JDS.L Regulatory News (JDS)

To: Business Editor 4th August 2017

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 2017

Highlights

· Underlying profit up 19%

· Good performances from most Group companies

· Strong financial position maintained

"Good trading is expected to continue in a number of the Group's businesses in the remainder of the year, although the level of profit growth in the second half is likely to be tempered due to fewer residential completions expected in Hongkong Land and price competition in a number of the Group's automotive markets."

Sir Henry Keswick, Chairman

Results

The interim dividend of US¢9.50 per share will be payable on 19th October 2017 to shareholders on the register of

members at the close of business on 25th August 2017 and will be available in cash with a scrip alternative.

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2017

Overview

Jardine Strategic benefited from good performances from many of its businesses and produced strong growth in underlying profit for the first half of 2017.

Results

Underlying profit for the period rose 19% to US$787 million, and underlying earnings per share were up 21% at US$1.35. The revenue of the Group for the first six months of 2017 was 9% higher at US$15.6 billion, while revenue, including 100% of Jardine Matheson, associates and joint ventures, was up 10% at US$38.1 billion.  

Hongkong Land's commercial interests performed well and it recorded a higher level of sale completions in its development properties.  Astra benefited from better results from across its businesses, while Permata Bank returned to profit.  Jardine Matheson saw improvements in its directly held businesses.  Dairy Farm's trading was mixed, although it did achieve higher profit contributions from certain businesses.  Mandarin Oriental's results were impacted primarily by its London hotel renovation, while the contributions from Jardine Cycle & Carriage's non-Astra interests were lower.

Non-trading items in the first half represented a gain of US$1,440 million, primarily US$111 million in respect of profits on property disposals and US$1,311 million from revaluations of investment properties, compared with a non-trading gain of US$424 million in the first half of 2016. Accordingly, the Group's profit attributable to shareholders for the period was US$2,227 million for the six months under review, compared with US$1,088 million in 2016.

The Board has declared an increased interim dividend of US¢9.50 per share.

Business Developments

During the first half of the year the Company made additional investments in mainland Chinese businesses in support of the Group's overall development.  In June, a 28% stake was acquired in Hong Kong-listed Greatview, the third-largest supplier of aseptic carton packaging globally, for a total cost of some US$246 million.  This interest is now being managed as part of the Jardine Pacific portfolio of businesses within Jardine Matheson. 

Following the redemption of convertible bonds issued by Zhongsheng, the Company subscribed for additional shares increasing its interest by some 5% to 20%.  Zhongsheng, as well as Jardine Motors, are currently benefiting from the strong trading conditions in the new car market on the mainland.

Jardine Matheson held JLT made further progress with the development of its Specialty business in the United States, with revenues more than doubling due to strong organic growth and a first contribution from the recently acquired Construction Risk Partners.

Hongkong Land's WF Central project in Wangfujing, Beijing is nearing completion, with the luxury retail component opening later this year and the Mandarin Oriental hotel following in 2018.  In Jakarta, the fifth tower at its Jakarta Land joint venture will be ready early next year, while its prime mixed-use complex in Phnom Penh has been completed.  In June, the group agreed to purchase a one-third interest in a development site within the Marina Bay Financial District in Singapore, which will be connected to its existing portfolio in the district.  In addition, the group has entered two new cities in mainland China with mixed-use development projects in Wuhan and Nanjing.

In July, Dairy Farm agreed to increase its ownership in Rustan's in the Philippines to 100% with the acquisition of the remaining 34% interest from its joint venture partner.  Dairy Farm is continuing to improve its appeal to customers across its range of formats through its investment in technology, supply chain infrastructure, stores and people.

Mandarin Oriental has announced a number of management contracts, including a hotel operating in Santiago, Chile, and three new hotels with branded residences being developed in Dubai, Honolulu and Melbourne which will open between 2020 and 2022.  Following an announcement in June, Mandarin Oriental is pursuing strategic options for its wholly-owned hotel, The Excelsior in Hong Kong, which include the possible sale of the property for redevelopment.

