Jardine Cycle & Carriage – Final Results

To: Business Editor 26th February 2021 For immediate releaseJardine Cycle & Carriage Limited2020 Financial Statements and Dividend AnnouncementThe following announcement was issued today by the Company's 75%-owned subsidiary, Jardine Cycle & Carriage Limited.For further information, please contact:Jardine Matheson LimitedJoey Ho (65) 9765 0717Brunswick Group LimitedBen Fry (65) 9017 988626th February 2021JARDINE CYCLE & CARRIAGE LIMITED2020 FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENTHighlights

● Underlying profit 50% lower at US$429 million

● Significantly weaker performances from Astra's automotive, financial services and heavy equipment and mining operations

● Direct Motor Interests performance affected by lower profitability in Cycle & Carriage Singapore and Tunas Ridean

● Other Strategic Interests performance relatively stable

● Proposed final dividend of US¢34 per share, total dividend of US¢43 per share for the year, 51% lower than 2019

"Jardine Cycle & Carriage's full-year performance reflected the impact of the COVID-19 pandemic, particularly in the second quarter when movement restrictions were in place in the markets where we operate. Some of the Group's businesses began to see improvements in performance over the second half of the year, but full-year results for most of them were lower compared to the previous year.The Group continues to operate in challenging conditions and uncertainty remains about the duration of the pandemic. We expect these conditions to continue for some time and it is too early to predict what the impact of the pandemic will be on the Group's performance in 2021."Ben Keswick, ChairmanGroup Results

The exchange rate of US$1 =S$1.32 (31st December 2019: US$1=S$1.35) was used for translating assets and liabilities at the balance sheet date, and US$1=S$1.38 (2019: US$1=S$1.36) was used for translating the results for the period. The financial results for the year ended 31st December 2020 have been prepared in accordance with International Financial Reporting Standards and have not been audited or reviewed by the auditors. 

# The Group uses 'underlying profit attributable to shareholders' in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more fully described in Note 5 to the condensed financial statements. Management considers this to be a key performance measurement which enhances the understanding of the Group's underlying business performances.

^ Included in 'non-trading items' are unrealised gain/losses arising from the revaluation of the Group's equity investments.

CHAIRMAN'S STATEMENTOverviewThe full year performance of Jardine Cycle & Carriage ("JC&C" or "the Group") reflected the continuing challenging conditions it faced as a result of the pandemic.Astra contributed US$309 million to the Group's underlying profit in the year, 57% lower than the previous year, reflecting weaker performances from its automotive, financial services and heavy equipment and mining operations.The underlying profit from Direct Motor Interests was 78% lower at US$14 million, mainly due to lower contributions from Cycle & Carriage Singapore and Tunas Ridean.Other Strategic Interests contributed an underlying profit of US$120 million, down 5% from the previous year. Truong Hai Auto Corporation's ("Thaco") automotive business was adversely affected by lockdown restrictions in the second quarter, but performance has since improved.Corporate costs were US$14 million, down from US$42 million in the previous year, primarily due to lower net financing charges and higher foreign exchange gains from the translation of foreign currency loans.The Group's underlying profit attributable to shareholders was 50% lower than the previous year at US$429 million. After accounting for non-trading items, profit attributable to shareholders was US$540 million, 39% lower than the previous year. The non-trading items recorded in the year included a US$188 million gain on the disposal of Astra's investment in Permata Bank and unrealised fair value gains related to non-current investments. These gains in non-trading items were partly offset by an impairment loss of US$182 million in respect of the Group's investment in Siam City Cement due to challenging market conditions over several years.The Group's financial position remains strong, with shareholders' funds of US$6,974 million and a net asset value per share of US$17.65 at the year-end. Consolidated net debt, excluding Astra's financial services subsidiaries, was US$0.9 billion at the end of December 2020, compared to US$3.0 billion at the end of 2019, mainly due to the receipt of proceeds from the disposal of Astra's investment in Permata Bank.Net debt within Astra's financial services subsidiaries decreased from US$3.3 billion to US$2.8 billion. JC&C parent company's net debt was US$1.5 billion, similar to the previous year-end.Strategic DevelopmentsIn May 2020, Astra completed the sale of its 44.6% interest in Permata Bank for sale proceeds of US$1.1 billion.In September 2020, Acset Indonusa, a subsidiary of United Tractors, raised US$102 million from a rights issue to reduce debt and to strengthen its capital structure. Following the rights issue, United Tractors' ownership in Acset Indonusa increased from 50.1% to 64.8%.In November 2020, Astra acquired a 100% stake for US$45 million in Jakarta Marga Jaya, which owns 35% of Marga Lingkar Jakarta, the operator of the 7.7km Kebon Jeruk-Ulujami toll road as part of the Jakarta Outer Ring Road I.In November 2020, Astra acquired a further 50% of Astra Aviva Life (now Asuransi Jiwa Astra) from Aviva International Holdings Limited for US$95 million, which brought its ownership to 100%.DividendsThe Board is recommending a final one-tier tax-exempt dividend of US¢34 per share (2019: US¢69 per share) which, together with the interim dividend, will produce a total dividend for the year of US¢43 per share (2019: US¢87 per share).PeopleOn behalf of the Board, I would like to express our gratitude to our 240,000 employees across the region for their continuing hard work and dedication in this challenging business environment.Mr Mark Greenberg has stepped down from the Board after more than 14 years. He has also served as a member of the Audit Committee. On behalf of the Board, I would like to record our appreciation for his valuable contribution to the Group.I am delighted to welcome Ms Tan Yen Yen, who joined the Board in January 2021 as an independent director. She has extensive experience in the area of technology, and we look forward to the contribution she will bring to the Group.OutlookThe Group continues to operate in challenging conditions and uncertainty remains about the duration of the pandemic. We expect these conditions to continue for some time and it is too early to predict what the impact of the pandemic will be on the Group's performance in 2021.Ben KeswickChairmanGROUP MANAGING DIRECTOR'S REVIEWGroup ReviewThe Group's structure comprises three business pillars: (i) Astra; (ii) Direct Motor Interests ("DMI"), which consists of the Group's non-Astra automotive businesses; and (iii) Other Strategic Interests. The contribution to JC&C's underlying profit attributable to shareholders by business segment was as follows:   

