To:    Business Editor                                                                          8th March 2018

                                                                                                            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

2017 Preliminary Announcement of Results

 

Highlights

·     Underlying earnings per share* up 13%

·     Full-year dividend increased by 7%

·     Strong trading performances from most businesses

·     NAV per share up 11% reflecting higher property valuations

 

"The Group's key markets in Greater China and Southeast Asia look well placed for 2018 as the good levels of economic growth seen in 2017 appear set to continue.  This, when coupled with the development initiatives that are being pursued across the Group's businesses, provides the basis for future profit growth."

 

Sir Henry Keswick

Chairman

 

Results

Year ended 31st December
	2017 US$m	2016 US$m	Change %
Revenue together with revenue of Jardine Matheson, associates and joint ventures+	83,808	72,437	+16
Revenue	31,556	29,552	+7
Underlying profit* before tax	4,114	3,522	+17
Underlying profit* attributable to shareholders	1,598	1,438	+11
Profit attributable to shareholders	4,119	2,741	+50
	US$	US$	%
Underlying earnings per share*	2.76	2.45	+13
Earnings per share	7.12	4.67	+52
Dividends per share	0.32	0.30	+7
Net asset value per share #	59.08	53.25	+11
* The Group uses 'underlying profit' in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more fully described in note 1 to the financial statements.  Management considers this to be a key measure which provides additional information to enhance understanding of the Group's underlying business performance. #  Net asset value per share is calculated on a market value basis, details of which are set out in note 15.

The final dividend of US¢22.50 per share will be payable on 16th May 2018, subject to approval at the Annual General Meeting to be held on 10th May 2018, to shareholders on the register of members at the close of business on 23rd March 2018 and will be available in cash with a scrip alternative. 

 

Jardine Strategic Holdings Limited

 

Preliminary Announcement of Results

For The Year Ended 31st December 2017

 

Overview

The Group produced a good overall result for the year as most businesses traded well.  There were strong performances from Astra, Hongkong Land and Jardine Matheson's directly held businesses.  Reduced contributions were, however, seen from Dairy Farm, Mandarin Oriental and Jardine Cycle & Carriage's non-Astra businesses.

 

Performance

The Group's revenue for 2017, including 100% of revenue from Jardine Matheson, associates and joint ventures, was US$83.8 billion, compared with US$72.4 billion in 2016, while the Group's consolidated revenue for 2017 was US$31.6 billion, an increase of 7%.   Jardine Strategic achieved an underlying profit before tax for the year of US$4,114 million, an increase of 17%.   The underlying profit attributable to shareholders was up 11% at US$1,598 million, while underlying earnings per share were 13% higher at US$2.76. 

 

The profit attributable to shareholders for the year was US$4,119 million, which included the Group's US$2,326 million share of increases in property valuations, principally Hongkong Land's investment properties in Hong Kong, and US$195 million of other net non-trading gains.  This compares with US$2,741 million in 2016, which reflected a US$1,260 million increase in property valuations and US$43 million of other net non-trading gains. 

 

Within Jardine Matheson's businesses, Jardine Pacific achieved good results in 2017 as Gammon's contribution recovered and Hactl benefited from increased cargo throughput.  Jardine Motors' increased earnings were led by strong results from mainland China.  Jardine Lloyd Thompson's contribution was higher due to a combination of a good trading performance and the absence of the restructuring costs seen in 2016.

 

At Hongkong Land, underlying profit grew due to the strength of both its investment and development property activities.   Positive performances in most of Dairy Farm's retail formats and key associates were, however, offset by poor performances in its supermarket and hypermarket businesses in Southeast Asia and it recognized US$64 million of business rationalization costs.  Mandarin Oriental saw generally improved performances across its hotel portfolio, notably in Hong Kong, but profitability was again impacted by the renovation of its London hotel.  Mandarin Oriental's adjusted shareholders' funds at the end of 2017 were US$1.9 billion higher following a significant revaluation of The Excelsior hotel in Hong Kong.

 

Jardine Cycle & Carriage produced good profit growth as Astra's results improved, although there was a reduced overall contribution from the group's Direct Motor Interests and Other Strategic Interests including Thaco and Siam City Cement.  Astra's performance reflected the return to profitability at Permata Bank and enhanced commodity prices benefiting its heavy equipment and mining activities as well as agribusiness.  The results from Astra's automotive activities, however, were lower due to reduced earnings from motor cars in challenging markets. 

