Hotels
Hotels
Heavy Equipment
Heavy Equipment
Construction
Construction
Engineering
Engineering
Jardine
Jardine
Aviation
Aviation
Jardine Pacific
Jardine Pacific
Transport Services
Transport Services
Commercial
Commercial
Property
Property
Automobiles
Automobiles
Residential
Residential
One
One
Development
Development
Raffles Quay
Raffles Quay
Yonghui
Yonghui
Home
Home
Furnishings
Furnishings
Construction
Construction
Jakarta Land
Jakarta Land
Hongkong Land
Hongkong Land
Commercial
Commercial
Property
Property
Transport Services
Transport Services
Health and
Health and
Beauty
Beauty
Jardine Matheson
Jardine Matheson
Reinsurance
Reinsurance
Engineering
Engineering
Hotels
Hotels
Mandarin Oriental
Mandarin Oriental
Restaurants
Restaurants
Heavy Equipment
Heavy Equipment
Commercial
Commercial
Property
Property
Construction
Construction
Hactl
Hactl
Gammon
Gammon
Home Furnishings
Home Furnishings
Toll Roads
Toll Roads
Zhongsheng
Zhongsheng
Group
Group
Restaurants
Restaurants
Infrastructure
Infrastructure
Construction
Construction
Airport Services
Airport Services
Restaurants
Restaurants
JEC
JEC
Zung Fu
Zung Fu
Automobiles
Automobiles
Transport Services
Transport Services
Airport Services
Airport Services
Hotels
Hotels
Residential Development Commercial Property
Residential Development Commercial Property
Jardine Schindler
Jardine Schindler
Jardine Strategic
Jardine Strategic
Jardine Motors
Jardine Motors
JTH
JTH
Airport Services
Airport Services
Transport
Transport
Services
Services
Commercial
Commercial
Property
Property
Health
Health
and
and
Beauty
Beauty
Retail
Retail
Hotels
Hotels
Financial
Financial
Restaurants
Restaurants
Jardine
Jardine
Lloyd Thompson
Lloyd Thompson
Employee
Employee
Insurance
Insurance
Services
Services
Residential
Residential
Benefits
Benefits
Reinsurance
Reinsurance
Development
Development
Dairy Hypermarkets
Dairy Hypermarkets
Farm
Farm
Supermarkets
Supermarkets
Home Furnishings
Home Furnishings
Cold Storage
Cold Storage
Hero Maxim’s
Hero Maxim’s
MCL LAND
MCL LAND
Health and
Health and
Beauty
Beauty
Tunas Ridean
Tunas Ridean
Automobiles
Automobiles
Convenience Stores
Convenience Stores
Heavy
Heavy
Equipment
Equipment
Health and
Health and
Beauty
Beauty
Health
Health
and
and
Beauty
Beauty
Transport
Transport
Services
Services
Motorcycles
Motorcycles
Hotels
Hotels
Hotels
Hotels
Health
Health
and Beauty
and Beauty
Pharmacies
Pharmacies
Financial
Financial
Services
Services
Logistics
Logistics
Residential
Residential
Toll
Toll
Hotels
Hotels
Roads
Roads
Logistics
Logistics
Health
Health
and
and
Beauty
Beauty
JEC
JEC
JEC
JEC
Hotels
Hotels
JEC
JEC
Health
Health
and Beauty
and Beauty
Pharmacies
Pharmacies
Financial
Financial
Services
Services
JEC
JEC
Health
Health
and Beauty
and Beauty
Motorcycles
Motorcycles
Logistics
Logistics
Commercial
Commercial
Property
Property
JEC
JEC
Heavy
Heavy
Equipment
Equipment
Residential
Residential
Development
Development
Toyota
Toyota
Astra Motor
Astra Motor
Cycle & Carriage
Cycle & Carriage
Bintang
Bintang
Automobiles
Automobiles
Jardine Cycle
Jardine Cycle
& Carriage
& Carriage
THACO
THACO
Astra
Astra
Aviva Life
Aviva Life
Astra Honda Motor
Astra Honda Motor
Astra Otoparts
Astra Otoparts
Astra
Astra
Astra
Astra
Daihatsu Motor
Daihatsu Motor
International
International
Toll
Toll
Roads
Roads
Transport
Transport
Services
Services
Permata
Permata
Federal International
Federal International
Finance Asuransi
Finance Asuransi
Astra Buana
Astra Buana
Pamapersada
Pamapersada
Nusantara
Nusantara
Astra Sedaya
Astra Sedaya
Services
Services
Bank
Bank
Financial
Financial
Services
Services
Heavy Equipment
Heavy Equipment
Hotels
Hotels
Mining
Mining
United Tractors
United Tractors
Astra Agro Lestari
Astra Agro Lestari
Astra Graphia
Astra Graphia
Astra Land
Astra Land
Marga Mandalasakt
Marga Mandalasakt
Toll Roads
Toll Roads
TRAC
TRAC
Information Technology
Information Technology
Automobiles
Automobiles
Hotels
Hotels
Jardine Matheson
Annual Report 2016
Toll Roads TollRoadsToll RoadsHeavy Equipment Toyota Astra MotorAstra Daihatsu Motor Astra Honda Motor AutomobilesAstra OtopartsAstraInternational United TractorsAstra Agro Lestari Astra Graphia Astra LandMarga Mandalasakt TRAC MiningInformation TechnologyHeavyEquipmentHotelsHotelsTransport ServicesResidential DevelopmentRetail Health and Beauty HotelsJardine Motors FarmSupermarkets Hero Maxim’s MCL LAND Employee BenefitsJardine PacificJardine AviationJardine MathesonMandarin OrientalJardine StrategicGammonHactl AutomobilesEngineeringAirport ServicesAirport ServicesInfrastructureConstructionEngineeringConstructionHotelsHotelsHotelsJardine SchindlerZung Fu Zhongsheng GroupResidential DevelopmentCommercial PropertyJardineLloyd ThompsonRestaurantsRestaurantsRestaurantsRestaurantsInsuranceConvenience StoresReinsuranceReinsuranceHeavy Equipment Heavy Equipment HotelsHome FurnishingsHome FurnishingsAutomobilesAutomobiles AstraAviva LifeAstra Sedaya ServicesFederal InternationalFinanceAsuransi Astra Buana PamapersadaNusantara Jardine Cycle & Carriage THACODairyHypermarketsHealth and Beauty Health andBeauty Cycle & Carriage BintangTunas RideanCold Storage JTH JECFinancial ServicesBankPermataServices Financial Transport ServicesTransport ServicesTransport ServicesHongkong Land AutomobilesCommercial PropertyResidentialDevelopmentAirport ServicesConstructionConstruction YonghuiRaffles Quay OneCommercialPropertyJakarta LandHomeFurnishingsHealth andBeauty Health and Beauty Transport ServicesMotorcycles Transport ServicesCommercial PropertyJEC Health and Beauty Toll RoadsJECJECJECJEC Healthand Beauty HotelsLogisticsLogisticsLogisticsMotorcycles Healthand Beauty Financial ServicesFinancialServicesResidentialPharmaciesPharmacies Healthand Beauty HotelsHotelsCommercial PropertyCommercialProperty Residential Development Heavy Equipment www.jardines.com
for more information
Jardine Matheson Holdings Limited
is incorporated in Bermuda and has
a standard listing on the London
Stock Exchange, with secondary
listings in Bermuda and Singapore.
Jardine Matheson Limited
operates from Hong Kong and
provides management services to
Group companies.
Jardine Matheson Holdings Limited
Jardine House
Hamilton
Bermuda
Contents
Introduction
Highlights
Jardine Matheson Group Businesses at a Glance
Chairman’s Statement
Managing Director’s Review
People and the Community
Financial Review
Directors’ Profiles
Financial Statements
Independent Auditors’ Report
Five Year Summary
Responsibility Statement
Corporate Governance
Principal Risks and Uncertainties
Shareholder Information
Group Offices
1
2
4
6
8
20
22
27
28
113
114
115
116
122
123
124
Jardine Matheson is a diversified Asian-based
group with unsurpassed experience in the
region, having been founded in China in 1832.
We comprise a broad portfolio of market-leading
businesses, which represent a combination of
cash generating activities and long-term property
assets and are closely aligned to the increasingly
prosperous consumers of the region.
Where we operate
Our operations
Our philosophy
We operate principally in Greater China
and Southeast Asia, where our
subsidiaries and affiliates benefit from
the support of Jardine Matheson’s
extensive knowledge of the region
and its long-standing relationships.
We are always prepared to take a
long-term view when supporting their
development and to ensure that they
have the financial resources to achieve
their goals.
In our operations, which employ
430,000 people, we are active in
the fields of motor vehicles and related
operations, property investment and
development, food retailing, home
furnishings, engineering and
construction, transport services,
insurance broking, restaurants, luxury
hotels, financial services, heavy
equipment, mining and agribusiness.
Our businesses aim to produce
sustainable returns by providing their
customers with high quality products
and services. They provide good
working conditions for their people,
and offer fair remuneration and equal
opportunities. They recognize their
place in the communities in which
they operate and participate fully.
1
Jardine Matheson | Annual Report 2016 Highlights
• Underlying profit up 2%
• Full-year dividend up 3%
• Sound trading performances from across Group operations
• Regional economies remain resilient
• Material increase in value of the Hongkong Land property portfolio
Analysis of Underlying Profit of US$1,386m
By Business*
US$135m
1. Jardine Pacific
US$297m
5. Dairy Farm
US$110m
2. Jardine Motors
US$56m
3. Jardine Lloyd Thompson
US$353m
4. Hongkong Land
US$36m
6. Mandarin Oriental
US$125m
7. Jardine Cycle & Carriage
US$312m
8. Astra
1
0
2
3
4
5
6 7
20
40
60
8
80
9%
8%
4%
25%
21%
2%
9%
100
22%
By Sector*
25%
US$354m
Property
12%
US$174m
Engineering, construction
& mining contracting
By Geographical Area*
28%
US$392m
Motor vehicles
2%
US$36m
Hotels
23%
US$323m
Retail & restaurants
5%
US$74m
Insurance broking
& financial services
5%
US$71m
Others
52%
Greater China
43%
Southeast Asia
5%
UK & rest of the world
2
Jardine Matheson | Annual Report 2016 2016 Financial Highlights
US$72,437m
Gross revenue
US$21,800m
Shareholders’ funds
US$3,729m
Underlying profit
before tax
US$1,386m
Underlying profit
attributable
to shareholders
Results
Gross revenue including 100% of associates and joint ventures
Revenue
Underlying profit before tax+
Underlying profit attributable to shareholders+
Profit attributable to shareholders
Shareholders’ funds
Underlying earnings per share+
Earnings per share
Dividends per share
Net asset value per share
US$71,523m
Total assets
430,000
People employed
US$2,087m
Net debt#
US$5,692m
Total capital investment†
2016
US$m
72,437
37,051
3,729
1,386
2,503
21,800
US$
3.71
6.69
1.50
58.15
2015
US$m
restatedΩ
65,271
37,007
3,507
1,360
1,799
19,886
US$
3.64
4.82
1.45
53.30
Underlying Earnings per Share (US$)
Net Asset Value per Share (US$)
12
13
14
15
16
4.00
4.08
4.13
3.64
3.71
12
13
14
15
16
48.28
49.64
51.60
53.30
58.15
* Based on underlying profit attributable to shareholders before corporate and other interests.
# Excluding net debt of financial services companies.
† Including expenditure on properties for sale and associates and joint ventures.
Ω Restated due to a change in accounting policy as set out in note 1 to the financial statements.
+ The Group uses ‘underlying profit’ in its internal financial reporting to distinguish between
ongoing business performance and non-trading items, as more fully described in note 1 to
the financial statements. Management considers this to be a key measure which provides
additional information to enhance understanding of the Group’s underlying business
performance.
Change
%
11
–
6
2
39
10
%
2
39
3
9
3
Jardine Matheson | Annual Report 2016 Jardine Matheson Group Businesses at a Glance
Jardine Matheson
The listed holding company of
the Group which oversees a portfolio
of market-leading businesses and
supports their long-term development.
It holds an 84% interest in
Jardine Strategic, a listed company
holding most of the Group’s major
listed interests, including 57%
of Jardine Matheson.
Jardine Pacific
Jardine Motors
Jardine Pacific’s diverse portfolio
comprises industry leaders in the areas
of engineering and construction, airport
and transport services, restaurants and IT.
Its companies seek to deliver excellent
performances and services to their
customers and to create value for their
business partners and shareholders.
(100%)*
Jardine Motors is engaged in the sales
and service of motor vehicles and related
activities. It has operations in Hong Kong,
Macau and the United Kingdom, and a
large and growing presence in Southern
China. It combines a customer-oriented
approach with first class products and
services. (100%)*
Jardine Lloyd Thompson
Hongkong Land
JLT is one of the world’s leading providers
of insurance, reinsurance and employee
benefits related advice, brokerage and
associated services. A UK-listed group,
its deep expertise and entrepreneurial
culture give it the insights, creative
freedom and tenacity necessary to go
beyond the routine and deliver better
results for its clients. (42%)*
Hongkong Land is a major listed
property investment, management and
development group that operates under
the principles of excellence, integrity and
partnership. Its almost 800,000 sq. m.
prime office and retail space in Hong Kong,
Singapore and other major Asian cities
attracts the world’s foremost companies
and luxury brands. The group also has a
number of high quality residential and
mixed-use projects under development
in cities across Greater China and
Southeast Asia. (50%)†
* Figures in brackets show effective ownership by Jardine Matheson as at 2nd March 2017.
