29th Mar 2006 10:05
Jardine Strategic Hldgs Ld29 March 2006 To: Business Editor 29th March 2006 For immediate release The following announcement was today issued to the London Stock Exchange. Jardine Strategic Holdings Limited2005 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 thecurrent year will be affected by the timing of residential completions inHongkong Land, the refurbishment by Mandarin Oriental of its Hong Kong propertyand the economic slowdown in Indonesia, the medium-term prospects remainpromising." Henry Keswick, Chairman29th March 2006 Year ended 31st December 2005 US$m 2004 US$m Change %------------------------------------------------------------------------------------------Underlying profit attributable to shareholders* 475 404 +18Profit attributable to shareholders 1,398 1,122 +25Shareholders' funds 5,886 4,269 +38------------------------------------------------------------------------------------------ US$ US$ %------------------------------------------------------------------------------------------Underlying earnings per share* 0.78 0.66 +18Earnings per share 2.29 1.82 +26------------------------------------------------------------------------------------------ USc USc %------------------------------------------------------------------------------------------Dividends per share 16.00 15.20 +5------------------------------------------------------------------------------------------ US$ US$ %------------------------------------------------------------------------------------------Net asset value per share+ 15.50 12.80 +21------------------------------------------------------------------------------------------ * The basis of calculation is set out in note 8.+ Based on the market price of the Company's holdings.------------------------------------------------------------------------------------------ The final dividend of USc11.00 per share will be payable on 21st June 2006,subject to approval at the Annual General Meeting to be held on 15th June 2006,to shareholders on the register of members at the close of business on 21st April 2006 and will be available in cash with a scrip alternative. The ex-dividend date will be on 19th April 2006, and the share registers will be closed from 24th to 28th April 2006, inclusive. Jardine Strategic Holdings Limited Preliminary Announcement of ResultsFor The Year Ended 31st December 2005 Overview Good performances from a majority of the Group's operations in 2005 enabledJardine Strategic to achieve a satisfactory increase in profits andshareholders' funds. Performance Jardine Strategic's underlying profit rose 18% in 2005 to US$475 million andunderlying earnings per share also rose 18% to US$0.78. Earnings were, however,flattered by certain mark to market foreign exchange hedging contracts, whichproduced gains in 2005 following losses in 2004. Without these, the Group'sunderlying profit growth would have been closer to 8%. In terms of trading profit the main contributors to a successful year were Astraand Dairy Farm, which both produced good results, together with companiesdirectly held by Jardine Matheson. The significant increase in total net profitfor the period was primarily due to the Company's share of the 34% revaluationof Hongkong Land's investment properties, which was taken through the profit andloss account. Net assets per share based on the market price of the Company's holdings at 31stDecember 2005 increased by 21% to US$15.50. The Board is recommending a final dividend of USc11.00 per share, which togetherwith the interim dividend of USc5.00 gives a total for the full year of USc16.00per share, an increase of 5% compared with USc15.20 for the prior year. Business Developments Group companies have achieved good operating cash flows, improved earnings andstronger balance sheets. Advantage has also been taken of the low interest rateenvironment to secure long-term financing. The resultant sound financialposition has supported broad capital expenditure programmes, dividend growth andthe pursuit of opportunities for profitable expansion. The Company has acquired a 20% shareholding in Rothschilds ContinuationHoldings, a holding company within the Rothschild group and the parent companyof N M Rothschild & Sons. In addition to its successful core investment bankingbusiness, Rothschild is involved in commercial banking, private banking and theprivate equity sector. Jardine Cycle & Carriage's underlying profit was maintained in 2005 as a goodperformance from Astra compensated for a reduced contribution fromSingapore-listed residential property developer, MCL Land, and lower motorearnings following the withdrawal from Australasia. In August 2005 Jardine Cycle& Carriage took its shareholding in Astra above 50% to make it a Groupsubsidiary and its results have been consolidated for the first time, which hasrequired the inclusion of an additional month of Astra's earnings to align itsaccounting period. Astra is one of Indonesia's leading companies with adiversified portfolio of businesses primarily in the motor sector, and theinvestment 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 ninemonths of 2005, but weakened in the last quarter as the Indonesian economyslowed. Its automotive interests were strong for most of the year, and Astra Automotive opened its third Honda motorcycle plant in September. There wasfurther growth in its vehicle financing operations, and three financial servicespartnerships were formed to support Astra's automotive and heavy equipmentoperations. A significant increase in sales of heavy equipment was achieved, andits mining equipment subsidiary, Pama, performed well. Its agribusinesssubsidiary is expanding its oil palm plantations, and the group has begun todevelop infrastructure interests. While the recent economic slowdown inIndonesia is likely to affect Astra in 2006, its prospects for continued growthin the medium term are good. Jardine Cycle & Carriage's strategy of focusing on motor interests in SoutheastAsia and its strategic investment in Astra led to its decision to distribute inspecie to shareholders its 65.6% interest in MCL Land. The distribution enabledshareholders to make their own investment decision when a cash offer for MCLLand was subsequently made by Hongkong Land in early 2006. Jardine Strategictendered its 41% interest received in the distribution into the offer, receivingUS$163 million in consideration. Hongkong Land recorded significant increases in asset values in 2005 as the HongKong commercial property market improved, and its rental renewals began to turnstrongly positive. The extensive refurbishment and redevelopment undertaken inrecent years of both the office