JDS.L Regulatory News (JDS)

To: Business Editor 31st July 2015

 For immediate release

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

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2015

Highlights

· Underlying earnings 9% lower

· Challenging trading conditions

· Astra contribution hit by lower earnings and weak rupiah

· Significant acquisitions by a number of Group companies

· Rights issues by Mandarin Oriental and JC&C fully subscribed

"The more challenging conditions seen in the first half are expected to continue for the remainder of the year, and this will be reflected in the full-year result."

Sir Henry Keswick, Chairman

Results

The interim dividend of US¢8.50 per share will be payable on 14th October 2015 to shareholders on the register of members at the close of business on 21st August 2015 and will be available in cash with a scrip alternative.

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2015

Overview

Underlying profit for the period declined, reflecting uncertain economic conditions in the region. Reduced rupiah profits within Astra were further impacted on consolidation by a weaker exchange rate, and both Dairy Farm and Mandarin Oriental reported lower earnings. Hongkong Land, however, did well to maintain its profitability, Jardine Cycle & Carriage's non-Astra interests increased their contribution and Jardine Pacific posted an improved result. A number of investments were made during the period by Group companies to lay the foundations for future growth. 

Results

Jardine Strategic's underlying profit for the first six months of 2015 was US$702 million, 9% below the same period in 2014. Underlying earnings per share were also 9% lower at US$1.16. The revenue of the Group, including 100% of the revenue of Jardine Matheson, associates and joint ventures, was US$31.5 billion, compared to US$30.8 billion in the first half of 2014.

Non-trading items in the first half represented a modest gain of US$46 million, primarily in respect of revaluations of investment properties, and compares with a non-trading gain of US$101 million in the first half of 2014. As a result, the Group's profit attributable to shareholders was US$748 million for the six months under review, compared with US$876 million in 2014.

The Board has declared an increased interim dividend of US¢8.50 per share.

Business Performances

Within Jardine Matheson's directly held interests, Jardine Pacific achieved an increase in earnings for the period primarily due to a stronger performance from Gammon and a good result from Jardine Schindler. Jardine Motors saw earnings decline following a record year in Hong Kong in 2014, which had benefited from new models, and the market in mainland China is again presenting challenges. JLT's profits for the period were held back, as anticipated, by its investment in its new US specialty business, which has begun well and continues to attract talent, laying the foundation for future profitability.

Hongkong Land's commercial portfolio produced another strong contribution with the benefit of lower vacancy. In the residential sector, the group achieved improved results in mainland China, although these were offset in part by the absence of a contribution from Hong Kong. In May, Hongkong Land signed a memorandum of understanding to develop a mixed-use project in Pudong, Shanghai, with a total developable area of some 227,000 sq. m.

Dairy Farm saw modest like-for-like sales growth in most of its major markets, but underlying profit was lower as it faced margin pressures across its food businesses and disappointing trading in its health and beauty business in Malaysia. Adverse exchange rates also affected the group's results on translation into US dollars. Its investment in a 20% shareholding in Yonghui Superstores in mainland China completed in the first half.

Mandarin Oriental raised US$316 million in April through a rights issue. The proceeds of the issue were used to pay down debt in advance of a US$130 million refurbishment of its London hotel, which is due to commence next year, and to help finance the acquisition of a 50% joint venture interest in the Hotel Ritz, Madrid. Mandarin Oriental has also announced a new management contract for a second hotel in Beijing, scheduled to open in 2017 in Hongkong Land's new luxury retail centre in Wangfujing.

In April, Jardine Cycle & Carriage increased the Group's exposure to the Thai economy through the acquisition of a 24.9% interest in Siam City Cement for some US$615 million. Siam City Cement is the second largest cement manufacturer in Thailand. To refinance this acquisition, Jardine Cycle & Carriage raised some US$749 million by way of a rights issue in July 2015.

Astra continued to face slowing economic growth in Indonesia resulting from soft demand and weak commodity prices. Its automotive operations in particular saw reduced activity which, when coupled with discounting in the motor car market caused by manufacturing overcapacity, had a negative impact on earnings. Of its business segments, only heavy equipment and mining produced an increase in earnings.

Outlook

The more challenging conditions seen in the first half are expected to continue for the remainder of the year, and this will be reflected in the full-year result.

Sir Henry Keswick

Chairman

Operating Review

Jardine Matheson

Jardine Matheson reported an underlying profit for the first six months of 2015 of US$667 million, 10% lower than the same period in 2014. Non-trading items in the first half produced a gain of US$42 million, giving a profit attributable to shareholders of US$709 million, compared with US$818 million in the first half of 2014. Shareholders' funds rose modestly to US$19.5 billion during the first six months of the year.

· Jardine Pacific

Jardine Pacific's underlying profit for the first half of 2015 was up 20% at US$56 million. Jardine Schindler saw steady earnings growth during the period, benefiting from stable margins and an expanding maintenance portfolio. Gammon recorded a higher profit, and its order book has remained steady at some US$4 billion. JEC's earnings declined following softer trading in Singapore and its Trane joint venture. Jardine Pacific's transport services businesses recorded an increased profit contribution, despite weaker trading at Hactl in the face of challenging market conditions. Jardine Restaurants performed broadly in line with last year against a background of softer consumer sentiment in Hong Kong. The turnaround at JOS is continuing.

