Group Managing
Director’s
Review

John Witt,

Group Managing Director

The Group performed well in 2023 and, despite facing increasing headwinds in the second half of the year, achieved a new record level of profit.

We remain focussed on addressing the short-term challenges our businesses face from local and global economic pressures. As the pace of change increases, we are focussed on advancing our strategic priorities with urgency, as outlined below.

Enhancing Leadership and Entrepreneurialism

In the last year, the Group has made several significant senior appointments to enhance leadership and drive future growth, including the appointment of new chief executives at DFI Retail, Mandarin Oriental and Hongkong Land.

Scott Price succeeded Ian McLeod as Group Chief Executive of DFI Retail with effect from 1st August 2023. Scott is an experienced senior business executive with 25 years’ international experience, mostly in Asia, spanning the retail, logistics and consumer packaged goods sectors.

Since joining DFI Retail, Scott has visited all its formats and markets to meet colleagues and learn about the group’s business and customers. He has introduced a new strategic framework, which will support the group’s capital allocation priorities and growth plans over the coming three to five years. The new framework is centred on putting the customer first – evolving the business at the same pace as customers’ changing shopping behaviours; focussing on the group’s people – embedding core values throughout the group, speeding up decision making and improving diversity, equity and inclusion to ensure local relevancy of decision-making to customers; and driving improved shareholder returns – through a disciplined capital and resource allocation approach.

Laurent Kleitman succeeded James Riley as Group Chief Executive of Mandarin Oriental with effect from 1st September 2023. Laurent joined the group from LVMH, where he was President and CEO of Parfums Christian Dior, and brings many years’ experience in building iconic consumer brands across the beauty and broader FMCG sectors.

In his first few months at Mandarin Oriental, Laurent has visited the group’s properties around the world, met with owners and partners and spent time listening to and learning from the group’s many colleagues. Going forward, he aims to scale up the management business, further elevate the brand to become the reference point in luxury hospitality and enrich the group’s service proposition to guests and owners.

In November 2023, we announced that Michael Smith will succeed Robert Wong as the new Chief Executive of Hongkong Land, effective 1st April 2024. Michael brings 30 years of real estate, capital markets and investment banking experience. He was most recently Regional Chief Executive Officer of Europe and the US at Mapletree Investments, a global real estate development, investment, capital and property management company. Michael grew Mapletree Investment’s Europe and US businesses through his successful build-out of an entrepreneurial and high-performance organisation.

Elton Chan, currently the Chief Executive of Jardine Schindler Group and a non-Executive Director of Zhongsheng, will succeed Y.K. Pang as Chief Executive of the Jardine Pacific group of companies, with effect from 1st April 2024. Prior to his current role at Jardine Schindler Group, Elton was Managing Director of Zung Fu China. He joined Jardines in 2004 and has worked in a range of senior management roles across the Group.

I would like to thank Ian, James, Robert and Y.K. for their significant contributions to the Group.

A crucial part of building an entrepreneurial culture is finding, developing and keeping the right leadership talent, and this is a high priority for the Group and its companies. We also recognise the importance of having the right management structure to support the future development of our portfolio and identify new growth areas.

During the year, we have continued to invest in developing our leaders and giving them opportunities to advance their careers within different businesses across the Group, with multiple senior management progressions happening during the period.

We are also focussed on assessing and developing the next generation of leaders across our businesses. We offer colleagues the training and support they need to deal with the challenges and opportunities they face, both in the near- and the long-term. We supplement our talent planning with Group-wide leadership development programmes, co-designed with world-class institutions including IMD and INSEAD.

Jardines also continues to build a diverse and inclusive culture where anyone can succeed. Our strategy includes a five-year Inclusion, Equity and Diversity target, with an initial focus on gender representation. In addition, each Group business has set its own targets for improving Inclusion, Equity and Diversity in the workplace.

Evolving the Group Portfolio

We see the evolution of the Group’s portfolio as crucial to ensuring the long-term growth and sustainability of our business. We allocate capital towards strategic growth initiatives, both at the Group level and within our Group companies, while divesting non-strategic and lower-yielding assets.

Our diversified presence in China and South East Asia, as well as our balanced portfolio across sectors, has enabled us to perform well even in challenging market conditions. We continue to focus on further strengthening our position in the high-potential markets of Asia and in those industries where we can establish a leading position, to create long-term value and ensure sustainable growth.

Our primary goal is to expand our operations in areas with the greatest potential for future growth, including a number of emerging ASEAN markets. We aim to align ourselves with key trends in these markets, such as continuing urbanisation and the expanding middle class. We are actively seeking growth opportunities in markets like Indonesia and Vietnam, while also developing our business interests in China.

We also recognise the continuing growth opportunities in our established markets, such as Hong Kong and Singapore, which provide a stable foundation and strong cash flow.