 

The Group's financial position remains strong with shareholders' funds up 17% at US$30.5 billion at the year end.  Robust cash flows have enabled continued high levels of capital expenditure to be combined with low levels of debt.  The Group's capital investment, including expenditure on properties for sale, was US$6.8 billion in 2017, in addition to which capital investment at Jardine Matheson and the Group's associates and joint ventures exceeded US$4.9 billion.  The consolidated net debt excluding financial services companies was US$3.8 billion at 31st December 2017, representing gearing of 6%. 

 

The Board is recommending a final dividend of US¢22.50 per share, which produces a full-year dividend of US¢32.00 per share, up 7% from the prior year.

 

Strategic Developments

Mainland China continued to grow in importance for the Group, with its contribution to profits increasing to 15%.  In this market, Hongkong Land's residential developments achieved an excellent result, while Zung Fu and affiliates Zhongsheng and Yonghui each had a very good year.  A 28% shareholding was taken in Greatview, the second-largest supplier of aseptic carton packaging in China.

 

Hongkong Land secured five further development projects in mainland China during 2017, including in the new markets of Wuhan, Nanjing and Hangzhou.  The retail component of its luxury retail and hotel complex in Beijing, WF CENTRAL, was opened in late 2017.  In January 2018, Hongkong Land secured a prime commercial site in Nanjing city centre, which has a developable area of 235,000 sq. m.

 

In Southeast Asia, Jardine Cycle & Carriage continued to build its business interests, acquiring a 10% shareholding in Vinamilk, the leading dairy producer in Vietnam with a market share of some 58%.  Hongkong Land secured further development projects in Singapore and Vietnam, together with a joint-venture interest in a prime freehold site in Bangkok.  Astra in Indonesia is expanding its operations further with investments in toll roads, energy and property.  In February 2018, Astra acquired a minority stake in GO-JEK, Indonesia's leading multi-platform technology group.

 

The Group's new investments in Greatview and Vinamilk are in line with the strategy of taking stakes in leading companies that are benefiting from the opportunities offered by the economic development of the region and the growth of the middle classes.  Investments are being made in strong companies with first class management teams that can accelerate the Group's exposure to fast growing markets.

 

Weakness in Dairy Farm's supermarket and hypermarket businesses in Southeast Asia led to a review being undertaken to determine the actions necessary to re-establish the competitive positions of these operations.  While Dairy Farm's other formats and markets are trading well, Dairy Farm recognizes that it must change and adapt in the face of intensifying and evolving competition, both online and offline, as well as greater demands from increasingly well-informed customers. 

 

During the year, Mandarin Oriental explored strategic options for The Excelsior hotel in Hong Kong.  While a review of market interest in a potential sale did not give rise to any acceptable offers, all options for the site are still being considered, including the redevelopment of the site as a commercial property.

 

People

Julian Hui and Dr George Koo will step down from the Board at the forthcoming Annual General Meeting and will not seek re-election.  We would like to thank them for their contributions to the Company.  We are very pleased that Lord Powell of Bayswater has been invited to join the Board with effect from 10th May 2018.

 

Outlook

The Group's key markets in Greater China and Southeast Asia look well placed for 2018 as the good levels of economic growth seen in 2017 appear set to continue.  This, when coupled with the development initiatives that are being pursued across the Group's businesses, provides the basis for future profit growth.

 

Sir Henry Keswick

Chairman

 

Operating Review

 

Jardine Matheson

Jardine Matheson achieved an underlying profit before tax for the year of US$4,378 million, an increase of 17%.  The underlying profit attributable to shareholders was up 13% at US$1,568 million, while underlying earnings per share were 12% higher at US$4.17.  The profit attributable to shareholders for the year was US$3,785 million, benefiting mainly from an increase in the value of Hongkong Land's investment property portfolio.  This compares with US$2,503 million in 2016, which also benefited from increases in property values.

 

·     Jardine Pacific

      Jardine Pacific produced an underlying net profit of US$164 million, including an initial contribution from the 

      interest in Greatview, compared with US$135 million in 2016, an increase of 21%.  The net profit after non-trading

      gains was US$174 million.  Within its engineering and construction activities, Jardine Schindler and JEC again

      performed well and Gammon's result recovered in 2017 following a weaker performance in 2016 due to provisions

      for a specific civils project.  Jardine Restaurants produced steady profit growth, but the reported result was lower

      due to one-off employee benefit costs.  The contribution from Transport Services reflected Hactl's improved

      performance due to good growth in cargo throughput.  JTH delivered reduced earnings as IT markets remained

      soft.

 

      The Company acquired 28% stake in Hong Kong-listed Greatview in June 2017.  Founded in mainland China,

      Greatview is the second-largest supplier of aseptic carton packaging in China and the third-largest globally. 