and retail components of its Central portfoliohas enhanced the benefits arising from the current positive cycle. Itsresidential business also progressed with the acquisition of a 77% interest inMCL Land at a cost of US$307 million. Hongkong Land's own development pipelineis stronger than it has been for many years with interests in three major sitessecured in 2005 for commercial and residential developments in Singapore,mainland China and Macau. Of its two residential projects in Hong Kong, work hascommenced on the first site and is due to begin shortly on the second. Thetiming of residential completions will again hold back earnings in 2006, butwith the benefit of positive rental reversions the prospects for 2007 areexcellent. Within Jardine Matheson's directly-held operations, Jardine Pacific's earningsfrom continuing businesses grew, although its total results reflected theabsence of profits from businesses sold. There were some good performances, butthe results were mixed in the engineering and construction sector where Gammonhas only just begun to show signs of recovery. Jardine Pacific further refinedits portfolio with the sale of two businesses in 2005, and its operations arenow concentrated on the areas of transport services, engineering andconstruction, restaurants and information technology. Its outlook for 2006remains promising, but growth in earnings will depend largely on the extent ofGammon's improvement. Jardine Motors' continuing businesses have performed well. In the United Kingdomits dealerships increased sales of new cars despite an overall decline in themarket, and the results were supplemented by the resolution of propertyexposures within provisions. The group maintained its high market share in HongKong, ending the year with a good order book. In Southern China Jardine Motorshas put in place a network of service centres that will form the backbone of adealership structure once the regulations permit. Its prospects remainsatisfactory, although the 2006 result is not expected to benefit from furtherproperty related gains in the United Kingdom. Jardine Lloyd Thompson had a difficult year despite new business wins in itsRisk & Insurance operation due to the continued soft market, cost and feepressures and the expiry of some of its favourable US dollar hedging contracts.Trading profit increased in its Employee Benefits Group. Under a new chiefexecutive officer, the company is conducting a thorough review of its operationsto establish an appropriate response to recent structural and regulatory changesin the insurance broking industry. The emphasis will be on cost control,operational efficiency and the active development of those areas where thecompany has the strength in depth to compete effectively. It is, however,unlikely that these changes will have an immediate material impact onperformance in current market conditions. Dairy Farm's multi-format retail operations are continuing to perform well andthe group is building its presence in its established markets across Asia. Atthe year end it was operating 3,165 stores, including 41 hypermarkets inMalaysia, Indonesia and Singapore which have become an important element of itsgrowth strategy. It has increased its direct shareholding in its Indonesianaffiliate, and its prospects in India have been improved with the introductionof new joint venture partners. Expansion is taking place in mainland China,Macau and Thailand, and its restaurant associate has recently acquired the GenkiSushi chain in Hong Kong. Mandarin Oriental achieved strong earnings growth in 2005 as a result ofimproved room rates and the contribution from recently opened hotels. Thecompany's finances have also benefited from the sale of its Hawaiian hotelproperty interest in 2005, followed by the sale of The Mark hotel in New York in2006. Expansion continued in 2005 with the opening of new hotels in Hong Kongand Tokyo and the announcement of four new management contracts. Increasingbrand recognition is attracting a growing number of hotel management prospects,and with a portfolio of 21 hotels in operation and eight under development,Mandarin Oriental is well on its way to reaching its goal of operating 10,000rooms in key destinations. Its trading performance should continue to improve,although earnings in 2006 will be affected by the eight-month closure of itsHong Kong flagship hotel for a US$140 million renovation. Outlook In conclusion, the Chairman, Henry Keswick said, "The Group's businesses areperforming well, and while the results for the current year will be affected bythe timing of residential completions in Hongkong Land, the refurbishment byMandarin Oriental of its Hong Kong property and the economic slowdown inIndonesia, the medium-term prospects remain promising." Operating Review Jardine Matheson Jardine Matheson reported record earnings and net assets per share in 2005.Underlying profit rose 17% to US$463 million in 2005, while earnings per sharerose 19%. The earnings were, however, flattered by mark to market foreignexchange hedging contracts, without which the underlying profit growth wouldhave been closer to 10%. Net assets per share, which does not include the marketvalue of the company's listed subsidiaries and affiliates, increased by 36% toUS$14.33. • Jardine Pacific's result for 2005 reflected some good performances from its continuing businesses. Underlying profit of US$90 million was only 4% lower despite the absence of profits from businesses sold in 2004. Shareholders' funds were reduced by 3% to US$317 million, and the return on average shareholders' funds, excluding non-recurring items, increased to 28%. The company's interests in Pacific Finance and EastPoint were sold during the year. HACTL produced another year of record volumes and its profit contribution rose by 14%. Jardine Aviation Services also benefited from increased activity at Hong Kong International Airport, but Jardine Shipping Services suffered from industry-wide rate declines. Gammon began to show signs of recovery following a US$8 million loss in 2004, and Jardine Schindler benefited from strong markets in both Hong Kong and Singapore. Jardine Engineering Corporation's continuing operations generally performed well. Jardine OneSolution experienced lower margins and saw profit slip. Jardine Restaurants produced better earnings in Hong Kong and Taiwan, but the overall profit from restaurants was down 35% following the sale of its Hawaiian operations at the end of 2004. While the outlook for Jardine Pacific's businesses in 2006 remains positive, disposals made in 2005 will impact earnings and growth will depend largely on the extent of Gammon's improvement. • Jardine