† Figures in brackets show effective ownership by Jardine Strategic as at 2nd March 2017.
4
Jardine Matheson | Annual Report 2016 Dairy Farm
Mandarin Oriental
Dairy Farm is a leading listed Asian
retailer that is active across four divisions,
being Food (including supermarkets,
hypermarkets and convenience stores),
Health and Beauty, Home Furnishings
and Restaurants. The group aims to meet
the changing needs of Asian consumers
by offering leading brands, a compelling
retail experience and great value, all
provided through responsible operations
supported by reliable and trusted supply
chains. (78%)†
Mandarin Oriental is an international hotel
investment and management group with
deluxe and first class hotels, resorts and
residences in sought-after destinations.
The group operates 29 hotels and eight
residences in 19 countries and territories,
and has a strong pipeline of properties
under development. As an innovative
industry leader, the group is committed to
exceeding its guests’ expectations through
exceptional levels of hospitality. (77%)†
Jardine Cycle & Carriage
Astra International
Jardine Cycle & Carriage is a leading
Singapore-listed company. In addition
to holding just over 50% in Astra
International, it is growing its portfolio
of motor and other interests in Southeast
Asia, including in Indonesia, Vietnam,
Singapore, Thailand, Malaysia and
Myanmar. The businesses include motor
dealerships and financing, engineering,
cement production and property. (75%)†
Astra is a major listed Indonesian group
working through its seven business lines –
Automotive; Financial Services; Heavy
Equipment and Mining; Agribusiness;
Infrastructure and Logistics; Information
Technology; and Property. Astra’s
philosophy is to be an asset to the nation
with an emphasis on sustainable growth,
through providing the best services
to its customers, a first class working
environment and socially responsible
outlook. Jardine Cycle & Carriage has a
shareholding of just over 50%.
5
Jardine Matheson | Annual Report 2016 Chairman’s Statement
Sir Henry Keswick
Chairman
After a steady result for the
Jardine Matheson Group in 2016,
the current year will see our businesses
concentrating on improving their
underlying performances and investing
in key areas for future growth.
Overview
The Jardine Matheson Group produced a satisfactory
result for the year as most of its businesses traded well.
Good performances were seen in Jardine Motors and most
of Jardine Pacific’s activities. Dairy Farm made further
progress in highly competitive retail markets and steady
performances were seen in Hongkong Land’s operations.
Astra produced some very good trading results, although
its profit growth was held back by provisions in its
banking affiliate, while Jardine Cycle & Carriage saw
good contributions from its non-Astra interests. The results of
both Mandarin Oriental and Jardine Lloyd Thompson suffered
from challenges in their respective markets. The Group’s
balance sheet benefited from enhanced asset values in
Hongkong Land.
Performance
The Group’s revenue for 2016, including 100% of revenue
from associates and joint ventures, was US$72.4 billion,
compared with US$65.3 billion in 2015. Jardine Matheson
achieved an underlying profit before tax for the year of
US$3,729 million, an increase of 6%. The underlying profit
attributable to shareholders was up 2% at US$1,386 million,
while underlying earnings per share were 2% higher
at US$3.71.
The profit attributable to shareholders for the year
was US$2,503 million, which included the Group’s
US$1.1 billion share of an increase in the value of
Hongkong Land’s investment property portfolio. This
compares with US$1,799 million in 2015, that included
a more modest increase in property valuations.
The Group’s financial position remains strong with
shareholders’ funds up 10% at US$21.8 billion. At the
end of 2016, the consolidated net debt excluding financial
6
services companies was US$2.1 billion, representing gearing
of 4%, compared with US$3.0 billion at the end of 2015 with
gearing of 6%.
The Board is recommending a final dividend of US$1.12 per
share, which increases the dividend by 3% for the full year to
US$1.50 per share.
Business Developments
With most of the Group’s businesses concentrated in Greater
China and Southeast Asia, they benefit from the ongoing
economic development of the Region and the demands for
products and services from a growing middle class. Despite
China’s ongoing economic challenges, its economy saw
relatively stable growth during 2016, with retail sales in
particular showing promise at the year end. During the year,
the Group continued the development of its business
networks and operating activities in key commercial centres
across the Mainland, and produced good performances in
the retail, property and motor sectors. In Southeast Asia,
Astra in Indonesia was able to capture market share in the
automotive segment with new model launches, while
increases in raw material prices should bring further benefits.
Jardine Pacific saw steady trading in most of its businesses
during 2016, although Gammon’s result was affected by a
problem civils contract. The group is seeking expansion
opportunities, both in the development of its existing
operations and by identifying new interests where it can
apply its specialist knowledge and expertise.
Jardine Motors enjoyed a very good year as Zung Fu’s
mainland China operations achieved increased sales and
higher margins. In Hong Kong, Zung Fu is repositioning its
sales and service facilities, where proceeds from the disposal
of existing properties are being reinvested in new facilities
designed to meet the evolving requirements of its customers.
Jardine Strategic’s motor dealership affiliate, Zhongsheng,
also benefited from the strengthening of the Mainland
market and reported much improved profitability.
Jardine Lloyd Thompson reported a good result set against
the continued challenging economic and trading
environment. The weakness of sterling in the second half
was a positive factor in JLT’s reported results, although the
benefit was largely reversed on consolidation in the Group’s
US dollar results.
Jardine Matheson | Annual Report 2016 Hongkong Land had another good year as its commercial
markets remained relatively firm and there was another
steady contribution from residential property developments.
The value of the group’s commercial portfolio in Hong Kong
increased by 12% due to office capitalization rates falling
further with strong investment demand and rental growth.
The group is currently developing a range of commercial and
residential projects in mainland China and Southeast Asia,
while its strong financial position with ample liquidity and
low gearing is allowing it to pursue further opportunities in
its chosen markets.
Dairy Farm produced sound profit growth in retail markets
that remained highly competitive. Its Hong Kong operations
continued to trade well, but challenges persisted for a
number of its Southeast Asian banners, particularly in
Malaysia. In mainland China, Yonghui saw a strong profit
improvement, and its contribution was enhanced by the
inclusion of its results for a full twelve months. Dairy Farm is
making progress in its transformation to compete effectively
in an evolving retail landscape, which it is supporting with
investment in its supply chain, IT infrastructure and systems,
and in the skills and expertise of its people.
Mandarin Oriental’s hotels remained focused on maintaining
or enhancing their market leadership positions, but weaker
demand in the group’s key cities of Hong Kong, London and
Paris meant that its earnings were lower. Mandarin Oriental
continues to pursue expansion opportunities around the
world and has a number of hotel management contracts at
various stages of development. It recently announced a
management contract for a new hotel and residences in
Honolulu, Hawaii to open in 2020.
Jardine Cycle & Carriage produced a satisfactory performance
in 2016 as Astra’s results improved, the Indonesian rupiah
exchange rate was stable, and there were increased
contributions from its other interests. The group is pursuing
expansion in Southeast Asia, through supporting the growth
of Astra in Indonesia, strengthening its other motor interests,
and investing in market-leading companies that provide
exposure to new business sectors.
Astra had a better year in 2016. Strong performances from its
automotive businesses led to increased market shares of
56% for cars and 74% for motorcycles. Most of the group’s
financial services businesses performed well, with the
principal exception of Permata Bank where a material
increase in its loan-loss provisions led to a significant loss.
Prospects for Astra’s heavy equipment and mining activities
improved in the final quarter as coal prices started to recover.
Its agribusiness also benefited from rising crude palm oil
prices, although its 2016 performance was hampered by
lower production due to the effects of poor weather. Astra
continues to seek investment opportunities in Indonesia to
expand its existing activities and move into new sectors,
and during the year took additional stakes in toll roads and
progressed its property development interests.
People
The strong trading performances achieved by our businesses
in the face of uncertain and disruptive markets are a
reflection of the hard work, dedication and professionalism
of the Group’s 430,000 employees, for which we are
most grateful.
Jeremy Parr joined the Board in February 2016. James Riley
stepped down as Group Finance Director at the end of March
2016 and was succeeded by John Witt. David Hsu joined the
Board in May 2016. In August 2016, Adam Keswick moved
from Hong Kong to become chairman of Matheson & Co. in
London and relinquished his position as Deputy Managing
Director in favour of Y.K. Pang. Adam remains on the Board.
We were saddened by the death of Lord Leach in June 2016.
He made a significant contribution to the Group over 33 years
and his intellect and wise counsel will be greatly missed.
Outlook
After a steady result for the Jardine Matheson Group in 2016,
the current year will see our businesses concentrating on
improving their underlying performances and investing in key
areas for future growth.
7
Jardine Matheson | Annual Report 2016 Managing Director’s Review
Ben Keswick
Managing Director
Each business has access to the Group’s
financial resources, expertise, people
and customers necessary to enable it to
compete effectively in rapidly evolving
business environments.
Jardine Matheson is a diversified group of market-leading
operations focused principally on two of the regions that are
driving global growth, Greater China and Southeast Asia,
although some of its businesses have a more global reach.
In 2016, 52% of underlying profit came from Greater China,
compared with 43% from Southeast Asia. The main
contributors to underlying profit by activity were motor
related interests at 28%, property at 25%, and retailing
and restaurants at 23%.
To support their development, each business has access to
the Group’s financial resources, expertise, people and
customers necessary to enable it to compete effectively in
rapidly evolving business environments. This includes the
ability to take advantage of the developments in technology
necessary to keep pace with consumer demands.
The Group’s operations produced creditable performances
in 2016, enabling Jardine Matheson to achieve an
underlying profit before tax of US$3,729 million, up 6%.
The underlying profit attributable to shareholders rose 2% to
US$1,386 million, while underlying earnings per share were
2% higher at US$3.71. The profit attributable to shareholders
of US$2,503 million included a US$1,043 million share of
Hongkong Land’s increase in the valuation of investment
properties and gains on property and business disposals of
US$163 million. Partially offsetting these was US$101 million
in charges in respect of the impairment in goodwill within
Jardine Pacific, which were taken through profit and loss
account in line with accounting requirements.
The Group’s profit generation, cash flows and retained
earnings have supported continued investment enabling
high levels of capital expenditure to be combined with low
levels of debt. The Group’s capital investment, including
expenditure on properties for sale, exceeded US$3.3 billion
in 2016, in addition to which its associates and joint ventures
had capital investment of US$2.3 billion. Three of Astra’s
8
Total Capital Investment of US$5.7 billion (US$ million)
409
Corporate
71
Jardine Pacific
100
Jardine Motors
93
JLT
1,377
Hongkong Land
430,000 Employees by Business Units
44,000
Jardine Pacific
7,800
Jardine Motors
10,400
JLT
3,400
Hongkong Land
1,633
Astra
830
Jardine Cycle &
Carriage
261
Mandarin Oriental
918
Dairy Farm
213,400
Astra
28,000
Jardine Cycle &
Carriage
13,000
Mandarin Oriental
110,000
Dairy Farm
Forecast middle class consumption in Asia*
2015
2020F
2030F
China
Rest of Asia ex Japan, India
US$ trillion
0
5.0
10.0
15.0
20.0
25.0
* Calculated at purchasing power parity in 2011 pricing in US dollars, published in
2017 by Kharas, Brookings Institution.
operations, Permata Bank, Astra Agro Lestari and Acset
Indonusa, raised equity through rights issues during
the year to enhance their balance sheets and fund growth.
The Group’s consolidated net debt at the end of the year,
excluding financial services companies, was US$2.1 billion,
which compares to US$3.0 billion at the end of 2015, with
gearing reducing from 6% to 4%.
Jardine Matheson | Annual Report 2016 • Underlying profit 5% lower
• Most businesses reported steady growth
• Gammon’s contribution affected by difficult contract
2016
2015 Change (%)
Gross revenue (including 100%
of associates and joint
ventures) (US$billion)
Underlying profit attributable
6.3
6.2
to shareholders (US$million)
135
142
2
(5)
Gross revenue (US$ billion)
12
13
14
15
16
5.3
5.4
6.1
6.2
6.3
Underlying Profit Attributable to
Shareholders (US$ million)
12
13
14
15
16
110
145
131
142
135
Underlying Profit by Business (excluding Corporate &
Other Interests) (US$ million)
18
Gammon
28
JEC
44
Jardine Schindler
17
Transport Services
9
JTH Group
28
Jardine Restaurants
Jardine Pacific produced an underlying net profit of
US$135 million in 2016, a reduction of 5% largely as a
result of the sale of its shipping business in 2015. Most
ongoing businesses reported steady growth, although
Gammon’s contribution was affected by a difficult contract.
The profit attributable to shareholders was US$57 million
after taking into account property valuations and goodwill
impairments principally against the IT operations. This
compares with US$145 million in 2015.