Our capital allocation strategy prioritises organic investment in our portfolio to drive long-term growth and returns, while also aiming to increase dividends over time. We then focus on investing in new business opportunities and carrying out share buybacks in our companies as appropriate. Our strategy is supported by a strong balance sheet, and we are increasingly focussed on ensuring that our investment opportunities align with our sustainability goals.

During 2023 and, as we enter 2024, we have continued to progress the simplification of the Group’s portfolio and lay the foundations for the next stage of its growth. In March 2023, we completed the sale of our Motors business in the United Kingdom for US$402 million. In September 2023, the Group completed the sale of its 28.22% stake in Hong Kong-listed Greatview Aseptic Packaging Company for US$128 million. In March 2024, the Group completed the sale of its 50% stake in Jardine Aviation Services Group.

In March 2023, DFI Retail sold its Malaysia Grocery Retail business and it completed the sale of several associated properties over the course of the second half of the year.

In line with Mandarin Oriental’s strategy for driving future growth, primarily through developing its management business and realising capital, in 2023 the group sold its Jakarta hotel to Astra and signed an option to sell its Paris hotel, in each case retaining the management contract.

Against the backdrop of challenging market conditions in China, the Group continued to make strategic investments in South East Asia.

Astra continued its diversification into non-coal assets, as part of its commitment to a just transition, with United Tractors’ acquisition of interests in two nickel mining and processing businesses: the acquisition of a 90% effective share ownership of PT Stargate Pasific Resources and PT Stargate Mineral Asia, for total consideration of US$319 million; and the acquisition of a 19.99% interest in Nickel Industries, for US$616 million.

Astra took further steps to deliver its commitment to transition away from coal and into renewables through the acquisition by its subsidiary United Tractors, in December 2023, of a 49.6% interest for US$52 million in Supreme Energy Sriwijaya, which owns an operating geothermal project in South Sumatera with a total existing capacity of 98 MW.

Astra progressed its healthcare strategy by investing an additional US$100 million in Halodoc, a leading digital health ecosystem platform in Indonesia, bringing its ownership to 21%.

The Group’s commitment to South East Asia was reinforced with JC&C investment of a further US$350 million in Truong Hai Group Corporation (‘THACO’) in Vietnam, through subscription for a five-year convertible bond. JC&C also increased its interest in Refrigeration Electrical Engineering (‘REE’) from 33.6% to 34.9% through a series of on-market purchases, for around US$14 million. In Singapore, JC&C completed a sale and leaseback arrangement of its properties for US$225 million.

The Company repurchased 4.4 million of its own shares for cancellation in 2023 for US$209 million, primarily in order to cancel the impact of scrip issues during the year on overall share count and EPS. The Group also acquired 5.8 million shares in JC&C for US$136 million during the year.

These examples illustrate the focus of the Group on implementing its capital allocation and portfolio strategy and on seizing opportunities when they arise to optimise our portfolio and prepare the Group for future growth.

Driving Innovation and Operational Excellence

The Group continues to focus on delivering operational excellence in both its existing and new businesses, and 2023 saw strong progress in driving greater efficiency and productivity. Many of the Group’s businesses progressed improvement initiatives in the year, with HACTL increasing its capacity to handle pallets by 30% by enhancing its use of robotics, as well as introducing automation more generally to increase efficiency. DFI Retail’s transformation programme also continued to deliver real improvements in operating metrics across its banners. The Group is progressing its implementation of an in-house Global Business Services function to support the Group’s businesses, while Mandarin Oriental has made encouraging progress in driving operational efficiency through modernising its systems and processes required to support evolving business needs.

The increased efficiencies which are being delivered across our businesses help them demonstrate adaptability and agility in addressing the challenges they face in delivering future growth.

The Group has continued to focus on driving innovation as a key strategic priority. In November 2023, Astra launched bank saqu, a digital banking service with a focus on small business owners and small entrepreneurs in Indonesia. In the automotive space, Astra acquired the leading online used car platform in Indonesia. This has been integrated with Astra’s existing used car business to create a preeminent position in both online/offline used car sales as the market grows. In June 2023, JC&C announced a used car and aftersales partnership with Carro, a leading online auto platform.

Mandarin Oriental is implementing its Guest Experience Programme, which will greatly improve the group’s ability to recognise, understand and engage guests. A redesign of Fans of M.O. will enhance Mandarin Oriental’s ability to attract and retain guests. Mandarin Oriental is also establishing a bespoke relationship management service, to build brand-level loyalty with ultra-high net worth guests.

We continue to seek new inorganic growth opportunities in the digital economy, emerging industries and new geographies. This is well illustrated by Astra’s partnership with Equinix, one of the world’s largest digital infrastructure companies, to develop data centres in Indonesia, as well as United Tractors’ acquisition of interests in Supreme Energy Sriwijaya, Nickel Industries and Stargate.

