Creating Growth for Southeast Asia
In the face of the COVID-19 pandemic and challenges presented in 2020, JC&C has remained resilient while maintaining its focus as a long-term strategic partner to Southeast Asia. At JC&C, our interests are closely aligned with the dynamic development of the region, where we have market-leading businesses in six countries across eight sectors, aligned to our investment themes of urbanisation and the emerging consumer class. Through the committed execution of our growth strategy and capital allocation priorities, we aim to outperform regional growth rates in Southeast Asia. We work closely with our businesses to add value by promoting progress through digital transformation, people development and collaboration across our extensive network and relationships. We also aim to elevate our communities by contributing to their development through environmental, social and governance efforts.
Group Overview
Jardine Cycle & Carriage (“JC&C” or “the Group”) is the investment holding company of the Jardine Matheson Group in Southeast Asia. JC&C seeks to create growth for Southeast Asia by investing in diversified market-leading businesses based on the themes of urbanisation and the emerging consumer class. The Group works closely with its businesses to enable them to achieve their potential and elevate their local communities.
The Group has a 50.1% interest in Astra, a diversified group in Indonesia, which is also the largest independent automotive group in Southeast Asia. JC&C also has significant interests in Vietnam, including 26.6% in Truong Hai Auto Corporation, 29.8% in Refrigeration Electrical Engineering Corporation and 10.6% in Vinamilk. Its 25.5%-owned Siam City Cement also has a presence in South Vietnam, in addition to operating in Thailand, Sri Lanka, Cambodia and Bangladesh. The other investments in JC&C’s portfolio are the Cycle & Carriage businesses in Singapore, Malaysia and Myanmar, and 46.2%-owned Tunas Ridean in Indonesia. These motor businesses are managed by Jardine International Motors.
JC&C is a leading Singapore-listed company, 75%-owned by the Jardine Matheson Group. Together with its subsidiaries and associates, JC&C employs 240,000 people across Southeast Asia.
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Combined gross revenue*
US$28bn
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Revenue
US$13bn
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Underlying profit attributable to shareholders
US$429m
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Dividend per share
US¢43
* Includes 100% of revenue from associates and joint ventures
The exchange rate of US$1=S$1.32 (31st December 2019: US$1=S$1.35) was used for translating assets and liabilities at the balance sheet date and US$1=S$1.38 (2019: US$1=S$1.36) was used for translating the results for the period.
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*
The Group uses underlying profit in its internal financial reporting to distinguish between ongoing business performance and non-trading items. Items classified as non-trading items include fair value gains or losses on revaluation of investment properties, agricultural produce and equity investments which are measured at fair value through profit and loss; gains and losses arising from the sale of businesses, investments and properties; impairment of non-depreciable intangible assets, associates and joint ventures and other investments; provisions for closure of businesses; acquisition-related costs in business combinations and other credits and charges of a non-recurring nature that require inclusion in order to provide additional insight into the Group’s underlying business performance.
Underlying profit attributable to shareholders
US$429m
- Automotive 24%
- Financial Services 24%
- Heavy Equipment & Mining 28%
- Agribusiness 3%
- Utilities & Infrastructure 3%
- Consumer Products 8%
- Property 4%
- Cement 5%
- Others 1%
- Indonesia 70%
- Vietnam 21%
- Singapore4%
- Thailand 5%
- Insignificant contribution from Malaysia and Myanmar
CONVERSATION WITH Group Managing Director
Ben Birks shares his insights on JC&C's strategy to capture growth opportunities in Southeast Asia.
“Our ambition is to contribute positively to the growth and development of Southeast Asia, and at the same time, we aspire to elevate the communities within which we operate.”
Download Read MoreQ WHAT IS JC&C’S OVERALL STRATEGY?
A Looking first at our desired outcome, our ambition is to contribute positively to the growth and development of Southeast Asia, and at the same time, we aspire to elevate the communities within which we operate.
We achieve this by investing in diversified market-leading businesses, with good growth potential and strong earnings, which are well positioned to benefit from the themes of urbanisation and the emerging consumer class in the region.
By working closely with our portfolio companies, we support them to reach their potential. Practically, I believe our management expertise, established networks, relationships and deep regional understanding provide us with a strong foundation to progress this ambition.
Q HOW DOES JC&C ADD VALUE TO ITS BUSINESSES?
A Having a clear view of the Group’s role is an important part of our approach towards our portfolio companies. We proactively review our portfolio on an ongoing basis and see six broad areas where we make a difference in supporting our companies to grow and achieve their potential.
We provide input to the strategic direction of our portfolio companies through Board and management representation, and support future growth through the allocation of capital. We leverage our broader Jardines network to provide our portfolio companies with a capable talent pool and Learning & Development capabilities, as well as provide access to the Group’s networks and relationships including financial contacts, government stakeholders or other partners. We also work to guide and strengthen ESG practices across the portfolio. Finally, we support our portfolio companies to digitally transform their business and operations to ensure that they are future-ready.
Q WHAT ARE SOME MACRO THEMES THAT YOU IDENTIFY WILL SHAPE YOUR FUTURE IN AN EVOLVING WORLD?
A There are three key themes that we pay close attention to.
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Digital revolution and disintermediation: This is transforming the way businesses operate, and adapting our operations and business models is a key focus. An example is our directly owned automotive businesses, where we set up Jardine International Motors (“JIM”) to unify Jardines’ automotive strategy and combine expertise from North Asia and Southeast Asia. JIM’s digital transformation initiative includes modernising our core systems, building a data-centric approach to mapping and managing the customer journey, and most importantly, building closer customer relationships through digital connectivity.
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Climate change: To limit the impact of global warming, many new government regulations and targets have been introduced. Other factors that are changing the landscape in which businesses operate include social and consumer expectations as well as capital, investor and financing exclusions. There is an increasing focus on ESG and climate action at JC&C; it is key to the long-term sustainability of our businesses and the shape of our overall portfolio.
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Economic inclusion: Contributing to social and economic inclusion is a key component of both our business focus and also our broader responsibility within our local communities. This includes products and services that increase access to energy and infrastructure, housing and transport, food and finance, clean and safe environments, all underpinned by decent work opportunities.
Q WHAT IS JC&C’S OVERALL APPROACH TO SUSTAINABILITY, GIVEN THAT ESG IS ONE OF THE FOCUS AREAS FOR THE GROUP?
