Jardine Pacific

• Jardine Pacific produced an underlying profit of US$182 million, 11% higher than 2019
• Extensive focus on driving operational improvements
• Net profit after net non-trading gains was US$514 million

Jardine Pacific produced an underlying net profit of US$182 million, 11% higher than 2019. Net profit after net non-trading gains was US$514 million. There was an extensive focus in the year across Jardine Pacific’s businesses on driving operational improvements. These initiatives required significant investment but the benefits are beginning to be seen in improved business performance and Jardine Pacific is well set for future growth.

Jardine Restaurants saw profits rise by US$19 million, with a better performance from Pizza Hut in Hong Kong and Taiwan driven by strong delivery sales, partly offset by asset impairment on loss-making stores. There were weaker performances by other banners which were more affected by COVID-19. JEC delivered good profit growth. Its Hong Kong operations saw stable performance, but some of the regional businesses had a difficult year. Gammon had a good year, with a profit contribution of US$38 million, 7% higher than last year, mainly due to the timing of project completions. The order book remains healthy, boosted by securing some large civil projects at Hong Kong International Airport. HACTL’s performance was better than last year, due to an 8% increase in cargo throughput and productivity improvements.

Jardine Schindler saw lower profits, with underperformance in most countries, in particular softer sales and margins in its New Installation business. Jardine Aviation Services delivered an overall loss. Its performance was impacted by the very low flight volumes resulting from the ongoing challenges to the aviation sector, and the business also incurred operational efficiency costs.

All Jardine Pacific businesses benefitted from the receipt of government support, which enabled them to take steps to preserve employment.

Under other interests, Greatview reported good sales growth. Its China business remained resilient, while its international business benefitted from the group’s ongoing market and customer rationalisation strategy. The disposal of JTH was completed with the sale of Innovix in September 2020.

Jardine Motors

• Jardine Motors produced higher underlying net profit in 2020 of US$214 million
• Higher contributions from the investment in Zhongsheng and Zung Fu on the Chinese mainland
• The Hong Kong business saw a lower underlying performance
• Difficult market conditions continued in the United Kingdom as a result of the pandemic, which led to the temporary closure of dealerships and lower demand

The Group’s Motors business produced higher underlying net profit in 2020 of US$214 million, a 9% increase, benefitting from a higher contribution from the investment in Zhongsheng in respect of the second half of 2019 and the first half of 2020. There was also a higher contribution from Zung Fu on the Chinese mainland, which delivered better performance in car sales – benefitting from a rapid recovery in demand from the second quarter onwards – and also implemented cost mitigation measures.

The Hong Kong business saw a lower underlying performance and difficult market conditions continued in the United Kingdom as a result of the pandemic, which led to the temporary closure of dealerships and lower demand.

Hongkong Land

• Underlying profit of US$963 million, down 11%
• Net asset value per share down 7% on lower capital values
• Dividend level maintained
• 43% interest retained in the prime West Bund project in Shanghai
• Balance sheet and funding position remain strong

Hongkong Land delivered underlying profit of US$963 million, 11% lower than the prior year. Performance was negatively impacted by COVID-19, particularly in relation to retail rent relief in the Investment Properties business and a lower contribution from Development Properties as a result of fewer planned residential completions. On the Chinese mainland, however, sentiment in the group’s markets has recovered to pre-pandemic levels.

There was a loss attributable to shareholders of US$2,647 million, reflecting net losses of US$3,611 million due to lower valuations of Investment Properties. This compares to a profit attributable to shareholders of US$198 million in 2019, which included net revaluation losses of US$878 million.

The group’s balance sheet remains strong and it remains well-financed, with net debt of US$4.6 billion at the year end, up from US$3.6 billion at the end of 2019 – primarily due to the acquisition of the West Bund site – and with net gearing of 13% at the year end, up from 9% at the end of 2019.

Investment Properties

In Hong Kong, office leasing activity in Central was largely subdued as a result of economic uncertainties brought about by the pandemic. However, as a result of the group’s active lease management in recent years, the group’s Central office portfolio performed relatively well amidst the current market downturn. Rental reversions were broadly neutral, and average rents rose slightly. Singapore saw lower vacancy, positive rental reversions and increased rents.

Retail market sentiment in Hong Kong was severely impacted by the pandemic and resulting travel restrictions, although there were modest improvements in the second half of the year. The contribution from the group’s retail portfolio was lower, mainly due to the provision of rent relief. In Beijing, WF CENTRAL experienced a significant decline in tenant sales and footfall in the first half of the year due to the pandemic, but trading performance in the second half of the year recovered to pre-pandemic levels buoyed by the strong recovery in luxury retail spending on the Chinese mainland.