Jardine Schindler continued its good performance as it
generated stable profits and margins, and further growth in
its maintenance portfolio was achieved. JEC also did well to
generate improved earnings. Gammon’s contribution was
lower following the underperformance of a contract in its civils
division. Its order book has remained steady at US$3.8 billion.
Jardine Restaurants produced good profit growth in Taiwan,
in part deriving from tax benefits, but saw more difficult
trading for its Pizza Hut operations in Hong Kong. Jardine
Pacific’s continuing Transport Services businesses reported
stable contributions, with a slight increase in cargo
throughput seen at Hactl. There was a better result from
JTH Group despite continuing weak markets, however,
following a review of the trading performance of its IT
distribution business, a US$73 million goodwill impairment
was recorded.
9
Jardine Matheson | Annual Report 2016 Jardine Motors produced a much improved underlying profit of
US$110 million in 2016, 43% higher than the prior year.
Zung Fu in mainland China achieved higher sales of
Mercedes-Benz passenger cars at enhanced margins and better
performances from its after-sales operations. However, it faced
declining sales and margins in softer markets in Hong Kong
and Macau. Zung Fu is developing a new flagship property on
Hong Kong Island, primarily financed by proceeds from the
disposal of existing properties, that will combine most of its
Mercedes-Benz sales, service and administration activities
onto a single site. In the United Kingdom, the dealerships
achieved higher vehicle sales and stable margins, but a weaker
sterling exchange rate led to a lower earnings contribution.
Zhongsheng, one of mainland China’s leading motor
dealership groups in which Jardine Strategic now holds a
15.5% interest, announced a significant improvement in
profitability in 2016 as a result of increased sales and
better margins.
• Underlying profit up 43%
• Excellent result in mainland China
• Softer markets in Hong Kong and Macau
•
Improved UK sales contribution offset by
weaker currency
• Significant profit improvement at Zhongsheng
2016
2015 Change (%)
Revenue (US$ billion)
5.2
5.2
Underlying profit attributable
to shareholders (US$ million)
110
77
–
43
Revenue (US$ billion)
12
13
14
15
16
4.0
4.5
5.1
5.2
5.2
Underlying Profit Attributable to
Shareholders (US$ million)
15
59
12
13
14
15
16
97
77
110
Revenue by Geographical Location (US$ million)
2,600
Hong Kong &
mainland China
Profit by Geographical Location (US$ million)
81
Hong Kong &
mainland China
10
2,598
United Kingdom
29
United Kingdom
Managing Director’s Review (continued)Jardine Matheson | Annual Report 2016 • Underlying trading profit 9% lower at constant rates
of exchange
• Good performance in Risk and Insurance businesses
• Further investment in US Specialty business
• Restructuring costs in UK Employee Benefits
2016
2015 Change† (%)
Revenue (US$ billion)
1.7
1.8
Underlying profit attributable
to shareholders (US$ million)
149
172
9
(1)
Revenue (US$ billion)
12
13
14
15
16
1.4
1.5
1.8
1.8
1.7
Underlying Profit Attributable to
Shareholders (US$ million)
12
13
14
15
16
169
188
203
172
149
Revenue* by Division (US$ million)
1,287
Risk & Insurance
Revenue* by Location of Client
29%
United Kingdom
8%
Europe
4%
Rest of the world
404
Employee Benefits
16%
Asia
30%
The Americas
13%
Australia & New Zealand
JLT’s total revenue for 2016 was US$1,698 million, an
increase of 9% in its reporting currency. While underlying
trading profit was up 3% in its reporting currency at
US$260 million, it was 9% lower at constant rates of
exchange. This reflects a weaker first-half performance in
its UK Employee Benefits business and the development cost
of its US Specialty business. On conversion into US dollars
and after adjusting for restructuring costs, JLT’s contribution
to the Group’s underlying profit was 20% lower than the
prior year.
JLT’s Risk & Insurance businesses produced a 4% increase in
revenues at constant rates of exchange. Good performances
were seen in its Specialty and Reinsurance businesses as
well as its Asian and Latin American operations, with
progress continuing to be made in its new US Specialty
business.
The revenues of its Employee Benefits operations were down
1% at constant rates of exchange following the impact on the
UK Employee Benefits business of structural changes in the
industry. The profits of the business started to recover,
however, in the second half of the year. The International
Employee Benefits operations delivered 5% revenue growth
at constant rates of exchange.
† Based on the change in UK sterling, being the reporting currency of Jardine Lloyd Thompson.
* Excluding investment income.
11
Jardine Matheson | Annual Report 2016 • Underlying profit down 6%
• Continued strong contribution from commercial
portfolio
• Steady residential contribution from mainland China
and Singapore
• Net assets per share up 9% on higher capital values
2016
2015 Change (%)
Underlying profit attributable to
shareholders (US$ million)
848
905
Gross assets (US$ billion)
33.3
31.1
Net asset value per share (US$) 13.30 12.19
(6)
7
9
Underlying profit attributable to
shareholders (US$ million)
12
13
14
15
16
Net Asset Value per Share (US$)
12
13
14
15
16
776
935
930
905
848
11.11
11.41
11.71
12.19
13.30
1.1 million sq. m.
Area of commercial investment portfolio
under management
(including 100% of joint ventures)
Hongkong Land’s underlying profit in 2016 was 6%
lower at US$848 million. Good results were seen in its
commercial portfolio and its residential sector profits were
marginally lower, but its overall earnings declined in
the absence of a gain recorded in 2015 on a redeveloped
property in Hong Kong. The profit attributable to shareholders
was US$3,346 million after accounting for net non-trading
gains of US$2,498 million recorded on the revaluation
of the group’s investment properties. This compares to
US$2,012 million in 2015, which included net valuation gains
of US$1,107 million. Hongkong Land remains well-financed
with net debt of US$2.0 billion at the year end and net
gearing of 6%.
In commercial property, limited competitive supply in the
Hong Kong office leasing market benefited the group’s
Central portfolio, with year-end vacancy of 2.2% and rental
reversions remaining positive. The retail portion of the
portfolio was fully occupied and base rental reversions were
largely positive, although the impact of turnover rent led to
reduced rental income. The group’s Singapore office portfolio
was almost fully let, but the average rent decreased slightly.
In mainland China, construction of the group’s luxury retail
and hotel complex in Beijing is on target, with the retail
component opening later in 2017 and the Mandarin Oriental
Hotel due to open in 2018. In Jakarta, the fifth tower at
Jakarta Land, the group’s 50%-owned joint venture, is due to
complete in 2018.
12
Managing Director’s Review (continued)Jardine Matheson | Annual Report 2016 Underlying Operating Profit by Activity (before corporate cost)
(US$ million)
China
946
Commercial
Hong Kong
Macau
Thailand
Vietnam
Cambodia
Philippines
Singapore
Indonesia
Commercial Office
Commercial Retail
Residential Trading
Gross Assets by Activity
91%
Commercial
Gross Assets by Location
78%
Hong Kong
In Hongkong Land’s residential developments, revenue
recognized in mainland China during the year, including
attributable interests in joint ventures, increased by 34%,
but the profit contribution was flat due to the product mix
and a weaker Chinese currency. The group’s attributable
interest in contracted sales was 38% higher in 2016 at
US$1,105 million. The construction of the 50%-owned
New Bamboo Grove in Chongqing began in mid-2016 and
is progressing well. Results from the Singapore residential
business declined marginally due to lower provision write-
backs on completed developments. Of Hongkong Land’s
other residential interests, the developments in Indonesia
and the Philippines are progressing well.
293
Residential
9%
Residential
9%
Mainland China & Macau
13%
Southeast Asia
13
Jardine Matheson | Annual Report 2016 • Modest sales growth achieved in challenging markets
• Underlying profit up 7% at US$460 million
• Food, Home Furnishings and Restaurants deliver
higher profits
• Additional contribution from Yonghui Superstores
2016
2015 Change (%)
Sales including 100% of
associates & joint ventures
(US$ billion)
Sales (US$ billion)
20.4
17.9
11.2
11.1
Underlying profit attributable to
shareholders (US$ million)
460
428
14
1
7
Dairy Farm produced sound profit growth despite soft
consumer spending and pressure on pricing in most of its
markets. Sales by subsidiaries in 2016 were up 1% at
US$11.2 billion. Total sales, including 100% of associates
and joint ventures, were 14% higher at US$20.4 billion as
Yonghui produced stronger growth and an additional three
months’ contribution. Dairy Farm’s underlying profit was up
7% at US$460 million, with the increase being largely
attributable to improved operating margins in its Food and
Home Furnishings divisions and strong contributions from
both Yonghui and Maxim’s. The group’s operations continue
to generate good net cash flows, although somewhat
reduced from 2015 due to timing differences on working
capital movements. A further US$190 million was invested
in Yonghui in August to maintain Dairy Farm’s shareholding
at 19.99%.
Underlying Profit Attributable to
Shareholders (US$ million)
12
13
14
15
16
444
480
500
428
460
Sales Mix by Format*
56%
Supermarkets/
Hypermarkets
14%
Convenience Stores
Profit Mix by Format#
36%
Supermarkets/
Hypermarkets
12%
Convenience Stores
19%
Health & Beauty
4%
Home Furnishings
7%
Restaurants
27%
Health & Beauty
11%
Home Furnishings
14%
Restaurants
* Including share of associates and joint ventures.
# Based on operating profit and share of results of associates and joint ventures,
and excluding support office costs.
14
Managing Director’s Review (continued)Jardine Matheson | Annual Report 2016 11
Asian countries and territories
6.6million
Customer transactions per day
Over
Outlets6,500
Gross trading area5.5million sq. m.
Further progress was made by Dairy Farm in pursuit of its
strategic objectives in 2016 as it took measures to compete
effectively in an evolving retail landscape and grow its market
share. Its e-commerce offerings were improved, with
initiatives in its Home Furnishings, Food and Health and
Beauty operations. Range enhancements were introduced in
all of its formats in areas such as fresh produce, ready-to-eat
and corporate brands. Dairy Farm is using its scale to provide
an increasingly extensive international product range at
more attractive prices, while its customers are benefiting
from improved store networks and further investment in
quality assurance.
Dairy Farm’s continuing operations, including associates
and joint ventures, added a net 114 stores during the year
after the rationalization of some underperforming stores.
At 31st December 2016, the group had 6,548 stores in
operation in eleven countries and territories, including
its interest in 487 Yonghui stores in mainland China.
Retail Outlet Numbers by Format†
1,608
Supermarkets/
Hypermarkets
2,231
Convenience Stores
† Including 100% of associates and joint ventures.
1,715
Health & Beauty
9
Home Furnishings
985
Restaurants
15
Jardine Matheson | Annual Report 2016 • Weak demand persists in key cities
• Underlying earnings 37% lower
• Phased renovation of London hotel commenced
• New management contract in Hawaii
2016
US$m
2015
US$m
Change
%
Combined total revenue of
hotels under management
1,324 1,335
(1)
Underlying profit attributable
to shareholders
57
90
(37)
Underlying Profit Attributable to
Shareholders (US$ million)
12
13
14
15
16
69
57
93
97
90
Net Asset Value per Share* (US$)
12
13
14
15
16
2.77
2.93
3.02
2.84
3.10
* With freehold and leasehold properties at valuation.
Combined Total Revenue of US$1,324 million by Geographical Area
(US$ million)
297
Europe
350
The Americas
Portfolio of 8,025 Hotel Rooms by Geographical Area
1,270
Europe
1,634
The Americas
16
412
Other Asia
265
Hong Kong
5,121
Asia
Mandarin Oriental faced softer demand in many of its
key markets throughout 2016 resulting in its underlying
profit reducing to US$57 million, compared with the
US$90 million in the prior year. Profit attributable to
shareholders was US$55 million, compared to US$89 million
in 2015.
The group’s hotels in Hong Kong, London and Paris were
particularly affected by reduced demand, while its London
property was also impacted by an 18-month renovation
programme which began in September. The group saw a
positive trading environment in Tokyo, a return to normal
operations in Munich following a public area renovation,
and a contribution from the newly acquired equity interest
in Mandarin Oriental, Boston. There were, however, weaker
performances in Washington D.C. and Jakarta.
Mandarin Oriental completed the US$140 million acquisition
of its Boston hotel in April 2016. In July, it announced
30 branded residences adjacent to Mandarin Oriental, Bali,
both of which are due to open in mid-2018, and in February
2017 it announced a management contract for a new hotel
and residences in Honolulu, Hawaii to open in 2020. The
group has eleven hotels under development, which are
expected to open in the next five years, with the next hotel
opening in Doha expected later this year. Mandarin Oriental
currently operates 29 hotels and eight residences in 19
countries and territories.