A ESG is an important part of our Group strategy and we continue to work closely with our businesses to ensure that we are well positioned to manage both the risks and opportunities around ESG issues.
In terms of deploying capital, ESG is one of the lenses that we consider to be central to our decision making.
In 2020, we conducted climate risk assessments of our businesses. In 2021, we are enhancing our internal capabilities and actively engaging the Task Force for Climate-related Financial Disclosures (“TCFD”) framework to help guide our thinking and actions.
During the year, we also conducted a social impact assessment of our portfolio companies and have identified three United Nations Sustainable Development Goals that the Group will focus on: Good Health & Well-being (SDG3); Quality Education (SDG4) and Decent Work and Economic Growth (SDG8).
At JC&C, we provide decent jobs and development to 240,000 people in Southeast Asia; this is aligned to our objective to elevate communities in the region.
We are committed to excellence in corporate governance and we continue to share best practice with our businesses to enhance existing corporate governance policies and practices. Moreover, we aim to continually improve our Singapore Governance and Transparency Index (“SGTI”) scoring (top 10% in 2020) and ensure a high standard of corporate governance across our entire portfolio.
CONVERSATION WITH Group Finance Director
Stephen Gore discusses JC&C's value add to the success of portfolio companies.
“Our strength lies in adding value to our portfolio businesses to grow underlying earnings by working with them to develop long-term strategies, supported by our expertise, experience and network. The objective is clear; to create and maximise value for our stakeholders.”
Download Read MoreQ THE PANDEMIC HAS CREATED UNPRECEDENTED CHALLENGES FOR BUSINESSES. HOW HAS JC&C BEEN SUPPORTING ITS REGIONAL BUSINESSES?
A In 2020, the management team has been executing our new strategy to create growth for Southeast Asia. What we have learnt from this pandemic is that in facing tough times, it is important to go back to basics.
We need to have a strong balance sheet, good liquidity and sound cashflow management. Having stress tested our businesses at the start of the pandemic, we are reassured that they are in a strong financial position. We also introduced a range of measures to manage costs and preserve cash including reducing capital expenditure and managing working capital across the Group.
In addition to building financial resilience, we were able to take clear and decisive actions to progress the strategic priorities that we have set at the Group level, which will position us well to deliver long-term growth.
The pandemic also reinforced the importance of diversification across our portfolio. The contributions from Refrigeration Electrical Engineering Corporation and Siam City Cement in 2020 have increased. Overall, the underlying profit from our Other Strategic Interests were modestly down just 5%.
Q WHAT IS THE GROUP’S CAPITAL ALLOCATION STRATEGY?
A As part of our continual assessment of our investments, we completed a review of our capital allocation strategy in 2020. The observations from this review have sharpened our focus on how we want to evolve our portfolio to achieve our objective of outperforming Southeast Asia’s growth rates.
Reviewing the portfolio based on geographical and sectoral exposure, growth and value potential, as well as cash flow and ESG-related considerations, we have a clear sense of the value each business brings to our portfolio.
There are some businesses where we have a strong appetite to increase our weighting and deploy more capital to support their growth and earnings potential, while other businesses have strong cash generative profiles and do not require further capital. In addition, the capital allocation review has highlighted a number of higher growth sectors in which we will seek opportunities to deploy capital.
Q FROM A FINANCIAL PERSPECTIVE, CAN YOU SHARE EXAMPLES OF HOW JC&C ACTIVELY CONTRIBUTES TO THE SUCCESS OF ITS PORTFOLIO COMPANIES?
A As part of the wider Jardines Group, our portfolio companies can leverage Group Treasury and gain access to capital through our banking relationships. This was particularly important when the pandemic started as debt levels and liquidity positions were carefully monitored and where appropriate, balance sheets were reinforced.
On a broader level, risk controls and management are key to strengthening our portfolio companies. We implement Group-wide comprehensive risk management frameworks to identify, evaluate and manage risks impacting our businesses. The process is supported by detailed methodologies and evaluation criteria to ensure clarity and consistency of application across the Group.
Q ARE THERE ANY NEW BUSINESS DEVELOPMENTS THAT JC&C IS LOOKING AT?
A Our strategy has been to build a diversified portfolio across Southeast Asia. Over the years, the Group has increased its exposure in Other Strategic Interests, which together with Direct Motor Interests, accounted for 30% of JC&C’s underlying profits in 2020.
On an ongoing basis, we are actively looking at opportunities that will deliver growth over the long-term. We are also interested in new technology businesses with adjacencies to our existing business segments where we can create value. For example, through Astra, we have invested in Gojek and they have been working closely and collaborating together.
Our strength lies in adding value to these businesses to grow underlying earnings by working with them to develop long-term strategies, supported by our expertise, experience and network. The objective is clear; to create and maximise value for our stakeholders.
Significantly weaker performances from Astra’s automotive, financial services and heavy equipment and mining operations
Direct Motor Interests performance affected by lower profitability in Cycle & Carriage Singapore and Tunas Ridean
Other Strategic Interests performance relatively stable
Chairman’s Statement
The full year performance of Jardine Cycle & Carriage (“JC&C” or “the Group”) reflected the continuing challenging conditions it faced as a result of the pandemic.
Astra contributed US$309 million to the Group’s underlying profit in the year, 57% lower than the previous year, reflecting weaker performances from its automotive, financial services and heavy equipment and mining operations.
The underlying profit from Direct Motor Interests was 78% lower at US$14 million, mainly due to lower contributions from Cycle & Carriage Singapore and Tunas Ridean.
Other Strategic Interests contributed an underlying profit of US$120 million, down 5% from the previous year. Truong Hai Auto Corporation's (“THACO”) automotive business was adversely affected by lockdown restrictions in the second quarter, but performance has since improved.
OVERVIEW
The full year performance of Jardine Cycle & Carriage (“JC&C” or “the Group”) reflected the continuing challenging conditions it faced as a result of the pandemic.
Astra contributed US$309 million to the Group’s underlying profit in the year, 57% lower than the previous year, reflecting weaker performances from its automotive, financial services and heavy equipment and mining operations.
The underlying profit from Direct Motor Interests was 78% lower at US$14 million, mainly due to lower contributions from Cycle & Carriage Singapore and Tunas Ridean.