      Greatview achieved stable growth during 2017 as the effect of challenging market conditions in China was offset

      by strong growth momentum in its international business.  Its contribution from June onwards reflects the Group's

      equity interest.  Jardine Pacific will be supporting Greatview's continued development, particularly in new markets

      including those in Southeast Asia.

 

·     Jardine Motors

      Jardine Motors produced an underlying net profit in 2017 of US$184 million, a 46% improvement being largely due

      to impressive performances from Zung Fu and Zhongsheng in mainland China.  After taking into account non

      trading gains, the net profit was US$388 million.  In mainland China, Zung Fu had another good year due to higher

      sales of Mercedes-Benz passenger cars, margin improvement and a strong performance from its after-sales

      activities.  In Hong Kong and Macau there was an improved trading performance, although this was offset by costs

      associated with the repositioning of its sales and service facilities.  The new flagship property, combining most of

      the Mercedes-Benz sales, service and administration activities, is scheduled to be fully operational in the last

      quarter of 2018.  In the United Kingdom, the result was significantly lower than that in 2016, which had included a

      gain on the sale of a dealership. 

 

      Zhongsheng, one of mainland China's leading motor dealership groups, produced a significant improvement in

      profitability in 2017, reflecting increased sales and better margins.  The Company's shareholding was increased

      from 15.5% to 20% in June 2017.

 

·     Jardine Lloyd Thompson

      JLT's total revenue for 2017 was US$1,800 million, an increase of 10% in its reporting currency, of which 5%

      represented organic growth.  Underlying trading profit was up 10% in its reporting currency at US$277 million, or

      7% higher at constant rates of exchange.  On conversion into US dollars, JLT's contribution to the Group's

      underlying profit in 2017 was 22% higher than in 2016, which had included restructuring costs.  JLT's Risk &

      Insurance businesses saw revenue growth of 11%, with good performances in Europe, Latin America, Asia and the

      United States.  The combined Employee Benefits businesses produced headline revenue growth of 7%. 

      Continued progress was made with the development of JLT's Specialty business in the United States.  The group

      is undertaking a reorganization into three global divisions, Reinsurance, Specialty and Employee Benefits, and is

      implementing a business transformation programme which will deliver significant cost reductions. 

 

Hongkong Land

Hongkong Land's underlying profit for 2017 rose 14% to US$970 million, with strong performances from both investment properties and development properties.  The profit attributable to shareholders of US$5,585 million included net revaluation gains of US$4,615 million recorded on its investment properties, principally in Hong Kong.  This compares to US$3,346 million in 2016, which included net revaluation gains of US$2,498 million.  The group remains well-financed with net debt of US$2.5 billion at the year end and net gearing of 7%. 

 

In investment properties, limited competitive supply in the Hong Kong office leasing market benefited the group's Central portfolio where year-end vacancy reduced to 1.4% and rental reversions remained positive.  The retail portion of the portfolio was effectively fully occupied, although rental reversions were neutral during the year.  The group's Singapore office portfolio was almost fully let, but the average rents declined marginally.

 

In mainland China, the retail component of the group's luxury retail and hotel complex in Beijing opened in late 2017, and the Mandarin Oriental Hotel is due to open in the second half of 2018.  Elsewhere, in Jakarta the development of the fifth tower of World Trade Centre was completed, in Phnom Penh a 25,000 sq. m. mixed-use complex was opened, and in Bangkok's central business district the group acquired a 49%-joint venture interest in a prime freehold site with a developable area of 440,000 sq. m.

 

Within development properties, the profit contribution from mainland China increased significantly in 2017 due to higher completions of residential units.  In Singapore, results were lower with only one project completion during the year.  Hongkong Land's joint venture projects in the rest of Southeast Asia are progressing on schedule. 

 

Dairy Farm

Dairy Farm's result in 2017 was disappointing as positive performances in most formats and key associates were offset by weakness in its supermarket and hypermarket operations in Southeast Asia.  Sales for the year by the group's subsidiaries were little changed at US$11.3 billion.  Total sales, including 100% of associates and joint ventures, were up 7% at US$21.8 billion, reflecting strong growth at both Yonghui and Maxim's.  The underlying profit attributable to shareholders was 13% lower at US$403 million, after deducting rationalization costs of US$64 million principally relating to the closure of underperforming stores and stock clearance in the Food Division. 

 

The Food Division's poor performances in its supermarket and hypermarket businesses in Malaysia, Singapore and Indonesia led to sales being down and profits significantly lower.  A strategic review is underway to determine the actions needed to restore the profitability of these businesses.  Sales were more resilient in Hong Kong, although increasing costs led to profits being marginally lower.  The group's convenience stores produced overall sales and profit growth, in part reflecting a consumer shift to more convenient retail formats and enhanced customer offerings. 