Managing Director’s Review (continued)Jardine Matheson | Annual Report 2016 • Underlying earnings per share up 3%
•
Improved contribution from Astra
• Strong performance across Direct Motor Interests
• Higher contribution from Other Interests
2016
2015 Change (%)
Revenue (US$ billion)
15.8
15.7
Underlying profit attributable to
shareholders (US$ million)
679
632
–
7
Revenue (US$ billion)
12
13
14
15
16
21.5
19.8
18.7
15.7
15.8
Underlying Profit Attributable to
Shareholders (US$ million)
12
13
14
15
16
1,011
889
787
632
679
Underlying Profit (excluding Astra) of US$200 million by Business
(US$ million)
Other Interests:
22
Siam City Cement
11
Refrigeration Electrical
Engineering
Direct Motor Interests:
49
Cycle & Carriage Singapore
6
Cycle & Carriage Bintang
18
Tunas Ridean
94
Truong Hai Auto
Jardine Cycle & Carriage’s underlying profit was 7% higher
at US$679 million. Profit attributable to shareholders was
US$702 million after accounting for a net non-trading profit
of US$23 million, compared with US$691 million in 2015
after a net non-trading gain of US$59 million. Astra’s
contribution of US$500 million was up 6%. The group’s
Direct Motor Interests contributed US$167 million, up 18%,
while the contribution from its Other Interests was 11%
higher at US$33 million.
Within the Direct Motor Interests, the 25%-owned Truong Hai
Auto Corporation in Vietnam had a good year with its
contribution up 10% at US$94 million following a good
performance from its automotive operations and initial
profits from a new real estate business. Earnings from the
wholly-owned Singapore motor operations rose 26% to
US$49 million following an increase in the number of
certificates of entitlement. In Malaysia, the results of
59%-owned Cycle & Carriage Bintang declined despite
increased unit sales as changes in the sales mix led to lower
margins. In Indonesia, 44%-owned Tunas Ridean increased
its contribution by 94% to US$18 million with higher income
from motor car sales and financing.
Of the group’s Other Interests, the first full-year’s contribution
from 25%-held Siam City Cement Public Company Limited
(‘SCCC’) in Thailand of US$22 million was modestly higher
as the effect of reduced domestic cement prices was partly
offset by contributions from new acquisitions. SCCC is
investing some US$1 billion to expand its business with
acquisitions in Vietnam, Bangladesh and Sri Lanka,
which it will finance in part by a US$480 million rights issue.
Jardine Cycle & Carriage’s 23%-owned Refrigeration
Electrical Engineering Corporation in Vietnam, contributed
US$11 million, an increase of 25% with progress being made
in its property development activities.
17
Jardine Matheson | Annual Report 2016 • Net earnings per share up 5%
•
Increased market shares for cars and motorcycles
• Heavy equipment and mining result up due to
non-recurrence of impairment charge
• Agribusiness benefited from improved prices
• Significant increase in loan-loss provisions by
Permata Bank
2016
2015 Change* (%)
Net Revenue# (US$ billion)
13.6
13.7
Profit attributable to
shareholders# (US$ million)
1,137 1,075
(2)
5
Motor Vehicle Sales including Associates
and Joint Ventures (thousand units)
12
13
14
15
16
605
655
614
510
591
Motorcycle Sales including Associates
and Joint Ventures (thousand units)
12
13
14
15
16
4,089
4,697
5,051
4,454
4,381
Profit Attributable to Shareholders of US$1,137 million by Business
(US$ million)
688
Automotive
59
Financial Services
227
Heavy Equipment
& Mining
20
Infrastructure & Logistics
15
Information
Technology
8
Property
120
Agribusiness
* Based on the change in Indonesian rupiah, being the reporting currency of Astra.
# Reported under Indonesian GAAP.
18
Astra’s underlying profit for 2016 under Indonesian
accounting standards was up 4% at Rp14.6 trillion,
equivalent to US$1,096 million. Its net profit was up 5%
at Rp15.2 trillion, some US$1,137 million. Strong working
capital inflows were maintained with net cash, excluding
its financial services subsidiaries, of Rp6.2 trillion or
US$461 million at 31st December 2016, compared to net
cash of Rp1.0 trillion or US$75 million at the end of 2015.
Net income from Astra’s automotive businesses in Indonesia
rose 23% to US$688 million, largely due to successful new
model launches. Astra’s car sales were up 16% at 591,000
units, outperforming the wholesale market increase of 5%,
resulting in its market share rising from 50% to 56%. Astra
Honda Motor’s domestic motorcycle sales were 2% lower at
4.4 million units, while the wholesale market declined 8%,
increasing its market share from 69% to 74%. Net income
from Astra Otoparts rose 31% to US$31 million.
Net income in financial services was 78% lower at
US$59 million, mainly due to a loss in Permata Bank
following a significant increase in loan-loss provisions in
its commercial loan book, excluding this loss the net income
would have risen 7% to US$282 million. To strengthen
its capital base, Permata Bank undertook a US$420 million
rights issue in June 2016 and plans for a further
US$220 million rights issue in the first half of 2017,
in respect of which US$110 million has already been
advanced by its two major shareholders, Astra and
Standard Chartered Bank. Astra’s consumer financing rose
21% in 2016 to US$5.5 billion, while its heavy equipment
financing rose 20% to US$352 million. Modest improvement
Managing Director’s Review (continued)Jardine Matheson | Annual Report 2016 2016 New motor car market share56%
2016 New motorcycle market share74%
US$5.5bn +21%
2016 New consumer financing
US$352m +20%
2016 New heavy equipment financing
was seen in Astra’s general insurance company, and by
the end of the year its life insurance joint venture,
Astra Aviva Life, had reached 228,000 individual life
customers and 596,000 participants for its corporate
employee benefits programmes.
United Tractors’ net income of US$375 million was up 30%
over 2015, when an impairment charge was incurred,
excluding which the net income in 2016 would have been
down 22%. Mining contracting revenue was lower due to
the relatively weak coal prices for much of the year. Earnings
were also impacted by foreign exchange translation losses.
Komatsu heavy equipment sales rose 3%, but parts and
service revenue declined. Pamapersada Nusantara’s mining
contracting operations saw coal production little changed,
while overburden removal was 8% lower. Coal sales at
United Tractors’ mining subsidiaries were 48% higher at
6.8 million tonnes. General contractor, Acset Indonusa,
reported net income up 63% at US$5 million, and in
June 2016 raised US$45 million in a rights issue to support
its continued growth.
Astra Agro Lestari’s net income increased from US$46 million
to US$150 million. Its revenue improved as higher crude
palm oil prices offset reduced production due to the impact
of poor weather, while the stronger rupiah at the year end
benefited the translation of its US dollar monetary liabilities.
It completed a US$300 million rights issue in June 2016.
Net income from Astra’s infrastructure and logistics
activities increased by 35% to US$20 million. Progress
continues in the expansion of the group’s toll road interests,
which including greenfield developments now extend to
343 kilometres. PAM Lyonnaise Jaya, which operates the
western Jakarta water utility system, saw a modest rise in
sales volumes. Astra’s contract car hire business produced
a better result, while its information technology interests saw
a modest decline in net income.
Astra’s new property division produced net income of
US$8 million, down from US$16 million in 2015 primarily due
to lower revaluation gains. Construction is ongoing at the
93%-sold luxury residential development Anandamaya
Residences, a 60%-owned joint venture with Hongkong Land
in Jakarta’s Central Business District, and at Menara Astra,
the adjacent Grade A office tower development. Both are on
schedule to complete in 2018.
19
Jardine Matheson | Annual Report 2016 People and the Community
Jardine Matheson Group companies remain committed
to making a positive change in the communities where
they operate through charitable initiatives.
In Hong Kong and Singapore, Group companies focus their
philanthropic activities on the area of mental health through
MINDSET, the Group’s in-house charitable programme.
Led by the Jardine Ambassadors, young executives drawn
from across the Group, the MINDSET programme aims to
raise awareness and understanding of mental health issues
and to change attitudes, while at the same time providing
practical support for charitable initiatives in the sector.
In Hong Kong, MINDSET (www.mindset.org.hk) continued to
support people in recovery to engage in art projects to foster
mental wellness and positive psychology through MINDSET
Expression. Its school-based ‘Health in Mind’ programme,
operated jointly with the Hong Kong Hospital Authority,
aims to raise awareness of mental health issues among
young people. MINDSET College, a pilot programme in
Hong Kong, established to provide supported education
for people in recovery from mental illness and help them
develop their potential, is expected to commence its
courses in summer 2017.
The signature event in Hong Kong, CENTRAL Rat Race, attracted
over 460 entrants and raised a record US$423,000 for MINDSET.
MINDSET in Singapore (www.mindset.com.sg) officially
launched the flagship project ‘MINDSET Learning Hub’
in October 2016 to offer support and job training for
recovering individuals. The setup of the Hub is supported
by a US$1.5 million pledge from the Group. The MINDSET
Challenge 2016 raised over US$267,000, and the first
MINDSET Carnival was held on the same day to celebrate
MINDSET’s fifth anniversary with the participation of 1,700
staff and service users. MINDSET also won the inaugural
Charity Transparency Award at the Singapore Charity
Transparency Awards and Charity Governance Awards 2016.
In addition, the Group was named a top three finalist in the
category of ‘Sustainability Initiatives’ for its contributions to
the mental health sector at the British Chamber of Commerce
Singapore Annual Business Awards 2016.
In Indonesia, Astra continued to offer support to the
community in the areas of health, education, environment
and entrepreneurship. Astra launched its first Green Energy
Summit and implemented energy conservation and efficiency
initiatives in its companies in support of Indonesia’s
commitment to tackle climate change. The company also
initiated the ‘Astra Start-Up Challenge’, a platform that
encourages young people to be innovative entrepreneurs.
Under its ‘Astra Berseri Village’ programme, Astra helped in
the development of rural villages by building facilities such
as playgrounds and water treatment plants in order to
improve the quality of life. The concept of this programme
came from a winner of the SATU Indonesia (Astra’s Unified
Spirit of Indonesia) Awards, which aims at recognizing young
people’s efforts in contributing to the communities for
building a better Indonesia.
Jardine Lloyd Thompson’s charitable activities, which were
founded on three themes – Knowledge, Wellbeing and
Resilience, reflected the company’s business capabilities
through the partnership with three charitable organizations,
the Udaan Foundation for disadvantaged children in
Mumbai, and in the UK the Alzheimer’s Society and the
disaster relief specialist, RedR.
20
Jardine Matheson | Annual Report 2016
Encouraging Higher Education
In January 2017, 14 students from mainland China,
Hong Kong, Malaysia, Singapore and Thailand were
awarded scholarships by the Jardine Foundation to pursue
their undergraduate studies in the United Kingdom.
Meanwhile, the Foundation’s postgraduate scholarship
scheme supported 11 scholars from mainland China,
Malaysia, Myanmar, Hong Kong and Indonesia for their
master’s or doctoral studies commencing in October 2016.
Scholarships are available for selected colleges at Oxford
and Cambridge Universities, and scholars are chosen for
their academic ability, leadership qualities and community
participation. Since its establishment, 250 scholarships have
been awarded to students from the regions in which the
Group operates. (www.jardine-foundation.org)
In Indonesia, Astra distributed scholarships through a
number of foundations to support students from
underdeveloped areas. Over 229,190 scholarship grants
were given to recipients in elementary schools up to
university level. Some 15,350 schools were funded to
improve their educational activities.
Meanwhile, in Singapore, Jardine Cycle & Carriage
scholarships awarded scholarships to three outstanding
business management undergraduates.
Providing Expertise
Group executives are active on external management boards
and professional and advisory bodies where they provide
expertise and knowledge. These activities are encouraged as
they contribute to the development of the communities and
the business sectors in which the Group operates.
Two of the 18 Jardine Scholars who participated in the annual
Cambridge University Chinese New Year Trust Charity Run, which the
Jardine Foundation has supported since 2001. The funds raised will
help to improve access to education for children in rural China.
Supporting our People
The Group supports its people with various management
training and development programmes. A good example is
the central recruitment of graduates who in addition to
pursuing a modular, three-year leadership development
programme, also attain a Chartered Institute of Management
Accountants qualification. This approach brings a rare
balance of management breadth and financial depth, and
readies them for leadership positions. Another example is
the Director Development Initiative, which provides senior
executives with the opportunity to meet chief executives from
some of the world’s most admired companies.
The Group also conducts a series of development centres
every year to identify talent and support the Group’s human
resources planning process. In 2016, around 40 executives
were transferred between businesses in the Group.
21
Jardine Matheson | Annual Report 2016 Financial Review
John Witt
Group Finance Director
Accounting Policies
The Directors continue to review the appropriateness of the
accounting policies adopted by the Group having regard to
developments in International Financial Reporting Standards
(‘IFRS’). In 2016, a number of amendments to the Standards
became effective and the Group adopted those which are
relevant to the Group’s operations. As mentioned in note 1
of the financial statements, the only amendments adopted
that impact the consolidated profit and loss account and
balance sheet are the amendments to IAS 16 and IAS 41
on Agriculture: Bearer Plants. The adoption of these
amendments does not have a material effect on the financial
statements, but the comparative financial statements have
been restated in accordance with the requirements
under IFRS.
Results
Underlying Profit
Underlying Business Performance
Revenue
Operating profit
Net financing charges
Share of results of
associates and
joint ventures
Profit before tax
Tax
Profit after tax
Non-controlling interests
Underlying profit
attributable to
shareholders
Non-trading items
Net profit
2016
US$m
37,051
3,146
(151)
734
3,729
(654)
3,075
(1,689)
1,386
1,117
2,503
US$
2015
US$m
37,007
2,804
(135)
838
3,507
(624)
2,883
(1,523)
1,360
439
1,799
US$
Underlying earnings
per share
3.71
3.64
22
In 2016, revenue was broadly in line with 2015. Gross
revenue, including 100% of revenue from associates and
joint ventures, which is a measure of the full extent of
the Group’s operations, increased by 11% to US$72.4 billion.
