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The Good And The Bad That Investors Should Know From Jardine Matheson Holdings Limited’s FY2017 Earnings

Jardine Matheson Holdings Limited (SGX: J336) is a conglomerate with interests in a web of Jardines companies which include Jardine Strategic Holdings Limited (SGX: J37), Jardine Cycle & Carriage Ltd (SGX: C07), Hongkong Land Holdings Limited (SGX: H78), Dairy Farm International Holdings Ltd (SGX: D01), Mandarin Oriental Limited (SGX: M04), Jardine Lloyd Thompson and Jardine Pacific.

The company recently released its full-year results for financial year ended 31 December 2017 (FY17). In this article, we will look at the positive and negative points from the latest announcement.

The positive points

First of all, the company reported stronger revenue and underlying profitability in FY17. For the whole year, revenue increased 6% year-on-year to US$39.5 billion while underlying earnings per share (EPS) was up by 12% year-on-year to US$4.17.

Secondly, Jardine Matheson generated operating cash flow of US$4.3 billion in FY17, up from US$4.0 billion in FY16. The higher operating cash flow was mainly driven by growth in dividends from its associates and joint ventures.

Thirdly, most of Jardine Matheson’s investees, including Jardine Pacific, Jardine Motors, Jardine Lloyd Thompson, Hongkong Land and Astra, reported year-on-year growth in underlying profitability.

Last but not the least, the company recommended a final dividend per share of US$1.20. Including the interim dividend of 40 cents, total dividend per share for FY17 would be US$1.60, up 7% year-on-year.

The negative points

First of all, Jardine Matheson’s supermarket and hypermarket businesses in South East Asia (operating under Dairy Farm) faced significant challenges in FY17 due to competition and a change in consumer shopping habit. Moreover, it recognised US$64 million in business rationalisation costs for the year.

Secondly, Jardine Cycle & Carriage (excluding Astra) reported weaker performance in FY17, driven mainly by poor performance for its Direct Motor businesses in most markets (except in Singapore).

Last but not the least, the company’s net debt increased in FY17. As at 31 December 2017, the company’s non-financial services net debt stood at US$3.4 billion (6% gearing), up from US$2.1 billion (4% gearing), as at 31 December 2016.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has recommendations for Hongkong Land and Dairy Farm.