Chairman's Statement

Overview

The Group’s underlying net profit for the first half was US$747 million, 22% higher than the same period last year, and returning to the levels seen prior to the onset of the pandemic. Within this, 13 percentage-points of growth was driven by improved business performance, with the balance reflecting a higher share of earnings in businesses formerly owned by Jardine Strategic Holdings Limited (‘JSH’), following the completion in mid-April 2021 of the privatisation of JSH (the ‘Group Simplification’).

There were improved performances from most of the Group’s businesses in the first half of 2022, compared with the same period last year, with particularly strong growth in Southeast Asia, led by Astra. Jardine Cycle & Carriage (‘JC&C’), the Group’s Motors business and Hongkong Land also saw increases in underlying profit, and Mandarin Oriental delivered a lower underlying loss than the same period last year.

DFI Retail Group (‘DFI’) saw a decline year-on-year in the performance of their businesses, impacted by the resurgence in the first half of the pandemic on the Chinese mainland and in Hong Kong. The absence of Chinese mainland tourists also continued to impact the performance of the Group’s businesses in Hong Kong, including Hongkong Land’s Central retail portfolio, DFI’s health and beauty business and Mandarin Oriental’s hotels.

The Group continues to benefit from its diversified exposure to the key growth markets of Asia, with the different pathways of China and Southeast Asia across the pandemic bringing resilience to our earnings and growth. The strong performance of the Group’s businesses in Southeast Asia in the first half of 2022 led to 58% of the Group’s profit for the period coming from Southeast Asia and 37% coming from China.

Underlying earnings per share increased by 40% to US$2.60. Just over half of this growth (+24 percentage-points) reflected impacts of the Group Simplification, combining the effect on underlying net profits of a higher share of earnings, as above, with the reduction in the effective share count in Jardine Matheson Holdings Limited (the ‘Company’) following the elimination of the cross-shareholding held by JSH in the Company, which concluded in May 2022 and has now, therefore, fully annualised.

Group revenue for the period was 4% higher at US$18.3 billion, while gross revenue, including 100% of associates and joint ventures, was up 7% at US$56.0 billion.

The Group recorded a non-trading net loss in the first half of US$324 million, compared with a non-trading net loss of US$732 million in the first half of 2021. This was as a result of a net decrease of US$148 million in the fair value of the Group’s other investments, the impairment of goodwill and investment in associates of US$114 million, and a net fair value loss of US$70 million upon the semi-annual revaluation of investment properties in Hongkong Land as at 30th June 2022. The Group recorded a profit attributable to shareholders for the period of US$423 million, compared with a loss of US$117 million in the first half of 2021.

Dividend

The Board has announced an interim dividend of US¢55 per share, an increase of 25% over the prior year. This reflects both the strong EPS growth in the first half of the year and the Board’s decision to revert to a higher proportion of the total dividend for the year to be paid at interim as the effects of the pandemic and the impacts of the Group Simplification recede.

Significant Developments

The first half of the year continued to demonstrate the importance of the Group applying innovation and adaptability in its business approach. The pace of change continues to accelerate, however, so we need to further drive forward our strategic priorities in the second half of the year.

Evolving the Group Portfolio

The Group remains focussed on evolving its portfolio by deploying and, where appropriate, recycling capital towards strategic higher growth initiatives.

During the first half, Astra purchased a 5.43% stake in PT Medikaloka Hermina Tbk, one of the largest hospital groups in Indonesia, operating as Hermina Hospitals, which has an established brand in women’s and children’s care.

In February 2022, a joint venture was announced between Astra, Hongkong Land and LOGOS, a leading modern warehousing expert, to expand logistics facilities across Indonesia.

Astra continues to invest in digital businesses in Indonesia, and in the period it acquired an interest in Paxel, a technology-based logistics startup, and increased its investments in Sayurbox, an e-commerce grocery farm-to-table platform and Mapan, a digital community based social financing platform. In July 2022, Astra subscribed for a 49.56% stake in PT Bank Jasa Jakarta (‘Bank Jasa Jakarta’) for US$260 million, to support Astra Financial Services’ business development and digital offering. The transaction is subject to satisfaction of conditions precedent and regulatory approval.

During the period, Hongkong Land secured a 34% interest in a primarily residential site in Xuhui District in Shanghai, adjacent to the group’s existing 1.1 million sq. m. mixed-used project in West Bund. It also acquired a 49% interest in a residential site in the Tanjong Katong area in Singapore, with a developable area of 599,000 sq. ft.  

In July 2022, JC&C announced a general offer to acquire the remaining shares in Cycle & Carriage Bintang, which it did not already own. JC&C also increased its interest in Refrigeration Electrical Engineering Corporation (‘REE’) in the period through on-market purchases.

In July 2022, United Tractors announced a share buyback of up to US$333 million.

