Half Yearly Report

The following announcement was issued today to a Regulatory Information Service approved by the Financial Conduct Authority in the United Kingdom.

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2014

Highlights

· Underlying earnings down 5%

· Interim dividend up 7%

· Astra net profit up 11% in rupiah, but lower contribution in US dollars

· Hongkong Land's result affected by lack of Singapore residential completions although commercial property performed well 

· Satisfactory profit growth from Jardine Matheson interests

"The Company's first-half results were affected by a weaker rupiah exchange rate, fewer residential project completions and increased margin pressures in some of the Group's businesses. The full-year profit is expected to remain broadly in line with last year."

Sir Henry Keswick, Chairman

1st August 2014

Results

The interim dividend of US¢8.00per share will be payable on 15th October 2014 to shareholders on the register of members at the close of business on 22nd August 2014 and will be available in cash with a scrip alternative. The ex-dividend date will be on 20th August 2014, and the share registers will be closed from 25th to 29th August 2014, inclusive.

Jardine Strategic Holdings Limited

Half-Yearly Results for the Six Months ended 30th June 2014

Overview

Mixed performances from across the Group led to a decline in underlying earnings for the Group in the first half of the year. Strong profits from Astra in rupiah terms were more than offset by a weaker exchange rate. Fewer residential project completions resulted in a lower contribution from Hongkong Land despite higher commercial property earnings. Satisfactory growth was seen in Jardine Matheson, while the results from Dairy Farm were in line with last year.

Results

Jardine Strategic's underlying profit for the first six months of 2014 was US$775 million, 5% below the same period in 2013. Underlying earnings per share were also 5% lower at US$1.28. The revenue of the Group, including 100% of the revenue of Jardine Matheson, associates and joint ventures, was US$30.8 billion, compared to US$31.4 billion in the first half of 2013.

Non-trading items in the first half produced a gain of US$101 million, primarily due to an increase in investment property values in Hongkong Land, and compares with a non-trading gain of US$41 million in the first half of 2013. As a result, the Group's profit attributable to shareholders was US$876 million for the six months under review, compared with US$860 million in 2013.

The Board has declared an interim dividend of US¢8.00 per share, up 7%.

Business Performances

Within Jardine Matheson's directly held interests, Jardine Pacific saw an increase in profit for the period. While there was a significant reduction in the contribution from its transport services businesses, following the move last year of a major customer of Hactl to its own dedicated facility at Hong Kong International Airport, the effect was largely offset by improved results in the group's Restaurant operations and a return to profit in JOS. Jardine Motors performed better with all its operations producing enhanced results, particularly in mainland China where a profit was recorded following improvements in both sales and margins. JLT enjoyed a satisfactory first half with good performances across the group, continuing the strong organic revenue growth of recent years.

In April 2014, the Company completed a US$731 million investment in shares and convertible bonds representing up to a 20% interest in Zhongsheng Group, which is one of mainland China's leading motor dealership groups. Zhongsheng represents a range of major international marques and operates some 180 outlets across 15 provinces and regions.

Hongkong Land's commercial property operations in Hong Kong and Singapore continued to trade well during the first six months of the year. Satisfactory progress was made in several development projects, including a luxury retail complex at Wangfujing in Beijing, an office tower in central Jakarta and a mixed-use development in Phnom Penh. The absence of residential project completions in Singapore, however, led to an overall decline in earnings for the period. Further residential completions are expected in the second half of the year, which will benefit the full-year result.

Dairy Farm achieved higher sales in all divisions, although its underlying profit was marginally lower. Its Health and Beauty, Home Furnishings and Restaurants divisions each achieved improved profits, but its Food division saw lower earnings due to sustained margin pressure. To support its long-term growth objectives, Dairy Farm is investing significantly in existing stores, in modernizing its IT infrastructure and supply chain, and in building its human resource capability. The group is focused on Greater China and Southeast Asia, having recently disposed of its interests in its Indian operations to its joint venture partner.

