JC&C 2018 Financial Statements

To: Business Editor 27th February 2019

For immediate release

Jardine Cycle & Carriage Limited

2018 Financial Statements and Dividend Announcement

The following announcement was issued today by the Company's 75%-owned subsidiary, Jardine Cycle & Carriage Limited.

For further information, please contact:

Jardine Matheson Limited

Jonathan Lloyd (852) 2843 8223

Brunswick Group Limited

Ben Fry (65) 6426 8103

27th February 2019

JARDINE CYCLE & CARRIAGE LIMITED

2018 FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT

Highlights

· Underlying earnings per share up 12%

· Strong growth at Astra

· Improved performances in non-Astra interests

"The Group achieved good overall results in 2018, but Astra is likely to face a number of macro-economic and commercial headwinds in 2019, while the Group's Direct Motor Interests and Other Strategic Interests may also see slower growth."

Ben Keswick, Chairman

27th February 2019

The exchange rate of US$1=S$1.37 (31st December 2017: US$1=S$1.34) was used for translating assets and liabilities at the balance sheet date and US$1=S$1.35 (31st December 2017: US$1=S$1.38) was used for translating the results for the year. The financial results for the year ended 31st December 2018 have been prepared in accordance with International Financial Reporting Standards and have not been audited or reviewed by the auditors.

† The accounts have been restated due to changes in accounting policies upon adoption of IFRS 9 'Financial Instruments' and IFRS 15 Revenue from Contracts with Customers', as set out in Note 1 to the condensed financial statements.

# 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 losses arising from the revaluation of the Group's equity investments.

nm not meaningful

CHAIRMAN'S STATEMENT

120th Anniversary of Jardine Cycle & Carriage

2019 marks 120 years of Southeast Asian partnerships for Jardine Cycle & Carriage. We have grown alongside the development of Southeast Asia with strategic, long-term interests that support the region's urbanisation and emerging middle-class. Southeast Asia is projected to be the fourth largest economy in the world by 2030 and the Group remains committed to investing in the continued growth of the region.

Overview

The Group achieved good overall results in 2018, with strong growth in Astra and improved performance versus the prior year in its Direct Motor Interests and Other Strategic Interests.

Performance

The Group's revenue for the year increased by 10% to US$19 billion, due largely to revenue growth in most of Astra's businesses. The Group's underlying profit attributable to shareholders was 12% higher at US$858 million and underlying profit per share was also 12% higher at US¢217. Profit attributable to shareholders fell by 55% from US$939 million to US$420 million, after accounting for net non-trading losses of US$438 million, principally unrealised fair value losses related to non-current investments.

Astra contributed US$719 million to the Group's underlying profit, an increase of 15%. The underlying profit from its Direct Motor Interests was 19% higher at US$145 million, while its Other Strategic Interests contributed an underlying profit of US$71 million, up from US$34 million in the previous year.

The Group's financial position remains strong, with shareholders' funds at US$6,148 million and net asset value per share at US$15.56 at the year end, albeit down by 4% from the end of 2017, due to translation losses resulting from the weaker Rupiah. The Group continues to invest, with capital expenditure and investments amounting to US$3.1 billion in 2018. Consolidated net debt, excluding financial services companies, was US$2.2 billion at 31st December 2018, representing gearing of 16%. 

The Board is recommending a final one-tier tax dividend of US¢69 per share (2017: US¢68 per share) which, together with the interim dividend, will produce a total dividend for the year of US¢87 per share (2017: US¢86 per share).

Strategic Developments

The Group continues to pursue expansion in Southeast Asia by supporting the growth of Astra in Indonesia, strengthening its Direct Motor Interests, and growing its Other Strategic Interests by investing in market-leading companies which provide exposure to new business sectors in the region.

Astra 

Astra continues to seek opportunities in Indonesia to expand its existing activities and move into new sectors.

In 2018, Astra expanded its operations with further investments in toll roads, mining and property, as well as an interest in GOJEK, Indonesia's leading multi-platform technology group.

