale of Mercedes-Benz products in Singapore. Definitive agreements are expected to be finalised and signed early this year.
Under the new arrangement DaimlerChrysler will undertake the wholesale activities of the Mercedes-Benz operations while the Company will be DaimlerChrysler's exclusive dealer in Singapore handling the retail sales and after sales aspects from 1 January 2001.
The Company will hold a 24.9% stake in the new wholesale company to be formed by DaimlerChrysler enabling it to play an active role in the new wholesale company, although it will not participate fully in the profit & loss of the new company.
This new arrangement will enable the Company to continue its long term relationship with DaimlerChrysler with positive benefits.
In Malaysia, DaimlerChrysler has begun preliminary discussions with our 48% owned associate, Cycle & Carriage Bintang on their interest in participating in the Mercedes-Benz wholesale business there.
OPERATIONS REVIEW
Motor
Earnings from the motor operations grew to S$62.8 million, almost double the profits of 1998 due to improved performances in all the Group's major markets.
The Singapore car market increased by 38% to 38,559 units due to an increase in the number of Certificates of Entitlement ("COE") that were made available. Earnings for the Singapore motor operations increased by 26% on 1998 to S$50.4 million. Cycle & Carriage's share of the passenger car market decreased marginally to 20% for the year.
Mercedes-Benz sales of 2,468 units were assisted by strong demand for the new S-Class which became available for delivery in the second quarter of 1999. Mitsubishi and Proton both reflected increases on 1998 with sales of 4,079 and 1,201 units, respectively. Mercedes-Benz commercial vehicle sales increased by 51% due to the success of the Vito van while Mitsubishi commercial vehicle sales were satisfactory. Overall, however margins remained under pressure due to keen competition between motor distributors, high COE prices and the strength of the Japanese Yen in the later part of the year.
The Malaysian car market grew strongly and Cycle & Carriage Bintang benefited from it. The passenger car market increased by 74%, with the non-national passenger car segment growing by 54%. Sales of Mercedes-Benz passenger cars grew by 38% despite being hindered by stock shortages due to the unexpected strength of the recovery. As a result, Mercedes-Benz was still able to maintain its position as the market leader in the luxury car segment.
Cycle & Carriage Bintang made a strong turnaround from the loss incurred in 1998 with a profit after taxation and minority interests for the year of RM37.5 million, excluding its interests in its associates, CCL Group Properties (40%) and Cycle & Carriage (Malaysia) (30%). Cycle & Carriage (Malaysia), the Group's dealership business in Malaysia also benefited from the strong rebound in demand.
Astre, the Group's distribution business in Australia, had a strong turnaround in terms of profitability despite a 6% decline in the market to 547,575 units. Sales of Hyundai fell by 17% to 47,042 units while Audi sales increased to 2,864 units. The performance would have been better, but for market uncertainty ahead of the implementation of GST with effect from 1 July 2000.
The Group's New Zealand operation made a small loss due to the set up costs of three new Nissan dealerships.
Property
The property market in Singapore reflected a strong recovery. The contribution from the Group's property interest was S$45.3 million for the year, after taking into account the remaining profit from CCL Group Properties' MeraWoods project which was completed in March 1999 and a reversal of S$9.9 million of the exceptional charge made against the Group's property interests in 1998. The writeback was due to higher prices achieved for the remaining units of MCL Land's Seletar Springs and The Springbloom property developments and cost savings.
The Group's investment properties provided a steady return with improved occupancy levels, offset by renewals at lower rentals. A review of the values of the Group's investment properties at the end of 1999 has revealed no further deterioration in the values of the Group's office properties while the values of the Group's residential properties have appreciated.
In May 1999, MCL Land, together with Pidemco Land Ltd launched the Ubi Tech Park Industrial project and sales have been encouraging. MCL Land's development property at The Sunnydale, met with strong response from buyers and all 70 units were sold while Sims Residences, a 112-unit condominium development, will be relaunched with design changes to cater to customer preferences.
MCL Land's other development projects, Balmoral Crescent and The Grange, will be launched when the luxury sector of the market picks up further. The development of Robertson Quay, which is an investment property, has been brought forward due to the improvement in this sector of the market.
The values of properties in the vicinities of the three abovementioned properties have improved since the end of 1998, but the directors are of the view that it would be prudent to review the carrying values of Balmoral Crescent and The Grange closer to their launch dates and that of Robertson Quay closer to its completion date targeted for 2002.
MCL Land has begun to replenish its landbank. It acquired a 49,485 sq ft freehold site in Devonshire Road which will be developed into a 25-storey luxurious condominium project and a 116,924 sq ft leasehold site at Transit Road on which a 4-storey 123-unit condominium project will be developed.
Other Interests
Other interests representing the income from the Group's other associated companies and Cycle & Carriage Limited's cash reserves, offset by central overheads made a net loss of S$0.1 million, compared to the profit of the previous year due mainly to tax disallowances on certain expenses.
