| To : Business Editor | 27th August 1998 For immediate release |
CYCLE & CARRIAGE LIMITED
1998 ANNOUNCEMENT OF HALF-YEAR RESULTS
The attached press announcement was released by the Company's 25%-owned associate, Cycle & Carriage.
For further information, please contact:
| Ludgate Asia Limited Martin Spurrier |
Tel: (852) 2543 5413 (office) |
Full text of the announcement can be accessed through the Internet at "http://www.irasia.com/listco/sg/jsh1" and is also available through "First Call".
CYCLE & CARRIAGE LIMITED
1998 INTERIM REPORT
HIGHLIGHTS
RESULTS
The Board of Directors announced today an unaudited consolidated net loss after taxation and minority interests for the six months ended 30 June 1998 of S$21.0 million. This result was arrived at after an exceptional charge relating to foreseeable losses on development properties of S$67.7 million. Excluding the exceptional item, earnings were S$46.7 million, down 53% on 1997.
The Group also realised an extraordinary profit of S$29.7 million as a result of the restructuring of its interests in Cold Storage (Malaysia) Bhd.
The loss per share was 9.0 cents. Excluding the exceptional item, earnings per share were 20.0 cents, compared with 42.2 cents for the six months to 30 June 1997.
The Group's net asset value per share declined by 9% during the first half, primarily due to the effect of reduced property values in Singapore.
DIVIDEND
An interim dividend of 4% or 4 cents (1997: 9% or 9 cents) per share, less income tax at 26% (1997: 26%) has been declared for the six months to 30 June 1998. The dividend will be payable in cash on 25 September 1998 to shareholders whose registrable transfers are received by the share registrars, Coopers & Lybrand, 9 Penang Road, #10-20 Park Mall, Singapore 238459 by 5.00 p.m. on 14 September 1998.
CORPORATE EVENTS
On 20 March 1998, Cycle & Carriage Limited completed the sale of its 43.3% stake in Cold Storage (Malaysia) Bhd ("CSM") for RM6.75 per share. S$78.9 million of the consideration has been received in cash and the balance of S$25.6 million is receivable by 15 November 1998 and is secured against a 32% stake in CSM.
Prior to the sale of its interest, Cycle & Carriage Limited acquired a 30% stake in Selangor Ice Company Sdn Bhd ("SIC"), which owns CSM's Malaysian retailing interests, for S$10.5 million and a 30% stake in Guardian SEA Pte Ltd ("Guardian SEA"), which owns the Guardian pharmacy business in Singapore, for S$8.0 million. Cycle & Carriage Bintang Bhd ("CCB") acquired CSM's 20% stake in CCL Group Properties Sdn Bhd for RM82.9 million, taking its own stake up to 40%.
Cycle & Carriage Limited realised an extraordinary gain of S$41.5 million on the sale of its interest in CSM, but this was offset by a fair value adjustment to the cost of the SIC and Guardian SEA shares being acquired of S$11.8 million, resulting in a net extraordinary profit of S$29.7 million.
OPERATIONAL REVIEW
The regional currency crisis and its adverse economic impact on all of the countries in Southeast Asia has inevitably taken its toll on the trading performance of most of the Group's motor and property operations and this has resulted in a disappointing set of results for the Group.
Motor
Earnings from the motor vehicle operations were S$12.5 million, 79% lower than in the first half of 1997, with market conditions in all of the Group's major markets proving extremely difficult.
The Singapore car market has been one of the few markets in ASEAN not to experience a sharp decline in sales since the onset of the financial crisis. The new car market actually increased by 2% to 13,110 units in the first half compared to the previous year, due to the increased number of Certificates of Entitlement that were available during the period. However, competition among the major motor distributors remained intense and the weak economic climate inevitably resulted in the market share of luxury marques falling somewhat.
Against this background, Cycle & Carriage has seen its share of the Singapore passenger car market fall to 22% with sales of all three of the marques that it distributes decreasing. Earnings were also lower at S$20.6 million, although they were slightly up when compared with the second half of 1997. Mercedes' share of the car market fell to 10% with sales of 1,282 units. Mercedes commercial vehicle sales improved with the MB100 selling well.
Mitsubishi sales also fell, with car sales of 1,305 units, representing 10% of the car market, and commercial vehicle sales of 302 units, representing 6% of the commercial vehicle market. Proton sales were relatively weak during the first few months of the year, due to a shortage of stock, but have strengthened recently.
In contrast to Singapore, the Malaysian car market has experienced an extremely sharp fall in demand. Overall car sales were down 64% against the first half of 1997 and non-Malaysian car sales were down 85%. As a result, CCB suffered a dramatic decline in profitability, announcing earnings of RM4.7 million, against RM75.0 million previously. Excluding its interests in its associates, CCL Group Properties (40%) and Cycle & Carriage (Malaysia) ("CCM") (30%), CCB made a loss of RM15.9 million.
CCB's results were adversely affected by sluggish vehicle sales, debt provisioning and high stockholding costs. Vehicle sales were 83% down on 1997, falling from 4,802 units to 796 units, due in large part to tight liquidity in the market. Management's prime focus is now on managing stock levels, improving collections and reducing costs so as to maintain a healthy cashflow for the business. CCM continued to be profitable although its earnings were down sharply. Together, the Group's Malaysian motor interests contributed a net loss of S$3.0 million to Group earnings.