Astra and WeLab, a leading technology enabler for consumer lending in mainland China and Hong Kong, announced the establishment of Astra WeLab Digital Arta to offer mobile lending products to retail consumers and provide financial technology solutions to enterprise customers. Astra Land Indonesia, a 50%-owned joint venture, purchased a 3-hectare site in Jakarta's Central Business District for residential and commercial development. Astra, through its 59.5%-owned subsidiary, United Tractors, acquired a 95% interest in Agincourt Resources, which operates the Martabe gold mine in Sumatra.

Direct Motor Interests

The Group's Direct Motor Interests are focused on building customer-centric, innovative organisations across Singapore, Malaysia, Myanmar and Indonesia to strengthen their competitive positions.

Cycle & Carriage Singapore was appointed the exclusive distributor of electric forklifts manufactured by Chinese electric transport and technology company, BYD. A new wholly-owned subsidiary, Cycle & Carriage Leasing, was incorporated in January 2019 to provide vehicle leasing services.

In November 2018, Daimler AG exercised its call option to buy Cycle & Carriage Bintang's ("CCB") 49% interest in Mercedes-Benz Malaysia for US$16 million, with the disposal to take place at the end of November 2019 after a 12-month notice period. CCB will continue to focus on its dealership operations.

In Vietnam, Truong Hai Auto Corporation continued to invest in its core automotive business, and, in August 2018, it further diversified into the agriculture business.

Other Strategic Interests

The diversified businesses of the Group include Other Strategic Interests in Siam City Cement, Refrigeration Electrical Engineering Corporation and Vinamilk. The Group gains exposure to key Southeast Asian economies by supporting the long-term growth of these market-leading companies.

People

Our success is attributable to our employees, business partners and shareholders. On behalf of the Board, I would like to thank our more than 250,000 employees across the region for their hard work and dedication and our business partners and shareholders for their ongoing support.

Mr Chang See Hiang will be retiring as director of the Company at the close of the upcoming Annual General Meeting in April 2019, after more than 21 years on the Board. He has also served as Chairman of the Nominating Committee and as a member of both the Audit Committee and the Remuneration Committee for a number of years. On behalf of the Board, I would like to record our appreciation and thank Mr Chang for his valuable contribution to the Group.

I am delighted to welcome Mr Steven Phan who will join the Board in April 2019 as an independent director. Mr Phan is a chartered accountant with extensive knowledge and experience in auditing, advisory and consulting work. 

Mr Adrian Teng is stepping down as Group Finance Director on 31st March 2019 to pursue other interests and opportunities outside the Company. On behalf of the Board, I would like to thank him for his valuable contribution to the Group. Mr Stephen Gore, who is currently the Chief Financial Officer of Jardine Pacific and Jardine Motors, will succeed Mr Teng on 1st April 2019 as Group Finance Director.

Outlook

The Group achieved good overall results in 2018, but Astra is likely to face a number of macro-economic and commercial headwinds in 2019, while the Group's Direct Motor Interests and Other Strategic Interests may also see slower growth.

Ben Keswick

Chairman

27th February 2019

GROUP MANAGING DIRECTOR'S REVIEW

OVERVIEW

The Group's underlying profit rose 12% in 2018, due mainly to increased contributions from Astra's heavy equipment, mining, construction and energy, and financial services businesses, which more than offset lower contributions from its agribusiness and automotive businesses. The Group's Direct Motor Interests and Other Strategic Interests also saw higher contributions than the previous year.

PERFORMANCE

The Group reported an underlying profit attributable to shareholders of US$858 million, 12% up on the previous year, while underlying profit per share also grew by 12% to US¢217. Profit attributable to shareholders was down 55% from US$939 million to US$420 million, after accounting for net non-trading losses of US$438 million, principally unrealised fair value losses related to non-current investments. These result from the adoption of a new accounting standard which requires the unrealised gains and losses arising from the revaluation of equity investments at the end of each financial period to be included in the profit and loss account.

