CHAIRMAN’S STATEMENT

Overview

There were signs of improvement in the Group’s performance and profitability in the first half compared with the same period last year, but COVID-19 continued to have an impact in most sectors and markets, and conditions are expected to remain challenging for the second half of the year. The absence of tourists from the Chinese mainland will continue to impact the performance of the Group’s businesses in North Asia, including Hongkong Land’s Central retail portfolio in Hong Kong, Dairy Farm’s health and beauty business and Mandarin Oriental’s hotels. The performance of the Group’s businesses in Indonesia and other parts of Southeast Asia is also expected to be significantly affected by the continuing severe impact of the pandemic and related restrictions.

The Group’s underlying net profit for the first half was US$615 million, 65% higher than the same period last year. Following the completion in mid-April 2021 of the privatisation of Jardine Strategic Holdings Limited (‘JSH’) (the ‘Transaction’), and the elimination for accounting purposes of the cross-shareholding held by JSH in Jardine Matheson Holdings Limited (the ‘Company’), the growth in the Group’s underlying net profit in the period reflected both improved business performance - by comparison to the prior year when many of the Group’s businesses were most severely impacted by the pandemic and measures to contain it - and a higher share of earnings in businesses formerly held by JSH. Within the overall profit growth of 65% for the period, approximately 59% reflected recovering business performance and 6% the impact of completing the Transaction, with effect from mid-April 2021.

Underlying earnings per share increased by 84% to US$1.86. Similarly, this increase reflected both business recovery (comprising 63% of the 84% growth) and the effect of the Transaction on earnings and the Company’s issued share capital (21%). The revenue of the Group for the period was 10% higher at US$17.5 billion, while gross revenue, including 100% of associates and joint ventures, was up 17% at US$52.5 billion.

The Group recorded a non-trading net loss in the first half of US$732 million, compared with a non-trading net loss of US$1.1 billion in the first half of 2020. This was largely a result of the usual semi-annual revaluation of investment properties in Hongkong Land which was carried out during the period, which produced a net revaluation loss of US$635 million. The Group recorded a loss attributable to shareholders for the period of US$117 million, 85% lower than the loss in the first half of 2020.

Group results in some markets benefitted from government support relating to COVID-19, which totalled US$36 million attributable to the Group, compared to a total of US$78 million in the same period last year. This support is expected to reduce significantly in the second half.

With the exception of Dairy Farm, all of the Group’s significant businesses saw improved profits, and there were reduced losses from Mandarin Oriental and Dairy Farm’s associate, Maxim’s. Group profits, however, still remain around 17% behind the levels seen prior to the onset of the pandemic.

Dividend

The Board is recommending an interim dividend of US¢44.00 per share, in line with last year. As explained in the announcement of the Transaction in March 2021, the Group will assess the extent of a one-off uplift in the dividend at the time of the Group’s 2021 full year results announcement, when the Group’s final results for the year are known.

Significant Developments

The Group continues to actively manage its portfolio of businesses and deploy capital into value-creating opportunities. This was demonstrated in the period by the completion in April 2021 of the successful privatisation of JSH, creating a conventional ownership structure and further increasing the Group’s operational efficiency and financial flexibility.

Shortly after the end of the period, the Group announced the strengthening of its strategic partnership with Zhongsheng through the transfer of its Mercedes-Benz auto dealership business operating on the Chinese mainland under the Zung Fu brand. Total consideration of US$1.3 billion will be settled in cash and new Zhongsheng shares, which will increase the Group’s shareholding in Zhongsheng on a fully-diluted basis to 20% and solidify its position as the second-largest shareholder after the founders.

Hongkong Land secured three predominantly residential development projects on the Chinese mainland in the period - one in Nanjing and two in Wuhan – as well as two further residential development projects in Singapore.

Dairy Farm carried out the relaunch of its Giant brand in over 100 stores in Malaysia during the first half of the year. The group’s yuu Rewards programme in Hong Kong continues to grow and has now attracted over 3.5 million members, with approximately 80 billion points issued. A strategic review of PT Hero’s business led to the announcement in May 2021 of a pivot in its trading operations by increasing investment in its strong brands of IKEA, Guardian and Hero Supermarkets and away from the Giant banner, reflecting changing market dynamics and consumer behaviours. The group’s Own Brand initiatives continue to gather momentum, with over 1,200 SKUs now launched. Following the successful launch of the Meadows own brand range, Dairy Farm’s Chinese own brand range Yu Pin King was also relaunched in the first half. Own Brand penetration has grown approximately 40% since launch.