This increase was largely from Dairy Farm’s associate,
Yonghui Superstores in mainland China, Astra’s automotive
associates and joint ventures, and Jardine Cycle & Carriage’s
associates, Truong Hai Auto Corporation (‘THACO’) in Vietnam
and Siam City Cement in Thailand.
Operating profit from the Group’s subsidiaries, excluding
non-trading items, was US$3,146 million, and increase of
US$342 million or 12%. Whilst this represents good
overall growth, there was a mixed performance from the
Group’s businesses.
Astra’s underlying operating profit increased by
US$339 million or 31% from 2015, which had included an
impairment charge of US$349 million in relation to its coal
mining properties. Excluding the effect of this impairment
charge, Astra’s 2016 operating profit would have been
marginally lower compared with 2015. Lower earnings from
United Tractors as a result of relatively weak coal prices
were mitigated by higher earnings from Astra’s other major
businesses, namely automotive, financial services and
agribusiness, which benefited from rising crude palm oil
prices and the stronger Rupiah on the translation of its
US dollar monetary liabilities.
The underlying operating profit for Jardine Motors increased
by US$52 million as Zung Fu in mainland China achieved
strong sales at higher margins and a better performance from
its after-sales operations. This was partly offset by lower
earnings in Hong Kong due to lower sales and margins.
Jardine Motors’ United Kingdom operations achieved higher
vehicle sales and stable margins, but a weaker sterling
exchange rate led to a lower contribution in US dollar terms.
Dairy Farm’s contribution was US$17 million above 2015 as a
result of improved operating margins from its Food business
and higher sales in its Home Furnishings business, while its
Health and Beauty business reported lower earnings.
Jardine Matheson | Annual Report 2016 Jardine Cycle & Carriage’s contribution increased by
US$8 million mainly resulting from higher earnings in its
motor operations in Singapore. Jardine Pacific’s results
were US$4 million higher due to better performances in its
Restaurant businesses, JEC and JTH, partly offset by the
absence of profit from its shipping business which was sold
in 2015.
decreased by US$14 million mainly due to lower revenue and
the restructuring costs in its Employee Benefits business in
the United Kingdom and the development costs of its
United States Specialty business. The positive impact of the
weakness of sterling on Jardine Lloyd Thompson’s results
was largely offset upon conversion into US dollars at the
Group level.
Hongkong Land’s contribution decreased by US$23 million
due primarily to the absence of the gain recorded in 2015 on
a redeveloped property in Hong Kong. Excluding the effect of
this, the contribution from its principal commercial and
residential development activities showed a modest
increase. Mandarin Oriental’s contribution decreased by
US$38 million compared with 2015 primarily due to lower
demand affecting its Hong Kong, London and Paris hotels.
London was also impacted by its major renovation
programme which commenced in September 2016.
Net financing charges increased by US$16 million compared
to 2015 principally due to the higher levels of average net
debt in Astra’s holding company and Dairy Farm during the
year. Interest cover exclusive of financial services companies
remained strong at 22 times, calculated as the sum of
underlying operating profit and share of results of associates
and joint ventures divided by net financing charges.
The Group’s share of underlying results of associates
and joint ventures decreased by US$104 million or 12% to
US$734 million. Contributions from Astra’s associates and
joint ventures reduced by US$101 million as a result of a
significant increase in loan-loss provisions made against
Permata Bank’s commercial loan book, partly offset by strong
sales performances in Astra’s automotive businesses.
The contribution from Hongkong Land’s associates and joint
ventures decreased by US$23 million mainly due to the
timing of sales in its residential joint venture projects in
mainland China. Jardine Pacific’s joint venture contributions
fell by US$15 million, with lower earnings in Gammon
resulting from the underperformance of a major contract,
mitigated by higher contributions from Jardine Schindler
and Hactl. The contribution from Jardine Lloyd Thompson
In Dairy Farm, the contributions from its associates
increased by US$30 million primarily as a result of the strong
performance and a full-year contribution from Yonghui
Superstores. In addition, Maxim’s results were higher.
In Jardine Cycle & Carriage, its contribution from associates
and joint ventures was US$22 million higher mainly from
THACO, its motor vehicle associate in Vietnam, and Tunas
Ridean in Indonesia.
The underlying effective tax rate for the year was 24%, which
was broadly in line with that of 2015.
The Group’s underlying profit attributable to shareholders in
2016 was US$1,386 million (or US$3.71 on an earnings per
share basis), 2% higher than in the prior year.
Non-trading Items
In 2016, the Group had net non-trading gains of
US$1,117 million, which included a net increase of
US$1,061 million in the fair value of investment properties
primarily in Hongkong Land and gains on property disposals
of US$158 million, partly offset by impairment charges of
US$101 million against goodwill on certain businesses,
within Jardine Pacific.
Dividends
The Board is recommending a final dividend of US$1.12 per
share for 2016, providing a total annual dividend of US$1.50
per share, an increase of 3% over 2015. The final dividend
will be payable on 11th May 2017, subject to approval at the
Annual General Meeting to be held on 4th May 2017, to those
persons registered as shareholders on 17th March 2017.
The dividends are payable in cash with a scrip alternative.
23
Jardine Matheson | Annual Report 2016 Financial Review (continued)
Cash Flow
Summarized Cash Flow
Operating cash flow
Dividends from associates
and joint ventures
Operating activities
Capital expenditure
and investments,
net of disposals
2016
US$m
3,353
597
3,950
(2,063)
Cash flow before financing
1,887
2015
US$m
3,455
634
4,089
(3,200)
889
The cash inflow from operating activities for the year was
US$3,950 million compared with US$4,089 million in 2015.
The decrease of US$139 million from 2015 was principally
due to an increase in working capital in Astra’s financial
services, heavy equipment and mining businesses, and in
Dairy Farm mainly from timing differences on working capital
movements. This increase was partly offset by reduced
working capital in Jardine Motors and lower net investment
by Hongkong Land in residential projects.
Capital expenditure and investments for the year before
disposals amounted to US$2,594 million and was broadly
spread throughout the Group. This included the following:
• US$60 million for the purchase of businesses, principally
Jardine Motors’ acquisition of various motor dealerships in
the United Kingdom for US$46 million;
• US$652 million for investments in various associates and
joint ventures, the main ones being Dairy Farm’s further
investment of US$190 million in Yonghui Superstores to
maintain its shareholding at 19.99%; Astra’s subscription
to a Permata Bank rights issue and a subsequent equity
loan for a combined total of US$240 million; Hongkong
Land’s investment of US$70 million in a residential project
in Chengdu; Astra’s purchase of and capital injections into
certain associates and joint ventures in Indonesia of
US$74 million, and Hongkong Land and Astra’s joint
investment for a 50% share in a joint venture residential
project in Indonesia for US$57 million;
• US$294 million for the purchase of other investments,
mainly by Astra’s general insurance business;
• US$142 million for the purchase of intangible assets,
which included US$60 million for the acquisition of
contracts in Astra’s general insurance business and
US$30 million for leasehold land for use by Astra;
• US$996 million for the purchase of tangible assets, which
included US$456 million in Astra, (US$175 million of which
was for the acquisition of heavy equipment and machinery,
predominantly by Pamapersada, US$133 million was for
outlet development and additional operational machinery
and equipment in Astra’s automotive business, and
US$113 million to develop plantation infrastructure in
Astra’s agribusiness); US$217 million in Mandarin Oriental
(of which US$140 million was for the acquisition of the
hotel property in Boston); US$212 million in Dairy Farm
and US$55 million in Jardine Motors; and
• US$313 million for additions to investment properties in
Hongkong Land and Astra, and US$56 million for additions
to bearer plants in Astra.
In 2015, the Group’s principal capital expenditure and
investments consisted of:
• US$147 million for Dairy Farm’s acquisition of a 100%
interest in a supermarket chain in Macau;
• US$912 million for Dairy Farm’s acquisition of a 19.99%
interest in Yonghui Superstores;
• US$615 million for Jardine Cycle & Carriage’s acquisition of
a 25% interest in Siam City Cement in Thailand;
• US$315 million for Hongkong Land’s investment in
property joint ventures, mainly including the 50% interests
in the residential projects in Chongqing and in the Pudong
district of Shanghai for US$104 million and US$132 million,
respectively;
• US$1,093 million for the purchase of tangible assets by
Group companies; and
• US$233 million for additions to investment properties in
Hongkong Land and Astra.
24
Jardine Matheson | Annual Report 2016 The Group’s Treasury operations are managed as cost centres
and are not permitted to undertake speculative transactions
unrelated to underlying financial exposures.
Note 2 of the financial statements summarizes the Group’s
financial risk factors.
Funding
The Group is well financed with strong liquidity. Net gearing,
excluding net borrowings relating to Astra’s financial services
companies, was 4% at 31st December 2016, down from 6%
at the end of 2015. Net borrowings, on the same basis, were
US$2.1 billion at 31st December 2016 compared with
US$3.0 billion at the end of 2015. Astra’s financial services
companies had net borrowings of US$3.6 billion at the end of
the year compared with US$3.2 billion at the end of 2015.
Net Debt* and Total Equity (US$ billion)
3.4
2.6
2.5
3.0
2.1
12
13
14
15
16
Net Debt
Total Equity
42.0
42.4
44.5
45.5
49.7
* Excluding net debt of Astra’s financial services companies.
At the year end, undrawn committed facilities totalled
US$5.4 billion. In addition, the Group had liquid funds of
US$5.5 billion. During the year, the Group’s total equity
increased by US$4.2 billion to US$49.7 billion.
The contribution to the Group’s cash flow from disposals for
the year amounted to US$531 million (2015: US$730 million),
which principally included US$175 million from the
repayment of advances from associates and joint ventures
in Hongkong Land, US$204 million from the sale of tangible
assets mainly properties in Hong Kong and in the United
Kingdom by Jardine Motors, and US$122 million from the sale
of other investments by Astra’s general insurance business.
The Group also purchased additional shares in Group
companies for a total cost of US$362 million (2015:
US$275 million), which, according to accounting standards,
is presented as financing activities in the Consolidated Cash
Flow Statement.
The Group’s management also monitors total capital
investment across the Group. This exceeded US$5.6 billion
in 2016, compared with US$6.5 billion in 2015. These figures
include the capital expenditure of associates and joint
ventures and expenditure on properties for sale in addition
to the capital expenditure outlined above.
Treasury Policy
The Group manages its exposure to financial risk 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 about costs. The investment of the
Group’s cash resources is managed so as to minimize 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 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, to give flexibility to develop the business.
25
Jardine Matheson | Annual Report 2016 Financial Review (continued)
The average tenor of the Group’s debt at 31st December 2016
was 4.2 years, broadly unchanged from the end of 2015.
90% of borrowings were non-US dollar denominated and
directly related to the Group’s businesses in the countries of
the currencies concerned. As at 31st December 2016,
approximately 61% of the Group’s borrowings, exclusive of
Astra’s financial services companies, were at floating rates
and the remaining 39% were at fixed rates including those
hedged with derivative instruments with major creditworthy
financial institutions. For Astra’s financial services
companies, 88% of their borrowings were also at fixed rates.
Debt profile as at 31st December 2016
Interest rate*
61%
Floating
Currency
9%
Others
10%
USD
Maturity
38%
< 1 year
14%
1-2 years
* Excluding Astra’s financial services companies.
26
Shareholders’ Funds
Shareholders’ funds as at 31st December 2016 are analyzed
below, by business and by geographical area. There were no
significant changes from the prior year.
By Business
3%
Jardine Pacific
14%
Astra
4%
Jardine Cycle &
Carriage
4%
Mandarin Oriental
6%
Dairy Farm
By Geographical Area
39%
Fixed
3%
United Kingdom
31%
Southeast Asia
3%
Jardine Motors
2%
Jardine Lloyd Thompson
64%
Hongkong Land
4%
Rest of the World
62%
Greater China
Principal Risks and Uncertainties
A review of the principal risks and uncertainties facing the
Group is set out on page 122.
44%
IDR
37%
HKD
22%
> 5 years
26%
2-5 years
Jardine Matheson | Annual Report 2016 Directors’ Profiles
Sir Henry Keswick*
Chairman
Sir Henry joined the Group in 1961 and has been a Director of its
holding company since 1967. He is chairman of Jardine Strategic,
and a director of Matheson & Co., Dairy Farm, Hongkong Land and
Mandarin Oriental. He is also vice chairman of the Hong Kong
Association.
Ben Keswick*
Managing Director
Mr Ben Keswick joined the Board in 2007 and was appointed as
Managing Director in 2012. He has held a number of executive
positions since joining the Group in 1998, including finance
director and then chief executive officer of Jardine Pacific between
2003 and 2007 and, thereafter, group managing director of
Jardine Cycle & Carriage until 2012. He has an MBA from INSEAD.
