Jardine Strategic - Cycle & Carriage Limited 2002 Profit And Dividend Announcement

Performance

The Group's underlying profit, rose 57% to S$261 million, or S$1.09 per share, with the increase in the equity-accounted contribution from Astra being the major component. Net profit, after exceptional items, grew by 92% to S$231 million, or S$0.96 per share. The net result benefited from a profit recorded on Astra's foreign currency debt caused by the strengthening of the Indonesian Rupiah, compared to a loss in the prior year, and the share of a gain on disposal by Astra, but these were offset by a write-down in the value of MCL Land's investment property, exchange losses on loans to subsidiaries and the writing-off of deferred tax assets in Indonesia and Australia.

Underlying earnings from motor vehicle operations fell 18% to S$53 million due to a decline in Singapore's highly competitive market. Growth in the non-national car sector in Malaysia enabled Cycle & Carriage Bintang to increase its sales and profits. The Australian motor business recorded a loss due to reduced Hyundai unit sales and margins, while the New Zealand motor operations more than doubled their profits as they increased market share in an expanding commercial vehicle market.

The contribution from property, excluding exceptional items, rose from S$14 million to S$40 million with a good increase in MCL Land's earnings arising from the successful sale of a number of residential developments in Singapore.

Economic stability in Indonesia assisted Astra's strong growth and enabled it to increase its earnings contribution to S$185 million, up 74%. Astra's motor businesses benefited from improved markets, while its agribusiness contribution grew significantly due to the escalation in crude palm oil prices.

Cycle & Carriage's consolidated net debt was reduced by S$235 million to S$634 million at the the year-end due to improved working capital management and the sale by MCL Land of residential developments. Shareholders' funds increased to S$1,035 million, or S$4.28 per share compared with S$3.38 per share at the end of 2001. The return on capital employed, excluding exceptional items, improved to 22% from 15%.

The Board is recommending a final dividend of S$0.12 per share less income tax. This, together with the interim dividend, will give a total dividend for the year of S$0.15 per share, unchanged from the previous year. A scrip dividend alternative will continue to be available to shareholders.

Developments

2002 was a significant year for Cycle & Carriage as it became a subsidiary member of the Jardine Matheson Group following a successful partial offer by Jardine Strategic to increase its interest to 50.2%. Jardine Strategic has been a major supportive shareholder for over ten years.

During the year the Group was able to increase its shareholding in MCL Land to nearly 66%. The 5.7% of MCL Land received by Jardine Strategic under its €˜chain principle' offer was acquired by the Group at a discount to net asset value, and this was supplemented further by market purchases.

In Malaysia, Cycle & Carriage Bintang reached agreement for DaimlerChrysler to take over the Mercedes-Benz distribution rights with effect from 1 January 2003. Cycle & Carriage Bintang holds a 49% stake in the new distribution joint-venture, albeit with limited profit and management rights, and remains the major retailer of Mercedes-Benz cars in Malaysia. Nevertheless, the new distribution arrangement will have an adverse impact on profitability going forward.

In December, Astra's creditors approved a restructuring of its debt that extended the maturity to 2009 and provided an attainable repayment schedule. This was followed in January 2003 by a rights issue raising some S$280 million, in which the Group participated to the extent of S$135 million. This, together with market purchases, has enabled the Group to increase its stake in Astra to 34.3%. With a significant reduction in debt and increase in retained earnings, Astra should now be restored to full financial strength, although the ultimate test will be its ability to reinstate its dividend on a sustainable basis.

In February 2003, Astra announced that it had signed a Memorandum of Understanding with Toyota Motor Corporation on the re-organisation of P.T. Toyota-Astra Motor into separate manufacturing and distribution entities. Under the re-organisation, Toyota will increase its interest in the manufacturing entity to 95%, enabling it to be integrated into Toyota's international production capacity, while Astra will maintain its 51% interest in the distribution business. A final agreement is expected to be reached by the middle of the year.

The Company will be announcing that it will acquire from Capital Services of Singapore Limited ("CSS") 2,160,000 shares of S$1 each in the capital of UMF (Singapore) Ltd ("UMF") for a total consideration of S$16.5 million pursuant to the exercise of a put option by CSS under the terms of the shareholders' agreement governing UMF. With the acquisition, the Company's interest in UMF which is involved in the leasing and hire purchase of vehicles will increase from 40% to 50%.