Other Strategic Interests contributed an underlying profit of US$120 million, down 5% from the previous year. Truong Hai Auto Corporation's (“THACO”) automotive business was adversely affected by lockdown restrictions in the second quarter, but performance has since improved.
Corporate costs were US$14 million, down from US$42 million in the previous year, primarily due to lower net financing charges and higher foreign exchange gains from the translation of foreign currency loans.
The Group’s underlying profit attributable to shareholders was 50% lower than the previous year at US$429 million. After accounting for non-trading items, profit attributable to shareholders was US$540 million, 39% lower than the previous year. The non-trading items recorded in the year included a US$188 million gain on the disposal of Astra’s investment in Permata Bank and unrealised fair value gains related to non-current investments. These gains in non-trading items were partly offset by an impairment loss of US$182 million in respect of the Group’s investment in Siam City Cement due to challenging market conditions over several years.
The Group’s financial position remains strong, with shareholders’ funds of US$6,974 million and a net asset value per share of US$17.65 at the year-end.
Consolidated net debt, excluding Astra’s financial services subsidiaries, was US$0.9 billion at the end of December 2020, compared to US$3.0 billion at the end of 2019, mainly due to the receipt of proceeds from the disposal of Astra’s investment in Permata Bank.
Net debt within Astra’s financial services subsidiaries decreased from US$3.3 billion to US$2.8 billion. JC&C parent company’s net debt was US$1.5 billion, similar to the previous year-end.
STRATEGIC DEVELOPMENTS
In May 2020, Astra completed the sale of its 44.6% interest in Permata Bank for sale proceeds of US$1.1 billion.
In September 2020, Acset Indonusa, a subsidiary of United Tractors, raised US$102 million from a rights issue to reduce debt and to strengthen its capital structure. Following the rights issue, United Tractors’ ownership in Acset Indonusa increased from 50.1% to 64.8%.
In November 2020, Astra acquired a 100% stake for US$45 million in Jakarta Marga Jaya, which owns 35% of Marga Lingkar Jakarta, the operator of the 7.7km Kebon Jeruk-Ulujami toll road as part of the Jakarta Outer Ring Road I.
In November 2020, Astra acquired a further 50% of Astra Aviva Life (now Asuransi Jiwa Astra) from Aviva International Holdings Limited for US$95 million, which brought its ownership to 100%.
DIVIDENDS
The Board is recommending a final one-tier tax-exempt dividend of US¢34 per share (2019: US¢69 per share) which, together with the interim dividend, will produce a total dividend for the year of US¢43 per share (2019: US¢87 per share).
PEOPLE
On behalf of the Board, I would like to express our gratitude to our 240,000 employees across the region for their continued hard work and dedication in this challenging business environment.
Mr Mark Greenberg has stepped down from the Board after more than 14 years. He has also served as a member of the Audit Committee. On behalf of the Board, I would like to record our appreciation for his valuable contribution to the Group.
I am delighted to welcome Ms Tan Yen Yen, who joined the Board in January 2021 as an independent director. She has extensive experience in the area of technology, and we look forward to the contribution she will bring to the Group.
OUTLOOK
The Group continues to operate in challenging conditions and uncertainty remains about the duration of the pandemic. We expect these conditions to continue for some time and it is too early to predict what the impact of the pandemic will be on the Group’s performance in 2021.
Ben Keswick
Chairman
Group Managing Director’s Review
The Group’s structure comprises three business pillars: (i) Astra; (ii) Direct Motor Interests, which consists of the Group’s non-Astra automotive businesses; and (iii) Other Strategic Interests. The contribution to JC&C’s underlying profit attributable to shareholders by business segment was as follows:
Download Read MoreASTRA
Astra contributed US$309 million to JC&C’s underlying profit, 57% down from the previous year. Excluding the gain on disposal of its investment in Permata Bank, Astra reported a net profit equivalent to US$702 million under Indonesian accounting standards, 53% lower in its local currency terms than the same period last year. There were weaker performances from its automotive, financial services, and heavy equipment and mining divisions.
AUTOMOTIVE
Net income fell by 68% to US$185 million, reflecting a significant drop in sales volume. After suffering a net loss in the second quarter, the automotive division saw a return to profitability in the second half of the year, following a partial easing of the pandemic containment measures.
Key points were as follows:
- The wholesale car market declined by 48% to 532,000 units in 2020. Astra’s car sales were 50% lower at 270,000 units, reflecting a slight decline in market share. 16 new models and 18 revamped models were launched in the year.
- The wholesale market for motorcycles declined by 44% to 3.7 million units in 2020. Astra’s Honda motorcycle sales fell by 41% to 2.9 million units but it saw an increase in market share. Five new models and 11 revamped models were launched in the year.
- Components business, Astra Otoparts, reported a net income of less than US$1 million, compared to US$52 million in 2019, mainly due to lower revenues from the original equipment manufacturer, replacement market and export segments.
FINANCIAL SERVICES
Net income from financial services fell by 44% to US$226 million, primarily due to increased loan loss provisions to cover higher non-performing loan losses in the consumer and heavy equipment-focused finance businesses.
Key points were as follows:
- Consumer finance businesses saw a 23% decrease in the amounts financed to US$4.6 billion. The net income contribution from the car-focused finance companies decreased by 46% to US$55 million, while the contribution from the motorcycle-focused financing business fell by 42% to US$105 million, in both cases due to higher loan loss provisioning, as non-performing loans increased.
- Heavy equipment-focused finance operations saw a 17% decrease in the amounts financed to US$246 million, with the net income contribution from this business down 59% to US$3 million.
- General insurance company, Asuransi Astra Buana, reported a 16% decrease in net income to US$62 million, caused by lower underwriting income.
INFRASTRUCTURE & LOGISTICS
Net income from Astra’s infrastructure and logistics division decreased from US$21 million to US$3 million, due to lower toll road revenues and lower operating margins in Serasi Autoraya.
Key points were as follows:
- Traffic volumes were 12% lower. Astra has interests in almost 358km of operational toll roads along the Trans-Java network and in the Jakarta Outer Ring Road.
- Serasi Autoraya’s net income decreased by 55% to US$8 million, mainly due to lower operating margins in its car rental business and lower used car sales, despite a 2% increase in vehicles under contract at 23,000 units.
