Jardine Intnl Motors-Interims

JARDINE MATHESON HOLDINGS LIMITED 7 September 1999 JARDINE INTERNATIONAL MOTORS 1999 INTERIM RESULTS ANNOUNCEMENT The following press release was issued today by the Company's 75%-held subsidiary, Jardine International Motor Holdings Limited. For further information please contact: Forrest International Limited Tel: (852) 2522 6475 (office) David Dodwell (852) 2501 7902 (direct) Sue Gourlay (852) 2501 7936 (direct) Full text of this and other Group announcements can be accessed through the Internet at 'http://www.irasia.com/listco/hk/jim'. JARDINE INTERNATIONAL MOTORS INTERIM REPORT 1999 HIGHLIGHTS * Zung Fu outperforms weak Hong Kong market * Disappointing results in UK * UK and India joint ventures fully operational Results (unaudited) Six months ended 30th June 1999 1998 Change US$m US$m % -------------------------------------------------------------- Revenue 1,457 1,860 -22 Net profit 25 29 -13 -------------------------------------------------------------- USc USc % -------------------------------------------------------------- Earnings per share 5.25 6.01 -13 Interim dividend per share 1.20 1.20 - -------------------------------------------------------------- 'In Hong Kong the effect on Zung Fu of continued market weakness will be only partly mitigated by increased market share, while in the United Kingdom further costs are expected to be incurred in turning around problem operations. Against this background, the Group's full year performance should, nevertheless, be in line with last year.' A J L Nightingale, Chairman 7th September 1999 The interim dividend of USc1.20 per share will be payable on 20th October 1999 to Shareholders on the register of members at the close of business on 24th September 1999. The share registers will be closed from 27th September to 1st October 1999, inclusive. JARDINE INTERNATIONAL MOTOR HOLDINGS LIMITED INTERIM REPORT 1999 PERFORMANCE Jardine International Motors today announced that the Group, including its associates and joint ventures, sold and delivered some 77,600 new and used motor vehicles in the first half of 1999, representing an increase of 12% over the same period in 1998. Revenue, excluding associates and joint ventures, exceeded US$1,400 million. This represented an underlying reduction of 7%, excluding the revenue of the Polar Motor Group in the 1998 comparative as it became a joint venture in the second half of that year. The unaudited consolidated net profit for the six months ended 30th June 1999 was US$25 million, a decrease of 13% over the comparable figure for 1998. Earnings per share for the half year, at USc5.25, also decreased by 13%. The Board has declared an unchanged interim dividend of USc1.20 per share. GROUP REVIEW Turning to the operations, the Chairman, Anthony Nightingale, said that Hong Kong operations performed well in a difficult environment, continuing their focus on raising market share and providing excellent customer service. In the United Kingdom, the specialist franchises continued to achieve good results and the joint venture with Ford is making progress, but certain of the Group's other dealerships have performed poorly. The Indian joint venture with the Tata Group is now fully operational. In Japan, the small Stern Zushi Mercedes- Benz business was disposed of in the period on satisfactory terms. Hong Kong SAR and Mainland China In Hong Kong, the strong demand for the new S-class models enabled Zung Fu to increase its market share for Mercedes-Benz in an overall passenger car market which suffered from a 31% decline in unit sales. However, lower unit deliveries of new Mercedes-Benz passenger cars compared with the same period last year, a weaker demand for after-sales service and decreased activity in the commercial vehicle market led to a reduction in Zung Fu's profits, despite the continued tight management of costs. Nevertheless, the results showed some improvement compared to the second half of 1998, and continued customer interest has maintained the order book at levels close to those at the year-end. Preliminary discussions are taking place with DaimlerChrysler with regard to their participation in the distribution of Mercedes-Benz vehicles in Hong Kong. The Group expects to arrive at a mutually satisfactory arrangement and that Zung Fu will continue to play the leading role in sales and after-sales service of Mercedes-Benz vehicles in