While the performance of a majority of Mandarin Oriental's hotels was stable during the period, challenging conditions in certain markets led to a lower profit. Mandarin Oriental continues to develop its portfolio, which now consists of 27 hotels in operation and 17 under development. Three new hotels are to be opened within the next 18 months, in Marrakech, Milan and Beijing. The group has also agreed to invest some US$170 million over a number of years to expand its Munich property.

Jardine Cycle & Carriage's first-half results reflected generally strong trading performances from Astra's operations, which led to an 11% improvement in its rupiah earnings, although its contribution on consolidation was hit by a 17% weaker exchange rate. The group's other motor interests produced a higher profit overall.

Astra's businesses faced a number of challenges, not least heightened competition in the car market eroding margins and the effect of subdued coal prices. Improved results were seen from its agribusiness and contract mining operations, although these were partially offset by a decline in earnings from car sales. Its financial services interests recorded lower underlying earnings, although benefited from a non-trading gain on the establishment of Astra Aviva Life. Progress is being made with a luxury residential joint-venture development alongside Hongkong Land in Jakarta's Central Business District, and initial sales launches are expected to begin during the third quarter.

During the period, the Company's 2.9% shareholding in Tata Power was sold for a total consideration of some US$120 million.

Corporate Developments

Following shareholder approval at a Special General Meeting held in April, the transfer of the Company's listing on the Main Market of the London Stock Exchange to the standard listing category was completed on 27th May 2014.

Outlook

The Company's first-half results were affected by a weaker rupiah exchange rate, fewer residential project completions and increased margin pressures in some of the Group's businesses. The full-year profit is expected to remain broadly in line with last year.

Sir Henry Keswick

Chairman

1st August 2014

Operating Review

Jardine Matheson

Jardine Matheson reported an underlying profit for the first six months of 2014 of US$739 million, 2% lower than the same period in 2013. Non-trading items in the first half produced a gain of US$79 million, giving a profit attributable to shareholders of US$818 million, compared with US$784 million in the first half of 2013. Shareholders' funds rose modestly to US$19.0 billion during the first six months of the year.

· Jardine Pacific

Jardine Pacific's underlying profit for the first half of 2014 rose 6% to US$47 million. The value of the group's investment property portfolio remained unchanged. Jardine Schindler recorded a profit in line with last year and further growth in its maintenance portfolio. Gammon's earnings suffered from delays in major projects, although some improvement is expected in the second half, and JEC produced a higher profit. Earnings of the group's transport services businesses declined following the move last year of a major customer of Hactl to its own dedicated facility at Hong Kong International Airport. The results of Jardine Restaurants benefited from its recent acquisition of the KFC franchise in Hong Kong and a lower loss in its KFC business in Taiwan. JOS achieved increased revenues and a small profit following a difficult year in 2013.

· Jardine Motors

Jardine Motors produced a much improved underlying profit of US$52 million in the first half, compared to US$20 million in 2013. Zung Fu performed well in Hong Kong and Macau with higher deliveries of Mercedes-Benz cars at better margins reflecting a favourable mix of models following new product launches. While the market remained challenging in mainland China, growth in new car sales and enhanced margins enabled a profit to be recorded for the first half. The group's United Kingdom operations achieved a good result with vehicles sales up as trading conditions improved.

During the first half, Jardine Strategic invested US$731 million for a minority interest in Hong Kong-listed Zhongsheng Group, which is one of mainland China's leading motor dealership groups. The investment represents an initial 11% equity interest together with convertible bonds, which entitles the Group's interest to increase to 20%.

· Jardine Lloyd Thompson

Jardine Lloyd Thompson's revenue for the period was equivalent to US$937 million, up 15% in its reporting currency, reflecting organic growth and acquisitions offset in part by a 7% negative foreign exchange rate impact. The contribution to Group profits rose by 23%. These good results are set against a marked decline towards the end of the period in the insurance and reinsurance rating environment coupled with the continued strength of sterling.

The company's specialist Risk and Insurance business produced a 15% improvement in revenues, of which 5% was organic, with strong performances from its Asian and Latin American operations. The underlying trading profit was up 15%, reflecting the benefit of the Towers Watson Re acquisition. The Employee Benefits business achieved revenue growth of 13%, of which 12% was organic, with its international operations once again making an increased contribution. Its underlying trading profit rose 23%.