HEAVY EQUIPMENT, MINING, CONSTRUCTION & ENERGY
Net income decreased by 49% to US$234 million, mainly due to lower heavy equipment sales and mining contracting volume, caused by weaker coal prices for most of the year.
Key points were as follows:
- United Tractors reported a 47% decrease in net income to US$410 million.
- Komatsu heavy equipment sales fell by 47% to 1,564 units, and parts and service revenues were also lower.
- Mining contracting operations reported 17% lower overburden removal volume at 825 million bank cubic metres and 13% lower coal production at 115 million tonnes.
- Coal mining subsidiaries achieved 9% higher coal sales at 9.3 million tonnes, including 1.9 million tonnes of coking coal sales, but profits were affected by lower coal prices.
- Agincourt Resources saw 22% lower gold sales at 320,000 oz.
- General contractor, Acset Indonusa, reported a net loss of US$90 million, mainly due to the slowdown of several ongoing projects and reduced project opportunities.
AGRIBUSINESS
Net income from Agribusiness increased significantly to US$45 million, mainly as a result of a 28% increase in average crude palm oil prices, which offset a 14% decline in crude palm oil and derivative sales.
DIRECT MOTOR INTERESTS
Direct Motor Interests faced challenging trading conditions during the year and made a reduced contribution of US$14 million to the Group’s underlying profit, 78% lower than the prior year.
Key points were as follows:
- Cycle & Carriage Singapore contributed US$19 million, 68% down from the previous year, due to lower sales and weaker margins. Passenger car sales fell by 44% to 7,572 units and market share was reduced from 19% to 17%.
- In Indonesia, Tunas Ridean’s contribution of US$1 million was 94% lower. Its automotive business saw reduced sales, while its consumer finance operations were adversely impacted by lower lending volumes and increased loan provisioning.
- Cycle & Carriage Bintang in Malaysia contributed a loss of US$1 million, compared to a loss of US$6 million in 2019. Despite challenging trading conditions, the financial performance of the business benefited from improved sales in the second half of the year due to a sales tax reduction, as well as cost savings initiatives.
OTHER STRATEGIC INTERESTS
Other Strategic Interests contributed US$120 million to the Group’s underlying profit, 5% down on the previous year.
Key points were as follows:
- THACO contributed US$39 million, which included an adjustment of US$7 million in respect of its 2019 results. Excluding the adjustment, the profit contribution would have been US$46 million, 9% up from the previous year. THACO’s automotive business contributed US$39 million, this was impacted by lower margins attributable mainly to difficult market conditions in the first half of the year as a result of the pandemic, but was partly offset by higher unit sales for the full year. THACO's real estate business contributed US$7 million, compared to US$2 million in the previous year as sales resumed on the back of a market recovery, while its new venture in the agriculture sector contributed a loss of US$8 million.
- Siam City Cement’s contribution of US$24 million was 3% higher than the previous year. Margins benefited from improved operational efficiencies, which helped to offset the decline in sales.
- The contribution of US$21 million from REE was 13% higher than the previous year, due to a stronger contribution from real estate and the effect of an increase in the Group’s shareholding to 29.8%, partly offset by weaker performances from its hydropower investments and its M&E business.
- The Group’s investment in Vinamilk delivered dividend income of US$37 million, compared to US$36 million in the previous year. Vinamilk’s 2020 profit was 5% higher in local currency terms as its export business continued to grow, while its domestic dairy segment remained relatively stable.
CORPORATE COSTS
Corporate costs were US$14 million, compared to US$42 million in the previous year, which improved the overall underlying profit of the Group. This was primarily due to lower net financing charges and higher foreign exchange gains from the translation of foreign currency loans.
SUMMARY
The operating environment remains uncertain and trading conditions are expected to remain challenging for some time. The Group remains confident, however, in the long-term economic prospects for Southeast Asia and it will remain focused on delivering its strategic objectives.
Ben Birks
Group Managing Director
Group Finance Director’s Review
In 2020, the Group’s revenue fell by 29% to US$13.2 billion, mainly due to declines in Astra’s automotive and heavy equipment, mining, construction and energy businesses. Direct Motor Interests also reported lower revenue particularly in Singapore. The Group’s gross revenue, including 100% of revenue from associates and joint ventures, which is a measure of the full extent of the Group’s operations, decreased by 30% to US$28.5 billion, which also saw declines from Astra’s associates and joint ventures mainly from the automotive sector.
Download Read MoreACCOUNTING POLICIES
The Company and Group accounts have been prepared under the dual compliance framework of both Singapore Financial Reporting Standards (International) (“SFRS(I)”) and (“IFRS”). The Directors continue to review the appropriateness of the accounting policies adopted by the Group, having regard to developments in SFRS(I) and IFRS. On 1st January 2020, the Group has adopted the new or amended IFRS and interpretations of IFRS that are mandatory for application for the financial year. Changes to the Group’s accounting policies have been made as required, in accordance with the transitional provisions in the respective IFRS and interpretations of IFRS.
The adoption of these new or amended IFRS and interpretations of IFRS did not result in substantial changes to the Group’s accounting policies and had no material effect on the amounts reported for the current or prior financial years.
RESULTS
In 2020, the Group’s revenue fell by 29% to US$13.2 billion, mainly due to declines in Astra’s automotive and heavy equipment, mining, construction and energy businesses. Direct Motor Interests also reported lower revenue particularly in Singapore. The Group’s gross revenue, including 100% of revenue from associates and joint ventures, which is a measure of the full extent of the Group’s operations, decreased by 30% to US$28.5 billion, which also saw declines from Astra’s associates and joint ventures mainly from the automotive sector.
Underlying operating profit from the Group’s parent company and subsidiaries of US$996 million was 55% lower than the previous year. Astra’s underlying operating profit fell by 56% to US$923 million compared to the previous year, which saw declines mainly in its automotive, financial services, and heavy equipment and mining businesses. The Group’s Direct Motor Interests also saw a 58% decrease in contribution mainly due to lower profit by Cycle & Carriage Singapore. Dividends from Vinamilk contributed US$37 million. Corporate costs excluding net financing charges were lower mainly due to higher exchange gains arising from the translation of foreign currency loans compared to the previous year.