Hong Kong, in a long term partnership with DaimlerChrysler. In Mainland China, Southern Star's performance has been affected by the limited availability of import permits, while the joint venture workshops experienced lower trading volumes in a slack market. Southeast Asia P.T. Tunas Ridean, the Group's 30%-held associate in Indonesia, continued to operate in extremely difficult and uncertain market conditions. Tight control over costs, consumer finance receivables and foreign exchange exposures led to a slightly improved result. In Malaysia, Cycle & Carriage Bintang, the Group's 13%-owned affiliate, saw a sharp increase in unit sales in a fast improving market, but the dividend accounted for in the first half reflected the prior year's result. India Concorde Motors incurred an increased loss following completion of its dealership infrastructure in anticipation of the new Indica production coming fully on stream. The Mercedes-Benz business in Mumbai continued to operate satisfactorily. United Kingdom In the United Kingdom, the passenger car market has shown growth in the first half year. The group's specialist franchises, performing ahead of expectations, maintained their levels of profitability. But some of the volume franchises disappointed due to a poor performance by Rover and a number of specific problem operations in the former Appleyard business. The Polar Motor Group joint venture, which includes Dagenham Motors acquired in March 1999, made a positive contribution to the Group results. Appleyard Vehicle Contracts, in which the Group has a 50% shareholding, produced a reduced return due to lower vehicle disposal profits and the adoption of a more conservative revenue recognition policy. France Cica achieved better results with both volume and margin improvement in a buoyant national market. United States In the United States the Group's operations increased revenues but suffered some reduction in margin and a higher tax charge following the utilisation of earlier tax losses. YEAR 2000 The Company has adopted the Year 2000 compliance standard issued by the British Standards Institution as its definition of compliance. The Group's businesses have taken a number of actions in order to achieve readiness. They have prepared an inventory of all business critical information technology systems and equipment which, if non-compliant, could have a material adverse impact on the business and operations of the Group. All such systems have been assessed and tested. Assurance has also been sought on Year 2000 compliance from key suppliers. Business continuity plans have been put in place in the event of any material system or supplier failure due to previously undetected problems. The actions required to attain Year 2000 readiness and put business continuity plans in place are now complete in all material respects. The Audit Committee has been monitoring progress and reporting to the Board. The costs specifically associated with Year 2000 projects are not considered material to the Group. No material amounts have been authorised or contracted for solely in respect of the Year 2000 issue. While the Group have made appropriate system changes and put in place appropriate business continuity plans, there can be no absolute assurance that the Year 2000 programme will be completely successful due to the inherent unpredictability and scope of the Year 2000 issue. OUTLOOK In conclusion, Mr Nightingale said, 'In Hong Kong the effect on Zung Fu of continued market weakness will be only partly mitigated by increased market share, while in the United Kingdom further costs are expected to be incurred in turning around problem operations. Against this background, the Group's full year performance should, nevertheless, be in line with last year.' -------------------------------------------------------------------- Jardine International Motor Holdings Limited Condensed Consolidated Profit and Loss Account -------------------------------------------------------------------- Year ended (unaudited) 31st Six months ended 30th June December 1999 1998 1998 US$m US$m US$m -------------------------------------------------------------------- Revenue (note 2) 1,457.2 1,860.1 3,555.5 Net operating costs (1,419.2) (1,812.0) (3,475.3) ------- ------- ------- Operating profit (note 3) 38.0 48.1 80.2 Net financing charges (8.5) (11.9) (24.7) Share of results of associates and joint ventures 1.5 