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Jardine Strategic Holdings Limited Issues 2005 Preliminary Announcement of Results
London, England: March 29, 2006 - The following was today issued to the London Stock Exchange with regard to Jardine Strategic Holdings Limited 2005 Preliminary Announcement of Results:
Highlights
€¢ Underlying earnings and net assets up strongly€¢ Full-year dividend up 5%
€¢ Good profit growth at Astra and Dairy Farm
€¢ Hongkong Land property portfolio value increases 34%
€¢ Astra consolidated as a subsidiary
€¢ 20% interest in Rothschilds Continuation acquired
"The Group's businesses are performing well, and while the results for the current year will be affected by the timing of residential completions in Hongkong Land, the refurbishment by Mandarin Oriental of its Hong Kong property and the economic slowdown in Indonesia, the medium-term prospects remain promising."
Henry Keswick,
Chairman29th March 2006
Overview
Good performances from a majority of the Group's operations in 2005 enabled Jardine Strategic to achieve a satisfactory increase in profits and shareholders' funds.
Performance
Jardine Strategic's underlying profit rose 18% in 2005 to US$475 million and underlying earnings per share also rose 18% to US$0.78. Earnings were, however, flattered by certain mark to market foreign exchange hedging contracts, which produced gains in 2005 following losses in 2004. Without these, the Group's underlying profit growth would have been closer to 8%.
In terms of trading profit the main contributors to a successful year were Astra and Dairy Farm, which both produced good results, together with companies directly held by Jardine Matheson. The significant increase in total net profit for the period was primarily due to the Company's share of the 34% revaluation of Hongkong Land's investment properties, which was taken through the profit and loss account.
Net assets per share based on the market price of the Company's holdings at 31st December 2005 increased by 21% to US$15.50.
The Board is recommending a final dividend of US¢11.00 per share, which together with the interim dividend of US¢5.00 gives a total for the full year of US¢16.00 per share, an increase of 5% compared with US¢15.20 for the prior year.
Business Developments
Group companies have achieved good operating cash flows, improved earnings and stronger balance sheets. Advantage has also been taken of the low interest rate environment to secure long-term financing. The resultant sound financial position has supported broad capital expenditure programmes, dividend growth and the pursuit of opportunities for profitable expansion.
The Company has acquired a 20% shareholding in Rothschilds Continuation Holdings, a holding company within the Rothschild group and the parent company of N M Rothschild & Sons. In addition to its successful core investment banking business, Rothschild is involved in commercial banking, private banking and the private equity sector.
Jardine Cycle & Carriage's underlying profit was maintained in 2005 as a good performance from Astra compensated for a reduced contribution from Singapore-listed residential property developer, MCL Land, and lower motor earnings following the withdrawal from Australasia. In August 2005 Jardine Cycle & Carriage took its shareholding in Astra above 50% to make it a Group subsidiary and its results have been consolidated for the first time, which has required the inclusion of an additional month of Astra's earnings to align its accounting period. Astra is one of Indonesia's leading companies with a diversified portfolio of businesses primarily in the motor sector, and the investment has given the Group an exceptional exposure to one of Southeast Asia's most promising economies.
All of Astra's major businesses performed above expectation in the first nine months of 2005, but weakened in the last quarter as the Indonesian economy slowed. Its automotive interests were strong for most of the year, and Astra Automotive opened its third Honda motorcycle plant in September. There was further growth in its vehicle financing operations, and three financial services partnerships were formed to support Astra's automotive and heavy equipment operations. A significant increase in sales of heavy equipment was achieved, and its mining equipment subsidiary, Pama, performed well. Its agribusiness subsidiary is expanding its oil palm plantations, and the group has begun to develop infrastructure interests. While the recent economic slowdown in Indonesia is likely to affect Astra in 2006, its prospects for continued growth in the medium-term are good.
Jardine Cycle & Carriage's strategy of focusing on motor interests in Southeast Asia and its strategic investment in Astra led to its decision to distribute in specie to shareholders its 65.6% interest in MCL Land. The distribution enabled shareholders to make their own investment decision when a cash offer for MCL Land was subsequently made by Hongkong Land in early 2006. Jardine Strategic tendered its 41% interest received in the distribution into the offer, receiving US$163 million in consideration.
Hongkong Land recorded significant increases in asset values in 2005 as the Hong Kong commercial property market improved, and its rental renewals began to turn strongly positive. The extensive refurbishment and redevelopment undertaken in recent years of both the office and retail components of its Central portfolio has enhanced the benefits arising from the current positive cycle. Its residential business also progressed with the acquisition of a 77% interest in MCL Land at a cost of US$307 million. Hongkong Land's own development pipeline is stronger than it has been for many years with interests in three major sites secured in 2005 for commercial and residential developments in Singapore, mainland China and Macau. Of its two residential projects in Hong Kong, work has commenced on the first site and is due to begin shortly on the second. The timing of residential completions will again hold back earnings in 2006, but with the benefit of positive rental reversions the prospects for 2007 are excellent.