Development Properties

The Development Properties division was impacted by varying levels of disruption across the Chinese mainland due to the temporary suspension of sales and development activities, with full year performance affected by construction delays which led to fewer planned residential completions. There were also construction delays in Singapore. Sentiment on the Chinese mainland has, however, recovered to pre-pandemic levels.

Planning and development of the West Bund site in Shanghai are proceeding on schedule. The acquisition provides an attractive opportunity to develop and operate a commercial complex of scale in line with Hongkong Land’s long-term strategy. The project mainly comprises office and retail space, with a developable area of 1.1 million sq. m. and will be developed in five phases to 2027.

The project will be jointly developed with a strategic investor headquartered on the Chinese mainland and a government-held special purpose vehicle. The group will maintain a 43% interest in the joint venture.

Hongkong Land participated in a number of land auctions on the Chinese mainland during the year, but it remained difficult to secure new sites due to a highly competitive primary land market. The group did, however, secure a wholly-owned, predominantly residential project in Chongqing.

During the year the group continued to focus on addressing changes in customer behaviours, and the need to adapt and align to new situations resulting from COVID-19, and it is continuing to add to its suite of digital services and flexible spaces that are available to tenants and customers.

In November 2020, the group launched its multi-year Hongkong Land HOME FUND, which was initiated to focus on creating initiatives that benefit younger generations and the group’s aspiration to foster a more inclusive society. Initiatives financed by the Fund will be launched in the coming months. The group received the ‘Sustainability Achievement of the Year’ award at the RICS Awards 2020 in Hong Kong in relation to its management of the Hong Kong Central Portfolio.

Dairy Farm

• Underlying profit of US$276 million, down 14%
• Substantial sales and profit growth in Grocery Retail
• Solid trading in Home Furnishings
• Health and Beauty, Convenience and Maxim’s significantly impacted by COVID-19

Dairy Farm’s underlying profit for the year was US$276 million, 14% lower than last year.

Grocery Retail

There was a good performance by Grocery Retail, which saw higher contributions from Hong Kong, Singapore, Malaysia and Taiwan. Profit growth was driven by the benefits realised from improvement programmes, strong like-for-like sales growth and government support. The performance of the business in Indonesia was significantly impacted by pandemic-related movement restrictions, which reduced hypermarket custom.

Home Furnishings

IKEA delivered good profit growth, mainly in Hong Kong and Taiwan, with new store openings and strong e-commerce growth offsetting pandemic-related disruptions. The business also benefitted from lower cost of goods, strong cost controls, reduced pre-opening expenses and government support. IKEA has a strong development pipeline, with two new stores to open in 2021.

Health and Beauty

There was a significantly lower contribution from Dairy Farm’s Health and Beauty business, with Mannings in North Asia severely impacted by low tourist traffic. The business has implemented price investment and cost management initiatives in order to address the challenges it faces.

Convenience

The group’s Convenience business saw profits reduced by lower sales and a sales mix shift to lower margin products.

Associates

The performance of 50%-owned Maxim’s was badly impacted by pandemic-related restrictions, which led to reduced visits to stores and some store closures.

Dairy Farm’s 20.1%-owned associate Yonghui performed well, with strong sales and profit growth in the first half.

The launch of the yuu rewards programme at the end of July 2020 represents a critical milestone in driving Dairy Farm’s modernisation and digital transformation. yuu will support a more customer-centric approach across all the Dairy Farm banners and drive an enhanced level of customer engagement.

During the period, Dairy Farm also launched Meadows, its new own-brand offering, in Hong Kong, Singapore and Malaysia. Over 600 items have already been launched across banners and markets at lower prices. There has been a very positive reaction from customers. The future growth of the group’s own-brand offering will allow it to leverage scale and help it to gain competitive advantage.

Dairy Farm’s multi-year transformation programme to reshape and reorganise the business, adapting to the changing needs of customers, continued to gain momentum during 2020. Opportunities continue to be unlocked across the group as the business seeks to leverage its scale effectively and develop a more coherent approach to improving its customer proposition, both by banner and at a country level. The group’s space optimisation plan, new store formats and improvement programmes generated greater efficiencies and delivered tangible benefits in the year.

Mandarin Oriental

• Underlying loss of US$206 million
• COVID-19 travel restrictions dramatically reduced demand
• Extensive cost reduction measures implemented across the business
• Robust liquidity and funding position
• Development pipeline remains solid and four new management contracts signed
• No dividend proposed for 2020

Mandarin Oriental moved from an underlying profit of US$41 million in 2019 to an underlying loss of US$206 million in 2020, as all hotels were severely impacted by COVID-19.

Government actions to curtail the pandemic drastically reduced both international and domestic travel in 2020. Many countries imposed significant restrictions on freedom of movement and on hospitality operations.