The overall size of the Australian passenger car and four-wheel drive market increased by 16% in the first half of 1998 and the Astre Automotive Group, in which Cycle & Carriage has a 49% interest, achieved sales of 36,937 units, giving it a market share of 11%. Margins continued to come under severe pressure, though, with the weakening of the A$ against the US$. As a result, the Astre Automotive Group recorded a loss of S$10.6 million. The Group's New Zealand operations were able to reduce the loss they made in the first half of 1997, in the absence of the closure costs of a dealership, but trading conditions remained difficult.
Property
Property earnings for the first six months, excluding the exceptional item, were S$34.5 million, an increase of 7% on the same period in 1997. An exceptional charge of S$67.7 million was made against the Group's property interests during the period and, after taking account of this charge, the contribution from the Group's property interests was a loss of S$33.2 million.
The Group's five major investment properties continued to generate valuable income during the period with operating profits of S$11.2 million, 4% up on 1997, with the benefit of higher occupancy being partly offset by the reduced value of the Ringgit earnings from the Malaysian properties. All of the properties remain more than 90% occupied, other than the Weld Tower which is 74% occupied.
The Directors have reviewed the values of the Group's investment properties as at 30 June 1998. This internal revaluation disclosed a decline in value of S$139.4 million, of which S$94.8 million representing the Group's share has been debited against the Group's revaluation reserve of S$163.2 million, arising from the appreciation in value of the Group's investment properties in previous years.
During the first half of the year, progress was made in the construction of six of the Group's development projects, namely Seven Oaks (100% completed), Mera Gardens (91% completed), Scotts 28 (78% completed), MeraWoods (52% completed), Springbloom (67% completed) and Seletar Springs (6% completed) and some profit was recognised on the first four of these. Progress during the period on Seven Oaks, Mera Gardens, Scotts 28 and MeraWoods was 8%, 24%, 14% and 24%, respectively.
On the sales front, Phase 1 of Seletar Springs was launched in June and as at 27 August 1998, options on a total of 143 units have been issued. In May, Phase 2 of The Springbloom was relaunched and options on a total of 88 units have been issued as at 27 August 1998, bringing the overall number of options in the project issued to 213 units, out of a total of 372 units. Four land parcels have also been sold at the Ubi Tech Park.
The Directors have reviewed the carrying value of development properties in the Group's balance sheet as at 30 June 1998. As a result of this review, the Directors have decided to make a provision for foreseeable losses of S$113.4 million against certain properties at the half year. Since these properties are owned by MCL Land, Cycle & Carriage Limited's 60% owned subsidiary, the net exceptional charge against the earnings of the Group is S$67.7 million.
Other interests
The Group made a net loss from its other interests of S$0.3 million. This represents the income from the Group's other associate companies, offset by the Group's central overheads. In the first half of 1997, other interests included a S$4.9 million non-recurring profit on the sale of one of the Group's associate companies.
PROSPECTS
The sharp economic downturn in the Group's major markets has inevitably adversely affected the Group's operating performance during the first six months of the year.
In Singapore, whilst the size of the motor market is not expected to fall in the second half, margins are likely to come under pressure. No improvement is expected in vehicle sales in Malaysia and, here again, margins will experience downward pressure. In Australia, the strong US dollar and competition will continue to affect the business, but the performance should be better than in the first half.
The outlook for the property market in both Singapore and Malaysia is poor and the consequences of this have been seen in the results for the first half. In the second half, the Group will continue to recognise significant profits on the development of MeraWoods and Scotts 28.
In the light of the deteriorating economic conditions, the Group is unlikely to see any improvement in its operating profits during the second half of the year. The Directors believe that the Group's results for the year as a whole will be substantially lower than in 1997.
1 Basis of preparation
The unaudited half year results have been prepared in accordance with the Statements of Accounting Standard. There have been no changes to the accounting policies as described in the 1997 audited accounts.
2 Company profit and loss account
3 Turnover and profit
4 Exceptional item
The exceptional item represents the provision made by MCL Land Limited for foreseeable losses on development properties in Singapore. The exceptional charge against the profits of the Group, after taxation and minority interests, amounted to S$67.7 million.
5 Taxation
The effective tax rate for the Group is higher than the current Singapore tax rate of 26% because of the provision for foreseeable losses on development properties and certain costs which are expected to be disallowed for income tax purposes.
6 Segment information
7 Extraordinary item
8 Group borrowings
9 Issue of shares
The number of shares that may be issued on conversion of all outstanding options amounted to 1,734,500 (31.12.97: 1,166,500).
Between 31 December 1997 and 30 June 1998, there have been no rights, bonus or equity issues.
10 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 item and the extraordinary item set out in notes 4 and 7 of this report. No other significant transaction or event has occurred between 30 June 1998 and the date of this report.
11 Closure of books
NOTICE IS HEREBY GIVEN that the Transfer Books and the Register of Members will be closed from Tuesday, 15 September 1998 to Wednesday, 16 September 1998 for the preparation of dividend warrants.
By Order of the Board
Ho Yeng Tat
Group Company Secretary
Singapore
27 August 1998
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