Jardine Math.sr Regulatory News (JAR)

To: Business Editor 27th July 2018

For immediate release

Jardine Cycle & Carriage Limited

2018 Half Year Financial Statements and Dividend Announcement

The following announcement was issued today by the Company's 75%-owned subsidiary, Jardine Cycle & Carriage Limited.

For further information, please contact:

Jardine Matheson Limited

Jonathan Lloyd (852) 2843 8223

Brunswick Group Limited

Karin Wong (852) 3512 5077

27th July 2018

JARDINE CYCLE & CARRIAGE LIMITED

2018 HALF YEAR FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT

Highlights

· Underlying earnings per share 10% higher

· Increased contribution from Astra

· Stronger performances by Direct Motor Interests and Other Strategic Interests 

"The Group performed well during the first half of the year, with a 10% increase in underlying profit attributable to shareholders. For the rest of the year, Astra's overall performance is expected to be satisfactory, led by its heavy equipment and mining businesses although there are concerns over competitive pressures in the car market. The Group's Direct Motor Interests and Other Strategic Interests are expected to continue to perform strongly."

Ben Keswick, Chairman

27th July 2018

The exchange rate of US$1=S$1.37 (31st December 2017: US$1=S$1.34) was used for translating assets and liabilities at the balance sheet date and US$1=S$1.33 (30th June 2017: US$1=S$1.40) was used for translating the results for the period. The financial results for the six months ended 30th June 2018 and 30th June 2017 have been prepared in accordance with International Financial Reporting Standards and have not been audited or reviewed by the auditors.

† The accounts have been restated due to changes in accounting policies upon adoption of IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from Contracts with Customers', as set out in Note 1 to the condensed financial statements.

# The Group uses 'underlying profit attributable to shareholders' in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more fully described in Note 4 to the condensed financial statements. Management considers this to be a key performance measurement which enhances the understanding of the Group's underlying business performances.

^ Included in 'non-trading items' are unrealised losses arising from the revaluation of the Group's equity investments.

* The Singapore currency equivalent is an estimate as the actual amount will be determined on the Books Closure Date referred to in Note 11.

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CHAIRMAN'S STATEMENT

Overview

The Group reported improved results in the first half of the year, with an increased contribution from Astra and stronger performances by Direct Motor Interests and Other Strategic Interests compared with the first half of 2017.

Performance

The Group's revenue for the six months ended 30th June 2018 was US$9.2 billion, a 10% increase over the previous year. Underlying profit attributable to shareholders grew by 10% to US$414 million and underlying profit per share was 10% higher at US¢105 per share. Profit attributable to shareholders fell by 56% from US$398 million to US$174 million, after accounting for net non-trading losses of US$240 million, principally unrealised fair value losses related to non-current investments. These result from the adoption of a new accounting standard that requires the unrealised gains or losses arising from the revaluation of equity investments at the end of each financial period to be included in the profit and loss account.

Astra's contribution of US$354 million to the Group's underlying profit was 12% higher than the previous year. The underlying profit from the Group's Direct Motor interests was 18% higher, at US$74 million, while the Group's Other Strategic Interests contributed underlying profit of US$41 million, significantly up on the previous year.

The Group consolidated net debt, excluding Astra's financial services subsidiaries, was US$1.8 billion at the end of June 2018, compared to US$819 million at the end of December 2017. The increase was primarily due to Astra's toll road and GO-JEK investments and capital expenditure in Astra's mining contracting business, together with the investments by the Group in Toyota Motor Corporation and in associates and joint ventures. Net debt within Astra's financial services subsidiaries was US$3.3 billion at the end of June, compared to US$3.4 billion at the end of 2017.

The Board has declared an interim one-tier tax exempt dividend of US¢18 per share (2017: US¢18 per share).

Group Review

Astra

Astra reported a net profit equivalent to US$750 million, under Indonesian accounting standards, 11% higher in its local currency terms, due to increased contributions from its heavy equipment and mining businesses and an improved contribution from its financial services division, which more than offset lower contributions from its agribusiness and infrastructure operations.

Net income from the group's automotive division was flat at US$304 million. Increased earnings in the motorcycle operations and automotive components business was more than offset by lower results in the car operations.  