Motors benefited from improvements in most of its major businesses in 2005 with underlying net profit from continuing businesses increasing by 29% to US$44 million. In Hong Kong, Zung Fu maintained its high Mercedes-Benz market share in a slightly reduced new car market, ending the year with a healthy order book. The performance of its service centres remained strong. The relatively new Hyundai passenger car franchise also achieved an improved performance with a good contribution from aftersales. Zung Fu has continued to expand its service centre network in Southern China, while withdrawing from those territories outside of its main areas of focus, and has achieved a significantly improved profit. In the United Kingdom, underlying dealership operating profit improved as new vehicle volumes grew despite an overall decline in the market. Appleyard Vehicle Contracts, the vehicle leasing joint venture, produced satisfactory results despite falls in used car residual values. The resolution of certain property exposures within previously made provisions enhanced the results. The business portfolio in the United Kingdom continues to be strengthened by the addition of selective franchises. • Jardine Lloyd Thompson's turnover for 2005 was US$877 million, an increase of 3%. Trading profit, being turnover less expenses and excluding exceptional items and impairment charges, was 21% lower at US$120 million. Profit before tax was US$134 million, compared to US$154 million in 2004. The competitive insurance market conditions that prevailed throughout the year intensified in the second half. The Risk & Insurance group's turnover grew by 4% to US$716 million, but trading profit fell 26% to US$118 million. The company's results were also affected by lower profits from JLT Risk Solutions, due in part to adverse currency movements and reduced earnings from placement or market services agreements. The Employee Benefits Group's turnover increased by 6% and trading profit was up 13% at US$25 million. The United Kingdom business achieved an increase in turnover of 19%, and the trading margin of 16% exceeded the long-term goal of 15% for the first time. In the United States, however, the trading margin fell from 15% to 12%, reflecting an increasingly competitive operating environment and sale of a non-core business. A review of JLT's operations has been initiated by its new chief executive officer, which will allow JLT to refine its strategy in response to the challenges it faces. While the company is expected to benefit from areas of expansion and improved efficiencies, these will be largely offset in 2006 by the highly competitive markets and continuing pressure on fees. Hongkong Land The broad-based recovery in the Hong Kong commercial property market continuedthroughout 2005. This led to the absorption of the additional office spacecompleted in Central in recent years and robust growth in the retail sector.Capital values and rents in both these sectors rose significantly. HongkongLand's office rental reversions turned positive during 2005, but the benefit toearnings was offset by reduced profits from the residential sector where therewere fewer completions. Consequently, Hongkong Land's underlying earningsreduced 5% to US$188 million. A 34% rise in the value of the Hongkong Land'sinvestment property portfolio to US$9,779 million led to its adjusted net assetvalue per share increasing 41% to US$3.86. Progress was made in its existing development projects. In Singapore, 70% of itsjoint venture development at One Raffles Quay has been pre-committed ahead ofcompletion in 2006. In Beijing, the second phase of its residential development,Central Park, was completed during the year, and the third phase currently underconstruction has been substantially pre-sold. In Hong Kong, work is commencingon two residential development sites. Three major sites were secured in 2005 that will provide a strong developmentpipeline and complement the group's prime investment portfolio. In July, theBusiness and Finance Centre site in Singapore was won by a consortium comprisingHongkong Land and its partners in One Raffles Quay. In Chongqing, in WesternChina, a joint venture with the Longhu group won the right to develop anexcellent 450,000 sq. m gross site. In Macau, a joint venture with Shun TakHoldings Limited is to develop a prime site that will comprise high-endresidential apartments, a luxury shopping podium and a luxury hotel. On 17th February 2006 Hongkong Land completed a voluntary cash offer for MCLLand, in which it acquired a 77% interest at a cost of US$307 million. Theacquisition gives scale to Hongkong Land's expanding residential propertybusiness and provides a platform for growth in Southeast Asia. The outlook for Hongkong Land's office portfolio remains good, although the lackof residential completions will hold back its 2006 result. Its developmentpipeline and the positive rental cycle give confidence for its progress in theyears to come. Dairy Farm Dairy Farm's sales, including associates, increased by 8% to US$5.5 billion in2005, supported by recent acquisitions and favourable economic conditions inmost of its major markets. Underlying profit rose 16% to US$190 million. Thegroup ended the year with no net debt despite the payment of a special dividendof US$334 million in May. Dairy Farm's operations in North Asia performed well increasing sales by 12% andprofit by 18%. An improving economy in Hong Kong helped Wellcome to make furthergains, and Mannings health and beauty stores produced another fine result. Anacquisition in late 2004 underpinned a much better performance from 7-Eleven. Astrong second half helped Wellcome Taiwan to record a good year. In Guangdong,7-Eleven continued its expansion, while Mannings has reached 11 stores after itsfirst full year of operation. South Korean associate, Olive Young, finished theyear with 25 outlets. IKEA in Hong Kong and Taiwan recorded a decline inunderlying profit in a challenging environment; two new stores are scheduled toopen in Taiwan in 2006. The underlying results of the group's Hong Kong-based restaurant associate,Maxim's, were flat having been affected by strong competition and closure costs.In early 2006, it completed the acquisition of a majority interest in the18-outlet Genki Sushi chain. South Asia produced excellent growth with sales up by 33% and profits up by 26%.The group's operations in both Singapore and Malaysia performed well, andIndonesia continued to improve. These businesses now operate 41 Gianthypermarkets. New partners and a fresh management team in India havesignificantly enhanced the prospects for the group's supermarket and health