JDS.L Regulatory News (JDS)

To: Business Editor 27th July 2012

For immediate release

The following announcement was issued today to a Regulatory Information Service approved by the Financial Services Authority in the United Kingdom.

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2012 

Highlights

·; Underlying earnings maintained

·; Good results from Astra and Dairy Farm

·; Hongkong Land's commercial property returns up, but residential earnings lower

·; Difficult trading for Jardine Matheson's motor operations in mainland China

"The Group's first-half results were satisfactory given the uncertain and difficult markets, and the level of performance is expected to be maintained for the full year."

Sir Henry Keswick, Chairman

27th July 2012

Results

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2012

Overview

There were strong contributions from Astra and Dairy Farm in the first half of 2012, offset by the effect of fewer residential development completions by Hongkong Land as well as a lower contribution from Jardine Matheson.

Results

Jardine Strategic's underlying profit for the first six months of 2012 was US$769 million, 1% higher than the same period in 2011. Underlying earnings per share were 1% up at US$1.25. The revenue of the Group, including 100% of the revenue of Jardine Matheson, associates and joint ventures, was US$30.3 billion, compared to US$27.4 billion in the first half of 2011.

Non-trading gains in the first half totalled US$91 million and included a modest uplift in investment property values in Hongkong Land, offset by the loss on the restructuring and partial sale of the Company's interest in Rothschilds Continuation Holdings. This compares with non-trading gains of US$1,773 million in the first half of 2011. As a result, the Company's profit attributable to shareholders was US$860 million for the six months, compared with US$2,539 million in 2011.

The Board has declared an increased interim dividend of US¢7.00 per share, up 8%.

Business Performances

Within Jardine Matheson's directly held interests, Jardine Pacific recorded mixed results from its businesses in the first half of 2012 leading to a reduction in earnings. The group's engineering and construction interests did well, but this was countered by the poor trading conditions facing its transport services operations and lower earnings in its restaurant and IT businesses. Jardine Motors experienced a very disappointing first half as fierce competition and oversupply led to sustained pressure on margins in mainland China. New business gains and disciplined cost control enabled Jardine Lloyd Thompson to produce another satisfactory performance, and the contribution to Jardine Matheson's results was enhanced by the increase in its shareholding, which took place in the latter part of 2011.

Hongkong Land's operating profit from its commercial properties rose in the first six months of 2012. There was a particularly good contribution from its prime Hong Kong portfolio, where rental levels were underpinned by a lack of new supply, as well as growth in Singapore. This improvement was more than offset, however, by lower earnings from residential developments, reflecting the incidence of completions. In mainland China, residential sales continued at the group's projects in Chongqing and Shenyang, although the overall market sentiment remained challenging.

Dairy Farm produced further earnings growth in the first half of 2012 while expanding its store network and investing in new markets. During the period the group acquired shareholdings in supermarket operations in the Philippines and Cambodia of 50% and 70%, respectively, which provide good opportunities for growth alongside local partners. Dairy Farm's Indonesian subsidiary has also been awarded the franchise right to operate IKEA stores in that country, and the first store is due to open in 2014.

Mandarin Oriental's Asian hotels continued to enjoy a good trading environment and improved performances were recorded in most locations. Elsewhere, however, the group has been impacted by the uncertain economic conditions. Four new hotel management contracts were announced in the period; for an existing property in Atlanta and new developments in Bodrum, Marrakech and Chengdu. This gives the group 45 hotels in operation or under development around the world. Within the next 18 months, new hotels are scheduled to open in Guangzhou, Taipei, Shanghai and Milan.

Jardine Cycle & Carriage achieved an improved result as Astra performed well in the first half of 2012. Astra's motor car sales benefited from strong domestic demand and increased supply as a consequence of additional capacity and fewer negative events in its supply chain. Its heavy equipment sales produced enhanced returns and its contract coal mining operations increased production, although experienced higher costs. These improvements more than offset the lower contribution from its agribusiness and motorcycle operations. Looking ahead, despite the recent introduction of new minimum down-payment requirements in auto financing which have the potential to impact demand, Astra is expected to perform satisfactorily in the second half of the year.

In June 2012, consequent on the restructuring of the Rothschild group, the Company exchanged its 21% interest in Rothschilds Continuation Holdings for a 12% interest in Paris Orléans, the listed French holding company of the enlarged group. Subsequently, the Company sold part of its holding, leaving an interest of some 6%. As a result, this holding is no longer equity accounted.

Outlook

The Group's first-half results were satisfactory given the uncertain and difficult markets, and the level of performance is expected to be maintained for the full year.