The wholesale market for cars was 4% higher in the period at 554,000 units. Astra's car sales, however, were 10% lower at 268,000 units as a result of increased competition. This resulted in a decline in market share from 56% to 48%. The group launched 12 new models and 4 revamped models during the period.

The wholesale market for motorcycles increased by 11% to 3 million units. Astra Honda Motor's domestic sales rose by 11% to 2.2 million units, with its market share maintained at 74%. The group launched 4 new models and 11 revamped models during the period.

Astra Otoparts, the group's automotive components business, reported net income 4% higher at US$15 million, mainly due to increased revenues from its original equipment manufacturing and replacement market sales.

Financial Services

Net income from the group's financial services division increased by 5% to US$155 million, with an improved contribution from its consumer finance businesses.

During the first half of 2018, the group's consumer finance businesses saw a 6% decrease in the amount financed to US$2.9 billion, mainly due to a reduction in the amount financed in the low cost car segment. The contribution from the group's car-focused finance companies increased by 2% to US$37 million as a result of lower provisioning. The contribution from motorcycle-focused Federal International Finance was 20% higher at US$84 million, due to a larger loan portfolio.

The amount financed through the group's heavy equipment-focused finance operations decreased by 30% to US$160 million, mainly due to reduced lending to small and medium-sized companies.

Permata Bank, in which Astra holds a 44.6% interest, reported net income of US$20 million compared to US$47 million in the equivalent period last year, a decrease of 56%. Permata Bank's results in the first half of 2017 benefited from a one-off gain on the sale of non-performing loans.  The bank's gross and net non-performing loan ratios at 30th June 2018 were 4.3% and 1.5%, respectively.

In May 2018, Permata Bank divested its 25% shareholding in Astra Sedaya Finance to the group for US$202 million, in order to strengthen the bank's capital position and maximise its capital allocation for lending. Astra Sedaya Finance is now 100%-owned by the group.

Asuransi Astra Buana, the group's general insurance company, reported net income of US$36 million, 2% lower than 2017 due to a reduction in investment income. During the period, the group's life insurance joint venture, Astra Aviva Life, acquired more than 138,000 new individual life customers and 507,000 new participants for its corporate employee benefits programmes.

Heavy Equipment, Mining, Construction and Energy

Net income from the group's heavy equipment, mining, construction and energy businesses increased by 60% to US$237 million.

United Tractors, which is 59.5%-owned, reported a net income of US$396 million, 60% higher than 2017 mainly due to improved performances in its construction machinery, mining contracting and mining operations as a result of increased coal prices.

Within United Tractors' construction machinery business, Komatsu heavy equipment sales were up 37% at 2,400 units, while parts and service revenues were also higher. The mining contracting operations of wholly-owned Pamapersada Nusantara recorded an 8% higher coal production at 56 million tonnes, and 23% higher overburden removal volume at 445 million bank cubic metres. United Tractors' mining subsidiaries reported 22% higher coal sales at 4.4 million tonnes.

During the first half of 2018, Suprabari Mapanindo Mineral, United Tractors' 80.1%-owned coking coal company which became operational in late 2017, achieved coal sales of 342,000 tonnes.

General contractor Acset Indonusa, a 50.1% subsidiary of United Tractors, reported a 14% higher net income at US$5 million, due to higher revenue arising from a larger project pipeline. US$22 million of new construction projects were secured during the period.

Bhumi Jati Power, 25%-owned by United Tractors, is in the process of constructing two 1,000 MW power plants in Central Java, which are scheduled to start commercial operations in 2021.

Agribusiness

Net income from the group's agribusiness division was US$45 million, a decrease of 23% from the prior year. Astra Agro Lestari, which is 79.7%-owned, reported a 23% decline in net income at US$57 million. This decline was primarily due to a fall in crude palm oil prices which were 8% lower at Rp7,893/kg compared to the first half of 2017. This more than offset a 19% improvement in crude palm oil and derivatives sales at 992,000 tonnes.

Infrastructure and Logistics

The group's infrastructure and logistics division reported a net income of US$0.3 million, compared with a net profit of US$8 million in the first half of 2017. Initial losses from the Cikopo-Palimanan toll road, acquired in the first half of 2017, and newly operational Semarang-Solo toll road more than offset improved earnings from the Tangerang-Merak toll road and Serasi Autoraya.