Prospects

The unsettled economic conditions experienced during 2002 are expected to continue and the Group's attributable profit will again be affected by the value of the Indonesian Rupiah. The impact of exchange rate fluctuations is, however, being reduced through substantial repayment of Astra's US dollar debt.

Anthony Nightingale

Chairman

GROUP MANAGING DIRECTOR'S REVIEW

MOTOR

Underlying profits from motor operations were S$53 million, 18% lower than the prior year due to a weaker performance in Singapore. Earnings after exceptional items were S$43 million following the write-off of S$10 million in deferred tax assets in the Australian operations.

Singapore

In a weak Singapore economy, car prices declined due to intense competition, a reduction in government duties and softer premiums on Certificates of Entitlement. Demand, nevertheless, remained poor, and the passenger car market contracted by 6% and the commercial vehicle market by 27%.

The Group's Singapore motor operations sold a total of 8,486 passenger cars and 1,039 commercial vehicles, their market share reducing to 13% and 10%, respectively. Earnings fell by 41% to S$31 million, primarily because 2001 had benefited from distributor margins earned on Mercedes Benz stocks carried over from 2000. While Mercedes Benz remained the largest profit-generator for the Group, sales of Mercedes-Benz passenger cars fell by 31% to 2,402 units due to the economic uncertainties. New models launched during the year included the E-Class, SL-Class and the CLK-Class. The Group's after-sales business performed satisfactorily with higher profits arising from cost savings and improved productivity.

Mitsubishi sustained its momentum in 2002 contributing positively to profit due to improved margins, despite a reduction in sales. Kia's sales were slightly down on the previous year. Following a review of the Proton operations, Cycle & Carriage decided to cease to be the Proton distributor from September 2002.

Malaysia

The Malaysian vehicle market grew by 10%, with sales of non-national brands increasing by 21%. The Group's 48% associate, Cycle & Carriage Bintang ("CCB"), recorded a net profit of RM67 million, up 24%, before accounting for the results of its associates, Cycle & Carriage Malaysia ("CCM") and CCL Group Properties.

The Mercedes-Benz marque had a successful year with passenger car sales increasing by 27%, representing nearly half of the luxury car market. Sales of Mercedes-Benz commercial vehicles rose by 38%. In January 2003, CCB ceased to be Mercedes-Benz distributor in Malaysia, and commenced operations as the major retailer only. The new arrangements, which are in line with the agreement signed with DaimlerChrysler AG to form a joint venture company to take over the distributorship role, will have a negative effect on earnings going forward.

The Mazda operations turned around in 2002, producing a small profit from improved sales. The Peugeot franchise commenced operations in September with a network of 14 dealers and, in January 2003, a flagship Peugeot showroom was opened.

CCM, our multi-franchised dealership, recorded a 32% increase in Proton sales, while its other sales increased 14%, with good demand for Hyundai passenger cars and Mitsubishi commercial vehicles.

The Malaysian motor operations contributed a profit of S$18 million to the Group's profit 32% higher than the previous year.

Australia

The Australian vehicle market reflected the national economy, growing by 7% to a record of 824,000 units, but the Group's operations saw a 4% decline in sales to 38,562 units. A loss was recorded, though lower than the previous year, due to lower Hyundai sales and margins. The result was further affected by the write-off of deferred tax assets totaling S$10 million due to the uncertainty of their utilisation. In the prestige car segment, however, Audi registered record sales up 23% from the previous year.

New Zealand

The New Zealand operations did well with profit growing by 134% to S$5 million. The passenger car and light commercial vehicle market grew by 11% and the heavy truck market grew by 23% on the back of a buoyant New Zealand economy. New vehicles sold by the Group's operations increased by 53% to 2,416 units.

Truck Investments remained the main contributor to New Zealand's earnings. Mack trucks achieved record sales of 146 units and Hino sales grew by 69% to 287 units. In December, Truck Stops expanded the branch network to 13 outlets, and a new parts warehouse is being constructed.

C&C New Zealand, the Group's multi-franchised retail operations, acquired a Nissan/Suzuki dealership in West Auckland and the sole distribution rights for Nissan Diesel heavy trucks.

PROPERTY

Property earnings, excluding exceptional items, grew by 186% to S$40 million in 2002 due mainly to the recognition of development profits from the fully sold The Warren. The net result was reduced by a S$16 million writedown in the value of 78 Shenton Way, partly offset by gains from the sale of units in Juniper at Ardmore and MCL's 20% stake in Masingtai Shanghai Properties Pte Ltd.

