JDS.L Regulatory News (JDS)

To: Business Editor 29th July 2016

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 2016

Highlights

· Underlying profit 5% lower

· Sound performances in challenging trading conditions

· Lower contribution from Astra

· Strong financial position maintained

"We expect most of the Group's businesses to maintain their recent performances in the second half and that a satisfactory result will be achieved for the full year."

Sir Henry Keswick, Chairman

Results

The interim dividend of US¢9.00 per share will be payable on 12th October 2016 to shareholders on the register of members at the close of business on 19th August 2016 and will be available in cash with a scrip alternative.

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2016

Overview

Jardine Strategic's underlying profit for the first half of 2016 was lower as market conditions remained challenging. There were improved results from Jardine Cycle & Carriage and Dairy Farm, a solid performance from Hongkong Land, but declines in Mandarin Oriental and Jardine Matheson. Within Astra, weaker commodity prices impacted a number of businesses and the contribution from financial services was also reduced, which was partly offset by generally improved performances in its automotive businesses.

Results

Jardine Strategic's underlying profit for the first six months of 2016 was US$664 million, 5% below the same period in 2015. Underlying earnings per share were down 3% at US$1.12. The revenue of the Group, including 100% of the revenue of Jardine Matheson, associates and joint ventures, was US$34.6 billion, compared to US$31.5 billion in the first half of 2015.

Non-trading items in the first half represented a gain of US$424 million, primarily in respect of revaluations of investment properties, compared with a non-trading gain of US$46 million in the first half of 2015. Accordingly, the Group's profit attributable to shareholders was US$1,088 million for the six months under review, compared with US$746 million in 2015.

The Board has declared an increased interim dividend of US¢9.00 per share.

Business Performances

Within Jardine Matheson's directly held interests, Jardine Pacific saw steady performances from most of its businesses. Jardine Motors produced good profit growth, benefiting from improved trading conditions in mainland China. JLT saw a decline in its trading profit primarily as a result of a lower contribution from its Employee Benefits business in the United Kingdom.

Hongkong Land's commercial portfolio provided a stable contribution as it benefited from lower levels of vacancy. In the residential sector, profits from mainland China remained steady, although there was a reduced contribution from Singapore due to the timing of project completions. Work is progressing well on the group's commercial and residential developments across the region.

Dairy Farm performed satisfactorily in the first half with modest sales growth at constant rates of exchange in all its divisions. Underlying profit improved despite tough trading conditions as higher contributions from Food, Home Furnishings, Restaurants and Yonghui offset a weaker performance from its Health and Beauty division. Benefits are starting to be seen from the investments it is making in areas such as store enhancement, private label products, information systems and supply chain infrastructure.

Mandarin Oriental faced a challenging environment in a number of its key markets, including Hong Kong, leading to lower earnings for the period. The group, which currently operates 29 hotels and eight residences, has a strong pipeline of projects under development.

Jardine Cycle & Carriage produced good profit growth from its directly held motor operations and recorded a six month contribution from Siam City Cement, compared with three months in 2015. Nevertheless, its overall result was lower due to reduced earnings in Astra coupled with a softer rupiah exchange rate on consolidation. Astra's net income for the period fell, despite higher automotive profits, as weak commodity prices adversely affected its heavy equipment, mining contracting and agribusiness operations, and a significant increase in loan-loss provisions at Permata Bank led to a lower contribution from financial services.

People

We were saddened by the death of Lord Leach in June 2016. He made a significant contribution to the Group over 33 years and his wise counsel will be greatly missed.

Y.K. Pang will join the Board on 1st August 2016.

Outlook

We expect most of the Group's businesses to maintain their recent performances in the second half and that a satisfactory result will be achieved for the full year.

Sir Henry Keswick

Chairman

Operating Review

Jardine Matheson

Jardine Matheson produced an underlying profit for the first six months of 2016 of US$636 million, 4% below the same period in 2015. Non-trading items in the first half represented a gain of US$348 million, giving a profit attributable to shareholders of US$984 million for the six months under review, compared with US$708 million in 2015. Shareholders' funds rose to US$20.7 billion during the first six months of the year.

· Jardine Pacific

Jardine Pacific's underlying profit for the first half of 2016 was US$54 million, down from US$56 million last year largely due to the sale of its shipping business in 2015. The results from Jardine Schindler and JEC were stable. Gammon's earnings were down, although its order book remains strong at US$4.1 billion, up from US$3.5 billion at the end of last year. There was a lower contribution from transport services. Jardine Restaurants' operations produced higher sales and profits in Taiwan, but it faced more difficult trading in Hong Kong. The technology services activities of JTH Group saw modest profit growth.