Sir Henry Keswick

Chairman

27th July 2012

Operating Review

Jardine Matheson

Jardine Matheson reported an underlying profit for the first six months of 2012 of US$714 million, a reduction of 1%. After investment property revaluations and other non-trading items, the company's profit attributable to shareholders was US$785 million for the period, compared with US$2,202 million in 2011. Shareholders' funds increased by 3% to US$16,902 million during the first six months of 2012.

·; Jardine Pacific

Jardine Pacific's underlying profit for the first half of 2012 of US$70million was 6% lower than in the corresponding period in 2011. Jardine Schindler generated higher profits and achieved further growth in its maintenance portfolio. Gammon's earnings improved significantly and its order book increased to US$3.5 billion, while JEC produced a higher profit with its Hong Kong and joint venture operations performing well. In difficult aviation and shipping markets, reduced flight frequencies led to a breakeven position for Jardine Aviation Services, and continued low freight rates and volumes led to only a modest profit for Jardine Shipping Services. With no increase in throughput and rising costs, Hong Kong Air Cargo Terminals produced lower results. Jardine Restaurants' Pizza Hut operations in Hong Kong achieved good sales growth and higher profits, although this was more than offset by reduced year-on-year results from its Pizza Hut and KFC franchises in Taiwan. JOS recorded lower earnings, primarily in Singapore, following a strong performance in 2011.

·; Jardine Motors

Jardine Motors recorded an underlying profit of US$5 million for the period, a reduction of 86%. The decline was mainly due to difficult trading conditions and margin erosion in mainland China where a loss was recorded. Zung Fu has been facing keen competition in the luxury car market in Southern China where a push for market share by Mercedes-Benz led to pressure on dealers to sell vehicles producing severely reduced margins. Zung Fu now has 25 outlets in Southern China with a further six under development. In Hong Kong and Macau, there was a modest increase in profit with higher deliveries of Mercedes-Benz passenger cars, and the order book remained strong. Jardine Motors' dealerships in the United Kingdom achieved higher vehicles sales.

·; Jardine Lloyd Thompson

Jardine Lloyd Thompson's revenue rose 7% in sterling, the company's reporting currency, to US$699 million, reflecting good organic growth of 6%. Underlying profit before tax was US$141 million, an increase of 12% in sterling. This strong performance, combined with the Jardine Matheson's increased shareholding, meant that Jardine Lloyd Thompson's contribution to the Group's first-half underlying profit was 46% higher at US$23 million. The company's specialist risk and insurance operations achieved a good result for the first half of the year, particularly in emerging markets and reinsurance. Underlying trading profit in sterling rose 14%, and trading margin improved from 23% to 24%. The Employee Benefits business, which now has a more international reach, recorded a 7% increase in trading profit with an unchanged trading margin of 19%. 

Hongkong Land

During the first half of 2012, Hongkong Land's underlying profit was 13% lower at US$318 million as improved earnings from its commercial properties were offset by a decrease in residential development profits. After accounting for a US$308 million increase in the values of investment property interests, the group's profit attributable to shareholders was US$626 million.

Despite the Hong Kong market being subdued, rental reversions in the group's Central office portfolio were generally positive and vacancy at the end of June 2012 was 3.1%. Its luxury retail portfolio remained fully let. In Singapore, its office portfolio was almost fully leased with the exception of the recently completed third office tower of Marina Bay Financial Centre, which is some 70% committed. In Jakarta, the group's joint venture development fourth office tower is nearing completion and is 88% pre-let. In Wangfujing in Beijing planning is progressing on Hongkong Land's first significant commercial project on the Mainland, which is being developed as a premier retail centre.

In the residential sector, 18 additional apartments of Serenade in Hong Kong were sold, of which eight were handed over to buyers. In Singapore, wholly-owned subsidiary MCL Land had no residential projects complete during the period, although two are expected to complete in the second half. A recent launch by MCL Land was well received, and of its six previously launched projects under construction all but one are fully pre-sold. In mainland China, at the 50%-held Bamboo Grove in Chongqing, a further 474 units have been handed over to buyers since the beginning of the year and some 250 units are scheduled for handover in the second half. In the next phase, due for completion later in 2012, 69% of the 640 units have been pre-sold. Sales also continue at other projects in Chongqing and Shenyang and at Maple Place in Beijing.

Dairy Farm

Dairy Farm continued to trade well with sales, including 100% of associates, increasing by 10% to US$5.5 billion in the first six months of 2012. Underlying net profit grew 12% to US$243 million. The profit attributable to shareholders of US$245 million included a small gain on a property disposal.

There were strong results from its retail operations in Hong Kong and Taiwan. In mainland China, 7-Eleven produced improved sales, and further resources were made available to support the development of the Mannings health and beauty chain. Restaurant associate, Maxim's, produced a good first-half result in Hong Kong as well as improved performances from its cake shops in Southern China. In Malaysia, the Giant hypermarkets and supermarkets made a steady contribution and there was a good result from the Guardian health and beauty chain. Profits in Singapore were little changed, while in Indonesia there were impressive increases in both sales and profits from all formats.

