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Jardine Matheson and companies affected by pandemic; remains in 'strong' financial position

Jardine Matheson posts 1Q business updates.

Jardine Matheson Holdings announced that it and its companies have seen a positive y-o-y recovery in performances for their 1QFY2022 ended March period.

Leading the recovery is Astra, Hong Kong Land (HKL), Jardine Cycle & Carriage (JC&C) and the Motors business, with all delivering increases in profit. Jardine Pacific saw a decline year-on-year and the performances of DFI Retail and Mandarin Oriental were broadly flat, with these businesses impacted by the resurgence of the pandemic in North Asia.

Overall, the group’s outlook continues to be uncertain, reflecting both the challenges it faces, including Covid-19 restrictions in China - and the good recovery opportunities for many of its businesses in Southeast Asia.


Hong Kong Land

HKL’s underlying profit in the period was higher than the same period a year ago, principally due to a higher number of Development Properties completions on the Chinese mainland, while the contribution from the group’s investment properties was broadly unchanged.

In Hong Kong, the increase in office leasing activity which was seen since 1H2021 was reversed upon the onset of the fifth wave of the pandemic. There have, however, been signs of a recovery in leasing activity since the partial easing of anti-pandemic measures in late April.

Physical vacancy at Mar 31 was 5.6%, compared to 5.2% at the end of 2021. On a committed basis, vacancy was 5.0%, up slightly from 4.9% at the end of last year. Rental reversions continued to be negative in the period.

The group’s Landmark retail portfolio in Hong Kong continued to be negatively affected by a lack of overseas visitors, with tenant sales lower y-o-y. The group is also providing a temporary rent relief to support selected tenants for 1H2022. Physical and committed vacancy at end March remained low at 0.4% and 0.3%, respectively.

For its development properties, market sentiment in mainland China for residential properties remain cautious despite relaxation of cooling measures. The Group’s attributable interest in contracted sales was US$213 million in 1QFY2022, compared to US$410 million a year ago.

In Singapore, leasing sentiment for the office portfolio is showing a recovery as travel restrictions ease. Rental reversions were positive in the period. Physical vacancy decreased to 5.6% at end March from 6.5% at the end of 2021. On a committed basis, vacancy was 3.1%, compared to 2.9% at end-2021.

The residential market in Singapore continue to show satisfactory demand despite cooling measures. The 407-unit Piccadilly Grand project, launched for sale in May 2022, has been well-received by the market, whilst pre-sales at the 638-unit Leedon Green project are performing within expectations. The Group’s attributable interest in contracted sales was US$45 million in the first quarter, compared to US$89 million in the equivalent period last year, due to the timing of sales launches

In February, the Group acquired a 49% interest in a residential site in the Tanjong Katong area in Singapore with a developable area of 590,000 sq. ft., which is expected to yield a total of 640 units for sale.

As previously announced, the group’s underlying profits for FY2022 are expected to be lower compared to the prior year, primarily due to the timing of sales completions on the Chinese mainland, while ongoing restrictions are expected to curtail the group’s sales and development activities.

The group’s financial position remains strong. Net debt increased to US$5.5 billion from US$5.1 billion at the end of 2021, primarily due to the scheduled payments for development sites acquired in the past six months. Committed liquidity was US$3.8 billion.

Dairy Farm International

Overall performance for DFI’s subsidiaries in 1QFY2022 was impacted by a number of factors.

In North Asia, the surge in Covid-19 cases and the resultant movement restrictions saw panic buying of core grocery products in the quarter, as well as a rush to buy Covid-19 protection items and anti-bacterial products. The trading performance of both grocery retail and health and beauty benefitted from these factors, which offset heavy reductions in foot traffic that negatively impacted convenience performance.

In Southeast Asia, stronger y-o-y performance within health and beauty broadly offset some softer performance in grocery retail as a result of normalisation of customer behaviours.

Like-for-like sales for the group’s grocery retail businesses were ahead of the same period last year.

In North Asia, Wellcome reported robust growth, driven by pantry-stocking behaviour and strong in-store execution in the face of challenging external conditions and supply chain constraints.

Sales performance in Southeast Asia was impacted by the easing of movement restrictions and store renovation disruptions in Singapore, as well as ongoing disruptions to stock availability caused by the pandemic in Malaysia.