Net financing charges, excluding those relating to the Group’s consumer finance and leasing activities, decreased by US$132 million to US$137 million, mainly due to lower interest rates at the Group’s parent company and improved funding positions at Astra’s parent company as well as Astra’s heavy equipment, mining, construction and energy operations. Interest cover (calculated as underlying operating profit before the deduction of amortisation/depreciation of right-of-use assets, net of actual lease payments, and share of results of associates and joint ventures divided by net financing charges excluding interest on lease liabilities) excluding the financial services companies decreased to 8 times (2019: 9 times), as the impact from the decrease in net financing charges was offset by the lower operating profit.
The Group’s share of underlying results of associates and joint ventures fell by 52% to US$287 million. Contributions from Astra’s associates and joint ventures decreased by US$290 million mainly due to weaker performances by the automotive business, while the share of Permata Bank’s result was lower compared to 2019, following its disposal in May 2020. The contribution from Direct Motor Interests’ joint ventures decreased by US$17 million mainly due to lower sales and lending volumes in Tunas Ridean and increased loan provisioning from its consumer finance operations. In Other Strategic Interests, the contribution from Refrigeration Electrical Engineering Corporation was higher than the previous year due to a stronger contribution from real estate and the effect of an increase in the Group’s shareholding from 24.9% to 29.8% over 2019 and 2020, partly offset by weaker performances from its hydro power investments and its M&E business. Contribution from Siam City Cement (“SCCC”) was higher than previous year due to improved operational efficiencies, which offset the decline in sales. However, Truong Hai Auto Corporation (“THACO”) saw weaker performances in its automotive and agriculture businesses, partly offset by higher earnings in the real estate business.
The underlying effective tax rate of the Group in 2020, excluding associates and joint ventures was 27%.
The Group’s underlying profit attributable to shareholders for the year was 50% lower at US$429 million.
NON-TRADING ITEMS
In 2020, the Group had net non-trading gains of US$111million. This included a US$188 million gain on the disposal of Astra’s investment in Permata Bank and unrealised fair value gains related to non-current investments, partly offset by an impairment loss of US$182 million in respect of the Group’s investment in SCCC due to the challenging market conditions. In 2019, the net non-trading gains were US$18 million mainly due to unrealised fair value gains related to non-current investments.
DIVIDENDS
The Board is recommending a final one-tier tax exempt dividend of US¢34 per share (2019: US¢69 per share) which together with the interim dividend, will produce total dividend for the year of US¢43 per share (2019: US¢87 per share). The final dividend will be payable on 25th June 2021, subject to approval at the Annual General Meeting to be held on 27th April 2021, to those persons registered as shareholders, on 28th May 2021. Dividends are usually declared on a semi-annual basis for every six-month period ending 30th June (in respect of an interim dividend) and 31st December (in respect of a final dividend).
CASH FLOW
SUMMARISED CASH FLOW
The Group has been focused on reducing operational and capital expenditure, managing working capital and ensuring liquidity during the COVID-19 pandemic.
Cash inflow from the Group’s operating activities was US$2.8 billion, US$1.0 billion higher than the previous year, mainly due to improved working capital management, partly offset by lower dividends received from associates and joint ventures.
Cash outflow from investing activities before disposals amounted to US$1.0 billion, US$1.0 billion lower than the previous year, reflecting the Group’s actions in curtailing capital expenditure. This included the following:
- US$97 million for the purchase of intangible assets, which included US$30 million for the acquisition costs of contracts in Astra’s general insurance business and US$52 million for the mining exploration costs in Astra’s mining business;
- US$309 million of property, plant and equipment comprising US$173 million of heavy equipment and machinery for Astra’s heavy equipment and mining, construction and energy businesses, US$49 million of equipment and network development for its automotive businesses and US$31 million for its agribusiness;
- US$6 million for additions to investment properties in Astra and US$35 million for additions to bearer plants in Astra;
- US$84 million for acquisitions and capital injection into various subsidiaries, associates and joint ventures;
- US$483 million for investments mainly by Astra’s insurance business.
The contribution to the Group’s cash flow from disposals for the year amounted to US$1.6 billion, which arose mainly from the sale of Astra’s 44.6% interest in Permata Bank.
TREASURY POLICY
The Group manages its exposure to financial risks using a variety of techniques and instruments. The main objectives are to limit foreign exchange and interest rate risks to provide a degree of certainty on costs. The investment of the Group’s cash resources is managed so as to minimise risk, while seeking to enhance yield. Appropriate credit guidelines are in place to manage counterparty risk.
When economically sensible to do so, borrowings are taken in local currency to hedge foreign exchange exposures on investments. A portion of borrowings is denominated in fixed rates. Adequate headroom in committed facilities is maintained to facilitate the Group’s capacity to pursue new investment opportunities and to provide some protection against market uncertainties. Overall, the Group’s funding arrangements are designed to keep an appropriate balance between equity and debt from banks and capital markets, both short and long-term in tenure, to give flexibility to develop the business.
The Group’s treasury operations are managed as cost centres and are not permitted to undertake speculative transactions unrelated to underlying financial exposures.
The Group’s financial risk factors are set out on pages 86 to 91 of the Annual Report.
FUNDING
The Group is well-financed with strong liquidity. The Group’s consolidated net debt, excluding Astra’s financial services subsidiaries, was US$0.9 billion at the end of December 2020, representing gearing of 6%, down from US$3.0 billion at the end of 2019, with gearing at 20%, mainly due to the receipt of proceeds from the disposal of Astra’s investment in Permata Bank. Net debt within Astra’s financial services subsidiaries decreased from US$3.3 billion to US$2.8 billion. JC&C parent company’s net debt was US$1.5 billion, similar to the previous year-end.
At the year-end, the Group had undrawn committed facilities of some US$2.9 billion. In addition, the Group had available liquid funds of US$3.5 billion.
71% of the Group’s borrowings were non-US dollar denominated and directly related to the Group’s businesses in the countries of the currencies concerned. At the year-end, approximately 59% of the Group’s borrowings, exclusive of Astra’s financial services companies, were at floating rates and the remaining 41% were at fixed rates including those hedges with derivative instruments with major creditworthy financial institutions. For Astra’s financial services companies, 96% of their borrowings were at fixed rates.