· Jardine Motors

Jardine Motors achieved an underlying profit up 50% at US$49 million. Zung Fu produced a good performance in mainland China with higher deliveries of Mercedes-Benz passenger cars and strong growth in the after-sales business, although in Hong Kong and Macau the business faced declining vehicle sales and reduced margins. In the United Kingdom, a trading profit in line with last year was achieved together with a gain on the sale of a dealership. 

In mainland China, Zhongsheng saw an increase in new car sales volumes and a higher contribution from after sales. In April 2016, Zhongsheng added 18 dealership stores via the acquisition of a 65% stake in Jiahua Weiye. Zhongsheng remains well placed as the market continues to consolidate. 

· Jardine Lloyd Thompson

JLT's total revenue for the period was US$881 million, an increase of 5% in its reporting currency. Its underlying trading profit was 4% lower in its reporting currency at US$140 million, reflecting both the lower revenues of its Employee Benefits business in the United Kingdom and the planned development cost of its Specialty business in the United States. JLT's Risk & Insurance businesses produced an 8% increase in revenues, while the Employee Benefits operations saw revenues decline 5%. JLT's contribution to the Group's underlying profit was 27% lower, after aligning the accounting treatment of the restructuring costs in the Employee Benefits business to that of the Group and reflecting the weaker sterling exchange rate.

Hongkong Land

Hongkong Land's underlying profit attributable to shareholders for the six months was US$393 million, compared with US$419 million in 2015. The profit attributable to shareholders was US$1,263 million after accounting for a net gain of US$870 million arising on the valuation of the group's investment properties. This compares with a profit of US$513 million in 2015, after a valuation net gain of US$94 million.

In Hong Kong, office vacancy in the group's Central office portfolio was 3.1% at 30th June 2016, compared with 3.4% at the end of 2015, and office rental reversions were positive. Its Central retail portfolio remained fully occupied, and while base rental reversions continued to be positive, the average retail rent declined due to a lower turnover element. In Singapore, vacancy was 1.0%, compared with 3.0% at the end of 2015, as previously committed space was taken up. In Beijing, its luxury retail complex at Wangfujing is on schedule to open in the first half of 2017. In Jakarta, work on the fifth tower at the group's 50%-owned joint venture, Jakarta Land, is on schedule.

In the residential sector, Hongkong Land's projects in mainland China continued to perform well, and the group's attributable interest in contracted sales in the first six months remained robust. In Singapore, no projects were completed in the first half of 2016, while the fully-sold J Gateway project is due for completion in the second half. Pre-sales continue at the LakeVille and Sol Acres projects, which are due to complete in 2017 and 2018, respectively. Of Hongkong Land's other residential developments, progress is being made in its joint venture projects in Indonesia and the Philippines.

Dairy Farm

Dairy Farm's sales for the period, excluding associates and joint ventures, declined 1%, although rose 2% at constant rates of exchange. Sales were affected by the closure of a number of underperforming stores in Singapore and Indonesia. Underlying net profit at US$199 million was 3% above the same period last year, or up 5% at constant rates of exchange, benefiting from an additional contribution from Yonghui.

In the Food division, Hong Kong was affected by increases in rental and labour costs, while Indonesia, the Philippines and Singapore achieved improved profitability. Sales were maintained, but profits were lower in Malaysia. The group's convenience store operations performed satisfactorily in a difficult trading environment. The Health and Beauty division produced lower profits due to decreases in Hong Kong, Malaysia and Macau, although sales growth was seen in mainland China and progress was made in Indonesia and the Philippines. In the Home Furnishings division, IKEA performed well, producing growth in both sales and profits, and store expansion opportunities are being pursued in all three of its markets. In the Restaurant division, Maxim's maintained its impressive track record with increased sales and profits in Hong Kong and mainland China.

The group is to invest a further US$191 million in Yonghui in the third quarter to maintain its 19.99% interest following the placement by Yonghui of a 10% shareholding to JD.com. Yonghui reported 18% revenue growth in the first half.

Mandarin Oriental

Mandarin Oriental's underlying profit for the first half was US$25 million, compared with US$33 million in 2015. Profit attributable to shareholders was US$23 million, compared with US$32 million in 2015, after deducting acquisition transaction costs in both periods.