New Business Opportunities
Cycle & Carriage continues to look for opportunities to grow its core motor business with the focus on acquiring new franchises that complement its existing operations as well as related businesses such as vehicle finance, automotive parts distribution and used car trading. Since the end of the financial year, the Group has been appointed by Kia Motors Corporation ("KMC") as the exclusive distributor in Singapore. KMC is part of the Hyundai Motors Group which is the largest vehicle manufacturer and distributor in Korea. It has also been successful in its NZ$39.1 million bid for a 100% interest in Truck Investments Limited ("TIL") of New Zealand. The completion of the acquisition is subject to the approval of the manufacturers of trucks distributed by TIL including Hino, Renault, ERF, Mack and Western Star. TIL also operates a chain of truck service facilities throughout New Zealand.
The Group's property arm, MCL Land has started to rebuild its landbank in Singapore and is looking to expand its operations in Malaysia and establish a presence in the region.
The explosive growth of the internet and e-commerce and the need to harness this in our core businesses has also given impetus to our efforts to source new opportunities in this area.
The Group is also intensifying its search in Singapore and the region for a third core business as part of its strategy to diversify its traditional sources of profits and maintain earnings growth in order to protect and enhance shareholder value. Targeted businesses are likely to be leaders in their industries with good growth prospects, have a strong management team, be capable of contributing at least 10% of the Group's profit and provide satisfactory returns over the medium term.
PROSPECTS
The economic recovery experienced in the Group's major markets in 1999 is expected to be sustained, with a positive impact on the Group's activities.
In Singapore, the increased quota of COEs should produce further growth in the passenger car market. Margins will however remain under pressure due to competition and high COE prices. The restructuring of the Mercedes-Benz relationship will not impact 2000's performance as the new arrangements will only be effective from 1 January 2001. The Malaysian market should also continue its strong performance. In Australia, the market is expected to be weak in the first half in anticipation of the introduction of GST on 1 July 2000.
The recovery in Singapore's residential property market is expected to have a positive impact on MCL Land's current development projects. Further provision writebacks are expected on the Group's development properties as these are sold in the coming years. Although commercial rentals have stabilised, the Group's office properties in Singapore and Malaysia are still experiencing negative rental revisions. Occupancy levels are however, expected to remain satisfactory despite excess supply from new completions.
The directors expect that overall the Group's performance for 2000 will be satisfactory.
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The computation of the earnings per share is in compliance with the Statement of Accounting Standard No. 6 (revised 1998)
1 Basis of preparation
The financial information contained in this announcement has been based on the unaudited results for the year ended 31 December 1999 which have been prepared in accordance with the Statements of Accounting Standard on the basis of the accounting policies set out in the financial statements.
2 Company profit and loss account and balance sheet
Profit and loss account for the year ended 31 December
3 Turnover and profit
4 Exceptional items
The exceptional items represent a partial writeback in the provision made by MCL Land Limited for foreseeable losses on certain development properties in Singapore. The exceptional items included in the profits of the Group, after taxation and minority interests, amounted to S$9.9 million (1998: exceptional charge of S$133.7 million).
5 Taxation
The effective tax rate for the Group is lower than the current Singapore tax rate of 26% as no tax is payable on the Malaysian sourced income for 1999, as well as certain subsidiaries have tax losses available for set off against current year's profit and certain items, including the exceptional items, are not subject to income tax.
6 Segment information
7 Extraordinary items
8 Group borrowings
9 Issue of shares
The number of shares that may be issued on conversion of all outstanding options granted pursuant to the Senior Executives' Share Option Scheme amounted to 1,696,000 as at 31 December 1999 (30.6.1999: 1,900,500).
Between 1 July 1999 and 31 December 1999, there have been no rights, bonus or equity issues.
10 Year 2000
In 1999, the Group continued with its programme to address any Y2K problems that might exist in its computers and embedded system, and those of the service providers. This included efforts by an internal Y2K Programme Office and external consultants to develop business contingency and continuity plans. The Group achieved a level of Y2K readiness for all its operations by 30 September 1999.
Following the crossover into year 2000, no Y2K related problems were encountered by the Group. The Group will, however, continue to monitor the impact of other critical dates in 2000 on its operations.
The total cost of the programme to the Group is estimated at S$4.7 million, all of which will be expensed to the Profit & Loss account and of which S$4.5 million had been incurred by the end of 1999.
11 Other
The results do not include any pre-acquisition profits and have not been affected by any item, transaction or event of a material or unusual nature other than the exceptional and extraordinary items set out in notes 4 and 7 of this report. Other than disclosed above, no other significant transaction or event has occurred between 31 December 1999 and the date of this report.
12 Closure of books
NOTICE IS HEREBY GIVEN that the Transfer Books and the Register of Members will be closed from Tuesday, 23 May 2000 to Wednesday, 24 May 2000 for the preparation of dividend warrants.
13 Annual General Meeting
The Annual General Meeting of the Company will be held on Thursday, 11 May 2000 in the Renoir Suite, Level One, The Oriental, Singapore, 5 Raffles Avenue, Singapore 039797 at 12.30 p.m.
By Order of the Board
Ho Yeng Tat
Group Company Secretary
Singapore
22 February 2000
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