Net Debt* and Total Equity
(US$ billion)
- Currency
- Net Debt
- Total Equity
- * Excluding net debt of Astra’s financial services companies
Debt profile
as at 31st December 2020
- Currency
- IDR
- USD
- Others
Debt profile
as at 31st December 2020
- Maturity
- <1 years
- 1-2 years
- 2-5 years
- >5 years
SHAREHOLDERS’ FUNDS
Shareholders’ funds as at 31st December 2020 are analysed by business. There were no significant changes from the prior year.
By Business
- Astra
- Direct Motor Interests
- Other Strategic Interests
RISK MANAGEMENT REVIEW
A review of the major risks facing the Group is set out on pages 38 to 40 of the Annual Report.
Stephen Gore
Group Finance Director
Group at a Glance
DownloadContribution to Underlying Profit
US$309.4m+
-57% from US$715.7m in 2019
- Automotive
- Financial Services
- Heavy Equipment, Mining, Construction & Energy
- Agribusiness
- Property
- Infrastructure & Logistics*
- Information Technology*
+ After withholding tax on dividend
* Insignificant contribution
JC&C has a 50.1% interest in Astra. Astra is a diversified business group in Indonesia with seven core businesses. It is listed on the Indonesia Stock Exchange and is one of the largest companies in Indonesia by market capitalisation. Astra employs some 190,000 people.
AUTOMOTIVE
Astra is the largest independent automotive group in Southeast Asia. Its automotive business comprises the production, distribution, retail and aftersales service of motor vehicles.
It manufactures, assembles, distributes, and owns dealership networks for Toyota, Daihatsu, Isuzu, Peugeot, UD Trucks and Honda motorcycles. It also manufactures and retails BMW vehicles, and owns the Lexus cars dealership. Additionally, Astra manufactures and distributes automotive components through Astra Otoparts.
Astra also develops digital initiatives to improve internal processes and customer experiences.
- Astra
- Toyota
- Daihatsu
- Isuzu
- UD Trucks
- Peugeot
- Honda (motorcycles)
- BMW
- Lexus
- Key for Status
-
Manufacturer/Assembler
Distributor and Dealer
Dealer
FINANCIAL SERVICES
Astra’s financial services are extensive, consisting of consumer financing for motor vehicles and motorcycles, heavy equipment financing, general and life insurance, as well as fintech services through Astra Welab Digital Arta.
HEAVY EQUIPMENT, MINING, CONSTRUCTION & ENERGY
Astra supplies and provides aftersales services for construction and mining equipment. It is the sole distributor of Komatsu heavy equipment and is the largest coal mining services contractor in Indonesia. It also participates in general construction, thermal power businesses and gold mining.
AGRIBUSINESS
Astra’s agribusiness includes the cultivation, harvesting and processing of palm oil. It is a major producer of crude palm oil in Indonesia.
INFRASTRUCTURE & LOGISTICS
Astra’s infrastructure and logistics business includes toll road development and management, with a total interest in 358km of operational toll roads in Indonesia. This includes the Tangerang-Merak, Jombang-Mojokerto, Cikopo-Palimanan, Semarang-Solo, Surabaya-Mojokerto toll roads, which form part of the Trans Java network, and the Kunciran-Serpong and Kebon Jeruk-Ulujami toll roads, which make up the Jakarta Outer Ring Road.
INFORMATION TECHNOLOGY
Astra’s information technology business provides document information and communication technology solutions. It is the sole distributor of Fuji Xerox office equipment in Indonesia.
PROPERTY
Astra’s property development business includes the Grade A office building, Menara Astra, the 509-unit Anandamaya Residences and two residential development projects, namely Arumaya in South Jakarta and Asya in East Jakarta.
Contribution to Underlying Profit
US$13.7m
-78% from US$62.9m in 2019
- Singapore
- Tunas Ridean
- Malaysia*
- Myanmar*
* Insignificant contribution
Cycle & Carriage SINGAPORE
Cycle & Carriage Singapore (100%) is a leading diverse automotive group in Singapore. It is engaged in the distribution, retail and aftersales services of Mercedes- Benz, Mitsubishi, Kia, Citroën, DS Automobiles and Maxus motor vehicles, and retails used cars under its Republic Auto brand. It is also the exclusive distributor of BYD electric forklifts in Singapore and engages in the leasing business through Cycle & Carriage Leasing.
CYCLE & CARRIAGE BINTANG
Listed on Bursa Malaysia Securities Berhad, Cycle & Carriage Bintang Berhad (59.1%) is one of the leading Mercedes-Benz dealers in Peninsula Malaysia with a network of 12 outlets, providing sales and aftersales services for Mercedes-Benz passenger cars and commercial vehicles.
CYCLE & CARRIAGE MYANMAR
Cycle & Carriage Myanmar (60%) distributes, retails and provides aftersales services for Mercedes-Benz and Mazda passenger cars and commercial vehicles, as well as for FUSO commercial vehicles in Myanmar. Cycle & Carriage Myanmar has seven facilities across two cities in Myanmar.
- Cycle & Carriage
- Mercedes-Benz (Singapore, Malaysia, Myanmar)
- Mitsubishi (Singapore)
- Kia (Singapore)
- Citroën (Singapore)
- DS Automobiles (Singapore)
- Maxus (Singapore)
- BYD (Singapore)
- FUSO (Malaysia, Myanmar)
- Mazda (Myanmar)
- Tunas Ridean
- Toyota (Indonesia)
- BMW (Indonesia)
- Daihatsu (Indonesia)
- Isuzu (Indonesia)
- Honda motorcycles (Indonesia)
- Key for Status
-
Distributor and Dealer
Dealer
TUNAS RIDEAN
Tunas Ridean (46.2%) is listed on the Indonesia Stock Exchange and is a leading automotive dealer group in Indonesia. With 91 motorcycle and 68 passenger car facilities across Indonesia, Tunas Ridean represents Toyota, Daihatsu, BMW and Isuzu passenger cars, as well as Honda motorcycles. In addition, Tunas Ridean provides automotive rental and fleet management services, and offers vehicle financing through its associate, Mandiri Tunas Finance.
Contribution to Underlying Profit
US$120.1m
-5% from US$126.0m in 2019
- Truong Hai Auto Corporation
- Refrigeration Electrical Engineering Corporation
- Siam City Cement
- Vinamilk
TRUONG HAI AUTO CORPORATION (“THACO”)
Truong Hai Auto Corporation (26.6%) is a multi-industry group headquartered in Ho Chi Minh, Vietnam.