During the period under review, Jardine Cycle & Carriage supported a US$500 million rights issue by Siam City Cement, and subsequently increased its shareholding in the Thai cement manufacturer to 25.5%.

Astra returned to profit growth as its net profit rose 31% under Indonesian accounting standards.  Its automotive operations did well, despite increasing competition in the car market and soft demand for motorcycles, with its market shares rising to 56% for cars and 74% for motorcycles.  Improvements in Permata Bank enabled it to produce a profit following a challenging year in 2016, and in June it completed a further US$220 million rights issue. Stronger commodity prices led to better performances from the group's heavy equipment and mining operations as well as its agribusiness activities.

Outlook

Good trading is expected to continue in a number of the Group's businesses in the remainder of the year, although the level of profit growth in the second half is likely to be tempered due to fewer residential completions expected in Hongkong Land and price competition in a number of the Group's automotive markets.

Sir Henry Keswick

Chairman

Operating Review

Jardine Matheson

Jardine Matheson produced an underlying profit for the first six months of 2017 of US$765 million, an increase of 20% over the same period in 2016.  Non-trading items in the first half represented a gain of US$1,313 million, giving a profit attributable to shareholders of US$2,078 million for the six months under review, compared with US$984 million in 2016. Shareholders' funds rose to US$23.9 billion during the first six months of the year.

· Jardine Pacific

Jardine Pacific achieved good earnings growth for the first half of 2017 with underlying profit up 26% at US$68 million following stronger performances in most of its operations. Jardine Schindler benefited from continued growth in new installations and in its maintenance portfolio, while JEC's businesses in Hong Kong traded well.  Gammon's profit improved as the comparable period had been impacted by project timings.  Trading momentum continued for Jardine Restaurants in Taiwan and Vietnam, but Hong Kong remained challenging.  Increased cargo throughput enabled HACTL to produce a better performance.  JTH Group's profit, however, was eroded in a weak IT market.  Jardine Pacific's business portfolio now includes a 28% stake in Greatview Aseptic Packaging Company Limited.

· Jardine Motors

Jardine Motors produced an excellent result in the first half of 2017 with its underlying profit 45% higher at US$83 million.  The result includes a contribution from Zhongsheng, in which Jardine Strategic now holds a 20% interest.  Profit attributable to shareholders was US$286 million after accounting for a US$203 million gain, principally arising from the sale of a property by Zung Fu.  In mainland China, trading results from both Zung Fu and Zhongsheng were strong with good volume growth and improved margins. Zung Fu's performance in Hong Kong was stable, and work is continuing on its new showroom and workshop facilities, which will complete in mid-2018.  In the United Kingdom, the performance was softer compared with 2016, when the results had also benefited from a gain on the sale of a dealership.

· Jardine Lloyd Thompson

JLT produced a good performance in what remained challenging trading conditions throughout the period.  Total revenue was US$877 million, an increase of 11% in its reporting currency, representing 3% organic growth.  Underlying trading profit was US$140 million, an increase of 12% in its reporting currency, or 3% at constant rates of exchange. JLT's Risk & Insurance businesses recorded revenue growth of 12%, with good performances in JLT Europe, JLT Re, Latin America, Asia and the United States.  The combined Employee Benefits businesses saw headline revenue growth of 8%, driven primarily by the strong performance of its UK Employee Benefits business, with revenues increasing by 9%, following its successful restructuring in 2016.

Hongkong Land

Hongkong Land's underlying profit attributable to shareholders for the first six months was US$517 million, up 32%. The profit attributable to shareholders was US$3,125 million after accounting for a net gain of US$2,608 million arising on the revaluation of investment properties. This compares with a profit of US$1,263 million in the first half of 2016, after a net revaluation gain of US$870 million.