1.3 (4.1) ------- ------- ------- Profit before tax 31.0 37.5 51.4 Tax (note 4) (5.8) (8.7) (12.0) ------- ------- ------- Profit after tax 25.2 28.8 39.4 Outside interests (0.1) (0.1) (0.3) ------- ------- ------- Net profit 25.1 28.7 39.1 ======= ======= ======= -------------------------------------------------------------------- USc USc USc -------------------------------------------------------------------- Earnings per share (note 5) - basic 5.25 6.01 8.18 - diluted 5.25 6.01 8.18 -------------------------------------------------------------------- -------------------------------------------------------------------- Jardine International Motor Holdings Limited Condensed Consolidated Balance Sheet -------------------------------------------------------------------- (unaudited) At 31st At 30th June December 1999 1998 1998 US$m US$m US$m -------------------------------------------------------------------- Net operating assets Goodwill 10.1 12.9 11.4 Tangible assets 296.6 354.2 303.5 Associates and joint ventures 114.5 72.2 96.3 Other investments 21.2 21.3 21.2 Other non-current assets 19.5 17.6 19.5 ------- ------- ------- Non-current assets 461.9 478.2 451.9 ------- ------- ------- Stocks 375.5 514.9 420.9 Debtors and prepayments 188.4 201.5 189.7 Deposits with a group treasury company - 54.3 - Bank balances and deposits 177.4 42.8 204.9 ------- ------- ------- Current assets 741.3 813.5 815.5 ------- ------- ------- Creditors, accruals and provisions (379.7) (447.3) (403.3) Borrowings (74.7) (110.1) (137.9) Current tax liabilities (7.1) (10.1) (5.1) ------- ------- ------- Current liabilities (461.5) (567.5) (546.3) ------- ------- ------- Net current assets 279.8 246.0 269.2 Borrowings (290.6) (221.2) (253.9) Other non-current liabilities (29.1) (47.7) (35.1) ------- ------- ------- 422.0 455.3 432.1 ======= ======= ======= Capital employed Share capital 11.9 11.9 11.9 Share premium 57.2 57.2 57.2 Revenue and other reserves 348.7 381.8 358.6 ------- ------- ------- Shareholders' funds 417.8 450.9 427.7 Outside interests 4.2 4.4 4.4 ------- ------- ------- 422.0 455.3 432.1 ======= ======= ======= -------------------------------------------------------------------- Jardine International Motor Holdings Limited Condensed Consolidated Statement of Changes in Equity -------------------------------------------------------------------- Year ended (unaudited) 31st Six months ended 30th June December 1999 1998 1998 US$m US$m US$m -------------------------------------------------------------------- At beginning of period - as previously reported 396.4 423.2 423.2 - change in accounting policies (note 1) 31.3 37.1 37.1 ------- ------- ------- - as restated 427.7 460.3 460.3 Property revaluation - - (38.0) Deferred tax on property revaluation - 0.2 2.0 Net exchange translation differences - amount arising in period (11.6) (8.2) 0.1 - disposal of subsidiary (0.5) - - ------- ------- ------- Net losses not recognised in consolidated profit and loss account (12.1) (8.0) (35.9) Net profit 25.1 28.7 39.1 Dividends (note 6) (22.9) (30.1) (35.8) ------- ------- ------- At end of period 417.8 450.9 427.7 ======= ======= ======= -------------------------------------------------------------------- Jardine International Motor Holdings Limited Condensed Consolidated Cash Flow Statement -------------------------------------------------------------------- Year ended (unaudited) 31st Six months ended 30th June December 1999 1998 1998 US$m US$m US$m -------------------------------------------------------------------- Operating activities ------- ------- ------- Operating profit 38.0 48.1 80.2 Depreciation and other non-cash items 9.6 11.5 21.4 Decrease/(increase) in working capital 3.2 (34.5) (31.0) Interest received 4.5 5.2 10.9 Interest paid and other financing charges (13.4) (16.4) (35.4) Tax paid (2.1) (4.0) (10.7) ------- ------- ------- 39.8 9.9 35.4 Dividends from associates and joint ventures 0.5 1.9 3.1 ------- ------- ------- Cash flows from operating activities 40.3 11.8 38.5 Investing activities Purchase of subsidiaries - (4.9) (6.3) Investment in joint ventures (note 7) (21.6) (10.9) (10.9) Purchase of tangible assets (22.6) (16.5) (44.8) Restructuring of Polar Motor Group - - 47.7 Sale of subsidiary 1.6 - - Sale of tangible assets 5.6 4.7 16.2 ------- ------- ------- Cash flows from investing activities (37.0) (27.6) 1.9 Financing activities ------- ------- ------- Drawdown