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The Good And Bad That Investors Should Know From Jardine Strategic Holdings Limited’s Latest Earnings

Jardine Strategic Holdings Limited (SGX: J37)  is a sprawling conglomerate with interests in many Singapore-listed companies such as automobile distributor Jardine Cycle & Carriage Ltd (SGX: C07), bricks-and-mortar retailer Dairy Farm International Holdings Ltd (SGX: D01), property investor and developer Hongkong Land Limited (SGX: H78), and more.

One of Jardine Strategic’s more interesting holdings is its majority stake (57%) in fellow conglomerate Jardine Matheson Holdings Limited (SGX: J36). The ownership is interesting because Jardine Matheson also owns a majority stake in Jardine Strategic (84%).

In early March, Jardine Strategic reported its 2017 full year earnings update. There are both positive and negative takeaways that investors may want to learn about.

The positives

Firstly, the conglomerate reported growth in revenue and underlying profit in 2017. For the year, Jardine Matheson’s revenue increased 7% to US$31.56 billion, while its underlying earnings per share (EPS) was up by 13% to US$2.76.

Secondly Jardine Strategic generated operating cash flow of US$3.75 billion in 2017, which was 9.3% higher than 2016’s operating cash flow of US$3.43 billion. The higher operating cash flow was mainly driven by a 57% jump to US$779 million in dividends from Jardine Strategic’s associates and joint ventures.

Thirdly, the conglomerate’s China-related businesses did well in the year. This includes a strong performance from Hongkong Land, Zung Fu (motor sales), Zhongsheng (vehicle dealership), and Yonghui (supermarkets).

The negatives

Firstly, one of the main challenges that the Jardine Strategic group faced in 2017 was the weak performance in Dairy Farm’s supermarkets and hypermarkets businesses in Southeast Asia. Dairy Farm has conducted a review to determine the necessary actions needed to improve its competitive position in the region.

The other challenge that Jardine Strategic faced in 2017 was related to Jardine Cycle & Carriage’s Direct Motors business. The business in question reported a decline in underlying profit for most of its geographical markets. Furthermore, Jardine Cycle & Carriage expects the challenges in the Direct Motors business to remain in 2018.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommendations for Hongkong Land and Dairy Farm.