Also in July 2022, Mandarin Oriental announced the sale of its Washington DC hotel for gross proceeds of US$139 million. This sale is consistent with the Group’s strategy of driving future growth primarily through development of its management business. The Group has an exciting pipeline of hotels worldwide in locations and properties which support its long-term vision for the brand.

Driving Innovation and Operational Excellence

The Group also continues to focus on driving innovation and operational excellence in our businesses and in new ventures we undertake. Despite the challenging market environment, our businesses continued to introduce greater efficiency and productivity.

We have been embedding innovation-thinking across our businesses, underscored by events such as Digital Day and LearnFest, where innovation-related themes are central to the agenda.

DFI’s yuu coalition loyalty programme continues to exceed expectations and now has more than four million members. It has built partnerships with a range of complementary businesses, including Maxim’s restaurants, insurance partners and, most recently, in February 2022, a fuel partner. In May 2022, yuu-to-me was launched, offering customers an integrated one-stop online shopping experience across leading Hong Kong brands on a single mobile app.

The Group remains focussed on making efficiency improvements across its existing businesses to drive future growth. Good progress has been made in a number of businesses, including JEC, HACTL, Jardine Restaurants and Gammon, to implement measures in areas such as procurement, shared resources and operations. HACTL has, for example, increased its capacity to handle pallets by 30% by enhancing its use of robotics, as well as introducing automation more generally to increase efficiency. The Group has also begun implementation of an in-house Global Business Services function, to serve the growth and technology needs of its subsidiary businesses.

Enhancing Leadership and Entrepreneurialism

Jardines continues its work to create a diverse and inclusive culture where everyone can succeed. During the period, we launched a new diversity and inclusion (‘D&I’) strategy to help progress our ambitions across the Group. New initiatives included a learning campaign on inclusive leadership, a comprehensive review to enhance HR policies and new processes which support D&I. We have also developed targets for increasing female representation in our workforce and leadership. We recognise further progress needs to be made to achieve our objectives.

The Group is working hard to support the growth of the next generation of leaders within our businesses, ensuring our colleagues can develop the skills they need.

We are also aiming to create an owner mindset among our staff, and supporting this by enhancing our incentive structures to focus less on current profits and more on value creation over a longer time horizon. This longer-term view also incentivises experimentation and innovation.

The Group’s Investment and Business Development Committee (‘IBDC’) is accelerating decision-making and helping us establish and support new teams, as well as bringing focus to specific project investment proposals. The IBDC also references macro trends to identify new opportunities to grow and serve our customers across Asia.

Progressing Sustainability

The Group has made substantial progress in driving its sustainability agenda and increasing visibility of the extensive range of activity taking place across our businesses.

An important milestone in the Group’s sustainability journey was the publication of our inaugural Sustainability Report at the end of June. This followed extensive work over the past year 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. Eight other Group businesses also published sustainability reports during the first half, three for the first time.

The Group demonstrated its commitment to addressing climate change and promoting decarbonisation, by publishing a statement in June 2022 clarifying its support for a Just Energy Transition to a low carbon economy in the geographies where we operate. The statement contains commitments to scale up investments in renewable energy and related innovations; diversify into non-coal mineral mining, and make no investments in new thermal or metallurgical coal mines or new thermal coal-fired power plants.

In addition, the Company and JC&C published TCFD-aligned disclosures in their sustainability reports.

The Group-wide colleague volunteering programme which was launched at the end of last year, to facilitate participation by colleagues across the Group in a range of social inclusion and other activities, continues to gather momentum.

People

Ensuring the safety and wellbeing of our people remains a top priority, as they face extensive challenges amid the ongoing pandemic. We continue to support our colleagues' health and wellbeing and invest in their development. We would like to thank all our colleagues for their continuing dedication, hard work and professionalism throughout the period.

Outlook

There was a strong improvement in the Group’s profitability in the first half compared to the same period last year, with a significantly improved performance in Southeast Asia and a further contribution to growth from the simplification of the Group’s holding structure, which has now fully annualised. COVID-19 continues to impact the Group’s businesses in Hong Kong and on the Chinese mainland, however, and conditions there remain uncertain for the second half of the year.

Taking this together with expected lower sales in Hongkong Land’s mainland China development property business and stronger comparable results in the second half of 2021, the Group expects growth to substantially moderate for the full year.

The Group remains confident that its businesses have the right strategic focus and valued market positions and are progressing well to meet the rapidly-evolving needs of their customers. With this foundation and substantial resources available to leverage attractive investment opportunities in our core growth markets across Asia, the Group is well positioned to drive sustainable mid- and long-term earnings growth.

Ben Keswick, Executive Chairman 

^{* 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 2022 and 31st December 2021, respectively. Net asset value per share is based on the book value of shareholders’ funds. 
The interim dividend of US¢55.00 per share will be payable on 12th October 2022 to shareholders on the register of members at the close of business on 19th August 2022 and will be available in cash with a scrip alternative.}