andbeauty businesses there. Dairy Farm increased its direct shareholding in its Indonesian supermarketaffiliate, Hero, from 12% to 44% during the year, and holds a further 25%interest through exchangeable bonds. The restructuring of the group's Malaysianproperty portfolio through a sale and leaseback transaction was completed atyear end, and further properties in Indonesia and Singapore were also sold undersale and leaseback arrangements. Dairy Farm entered new markets in 2005 withMannings and 7-Eleven opening in Macau and Guardian starting up in Bangkok, allwith promising results. Management remains focused on developing retailoperations in Asia, both organically and through acquisitions. Mandarin Oriental Mandarin Oriental's results benefited from increasing room rates as demand inmany cities strengthened. Net profit in 2005 was US$41 million, excluding apost-tax gain of US$36 million arising from a disposal of its hotel propertyinterest in Hawaii. This compares with US$29 million in 2004, which hadbenefited from a US$10 million investment writeback. There were significantprofit increases at the group's wholly-owned Hong Kong hotels, with its othersubsidiary hotels also producing better results, including the recently openedproperty in Washington D.C. Operating results from associates and joint venturesrose with good performances from hotels in Macau, Miami, New York and Singapore. Mandarin Oriental's balance sheet was strengthened following the conversion ofthe group's 6.75% convertible bonds into shares in the early part of the yearand the receipt of the US$97 million proceeds from the Hawaii sale. The US$150million sale of The Mark hotel in New York was completed in February 2006, and again of some US$35 million arising from the disposal will be recognized in the2006 results. The international visibility of the Mandarin Oriental brand has been enhancedconsiderably in recent years with the opening of select properties in keydestinations and the renovation of existing flagships. Its original flagshiphotel, Mandarin Oriental, Hong Kong, closed at the end of December 2005 for aUS$140 million eight-month renovation. Mandarin Oriental, Tokyo opened at theyear end, and followed the successful opening of The Landmark in Hong Kong in August. While the group has ceased to manage the Hotel Royal Monceau in Paris,its luxury hotels and resorts under development in Prague, on Hainan Island inChina and in Riviera Maya, Mexico will open over the next 12 months, with Bostonfollowing in late 2007. New management contracts were also announced for hotel developments in Chicago, Grand Cayman, Las Vegas and Macau. The group now operates 21 hotels around the world with a further eight hotels under development, representing a total of some 8,500 rooms. Markets are expected to remain favourable for Mandarin Oriental in 2006 withroom rates benefiting from growing demand and limited new supply. While thetemporary closure of Mandarin Oriental, Hong Kong will inevitably hold back thegroup's results in 2006, the effect will be partially offset by increasingcontributions from new properties. Jardine Cycle & Carriage Jardine Cycle & Carriage's underlying profit after tax and minority interestsrose 2% to US$299 million as a good performance from Astra compensated forreduced contributions from its property and motor interests. Jardine Cycle &Carriage increased its shareholding in Astra to 50.1% during the year and, as asubsidiary, its results are now consolidated. Astra's US$275 millioncontribution for 2005 does, however, include an extra month of earnings requiredto align the consolidation on a same-month basis; it had previously been equityaccounted one month in arrear as an associate. Excluding the profit for month ofDecember 2004, the contribution from Astra would have been US$256 million. Growth in the Indonesian motor car and motorcycle markets was strong for most of2005, and Astra was able to improve its market share. Its financial servicesbusinesses also benefited from this growth. There was, however, a significantdecline in demand in the final quarter in response to fuel price increases andrising interest rates, and this negative sentiment is expected to persist into2006. A new US$140 million Honda factory with an annual capacity of one millionunits was opened by the President of Indonesia in September 2005. Astra's heavy equipment division produced a good performance from both Komatsusales and contract mining operations in 2005. Profit from agribusiness wasslightly below the previous year, although prospects remain good and Astra AgroLestari is expanding its oil palm plantation interests. Astra has acquired a 34%stake in a toll road project, and is looking to participate in other newinfrastructure projects announced by the Indonesian Government. Jardine Cycle & Carriage's directly-held continuing motor operations inSingapore, Malaysia and Indonesia produced higher earnings in 2005, but theoverall contribution declined 16% to US$29 million following the withdrawal fromAustralia and New Zealand. In early 2006 a new 18,600 sq. m Mercedes-Benzflagship showroom was opened in Singapore, and new facilities have also beenopened in Malaysia. MCL Land made progress during the year in the marketing and construction ofdevelopment properties. Its underlying profit contribution to the group,however, was significantly lower as profit was recognized on only one completedproject in 2005, compared to two more substantial projects in the prior year. InDecember 2005, shareholders approved the distribution in specie of the company's65.6% interest in MCL Land, which was implemented on 25th January 2006. --------------------------------------------------------------------------------Jardine Strategic Holdings LimitedConsolidated Profit and Loss Accountfor the year ended 31st December 2005-------------------------------------------------------------------------------- 2005 2004 US$m US$m ------------------------ Revenue (note 2) 8,825 5,793Cost of sales (6,577) (4,282) ------- -------Gross profit 2,248 1,511Other operating income 239 170Selling and distribution costs (1,288) (956)Administration expenses (529) (272)Other operating expenses (57) (76) ------- -------Operating profit (note 3) 613 377Financing charges (96) (83)Share of results of Jardine Matheson (note 4) 130 54 Share of results of associates and joint ventures excluding change in fair value of investment properties 403 428Increase in fair value of investment properties 813 611 Share of results of associates and joint ventures (note 5) 1,216 1,039 ------- -------Profit before tax 1,863 1,387Tax (note 6) (154) (51) ------- -------Profit for the year 1,709 1,336 ------- ------- Attributable to:Shareholders of the Company 1,398 1,122Minority interests 311 214 ------- ------- 1,709 1,336 ------- ------- ------------------------ US$ US$ ------------------------Earnings per share (note 8)- basic 2.29 1.82- diluted 2.28 1.82 Underlying earnings per share (note 8)- basic 0.78 0.66- diluted 0.77 0.65 ------------------------ --------------------------------------------------------------------------------Jardine Strategic Holdings LimitedConsolidated Balance Sheetat 31st December 2005-------------------------------------------------------------------------------- 2005 2004 US$m US$m ------------------------Assets Intangible assets 1,691 780Tangible assets 2,183 1,216Investment properties 27 31Plantations 383 -Investment in Jardine Matheson 728 600Associates and joint ventures 4,790 3,697Other investments 307 300Financing and other debtors 1,285 -Deferred tax assets 69 20Pension assets 75 70 ------- -------Non-current assets 11,538 6,714 ------- -------Properties for sale - 286Stocks and work in progress 1,212 493Trade, financing and other debtors 2,104 343Current tax assets 55 12Bank balances and other liquid funds- non-finance companies 855 702- finance companies 187 - 1,042 702 4,413 1,836Non-current assets classified as held for sale (note 9) 662 148 ------- -------Current assets 5,075 1,984 ------- ------- Total assets 16,613 8,698 ------- ------- Equity Share capital 53 52Share premium and capital reserves 1,320 1,317Revenue and other reserves 5,488 3,804Own shares held (975) (904) ------- -------Shareholders' funds (note 10) 5,886 4,269Minority interests 2,934 1,026 ------- -------Total equity 8,820 5,295 ------- -------Liabilities Long-term borrowings (note 12)- non-finance companies 1,853 1,579- finance companies 1,005 - 2,858 1,579Deferred tax liabilities 427 109Pension liabilities 41 7Non-current provisions 11 -Other non-current liabilities 60 26 ------- -------Non-current liabilities 3,397 1,721 ------- -------Creditors and accruals 2,308 1,158Current borrowings - non-finance companies 586 451- finance companies 1,169 - ------- ------- 1,755 451Current tax liabilities 111 53Current provisions 26 19 ------- ------- 4,200 1,681Liabilities directly associated with non-current assets classified as held for sale (note 9) 196 1 ------- -------Current liabilities 4,396 1,682 ------- -------Total liabilities 7,793 3,403 ------- -------Total equity and liabilities 16,613 8,698 ------- ------- ------------------------ --------------------------------------------------------------------------------Jardine Strategic Holdings LimitedConsolidated Statement of Recognized Income and Expensefor the year ended 31st December 2005-------------------------------------------------------------------------------- 2005 2004 US$m US$m ------------------------ Surpluses on revaluation of intangible assets 468 -Surpluses on revaluation of properties 69 63Gains on revaluation of other investments 38 54Actuarial gains on defined benefit pension plans 27 27Net exchange translation differences (79) (27)Gains/(losses) on cash flow hedges 25 (6)Tax on items taken directly to equity (174) (27) ------- -------Net income recognized directly in equity 374 84Transfer to profit and loss on disposal and impairment of other investments (20) 71Transfer to profit and loss on disposal of subsidiary undertakings, associates and joint ventures (6) 25Transfer to profit and loss in respect of cash flow hedges - 3Profit for the year 1,709 1,336 ------- -------Total recognized income and expense for the year 2,057 1,519 ------- ------- Attributable to:Shareholders of the Company 1,613 1,293Minority interests 444 226 ------- ------- 2,057 1,519 ------- ------- ------------------------ Revaluation of intangible assets represents that part of the increase in fairvalue of Astra's and PT Hero Supermarket's identifiable net assets that isattributable to the Group's previously held interests in those companies on thedate they became subsidiary undertakings. --------------------------------------------------------------------------------Jardine Strategic Holdings LimitedConsolidated Cash Flow Statementfor the year ended 31st December 2005-------------------------------------------------------------------------------- 2005 2004 US$m US$m ------------------------Operating activities Operating profit 613 377Interest income (41) (12)Depreciation and amortization 223 131Other non-cash items 18 (57)(Increase)/decrease in working capital (353) 63Interest received 40 14Interest and other financing charges paid (120) (70)Tax paid (161) (43) ------- ------ 219 403Dividends from Jardine Matheson - 105Dividends from associates and joint ventures 234 145 Cash flows from operating activities 453 653 Investing activities Purchase of Astra (note 13(a)) 320 (319)Purchase of other subsidiary undertakings (note 13(b)) (101) (120)Purchase of associates and joint ventures (note 13(c)) (298) (85)Purchase of other investments (19) (13)Purchase of land use rights (12) (10)Purchase of tangible assets (419) (148)Purchase of investment properties (8) -Purchase of plantations (6) -Sale of subsidiary undertakings (note 13(d)) 103 68Sale of associates and joint ventures (note 13(e)) 101 17Sale of other investments (note 13(f)) 39 38Sale of land use rights 33 77Sale of tangible assets 59 18Sale of investment properties 50 138 Cash flows from investing activities (158) (339) Financing activities Repurchase of shares - (12)Capital contribution from minority shareholders 3 8Drawdown of borrowings 3,287 1,062Repayment of borrowings (3,043) (909)Dividends paid by the Company (26) (154)Dividends paid to minority shareholders (172) (31) Cash flows from financing activities 49 (36)Effect of exchange rate changes (2) 9 ------- ------Net increase in cash and cash equivalents 342 287Cash and cash equivalents at 1st January 702 415 ------- ------Cash and cash equivalents at 31st December 1,044 702 ------- ------ ------------------------ --------------------------------------------------------------------------------Jardine Strategic Holdings LimitedNotes-------------------------------------------------------------------------------- 1. Accounting Policies and Basis of Preparation The financial information contained in this announcement has been based on theaudited results for the year ended 31st December 2005 which have been preparedin conformity with International Financial Reporting Standards,including International Accounting Standards and Interpretations adopted by theInternational Accounting Standards Board. There have been no changes to theaccounting policies disclosed in the 2004 annual financial statements. The Group's reportable segments are set out in note 2. 