Hongkong Land

Hongkong Land produced an underlying profit in the first half in line with expectations of US$433 million, compared with US$519 million in 2013. The contribution from its commercial property was higher, but the absence of residential project completions in Singapore led to an overall decline in earnings. A US$130 million uplift in the value of investment properties produced a profit attributable to shareholders of US$563 million, compared with a US$79 million increase and an attributable profit of US$598 million in 2013.

While sentiment in the Hong Kong office leasing market was cautious, rental reversions in the group's portfolio were positive overall and vacancy at the end of June 2014 was 6.0%, compared with 5.0% at the end of 2013. The retail space remained fully let and rental reversions were positive. There was some evidence of increasing demand in the Singapore office leasing market, where the group's office portfolio saw a steady performance and occupancy levels. In Jakarta, its 50%-owned office portfolio was 96% let. Hongkong Land is making satisfactory progress with several development projects, including a luxury retail complex at Wangfujing in Beijing, an office tower in central Jakarta and a mixed-use development in Phnom Penh.

The contribution from residential activities was significantly lower as no projects were completed in Singapore in the first half of 2014, compared with two large projects completed in the first six months of 2013. Positive sales activity did, however, allow US$34 million of writedowns previously made to be reversed. MCL Land expects to complete two projects in Singapore in the second half of the year, with additional completions due in 2015. In Hong Kong, further sales at its Serenade project were completed. In Chongqing, sales completions continued at its 50%-owned Bamboo Grove project, although there was a decline in the group's contracted sales across its residential projects in mainland China resulting from general market uncertainty and a less liquid mortgage market. In Indonesia, work is progressing well at the group's two joint venture residential projects, where initial launches are planned for the second half of the year. 

Dairy Farm

Dairy Farm's sales for the period, including 100% of associates and joint ventures, rose 5% to US$6.3 billion. Underlying net profit was marginally lower at US$224 million. The profit attributable to shareholders of US$234 million includes gains arising from the disposal of properties, and compares with US$229 million in 2013. The group's financial position remains healthy with net cash of US$568 million at 30th June 2014.

The group's Health and Beauty, Home Furnishings, and Restaurants divisions each achieved solid growth in sales and earnings. Despite improved sales in the Food division, profits were down due to sustained margin pressure arising from competitive market conditions and increased costs. Its Food banners in Hong Kong had a satisfactory first half and Malaysia produced higher sales and profits, but lower earnings were recorded in Singapore and Indonesia. Less favourable exchange rates also affected the group's results on translation into US dollars.

In May 2014, Maxim's announced that it had entered into a new franchise relationship with The Cheesecake Factory to bring this US casual dining concept to Asia. In July 2014, Dairy Farm sold its 49% interest in Foodworld and 50% interest in Health and Glow in India to its joint venture partner. Also in July, Dairy Farm agreed to increase its shareholding in Rustan Supercenters, Inc. in the Philippines to 66% with the purchase of an additional 16% interest. The construction of the first IKEA store in Indonesia is progressing well.

Mandarin Oriental

Mandarin Oriental's underlying profit for the period was US$46 million, including US$9 million of branding fees, which compares with a profit US$54 million in 2013 that benefited from a US$7 million gain recognized on the acquisition of the freehold rights of its Paris hotel. Profit attributable to shareholders was US$46 million, compared with US$57 million in the first half of 2013.

Occupancy was stable at Mandarin Oriental's two wholly-owned Hong Kong hotels, while elsewhere in Asia, Bangkok was adversely affected by ongoing political uncertainty and there were weaker performances in Jakarta and Manila. In Europe, further progress was made in the Paris hotel and an improvement in Geneva offset softer demand in London and Munich. The overall performance in North America was impacted by lower demand in Washington D.C.

Hotels were recently opened in Taipei and Bodrum, while a further three new hotels in Marrakech, Milan and Beijing are due over the next 18 months. New management contracts have been announced for Bali in 2017 and Manila in 2020, the latter replacing the group's existing property which is due to close later this year.