 

In the Health and Beauty Division, strong performances in Hong Kong, Macau and Indonesia, together with improvements in mainland China, led to sales and profit growth.  IKEA recorded higher sales and trading profit, but overall profit was affected by store pre-opening expenses in Hong Kong.  There was encouraging growth in IKEA's e-commerce channels.  Maxim's, which enjoyed good sales and profit growth during the year, is continuing to expand in the region with the acquisition of the existing businesses and franchises of Genki Sushi in both Singapore and Malaysia, and of Starbucks in Singapore. 

 

The group's 20%-owned associate in mainland China, Yonghui Superstores, opened a net 292 new stores in 2017, which underpinned its 19% growth in revenue.  Supply chain and shrinkage improvements produced margin gains, which together with better capital utilization, led to a 45% growth in profit.

 

Mandarin Oriental

Mandarin Oriental's underlying profit was slightly lower primarily due to the impact of the renovation of its London property as the combined results of the group's other hotels improved in 2017, notably in Hong Kong.  The underlying profit was US$55 million, compared with US$57 million in 2016, and with no non-trading items the profit attributable to shareholders was also US$55 million, in line with 2016.

 

The renovation of Mandarin Oriental Hyde Park, London is on schedule to complete in the second quarter of 2018.  The jointly-owned Hotel Ritz, Madrid closed at the end of February 2018 to commence an extensive renovation.  In June 2017, the group announced that consideration was being given to its strategic options for The Excelsior, Hong Kong.  A subsequent review of market interest in a potential sale did not give rise to any acceptable offers.  Mandarin Oriental is still considering all options for the site, including possible redevelopment as a commercial property, although no decision has yet been made. 

 

Mandarin Oriental announced nine new management contracts over the past year.  They comprise the management of existing hotels in Santiago, Chile and on Canouan in Saint Vincent and the Grenadines; four hotels with branded residences scheduled to open in Dubai and Honolulu in 2020, in London in 2021 and in Melbourne in 2022; a hotel in Beijing located in a traditional hutong quarter due to open in 2019; branded residences in Barcelona opening in 2020; and a coastal resort in Viña del Mar in Chile opening in 2020.  In the next 12 months the group expects to open its first hotels in the Middle East, in Doha and Dubai, as well as Mandarin Oriental Wangfujing in Beijing.

 

Jardine Cycle & Carriage

Jardine Cycle & Carriage's underlying profit was up 16% at US$788 million.  Profit attributable to shareholders was US$811 million, including a net non-trading profit of US$23 million, compared with US$702 million in 2016.  Astra's contribution to underlying profit of US$641 million was up 28%.  The group's Direct Motor Interests contributed US$125 million, 25% down, while the contribution from its Other Strategic Interests was 3% higher at US$34 million.

 

Within the group's Direct Motor Interests, Cycle & Carriage Singapore performed well as it grew its earnings by 15% to US$57 million.  The 25%-owned Truong Hai Auto Corporation, however, faced an increasingly competitive environment in Vietnam ahead of the removal of tariffs on imported cars in January 2018.  Its profit contribution declined 40% to US$57 million, although its real estate interests performed better.  In Malaysia, 59%-owned Cycle & Carriage Bintang reported a loss in a particularly challenging year, while 44%-owned Tunas Ridean in Indonesia recorded an 18% reduction in its contribution mainly due to weaker margins in car sales.

 

Within Other Strategic Interests, 25.5%-held Siam City Cement in Thailand reported a profit of US$54 million, down 54% in local currency terms, following one-off restructuring expenses and lower domestic volume and prices, coupled with higher energy costs.  The profit of 24%-held Refrigeration Electrical Engineering Corporation in Vietnam of US$61 million was 26% higher in local currency terms due to higher contributions from all its businesses.  An initial dividend contribution of US$9 million was recognized on the recently acquired 10% shareholding in Vinamilk in Vietnam.

 

Astra

Astra's underlying profit for 2017 under Indonesian accounting standards was up 27% at Rp18.6 trillion, equivalent to US$1,387 million.  Its net profit was up 25% at Rp18.9 trillion, some US$1,409 million.  The group's net cash, excluding financial services subsidiaries, was US$196 million at 31st December 2017, the reduction from the net cash of US$461 million at the end of 2016 was due mainly to investments in toll roads, property and power plants.