· Jardine Motors

Jardine Motors produced an underlying profit of US$33 million in the first half of 2015, compared to US$52 million last year. Zung Fu in Hong Kong and Macau saw sales and margins decline following a record year in 2014 which had benefited from new models. The market in mainland China again proved challenging with higher volumes being offset by lower margins, leading to an overall loss being recorded. The United Kingdom reported improved earnings due to steady trading and a US$10 million profit from property disposals, despite somewhat unfavourable exchange rates.

Zhongsheng saw volumes, sales revenue and the contribution from after sales all increase in the first quarter, but the market in mainland China remains challenging. Despite this, as the fourth largest dealer group in the country, Zhongsheng is well placed as the market continues to consolidate. The income from the Group's interest in Zhongsheng, which is held through Jardine Strategic, is included in Corporate and Other Interests.

· Jardine Lloyd Thompson

JLT's total revenue for the period was US$905 million, an increase of 6% in its reporting currency in what continued to be a challenging insurance rating environment. The underlying trading profit was 7% lower in its reporting currency reflecting the development costs of its Specialty business in the United States, a shift in the phasing of trading profit between the two halves of the year and a move from Commisson payments to fees in the UK Employee Benefits business. Excluding the US development costs, the profit before tax would have shown a modest improvement. JLT's Risk and Insurance business revenue grew by 4%, and its Employee Benefits business achieved revenue growth of 11% reflecting strong performances from its operations in Asia and Australia. JLT's contribution to the Group's underlying profit declined by 17%.

Hongkong Land

Hongkong Land produced an underlying profit of US$419 million, compared with US$433 million in the first half of 2014. While operating results were marginally higher, this was offset by higher tax charges due to the geographical mix of sales. After accounting for a net gain of US$94 million, principally on the valuation of investment properties, its profit attributable to shareholders was US$513 million, and compares with US$563 million in 2014 which included net non-trading gains of US$130 million.

Hongkong Land's average office rent in Hong Kong remained unchanged from the second half of 2014 although reversions were marginally positive overall. Vacancy at the end of June was 4.2%, down from 5.4% at the end of 2014. Its retail portfolio remained fully occupied and saw positive rental reversions. A stable market in Singapore enabled the group's office portfolio to maintain low vacancy of 1.9%. In Jakarta, its 50%-owned office portfolio continued to perform well, and its new office tower is making good progress. Construction is also progressing well at its luxury retail complex project in Wangfujing in Beijing.

Earnings from Hongkong Land's residential developments in mainland China were higher following completions at two projects, although the timing of new project launches meant that contracted sales are lower than the second half of 2014. In April, the group sold its joint venture interest in the Park Life project in Shenyang, and expects to dispose of its stakes in two remaining Shenyang projects. In Singapore, MCL Land completed two residential projects during the period, and a further project is expected to complete in the second half of 2015. MCL Land acquired another residential site at Jurong West in Singapore, adjacent to its existing development, on which it plans to build some 700 units. Work is progressing well on Hongkong Land's two joint venture residential projects in Indonesia and its joint venture luxury development in Manila.

Dairy Farm

Dairy Farm's sales for the period including 100% of associates and joint ventures rose 27% to US$8.0 billion, including initial contributions from Yonghui and San Miu from the dates of acquisition. Sales for continuing businesses rose 3% to US$6.5 billion, while at constant rates of exchange the increase would have been 7%. Its underlying net profit of US$193 million was 14% lower as a weaker operating performance was only partially compensated for by the initial contribution from Yonghui.

Despite increased sales, the group's Food businesses experienced reduced margins and lower earnings due to cost pressures, price deflation on certain commodities and currency movements. The convenience store operations performed satisfactorily in Hong Kong and Macau, but were weaker in Singapore. In the Health and Beauty division, where sales were higher, Hong Kong and Macau produced good performances and further improvement was seen in mainland China, but profitability was lower in Malaysia and Indonesia. In Home Furnishings, the IKEA stores in both Hong Kong and Taiwan traded well, and the new store in Indonesia is performing in line with expectations. In the Restaurant division, Maxim's achieved improved sales and profits in Hong Kong and mainland China.

In February, Dairy Farm divested 30% of the ordinary shares in its previously wholly-owned food retail business in Malaysia to meet local regulatory requirements. In March, the group acquired the 15 store San Miu Supermarket chain in Macau, where it already operates convenience stores and health and beauty outlets. In early April, the group completed its US$900 million purchase of an interest of some 20% in Yonghui Superstores in mainland China.

Dairy Farm has established an on-line presence in Guardian Singapore, which is the first of several planned new moves into e-commerce. New finance and merchandising systems are also being introduced in stages across the group, and investment is continuing in existing stores to enhance the shopping experience, in the supply chain, and in building the people capability needed to support the company's growth objectives.