AstraAstra contributed US$309 million to JC&C's underlying profit, 57% down from the previous year. Excluding the gain on disposal of its investment in Permata Bank, Astra reported a net profit equivalent to US$702 million under Indonesian accounting standards, 53% lower in its local currency terms than the same period last year. There were weaker performances from its automotive, financial services, and heavy equipment and mining divisions.AutomotiveNet income fell by 68% to US$185 million, reflecting a significant drop in sales volume. After suffering a net loss in the second quarter, the automotive division saw a return to profitability in the second half of the year, following a partial easing of the pandemic containment measures. Key points were as follows: 

● The wholesale car market declined by 48% to 532,000 units in 2020. Astra's car sales were 50% lower at 270,000 units, reflecting a slight decline in market share. 16 new models and 18 revamped models were launched in the year.

● The wholesale market for motorcycles declined by 44% to 3.7 million units in 2020. Astra's Honda motorcycle sales fell by 41% to 2.9 million units but it saw an increase in market share. Five new models and 11 revamped models were launched in the year.

● Components business, Astra Otoparts, reported a net income of less than US$1 million, compared to US$52 million in 2019, mainly due to lower revenues from the original equipment manufacturer, replacement market and export segments.

Financial ServicesNet income from financial services fell by 44% to US$226 million, primarily due to increased loan loss provisions to cover higher non-performing loan losses in the consumer and heavy equipment-focused finance businesses. Key points were as follows: 

● Consumer finance businesses saw a 23% decrease in the amounts financed to US$4.6 billion. The net income contribution from the car-focused finance companies decreased by 46% to US$55 million, while the contribution from the motorcycle-focused financing business fell by 42% to US$105 million, in both cases due to higher loan loss provisioning, as non-performing loans increased.

● Heavy equipment-focused finance operations saw a 17% decrease in the amounts financed to US$246 million, with the net income contribution from this business down 59% to US$3 million.

● General insurance company, Asuransi Astra Buana, reported a 16% decrease in net income to US$62 million, caused by lower underwriting income.

Heavy Equipment, Mining, Construction & EnergyNet income decreased by 49% to US$234 million, mainly due to lower heavy equipment sales and mining contracting volume, caused by weaker coal prices for most of the year. Key points were as follows: 

● United Tractors reported a 47% decrease in net income to US$410 million.

● Komatsu heavy equipment sales fell by 47% to 1,564 units, and parts and service revenues were also lower.

● Mining contracting operations reported 17% lower overburden removal volume at 825 million bank cubic metres and 13% lower coal production at 115 million tonnes.

● Coal mining subsidiaries achieved 9% higher coal sales at 9.3 million tonnes, including 1.9 million tonnes of coking coal sales, but profits were affected by lower coal prices.