The Singapore residential market saw some improvement in sales, due largely to keen pricing by developers and changes in government policies on private housing. MCL Land made significant progress in the sale of its residential properties with a total of 1,313 residential units sold in 2002. Construction of The Metz freehold condominium at Devonshire Road commenced, and, subject to market conditions, will be launched for sale in 2003.

The office sector remained soft in 2002, and increased supply will maintain the downward pressure on rentals and capital values. MCL Land's investment properties performed creditably, with 78 Shenton Way maintaining an occupancy rate of 93%. The building was upgraded to improve the working environment and to enhance its competitive edge.

The 19 luxury apartments in Juniper at Ardmore achieved a 90% occupancy rate. Five units were sold in line with the Group's strategy to dispose of low yielding assets.

Ubi Tech Park, a joint-venture industrial development, was re-launched in September. A further 238 units were sold thanks to an aggressive pricing strategy, leaving 187 units remaining out of 699 units.

MCL Land acquired two freehold residential development sites for S$29 million in 2002. The first, at Upper Serangoon Road, will be developed into a 12-storey apartment block and, the second, located along Changi Road, will be developed into two five-storey apartment blocks. In early 2003, MCL Land acquired two adjoining plots at Carlisle Road and Norfolk Road for S$46 million, which can be developed into a high-rise condominium of around 120 units.

Competitive rental rates and the high quality of service enabled Wisma Cyclecarri, Menara Weld and Bintang Pantai to maintain almost full occupancy despite the soft property market in Malaysia.

ASTRA

Astra had an excellent year as consumer demand in Indonesia remained strong, and its results have now become the major component of the Group's profits. Astra contributed S$185 mmillion to the Group's underlying profit and S$193 million to net profit after exceptional items, increases of 74% and 189% respectively. The better than expected operating profit was due largely to improved results from its associates, especially the motorcycle business. Exceptional items of S$8 million consisted mainly of S$48 million in foreign exchange gains arising from the stronger Rupiah and the profit on the sale of Pramindo, substantially offset by the writing-off of deferred tax assets. Due to the size and complexity of the Astra group, its results are equity accounted based on the 12 months to November 2002, adjusted for any major transactions occurring in December 2002.

A major achievement during the year was the successful restructuring of Astra's outstanding debt obligations. This has resulted in a realistic debt amortisation schedule, including an option to refinance with the existing lenders in June 2006 for a further three years. The debt restructuring paved the way for an equity raising exercise and, following shareholders' approval in December 2002, Astra raised Rp1.4 trillion (S$280 million) in January 2003 by way of a 7 for 13 rights offer priced at Rp1,000 per share. The amount raised will be used to support higher debt amortisation payments, investment and working capital needs, and debt repurchase. Astra now has an appropriate capital structure, and this should allow it to reinstate its dividend on a sustainable basis.

The Indonesian motor vehicle market grew by 6% in 2002. Lower sales in the diesel market segment led to Astra's sales being maintained at some 130,000 units, causing its market share to fall to 43%. Toyota continued to be the market leader with a 27% share in 2002. Isuzu, however, which only produces diesel vehicles, recorded a 16% decline in sales. Peugeot, Nissan Diesel and BMW also saw decreases in sales. Daihatsu sales decreased slightly, with new competition in the 4x4 sector, while a restructuring resulted in Astra diluting its ownership in the Astra Daihatsu Motor joint-venture from 50% to 32%.

The overall motorcycle market recorded an impressive growth of 39% in 2002 to 2.4 million units. Honda continued to outperform the market, increasing its sales by 54% and its market share to 58% with sales of 1.4 million units. New models launched during the year included the Phantom, Karisma and Kirana 125 cc cub.

The agribusiness saw a substantial increase in revenue and earnings due to the sharp escalation in crude palm oil prices and increase in sales volumes of crude palm oil and its derivatives. As part of the long-term strategy of focusing on its core businesses, Astra disposed of its entire stake in Sumalindo Lestari Jaya, its woodbased business.

In August, Astra completed the disposal of the first 30% of its 35% stake in Pramindo, its telcom associate. The remaining interest will be disposed over the next two years.

Philip Eng

Group Managing Director