Jardine Cycle & Carriage increased its interest in Cycle & Carriage Bintang from 59.1% to 88.0% through market purchases and acceptances under a voluntary general offer and increased its interest in REE from 29.8% to 30.8%.

Mandarin Oriental Ritz, Madrid, reopened in April after an extensive restoration and this 50% owned property is expected to become a flagship property for the brand. The group signed two management contracts in the first half of the year for a new hotel and residences in Hangzhou and a resort in Da Nang, Vietnam. 

Despite the short-term challenges of the pandemic, the Board sees it as essential to continue to invest for the long-term in new business opportunities in order to drive momentum and change across the Group, and this has led to several important developments in the period. In March, the Group announced the formation of a strategic cooperation with Hillhouse Capital, a leading Asia-focused private equity firm, in order to drive innovation and digitisation in the Group’s portfolio companies, with a focus on investment and business development opportunities predominantly in China, as well as South-East Asia. There will also be close collaboration between the Jardines and Hillhouse value creation teams and respective portfolio companies, in particular in the areas of consumer technology and digital enablement.

Other significant strategic developments in the first half of the year included the announcement in Indonesia in May 2021 of the merger of Gojek - in which Astra has a stake - and Tokopedia to create GoTo group and form the largest technology ecosystem in the country. Astra also invested in April 2021 in Halodoc, Indonesia’s largest healthtech platform. The Group also invested in the period in Pickupp, a Hong Kong-based logistics startup.

The Group also remains focussed on making efficiency improvements across its existing businesses to drive future growth, and good progress has been made in a number of businesses, including JEC, Hactl, Jardine Restaurants and Gammon, to implement efficiency measures in areas such as procurement, shared resources and operational efficiency.

Sustainability

The Group and each of its businesses have continued to make encouraging progress in the period in driving their sustainability agendas. Working groups have been established to support each of the pillars of our Group sustainability strategy – shaping social inclusion, leading climate action and driving responsible consumption – and they are developing detailed plans for dealing with key issues, including decarbonisation, climate risk and reducing waste. Extensive work is also being done to set appropriate metrics and gather data from each of our businesses to enable the Group to measure and report on progress in implementing the sustainability agenda. The Group will report against these metrics for the first time in its 2021 sustainability report. Our Group businesses are also implementing a Group-wide colleague volunteering programme, which will facilitate participation by colleagues across the Group in a range of social inclusion and other activities. An important first step in this initiative is the launch of a volunteering programme during the summer, with opportunities for colleagues across the Group’s Hong Kong businesses to take part in activities supporting causes focussed on mental health, education and livelihood. 

People

Ensuring the safety and wellbeing of our people remains a top priority as they face extensive challenges amid the ongoing pandemic. We are offering support to our colleagues at this difficult time, including investing in their continuing development. The Group has also participated in the ongoing drive to encourage take-up of COVID-19 vaccinations in Hong Kong by offering HK$10 million in incentives.

We would like to recognise the remarkable resilience shown by colleagues across the Group and thank all of them for their continuing dedication, hard work and professionalism throughout the period.

Outlook

While there have been some promising signs of an improvement in performance in the first half of the year, COVID-19 continues to cause uncertainty and trading conditions in the second half are expected to continue to be challenging in certain sectors and markets, in particular in Indonesia and other parts of Southeast Asia. The Group is confident, however, that its businesses have the right strategic focus and are taking the actions needed to drive operational performance and to take advantage of emerging opportunities in order to deliver strong, sustainable future growth.

Ben Keswick, Executive Chairman 

Click here to read the full announcement. 

^{* The Group uses ‘underlying profit’ in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more fully described in note 7 to the condensed financial statements. Management considers this to be a key measure which provides additional information to enhance understanding of the Group’s underlying business performance.
# At 30th June 2021 and 31st December 2020, respectively. Net asset value per share is based on the book value of shareholders’ funds. 
The interim dividend of US¢44.00 per share will be payable on 13th October 2021 to shareholders on the register of members at the close of business on 20th August 2021 and will be available in cash with a scrip alternative.}