The group's investment properties produced an increased contribution from the higher average rents achieved in Hong Kong. Vacancy in Hongkong Land's Central office portfolio at 30th June 2017 was 1.5%, compared with 2.2% at the end of 2016, while the retail portfolio was almost fully occupied.  In Singapore, the performance of its office portfolio reflected the current relative surplus of market supply, although vacancy at the end of June was only 0.2% compared with 0.1% at the end of 2016, with a slight decrease in average rents.

Within Hongkong Land's development properties, being residential and mixed-use projects developed for sale in the short to medium-term, mainland China benefited from further sale completions and positive market sentiment leading to both an improved profit contribution and an increase in contracted sales.  At 30th June, the group had US$1,421 million in sold but unrecognized contracted sales, compared with US$1,083 million at the end of 2016. Results from Singapore reflected the completion of the 699-unit LakeVille project, compared with no completions in the first half of 2016, and the pre-sales continuing in two other projects were satisfactory.  Progress is being made in the group's other developments in Indonesia and the Philippines.

Dairy Farm

Dairy Farm's sales for the period by its subsidiaries were marginally behind last year, although flat at constant exchange rates, as declines within supermarkets and hypermarkets in the Food division were offset by sales growth in all its other divisions. Underlying net profit was up 6% at US$211 million, with reductions in the Food division being more than compensated for by strong results from Yonghui and Maxim's in addition to improved performances from the Health and Beauty and Home Furnishings divisions.

In the Food division, continuing softness in certain key markets led to sales within supermarkets and hypermarkets being 3% lower at constant exchange rates and profits declining. The group's convenience store operations traded well, and strong growth in sales and profit were achieved by Yonghui in mainland China. In the Health and Beauty division, progress was made in Hong Kong, Macau, mainland China and Indonesia, although more challenging conditions were experienced in Singapore and Malaysia.  In Home Furnishings, IKEA performed well, driven by strong sales in Taiwan and Indonesia.  In the Restaurants division, Maxim's delivered further growth as it continues to expand its regional presence and range of franchises.

Dairy Farm is continuing its programme of investment in its technology backbone, supply chain infrastructure, stores and people.  These initiatives are supporting the expansion of the range of fresh produce and own brand products on offer, together with the introduction of enhanced e-commerce offers in many of its businesses and the innovation of new store formats in most markets.  By improving the shopping experience of its customers and meeting their changing requirements, Dairy Farm is underpinning its future growth.

Mandarin Oriental

Mandarin Oriental's underlying profit for the first half was US$15 million, compared with US$25 million in 2016.  Profit attributable to shareholders was also US$15 million, while in 2016 it was US$23 million.  Earnings were lower during the period due to the impact of the ongoing phased renovation of its London hotel, which will complete in the second quarter of 2018, and the inclusion of a traditionally weaker first quarter result in its Boston hotel following its acquisition in April 2016.  While reduced contributions were seen from Jakarta and New York, these were offset by better performances in Paris, Munich and Washington. Results across the rest of the portfolio, including Hong Kong, were broadly stable.

Mandarin Oriental currently operates 30 hotels and eight residences in 20 countries and territories, and has a strong pipeline of hotels and residences under development.  Following an announcement in June, the group is pursuing strategic options for The Excelsior, Hong Kong, which include the possible sale of the property for redevelopment.  The wholly-owned property, which is the group's only four star hotel, is situated on a prime commercial site that has approval for the development of a commercial building.

Jardine Cycle & Carriage

Jardine Cycle & Carriage reported an underlying profit for the period of US$375 million, up 13%, while its profit attributable to shareholders of US$399 million was up 22% with the benefit of non-trading gains. Astra's contribution to the underlying profit rose 27% to US$315 million.  The contribution from the company's Direct Motor Interests was 20% lower at US$63 million, while Other Interests produced a contribution of US$8 million, down 46% compared with the first half of 2016.

