| To: Business Editor | 25th February 1999 For immediate release |
CYCLE & CARRIAGE LIMITED
1998 PROFIT AND DIVIDEND ANNOUNCEMENT
The attached press announcement was released 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) |
Full text of the announcement can be accessed through the Internet at
http://www.irasia.com/listco/sg/jsh1. It is also available through "First Call".
CYCLE & CARRIAGE LIMITED
1998 PROFIT AND DIVIDEND ANNOUNCEMENT
HIGHLIGHTS
RESULTS
The Board of Directors announced today an unaudited consolidated profit attributable to shareholders of S$3.5 million for the year ended 31 December 1998. This result was arrived at after an exceptional charge pertaining to foreseeable losses on development properties of S$133.7 million (1997: S$11.9 million) and an extraordinary profit of S$30.2 million as a result of the restructuring of the Group's interests in Cold Storage (Malaysia) Berhad. Excluding both the exceptional and extraordinary items, earnings were S$107.0 million, down 37% on 1997.
The loss per share was 11.4 cents, excluding the extraordinary profit. Excluding both the exceptional and extraordinary items, earnings per share were 45.7 cents, compared with 73.0 cents for the previous year.
The Group's net asset value per share declined by 14%, primarily due to the effect of reduced property values in Singapore and Malaysia.
DIVIDEND
The Directors recommend a final dividend of 10¢ or 10% (1997: 23¢ or 23%) per share, less income tax at 26% (1997: 26%), which, together with the interim dividend of 4¢ or 4% per share, less income tax at 26%, will make a total annual dividend in respect of 1998 of 14¢ or 14% per share. This is a decrease of 56% on the previous year.
The final dividend, if approved, will be payable in cash on Friday, 28 May 1999 to shareholders whose registrable transfers are received by the share registrars, Barbinder & Co Pte Ltd, 9 Penang Road, #13-21 Park Mall, Singapore 238459 by 5.00 p.m. on Monday, 17 May 1999.
CORPORATE EVENTS
On 18 September 1998, Cycle & Carriage Limited ("CCL") completed the acquisition of an additional 26% stake in Astre Investments ("Astre") for A$28 million. This increased CCL's total interest in Astre to 75%. A$2.8 million of the consideration has been deferred subject to the future profitability of Astre.
Astre is the holding company for several Australian companies which handle the Hyundai and Audi franchises in Australia. It also handled the Chrysler franchises for both Australia and New Zealand, but these expired on 31 December 1998 and are being taken over by Chrysler International Corporation itself.
On 22 January 1999, CCL entered into an agreement to acquire an additional 20% stake in Selangor Ice Company ("SIC") for RM9.2 million. This acquisition remains subject to regulatory approval in Malaysia. If completed, the acquisition will result in CCL's interest in SIC increasing to 50%. SIC is a holding company for the Guardian pharmacy and Wellsave and Cold Storage supermarket chains in Malaysia.
OPERATIONAL REVIEW
Motor
Earnings from the motor operations were S$21.2 million, 77% lower than in 1997, with all of the Group's interests being impacted by the adverse economic conditions prevailing in the Asia-Pacific region.
The Singapore car market is one of very few East Asian markets to have grown in 1998. New car sales were up by 3,900 units or 12% against the previous year due to the increased number of Certificates of Entitlement that were made available. Despite this, competition between motor distributors and weak consumer confidence maintained the pressure on margins. As a result earnings at S$39.9 million were 19% down on 1997.
Cycle & Carriage's share of the passenger car market has fallen to 22% for the year, largely due to the weaker demand in the luxury segment. Mercedes-Benz's share of the car market fell to 7% with sales of 2,060 units. Although there has been encouraging demand for the new S class, which will become available in Singapore in the second quarter of 1999, the market for luxury cars overall is expected to remain weak in 1999.
Mitsubishi and Proton sales were both up on 1997 with sales of 3,200 and 760 units, respectively. Margins also improved somewhat as lower COE prices and the weak Japanese Yen, which persisted for much of the year, assisted in their competitiveness. Mercedes-Benz and Mitsubishi commercial vehicle sales remained reasonably strong with a combined market share of 11% being achieved for the year.
Cycle & Carriage Bintang ("CCB") faced difficult market conditions in 1998. The motor industry in Malaysia suffered a 60% fall in registrations of new vehicles and non-national car sales were down 79%. Sales of Mercedes-Benz were 70% lower, with sluggish demand for most of the year, and margins under considerable pressure. Despite this, Mercedes-Benz was able to maintain its position as the market leader in the luxury car segment. Against this background, CCB made a loss after taxation and minority interests for the year of RM18.8 million, excluding its interests in its associates, CCL Group Properties (40%) and Cycle & Carriage (Malaysia)("CCM")(30%). Debt provisioning and high stock holding costs were also contributory factors. CCM, Cycle & Carriage's dealership business in Malaysia, suffered a fall in profits due to the weak car market, but continued to be profitable.
Astre Investments has had a very difficult year despite a strong year for car sales in Australia. The market grew to 584,400 units, up 8%. Sales of Hyundai remained relatively firm for much of the year, with 56,300 units being sold. Margins, however, were put under enormous pressure as a result of the weak A$ and competitive pressures from other marques, especially in the small car segment. Adverse publicity in the last quarter of the year, arising from a product concern, has also impacted demand and caused the company to incur additional costs. Both the Chrysler franchise, which has now expired, and the Audi franchise made losses. Audi sales of 2,300 units were disappointing, but work on restructuring the franchise's dealership network is expected to improve the performance in 1999.
The Group's New Zealand operations made a small profit for the year, despite the losses reported at the interim stage, on the back of improved new car demand.