Against this background, combined total revenue of the group’s hotels under management fell by 55% in 2020 compared to 2019 and the group’s profitability was severely impacted.

A US$31 million impairment of the carrying value of the Geneva hotel occurred during the year, following a significant decrease in the market value of the leasehold interest. In addition, there was a 15% decrease in the valuation of the Causeway Bay redevelopment (previously the site of The Excelsior hotel in Hong Kong). The redevelopment, net of future construction costs, was valued at some US$2.5 billion, a decrease of US$475 million during the year.

Extensive cost reductions were implemented from early in the year, including a 33% reduction in payroll costs through a combination of measures, including furlough, unpaid leave, reduced pay and redundancies. Substantial reductions in non-payroll costs were also achieved. Many of these measures are continuing. Results benefitted from government financial support in some countries.

Trading conditions remain extremely challenging and the group’s performance will not substantially improve until travel restrictions are relaxed. An underlying loss is expected to be reported for the first half of 2021.

In Asia, most hotels were able to remain operational through the year, albeit with sharply reduced occupancy due to constraints on travel. There was, however, a recovery in the second half of the year for hotels on the Chinese mainland. In Europe and America, hotels closed for much of the second quarter, with most reopening thereafter. The relaxation of restrictions on travel allowed some recovery in business levels. A resurgence in COVID-19 cases towards the end of the year, however, brought back many, even stricter, restrictions. The group’s managed hotels in resort locations, such as Dubai and Bodrum, performed well when travel conditions permitted.

The group’s development pipeline remains strong, with many projects at an advanced stage. The group took over the management of the Emirates Palace in Abu Dhabi at the beginning of 2020 and the Al-Faisaliah in Riyadh in March 2021, increasing the total number of hotels under operation to 34. New management contracts were signed and announced in 2020 in respect of Zurich and Vienna. In 2021, a new resort location was announced in Da Nang, Vietnam. The recently restored Mandarin Oriental Ritz, Madrid, in which the group has a 50% interest, and the Mandarin Oriental Bosphorus, Istanbul are expected to open in the first half of this year.

Jardine Cycle & Carriage

• Underlying profit 50% lower at US$429 million
• Significantly weaker performances from Astra’s automotive, financial services and heavy equipment and mining operations
• Direct Motor Interests performance affected by lower profitability in Cycle & Carriage Singapore and Tunas Ridean
• Other Strategic Interests performance relatively stable
• Proposed final dividend of US¢34 per share, total dividend of US¢43 per share for the year, 51% lower than 2019

Jardine Cycle & Carriage’s (‘JC&C’) underlying profit attributable to shareholders was 50% lower than the same period last year at US$429 million. After accounting for non-trading items, profit attributable to shareholders was US$540 million, 39% lower than the same period last year. Non-trading items in 2020 included a US$188 million gain on the disposal of Astra’s investment in Permata Bank and US$109 million unrealised fair value gains related to non-current investments. These were partly offset by an impairment loss of US$182 million in respect of the group’s investment in Siam City Cement, reflecting several years of challenging market conditions.

Astra’s contribution to the group’s underlying profit of US$309 million was 57% down from the previous year. There were weaker performances from its automotive, financial services, and heavy equipment and mining divisions.

The underlying profit from Direct Motor Interests was 78% lower at US$14 million, mainly due to lower contributions from Cycle & Carriage Singapore and Tunas Ridean in Indonesia.

Other Strategic Interests contributed an underlying profit of US$120 million, down 5% from the previous year.

Direct Motor Interests

Direct Motor Interests faced challenging trading conditions during the year. Cycle & Carriage Singapore saw lower sales and weaker margins. Passenger car sales and market share both fell. In Indonesia, Tunas Ridean’s automotive business saw reduced sales, while its consumer finance operations were adversely impacted by lower lending volumes and increased loan provisioning. Cycle & Carriage Bintang in Malaysia contributed a lower loss than the prior year, with improved sales in the second half of the year due to a sales tax reduction, as well as cost savings initiatives.

Other Strategic Interests

Under Other Strategic Interests, Thaco saw a lower underlying performance than last year. Its automotive business provided a lower contribution due to reduced margins, attributable mainly to difficult market conditions in the first half of the year as a result of the pandemic, partly offset by higher unit sales. Thaco’s real estate business saw better performance than the previous year, as sales resumed on the back of a market recovery, while its new venture in the agriculture sector contributed a loss.

Siam City Cement’s contribution was higher than the previous year, with margins benefitting from improved operational efficiencies, which helped to offset a decline in sales.

There was a higher contribution from REE, due to a stronger performance by the real estate business and the effect of an increase in JC&C’s shareholding to 29.8%, partly offset by weaker performances from its hydropower investments and its M&E business.