The Group's consolidated net debt, excluding Astra's financial services subsidiaries, was US$2.2 billion at the end of 2018, representing gearing of 16%, compared to US$819m at the end of 2017, when gearing was 6%. This increase was largely due to investments by Astra in its toll road businesses, a gold mining concession and GOJEK, together with the Group's investment in Toyota Motor Corporation and further purchases in Vinamilk and in its associates and joint ventures. Net debt within Astra's financial services subsidiaries was US$3.3 billion compared with US$3.4 billion at the end of 2017. JC&C parent's net debt was US$1.3 billion at the end of 2018, an increase from US$1.2 billion at the end of 2017.

GROUP REVIEW 

ASTRA

Astra reported a net profit equivalent to US$1.5 billion, under Indonesian accounting standards, 15% higher in its local currency terms.

Automotive

Net income from Astra's automotive division was 4% lower at US$597 million, mainly due to lower operating margins despite higher automotive sales.

The wholesale market for cars was 7% higher in the year compared to 2017 at 1.2 million units. Astra's car sales were 1% higher at 582,000 units, but increased competition resulted in a decline in market share from 54% to 51%. The group launched 18 new models and seven revamped models during the year.

The wholesale market for motorcycles increased by 8% to 6.4 million units. Astra Honda Motor's domestic sales increased by 9% to 4.8 million units, with its market share stable at 75%. The group launched six new models and 19 revamped models during the year.

Astra Otoparts, the group's automotive components business, reported net income 11% higher at US$43 million, with increased revenues from its original equipment manufacturing and replacement market segments.

Financial Services

Net income from the group's financial services division increased by 28% to US$337 million. This resulted from improved contributions from its consumer finance, banking and general insurance businesses.

The net income contribution from the group's car-focused finance companies increased by 26% to US$86 million, mainly due to lower loan loss provisions and an increased shareholding in Astra Sedaya Finance. The net income contribution from motorcycle-focused Federal International Finance was 16% higher at US$162 million, reflecting a larger loan portfolio. The group's consumer finance businesses overall saw a 1% decrease in the amount financed to US$5.6 billion during the year, due to a reduction in the amount financed in the low-cost car segment.

The net income contribution from the group's heavy equipment-focused finance operations increased by 30% to US$6 million, partly due to lower loss provisions. The amount financed decreased by 12% to US$363 million, mainly due to reduced lending to the small and medium-sized segment.

Permata Bank, in which Astra holds a 44.6% interest, reported net income of US$63 million, compared to US$56 million in 2017, mainly due to increased net interest income and recoveries from non-performing loans. The bank's gross non-performing loan ratio was 4.4% at the end of 2018 compared to 4.6% at the end of 2017, while its net non-performing loan ratio was stable at 1.7%. 

Asuransi Astra Buana, the group's general insurance company, reported net income 4% higher at US$73 million, primarily due to higher investment income. During the year, the group's life insurance joint venture, Astra Aviva Life, acquired more than 339,000 new individual life customers and more than 713,000 new participants for its corporate employee benefits programmes.

Heavy Equipment, Mining, Construction and Energy

Net income from Astra's heavy equipment, mining, construction and energy division increased by 48% to US$465 million.

United Tractors, which is 59.5%-owned, reported net income of US$775 million, 50% higher than the previous year, mainly due to improved performances in its construction machinery, mining contracting and mining operations, all of which benefited from higher coal prices compared with 2017.

Within United Tractors' construction machinery business, Komatsu heavy equipment sales rose 29% to 4,878 units, while parts and service revenues were also higher. The mining contracting operations of wholly-owned Pamapersada Nusantara recorded a 22% increase in overburden removal volume at 979 million bank cubic metres and 11% higher coal production at 125 million tonnes. United Tractors' coal mining subsidiaries reported an 11% increase in coal sales to 7 million tonnes, including sales of 807,000 tonnes of coking coal by 80.1%-owned Suprabari Mapanindo Mineral, which became operational in late 2017. Agincourt Resources, in which United Tractors acquired a 95% interest in December 2018 and which operates a gold mining concession in Sumatra, reported gold sales of 35,000 oz in December 2018.

Acset Indonusa, United Tractor's 50.1%-owned general contractor reported a 88% decrease in net income to US$1 million, mainly due to increased financing costs. US$112 million of new construction projects were secured during 2018.

25%-owned Bhumi Jati Power is in the process of constructing two 1,000MW power plants in Central Java, which are scheduled to start commercial operation in 2021.

Agribusiness

Net income from Astra's agribusiness division was down 27% at US$80 million.

Astra Agro Lestari, which is 79.7%-owned, reported a 27% decline in net income to US$101 million, primarily due to a fall in crude palm oil prices, which were 12% lower at Rp7,275/kg compared with the average in 2017. This more than offset a 30% increase in crude palm oil and derivatives sales to 2.3 million tonnes.

Infrastructure and Logistics

The group's infrastructure and logistics division reported a net income of US$14 million in 2018, compared to a net loss of US$17 million in the prior year. This was mainly due to improved earnings from the Tangerang-Merak toll road and Serasi Autoraya, as well as the inclusion in the prior year's results of a one-off loss on the disposal of Astra's 49% interest in PAM Lyonnaise Jaya. Astra has interests in 302km of operational toll roads along the Trans-Java network, with a further 11km in Greater Jakarta under construction.

Serasi Autoraya's net income increased by 50% to US$21 million, primarily due to improved operating margins in its car leasing and rental businesses. Its vehicles under contract decreased by 2% to 23,000 units.

Information Technology

Net income from the group's information technology division was 5% higher at US$15 million.

Astra Graphia, which is 76.9%-owned, reported net income of US$19 million, 5% higher than the previous year as a result of increased revenue from its document and IT solution businesses.

Property

The group's property division reported a 28% lower net profit at US$11 million, due mainly to reduced development earnings recognised from its Anandamaya Residences project as a result of lower percentage completion during the period in its final stages of construction. The group's other property development projects comprise its interests in Arumaya in South Jakarta and Asya in East Jakarta, both residential projects, and a 3-hectare residential and commercial development in Jakarta's Central Business District.

DIRECT MOTOR INTERESTS

The Group's Direct Motor Interests contributed a profit of US$145 million, 19% higher than the prior year.

Singapore

The Singapore passenger car market fell by 13% to 80,300 units, following a decrease in the number of certificates of entitlement issued. The Group's wholly-owned business, Cycle & Carriage Singapore, saw its earnings grow by 8% to US$62 million due to improved margins, despite a 7% decrease in passenger car sales to 13,300 units. The Group's passenger car market share improved from 16% to 17%.

Malaysia

In Malaysia, 59.1%-owned Cycle & Carriage Bintang contributed a profit of US$2 million, mainly comprising dividend income from its investment in Mercedes-Benz Malaysia. At the trading level, a small profit was recorded, compared to a loss in the previous year, as the company benefited from operational improvements and the zero rate of Goods & Services Tax from June to August.

Myanmar

Cycle & Carriage Myanmar in which the Group owns a 60% interest, contributed a loss of US$5 million, compared to the loss of US$3 million in the prior year, due mainly to higher depreciation charges on new facilities in Yangon and higher stock provisions, partly offset by higher unit sales.

Indonesia

In Indonesia, 46.2%-owned Tunas Ridean's profit contribution of US$18 million was 17% higher than the prior year, reflecting improved performances across all its segments: automotive, rental operations and consumer finance. Motor car sales of 48,300 units were 6% down due to intense competition, while motorcycle sales, which mainly occur in Sumatra, rose by 11% to 248,900 units, benefiting from higher agricultural prices.

Vietnam

In Vietnam, 25.3%-owned Truong Hai Auto Corporation ("Thaco") performed well, with a 29% increase in its profit contribution to US$73 million, due mainly to higher unit sales and improved margins. The vehicle market grew by 9% to 362,000 units as tariffs on CBUs were eliminated, following the full implementation of the ASEAN Trade in Goods Agreement in 2018. Thaco's overall vehicle sales rose 11% to 97,100 units with market share stable at 27%.

OTHER STRATEGIC INTERESTS

The Group's Other Strategic Interests contributed a profit of US$71 million, more than double the previous year, benefiting in particular from Vinamilk dividends and improved results from Siam City Cement Public Company ("SCCC") and Refrigeration Electrical Engineering Corporation ("REE").

SCCC, which is 25.5%-owned, contributed a profit of US$20 million, compared to US$11 million in the previous year, due to improved domestic performance and lower one-off expenses, partially offset by lower contributions from its regional operations. The Group's 24.9%-owned REE, contributed US$19 million, 39% up on the previous year due mainly to strong contributions from its power and water investments. The Group's 10.6% interest in Vinamilk, which was acquired in the last quarter of 2017, produced dividend income of US$32 million, compared to US$9 million in 2017.

Alex Newbigging

Group Managing Director

27th February 2019

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

1 Basis of preparation

The financial statements have been prepared in accordance with the Singapore Financial Reporting Standards (International) ("SFRS(I)") and International Financial Reporting Standards ("IFRS"). 

Adoption of SFRS(I)

As required by the listing requirements of Singapore Exchange, the Group has adopted SFRS(I) on 1st January 2018. These financial statements for the year ended 31st December 2018 are the first set of financial statements the Group prepared in accordance with SFRS(I). The Group's previously issued financial statements for periods up to and including the financial year ended 31st December 2017 were prepared in accordance with IFRS, including International Accounting Standards and Interpretations adopted by the International Accounting Standard Board.

For the purpose of SFRS(I), financial statements that have been prepared in accordance and complied with IFRS are deemed to have also complied with SFRS(I).

SFRS(I) comprise standards and interpretations that are equivalent to IFRS. All references to SFRS(I) and IFRS are referred to collectively as "IFRS" in these financial statements, unless specified otherwise.

The following new standards, which are effective from 1st January 2018, were adopted

Under IFRS 9, the gains and losses arising from changes in fair value of the Group's investments in equity instruments, previously classified as available-for-sale, is recognised in profit and loss, instead of through other comprehensive income. Such fair value gains or losses on revaluation of these investments are classified as non-trading items, and hence do not have any impact on the Group's underlying profit attributable to shareholders. The forward-looking expected credit loss model affects mainly the loan impairment provisions of the Group's financial services companies in Indonesia. The new hedge accounting rules align the accounting for hedging instruments closely with the Group's risk management practices, but have no significant impact on the Group's results.

The adoption of IFRS 9 has been accounted for retrospectively and the comparative financial statements have been restated. The adoption has resulted in an increase in the profit attributable to shareholders for the financial year ended 31 December 2017 by US$129.4 million and a decrease in shareholders' funds as at 31st December 2017 by US$16.4 million.

IFRS 15 establishes a comprehensive 5-step framework for the recognition of revenue which replaces IAS 11 "Construction Contracts" and IAS 18 "Revenue" which covers contracts for goods and services. The core principle in the framework is that revenue is recognised when control of a good or service transfers to a customer. It provides clarification on recognition criteria for certain revenue elements, resulting in restatements to revenue and net operating costs, respectively.

The adoption of IFRS 15 has been accounted for retrospectively and the comparative financial statements have been restated. The adoption has resulted in a decrease in the profit attributable to shareholders for the financial year ended 31 December 2017 by US$1.8 million and a decrease in shareholders' funds as at 31st December 2017 by US$2.3 million.

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$1.3659 (2017: US$1=S$1.337), US$1=RM4.1480 (2017: US$1= RM4.0650), US$1=IDR14,481 (2017: US$1= IDR13,548), US$1=VND23,175 (2017: US$1= VND22,704) and US$1=THB32.518 (2017: US$1= THB32.689).

The exchange rates used for translating the results for the year are US$1=S$1.3499 (2017: US$1 =S$1.3757), US$1=RM4.0386 (2017: US$1= RM4.2820), US$1=IDR14,267 (2017: US$1= IDR13,400), US$1=VND23,044 (2017: US$1= VND22,719) and US$1=THB32.3314 (2017: US$1= THB33.8198).

2 Net operating costs and operating profit

nm - not meaningful

(1) Fair value loss in 2018 relates mainly to the fair value of Vinamilk and other equity investments

(2) Net exchange loss in 2018 mainly relates to the impact of weaker Singapore dollars on monetary liabilities denominated in US dollars

3 Revenue and Profit after tax

4 Dividends