Mr Keswick is chairman of Jardine Matheson Limited and
Jardine Cycle & Carriage and a commissioner of Astra. He is also
chairman and managing director of Dairy Farm, Hongkong Land
and Mandarin Oriental, managing director of Jardine Strategic
and a director of Jardine Pacific and Jardine Motors.
Anthony Nightingale
Mr Nightingale joined the Group in 1969 and was appointed as a
Director in 1994. He was Managing Director from 2006 until he
retired from executive office in 2012. He is also a director of Dairy
Farm, Hongkong Land, Jardine Cycle & Carriage, Jardine Strategic,
Mandarin Oriental, Prudential, Schindler, Shui On Land and
Vitasoy and a commissioner of Astra. Mr Nightingale also holds
a number of senior public appointments, including acting as
a non-official member of the Commission on Strategic
Development, a Hong Kong representative to the Asia Pacific
Economic Cooperation (APEC) Business Advisory Council and
a director of the UK-ASEAN Business Council. He is chairman of
The Sailors Home and Missions to Seamen in Hong Kong.
Jeremy Parr*
Mr Parr was appointed to the Board in February 2016, having
first joined the Group as Group General Counsel in 2015. He was
previously a senior corporate partner with Linklaters, where he
was the global head of the firm’s corporate division, based in
London. Mr Parr is also a director of Jardine Matheson Limited,
Dairy Farm and Mandarin Oriental.
Y.K. Pang*
Deputy Managing Director
Mr Pang joined the Board in 2011 and was appointed Deputy
Managing Director in August 2016. He has held a number of
senior executive positions in the Group, which he joined in 1984,
including chief executive of Hongkong Land between 2007 and
2016. He is chairman of Jardine Pacific and chairman and chief
executive of Jardine Motors. Mr Pang is also deputy chairman of
Jardine Matheson Limited, and a director of Dairy Farm,
Hongkong Land, Jardine Matheson (China), Jardine Strategic,
Mandarin Oriental, Yonghui Superstores and Zhongsheng. He is
chairman of the Employers’ Federation of Hong Kong and a past
chairman of the Hong Kong General Chamber of Commerce.
Lord Sassoon, Kt*
Lord Sassoon joined the Board in 2013. He began his career at
KPMG, before joining SG Warburg (later UBS Warburg) in 1985.
From 2002 to 2006 he was in the United Kingdom Treasury as a
civil servant, where he had responsibility for financial services
and enterprise policy. Following this, he chaired the Financial
Action Task Force; and conducted a review of the UK’s system
of financial regulation. From 2010 to 2013 Lord Sassoon was the
first Commercial Secretary to the Treasury and acted as the
Government’s Front Bench Treasury spokesman in the House
of Lords. He is a director of Matheson & Co., Dairy Farm,
Hongkong Land, Mandarin Oriental and Jardine Lloyd Thompson.
He is also chairman of the China-Britain Business Council.
Mark Greenberg*
Mr Greenberg joined the Board as Group Strategy Director in 2008
having first joined the Group in 2006. He had previously spent 16
years in investment banking with Dresdner Kleinwort Wasserstein
in London. He is a director of Jardine Matheson Limited, Dairy
Farm, Hongkong Land, Jardine Cycle & Carriage and Mandarin
Oriental, and a commissioner of Astra and Bank Permata.
Percy Weatherall
Mr Weatherall first joined the Company in 1976 and was
appointed to the Board in 1999 before being made Managing
Director in 2000. He retired from executive office in 2006. He is
also a director of Matheson & Co., Dairy Farm, Hongkong Land,
Jardine Strategic and Mandarin Oriental. He is chairman of
Corney & Barrow and the Nith District Salmon Fishery Board.
David Hsu*
Mr Hsu joined the Board in May 2016, having first joined the
Group in 2011. He is chairman of Jardine Matheson (China) with
responsibility for supporting the group’s business developments
in mainland China, Taiwan and Macau. He was previously chief
executive of J.P. Morgan Asset Management in the Asia Pacific
Region. Mr Hsu is also a director of Jardine Matheson Limited and
Jardine Strategic.
John Witt*
Mr Witt joined the Board as Group Finance Director in April 2016.
He is a Chartered Accountant and has an MBA from INSEAD.
He has been with the Jardine Matheson Group since 1993
during which time he has held a number of senior finance
positions. Most recently, he was the chief financial officer of
Hongkong Land. He is also a director of Jardine Matheson Limited
and Dairy Farm.
Adam Keswick*
Mr Adam Keswick first joined the Group in 2001 before being
appointed to the Board in 2007. He was Deputy Managing Director
from 2012 to 2016, and became chairman of Matheson & Co. in
August 2016. Mr Keswick is also deputy chairman of Jardine Lloyd
Thompson and a director of Dairy Farm, Hongkong Land,
Jardine Strategic and Mandarin Oriental. He is also a director of
Ferrari, and a supervisory board member of Rothschild & Co.
Simon Keswick*
Mr Simon Keswick joined the Group in 1962 and has been a
Director of its holding company since 1972. He is a director of
Matheson & Co., Dairy Farm, Hongkong Land, Jardine Strategic
and Mandarin Oriental.
Dr Richard Lee
Dr Lee joined the Board in 1999. Dr Lee’s principal business
interests are in the manufacturing of textiles and apparel in
Southeast Asia, and he is the honorary chairman of TAL Apparel.
He is also a director of Hongkong Land and Mandarin Oriental.
Michael Wei Kuo Wu
Mr Wu joined the Board in 2015. He is chairman and managing
director of Maxim’s Caterers in Hong Kong. He is also a
non-executive director of Hang Seng Bank and Hongkong Land,
a council member of the Hong Kong University of Science and
Technology and a member of the court of the University of
Hong Kong.
*
Executive Director
Company Secretary
Neil McNamara
Registered Office
Jardine House, 33-35 Reid Street
Hamilton
Bermuda
27
Jardine Matheson | Annual Report 2016 Consolidated Profit and Loss Account
for the year ended 31st December 2016
Underlying
business
performance
2016
Non-trading
items
US$m
US$m
Total
US$m
37,051
(33,905)
–
93
37,051
(33,812)
Underlying
business
performance
US$m
restated
37,007
(34,203)
2015
Non-trading
items
US$m
restated
Total
US$m
restated
–
(59)
37,007
(34,262)
–
3,146
(297)
146
(151)
2,573
2,666
–
–
–
2,573
5,812
(297)
146
(151)
–
2,804
(269)
134
(135)
1,043
984
–
–
–
1,043
3,788
(269)
134
(135)
734
7
741
838
37
875
–
734
3,729
(654)
3,075
(56)
(49)
2,617
(5)
2,612
(56)
685
6,346
(659)
5,687
10 & 11
1,386
1,117
2,503
1,495
2,612
3,184
5,687
–
838
3,507
(624)
2,883
1,360
1,523
2,883
72
109
1,093
13
1,106
439
667
1,106
1,689
3,075
US$
3.71
3.70
US$
US$
6.69
6.68
3.64
3.64
72
947
4,600
(611)
3,989
1,799
2,190
3,989
US$
4.82
4.81
Note
5
6
7
8
9
Revenue
Net operating costs
Change in fair value
of investment
properties
Operating profit
Net financing charges
– financing charges
– financing income
Share of results of
associates and
joint ventures
– before change
in fair value of
investment
properties
– change in fair value
of investment
properties
Profit before tax
Tax
Profit after tax
Attributable to:
Shareholders of the
Company
Non-controlling
interests
Earnings per share
– basic
– diluted
10
28
Jardine Matheson | Annual Report 2016 Consolidated Statement of Comprehensive Income
for the year ended 31st December 2016
Profit for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans
Net revaluation surplus before transfer to investment properties
– intangible assets
– tangible assets
Tax on items that will not be reclassified
Share of other comprehensive expense of associates and joint ventures
Items that may be reclassified subsequently to profit or loss:
Net exchange translation differences
– net loss arising during the year
– transfer to profit and loss
Revaluation of other investments
– net gain/(loss) arising during the year
– transfer to profit and loss
Impairment of other investments transfer to profit and loss
Cash flow hedges
– net (loss)/gain arising during the year
– transfer to profit and loss
Tax relating to items that may be reclassified
Share of other comprehensive expense of associates and joint ventures
Other comprehensive expense for the year, net of tax
Total comprehensive income for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
Note
20
12
13
17
2016
US$m
5,687
23
105
2
(10)
120
(25)
95
(139)
(3)
(142)
113
–
113
–
(173)
186
13
1
(213)
(228)
(133)
5,554
2,310
3,244
5,554
2015
US$m
restated
3,989
(79)
–
–
13
(66)
(2)
(68)
(1,112)
3
(1,109)
(1)
(132)
(133)
188
109
(101)
8
(5)
(654)
(1,705)
(1,773)
2,216
1,121
1,095
2,216
29
Jardine Matheson | Annual Report 2016 Consolidated Balance Sheet
at 31st December 2016
Assets
Intangible assets
Tangible assets
Investment properties
Bearer plants
Associates and joint ventures
Other investments
Non-current debtors
Deferred tax assets
Pension assets
Non-current assets
Properties for sale
Stocks and work in progress
Current debtors
Current investments
Current tax assets
Bank balances and other liquid funds
– non-financial services companies
– financial services companies
Non-current assets classified as held for sale
Current assets
At 31st December
Note
12
13
14
15
16
17
18
19
20
21
22
18
17
23
2016
US$m
2,825
6,239
28,609
497
10,595
1,369
2,936
375
5
53,450
2,315
3,281
6,697
65
169
5,314
229
5,543
18,070
3
18,073
2015
US$m
restated
2,753
6,086
25,630
485
10,190
1,105
3,263
315
5
49,832
2,763
3,331
5,661
32
180
4,535
247
4,782
16,749
–
16,749
At 1st January
2015
US$m
restated
2,679
6,690
24,309
483
8,881
1,354
3,540
305
23
48,264
2,953
3,280
6,068
18
133
4,933
382
5,315
17,767
1
17,768
Total assets
71,523
66,581
66,032
Approved by the Board of Directors
Ben Keswick
John Witt
Directors
2nd March 2017
30
Jardine Matheson | Annual Report 2016 Equity
Share capital
Share premium and capital reserves
Revenue and other reserves
Own shares held
Shareholders’ funds
Non-controlling interests
Total equity
Liabilities
Long-term borrowings
– non-financial services companies
– financial services companies
Deferred tax liabilities
Pension liabilities
Non-current creditors
Non-current provisions
Non-current liabilities
Current creditors
Current borrowings
– non-financial services companies
– financial services companies
Current tax liabilities
Current provisions
Current liabilities
Total liabilities
At 31st December
Note
24
26
28
29
30
19
20
31
32
31
30
32
2016
US$m
178
175
25,547
(4,100)
21,800
27,937
49,737
5,343
1,518
6,861
500
419
440
151
8,371
8,714
2,058
2,265
4,323
266
112
13,415
2015
US$m
restated
175
158
23,149
(3,596)
19,886
25,614
45,500
5,199
1,796
6,995
493
416
430
145
8,479
8,261
2,308
1,683
3,991
266
84
12,602
At 1st January
2015
US$m
restated
173
138
21,990
(3,105)
19,196
25,289
44,485
5,240
2,176
7,416
590
350
364
138
8,858
8,244
2,176
1,892
4,068
300
77
12,689
21,786
21,081
21,547
Total equity and liabilities
71,523
66,581
66,032
31
Jardine Matheson | Annual Report 2016 Consolidated Statement of Changes in Equity
for the year ended 31st December 2016
Share
capital
US$m
Share
premium
US$m
Capital
reserves
US$m
Revenue
reserves
US$m
Asset
revaluation
reserves
US$m
Hedging
reserves
US$m
Exchange
reserves
US$m
Own
shares
held
US$m
Attributable to
shareholders of
the Company
Attributable to
non-controlling
interests
US$m
US$m
2016
At 1st January
– as previously reported
– change in accounting policy for bearer plants
– as restated
Total comprehensive income
Dividends paid by the Company
Dividends paid to non-controlling interests
Unclaimed dividends forfeited
Issue of shares
Employee share option schemes
Scrip issued in lieu of dividends
Increase in own shares held
Capital contribution from non-controlling interests
Change in interests in subsidiaries
Change in interests in associates and joint ventures
Transfer
At 31st December
2015
At 1st January
– as previously reported
– change in accounting policy for bearer plants
– as restated
Total comprehensive income
Dividends paid by the Company
Dividends paid to non-controlling interests
Unclaimed dividends forfeited
Issue of shares
Employee share option schemes
Scrip issued in lieu of dividends
Increase in own shares held
Subsidiaries acquired
Subsidiaries disposed of
Capital contribution from non-controlling interests
Change in interests in subsidiaries
Change in interests in associates and joint ventures
Transfer
At 31st December
175
–
175
–
–
–
–
–
–
3
–
–
–
–
–
178
173
–
173
–
–
–
–
–
–
2
–
–
–
–
–
–
–
175
21
–
21
–
–
–
–
1
–
(3)
–
–
–
–
1
20
20
–
20
–
–
–
–
2
–
(2)
–
–
–
–
–
–
1
21
137
–
137
–
–
–
–
–
22
–
–
–
–
–
(4)
155
118
–
118
–
–
–
–
–
22
–
–
–
–
–
–
–
(3)
137
24,674
(96)
24,578
2,558
(541)
–
1
–
–
700
–
–
(74)
(2)
3
27,223
22,824
(97)
22,727
1,813
(540)
–
1
–
–
653
–
–
–
–
(51)
(27)
2
24,578
Total comprehensive income included in revenue reserves comprises profit attributable to shareholders of the Company of
US$2,503 million (2015: US$1,799 million) and net fair value gain on other investments (net of impairment and transfer to
profit and loss) of US$94 million (2015: US$64 million). Cumulative net fair value gain on other investments amounted to
US$347 million (2015: US$253 million).