The weaker result in the Direct Motor Interests reflects the impact of increasing competition, particularly for Truong Hai Auto Corporation in Vietnam.  While in Singapore, Cycle & Carriage's earnings improved, results were also lower for Cycle & Carriage Bintang in Malaysia and Tunas Ridean in Indonesia.  For the group's Other Interests, the 25.5%-held Siam City Cement reported a 69% decline in profit mainly due to lower prices and sales volumes in the Thai market and one-off expenses, partly offset by contributions from recent acquisitions in Sri Lanka and Vietnam.  Refrigeration Electrical Engineering Corporation in Vietnam, which is 22.9%-held, performed better with improvements in most of its businesses.

Astra

Astra reported a net profit equivalent to US$702 million under Indonesian accounting standards, up 31% in its reporting currency, with improvements seen in most businesses.  The group's automotive operations performed well with market shares for both cars and motorcycles rising, although it faced discount pressure as competition increased in the car market, and soft demand for motorcycles.  Better results were seen from financial services with a return to profit by Permata Bank.  Higher commodity prices benefited the heavy equipment and mining operations, as well as Astra's agribusiness activities.  Information technology, and infrastructure and logistics saw declines in earnings.

Net income from Astra's automotive business increased by 9%, largely due to improved car sales.  The wholesale market for cars in Indonesia grew marginally to 534,000 units, while the group's car sales were up 9% at 298,000 units, resulting in its market share rising from 51% to 56%.  The wholesale market for motorcycles contracted by 9% to 2.7 million units, while Astra Honda Motor's domestic sales fell by 7% to 2.0 million units, with its market share increasing from 73% to 74%.  Net income rose 30% in its components business, Astra Otoparts.

Within Astra's financial services business, net income rose 62% to US$153 million with better contributions from most activities.  The consumer finance businesses saw the aggregate amount financed increase by 8% to US$2.9 billion, while heavy equipment financing was up 68% to US$237 million.  Permata Bank's financial position stabilized and it reported a net income of US$47 million for the period compared with a net loss of US$62 million in the first half of 2016.  The bank benefited from an improvement in asset quality and the sale of a portfolio of its non-performing loans.  Asuransi Astra Buana, the group's general insurance company, reported net income up 24% due to higher underwriting and investment income, while Astra Aviva Life continued to grow its customer base.

United Tractors, which is 60%-owned, reported net income up 85% at US$257 million, as its businesses benefited from increased coal prices.  In construction machinery, Komatsu heavy equipment sales were up 69% and revenues from parts and service also rose.  Mining contracting within Pamapersada Nusantara recorded increases of 4% in coal production and 6% in overburden removal, although United Tractors' mining subsidiaries saw coal sales reduce by 18% to 3.6 million tonnes.  Acset Indonusa, the 50%-held general contractor, reported improved earnings and contracts worth US$536 million secured during the period. Bhumi Jati Power, which is 25%-owned, is constructing two power plants in Central Java that are scheduled to start commercial operations in 2021, while Suprabari Mapanindo Mineral, an 80%-owned coking coal company in Central Kalimantan, is expected to start production by the end of 2017.

Astra Agro Lestari, which is 80%-owned, saw its net income rise during the period by 32% to US$78 million.  Revenue benefited from higher crude palm oil prices and increased production.  Average crude palm oil prices achieved were up 16%, while sales of crude palm oil and its derivatives rose 10% to 833,000 tonnes.

The contribution from Astra's infrastructure and logistics business was down 21% to US$8 million, mainly due to initial losses arising on toll roads and lower earnings from its water utility business following a 3% decrease in sales.  The group continues to develop its toll road activities which, including interests in 51km of greenfield sites, now extend to 353km.  Serasi Autoraya's net income rose due to higher net margins in its car leasing and rental business.

Astra's information technology business saw lower earnings as Astra Graphia reported net income down 25% at US$5 million, mainly due to lower revenue from its IT solutions business.  Within Astra's property activities, net income reflected improved development earnings recognized under Indonesian accounting standards on its Anandamaya Residences development, which will complete in 2018.