The group's portfolio of toll road interests totals 353km, of which 269km is operational. Toll revenue from the mature 72.5km Tangerang-Merak toll road, operated by 79.3%-owned Marga Mandalasakti, increased by 12% to US$37 million, while the wholly-owned 40.5km Jombang-Mojokerto toll road, of which 39.6km became fully operational in September 2017, recorded US$7 million of toll revenue during the first half of 2018. Toll revenue from the 45%-owned, 116.8km Cikopo-Palimanan toll road increased by 13% to US$50 million. The 40%-owned, 72.6km Semarang-Solo toll road saw toll revenue of US$8 million, a 46% rise from the comparable period last year, with 40.1km now in operation, following the opening of the third section in September 2017.

The group also has a 40% stake in the 11.2km Kunciran-Serpong toll road and a 25% stake in the 39.8km Serpong-Balaraja toll road, both of which are under development. 

Serasi Autoraya's net income increased by 39% to US$8 million, primarily due to improved operating margins in its car leasing and rental businesses. Its vehicles under contract rose 4% to 24,000 units.

Information Technology

Net income from the group's information technology division was 24% higher at US$5 million. Astra Graphia, which is 76.9%-owned, reported net income of US$6 million which was 24% higher than 2017 due to higher revenue across its document and information technology solutions and office service businesses. 

Property

The group's property division reported a net profit of US$3 million in the first half of 2018, compared to a net profit of US$5 million in the prior year. This decline was due to lower development earnings recognised from its Anandamaya Residences project, reflecting lower percentage completion in its final stages of construction.

In April 2018, 50%-owned Astra Land Indonesia purchased a 3-hectare site in Jakarta's Central Business District for residential and commercial development. Together with the group's other property development projects, Arumaya in South Jakarta and Asya in East Jakarta, the group's land for property development now totals 70 hectares.

Direct Motor Interests

The Group's Direct Motor Interests contributed an underlying profit of US$74 million, 18% above the previous year.

Cycle & Carriage Singapore performed well, with improved margins on passenger cars and an increased contribution from used cars. In Malaysia, Cycle & Carriage Bintang's profit was mainly due to dividend income received from its 49% investment in Mercedes-Benz, Malaysia. In Indonesia, Tunas Ridean's contribution was higher, due to improved performances from its automotive, consumer finance and rental operations. In Vietnam, Truong Hai Auto Corporation recorded a higher profit, principally due to higher unit sales and margins.

Other Strategic Interests

The Group's Other Strategic Interests, which comprise a 25.5% interest in Siam City Cement, a 24.7% interest in Refrigeration Electrical Engineering Corporation ("REE") and a 10.6% interest in Vinamilk in Vietnam, together contributed a profit of US$41 million, compared to US$8 million in 2017, benefiting in particular from Vinamilk dividends declared in the period.

Siam City Cement's profit was higher than the prior year due to an improved domestic performance and lower one-off expenses, partially offset by lower contributions from its regional operations. REE's contribution, based on its reported first quarter performance, was 21% higher than the first quarter of 2017 due to higher contributions from its real estate, infrastructure and power divisions. The Group's investment in Vinamilk, acquired during the second half of last year, produced dividend income of US$24 million.

Outlook

The Group performed well during the first half of the year, with an increase of 10% in underlying profit attributable to shareholders. For the rest of the year, Astra's overall performance is expected to be satisfactory, led by its heavy equipment and mining businesses although there are concerns over competitive pressures in the car market. The Group's Direct Motor Interests and Other Strategic Interests are expected to continue to perform strongly.

Ben Keswick

Chairman

27th July 2018

Statement pursuant to Rule 705(5) of the Listing Manual

The directors confirm that, to the best of their knowledge, nothing has come to the attention of the Board of Directors which may render the accompanying unaudited interim financial results for the six months ended 30th June 2018 to be false or misleading in any material respect.

On behalf of the Directors

Ben Keswick

Director

Vimala Menon

Director

27th July 2018

(1) Fair value through other comprehensive income ("FVOCI")