2. Revenue 2005 2004 US$m US$m ------------------------ By business: Dairy Farm 4,749 3,956 Mandarin Oriental 399 337 Jardine Cycle & Carriage 1,087 1,500 Astra 2,590 - ------- ------- 8,825 5,793 ------- ------- 3. Operating Profit 2005 2004 US$m US$m ------------------------ By business: Dairy Farm 240 262 Mandarin Oriental 116 44 Jardine Cycle & Carriage 64 91 Astra 198 - ------- ------- 618 397 Corporate and other interests (5) (20) ------- ------- 613 377 ------- ------- 4. Share of Results of Jardine Matheson 2005 2004 US$m US$m ------------------------ Share of results excluding change in fair value of investment properties 121 41 Increase in fair value of investment properties 9 13 ------- ------- 130 54 ------- ------- Results are shown after tax and minority interests and include US$1 million(2004: US$24 million) relating to value added tax recovery in Jardine MotorsGroup. In 2004, results are also shown after a transfer from reserves onimpairment of a listed investment (refer note 8). 5. Share of Results of Associates and Joint Ventures 2005 2004 US$m US$m ------------------------ By business: Hongkong Land 87 111 Dairy Farm 29 21 Mandarin Oriental 11 13 Jardine Cycle & Carriage 193 283 Astra 82 - Corporate and other interests 1 - ------- ------- 403 428 Increase in fair value of investment properties in Hongkong Land 813 611 ------- ------- 1,216 1,039 ------- ------- Results are shown after tax and minority interests. 6. Tax 2005 2004 US$m US$m ------------------------ Current tax 145 52 Deferred tax 9 (1) ------- ------- 154 51 ------- ------- Tax on profits has been calculated at rates of taxation prevailing in theterritories in which the Group operates. Tax includes United Kingdom tax of US$1million (2004: nil). 7. Profit attributable to shareholders 2005 2004 US$m US$m ------------------------ By business: Jardine Matheson 77 67 Hongkong Land 82 84 Dairy Farm 149 128 Mandarin Oriental 26 13 Jardine Cycle & Carriage 30 46 Astra 159 124 Corporate and other interests (48) (58) ------- ------- Underlying profit 475 404 Value added tax recovery in Jardine Matheson 1 24 ------- ------- Underlying profit including value added tax recovery 476 428 Increase in fair value of investment properties 822 616 Other adjustments 100 78 ------- ------- Profit attributable to shareholders 1,398 1,122 ------- ------- 8. Earnings Per Share Basic earnings per share is calculated on profit attributable to shareholders ofUS$1,398 million (2004: US$1,122 million) and on the weighted average number of610 million (2004: 615 million) shares in issue during the year. The weightedaverage number excludes the Company's share of the shares held by JardineMatheson. Diluted earnings per share is calculated on profit attributable to shareholdersof US$1,394 million (2004: US$1,120 million), which is after adjusting for theeffects of the conversion of dilutive potential ordinary shares of JardineMatheson, subsidiary undertakings, associates or joint ventures. Additional basic and diluted earnings per share are also calculated based onunderlying earnings attributable to shareholders. A reconciliation of earningsis set out below: 2005 2004 Basic Diluted Basic Diluted earnings earnings earnings earnings per share per share per share per share US$m US$ US$ US$m US$ US$ -------------------------------------------------------------------------- Underlying profit 475 0.78 0.77 404 0.66 0.65Value added tax recovery in Jardine Matheson 1 24 ------ ------Underlying profit including value added tax recovery 476 0.78 0.78 428 0.70 0.69 Increase in fair value of investment properties 822 616Other adjustments 100 78 922 694 ------ ------Profit attributable to shareholders 1,398 2.29 2.28 1,122 1.82 1.82 ------ ------ A fuller analysis of the adjustments made to the profit attributable toshareholders in arriving at the underlying profit is set out below: 2005 2004 US$m US$m ------------------------ Increase in fair value of investment properties - Hongkong Land 813 611 - Jardine Matheson 9 13 - other - (8) 822 616Sale and closure of businesses - EastPoint 12 -- Pacific Finance 12 -- Kahala Mandarin Oriental 27 -- Hawaiian restaurant operations - 9- Asia Container Terminals - 25- Hong Kong Ice & Cold Storage - 11- motor operations 2 32- other 10 5 63 82Asset impairment - listed investment+ - (58)- Mandarin Oriental, Kuala Lumpur - 7- port facilities (1) (13)- other 1 1 - (63)Buyout of minorities in Jardine Lloyd Thompson 10 -Realization of exchange losses* - (4)Revaluation surplus/(deficit) on properties and provision for onerous leases 4 (2)Fair value (loss)/gain on plantations (1) 1Fair value gain on options embedded in Jardine Matheson Guaranteed Bonds - 4Sale of property interests 3 52Sale of investments 21 9Negative goodwill on acquisition of an associate 1 1Restructuring of businesses and other (1) (2) ------- ------- 922 694 ------- ------- + Transfer from reserves on impairment of investment in J.P. Morgan Chase shares in Jardine Matheson.* Arising on repatriation of capital from a foreign subsidiary undertaking of Jardine Matheson. 9. Non-current Assets Classified as Held for Sale The major classes of assets and liabilities classified as held for sale are set out below: 2005 2004 US$m US$m ------------------------ Intangible assets 7 - Tangible assets 71 107 Investment properties 24 41 Associates and joint ventures 34 - Deferred tax assets 1 - Current assets* 525 - ------- ------- Total assets 662 148 -------- ------- Long-term borrowings 81 - Deferred tax liabilities 1 - Other non-current liabilities 2 - Current liabilities 112 1 ------- ------- Total liabilities 196 1 ------- ------- At 31st December 2004, the non-current assets classified as held for saleincluded Dairy Farm's properties portfolio in Malaysia of US$107 million andJardine Cycle & Carriage's investment properties in Malaysia of US$41 million.With the exception of two properties in Dairy Farm and an investment property inJardine Cycle & Carriage with carrying values of US$7 million and US$4 millionwhich were reclassified to tangible assets and investment propertiesrespectively, all other properties were sold during the year resulting in apost-tax loss of US$4 million. Certain of Dairy Farm's properties acquired as part of the increasedshareholding in PT Hero Supermarket, and a property in Hong Kong were classifiedas held for sale. With the exception of the property in Hong Kong and one retailproperty in Indonesia with carrying values of US$2 million and US$1 millionrespectively, all other properties were sold during the year. Mandarin Oriental's interest in The Mark, New York was classified as held forsale. At 31st December 2005, total assets and total liabilities amounted toUS$80 million and US$14 million respectively. The sale was completed in February2006 for a consideration of US$150 million (refer note 16). Jardine Cycle & Carriage's interest in MCL Land, which comprised total assets ofUS$578 million and total liabilities of US$182 million at 31st December 2005,was classified as held for sale. The sale, which was effected through adistribution in specie by Jardine Cycle & Carriage to its shareholders and theacceptance of Hongkong Land's tender offer by the Company in respect of itsinterest in MCL Land received through the dividend in specie, was completed inJanuary 2006 (refer note 16). * Included bank balances and other liquid funds of US$26 million. 