Property
Property earnings for the year, excluding the exceptional item, were S$82.9 million, an increase of 18% on 1997. An exceptional charge of S$133.7 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$50.8 million.
The contribution from the Group's investment properties has increased by 40%, with steady occupancy levels and reduced costs playing a part, as well as a full year's earnings from Menara Weld Tower. The Directors reviewed the values of the Group's investment properties at the end of 1998. This revaluation disclosed a decline in their value of S$127.5 million (net of minority interests) since the end of 1997. This has been debited against the Group's revaluation reserve which arose from the appreciation in value of the Group's investment properties in previous years.
There has been a substantial pick-up in the sales of units at Seletar Springs and Springbloom in the last six months. As at 24 February 1999, sales, including options granted, for the two 99-year leasehold condominium projects totalled 685 units or 96 % and 91 % of the units available in the two projects, respectively. Construction of the Seletar Springs project was 11% completed at the end of 1998 and the Temporary Occupation Permit for The Springbloom was obtained on 14 January 1999.
The construction of CCL Group Properties' MeraWoods project is progressing well. It was 83% completed by the end of the year. Three other development projects owned by MCL Land, Seven Oaks, Mera Gardens and Scotts 28 were completed during the year. All four properties are fully sold.
The Directors reviewed the carrying value of development properties in the Group's balance sheet as at 31 December 1998. As a result of this review, the Directors decided to make a provision for foreseeable losses of S$223.9 million against certain properties to reflect the fall in property values that has occurred during the course of the year. Since the properties concerned are all owned by MCL Land, Cycle & Carriage's 60% owned subsidiary, the net exceptional charge against the earnings of the Group is S$133.7 million.
Other interests
The Group made a net profit from its other interests of S$2.9 million, down from S$7.2 million in 1997. This represents the income from the Group's other associated companies and Cycle & Carriage Limited's cash reserves, offset by central overheads. In 1997, other interests included a S$4.9 million non-recurring profit on the sale of one of the Group's associated companies.
PROSPECTS
The economic downturn in most of the Group's major markets is likely to continue to have an adverse impact on its performance in 1999.
In Singapore, whilst the motor business should benefit from the expected growth of the car market, weak consumer sentiment and competition will continue to put pressure on margins. In addition, the outlook for the market could be impacted by any change to the vehicle quota system likely to be introduced following a government review that is presently underway. The performance of Cycle & Carriage's motor businesses in Malaysia and Australia should improve in 1999, although this will depend in part on general market conditions.
The Group has already made substantial provisions against the carrying value of its property interests in both Singapore and Malaysia. The future profitability of the Group's property business is dependent upon whether there is any further fall in property values. This aside, there will be further profits from MeraWoods and the Group's investment property portfolio.
The Directors believe that the Group's overall results for 1999 will be better than those for 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 1998 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
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$133.7 million (1997: S$11.9 million).
5 Taxation
The effective tax rate for the Group is higher than the current Singapore tax rate of 26% because of losses made by certain subsidiaries and certain items including exceptional item 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 1,566,500 (30.6.98:1,734,500).
Between 1 July 1998 and 31 December 1998, there have been no rights, bonus or equity issues.
10 Year 2000
The year 2000 (Y2K) issue has arisen from the fact that some computer systems operate on a 2-digit year element and so are unable to make the proper transition from 1999 to 2000 or process dates for the year 2000 and thereafter. The problem affects date-processing or date-dependent functions in both computer systems and systems and equipment that rely on embedded electronic chip technology. The Y2K issue would be likely to have some impact on the Cycle & Carriage Group were it not to be addressed.
In 1997, the Group initiated a comprehensive programme to address any Y2K problems that might exist in its computer and embedded systems, and those of its service providers. A Y2K programme office was established to co-ordinate the effort across the Group and external Y2K consultants were appointed to support this effort. The office has compiled a detailed inventory list of the computer hardware and software systems and embedded equipment in the Group and has identified the areas for upgrading, replacement or retirement. As part of the work, testing is being carried out on the existing and upgraded systems. Progress is currently on schedule for both computer and embedded systems to be Y2K ready by the middle of 1999.
The Group will continue to monitor the level of Y2K readiness of all third-party systems and services. Notices have been given to all vendors supplying goods and services to the Group seeking assurances about their Y2K plans, and where appropriate, discussions have been held and will continue to be held with them to ensure their Y2K readiness. Contingency plans are also being put in place to minimise the potential impact to the Group's operations in the event any of the key systems in the Group or third-party suppliers should fail.
While the Group is making every effort to eliminate the risks of the Y2K issue, there can be no absolute assurance that its Y2K programme will be completely successful, or that the date change from 1999 to 2000 will not affect the Group's operations due to the inherent unpredictability and scope of the Y2K problem.
The total cost of the programme to the Group over a four-year period to 2000 is estimated at S$3.3 million, all of which is being expensed in the profit and loss account. S$2.3 million of these costs had been incurred by the end of 1998.
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 item and the extraordinary item set out in notes 4 and 7 of this report. No other significant transaction or event has occurred between 31 December 1998 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, 18 May 1999 to Wednesday, 19 May 1999 for the preparation of dividend warrants.
13 Annual General Meeting
The Annual General Meeting of the Company will be held on Thursday, 6 May 1999 in the Renoir Suite, Level One, The Oriental, Singapore, 5 Raffles Avenue, Singapore 039797 at 12.00 noon (or immediately after the Annual General Meeting of MCL Land Ltd to be held at 11.30 a.m. on the same day and at the same venue shall have been concluded or adjourned).
By Order of the Board
Ho Yeng Tat
Secretary
Singapore
25 February 1999
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