176
–
176
34
–
–
–
–
–
–
–
–
–
–
–
210
176
–
176
–
–
–
–
–
–
–
–
–
–
–
–
–
–
176
(14)
–
(14)
(18)
–
–
–
–
–
–
–
–
–
–
–
(32)
(10)
–
(10)
(4)
–
–
–
–
–
–
–
–
–
–
–
–
–
(14)
(1,625)
34
(1,591)
(264)
–
–
–
–
–
–
–
–
1
–
–
(1,854)
(929)
26
(903)
(688)
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,596)
–
(3,596)
–
–
–
–
–
–
–
(504)
–
–
–
–
(4,100)
(3,105)
–
(3,105)
–
–
–
–
–
–
–
(491)
–
–
–
–
–
–
19,948
(62)
19,886
2,310
(541)
–
1
1
22
700
(504)
–
(73)
(2)
–
21,800
19,267
(71)
19,196
1,121
(540)
–
1
2
22
653
(491)
–
–
–
(51)
(27)
–
25,833
(219)
25,614
3,244
97
(778)
–
–
1
–
(73)
83
(251)
–
–
27,937
25,538
(249)
25,289
1,095
98
(897)
–
–
2
–
(72)
28
(5)
262
(190)
4
–
(1,591)
(3,596)
19,886
25,614
45,500
Total
equity
US$m
45,781
(281)
45,500
5,554
(444)
(778)
1
1
23
700
(577)
83
(324)
(2)
–
49,737
44,805
(320)
44,485
2,216
(442)
(897)
1
2
24
653
(563)
28
(5)
262
(241)
(23)
–
32
33
Jardine Matheson | Annual Report 2016Jardine Matheson | Annual Report 2016 Consolidated Cash Flow Statement
for the year ended 31st December 2016
Operating activities
Operating profit
Change in fair value of investment properties
Depreciation and amortization
Other non-cash items
(Increase)/decrease in working capital
Interest received
Interest and other financing charges paid
Tax paid
Dividends from associates and joint ventures
Cash flows from operating activities
Investing activities
Purchase of subsidiaries
Purchase of associates and joint ventures
Purchase of other investments
Purchase of intangible assets
Purchase of tangible assets
Additions to investment properties
Additions to bearer plants
Advance to associates and joint ventures
Advance and repayment from associates and joint ventures
Sale of subsidiaries
Sale of associates and joint ventures
Sale of other investments
Sale of intangible assets
Sale of tangible assets
Sale of investment properties
Cash flows from investing activities
Financing activities
Issue of shares
Capital contribution from non-controlling interests
Change in interests in subsidiaries
Drawdown of borrowings
Repayment of borrowings
Dividends paid by the Company
Dividends paid to non-controlling interests
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1st January
Effect of exchange rate changes
Note
33 (a)
33 (b)
33 (c)
33 (d)
33 (e)
33 (f)
33 (g)
33 (h)
33 (i)
33 (j)
2016
US$m
5,812
(2,573)
945
120
(94)
136
(289)
(704)
3,353
597
3,950
(60)
(652)
(294)
(142)
(996)
(313)
(56)
(81)
175
16
5
122
8
204
1
(2,063)
1
77
(339)
23,629
(23,314)
(322)
(783)
(1,051)
836
4,773
(78)
Cash and cash equivalents at 31st December
33 (k)
5,531
2015
US$m
restated
3,788
(1,043)
963
620
76
136
(267)
(818)
3,455
634
4,089
(215)
(1,762)
(124)
(147)
(1,093)
(233)
(72)
(284)
386
4
8
269
2
60
1
(3,200)
2
262
(241)
20,353
(20,337)
(352)
(906)
(1,219)
(330)
5,288
(185)
4,773
34
Jardine Matheson | Annual Report 2016 Notes to the Financial Statements
1 Principal Accounting Policies
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’),
including International Accounting Standards (‘IAS’) and Interpretations adopted by the International Accounting Standards
Board (‘IASB’). The financial statements have been prepared on a going concern basis and under the historical cost
convention except as disclosed in the accounting policies below.
(i) Amendments effective in 2016 which are relevant to the Group’s operations:
Amendments to IFRS 11
Amendments to IAS 1
Amendments to IAS 16 and IAS 38
Amendments to IAS 16 and IAS 41
Annual Improvements to IFRSs
Accounting for Acquisitions of Interests in Joint Operations
Disclosure Initiative: Presentation of Financial Statements
Clarification of Acceptable Methods of Depreciation and Amortization
Agriculture: Bearer Plants
2012 – 2014 Cycle
The adoption of the above amendments does not have a significant effect on the Group’s accounting policies and
disclosures except for the amendments to IAS 16 and IAS 41, which has resulted in a change in accounting policy for bearer
plants. Previously, plantations were measured at each balance sheet date at their fair values. In accordance with the
amendments, bearer plants in the plantations are stated at cost less any accumulated depreciation and impairment.
The accounting for produce growing on the bearer plants will remain unchanged and is shown at fair value. The amendments
have been applied retrospectively and the comparative financial statements have been restated.
The effects of adopting amendments to IAS 16 and IAS 41 were as follows:
(a) On the consolidated profit and loss for the year ended 31st December 2015
Net operating costs
Tax
Profit after tax
Attributable to:
Shareholders of the Company
Non-controlling interests
There were no changes in basic and diluted earnings per share.
(b) On the consolidated statement of comprehensive income for the year ended 31st December 2015
Profit after tax
Net exchange translation differences
Total comprehensive income for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
Increase/(decrease)
in profit
US$m
9
(2)
7
2
5
Increase in total
comprehensive
income
US$m
7
32
39
10
29
39
35
Jardine Matheson | Annual Report 2016 (c) On the consolidated balance sheet
Plantations
Bearer plants
Total assets
Revenue and other reserves
Non-controlling interests
Deferred tax liabilities
Total equity and liabilities
Increase/(decrease)
31st December
2015
1st January
2015
US$m
(859)
485
(374)
(62)
(219)
(93)
(374)
US$m
(908)
483
(425)
(71)
(249)
(105)
(425)
(ii) New standards and amendments effective after 2016 which are relevant to the Group’s operations and yet to be adopted:
Certain new standards and amendments, which are effective after 2016, have been published and will be adopted by the
Group from their effective dates. The Group is currently assessing the potential impact of these standards and amendments
but expects their adoption will not have a significant effect on the Group’s consolidated financial statements except as set
out below.
IFRS 9 ‘Financial Instruments’ (effective for accounting periods beginning on or after 1st January 2018), which replaces IAS 39
‘Financial Instruments: Recognition and Measurement’, addresses the classification and measurement of financial assets
and liabilities and includes a new expected credit losses model for financial assets that replaces the incurred loss
impairment model used today. A substantially-reformed approach to hedging accounting is introduced. It also carries
forward the guidance on recognition and derecognition of financial instruments from IAS 39. The Group does not expect the
new guidance to have a significant impact on the classification and measurement of its financial assets and financial
liabilities. While the Group is still assessing the impact of how its impairment provisions would be affected by the new
impairment model, it may result in an earlier recognition of credit losses. The new hedge accounting rules will align the
accounting for hedging instruments closely with the Group’s risk management practices. Nevertheless, the Group does not
expect a significant impact on the accounting for its hedging relationships.
IFRS 15 ‘Revenue from Contracts with Customers’ (effective for accounting periods beginning on or after 1st January 2018),
establishes a comprehensive framework for determining when to recognize revenue and how much revenue to recognize.
lFRS 15 replaces IAS 11 ‘Construction Contracts’ and IAS 18 ‘Revenue’ which covers contracts for goods and services. The core
principle in that framework is that revenue is recognized when control of a good or service transfers to a customer. The new
standard will also result in new disclosure requirements on revenue, provide guidance for transactions that were not
previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for
multiple-element arrangements. The new standard may change the Group’s revenue recognition on certain property sales
from completion method to percentage of completion method. The Group is still assessing the impact of the new rules on the
Group’s financial statements.
IFRS 16 ‘Leases’ (effective for accounting periods beginning on or after 1st January 2019) replaces IAS 17 ‘Leases’ and related
interpretations. It will result in lessees bringing almost all their leases onto the balance sheet as the distinction between
operating leases and finance leases is removed. The model requires a lessee to recognize a right-of-use asset (the right to
use the underlying leased asset) and a lease liability (the obligation to make lease payments) except for leases with a term
of less than 12 months or with low-value. The accounting for lessors will not change significantly. IFRS 16 will affect primarily
the accounting for the Group’s operating leases. The Group is yet to undertake a detailed assessment on how the new lease
model will affect the Group’s profit, classification of cash flows and balance sheet position.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line with the
economic environments of the locations in which they operate. The functional currency of the Company is United States
dollars. The consolidated financial statements are presented in United States dollars.
The Group’s reportable segments are set out in note 4 and are described on pages 4 and 5, and pages 9 to 19.
36
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Basis of consolidation
(i) The consolidated financial statements include the financial statements of the Company, its subsidiaries, and the Group’s
interests in associates and joint ventures.
(ii) A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an
acquisition includes the fair value at the acquisition date of any contingent consideration. The Group recognizes the
non-controlling interest’s proportionate share of the recognized identifiable net assets of the acquired subsidiary.
In a business combination achieved in stages, the Group remeasures its previously held interest in the acquiree at its
acquisition-date fair value and recognized the resulting gain or loss in profit and loss. Changes in a parent’s ownership
interest in a subsidiary that do not result in the loss of control are accounted for as equity transactions. When control over a
previous subsidiary is lost, any remaining interest in the entity is remeasured at fair value and the resulting gain or loss is
recognized in profit and loss.
All material intercompany transactions, balances and unrealized surpluses and deficits on transactions between Group
companies have been eliminated. The cost of and related income arising from shares held in the Company by subsidiaries
are eliminated from shareholders’ funds and non-controlling interests, and profit, respectively.
(iii) An associate is an entity, not being a subsidiary or joint venture, over which the Group exercises significant influence.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Associates and joint ventures are included on the equity basis of accounting.
Profits and losses resulting from upstream and downstream transactions between the Group and its associates and joint
ventures are recognized in the consolidated financial statements only to the extent of unrelated investor’s interests in the
associates and joint ventures.
(iv) Non-controlling interests represent the proportion of the results and net assets of subsidiaries and their associates and
joint ventures not attributable to the Group.
(v) The results of subsidiaries, associates and joint ventures are included or excluded from their effective dates of
acquisition or disposal, respectively. The results of entities other than subsidiaries, associates and joint ventures are
included to the extent of dividends received when the right to receive such dividend is established.
Foreign currencies
Transactions in foreign currencies are accounted for at the exchange rates ruling at the transaction dates.
Assets and liabilities of subsidiaries, associates and joint ventures, together with all other monetary assets and liabilities
expressed in foreign currencies, are translated into United States dollars at the rates of exchange ruling at the year end.
Results expressed in foreign currencies are translated into United States dollars at the average rates of exchange ruling
during the year, which approximate the exchange rates at the dates of the transactions.
Exchange differences arising from the retranslation of the net investment in foreign subsidiaries, associates and joint
ventures, and of financial instruments which are designated as hedges of such investments, are recognized in other
comprehensive income and accumulated in equity under exchange reserves. On the disposal of these investments, such
exchange differences are recognized in profit and loss. Exchange differences on available-for-sale investments are
recognized in other comprehensive income as part of the gains and losses arising from changes in their fair value. Exchange
differences relating to changes in the amortized cost of monetary securities classified as available-for-sale and all other
exchange differences are recognized in profit and loss.
Goodwill and fair value adjustments arising on acquisition of a foreign entity after 1st January 2003 are treated as assets and
liabilities of the foreign entity and translated into United States dollars at the rate of exchange ruling at the year end.
37
Jardine Matheson | Annual Report 2016 Impairment of non-financial assets
Assets that have indefinite useful lives are not subject to amortization and are tested for impairment annually and whenever
there is an indication that the assets may be impaired. Assets that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of
assessing impairment, assets are grouped at the lowest level for which there is separately identifiable cash flows. Cash-
generating units or groups of cash-generating units to which goodwill has been allocated are tested for impairment annually
and whenever there is an indication that the units may be impaired. An impairment loss is recognized for the amount by
which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s fair value less costs
to sell and value in use. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible
reversal of the impairment annually.