The group’s investment in Vinamilk delivered slightly higher dividend income of US$37 million. Vinamilk’s export business continued to grow while its domestic dairy segment remained relatively stable.

Astra

• Net earnings per share down 53% (before the gain on sale of investment in Permata Bank)
• Car sales down 50% with a slight decline in market share, while motorcycle sales down 41% with increased market share
• Increased loan loss provisions in the financial services business
• Lower coal prices impacted heavy equipment sales and mining contracting volumes
• Agribusiness benefitted from higher crude palm oil prices
• Strong balance sheet and funding position

Astra’s net profit for 2020 under Indonesian accounting standards, including the gain from the sale of the group’s investment in Permata Bank, was Rp16.2 trillion, equivalent to US$1.1 billion, 26% lower than 2019. Excluding this one-off gain, the group’s net income would have decreased by 53% to Rp10.3 trillion (equivalent to US$0.7 billion), primarily due to weaker performances by its automotive, heavy equipment and mining, and financial services divisions, as a result of the impact of the pandemic and related containment measures.

Automotive

Net income from Astra’s automotive division decreased by 68% to US$185 million, reflecting a significant drop in sales volume. After suffering a net loss in the second quarter, the automotive division saw a return to profitability in the second half of the year following the partial easing of pandemic containment measures. The wholesale market for cars declined by 48% in 2020 and Astra’s car sales were 50% lower, reflecting a slight decline in its market share.

The wholesale market for motorcycles declined by 44% and Astra Honda Motor’s sales decreased by 41%, with an increased market share. Astra Otoparts saw a decrease in net income, mainly due to lower revenues from the original equipment manufacturer, replacement market and export segments.

Financial Services

Net income from the group’s financial services division decreased by 44% to US$226 million in 2020, primarily due to increased provisions to cover higher non-performing loans in the consumer and heavy equipment-focused finance businesses. The consumer finance businesses saw a 23% decrease in new amounts financed. There was a 46% decrease in the contribution from the group’s car-focused finance companies and a fall of 42% in the contribution from its motorcycle-focused business.

Astra’s heavy equipment-focused finance operations saw a 17% decrease in new amounts financed to US$246 million. The net income contribution from this segment decreased by 59%.

General insurance company Asuransi Astra Buana reported a 16% decrease in net income, mainly caused by lower underwriting income. In November, the group acquired a further 49.99% of PT Astra Aviva Life (now PT Asuransi Jiwa Astra) from Aviva International Holdings Limited, bringing its ownership to 99.99%.

Astra completed the sale of Permata Bank in May 2020 for a consideration of US$1.1 billion.

Heavy Equipment, Mining and Construction

Net income from Astra’s heavy equipment, mining and construction division decreased by 49% to US$234 million, mainly due to lower heavy equipment sales and mining contracting volume caused by weaker coal prices for most of the year. Komatsu heavy equipment sales fell by 47%, while parts and service revenues were also lower.

Mining contractor Pamapersada Nusantara recorded 17% lower overburden removal volume and 13% lower coal production. United Tractors’ coal mining subsidiaries achieved 9% higher coal sales, but their performance was affected by lower coal prices. Agincourt Resources reported 22% lower gold sales at 320,000 oz.

General contractor Acset Indonusa reported a net loss of US$90 million, mainly due to the slowdown of several ongoing projects and reduced project opportunities during the pandemic. In September 2020, the company raised US$102 million from a rights issue to reduce debt and strengthen its capital structure. United Tractors’ ownership of Acset increased from 50.1% to 64.8% as a result.

Agribusiness

Net income from the group’s agribusiness division was US$45 million, significantly higher than 2019, mainly due to higher crude palm oil prices, which rose by 28%. Crude palm oil and derivatives sales fell by 14%.

Infrastructure and Logistics

Astra’s infrastructure and logistics division saw its net income fall significantly from US$21 million to US$3 million in 2020, due to lower toll road revenues and lower operating margin in Serasi Autoraya. The group’s toll road concessions experienced a 12% fall in traffic volume. Serasi Autoraya’s net income decreased by 55%, mainly due to lower operating margins in its car rental business and lower used car sales, despite a slight increase in the number of vehicles under contract.

In November, the group acquired Jakarta Marga Jaya, which owns a 35% stake in Marga Lingkar Jakarta, the operator of the 7.7 km Kebon Jeruk-Ulujami toll road, part of the Jakarta Outer Ring Road I.

Information Technology

Net income from the group’s information technology division was 81% lower at US$2 million, primarily due to lower revenues in the document solution and office service businesses of Astra Graphia.

Property

Net income from the group’s property division increased slightly to US$6 million, mainly as a result of higher occupancy at Menara Astra and earnings recognised from its Asya Residences development project.