Latest Earnings From Jardine Matheson Holdings Limited: What’s Next After Lower Revenue And Profit?

Last Friday, Jardine Matheson Holdings Limited (SGX: J36) reported its earnings for the first-half of 2016.

As a brief background, the company is one of the largest in Singapore’s stock market, with a market capitalisation of US$19.3 billion. It is a conglomerate with many subsidiaries that include other Singapore-listed companies. The company’s portfolio contains:

  • The private companies, Jardine Pacific and Jardine Motors Group;
  • The London-listed Jardine Lloyd Thompson Group;
  • The Singapore-listed bunch of Jardine Strategic Holdings Limited (SGX: J37), Hongkong Land Holdings Limited (SGX: H78), Dairy Farm International Holdings Ltd (SGX: D01), Mandarin Oriental International Limited (SGX: M04), and Jardine Cycle & Carriage Ltd (SGX: C07);
  • And the Indonesia-listed Astra International.

These companies in Jardine Matheson’s portfolio provide services in a wide range of areas, including engineering and construction, insurance broking, property investment and development, retailing, luxury hotels and motor vehicles related activities.

With that, let’s dig into Jardine Matheson’s latest results to find out how it did. Here are some important financial takeaways:

  • Revenue was down 3.8% year-on-year from US$18.8 billion to US$18.0 billion.
  • Profit attributable to shareholders jumped by 39% year-on-year to US$984 million. Consequently, earnings per share climbed by 38% to US$2.63.
  • But, underlying profit attributable to shareholders had declined by 4% from US$666 million in the first-half of 2015 to US$636 million. Underlyin gearnings per share dipped by 5% to US$1.70. The company also looks at underlying profit which strips away non-trading items; Jardine Matheson “considers this to be a key measure which provides additional information to enhance understanding” of the business. In any case, the non-trading gains that were recognised during the first-half of 2016 came mostly from Hongkong Land due to the revaluation of its investment properties.
  • Jardine Matheson’s net asset value (NAV) per share rose 4% from US$53.30 in the second-half of 2015 to US$55.29.
  • Moving on to the cash flow statement, the company reported positive free cash flow of US$1.16 billion (operating cash flow of US$1.72 billion and capital expenditures of US$559 million). This is lower than the previous year when free cash flow came in at US$1.27 billion (operating cash flow of US$1.81 billion and capital expenditures of US$541 million).
  • Net-debt (total borrowings minus cash) is at US$6.36 billion as of 30 June 2016, an improvement from the US$7.22 billion seen a year ago.
  • The company declared an interim dividend US$0.38 per share, unchanged from the first-half of 2015.

For the reporting half, improved results were seen from Jardine Motors, Jardine Cycle & Carriage, Dairy Farm, Jardine Pacific, and Hongkong Land.

But, declines were noted in Mandarin Oriental, Jardine Lloyd Thompson and Astra. Within Astra, weaker commodity prices had impacted a number of businesses and the contribution from financial services was also reduced. These more than offset an improvement in Astra’s automotive business.

In the earnings release, Jardine Matheson’s chairman Sir Henry Keswick shared a few words on the company’s outlook:

“We expect the recent performances by most of the Group’s businesses to be maintained in the second half and that the Company will achieve a satisfactory result for the full year.”

It seems like Jardine Matheson’s management team is unfazed by the near-term challenges and is confident about the company’s future prospects.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay owns shares in Dairy Farm International.