Mandarin Oriental

An uncertain operating environment and the impact of renovations at a number of its properties led Mandarin Oriental to record a reduced underlying profit for the period of US$33 million. This compares to US$46 million in 2014, which included US$9 million of branding fees from residences in Bodrum. Profit attributable to shareholders was US$32 million, after deducting US$1 million of acquisition expenses, and compares with US$46 million last year. In April 2015, the group raised US$316 million by way of a rights issue.

Lower occupancy and average rates were seen at the group's two wholly-owned hotels in Hong Kong. Its properties in Tokyo and Bangkok benefited from increased visitor arrivals, but softer corporate demand led to weaker performances in Singapore and Kuala Lumpur. In Europe, there was an improved result in London, but challenges elsewhere led to a lower contribution from the region. In The Americas, most properties experienced positive trading conditions.

In May, the group acquired the Hotel Ritz, Madrid in joint venture with The Olayan Group, and it is planned to undertake a comprehensive renovation of the property in 2017, which will bring the group's total investment in the property to some US$126 million. Mandarin Oriental, Milan has just opened, and will be followed by a new resort in Marrakech in September.

Jardine Cycle & Carriage

Jardine Cycle & Carriage reported an underlying profit of US$364 million, down 12%, while its profit attributable to shareholders of US$362 million was 16% lower. Astra contributed US$294 million to the group's underlying profit, which was 23% lower due to more difficult trading conditions coupled with the rupiah exchange rate being on average 10% weaker than in the first half of 2014.

The group's non-Astra motor interests produced a profit of US$69 million, up 88%. There was a strong performance from Truong Hai Auto Corporation in Vietnam, which benefited from significantly higher unit sales and good margins. The contribution from its Singapore motor operations improved following an increase in the government vehicle quota. In Malaysia, Cycle & Carriage Bintang's earnings rose in response to strong sales and enhanced margins. In Indonesia, Tunas Ridean's profit declined due to reduced motor car sales and a lower contribution from its rental operations, although its financing business performed better. The group's Other Interests, comprising two new associates, 24.9% held Siam City Cement in Thailand and 22% held Refrigeration Electrical Engineering Corporation in Vietnam, contributed US$12 million.

Astra

Astra reported a net profit equivalent to US$619 million under Indonesian accounting standards, 18% down in its reporting currency, with reduced contributions from all its businesses with the exception of heavy equipment and mining.

Astra's car sales fell by 21% to 263,000 units, in an Indonesian wholesale car market that contracted by 18%, and its market share decreased from 52% to 50%. The wholesale market for motorcycles decreased by 24%, while Astra Honda Motor's sales were 19% lower at 2.1 million units, with its market share increasing to 67%. The contribution from the group's component manufacturing business also declined as lower volumes and a weaker rupiah resulted in reduced manufacturing margins.

Net income from Astra's financial services businesses was 16% lower at US$160 million, although was up 2% if the gain from the acquisition of the 50% stake in Astra Aviva Life in May 2014 is excluded. The consumer finance operations saw increased activity, and while earnings from motorcycle financing rose, the contribution from motor car financing declined. There was increased financing in the heavy equipment-focused operations. Astra's 45% held joint venture, Permata Bank, reported net income rising 4% to US$64 million on modest loan growth and an improved funding environment. Group insurance company, Asuransi Astra Buana, recorded higher profits due to an increase in investment earnings. Astra's new life insurance joint venture with Aviva plc made a satisfactory start.

United Tractors, which is 60% owned, saw net income rise 4% to US$262 million as it benefited from a weaker rupiah on its US dollar denominated income. Its construction machinery business experienced a 38% decline in Komatsu heavy equipment sales, which was partly offset by higher parts and services revenue. Its contract mining operations through Pamapersada Nusantara reported a 9% decrease in revenue as coal production and overburden removal declined. United Tractors' mining subsidiaries reported reduced coal sales, which led to an 18% decline in revenue. During the second quarter, United Tractors acquired a further 10% interest in listed construction group Acset Indonusa, raising its shareholding to 50.1%.

Astra Agro Lestari, which is 80% held, reported net income down 68% at US$34 million as average crude palm oil prices achieved were 12% lower and crude palm oil sales were down 18%. Olein sales increased by 109%.

Net income from infrastructure, logistics and others fell by 60% to US$5 million, mainly due to initial losses arising on the first 14.7 km section of the greenfield 40.5 km Kertosono-Mojokerto toll road. In July a 25% interest in the 73 km Semarang-Solo toll road was acquired. Serasi Autoraya's earnings fell due to a 9% decrease in the number of vehicles under contract at its TRAC car rental business. Anandamaya Residences, the group's 60% held luxury residential development project located in Jakarta's Central Business District, continued to achieve market-leading pricing and strong buyer interest with close to 90% of the units sold. In information technology, 77% owned Astra Graphia, which is active in the areas of document information and communication technology solutions, reported net income down 11%.