Jardine Cycle & Carriage

Jardine Cycle & Carriage reported an underlying profit down 9% at US$413 million, while profit attributable to shareholders at US$433 million was 4% lower, after a net gain of US$20 million primarily relating to the recognition of negative goodwill arising on the establishment of Astra Aviva Life. Astra contributed US$381 million to the group's underlying profit, which was 12% lower due primarily to the rupiah exchange rate being on average 17% weaker than in the first half of 2013. The contribution from the group's other motor interests grew 50% to US$37 million.

Earnings from the Singapore motor operations were up 30% following increased contribution from Mercedes-Benz passenger cars, after-sales, Kia passenger cars and taxis and used cars. In Malaysia, Cycle & Carriage Bintang's earnings improved following good demand for the newer Mercedes-Benz models. In Indonesia, Tunas Ridean's contribution was down 25% in the face of competitive pressures in the car market and reduced gains on the sale of ex-rental vehicles. In Vietnam, Truong Hai Auto Corporation performed well due to the strong sales, good margins and lower financing costs. The new operations in Myanmar incurred a small loss.

Astra

Astra reported a net profit equivalent to US$837 million under Indonesian accounting standards, 11% up on its reporting currency. Improved results from its agribusiness and contract mining operations were partially offset by a decline in earnings from its automotive businesses as discounting continued to impact on margins in the car sector.

The wholesale market for cars grew by 7%, while Astra's car sales rose by 4% to 334,000 units resulting in its market share decreasing slightly from 53% to 52%. The wholesale market for motorcycles increased by 7%, and Astra Honda Motor's sales were up by 11% to 2.6 million units, producing a market share of 62% up from 60%. Astra's component business made a lower contribution following the reduction in its shareholding in Astra Otoparts from 96% to 80% in 2013, while net income also fell by 11% on lower manufacturing margins despite higher sales volumes.

Net income from Astra's financial services operations increased by 15% to US$211 million with the inclusion of a US$38 million non-trading gain arising on the establishment of Astra Aviva Life. The amount financed through its automotive-focused consumer finance operations rose 11% to US$2.6 billion, while the amount financed in the heavy equipment sector declined by 23% to US$168 million following lower sales. Astra sold a 25% interest in Astra Sedaya Finance to Bank Permata, Astra's 45%-held joint venture, for a cash consideration of US$187 million, with the resulting US$89 million gain recorded directly in equity. Bank Permata reported net income down 2% to US$68 million. Group insurance company, Asuransi Astra Buana, saw reduced profits as growth in premiums was offset by a lower contribution from investment earnings following the recognition of one-off gains in 2013. 

United Tractors, which is 60%-owned, reported net income up 42% to US$280 million. In construction machinery, a marginal fall in net revenue reflected a 10% decline in sales of Komatsu heavy equipment offset by growth in parts and service revenue. The contract mining operations of subsidiary, Pamapersada Nusantara, benefited from improved coal volumes on lower stripping ratios. Net revenue grew 12% as contract coal production rose 20% to 60 million tonnes, although contract overburden removal was 3% lower at 401 million bank cubic metres. United Tractors' mining subsidiaries reported an increase in net revenue of 46%, with coal sales 51% higher at 3.4 million tonnes, although the average coal sale prices declined by 7%. Rises in fuel costs also reduced the gross profit margins.

Astra Agro Lestari, which is 80%-held, saw net income grow 91% to US$117 million. Average crude palm oil prices achieved were up 32%, although crude palm oil sales were reduced by 10% to 675,000 tonnes, primarily due to the commencement of operations of Astra Agro Lestari's refinery in West Sulawesi. 

Net income from infrastructure and logistics fell by 23%. The 79%-owned Tangerang-Merak toll road reported 4% growth in traffic volumes with 14% higher average tariffs. Serasi Autoraya's revenue improved, but the benefit was offset by an increase in operating costs resulting in a 25% decline in net income. Within information technology, Astra Graphia reported net income of US$9 million, up 53%.

Anandamaya Residences, a 60%-held luxury residential development located in Jakarta's Central Business District, is expected to commence initial sales launches during the third quarter. This high-end development, in joint venture with Hongkong Land, consists of approximately 500 apartment units, with completion expected in 2018.