● Agincourt Resources saw 22% lower gold sales at 320,000 oz.

● General contractor, Acset Indonusa, reported a net loss of US$90 million, mainly due to the slowdown of several ongoing projects and reduced project opportunities.

Infrastructure & LogisticsNet income from Astra's infrastructure and logistics division decreased from US$21 million to US$3 million, due to lower toll road revenues and lower operating margins in Serasi Autoraya. Key points were as follows: 

● Traffic volumes were 12% lower. Astra has interests in almost 358km of operational toll roads along the Trans-Java network and in the Jakarta Outer Ring Road.

● Serasi Autoraya's net income decreased by 55% to US$8 million, mainly due to lower operating margins in its car rental business and lower used car sales, despite a 2% increase in vehicles under contract at 23,000 units.

AgribusinessNet income from Agribusiness increased significantly to US$45 million, mainly as a result of a 28% increase in average crude palm oil prices, which offset a 14% decline in crude palm oil and derivative sales.Direct Motor InterestsDirect Motor Interests faced challenging trading conditions during the year and made a reduced contribution of US$14 million to the Group's underlying profit, 78% lower than the prior year. Key points were as follows:  

● Cycle & Carriage Singapore contributed US$19 million, 68% down from the previous year, due to lower sales and weaker margins. Passenger car sales fell by 44% to 7,572 units and market share was reduced from 19% to 17%.

● In Indonesia, Tunas Ridean's contribution of US$1 million was 94% lower. Its automotive business saw reduced sales, while its consumer finance operations were adversely impacted by lower lending volumes and increased loan provisioning.

● Cycle & Carriage Bintang in Malaysia contributed a loss of US$1 million, compared to a loss of US$6 million in 2019. Despite challenging trading conditions, the financial performance of the business benefited from improved sales in the second half of the year due to a sales tax reduction, as well as cost savings initiatives.

Other Strategic InterestsOther Strategic Interests contributed US$120 million to the Group's underlying profit, 5% down on the previous year. Key points were as follows: 

● Thaco contributed US$39 million, which included an adjustment of US$7 million in respect of its 2019 results. Excluding the adjustment, the profit contribution would have been US$46 million, 9% up from the previous year. Thaco's automotive business contributed US$39 million, this was impacted by lower margins attributable mainly to difficult market conditions in the first half of the year as a result of the pandemic, but was partly offset by higher unit sales for the full year. Thaco's real estate business contributed US$7 million, compared to US$2 million in the previous year as sales resumed on the back of a market recovery, while its new venture in the agriculture sector contributed a loss of US$8 million.

● Siam City Cement's contribution of US$24 million was 3% higher than the previous year. Margins benefited from improved operational efficiencies, which helped to offset the decline in sales.

● The contribution of US$21 million from REE was 13% higher than the previous year, due to a stronger contribution from real estate and the effect of an increase in the Group's shareholding to 29.8%, partly offset by weaker performances from its hydropower investments and its M&E business.

● The Group's investment in Vinamilk delivered dividend income of US$37 million, compared to US$36 million in the previous year. Vinamilk's 2020 profit was 5% higher in local currency terms as its export business continued to grow, while its domestic dairy segment remained relatively stable. 

Corporate CostsCorporate costs were US$14 million, compared to US$42 million in the previous year, which improved the overall underlying profit of the Group. This was primarily due to lower net financing charges and higher foreign exchange gains from the translation of foreign currency loans. SummaryThe operating environment remains uncertain and trading conditions are expected to remain challenging for some time. The Group remains confident, however, in the long-term economic prospects for Southeast Asia and it will remain focused on delivering its strategic objectives.Ben BirksGroup Managing DirectorCORPORATE PROFILEJardine Cycle & Carriage is the investment holding company of the Jardine Matheson Group in Southeast Asia. JC&C seeks to grow with Southeast Asia by investing in market leading businesses based on the themes of urbanisation and the emerging consumer class. The Group works closely with its businesses to enable them to achieve their potential and to elevate their communities.The Group has a 50.1% interest in Astra, a diversified group in Indonesia, which is also the largest independent automotive group in Southeast Asia.JC&C also has significant interests in Vietnam, including 26.6% in Truong Hai Auto Corporation, 29.8% in Refrigeration Electrical Engineering Corporation and 10.6% in Vinamilk. Its 25.5%-owned Siam City Cement also has a presence in South Vietnam, in addition to operating in Thailand, Sri Lanka, Cambodia and Bangladesh.The other investments in JC&C's portfolio are the Cycle & Carriage businesses in Singapore, Malaysia and Myanmar, and 46.2%-owned Tunas Ridean in Indonesia. These motor businesses are managed by Jardine International Motors.JC&C is a leading Singapore-listed company, 75%-owned by the Jardine Matheson Group. Together with its subsidiaries and associates, JC&C employs around 240,000 people across Southeast Asia. 