of term loans 16.1 13.5 71.9 Repayment of term loans (7.2) (39.6) (52.4) Dividends paid by the Company (22.9) (30.1) (35.8) Dividends paid to outside shareholders (0.2) (0.2) (0.4) ------- ------- ------- Cash flows from financing activities (14.2) (56.4) (16.7) Effect of exchange rate changes 2.4 (0.2) (1.6) ------- ------- ------- Net (decrease)/increase in cash and cash equivalents (8.5) (72.4) 22.1 Cash and cash equivalents at beginning of period 136.3 114.2 114.2 ------- ------- ------- Cash and cash equivalents at end of period 127.8 41.8 136.3 ======= ======= ======= -------------------------------------------------------------------- USc USc USc -------------------------------------------------------------------- Cash flow per share from operating activities 8.43 2.47 8.06 -------------------------------------------------------------------- -------------------------------------------------------------------- Jardine International Motor Holdings Limited Notes -------------------------------------------------------------------- 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The unaudited interim condensed financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting. In 1999, the Group implemented IAS 14 (revised) - Segment Reporting, IAS 17 (revised) - Leases, IAS 19 (revised) - Employee Benefits and IAS 35 - Discontinuing Operations. The provisions of IAS 10 (revised) - Events After the Balance Sheet Date, IAS 16 (revised) - Property, Plant and Equipment, IAS 22 (revised) - Business Combinations, IAS 28 (revised) - Accounting for Investments in Associates, IAS 31 (revised) - Financial Reporting of Interests in Joint Ventures, IAS 36 - Impairment of Assets, IAS 37 - Provisions, Contingent Liabilities and Contingent Assets and IAS 38 - Intangible Assets are applied in advance of their effective dates. In accordance with IAS 10 (revised), dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date. In previous years dividends proposed or declared after the balance sheet date were recognised as a liability at the balance sheet date. The effect of this change has been to increase the Shareholders' funds at 31st December 1997 and 1998 by US$30.1 million and US$22.9 million respectively. In accordance with IAS 19 (revised), pension costs for defined benefit plans are assessed using the projected unit credit method. Under this method, pension obligations are measured as the present value of the estimated future cash flows by reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms of the related liability. This is a change in accounting policy as in previous years certain pension plans used the attained age normal method and pension obligations were discounted at the expected rate of return on plan assets. The comparative figures for 1998 have been restated to reflect the change in policy. The effect of this change has been to increase net profit for the six months ended 30th June 1998 and for the year ended 31st December 1998 by US$0.7 million and US$1.4 million respectively, and the Shareholders' funds at 31st December 1997 and 1998 by US$7.0 million and US$8.4 million respectively. With the exception of IAS 10 (revised) and IAS 19 (revised), there are no changes in accounting policy that affect profit or Shareholders' funds resulting from the adoption of the above standards in these condensed financial statements, as the Group was already following the recognition and measurement principles in those standards. There have been no other changes to the accounting policies described in the 1998 financial statements. The disclosure requirements of IAS 1 (revised) - Presentation of Financial Statements will be complied with in the Group's 1999 annual financial statements. 2. REVENUE Six months ended 30th June 1999 1998 US$m US$m -------------------------- By geographical area: Hong Kong and Mainland China 135.4 150.0 United Kingdom 886.1 1,312.1 France 301.1 267.6 United States 134.6 125.5 Other - 4.9 ------- ------- 1,457.2 1,860.1 ======= ======= 3. OPERATING PROFIT Six months ended 30th June 1999 1998 US$m US$m -------------------------- By geographical area: Hong Kong and Mainland China 19.4 25.6 United Kingdom 9.0 16.3 France 3.9 2.3 United States 3.5 3.7 Corporate and other interests 2.2 0.2 ------- ------- 38.0 48.1 ======= ======= 4. TAX Six months ended 30th June 1999 1998 US$m US$m -------------------------- Company and subsidiaries 4.6 7.7 Associates and joint ventures 1.2 1.0 ------- ------- 5.8 8.7 ======= ======= Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates and includes Hong Kong tax of US$2.4 million (1998: US$4.7 million). 