10. Shareholders' Funds 2005 2004 US$m US$m ------------------------ At 1st January 4,269 2,965 Effect of adopting IFRS 3 - 150 ------- ------- 4,269 3,115 Recognized income and expense attributable to shareholders 1,613 1,293 Dividends (note 11) (93) (91) Employee share option schemes - value of employee services 4 1 Scrip issued in lieu of dividends 135 - Repurchase of shares - (12) Equity component of convertible bonds issued by an associate 27 - Change in attributable interests 2 - Increase in own shares held (71) (37) ------- ------- At 31st December 5,886 4,269 ------- ------- 11. Dividends 2005 2004 US$m US$m ------------------------ Final dividend in respect of 2004 of USc10.40 (2003: USc9.90) per share 109 104 Interim dividend in respect of 2005 of USc5.00 (2004: USc4.80) per share 52 50 ------- ------- 161 154 Less Company's share of dividends paid on the shares held by Jardine Matheson (68) (63) ------- ------- 93 91 ------- ------- A final dividend in respect of 2005 of USc11.00 (2004: USc10.40) per shareamounting to a total of US$117 million (2004: US$109 million) is proposed by theBoard. The dividend proposed will not be accounted for until it has beenapproved at the Annual General Meeting. The net amount after deducting theCompany's share of the dividends payable on the shares held by Jardine Mathesonof US$49 million (2004: US$45 million) will be accounted for as an appropriationof revenue reserves in the year ending 31st December 2006. 12. Long-Term Borrowings 2005 2004 US$m US$m ------------------------ Dairy Farm 388 346 Mandarin Oriental 480 522 Jardine Cycle & Carriage 328 381 Astra - non-finance companies 538 - - finance companies 2,174 - 2,712 - Corporate 705 781 ------- ------- Total borrowings 4,613 2,030 Less: Amount included in current liabilities (1,755) (451) ------- ------- 2,858 1,579 ------- ------- 13. Notes to Consolidated Cash Flow Statement 2005 Book Fair value Fair value adjustments value(a) Purchase of Astra US$m US$m US$m --------------------------------------- Intangible assets 69 591 660 Tangible assets 822 - 822 Investment properties 20 - 20 Plantations 359 - 359 Associates and joint ventures 472 467 939 Other investments 24 - 24 Financing and other debtors 1,183 - 1,183 Deferred tax assets 129 (91) 38 Current assets 2,778 - 2,778 Long-term borrowings (1,260) - (1,260) Deferred tax liabilities (170) (107) (277) Pension liabilities (38) - (38) Non-current provisions (3) - (3) Other non-current liabilities (69) - (69) Current liabilities (2,172) - (2,172) Minority interests (386) (79) (465) ------- -------- ------- Net assets 1,758 781 2,539 ------- -------- Adjustment for minority interests (1,267) ------- Net assets acquired 1,272 Goodwill 66 ------- Total consideration 1,338 Adjustment for carrying value of associates and joint ventures (889) Adjustment to fair values relating to previously held interests (315) Cash and cash equivalents of Astra acquired (454) ------- Net cash inflow (320) ------- During the year, Jardine Cycle & Carriage acquired an additional 2.9% interestin Astra increasing its holding to 50.1%. Fair value adjustments were determinedbased on provisional fair values of Astra's identifiable assets and liabilitiesat the date on which the Group obtained control. Goodwill represented the excessof the cost of acquisition over the fair value of the share of the netidentifiable assets acquired, and is attributable to the profitability of theacquired business after the acquisition. 2005 2004 Book Fair value Fair Fair value adjustments value value(b) Purchase of other subsidiary undertakings US$m US$m US$m US$m ---------------------------------------------------------------- Intangible assets 14 13 27 - Tangible assets 47 - 47 2 Deferred tax assets 5 - 5 - Current assets 98 1 99 1 Long term borrowings (9) - (9) - Deferred tax liabilities (4) (4) (8) - Pension liabilities (9) - (9) - Current liabilities (85) - (85) - Minority interests 13 - 13 15 ------- -------- ------ ------ Net assets 70 10 80 18 ------- -------- Adjustment for minority interests (27) - ------ ------ Net assets acquired 53 18 Goodwill 39 10 ------ ------ Total consideration 92 28 Adjustment for deferred consideration and carrying value of associates and joint ventures (23) - Adjustment to fair values relating to previously held interests (4) - Cash and cash equivalents of subsidiary undertakings acquired (5) - ------ ------ Net cash outflow 60 28 Purchase of shares in Dairy Farm - 40 Purchase of shares in Jardine Cycle & Carriage 41 52 ------ ------ 101 120 ------ ------ Net cash outflow in 2005 of US$60 million included US$39 million for acquisitionof an additional 32.3% interest in PT Hero Supermarket in Dairy Farm, and US$7million for an additional 30% interest in Republic Auto and US$8 million for anadditional 30% interest in Century Gardens in Jardine Cycle & Carriage. Net cash outflow in 2004 of US$28 million included US$16 million for storeacquisitions in Dairy Farm and US$11 million for acquisition of an additional12.3% interest in Cycle & Carriage Bintang. (c) Purchase of associates and joint ventures in 2005 included US$21 million for increased interest in Landmark Land and Properties in Jardine Cycle & Carriage, US$15 million for Astra's interest in PT Marga, US$71 million for the Company's increased interest in Hongkong Land and US$187 million for a 20% interest in Rothschilds Continuation Holdings. Purchase of associates and joint ventures in 2004 included US$55 million for the Company's increased interest in Hongkong Land and US$20 million for the acquisition of a 33.7% interest in PT Tunas Ridean in Jardine Cycle & Carriage. 