THACO is a leading automotive player in Vietnam and participates in R&D, manufacturing, assembly, logistics, distribution and retail. It manufactures and distributes Kia, Mazda, Peugeot, FUSO (trucks and buses), Frontier, Foton and Hyundai motor vehicles. THACO also distributes BMW and MINI.
It is a developer of residential and commercial properties in District 2, Ho Chi Minh City, including Sala City in the Thu Thiem area that was launched in 2020. THACO also owns residential and commercial assets in Yangon, Myanmar.
THACO’s agriculture business includes the cultivation of fruit trees, forestry and livestock in Vietnam and Cambodia.
The group also provides logistics services from warehousing and freight forwarding to seaport services.
- THACO
- Kia
- Mazda
- Peugeot
- FUSO
- Frontier
- Foton
- Hyundai
- BMW
- MINI
- Key for Status
-
Manufacturer/Assembler
Distributor and Dealer
REFRIGERATION ELECTRICAL ENGINEERING CORPORATION (“REE”)
Refrigeration Electrical Engineering Corporation (29.8%) is listed on the Ho Chi Minh Stock Exchange. It is a diversified business group in Vietnam with operations in power and utilities, real estate and mechanical and electrical engineering services. It has strategic interests in thermal, hydro, solar, wind businesses with a total of 3,800MW designed power generation capacity, and operates over 150,000 sqm of total lease area of Grade B office space in Vietnam.
SIAM CITY CEMENT (“SCCC”)
Siam City Cement Public Company Limited (25.5%) is listed on the Stock Exchange of Thailand. Operating in Thailand, South Vietnam, Sri Lanka, Cambodia and Bangladesh, SCCC holds market-leading positions in most of its markets. SCCC produces cement, concrete and aggregates, fiber cement and other building materials, as well as participates in trading and industrial waste management solutions.
VINAMILK
Vietnam Dairy Products Joint Stock Company (“Vinamilk”) (10.6%) is the largest food & beverage company on the Ho Chi Minh Stock Exchange by market capitalisation. It has 14 farms and 15 factories in Vietnam, Laos, Cambodia and USA. Vinamilk is the country’s largest dairy producer with a dominant market share and a strong network of over 250,000 distribution points in Vietnam.
SUSTAINABILITY AT JC&C
At JC&C, we aim to create growth for Southeast Asia and elevate the communities we engage with to deliver long-term sustainable value for our stakeholders. As such, it is important that we consider both financial and non-financial factors that contribute to the long-term viability of our businesses.
In 2020, JC&C has taken active steps to elevate our sustainability roadmap to attain our sustainability goals. We conducted a climate risk assessment to embed climate resilience into our long-term business sustainability. We also conducted a social impact assessment across our portfolio companies to elevate our corporate social responsibility (“CSR”) agenda to the Group level and ensure that our community engagement is tracked and produces effective benefits. In addition, we included sustainability metrics within our capital allocation strategy as we look at new investments as a responsible investor.
DownloadGOVERNANCE
JC&C strongly believes that a well-managed business will attract the right people who will uphold our commercial standing and reputation. Being transparent and combating corruption are essential in ensuring our operations and businesses are conducted in a fair and lawful manner. As a holding company, we focus on the governance of our Group businesses by working closely with our portfolio companies to ensure sound governance, professionalism and ethical business conduct.
In 2020, JC&C was placed in the top 10% of Singapore-listed companies in the Singapore Governance and Transparency Index published by the National University of Singapore Business School, which provides corporate governance performance rating for Singapore-listed companies. JC&Cʼs overall score has improved consistently over the last three years.
DownloadSUPPORTING OUR PEOPLE AND COMMUNITIES THROUGH THE PANDEMIC
From the onset of the COVID-19 pandemic, it was our priority to take care of our employees and customers, while ensuring business continuity and extending support towards our local communities.
JC&C implemented strict measures to ensure the health and safety of our employees by working closely with the authorities to keep our facilities safe, increasing the means for telecommuting for employees and maintaining regular communications.
We also placed a high emphasis on our employees’ mental health and wellness. We are aware of the implications that COVID-19 and working from home can bring about to the mental health of our employees and thus, implemented virtual wellness programmes and communications for employees to interact, bond and keep active.
Read MoreWe implemented the Employee Assistance Programme, a 24-hour anonymous counselling hotline, to offer help to employees in need. JC&C’s line managers also underwent mental health trainings to better equip them to identify mental health issues among their team members and to provide assistance.
During the circuit breaker period, JC&C launched a series of virtual wellness programmes and e-guides on JC&C’s internal employee communications platform, as well as staff communications sessions for employees to interact and upkeep their mental well-being.
On the community front, together with 100%-owned subsidiary Cycle & Carriage Singapore, we collectively raised and donated S$83,000 to REACH Community Services’ “Be our Beacon of Hope” fund, which supported over 4,000 beneficiaries including low-income families and isolated seniors impacted by COVID-19. The fundraising was done through a virtual challenge, where employees clocked steps to raise funds. This was also an opportunity for employees to keep fit.
JC&C continues to practise safety measures in our business operations to ensure the safety of all employees, partners, customers and communities.
SOCIAL
JC&C aims to ensure that our social efforts and those of our affiliates to be aligned to support the United Nations Sustainability Development Goals (“UN SDGs” or “Goals”) identified as priority by the Jardine Matheson Group:
- Good Health and Well-Being (SDG 3),
- Quality Education (SDG 4),
- Decent Work and Economic Growth (SDG 8),
- Responsible Consumption and Production (SDG 12), and
- Climate Action (SDG 13).
Of these five, JC&C is focused on Good Health and Well-Being (SDG 3), Quality Education (SDG 4), and Decent Work and Economic Growth (SDG 8).
In 2020, JC&C embarked on a social impact mapping exercise to align the current initiatives with the prioritised UN SDGs. Currently, JC&C has been taking steps to roll out initiatives to contribute to the Goals.
-
Good Health and Well-Being
- Planning more comprehensive mental health initiatives through the Employee Assistance Programme.
- Adopting the tripartite advisory on mental well-being at workplaces as recommended by Singapore’s Ministry of Manpower.