(1) Lower revenue was mainly due to lower sales in Astra's automotive and heavy equipment, mining, construction and energy businesses, as well as Direct Motor Interests;

(2) Decrease in financing charges was mainly due to lower interest rates and lower level of net debt

(1) Fair value through other comprehensive income ("FVOCI")

(1) For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents comprise deposits with bank and financial institutions, bank and cash balances, net of bank overdrafts. In the balance sheet, bank overdrafts are included under current borrowings.

1 Basis of preparation

The financial statements are consistent with those set out in the 2019 audited accounts which have been prepared in accordance with Singapore Financial Reporting Standards (International) ("SFRS(I)") and International Financial Reporting Standards ("IFRS"). There have been no changes to the accounting policies described in the 2019 audited accounts other than the following changes in relation to rent concessions and government grants. Other amendments which are effective in 2020 and relevant to the Group's operations, do not have a significant effect on the Group's accounting policies. The Group has not early adopted any other standard or amendments that have been issued but not yet effective. COVID-19 Related Rent Concessions: Amendment to IFRS 16 LeasesThe Group has applied the Amendment, which is effective for annual reporting periods beginning on and after 1st June 2020, for the Group's annual reporting period commencing 1st January 2020. Where the Group is a lessee, the practical expedient is applied to account for the change in lease payments resulting from rent concessions granted as a direct consequence of the COVID-19 pandemic and elects not to assess these concessions as lease modifications when all of the following conditions are met: 

(i) the revised lease payments are substantially the same as, or less than, the consideration for the lease immediately preceding the change;

(ii) reduction in lease payments relates to payment due on or before 31st December 2021; and

(iii) there is no substantive change to the other terms and conditions of the lease.

Rent concessions fulfilling the above conditions are recognised in the profit and loss over the period in which they cover.The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. Estimates and judgments used in preparing the financial statements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results.The exchange rates used for translating assets and liabilities at the balance sheet date are US$1= S$1.3216 (2019: US$1=S$1.3473), US$1= RM4.0245 (2019: US$1= RM4.0925), US$1= IDR14,105 (2019: US$1=IDR13,901), US$1= VND23,086 (2019: US$1= VND23,173) and US$1= THB29.920 (2019: US$1=THB29.863).The exchange rates used for translating the results for the period are US$1= S$1.3771 (2019: US$1=S$1.3635), US$1= RM4.202 (2019: US$1= RM4.142), US$1= IDR14,647 (2019: US$1=IDR14,131), US$1= VND23,247 (2019: US$1= VND23,234) and US$1= THB31.309 (2019: US$1=THB30.938). 

2 Net operating costs and operating profit

nm - not meaningful

(1) Fair value gain/(loss) relates mainly to equity investments in Vinamilk and Toyota Motor Corporation 

(2) Profit in 2020 relates mainly to the gain from disposal of Permata Bank

(3) Increase in impairment of debtors relates mainly to higher loss provision attributable to higher non-performing loan losses

(4) Net exchange gain relates mainly to the impact of revaluating monetary liabilities denominated in US dollars

3 Revenue and Profit after tax

4 Dividends

The Board is recommending a final dividend of US¢34 per share which, together with the interim dividend of US¢9 per share, will give a total dividend for the year of US¢43 per share. 

5 Earnings per share

As at 31st December 2019 and 2020, there were no dilutive potential ordinary shares in issue.

A reconciliation of the profit attributable to shareholders and underlying profit attributable to shareholders is as follows:

Non-trading items are separately identified to provide greater understanding of the Group's underlying business performance. Items classified as non-trading items include fair value gains or losses on revaluation of investment properties, agricultural produce and equity investments which are measured at fair value through profit and loss; gains and losses arising from the sale of businesses, investments and properties; impairment of non-depreciable intangible assets, associates and joint ventures and other investments; provisions for closure of businesses; acquisition-related costs in business combinations; and other credits and charges of a non-recurring nature that require inclusion in order to provide additional insight into the Group's underlying business performance.

6 Segment information

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board for the purpose of resource allocation and performance assessment. Set out below is an analysis of the segment information: