Final Results

Jardine Matheson Hldgs Ld 25 February 2004 To: Business Editor 25th February 2004 For immediate release The following announcement was today issued to the London Stock Exchange. Jardine Matheson Holdings Limited 2003 Preliminary Announcement of Results Highlights • Underlying earnings per share up 25% • Major contribution from Astra through Jardine Cycle & Carriage • Strong performance at Dairy Farm • Hongkong Land portfolio values stabilize 'Our businesses are focused, soundly financed and trading well. Subject to normal market and economic risks, they should again produce a satisfactory performance this year. We are also hopeful that the stabilization in the capital values of the Group's Hong Kong properties in the second half of 2003 will continue into the present year.' Henry Keswick, Chairman 25th February 2004 The basis of calculation of underlying earnings is set out in note 6. The final dividend of USc25.20 per share will be payable on 12th May 2004, subject to approval at the Annual General Meeting to be held on 6th May 2004, to shareholders on the register of members at the close of business on 12th March 2004 and will be available in cash with a scrip alternative. The ex-dividend date will be on 10th March 2004, and the share registers will be closed from 15th to 19th March 2004, inclusive. Jardine Matheson Holdings Limited Preliminary Announcement of Results For The Year Ended 31st December 2003 An encouraging result was achieved in 2003, although the further decline in Hong Kong property values in the first half was disappointing. Underlying profits grew despite the challenges of SARS, the Iraq war and sluggish demand in a number of our markets. Performance Underlying profit rose 22% to US$296 million in 2003. Underlying earnings per share increased 25% to USc80.74, enhanced by the positive effect of share repurchases. The Board is recommending an increased final dividend of USc25.20 per share, which together with the interim dividend of USc7.80 per share, gives a dividend for the full year of USc33.00 per share, compared with USc30.00 per share for the prior year. The Company's financial statements are prepared in conformity with International Financial Reporting Standards ('IFRS'), which require the revaluation of investment properties to be taken through the profit and loss account, rather than directly to reserves. For 2003 the negative impact of non-cash movements in the valuation of Hongkong Land's properties of 12% was primarily responsible for the profit attributable to shareholders of US$66 million falling well short of underlying earnings. Jardine Pacific suffered from lower earnings in its construction and engineering businesses, partly offset by a good performance from its restaurant operations. Jardine Motors Group benefited from a better result in the United Kingdom. Hongkong Land reported a small profit decline as rents remained under pressure. Dairy Farm had a good year, with significant improvements in its supermarkets and health and beauty stores in Hong Kong and its Southeast Asian operations. Despite an improving performance for Mandarin Oriental in the second half and the benefit of a substantial insurance claim in respect of business interruption caused by SARS the group's trading profit was lower, and its net result was reduced further by additional depreciation charges. Jardine Cycle & Carriage's contribution more than doubled, benefiting from another strong performance from its Indonesian affiliate, Astra, as well as increased shareholdings in both companies. Jardine Lloyd Thompson again achieved increased profits. There has been a significant increase in the overall contribution from Southeast Asia where Jardine Cycle & Carriage, with its major associate Astra, is now a Group subsidiary. Dairy Farm is also active in developing its regional business. The Southeast Asian region now accounts for a third of the Group's underlying earnings, compared with less than 10% three years ago. Corporate Developments Over recent years the Group has pursued a policy of focusing its business interests and concentrating on those sectors, primarily in Asia, where it has a competitive advantage stemming from many years of local knowledge. The Group's operating cash flows remained strong in 2003 and have been supplemented by selective disposals of businesses. This has supported further capital expenditure intended to produce growth over the longer term. Dairy Farm, Hongkong Land and Mandarin Oriental have been active in building their businesses through both new ventures and acquisitions. Investment continued in Group companies' shares where favourable opportunities arose. As part of the Group's broader strategy, this policy enables the Group to concentrate resources on its principal businesses as well as improving earnings per share. Jardine Cycle & Carriage and Astra strengthened their balance sheets through rights issues. Dairy Farm and Cycle & Carriage Bintang, on the other hand, both returned surplus cash to shareholders through special dividends. Advantage was also taken by Group companies of low prevailing interest rates to refinance debt and extend maturities. Prospects In conclusion, the Chairman, Henry Keswick said, 'Our businesses are focused, soundly financed and trading well. Subject to normal market and economic risks, they should again produce a satisfactory performance this year. We are also hopeful that the stabilization in the capital values of the Group's Hong Kong properties in the second half of 2003 will continue into the present year.' Managing Director's Review A Year of Progress The Jardine Matheson Group achieved a good level of growth in 2003 reflecting the quality and mix of our businesses and their geographic spread. The contributions from Hongkong Land, Dairy Farm, Mandarin Oriental and Jardine Cycle & Carriage were also enhanced by increases in the Group's shareholdings. 2003 was not, however, an easy year. The SARS outbreak in Asia was accompanied by the war in Iraq, and Group businesses exposed to the travel, hotel, restaurant and property management sectors had a very difficult second quarter. But as the threats posed by SARS receded, management teams across the Group, particularly in those businesses worst affected, responded with professionalism to the improving commercial environment and much of the lost ground was recovered. Business Performances Jardine Pacific's businesses mainly produced lower results as they faced weak markets in Hong Kong. HACTL, however, benefited from the continued strength of manufactured exports from the Pearl River Delta, and the Restaurants operations also performed well. Jardine Schindler had a good year, but the group's other engineering and construction activities experienced a number of poorly performing contracts leading to a disappointing overall result. Jardine Motors Group produced a modest increase in profit as a good contribution from the United Kingdom offset a decline in Hong Kong. This group also benefited from an exceptional gain on the sale of its motor trading activities in Hawaii at the year end. Hongkong Land's underlying profit declined in the face of a weak Hong Kong office market, although vacancy in its Central portfolio was reduced to 7% by year end. With demand returning office rents have begun to harden, but Hongkong Land's renewal cycle will delay any significant enhancement to earnings. A net revaluation deficit of US$824 million was recorded on its investment portfolio, which was charged to the profit and loss account in accordance with IFRS. The entire decline took place in the first half, with values recovering modestly thereafter. The revised application of the accounting standard on deferred tax has also required Hongkong Land to make a cumulative provision of US$573 million in respect of the group's Hong Kong portfolio, even though no such liability for tax would arise under the current tax regime should there be a property disposal. Dairy Farm gained momentum in 2003 with increasing profits reflecting strong performances from most of its businesses, although its Hong Kong restaurant joint venture suffered because of a market downturn in the middle of the year. Mandarin Oriental was severely impacted by the disruption in the international travel market in the first half. Improved performances later in the year and a US$16 million insurance settlement for business interruption were unable to recover fully the lost ground. The result was further reduced by an additional depreciation charge under the revised accounting standards. There was a good result from Jardine Cycle & Carriage in Southeast Asia with a strong growth in underlying profit. Astra's contribution rose significantly as consumer demand in Indonesia supported an increase in sales in its motor businesses. Improved performances were also achieved in Astra's financing operations and agribusiness. Jardine Lloyd Thompson achieved further growth in pre-tax profits with higher contributions from both Risk & Insurance and Employee Benefits. The restructuring of its French associate, SIACI, resulted in the receipt of US$52 million, with JLT's shareholding remaining unchanged. A change to IFRS in 2003 permitting leasehold interests in land to be carried at valuation has enabled the Group to carry its interest in Hongkong Land's investment properties at full value and to end the recent practice of presenting supplementary financial information. The change did not extend to leasehold interests in land occupied on an 'own-use' basis, and consequently such interests of other Group companies, primarily Mandarin Oriental, will be carried at depreciated cost. Building for the Future Jardine Cycle & Carriage and Astra It was an active year for the renamed Jardine Cycle & Carriage. The company strengthened its balance sheet with a US$141 million rights issue, which it used to replace part of the debt incurred in financing its strategic investment in Astra. In addition, it disposed of its under-performing Australian motor businesses. Astra also raised funds in 2003 with a US$158 million rights issue and US$226 million from the sale of its stake in the Toyota manufacturing operations in Indonesia. These moves restored Astra's balance sheet to financial health and allowed it to resume dividend distributions. Jardine Cycle & Carriage invested US$135 million in supporting Astra's refinancing and in acquiring additional shares through the market, in the process increasing its shareholding from 31% to 37%. Since Jardine Cycle & Carriage acquired its initial 25% interest in 2000, Astra has become the majority contributor to its profitability. Astra is one of Indonesia's leading conglomerates with a market capitalization of some US$2 billion. The largest independent automotive group in Southeast Asia, it has a significant share of the markets in Indonesia where it handles Toyota, Daihatsu, Isuzu, BMW, Peugeot and Nissan Diesel in the motor vehicle sector and Honda in motorcycles. It also has interests in agribusiness, heavy equipment, mining, financial services and information technology. While there is still work being undertaken to improve the financial position of some of Astra's affiliates, the group is now on a sound financial footing. Operational Development Hongkong Land has begun work on a major renovation of The Landmark, its retail complex in the heart of Hong Kong, which will incorporate a new hotel to be managed by Mandarin Oriental. In Beijing, the second phase of its residential development, Central Park, was launched at the year end following strong demand for the first phase. Its joint venture development in Singapore, One Raffles Quay, approaches completion amid signs of stabilization in the office market. In Indonesia the group acquired from Jardine Pacific a 25% interest in the office investment and development company, Jakarta Land. Dairy Farm's strategy remains focused on the profitable growth of its core areas of operation in Asia. Additional supermarket chains were acquired in Singapore, Malaysia and Indonesia, consolidating Dairy Farm's leading position in these Southeast Asian markets, and a further acquisition was made in Taiwan. The group continued to invest in extensive store expansion programmes across its range of activities in the supermarket, hypermarket, health and beauty and convenience store sectors. Mandarin Oriental opened its latest luxury hotel in New York in December 2003, and will open its new Washington property in spring 2004. The development of further new hotels remains on schedule with Hong Kong due in 2005, and Tokyo and Boston in 2006. The group has announced that it will manage two new luxury resorts in Thailand and Mexico; it will also manage Mandarin Oriental branded condominiums adjacent to its new hotels in New York and Boston. The benefits of the increasing geographic spread of Mandarin Oriental's portfolio will become more tangible as the group reaches 7,500 rooms under management out of its target of 10,000. Jardine Lloyd Thompson continues to expand both of its main operating areas of Risk & Insurance and Employee Benefits. During the year further progress was made with the acquisition of teams in property and aviation and the expansion of operations in the United States, most recently with the acquisition of a specialty life, accident and health insurance broking portfolio in December 2003. Jardine Pacific reshaped its portfolio further with the sale of a number of its smaller interests in 2003, generating a net non-recurring profit of US$20 million. These included a 20% stake in UMF (Singapore), various wines and spirits interests, a 25% stake in Jakarta Land, 4% of Salmat, Pizza Hut South China, Oliver's Super Sandwiches in Hong Kong, a sugar mill in the Philippines and a number of Hong Kong residential units. It also announced its intention of disposing of its Hawaiian restaurant and engineering operations. Jardine Motors Group continues to strengthen its key franchise base in the United Kingdom with the acquisition of a major BMW dealership group. In Asia, Zung Fu is broadening its revenue base in Hong Kong with its appointment as the exclusive dealer for Hyundai passenger cars. The group's service centres in Southern China have been expanded to ten locations, forming the basis of a dealership network once regulations permit. The group disposed of its motor interests in Hawaii at the year end. Investing in Group Shares The Group has continued to purchase and repurchase shares in line with the strategy of allocating resources to increase stakes in Group companies when this can be accomplished on attractive terms. Dairy Farm repurchased some 10.3% of its share capital in March as part of the process of returning value to shareholders and increasing the efficiency of its balance sheet. Jardine Strategic increased to 53% its interest in Jardine Cycle & Carriage, which has itself increased its stake in Astra to 37%; in both cases by way of market purchases and through supporting rights issues. Further shares were also acquired by Jardine Strategic in Hongkong Land and Mandarin Oriental, while Jardine Matheson repurchased its own shares. Prospects Despite the difficulties of the last 12 months, coming after several years of disruptions in Asia, we were able to achieve a very creditable result in 2003. It is far too early to predict the outcome for the current year, but our businesses are in good shape as we enter 2004. They are leaders in their fields, well financed and run by capable management teams and they have clear and realizable objectives. As such I am confident that we can continue to do well. Percy Weatherall Managing Director 25th February 2004 Operating Review Jardine Pacific In a challenging operating environment Jardine Pacific's underlying net profit in 2003 fell by 8% to US$74 million. Shareholders' funds stood at US$391 million by the end of the year, a reduction of 13%, following the payment of US$163 million in dividends to the parent company. The return on average shareholders' funds, excluding non-recurring items, rose 1% to 18%. Net borrowings at the end of the year stood at US$131 million, giving a gearing of 33%. Continuing weakness in the Hong Kong economy in 2003 prompted several units to take the opportunity to restructure, which included realigning themselves with their customers and reducing their cost base. Outside Hong Kong, Jardine Pacific's profitability improved in a number of markets including China, Malaysia, Thailand and Hawaii. The following is summary financial information of Jardine Pacific's larger businesses: Underlying profit Shareholders' funds 2003 2002 2003 2002 US$m US$m US$m US$m ------------------------------------------------------------------------------ EastPoint 4 3 7 9 Gammon Skanska 1 12 40 54 HACTL 22 23 103 102 Jardine Aviation Services 4 7 12 12 Jardine Engineering Corporation 4 8 64 60 Jardine OneSolution 4 2 24 36 Jardine Property Investment 4 5 118 126 Jardine Restaurants 12 8 7 11 Jardine Schindler 12 11 23 21 Jardine Shipping Services 6 6 10 11 Pacific Finance 2 3 32 32 Other Interests 10 6 48 72 ------------------------------------------------------------------------------ 85 94 488 546 Corporate (11) (13) (97) (95) ------------------------------------------------------------------------------ 74 81 391 451 ---------------------------------------------- HACTL achieved record throughput of just over two million tonnes at Hong Kong's Chek Lap Kok airport. JARDINE AVIATION SERVICES experienced a strong pick-up in flight frequencies after the very difficult conditions experienced in the first half, while JARDINE SHIPPING SERVICES benefited from firmer shipping rates. GAMMON SKANSKA faced a slow construction market in Hong Kong and a poorly performing project in Singapore further impacted profits, although an improved order book gives grounds for optimism. JARDINE ENGINEERING CORPORATION's results suffered from a poor Hong Kong market, restructuring costs and a loss in its Caterpillar business in Taiwan, offset in part by strong performances from its joint ventures with Trane and Thorn. JARDINE SCHINDLER did well, increasing order intake and expanding its maintenance portfolio across the region, while acquisitions in Korea and Hong Kong have improved future prospects. Despite a further fall in turnover, earnings in JARDINE ONESOLUTION improved, and new initiatives are expected to lead to further growth in 2004. Profits in JARDINE RESTAURANTS increased by 46% as the business benefited from improvements in margins and the disposal of loss-making ventures. EASTPOINT maintained earnings despite falling prices in the market. PACIFIC FINANCE's lower returns on capital continued due to thin margins and higher levels of doubtful debt provision. JARDINE PROPERTY INVESTMENT's income reduced as a result of a programme to sell non-strategic residential properties, which should be completed in 2004. OTHER INTERESTS performed above last year and included dividend income of US$1 million from a 20% stake in BALtrans. Central overheads remained low, while finance costs benefited from low interest rates and debt levels. Jardine Pacific sold a number of smaller investments during the year including a 20% stake in UMF in Singapore (10% to Jardine Cycle & Carriage), various wines and spirits interests, a 25% interest in Jakarta Land (to Hongkong Land), 4% of Salmat, Pizza Hut South China, Oliver's Super Sandwiches, a sugar mill in the Philippines and a number of Hong Kong residential units. These disposals resulted in a net non-recurring profit of US$20 million. The decision was also taken to dispose of the group's operations in Hawaii, which comprise Pacific Machinery and the Pizza Hut and Taco Bell franchises. Jardine Motors Group Jardine Motors Group increased its underlying net profit to US$42 million in 2003, a rise of 11% following improved results in the United Kingdom. The group disposed of its interests in Hawaii at the end of the year realizing an additional non-recurring gain of US$11 million. In Hong Kong, 2003 was the first full year of the new Mercedes-Benz franchise arrangements, and results in Zung Fu reflected the lower margins. Difficult trading conditions and an increase in first registration tax led to a contraction of the new passenger car market, yet Zung Fu was able to achieve a significant increase in its market share supported by strong order book at the start of the year. In December, the group began the exclusive distribution and service of Hyundai passenger cars in Hong Kong. In Southern China, the Mercedes-Benz distribution joint venture achieved increased deliveries, but at lower margins, and Zung Fu expanded its service centre network to ten locations. Tunas Ridean, the 34%-held Indonesian associate, also achieved a better result and benefited from a stronger Rupiah. There was a much improved result in the United Kingdom, helped by reduced restructuring and overhead costs. Lancaster was affected by the costs associated with the mandatory reorganization of the Mercedes-Benz network, but its other dealerships produced good results. Further dealerships, including BMW in North London, have been acquired to strengthen the representation of core franchises. The Polar Motor Group joint venture with Ford also produced an increased contribution. Appleyard Vehicle Contracts, the contract hire joint venture, performed well with improved rental margins and vehicle disposal profits. In the United States, Beverly Hills made a steady contribution despite margin pressure, while the Hawaiian operations produced an enhanced result prior to their disposal at the year end. In 2004 Jardine Motors Group will continue to develop its network in Southern China. In the United Kingdom there will be benefits from newly acquired dealerships and further strengthening of the representation of core brands. Jardine Lloyd Thompson Jardine Lloyd Thompson's turnover increased by 10% in 2003 to £429 million. Trading profit (turnover less operating expenses, excluding exceptional items and goodwill amortization) increased by 16% to £92 million, and profit before tax, exceptional items and goodwill amortization grew by 11% to £114 million based on UK accounting standards. The overall performance once again reflects strong growth across the business and builds upon the achievements in JLT's core businesses in recent years. In both of the main operating areas of Risk & Insurance and Employee Benefits, good progress was made over the past year. Organic growth was achieved, and further strategic development with the acquisition of teams in property and aviation and the expansion of operations in the United States, most recently with the acquisition of a specialty life, accident and health insurance broking portfolio in December 2003. Risk & Insurance produced a satisfactory 12% growth in revenue to £353 million. A solid performance came from Risk Solutions and strong results from JLT's retail businesses in the United Kingdom, Asia, Canada and Australasia. Employee Benefits revenue growth was a modest 2%, rising to £76 million. But underlying growth at constant rates of exchange and excluding the effect of discontinued business was 10%. The business also achieved improved margins through operational efficiencies. JLT is well positioned to make further progress in 2004 and beyond, although any sustained weakness in the United States dollar will impact its Sterling reported earnings despite a prudent hedging policy. The group will continue with the integration of its new acquisitions and teams and remain alert to any new opportunities to further develop both Risk & Insurance and Employee Benefits. Hongkong Land Hongkong Land's underlying profit declined 10% in 2003 to US$174 million as average rents continued to fall in its Hong Kong office portfolio and were only partly offset by a full year's contribution from Chater House. The office market remained fiercely competitive throughout the year with the addition of significant new space, although the last quarter saw some recovery in sentiment. Hongkong Land did well to achieve an improvement in occupancy, which ended the year at 93%, and its retail portfolio remained close to fully let as increasing consumer spending stimulated demand. Hongkong Land's investment portfolio recorded a net valuation deficit of US$824 million in 2003. The decline took place in the first half after which values stabilized. The revised application of an accounting standard on deferred tax also led to a cumulative provision of US$573 million being made in respect of the group's Hong Kong portfolio, even though no such liability is expected to arise. These factors led to a 15% fall in net asset value per share. The emphasis on building value in its core Hong Kong portfolio continued with the commencement of a major renovation of the Landmark retail complex, which includes the addition of a luxury hotel. Elsewhere, construction at One Raffles Quay in Singapore is progressing amid signs of stabilization in the office market in the city. In Indonesia, Hongkong Land has purchased a 25% stake in Jakarta Land, a premium office investment and development company in central Jakarta. There was also progress in the residential sector with the start of the construction and pre-sale of Phase II of Central Park in Beijing following the success of Phase I. Encouraging sales were also achieved at two residential developments in Hong Kong. A recovery in office rental levels in Hong Kong should take place as supply begins to tighten and demand returns, but this will take time to work through to Hongkong Land's earnings. Dairy Farm Dairy Farm performed strongly in 2003 with sales from continuing activities, including associates, increasing 13% to US$4.5 billion and underlying profit rising 24% to US$126 million. The efficiency of Dairy Farm's balance sheet was also improved by the repurchase of 10.3% of its share capital through a tender offer and a special dividend of USc30.00 per share, returning US$576 million in value to shareholders. Four significant bolt-on acquisitions were made during the year that increased market share and enhanced productivity in Singapore, Malaysia, Taiwan and Indonesia. These bring to ten the number of acquisitions Dairy Farm has made in the past four years as it pursues a strategy of building a leading market presence in Asia. In North Asia, sales increased by 13% while profits grew by 65%. Dairy Farm's Hong Kong operations performed well despite the difficult economic conditions, but the results of its restaurant associate were impacted by the SARS outbreak in the second quarter. The supermarket operation in Taiwan was able to build upon its acquisition to improve profit. In Southern China, the group's convenience store chain continued to expand, ending the year with 150 outlets, and the 50%-owned health and beauty chain in South Korea added seven stores. The IKEA home furnishings business in Hong Kong and Taiwan achieved improved sales. Dairy Farm's Southeast Asian operations continued to perform strongly, increasing sales by 24% and profits by 48%. Six Giant hypermarkets were opened, continuing the establishment of the group's main growth format in the region. The group also opened 56 health and beauty stores, producing strong returns from this successful format. Indonesia, however, remained a challenging market where further work is required to achieve an acceptable level of returns. With strong financials and focused operations, Dairy Farm is well placed for further growth in Asia. Mandarin Oriental The outbreak of SARS, hostilities in Iraq and overall economic uncertainty had a detrimental impact on Mandarin Oriental's results. A profit attributable to shareholders of US$3 million was reported for 2003, compared with US$16 million in the prior year. The results benefited from a US$16 million insurance settlement in respect of business interruption caused by SARS, offset by US$8 million of pre-opening expenses and initial operating losses incurred in respect of its new hotels and additional depreciation charge of US$10 million under revised International Financial Reporting Standards. In Hong Kong, results of both Mandarin Oriental and The Excelsior benefited from the insurance settlement which compensated for the sharp decline in business. Contributions from Macau, Kuala Lumpur, Hawaii and Miami all improved due to higher revenues, but were partially offset by weaker performances in Bangkok, Singapore and Geneva due to lower occupancy. There were good performances from Mandarin Oriental, Hyde Park in London, as it achieved higher average room rates, and Munich where the hotel benefited from higher occupancy. Both contributions were enhanced by the strengthening of the local currencies against the US dollar. In New York, The Mark was adversely affected by weak market conditions. In an important milestone in its development strategy, Mandarin Oriental's new property in New York opened in December 2003 as one of the city's finest luxury hotels, and a new 400-room hotel will open in Washington D.C. in spring 2004. Further hotels will follow in Hong Kong in 2005, and Tokyo and Boston in 2006. Mandarin Oriental has also announced that it will manage two luxury resorts under development in Thailand and Mexico, and, in a further initiative, the group will manage Mandarin Oriental branded condominiums adjacent to its new hotels in New York and Boston. In a realignment of other interests, it has increased its stake in its Geneva property to 93%. The current year has started on a firmer footing, and the benefit of Mandarin Oriental's growth strategy will become more tangible as contributions from new hotels in the United States provide a more balanced geographic spread to its portfolio. Jardine Cycle & Carriage Jardine Cycle & Carriage made good progress in 2003 as underlying profit grew 48% to US$196 million with a strong contribution from Astra. The group's balance sheet was enhanced by a successful US$141 million rights issue and the exit from the Hyundai operations in Australia. Jardine Cycle & Carriage invested a further US$135 million in Astra shares by supporting its rights issue and through market purchases, increasing its stake to 37%. The underlying profit contribution from Astra rose 42% to US$144 million in 2003 as good consumer demand in Indonesia supported increased sales in its motor businesses. Improved performances were also achieved in its financing operations and agribusiness. Astra's US$158 million rights issue in January 2003 and the sale of its Toyota manufacturing operations for US$226 million restored its balance sheet, which has enabled it to recommence the distribution of dividends. United Tractors, Astra's remaining major affiliate in default on its debt, has reached agreement with the majority of its creditors for a financial restructuring, following which it will proceed with a rights issue of at least US$75 million. The profit contribution from Jardine Cycle & Carriage's motor operations in Singapore was flat, while New Zealand produced good growth in the commercial vehicle sector. Earnings in Cycle & Carriage Bintang, Malaysia, declined due to the loss of the Mercedes-Benz distribution, although a special dividend was paid from surplus funds released on the transfer of distribution stocks to DaimlerChrysler. Overall, underlying earnings increased to US$36 million, supported by the write-back of warranty provisions following withdrawal from under-performing operations in Australia. The underlying profit contribution from property increased by 14% to US$25 million as lower development profits in MCL Land were offset by the release of a provision. While satisfactory trading performances are expected from Jardine Cycle & Carriage's businesses in 2004, Astra's contribution will reflect the loss of earnings from the Toyota manufacturing operations and the impact of any exchange rate volatility. -------------------------------------------------------------------------------- Jardine Matheson Holdings Limited Consolidated Profit and Loss Account for the year ended 31st December 2003 -------------------------------------------------------------------------------- Restated 2003 2002 US$m US$m --------------------- Revenue (note 2) 8,452 7,398 Cost of sales (6,496) (5,501) ---------- ---------- Gross profit 1,956 1,897 Other operating income 122 162 Selling and distribution costs (1,280) (1,243) Administration expenses (445) (463) Other operating expenses (71) (84) Net profit on disposal of Woolworths in Dairy Farm - 231 ---------- ---------- Operating profit (note 3) 282 500 Net financing charges (113) (117) Share of results of associates and joint ventures excluding decrease in fair value of investment properties 390 274 Decrease in fair value of investment properties (315) (350) Share of results of associates and joint ventures (note 4) 75 (76) ---------- ---------- Profit before tax 244 307 Tax (note 5) (63) (34) ---------- ---------- Profit after tax 181 273 ---------- ---------- Profit attributable to shareholders 66 110 Profit attributable to outside interests 115 163 ---------- ---------- 181 273 ---------- ---------- --------------------- USc USc --------------------- Earnings per share (note 6) - basic 18.04 29.40 - diluted 17.58 28.78 Underlying earnings per share (note 6) - basic 80.74 64.34 - diluted 79.92 63.60 --------------------- -------------------------------------------------------------------------------- Jardine Matheson Holdings Limited Consolidated Balance Sheet at 31st December 2003 -------------------------------------------------------------------------------- Restated 2003 2002 US$m US$m ----------------------------------- Net operating assets Goodwill 151 54 Tangible assets 1,521 1,375 Investment properties 359 411 Leasehold land payments 484 467 Associates and joint ventures 2,793 2,752 Other investments 696 509 Deferred tax assets 37 31 Pension assets 79 89 Other non-current assets 16 13 ---------- ---------- Non-current assets 6,136 5,701 Properties for sale 340 285 Stocks and work in progress 832 894 Debtors and prepayments 603 784 Current tax assets 11 12 Bank balances and other liquid funds 955 1,273 ---------- ---------- Current assets 2,741 3,248 ---------- ---------- Creditors and accruals (1,687) (1,721) Borrowings (362) (580) Current tax liabilities (57) (52) Current provisions (65) (45) ---------- ---------- Current liabilities (2,171) (2,398) ---------- ---------- Net current assets 570 850 Long-term borrowings (2,408) (2,282) Deferred tax liabilities (158) (145) Pension liabilities (16) (13) Non-current provisions (12) (24) Other non-current liabilities (27) (31) ---------- ---------- 4,085 4,056 ---------- ---------- Total equity Share capital 151 153 Share premium 2 - Revenue and other reserves 3,199 3,110 Own shares held (670) (670) ---------- ---------- Shareholders' funds 2,682 2,593 Outside interests 1,403 1,463 ---------- ---------- 4,085 4,056 ---------- ---------- ----------------------------------- -------------------------------------------------------------------------------- Jardine Matheson Holdings Limited Consolidated Statement of Changes in Equity for the year ended 31st December 2003 -------------------------------------------------------------------------------- Restated 2003 2002 US$m US$m -------------------------- At 1st January - as previously reported 3,452 2,787 - changes in accounting policies 604 976 ----------- ---------- - as restated 4,056 3,763 Attributable to outside interests (1,463) (1,078) ----------- ---------- 2,593 2,685 Revaluation of properties - net revaluation (deficit)/surplus (12) 22 - deferred tax (3) (3) Revaluation of other investments - fair value gain/(loss) 171 (82) - transfer on change in attributable interests - 5 - transfer to consolidated profit and loss account on disposal (4) (234) - deferred tax (1) - Net exchange translation differences - amount arising in year 103 114 - transfer to consolidated profit and loss account 14 64 Cash flow hedges - fair value gain/(loss) 9 (12) - transfer to consolidated profit and loss account 6 6 ----------- ---------- Net profit/(loss) recognized directly in equity 283 (120) Profit after tax 181 273 ----------- ---------- Total recognized profit 464 153 Attributable to outside interests (176) (119) 288 34 Dividends (note 7) (110) (100) Exercise of share options 9 2 Scrip issued in lieu of dividends 22 21 Repurchase of shares (119) (21) Change in attributable interests (1) 1 Increase in own shares held - (29) ----------- ---------- At 31st December 2,682 2,593 ----------- ---------- Total equity 4,085 4,056 Attributable to outside interests (1,403) (1,463) ----------- ---------- Shareholders' funds 2,682 2,593 ----------- ---------- -------------------------- -------------------------------------------------------------------------------- Jardine Matheson Holdings Limited Consolidated Cash Flow Statement for the year ended 31st December 2003 -------------------------------------------------------------------------------- Restated 2003 2002 US$m US$m -------------------------- Operating activities Operating profit 282 500 Depreciation and amortization 172 179 Other non-cash items 28 (264) Decrease in working capital 157 135 Interest received 16 18 Interest and other financing charges paid (133) (126) Tax paid (59) (57) ---------- ----------- 463 385 Dividends from associates and joint ventures 214 209 Cash flows from operating activities 677 594 Investing activities Purchase of subsidiary undertakings (note 8(a)) (338) (343) Purchase of associates and joint ventures (note 8(b)) (176) (68) Repayment of amounts due to associates and joint ventures (78) - Purchase of other investments (28) (14) Purchase of tangible assets (220) (240) Purchase of investment properties - (1) Leasehold land payments - (1) Sale of subsidiary undertakings (note 8(c)) 100 384 Sale of associates and joint ventures (note 8(d)) 51 5 Sale of other investments (note 8(e)) 55 174 Sale of tangible assets 64 29 Sale of investment properties 25 9 Sale of leasehold land 2 2 Cash flows from investing activities (543) (64) Financing activities Issue of shares 9 2 Repurchase of shares (119) (21) Capital contribution from outside shareholders 70 8 Grants received 4 29 Drawdown of borrowings 6,408 6,488 Repayment of borrowings (6,567) (6,608) Dividends paid by the Company (69) (59) Dividends paid to outside shareholders (173) (41) Cash flows from financing activities (437) (202) Effect of exchange rate changes (2) 8 ---------- ----------- Net (decrease)/increase in cash and cash equivalents (305) 336 Cash and cash equivalents at 1st January 1,245 909 ---------- ----------- Cash and cash equivalents at 31st December 940 1,245 ---------- ----------- -------------------------------------------------------------------------------- Jardine Matheson Holdings Limited Analysis of Profit Contribution for the year ended 31st December 2003 -------------------------------------------------------------------------------- Restated 2003 2002 US$m US$m -------------------------- Group contribution Jardine Pacific 74 81 Jardine Motors Group 44 41 Jardine Lloyd Thompson 32 30 Hongkong Land 62 64 Dairy Farm 72 51 Mandarin Oriental 6 11 Jardine Cycle & Carriage 81 38 Profit from core businesses 371 316 Corporate and other interests (75) (74) ---------- ----------- Underlying profit attributable to shareholders 296 242 Adjustment for depreciation, amortization and deferred tax on owner-occupied leasehold interests (note 6) (5) (2) Decrease in fair value of investment properties (247) (276) Other non-recurring items 22 146 ---------- ----------- Profit attributable to shareholders 66 110 ---------- ----------- Further analysis of Jardine Pacific EastPoint 4 3 Gammon Skanska 1 12 HACTL 22 23 Jardine Aviation Services 4 7 Jardine Engineering Corporation 4 8 Jardine OneSolution 4 2 Jardine Property Investment 4 5 Jardine Restaurants 12 8 Jardine Schindler 12 11 Jardine Shipping Services 6 6 Pacific Finance 2 3 Other interests 10 6 85 94 Corporate (11) (13) ---------- ----------- 74 81 ---------- ----------- Further analysis of Jardine Motors Group Hong Kong and Mainland China 22 34 United Kingdom 15 - France - (1) United States 6 5 Corporate and other interests (1) - ---------- ----------- 42 38 Adjustments for amortization of goodwill and dividend from Cycle & Carriage Bintang 2 3 ---------- ----------- 44 41 ---------- ----------- -------------------------------------------------------------------------------- Jardine Matheson Holdings Limited Notes -------------------------------------------------------------------------------- 1. Accounting Policies and Basis of Preparation The financial information contained in this announcement has been based on the audited results for the year ended 31st December 2003 which have been prepared in conformity with International Financial Reporting Standards ('IFRS'), including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board. In 2003, the Group implemented IAS 1 (revised 2003) - Presentation of Financial Statements, IAS 2 (revised 2003) - Inventories, IAS 8 (revised 2003) - Accounting Policies, Changes in Accounting Estimates and Errors, IAS 10 (revised 2003) - Events After the Balance Sheet Date, IAS 16 (revised 2003) - Property, Plant and Equipment, IAS 17 (revised 2003) - Leases, IAS 21 (revised 2003) - The Effects of Changes in Foreign Exchange Rates, IAS 24 (revised 2003) - Related Party Disclosures, IAS 27 (revised 2003) - Consolidated and Separate Financial Statements, IAS 28 (revised 2003) - Investments in Associates, IAS 31 (revised 2003) - Interests in Joint Ventures, IAS 32 (revised 2003) - Financial Instruments: Disclosure and Presentation, IAS 33 (revised 2003) - Earnings Per Share, IAS 39 (revised 2003) - Financial Instruments: Recognition and Measurement, and IAS 40 (revised 2003) - Investment Property. These revised standards are applied in advance of their effective dates. With the exception of IAS 16 (revised) and IAS 40 (revised), there are no changes in accounting policy that affect profit or shareholders' funds resulting from the adoption of the above standards in these financial statements, as the Group was already following the recognition and measurement principles in those other standards. The Group has also adopted IAS 41 - Agriculture in 2003. The effect on the current year is to increase profit attributable to shareholders by US$4 million. There has been no impact on profit in the previous year. The Group has changed its accounting policy for depreciating hotel properties in accordance with IAS 16 (revised). This revised standard requires all qualifying expenditure to be capitalized and depreciated over the appropriate period whereas the previous standard permitted additional expenditure to be recognized when it was probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, would flow to the entity. All other subsequent expenditure was expensed in the period in which it was incurred. The revised standard has also clarified the requirement to separate the carrying value of a building into constituent components. These components are then depreciated separately. Where the carrying amount of an a component is greater than its estimated recoverable amount, it is written down immediately or derecognized, as appropriate. Applying these changes constitutes a change in accounting policy which has been applied retrospectively. The costs for surface finishes and services ('SFS') have been identified as a separate component within the cost of buildings as their useful economic lives for depreciation purposes are substantially different from the building core and a retrospective adjustment has been made. The comparative figures for 2002 have been restated to reflect the change in policy. The Directors have also reviewed and revised the useful economic lives and residual values of the building core of each property, and the resulting change in depreciation is accounted for prospectively from 1st January 2003. The effect on the current year is to decrease profit attributable to shareholders by US$3 million. In accordance with IAS 40 (revised), leasehold properties held for long-term rental yields are classified as investment properties and carried at fair value. This is a change in accounting policy as in previous years these properties were carried at depreciated cost. The comparative figures for 2002 have been restated to reflect the change in policy. The effect of changes in accounting policies on investment properties and depreciation of hotel properties is summarized as follows: Increase in total equity: Effect of Effect of Con- Con- adopting adopting sequential sequential IAS 16 IAS 40 change to change to (revised) (revised) deferred tax goodwill Total US$m US$m US$m US$m US$m ------------------------------------------------------------------------- At 1st January 2003 Goodwill - - - 50 50 Tangible assets (36) - - - (36) Investment properties - 142 - - 142 Leasehold land payments - (17) - - (17) Associates and joint ventures (7) 719 (303) 136 545 Deferred tax - - (80) - (80) ------- ------- -------- ------- ------- Total equity (43) 844 (383) 186 604 ------- ------- -------- ------- ------- At 1st January 2002 Goodwill - - - 39 39 Tangible assets (33) - - - (33) Investment properties - 150 - - 150 Leasehold land payments - (18) - - (18) Associates and joint ventures (6) 1,145 (360) 130 909 Deferred tax - - (71) - (71) ------- ------- -------- ------- ------- Total equity (39) 1,277 (431) 169 976 ------- ------- -------- ------- ------- Decrease in profit attributable to shareholders 2003 2002 US$m US$m ------------------- Depreciation of SFS (3) (1) Change in fair value of investment properties (231) (232) Amortization of goodwill (9) (9) ------- ------- (243) (242) ------- ------- As the market value of the Group's investment properties which represent a significant portion of the Group's leasehold interests in land is now recognized in the financial statements, comprehensive supplementary financial information described as 'prepared in accordance with IFRS as modified by the revaluation of leasehold properties' is no longer presented in the financial statements. However, the Directors continue to believe that the restriction to carry leasehold properties occupied by businesses at market value is not appropriate. Accordingly, in determining the Group's gearing and net asset value per share, total equity and shareholders' funds have been adjusted to reflect the market value of those leasehold properties. 2. Revenue 2003 2002 US$m US$m --------- --------- By business: Jardine Pacific 1,189 1,585 Jardine Motors Group 1,910 1,975 Dairy Farm 3,457 3,354 Mandarin Oriental 218 234 Jardine Cycle & Carriage 1,676 248 Other activities 2 2 --------- --------- 8,452 7,398 --------- --------- 3. Operating Profit 2003 2002 US$m US$m --------- --------- By business: Jardine Pacific 59 4 Jardine Motors Group 57 36 Dairy Farm 124 77 Mandarin Oriental 34 41 Jardine Cycle & Carriage 31 7 --------- --------- 305 165 Discontinued operation - Woolworths in Dairy Farm - 17 Net profit on disposal of Woolworths in Dairy Farm - 231 Corporate and other interests (23) 87 --------- --------- 282 500 --------- --------- 4. Share of Results of Associates and Joint Ventures 2003 2002 US$m US$m --------- ---------- By business: Jardine Pacific 53 68 Jardine Motors Group 14 6 Jardine Lloyd Thompson 32 31 Hongkong Land 83 71 Dairy Farm 18 27 Mandarin Oriental (1) 8 Jardine Cycle & Carriage 191 63 --------- ---------- 390 274 Decrease in fair value of investment properties - Hongkong Land (314) (346) - other (1) (4) --------- ---------- 75 (76) --------- ---------- Results are shown after tax and outside interests, and after amortization of goodwill as required by IAS 1 (revised). This represents a change in accounting policy as previously the Group's share of results of associates and joint ventures was stated before tax and outside interests. 5. Tax 2003 2002 US$m US$m --------- ---------- Current tax 64 46 Deferred tax (1) (12) --------- ---------- 63 34 --------- ---------- Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates and includes United Kingdom tax credit of US$2 million (2002: US$4 million). 6. Earnings Per Share Basic earnings per share are calculated on profit attributable to shareholders of US$66 million (2002: US$110 million) and on the weighted average number of 367 million (2002: 375 million) shares in issue during the year. The weighted average number excludes the Company's share of the shares held by subsidiary undertakings and the shares held by the Trustee under the Senior Executive Share Incentive Schemes. Diluted earnings per share are calculated on profit attributable to shareholders after adjusting for the effects of the conversion of dilutive potential ordinary shares of subsidiary undertakings, associates or joint ventures, and on the weighted average number of 369 million (2002: 378 million) shares after adjusting for the number of shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average share price during the year. Additional basic and diluted earnings per share are also calculated based on underlying earnings attributable to shareholders of US$296 million (2002: US$242 million). A reconciliation of earnings is set out below: 2003 2002 US$m US$m ------------------------ Underlying profit attributable to shareholders 296 242 Adjustment for depreciation and amortization* (2) (2) Changes in tax rates** (3) - --------- --------- 291 240 Decrease in fair value of investment properties - Hongkong Land (246) (266) - other (1) (10) (247) (276) Discontinued operations - net profit of Woolworths - 5 - net profit on disposal of Woolworths - 122 - reversal of closure cost provision for Franklins - 3 - 130 Sale and closure of businesses - Pizza Hut South China 7 - - Hawaii motor operations 11 - - French motor operations (11) (14) - Australian motor operations (4) - - PT Toyota - Astra Motor 8 - - other (1) 3 10 (11) Asset impairment - Hongkong Land 2 (16) - Edaran Otomobil Nasional - 28 2 12 Realization of exchange losses - (27) Revaluation deficit on properties and provision for onerous leases (2) (4) Fair value gain on biological assets 4 - Fair value (loss)/gain on conversion option component of 4.75% Guaranteed Bonds due 2007 (2) 18 Sale of investments 8 28 Debt buyback in an associate 2 - --------- --------- Profit attributable to shareholders 66 110 --------- --------- * Representing difference between depreciation and amortization of owner-occupied leasehold interests calculated on a valuation and on a cost basis. ** In respect of deferred tax on leasehold land payments, representing tax on the surplus arising on the valuation of owner-occupied leasehold interests upon an increase in holdings in subsidiary undertakings. 7. Dividends 2003 2002 US$m US$m ---------------------- Final dividend in respect of 2002 of USc22.20 (2001: USc18.70) per share 136 115 Interim dividend in respect of 2003 of USc7.80 (2002: USc7.80) per share 48 48 --------- ---------- 184 163 Less Company's share of dividends paid on the shares held by subsidiary undertakings (74) (63) --------- ---------- 110 100 --------- ---------- A final dividend in respect of 2003 of USc25.20 (2002: USc22.20) per share amounting to a total of US$152 million (2002: US$136 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting. The net amount after deducting the Company's share of the dividends payable on the shares held by subsidiary undertakings of US$62 million (2002: US$55 million) will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2004. 8. Notes to Consolidated Cash Flow Statement 2003 2002 (a) Purchase of subsidiary undertakings US$m US$m --------- --------- Tangible assets 152 97 Investment properties - 262 Leasehold land payments 6 19 Associates and joint ventures - 293 Deferred tax assets - 4 Other non-current assets - 13 Current assets 41 770 Current liabilities (70) (251) Long-term borrowings - (364) Deferred tax liabilities (1) (7) Non-current provisions - (11) Other non-current liabilities - (7) Outside interests (4) (185) --------- --------- Fair value at acquisition 124 633 Adjustment for outside interests - (322) --------- --------- Share of fair value at acquisition 124 311 Goodwill attributable to subsidiary undertakings 64 21 --------- --------- Total consideration 188 332 Adjustment for deferred consideration, and carrying value of associates and joint ventures and other investments (33) (185) Cash and cash equivalents of subsidiary undertakings acquired (7) (66) --------- --------- Net cash outflow 148 81 Payment of deferred consideration 2 2 Purchase of shares in Jardine Strategic - 103 Purchase of shares in Dairy Farm 181 135 Purchase of shares in Mandarin Oriental 7 22 --------- --------- 338 343 --------- --------- Net cash outflow in 2003 of US$148 million included Jardine Motors Group's acquisition of a BMW dealership in North London of US$27 million, Dairy Farm's acquisition of Shop N Save of US$49 million and stores in Taiwan and Malaysia of US$37 million, and Mandarin Oriental's acquisition of an additional 46.3% interest in its Geneva hotel of US$23 million. Net cash outflow in 2002 of US$81 million included Jardine Strategic's increased interest in Jardine Cycle & Carriage of US$71 million. (b) Purchase of associates and joint ventures in 2003 included Jardine Strategic's increased interest in Hongkong Land of US$35 million and Jardine Cycle & Carriage's increased interest in Astra of US$135 million. Purchase of associates and joint ventures in 2002 included investment in Mandarin Oriental, New York of US$47 million, and Jardine Strategic's increased interest in Hongkong Land of US$5 million. 2003 2002 (c) Sale of subsidiary undertakings US$m US$m --------- --------- Goodwill 2 1 Tangible assets 41 148 Other investments - 1 Pension assets 3 - Deferred tax assets - 8 Current assets 190 211 Current liabilities (115) (153) Long-term borrowings (8) (64) Deferred tax liabilities - (4) Other non-current liabilities - (6) Outside interests - (1) --------- --------- Net assets disposed of 113 141 Adjustment for investment in associates and joint ventures and other investments (20) 4 Cumulative exchange translation differences 10 12 Profit on disposal 11 228 --------- --------- Sale proceeds 114 385 Adjustment for deferred consideration (8) - Cash and cash equivalents of subsidiary undertakings disposed of (6) (1) --------- --------- Net cash inflow 100 384 --------- --------- Net cash inflow in 2003 of US$100 included Jardine Motors Group's sale of its Hawaii motor operations of US$56 million and dealerships in the United Kingdom of US$25 million. Net cash inflow in 2002 of US$384 million included Jardine Motors Group's sale of its French motor operations of US$73 million and Dairy Farm's sale of Woolworths, New Zealand of US$276 million. (d) Sale of associates and joint ventures in 2003 included Jardine Pacific's sale of its interest in UMF Singapore and P.T. Jakarta Land of US$9 million and US$18 million respectively, and a repayment of shareholders' loan from Mandarin Oriental Macau of US$6 million. (e) Sale of other investments in 2003 included a distribution from Edaran Otomobil Nasional of US$36 million following its asset divestment in 2002. Sale of other investments in 2002 included Jardine Strategic's sale of an investment. The final dividend of USc25.20 per share will be payable on 12th May 2004, subject to approval at the Annual General Meeting to be held on 6th May 2004, to shareholders on the register of members at the close of business on 12th March 2004, and will be available in cash with a scrip alternative. The ex-dividend date will be on 10th March 2004, and the share registers will be closed from 15th to 19th March 2004, inclusive. Shareholders will receive their cash dividends in United States Dollars, unless they are registered on the Jersey branch register where they will have the option to elect for Sterling. These shareholders may make new currency elections by notifying the United Kingdom transfer agent in writing by 23rd April 2004. The Sterling equivalent of dividends declared in United States Dollars will be calculated by reference to a rate prevailing on 28th April 2004. Shareholders holding their shares through The Central Depository (Pte) Limited ('CDP') in Singapore will receive United States Dollars unless they elect, through CDP, to receive Singapore Dollars or the scrip alternative. - end - For further information, please contact: Jardine Matheson Limited Norman Lyle (852) 2843 8216 Matheson & Co Limited Martin Henderson (44) 20 7816 8135 Golin/Harris Forrest Nick Bradbury (852) 2501 7910 Weber Shandwick Square Mile Richard Hews/ Katie Hunt/ Helen Thomas (44) 20 7067 0700 Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 2003 can be accessed through the Internet at 'www.jardines.com'. This information is provided by RNS The company news service from the London Stock Exchange

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