Progressing Sustainability

Sustainability remains a key strategic priority for the Group. In 2023, we continued to leverage and build on the work our Group companies are doing on sustainability, to create an aligned, focussed approach which maximises the impact Jardines has in its communities and on the environment, and enables us to create real scale in what we do.

In Leading Climate Action, we continue to build momentum on our net-zero strategy and our businesses have set decarbonisation targets to align with the trajectory needed to limit global warming to 1.5°C. All our businesses have also developed decarbonisation pathways to achieve their targets for reducing Scope 1 and 2 emissions. We are working towards understanding and reducing our Scope 3 emissions over time.

In Driving Responsible Consumption, most businesses have identified their material waste streams and set individual waste reduction/diversion targets, and we are looking for synergies and cooperation opportunities between our businesses on circular solutions. We are also building up expertise to understand our dependencies and impacts on biodiversity, so we can adopt industry-leading practices for biodiversity management.

The Group continues to operate some businesses in Indonesia which are the focus of stakeholders on environmental and biodiversity-related issues, but we believe that our businesses are taking appropriate and extensive steps to protect biodiversity and the environment, while at the same time supporting the communities where they operate.

In relation to Shaping Social Inclusion, we are prioritising the promotion of access to quality education and efforts to create greater awareness of mental health.

Summary of Performance

The Group delivered a good performance in 2023, with a 5% increase (+7% at Constant Exchange Rates (‘CER’)) in underlying profit to US$1,661 million, and 5% growth (+6% at CER) in underlying earnings per share to US$5.74.

Growth was primarily driven by strong results from Astra and significantly improved contributions from DFI Retail and Mandarin Oriental. Growth continued in the second half in all three businesses, but saw a marked slowdown as market conditions weakened (and prior year comparables became tougher). There was a significantly lower contribution in 2023 from Zhongsheng and contributions from JC&C’s other businesses (ex-Astra), Hongkong Land and Jardine Pacific were also lower. Further details of the individual businesses are provided below.

Net non-trading items were negative. The net non-trading losses in 2023 consisted primarily of the Group’s fair value losses arising from the revaluation of the Group’s investment properties portfolio of US$1,066 million and impairment of goodwill of US$172 million, offset by gain on sale of property interests of US$105 million and the US$101 million share of Zhongsheng’s 2022 second half profit (resulting from a change in accounting policy as explained under the Zhongsheng section below).

Cashflow remained strong both at Group and parent company level. The Group’s cash flows from operating activities for the year was US$4.6 billion and free cashflow at parent company¹ was US$778 million, amply covering the Company’s external dividend payments by 1.7x. The Group’s balance sheet remains strong with gearing of 15%, slightly up from 13% at the end of 2022, despite significant capex and enhanced external dividend payments at Astra during the year.

The Group continued to focus during 2023 on making organic and strategic investments to sustain the businesses and drive future growth. The Group’s organic capital expenditure in 2023, including expenditure on properties for sale, was US$3.4 billion (2022: US$3.8 billion), and strategic investments added a further US$1.8 billion (2022: US$1.5 billion) to capital expenditure in 2023. Additional capital investment within the Group’s associates and joint ventures was over US$5.2 billion (2022: US$4.3 billion). The Group continues to invest for the long-term and ensure that its businesses have the resources to drive future growth.

These results demonstrate, once again, the value of our diversified portfolio, enabling Jardines to produce a resilient profit and cash performance, despite challenging conditions in a number of our sectors and markets.

The strong performance of the Group’s businesses in Indonesia, together with the challenges faced by our businesses in Hong Kong and on the Chinese mainland, led to 56% of the Group’s profit for the period coming from South East Asia and 37% from China.

Outlook

There was a very solid performance overall by the Group in 2023, exceeding pre-pandemic profit levels despite increasingly challenging conditions as the year progressed.

The Group enters 2024 facing continued market challenges in key segments in China and Vietnam, as well as lower market prices for a number of Astra’s key commodity outputs in Indonesia.

We remain confident, however, in our long-term strategy across our core markets in Asia and will continue to focus on our strategic priorities in order to deliver growth and long-term value, benefitting from our diversified portfolio.

Certain financial information of the Group’s listed subsidiaries presented and referred to in the following individual business performance section represents the financial information of each respective business of the Group as reported within their own Annual Report (‘100% basis’). References to profit attributable to shareholders is therefore the performance attributable to the shareholders of the respective business, which we believe provides the reader a better understanding of the relevant listed Group subsidiaries. The Jardine Matheson Group’s attributable interest in each business is disclosed, where relevant, within the segmental information in Note 2 of the financial statements.