 

Net income from Astra's automotive division was 3% lower at US$661 million.  Astra's car sales were 2% lower at 579,000 units in a wholesale market that was little changed, leading to its market share declining from 55% to 54%.  Astra Honda Motor's market share improved from 74% to 75% as its domestic sales of motorcycles were maintained at 4.4 million units while the wholesale market contracted by 1%.  Astra Otoparts, the group's components business, saw net income increase by 32% to US$41 million.

 

Net income from financial services increased to US$280 million from US$59 million, primarily due to a return to profitability at 44.6%-owned Permata Bank.  To strengthen its capital base, Permata Bank completed a further US$220 million rights issue in June 2017.  There were improved contributions from a number of the group's finance businesses, although overall earnings were held back by increased loan loss provisions relating to the low cost car segment and the small and medium sized borrowers in the heavy equipment segment.  Net income at general insurer Asuransi Astra Buana was 9% higher at US$75 million, and life insurance joint venture, Astra Aviva Life, continued to acquire new individual life customers and participants for its corporate employee benefits programmes.

 

United Tractors, which is 59.5%-owned, reported net income 48% higher at US$553 million as significantly stronger coal prices led to improved performances in its construction machinery and mining contracting businesses, as well as its mining operations.  Komatsu heavy equipment sales were up 74%, and parts and service revenues were also higher.  The mining contracting operations of Pamapersada Nusantara recorded a 3% increase in coal production, while overburden removal was up 14%.  United Tractors' mining subsidiaries, however, reported coal sales down 8%.  General contractor Acset Indonusa, 50%-held, reported net income up 126% at US$11 million, with new contracts worth US$627 million secured.

 

United Tractors has an 80% interest in a coking coal company in Central Kalimantan, which started production at the end of 2017, and a 25% interest in two 1,000MW power plants under construction in Central Java, which are due to start commercial operations in 2021.

 

Astra Agro Lestari, which is 80%-owned, saw improved revenue from higher crude palm oil prices and sales volumes, but reported net income little changed at US$150 million.  The 2016 result had benefited from foreign exchange translation gains, excluding which net income in 2017 would have been 8% higher.  

 

Astra's infrastructure and logistics division reported a net loss of US$17 million, compared with net profit of US$20 million in 2016, due to initial losses on a newly opened toll road and a loss on the disposal of the group's 49% interest in PAM Lyonnaise Jaya, a water concession with five years left to run.  Astra is continuing to expand its toll road interests, which now extend to 353km of toll roads, of which 269km is operational.  Serasi Autoraya's net income doubled to US$15 million due to higher net margins in its car leasing and rental, as well as logistics businesses.  Net income from the group's information technology division was 1% higher at US$15 million.

 

The group's property division saw net income double to US$17 million under local accounting standards, primarily due to higher property development earnings recognized on its Anandamaya Residences project.

 

Ben Keswick

Managing Director

 

Jardine Strategic Holdings Limited Consolidated Profit and Loss Account for the year ended 31st December 2017
	2017											2016
Underlying business performance US$m			Non- trading items US$m				Total US$m					Underlying business performance US$m					Non- trading items US$m				Total US$m
Revenue (note 2)		31,556				-					31,556					29,552				-					29,552
Net operating costs (note 3)		(28,593)				68					(28,525)					(26,686)				23					(26,663)
Change in fair value of investment properties		-				4,701					4,701					-				2,558					2,558
Operating profit		2,963				4,769					7,732					2,866				2,581					5,447
Net financing charges
- financing charges		(321)				-					(321)					(279)				-					(279)
- financing income		168				-					168					144				-					144
		(153)				-					(153)					(135)				-					(135)
Share of results of Jardine Matheson (note 4)		253				119					372					202				31					233
Share of results of associates and joint ventures (note 5)
- before change in fair value of investment properties		1,051				(5)					1,046					589				35					624
- change in fair value of investment properties		-				(32)					(32)					-				(56)					(56)
		1,051				(37)					1,014					589				(21)					568
Profit before tax		4,114				4,851					8,965					3,522				2,591					6,113
Tax (note 6)		(755)				(1)					(756)					(605)				(5)					(610)
Profit after tax		3,359				4,850					8,209					2,917				2,586					5,503
Attributable to:
Shareholders of the Company (notes 7 & 9)		1,598				2,521					4,119					1,438				1,303					2,741
Non-controlling interests		1,761				2,329					4,090					1,479				1,283					2,762
		3,359				4,850					8,209					2,917				2,586					5,503
		US$									US$					US$									US$
Earnings per share (note 8)
- basic		2.76									7.12					2.45									4.67
- diluted		2.76									7.11					2.45									4.67