Overall Grocery Retail profitability for the quarter was broadly in line with the prior year. Strong sales performance, particularly in Hong Kong, was offset by higher pandemic-related store expenses and increased electricity costs in Singapore caused by higher energy prices.

Sales and profit for the group’s convenience businesses in Hong Kong and South China were both significantly adversely affected by government-imposed Covid-19-related restrictions. Sales and profit for the 7-Eleven business in Singapore, however, both grew strongly as the easing of movement restrictions there supported the recovery of customer traffic.

Health and beauty businesses reported strong sales growth in the quarter, with Mannings’ revenues in Hong Kong experiencing a surge in demand for Covid-19-related products and over-the-counter medicines. Guardian’s like-for-like sales also grew strongly across Southeast Asia.

The home furnishings division saw revenue increase thanks to the annualisation impact of newly-opened stores in the prior year and strong e-commerce sales. Despite the challenges posed by Covid-19 and ongoing supply chain constraints, IKEA’s profitability in the quarter was broadly in line with the prior year, reflecting strong cost control.

Meanwhile, Maxim’s, the group’s 50%-owned associate, was adversely impacted by the pandemic. Yonghui saw increased underlying profitability thanks to improved sales revenue, higher gross margins and operating cost control. Robinsons Retail also kept up its upward momentum with strong growth in sales and profits.

Despite the prolonged impact of the pandemic on the group’s operations, the group remains confident in the long-term benefit potential of its transformation changes. The group is therefore continuing to make operating expense investments to drive the advancement of digital capacity and capital investments in stores as it seeks to catch up on planned investment, compromised over the previous two years as a result of the pandemic.

Mandarin Oriental

MO’s trading conditions for 1QFY2022 improved in most parts of the world compared to 1QFY2021. Government restrictions on international and domestic travel, however, hampered the operating performance in Asia, with properties in China being particularly affected, and these challenges have continued into 2QFY2022.

In Europe, Middle East and Africa (EMEA) and America, occupancy levels were lower than pre-pandemic levels for most properties, but room rates have held up well and are generally higher than in 2019. In Asia, both occupancy and room rates have remained substantially below pre-pandemic levels.

During the period, the group announced three new properties, in the Maldives, Costa Navarino and Cairo, increasing its pipeline of new hotels and residences under development to 25.

The Group recorded an Ebitda loss of US$1 million for 1QFY2022. The impact of continued travel restrictions in much of Asia was offset by a more robust performance in EMEA and America and tightly-controlled corporate costs. Owned hotels and the management business recorded an underlying EBITDA loss of US$6 million and an underlying Ebitda profit of US$5 million, respectively.

Underlying losses (unaudited) for the group were much improved compared to 2021, with the management business recording a marginal underlying profit (unaudited) in the period. As noted in the group’s FY2021 results, the outlook continues to improve in most markets, but there remains uncertainty in relation to China

The Group’s financial position is robust. Net debt at end March was US$542 million, and it held US$159 million of cash reserves and US$317 million in available, committed debt facilities. Gearing was 11% of adjusted shareholders’ funds.

Jardine Cycle & Carriage

JC&C delivered an improved performance in 1QFY2022, compared to the same period last year, mainly due to higher contributions from Astra and other strategic interests. THACO achieved higher automotive sales and
margins, but Siam City Cement was affected in particular by high energy costs.

JC&C’s direct motor interests delivered a relatively stable performance, with improved profits from Tunas Ridean and Cycle & Carriage Bintang. Cycle & Carriage in Singapore, however, recorded lower sales in challenging trading conditions.

Astra reported a significant y-o-y increase in earnings, driven primarily by the domestic economic recovery in Indonesia and higher commodity prices. Astra’s automotive division saw increased car sales as a result of luxury sales tax incentives, and the financial services division recorded higher lending volumes. The heavy equipment and mining division also saw a strong performance, with increased heavy equipment sales and higher coal selling prices, while the performance of Astra’s agribusiness division benefitted from higher crude palm oil prices.

On May 19, shares in Jardine Matheson closed at US$53.26; HKL closed at US$4.71; DFI closed at US$2.71; MO closed at US$2.03; and JC&C closed at US$29.25.


Photo: The Edge Singapore/ Albert Chua

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