Mandarin Oriental

Mandarin Oriental's underlying profit for the period was US$29 million, compared to US$33 million in the same period in 2011 which had benefited from US$16 million of branding fees partially offset by US$11 million of pre-opening expenses for its Paris hotel. The profit attributable to shareholders of US$30 million included a US$1 million provision write back. This compares to US$43 million in the first half of 2011, which included a US$10 million gain arising from a long-term leasehold interest granted at no cost.

Mandarin Oriental's Asian hotels performed well in the first half of 2012 with improved performances in most properties, and Tokyo continued to recover from the impact of last year's natural disasters. Despite the difficult market conditions in Europe, resilient demand from the leisure sector helped compensate for reduced corporate business, while in North America the group's overall performance saw some improvement.

Jardine Cycle & Carriage

Jardine Cycle & Carriage's revenue increased by 19% to US$11.2 billion, while profit attributable to shareholders was up 5% at US$511 million. Astra's contribution to underlying profit rose 6% to US$518 million as its good overall growth was partly offset by the weakening of the rupiah.

The underlying profit from Jardine Cycle & Carriage's other motor interests grew by 12% to US$31 million. The Singapore market contracted by 5%, although the profit from the group's motor operations rose following good performances from Mercedes-Benz and used car sales. In Indonesia, Tunas Ridean's earnings improved, but Cycle & Carriage Bintang in Malaysia reported a lower profit in the face of intense competition in the luxury car market. In Vietnam, Truong Hai Auto Corporation's contribution fell due to a 28% decline in unit sales and higher interest expenses in a much weaker market.

Astra

Astra benefited from strong results from its motor car and heavy equipment businesses, which more than offset a lower contribution from its palm oil and motorcycle businesses. It announced a 13% increase in net profit under Indonesian accounting standards for the period, equivalent to US$1,046 million.

The contribution to Astra's results from its automotive interests was 25% higher in the first half of 2012. Astra's car sales rose 32% to 302,000 units during the period, representing a market share of 56% compared to 55% in the first half of last year, as the Indonesian wholesale market for cars grew by 28%. The wholesale market for motorcycles declined by 9% to 3.7 million units, while Astra Honda Motor's motorcycle sales improved slightly to 2.1 million units, with its market share increasing from 52% to 57%. In June 2012, new minimum down-payment regulations governing loans in the automotive sector in Indonesia became effective and might have an adverse impact on automotive sales in the second half of the year. Astra Otoparts, the group's 95.7%-owned component manufacturing business, reported 17% higher sales, with improvements in the original equipment manufacturer and replacement markets, and net income was up 10%.

Astra's financial services interests produced a 4% increase in contribution to profit. The amount financed through Astra's automotive-focused consumer finance operations grew by 10% to US$2.8 billion, while the amount financed through its heavy equipment-focused finance operations grew by 32% to US$479 million. Group insurance company, Asuransi Astra Buana, saw lower earnings despite strong growth in gross written premiums due to higher commissions and claims expenses. The 44.5%-held joint venture, Bank Permata, saw net income rise 1%, with growth in net interest income and fee-based income partly offset by higher operating costs.

United Tractors, which is 59.5%-owned, reported net income up 21%. In the construction machinery sector, sales of Komatsu heavy equipment declined 2% to 4,231 units in the face of competition from supply redirected to Indonesia from the Chinese market. Net revenues increased by 9%, however, due to the sales mix, price increases and strong after sales. Additional capacity enabled contract coal mining subsidiary, Pamapersada Nusantara, to achieve a 31% improvement in net revenues with an increase in contract coal production of 12% to 45 million tonnes and an increase in contract overburden removal of 13% to 415 million bcm. United Tractors' mining subsidiaries, which own eight coal mines, sold 3 million tonnes of coal during the period, an increase of 38%. A decline in prices and an increase in fuel costs impacted earnings.

Palm oil producer, 79.7%-held Astra Agro Lestari, reported net income down 25%. Its palm oil production increased by 7% to 636,000 tonnes and total sales value increased by 7%, but average crude palm oil prices achieved were 2% lower and the net income was affected by higher costs of production and operating expenses.

The contribution to Astra's profit from infrastructure and logistics fell by 10% to US$34 million, as the first half of 2011 benefited from the reversal of a tax provision. Astra's infrastructure interests produced improved results. Its greenfield 40.5 km toll road near Surabaya, acquired in the third quarter of 2011, is under construction and is planned to complete next year subject to land clearance. Elsewhere, its car rental business produced improved returns, as did 76.9%-owned Astra Graphia, which is active in the area of information technology solutions.