5. EARNINGS PER SHARE Basic earnings per share are calculated on the net profit of US$25.1 million (1998: US$28.7 million) and on the weighted average number of 477.8 million (1998: 477.8 million) shares in issue during the period. Diluted earnings per share are calculated on the weighted average number of 477.9 million (1998: 477.8 million) shares after adjusting for the number of shares which are deemed to have been issued for no consideration under the Executive Share Option Scheme based on the average share price during the period. 6. DIVIDENDS Six months ended 30th June 1999 1998 US$m US$m -------------------------- Final dividend in respect of 1998 of USc4.80 (1997:USc6.30) per share 22.9 30.1 ======= ======= An interim dividend in respect of 1999 of USc1.20 (1998: USc1.20) per share amounting to a total of US$5.7 million (1998: US$5.7 million) is declared and will be accounted for as an appropriation of revenue reserves in the year ending 31st December 1999. 7. INVESTMENT IN JOINT VENTURES Investment in joint ventures includes the additional investment of US$21.3 million in Polar Motor Group Limited to finance the acquisition of Dagenham Motors Group plc in the United Kingdom. 8. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES At 31st At 30th June December 1999 1998 1998 US$m US$m US$m ------------------------------------ Capital commitments 7.2 13.1 11.0 ======= ======= ======= Guarantees of borrowings and other liabilities of joint ventures 8.4 7.1 27.9 ======= ======= ======= 9. PURCHASE OF OWN SHARES Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of its listed securities during the period under review. 10. INTERIM REPORT The Interim Report will be posted to Shareholders on or about 27th September 1999. Copies may be obtained from Central Registration Hong Kong Limited, 19th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong. The interim dividend of USc1.20 per share will be payable on 20th October 1999 to Shareholders on the register of members at the close of business on 24th September 1999. The share registers will be closed from 27th September to 1st October 1999, inclusive. The dividend, declared in United States Dollars, will also be available in Hong Kong Dollars calculated by reference to a rate prevailing five business days prior to the payment date. Shareholders on the principal register will receive United States Dollars while Shareholders on the Hong Kong branch register will receive Hong Kong Dollars, unless they elect for the alternative currency by notifying the Company's registrars by 6th October 1999. Issued by Forrest International Limited on behalf of Jardine International Motors Management Limited. For further information, please contact: Jardine International Motors Peter Ward (852) 2895 7281 (direct) Sam Houston (852) 2895 7343 (direct) Matheson & Co. Ltd (0171) 816 8135 (office) Martin Henderson Forrest International (852) 2522 6475 (office) Sue Gourlay (852) 2501 7936 (direct) Ludgate Communications (0171) 253 2252 (office) Richard Hews Full text of this and other Group announcements can be accessed through the Internet at 'http://www.irasia.com/listco/hk/jim'. Note to Editors Jardine International Motors invests in and operates businesses engaged in the distribution, sales and service of motor vehicles and in related activities including financing and contract hire. In Hong Kong the Group's Mercedes Benz franchise enjoys a strong position in the luxury market. The Group's other principal interests are in the United Kingdom, France and the United States. In 1998, the Group's combined businesses achieved revenue in excess of US$3.5 billion and employed more than 10,000 people. The parent company, Jardine International Motor Holdings Limited, is incorporated in Bermuda and listed on the Stock Exchange of Hong Kong. Jardine International Motors Management Limited manages the Group's activities from Hong Kong. Jardine International Motors is committed to delivering long-term value to its Shareholders by careful selection of the franchises and the territories in which it operates, while ensuring the highest standards of service to customers.

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