- Continuing to contribute to the mental health community in Singapore through the mental health charity, Jardines MINDSET Singapore.
-
Quality Education
- Continuing to provide opportunities for university students through the JC&C Scholarship launched in 2019.
- Maintaining regular engagement with our partner universities to ensure that their needs are met and that our contributions adequately support the development of our beneficiaries.
-
Decent Work and Economic Growth
- Maintaining our role as a social-economic pillar in the communities that we engage in by providing decent work and employment for the local workforce.
- Develop our employees’ skills regularly and actively provide them with a valuable term of employment.
SOCIAL
GOOD HEALTH AND WELL-BEING (SDG 3)
Our long-term goal is to build a healthy and happy workforce to increase workplace productivity. JC&C adopts a balanced work-life approach by creating a supportive and conducive work environment as well as by engaging our employees through our Workplace Health Programme (“WHP”) and the Group’s Key2Wellness initiatives, flexi-work scheme and other initiatives.
Mental health is a key priority in our social efforts. It is an area that we have identified as under-served, and thus hope to be able to make a significant impact in. JC&C encourages employees to take care of their mental wellness and provides the tools to support them to do so. JC&C also aligns its initiatives to the Singapore Ministry of Manpower’s Tripartite Advisory on Mental Well-being at Workplaces.
Prioritising Mental Health through Jardines MINDSET
JC&C, along with the Jardine Matheson Group of companies, extend our support towards mental health through MINDSET Care Limited (“MINDSET” or “Jardines MINDSET”) – the registered charity of the Jardine Matheson Group in Singapore.
JC&C provides support towards MINDSET and the mental health community through employee volunteer hours, expertise, funding and resources. Senior leaders and management are actively involved in the governance and operations of MINDSET. JC&C’s Group Managing Director is the Chairman of MINDSET while JC&C’s Group General Counsel serves as the Chief Executive Officer. Additionally, JC&C handles MINDSET’s communications, finance and legal functions, while our Legal & Corporate Affairs department serves as MINDSET’s secretariat.
MINDSET highlights
Funding and volunteer hours
Due to the COVID-19 pandemic, MINDSET had to utilise creative and innovative ways to raise funds for mental health. Instead of a physical vertical race, MINDSET’s annual fundraiser, The MINDSET Challenge & Carnival, was done through a virtual platform which encouraged participants to race at their convenience around the globe. The virtual race raised S$153,000 which was channelled towards DigitalMINDSET, an intervention programme for youths facing mental health issues due to digital or device addiction.
Reintegration through employment
We believe in the social reintegration of persons recovering from mental health issues by advancing equitable employment opportunities. Since 2011, MINDSET has placed 229 clients within Jardine companies, with 11 of them in JC&C. MINDSET also facilitated the placement of clients in jobs outside of the Jardines Group, extending this meaningful initiative to more companies.
Raising awareness through thought leadership
MINDSET believes in raising awareness of mental health to reduce the stigma against mental health illness. This is done through organising awareness events and thought leadership through panel discussions with fellow mental health partners in Singapore.
In 2020, MINDSET participated in the “Beyond the Label” campaign organised by the National Council of Social Services as a supporting partner and panel moderator. The panel discussion, which saw over 3,600 views, aimed to discuss the stressors faced by the sandwich generation in Singapore and its effects on mental health.
During the year, MINDSET and JC&C also partnered with the Workwell Leaders Workgroup, chaired by former Nominated Member of Parliament, Anthea Ong, to host the “Workwell Leaders CEO Dialogue” session. The session saw about 50 Singapore leaders come together to jointly discuss ways to improve the mental well-being within their organisations and in Singapore as a whole.
QUALITY EDUCATION (SDG 4)
In 2020, JC&C continued its efforts in raising the educational standards of the younger generation across Southeast Asia through its Jardine Cycle & Carriage scholarships. The scholarships comprise a series of endowments and donations that are long-term in nature to support the educational development of local talents at top-ranking universities. By 2032, JC&C would have supported 60 students through the JC&C scholarship. This year, seven students from across Southeast Asia were each awarded with a JC&C scholarship. We regularly check in with our university partners and receive updates from them. This allows them to express feedback on our scholarships and encourages constant improvement to the programme.
Scholarship candidates are recommended by the universities and selected based on academic results, means testing (household income levels) and personal traits such as a commitment to public duty or the community. JC&C works closely with the universities to ensure that all funds are properly channelled to the selected students for their education fees.
JC&C SCHOLARS’ TESTIMONIALS
“Being a recipient of the JC&C Scholarship has allowed me to appreciate the value and importance of giving back to the society, especially when we have the capability to do so. I now recognise the need to be proactive in supporting university education as it will help students tremendously. I feel encouraged to give back to the community after I graduate, just like how the JC&C Scholarship has helped me.”
Agnes Abigail Tan
National University of Singapore
“This scholarship has made me realise that there are many youths in Thailand like myself, who lack the opportunities and funds to pursue education subjects which they are passionate about. Through receiving the JC&C Scholarship, I understand the importance of having a quality foundation in education and am inspired to extend my support to children in need.”
Attapon Poncharoen
Chulalongkorn University (Thailand)
“The JC&C Scholarship inspired me to contribute to my community. Currently, I am teaching and sharing what I have learnt at Vietnam National University with children who are unable to afford and access education. I hope to continue giving back to the community through education even after graduation.”
Nguyen Kieu Chinh
Vietnam National University
“After receiving the JC&C Scholarship, I’ve learnt that it is important for me to give back to the community and appreciate the people who helped me get to where I am today. Therefore, I intend to maximise my university experience through service-learning and volunteer opportunities.”
Khairunnisa Gulamnabi
University of Malaya (Malaysia)
ENVIRONMENT
JC&C is aware of the environmental and climate risks that JC&C and our portfolio companies are exposed to. JC&C plans to elevate our approach through referencing Task Force on Climate-related Financial Disclosures (“TCFD”) principles. Additionally, we have started dialogues with our portfolio companies to strengthen knowledge sharing to enhance our commitment to sustainability practices together.
Furthermore, JC&C has formed a Sustainability Committee that will meet on a quarterly basis. This committee aims to elevate climate risk as a key issue and push for Group-wide initiatives and directions to be implemented.