Jardine Strategic Holdings Limited (SGX: J37) or JSH is a conglomerate with interest in the web of Jardines companies which include Jardine Cycle & Carriage Ltd (SGX: C07), Hongkong Land Holdings Limited (SGX: H78), Jardine Matheson Holdings Limited (SGX: J336) and others.
The company recently published its annual report for the year ending 31 December 2017. Reading an annual report is one of the best ways to keep up with a company’s developments. With that in mind, I decided to go through Jardine Strategic’s latest annual report to understand the company’s prospects, and how it had performed in 2017.
When I read an annual report, I tend to pay close attention to the letter to shareholders that the company’s chairman or CEO writes. Today, we will look at an area that I found interesting: the conglomerate’s challenges in 2017.
Dairy Farm, a subsidiary under Jardine Strategic, had a difficult year mainly due to poor performance in the supermarket and hypermarket businesses in South East Asia. Jardine Strategic’s chairman, Sir Henry Keswick, said:
“Positive performances in most of Dairy Farm’s retail formats and key associates were, however, offset by poor performances in its supermarket and hypermarket businesses in Southeast Asia and it recognized US$64 million of business rationalization costs.”
He also shared with investors what the company is doing to address the challenge above.
“Weakness in Dairy Farm’s supermarket and hypermarket businesses in Southeast Asia led to a review being undertaken to determine the actions necessary to re-establish the competitive positions of these operations.
While Dairy Farm’s other formats and markets are trading well, Dairy Farm recognizes that it must change and adapt in the face of intensifying and evolving competition, both online and offline, as well as greater demands from increasingly well-informed customers.”
The Mandarin Makeover
Next, Mardarin Oriental profitability was affected by its renovation activities. Here’s what the management shared about this business:
“Mandarin Oriental saw generally improved performances across its hotel portfolio, notably in Hong Kong, but profitability was again impacted by the renovation of its London hotel. Mandarin Oriental’s adjusted shareholders’ funds at the end of 2017 were US$1.9 billion higher following a significant revaluation of The Excelsior hotel in Hong Kong.”
Running to a Halt
Lastly, Jardine Strategic’s motor business had a tough year in 2017. Here’s what the management shared:
“Jardine Cycle & Carriage produced good profit growth as Astra’s results improved, although there was a reduced overall contribution from the group’s Direct Motor Interests and Other Strategic Interests including Thaco and Siam City Cement.
Astra’s performance reflected the return to profitability at Permata Bank and enhanced commodity prices benefiting its heavy equipment and mining activities as well as agribusiness. The results from Astra’s automotive activities, however, were lower due to reduced earnings from motor cars in challenging markets.”
Astra is an Indonesian conglomerate partly owned by Jardine Cycle & Carriage.
A Foolish Takeaway
Overall, Jardine Strategic had a good performance in year 2017 with growth in both its top and bottom line. Being a conglomerate, some areas will do better compared to others. At the same time, the conglomerate faced challenges in its supermarket and hypermarket businesses in South East Asia, lower profitability in its hotel business, coupled with a weak performance from its direct motor businesses.
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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 a recommendation for Hongkong Land Holdings Limited.