2005 2004(d) Sale of subsidiary undertakings US$m US$m ------------------ Intangible assets - 1 Tangible assets - 12 Deferred tax assets - 1 Current assets 105 51 Long-term borrowings - (2) Deferred tax liabilities - (1) Current liabilities - (31) ------- ------- Net assets disposed of 105 31 Cumulative exchange translation differences - (4) (Loss)/profit on disposal (1) 41 ------- ------- Sale proceeds 104 68 Adjustment for deferred consideration (1) - ------- ------- Net cash inflow 103 68 ------- ------- Sale proceeds in 2005 of US$104 million included US$96 million from Dairy Farm'ssale of its interest in Hartanah Progresif, a property-owning subsidiaryundertaking. Sale proceeds in 2004 of US$68 million included US$20 million from sale of HongKong Ice and Cold Storage in Dairy Farm and US$48 million from sale of JardineCycle & Carriage's New Zealand motor operations. (e) Sale of associates and joint ventures in 2005 included US$97 million from sale of Kahala Mandarin Oriental in Mandarin Oriental. Sale of associates and joint ventures in 2004 included US$7 million from repayment of shareholders' loan by Mandarin Oriental, Kuala Lumpur in Mandarin Oriental and US$6 million from sale of Jardine Cycle & Carriage's remaining Australian motor operations. (f) Sale of other investments in 2005 included US$36 million from sale of the Company's interest in EON Capital. Sale of other investments in 2004 included US$13 million from sale of corporate investments in Mandarin Oriental and US$20 million from sale of the Company's interest in Hap Seng Consolidated. 14. Jardine Strategic Corporate Cash Flow and Net Debt 2005 2004 US$m US$m ------------------- Dividends receivable Subsidiary undertakings 367 68 Jardine Matheson 128 105 Associates 67 56 Other holdings 16 8 578 237 Less: taken in scrip (147) (14) ------- ------- 431 223 Other operating cash flows (67) (48) ------- ------- Cash flows from operating activities 364 175 Investing activities Purchase of subsidiary undertakings (41) (92) Purchase of associates (258) (54) Purchase of other investments (4) (11) Sale of a subsidiary undertaking 2 - Sale of other investments 36 23 Cash flows from investing activities (265) (134) Financing activities Repurchase of shares - (12) Dividends paid by the Company (26) (154) Cash flows from financing activities (26) (166) Effect of exchange rate changes 4 (9) ------- ------- Net decrease/(increase) in net debt 77 (134) Net debt at 1st January (775) (641) ------- ------- Net debt at 31st December (698) (775) ------- ------- Represented by: Bank balances and other liquid funds 6 5 6.375% Guaranteed Bonds due 2011 (296) (296) Other long-term borrowings (408) (484) ------- ------- (698) (775) ------- ------- Corporate cash flow and net debt comprises the cash flows and net cash or debtof the Company and of its investment holding and financing subsidiaryundertakings. 15. Capital Commitments and Contingent Liabilities 2005 2004 US$m US$m ------------------- Capital commitments 307 182 ------- ------- Contingent liabilities Guarantees in respect of facilities made available to associates and joint ventures 71 70 ------- ------- Guarantees in respect of facilities made available to associates and jointventures are stated at their total respective contracted amounts. It is probablethat the Group has no obligations under such guarantees. Various Group companies are involved in litigation arising in the ordinarycourse of their respective businesses. Having reviewed outstanding claims andtaking into account legal advice received, the Directors are of the opinion thatadequate provisions have been made in the financial statements. 16. Post Balance Sheet Events (a) In December 2005, Jardine Cycle & Carriage announced that its shareholders approved the distribution of the company's 65.6% interest in MCL Land by way of a dividend in specie. At the same time, Hongkong Land announced a voluntary conditional cash offer for all the ordinary stock units in MCL Land. The Company undertook to accept the offer by Hongkong Land in respect of its 40.9% interest in MCL Land that it would receive through the dividend in specie. As Hongkong Land already held a 9.5% interest in MCL Land at 31st December 2005 and the offer would become unconditional upon the acceptance by the Company in respect of its holding, MCL Land was classified as a disposal group held for sale at 31st December 2005. In January 2006, the Company disposed of its interest in MCL Land to Hongkong Land for US$163 million. Hongkong Land's offer closed on 17th February 2006 and resulted in Hongkong Land holding 77.4% in MCL Land. (b) In December 2005, Mandarin Oriental announced that it had entered into an agreement to sell its interest in The Mark, New York for US$150 million. The sale was completed in February 2006 resulting in a profit after tax of approximately US$35 million. 17. Market Value Basis Net Assets Net assets based on the market price of the Company's holdings: 2005 2004 US$m US$m ------------------- Jardine Matheson 733 1,380 Hongkong Land 3,089 2,546 Dairy Farm 3,800 2,540 Mandarin Oriental 604 554 Jardine Cycle & Carriage 1,399 1,294 Other holdings 437 271 Corporate (558) (803) ------- ------- 9,504 7,782 ------- ------- US$ US$ ------- ------- Net assets per share 15.50 12.80 ------- ------- The final dividend of USc11.00 per share will be payable on 21st June 2006,subject to approval at the Annual General Meeting to be held on 15th June 2006,to shareholders on the register of members at the close of business on 21stApril 2006, and will be available in cash with a scrip alternative. Theex-dividend date will be on 19th April 2006, and the share registers will beclosed from 24th to 28th April 2006, inclusive. Shareholders will receive theircash dividends in United States Dollars, unless they are registered on theJersey branch register where they will have the option to elect for Sterling.These shareholders may make new currency elections by notifying the UnitedKingdom transfer agent in writing by 2nd June 2006. The Sterling equivalent ofdividends declared in United States Dollars will be calculated by reference to arate prevailing on 7th June 2006. Shareholders holding their shares through TheCentral Depository (Pte) Limited ('CDP') in Singapore will receive United StatesDollars unless they elect, through CDP, to receive Singapore Dollars or thescrip alternative. - end - For further information, please contact: Jardine Matheson LimitedJames Riley (852) 2843 8229 Matheson & Co Limited Martin Henderson (44) 20 7816 8135 GolinHarrisKennes Young (852) 2501 7987 Weber Shandwick Square MileRichard Hews/Helen Thomas (44) 20 7067 0700 Full text of the Preliminary Announcement of Results and the PreliminaryFinancial Statements for the year ended 31st December 2005 can be accessedthrough the Internet at 'www.jardines.com'. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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