The group experienced softer demand across many of its key markets, particularly in Hong Kong, London and Paris. There was also an adverse impact of a rooms renovation programme in Washington D.C. The group benefited from a positive trading environment in Tokyo and a return to normal operations in Munich following a public area renovation. The results also benefited from a profit contribution from Mandarin Oriental, Boston, following the US$140 million acquisition in April 2016 of the hotel property, which the group had managed since its opening.

The previously announced 18 month renovation of Mandarin Oriental Hyde Park, London is due to begin in September 2016. The next hotel opening will be in Doha in the first half of 2017.  The group has recently announced that it will brand and manage luxury residences adjacent to Mandarin Oriental, Bali, which are expected to complete at the same time as the hotel opens in mid-2018.

Jardine Cycle & Carriage

Jardine Cycle & Carriage reported an underlying profit for the period of US$332 million, down 8%, while its profit attributable to shareholders of US$328 million was 9% lower. Astra contributed US$249 million to the group's underlying profit, a 15% reduction which was due in part to a 3% weaker average rupiah exchange rate in the first half.

The group's non-Astra motor interests produced a profit of US$78 million, up 13%. In Vietnam, Truong Hai Auto Corporation's earnings rose on higher unit sales, although margins suffered from competitive pressures. Earnings at the Singapore motor operations improved, while the contribution from Malaysia was slightly lower. In Indonesia, Tunas Ridean achieved an improved profit from motor vehicles and financing activities. The contribution from associates, Siam City Cement in Thailand and Refrigeration Electrical Engineering Corporation in Vietnam, increased by 29% to US$15 million. This was mainly due to the incorporation of a half year's results of Siam City Cement, compared to three months in 2015 following the acquisition of the shareholding interest in April of that year.

Astra

Astra reported a net profit equivalent to US$530 million under Indonesian accounting standards, 12% down in its reporting currency. Astra's net income fell, despite higher automotive profits that benefited from new model launches, as weak commodity prices adversely affected its heavy equipment, mining contracting and agribusiness operations and there was a lower contribution from financial services.

The wholesale market for cars in Indonesia rose 1% in the period, while Astra's car sales were 4% higher at 273,000 units, increasing its market share from 50% to 51%. There was a 7% contraction in the wholesale market for motorcycles, while Astra Honda Motor's domestic sales were 1% higher at 2.2 million units, increasing its market share from 67% to 73%. Net income at Astra Otoparts, the group's component business, was little changed for the period.

Net income from Astra's financial services businesses was down 40% to US$93 million. The consumer finance operations increased the amount financed by 13% to US$2.7 billion. Financing in the heavy equipment sector declined 11% to US$140 million. Astra's 45%-held joint venture, Permata Bank, reported a net loss of US$62 million for the period compared to a net income of US$64 million in the previous year due to significant increases in loan-loss provisions. To strengthen further its capital base, Permata Bank completed a US$400 million rights issue in June. Astra's general insurance company, Asuransi Astra Buana, saw net income down 17%, primarily due to reduced investment earnings. Further customer growth was seen at Astra's life insurance joint venture with Aviva plc.

United Tractors, which is 60%-owned, reported net income 46% lower at US$138 million. In its construction machinery business, there was a 25% reduction in Komatsu heavy equipment unit sales, while parts and service revenues also declined. The contract mining operations of Pamapersada Nusantara reported a 22% decrease in revenue as contract coal production and overburden removal were both down. United Tractors' mining subsidiaries reported higher coal sales. Acset Indonusa, the general construction contractor just over 50%-held, reported an improvement in net income and new contracts of US$178 million secured in the first half.

Astra Agro Lestari, which is 80%-owned, reported net income up 78% to US$59 million due to the benefit of the stronger rupiah on the translation of its US dollar monetary liabilities. Average crude palm oil prices achieved were 4% lower and sales were down 9%, while olein sales were 5% lower. Astra Agro Lestari raised some US$300 million by way of a rights issue during the period.

Net income from infrastructure, logistics and others increased by 156% to US$13 million, mainly due to higher earnings from toll roads, used vehicles and logistics businesses. The expansion of Astra's toll road interests continues, and they now amount to 227 km including sections planned or under development. PAM Lyonnaise Jaya, which operates the western Jakarta water utility system, saw sales volume increase 4%. Serasi Autoraya's net income rose 63% to US$3 million, as higher used vehicle sales and logistics volumes outweighed the reduced activity in its car leasing and rental business.  Anandamaya Residences, the group's 60%-owned luxury residential development in Jakarta's Central Business District, is on schedule for completion in 2018. Astra Graphia, 77%-owned, which is active in the area of document information and communication technology solutions, reported net income modestly lower.