Intangible assets
(i) Goodwill represents the excess of the sum of the consideration transferred, the amount of any non-controlling interests in
the acquiree, and the acquisition-date fair value of any previously held equity interest in the acquiree over the acquisition-
date fair value of the Group’s share of the net identifiable assets acquired. Non-controlling interests are measured at their
proportionate share of the net identifiable assets at the acquisition date. If the cost of acquisition is less than the fair value
of the net assets acquired, the difference is recognized directly in profit and loss. Goodwill on acquisitions of subsidiaries is
included in intangible assets. Goodwill on acquisitions of associates and joint ventures is included in investment in
associates and joint ventures. Goodwill is allocated to cash-generating units or groups of cash-generating units for the
purpose of impairment testing and is carried at cost less accumulated impairment loss.
The profit or loss on disposal of subsidiaries, associates and joint ventures is stated after deducting the carrying amount of
goodwill relating to the entity sold.
(ii) Franchise rights, which are rights under franchise agreements, are separately identified intangible assets acquired as
part of a business combination. These franchise agreements are deemed to have indefinite lives because either they do not
have any term of expiry or their renewal by the Group would be probable and would not involve significant costs, taking into
account the history of renewal and the relationships between the franchisee and the contracting parties. The useful lives are
reviewed at each balance sheet date. Franchise rights are carried at cost less accumulated impairment loss.
(iii) Leasehold land represents payments to third parties to acquire short-term interests in property. These payments are
stated at cost and are amortized over the useful life of the lease which includes the renewal period if the lease can be
renewed by the Group without significant cost.
(iv) Concession rights are operating rights for toll roads under service concession arrangements. The cost of the construction
services is amortized based on traffic volume projections.
(v) Other intangible assets are stated at cost less accumulated amortization. Amortization is calculated on the straight line
basis to allocate the cost of intangible assets over their estimated useful lives.
Tangible fixed assets and depreciation
Freehold land and buildings, and the building component of owner-occupied leasehold properties are stated at cost less any
accumulated depreciation and impairment. Long-term interests in leasehold land are classified as finance leases and
grouped under tangible assets if substantially all risks and rewards relating to the land have been transferred to the Group,
and are amortized over the useful life of the lease. Grants related to tangible assets are deducted in arriving at the carrying
amount of the assets. Mining properties, which are contractual rights to mine and own coal reserves in specified concession
areas, and other tangible fixed assets are stated at cost less amounts provided for depreciation. Cost of mining properties
includes expenditure to restore and rehabilitate coal mining areas following the completion of production.
Depreciation of tangible fixed assets other than mining properties is calculated on the straight line basis to allocate the cost
or valuation of each asset to its residual value over its estimated useful life. The residual values and useful lives are reviewed
at each balance sheet date. The estimated useful lives are as follows:
Buildings
Surface, finishes and services of hotel properties
Leasehold improvements
Leasehold land
Plant and machinery
Furniture, equipment and motor vehicles
38
14 – 150 years
20 – 30 years
shorter of the lease term or useful life
period of the lease
2 – 20 years
2 – 25 years
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) No depreciation is provided on freehold land as it is deemed to have an indefinite life. Mining properties are depreciated
using the unit of production method.
Where the carrying amount of a tangible fixed asset is greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount.
The profit or loss on disposal of tangible fixed assets is recognized by reference to their carrying amount.
Investment properties
Properties including those under operating leases which are held for long-term rental yields or capital gains are classified
and accounted for as investment properties, but the business model does not necessarily envisage that the properties will
be held for their entire useful life. Investment properties are carried at fair value, representing estimated open market value
determined annually by independent qualified valuers who have recent experience in the location and category of the
investment property being valued. The market value of commercial properties are calculated on the discounted net rental
income allowing for reversionary potential. The market value of residential properties are arrived at by reference to market
evidence of transaction prices for similar properties. Changes in fair value are recognized in profit and loss.
Bearer plants
Bearer plants are stated at cost less any accumulated depreciation and impairment loss. The cost of bearer plants includes
costs incurred for field preparation, planting, fertilizing and maintenance, capitalization of borrowing costs incurred on loans
used to finance the development of immature bearer plants and an allocation of other indirect costs based on planted
hectares. Bearer plants are considered mature three to four years after planting and once they are generating fresh fruit
bunches which average four to six tonnes per hectare per year. Depreciation of mature bearer plants commences in the year
when the bearer plants are mature using the straight-line method over the estimated useful life of 20 years. Agricultural
produce growing on bearer plants comprise oil palm fruits which are measured at fair value and are included under current
debtors as they are not significant. Changes in fair value are recorded in the profit and loss account.
Investments
(i) Investments are classified by management as available for sale or held to maturity on initial recognition. Available-
for-sale investments are shown at fair value. Gains and losses arising from changes in fair value are recognized in other
comprehensive income and accumulated in equity. On the disposal of an investment or when an investment is determined
to be impaired, the cumulative gain or loss previously deferred in equity is recognized in profit and loss. Held-to-maturity
investments are shown at amortized cost. Investments are classified under non-current assets unless they are expected to
be realized within 12 months after the balance sheet date.
(ii) At each balance sheet date, the Group assesses whether there is objective evidence that an investment is impaired.
In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are impaired and are recognized in profit and loss.
(iii) All purchases and sales of investments are recognized on the trade date, which is the date that the Group commits to
purchase or sell the investment.
Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
(i) Amount due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in
the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the
Group’s net investment outstanding in respect of the leases.
(ii) Plant and machinery under finance leases are capitalized at the commencement of the lease at the lower of the fair value
of the leased asset and the present value of the minimum lease payments. Lease payments are allocated between the
liability and finance charges so as to achieve a constant rate on the finance balance outstanding.
(iii) Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss on
a straight line basis over the period of the lease. When a lease is terminated before the lease period has expired, any
payment required to be made to the lessor by way of penalty is recognized as an expense in the year in which termination
takes place.
39
Jardine Matheson | Annual Report 2016 Properties for sale
Properties for sale, which comprise land and buildings held for resale, are stated at the lower of cost and net realizable
value. The cost of properties for sale comprises land costs, and construction and other development costs.
Stocks and work in progress
Stocks, which principally comprise goods held for resale, are stated at the lower of cost and net realizable value. Cost is
determined by the first-in, first-out method. The cost of finished goods and work in progress comprises raw materials, labour
and an appropriate proportion of overheads.
Debtors
Consumer financing debtors and financing lease receivables are measured at amortized cost using the effective interest
method. The gross amount due from customers for contract work is stated at cost plus an appropriate proportion of profit,
established by reference to the percentage of completion, and after deducting progress payments and provisions for
foreseeable losses. Repossessed assets of finance companies are measured at the lower of the carrying amount of the
debtors in default and fair value less costs to sell. All other debtors, excluding derivative financial instruments, are
measured at amortized cost except where the effect of discounting would be immaterial. Provision for impairment is
established when there is objective evidence that the outstanding amounts will not be collected. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or
delinquency in payments are considered indicators that the debtor is impaired. The carrying amount of the asset is reduced
through the use of an allowance account and the amount of the loss is recognized in arriving at operating profit. When a
debtor is uncollectible, it is written off against the allowance account. Subsequent recoveries of amount previously written
off are credited to profit and loss.
Debtors with maturities greater than 12 months after the balance sheet date are classified under non-current assets.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and financial
institutions, bank and cash balances, and liquid investments, net of bank overdrafts. In the balance sheet, bank overdrafts
are included in current borrowings.
Liquid investments, which are readily convertible to known amounts of cash and which are subject to an insignificant risk of
change in value, are included in bank balances and other liquid funds and are stated at market value. Increases or decreases
in market value are recognized in profit and loss.
Provisions
Provisions are recognized when the Group has present legal or constructive obligations as a result of past events, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligations, and a reliable
estimate of the amount of the obligations can be made.
Borrowings and borrowing costs
Borrowings are initially recognized at fair value, net of transaction costs incurred. In subsequent periods, borrowings are
stated at amortized cost using the effective interest method.
On the issue of bonds which are convertible into a fixed number of ordinary shares of the issuing entity, the fair value of the
liability portion is determined using a market interest rate for an equivalent non-convertible bond; this amount is included in
long-term borrowings on the amortized cost basis until extinguished on conversion or maturity of the bond. The remainder of
the proceeds is allocated to the conversion option which is recognized and included in shareholders’ funds. On the issue of
convertible bonds which are not convertible into the issuing entity’s own shares or which are not convertible into a fixed
number of ordinary shares of the issuing entity, the fair value of the conversion option component is determined and
included in current liabilities, and the residual amount is allocated to the carrying amount of the bond. Any conversion
option component included in current liabilities is shown at fair value with changes in fair value recognized in profit
and loss.
Borrowing costs relating to major development projects are capitalized until the asset is substantially completed. Capitalized
borrowing costs are included as part of the cost of the asset. All other borrowing costs are expensed as incurred.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
40
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Current and deferred tax
The tax expense for the year comprises current and deferred tax. Tax is recognized in profit and loss, except to the extent that
it relates to items recognized in other comprehensive income or direct in equity. In this case, the tax is also recognized in
other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance
sheet date in the countries where the Group operates and generates taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided, using the liability method, for all temporary differences arising between the tax bases of assets
and liabilities and their carrying values. Deferred tax is determined using tax rates and laws that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or
the deferred tax liability is settled.
Provision for deferred tax is made on the revaluation of certain non-current assets and, in relation to acquisitions, on the
difference between the fair value of the net assets acquired and their tax base. Deferred tax is provided on temporary
differences associated with investments in subsidiaries, associates and joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets relating to the carry forward of unused tax losses are recognized to the extent that it
is probable that future taxable profit will be available against which the unused tax losses can be utilized.
Employee benefits
(i) Pension obligations
The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in trustee
administered funds.
Pension accounting costs for defined benefit plans are assessed using the projected unit credit method. Under this method,
the costs of providing pensions are charged to profit and loss spreading the regular cost over the service lives of employees
in accordance with the advice of qualified actuaries, who carry out a full valuation of major plans every year. The pension
obligations are measured as the present value of the estimated future cash outflows by reference to market yields on high
quality corporate bonds which have terms to maturity approximating the terms of the related liability. Plan assets are
measured at fair value.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in
other comprehensive income in the year in which they occur.
Past service costs are recognized immediately in profit and loss.
The Group’s total contributions relating to the defined contribution plans are charged to profit and loss in the year to which
they relate.
(ii) Share-based compensation
The Company and its subsidiaries and associates operate a number of equity settled employee share option schemes.
The fair value of the employee services received in exchange for the grant of the options in respect of options granted after
7th November 2002 is recognized as an expense. The total amount to be expensed over the vesting period is determined by
reference to the fair value of the options granted as determined on the grant date. At each balance sheet date, the entity
revises its estimates of the number of options that are expected to become exercisable. The impact of the revision of original
estimates, if any, is recognized in profit and loss.
Derivative financial instruments
The Group only enters into derivative financial instruments in order to hedge underlying exposures. Derivative financial
instruments are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the resulting gain or loss is dependent on the nature of the item
being hedged. The Group designates certain derivatives as a hedge of the fair value of a recognized asset or liability
(‘fair value hedge’), or a hedge of a forecasted transaction or of the foreign currency risk on a firm commitment (‘cash flow
hedge’), or a hedge of a net investment in a foreign entity.
41
Jardine Matheson | Annual Report 2016 Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective,
are recognized in profit and loss, along with any changes in the fair value of the hedged asset or liability that is attributable
to the hedged risk. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge
accounting, the cumulative adjustment to the carrying amount of a hedged item for which the effective interest method is
used is amortized to profit and loss over the residual period to maturity.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective,
are recognized in other comprehensive income and accumulated in equity under hedging reserves. Changes in the fair value
relating to the ineffective portion is recognized immediately in profit and loss. Where the forecasted transaction or firm
commitment results in the recognition of a non-financial asset or of a non-financial liability, the gains and losses previously
deferred in hedging reserves are transferred from hedging reserves and included in the initial measurement of the cost of the
asset or liability. Otherwise, amounts deferred in hedging reserves are transferred to profit and loss in the same periods
during which the hedged firm commitment or forecasted transaction affects profit and loss. When a hedging instrument
expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in
hedging reserves at that time remains in the hedging reserves and is recognized when the committed or forecasted
transaction ultimately is recognized in profit and loss. When a committed or forecasted transaction is no longer expected to
occur, the cumulative gain or loss that was reported in hedging reserves is immediately transferred to profit and loss.
Certain derivative transactions, while providing effective economic hedges under the Group’s risk management policies,
do not qualify for hedge accounting under the specific rules in IAS 39. Changes in the fair value of any derivative instruments
that do not qualify for hedge accounting under IAS 39 are recognized immediately in profit and loss.
Hedges of net investments in foreign entities are accounted for on a similar basis to that used for cash flow hedges. Any gain
or loss on the hedging instrument relating to the effective portion of the hedge is recognized in other comprehensive income
and accumulated in exchange reserves; the gain or loss relating to the ineffective portion is recognized immediately in profit
and loss.
The fair value of derivatives which are designated and qualify as effective hedges are classified as non-current assets
or liabilities if the remaining maturities of the hedged assets or liabilities are greater than 12 months after the balance
sheet date.
Insurance contracts
Insurance contracts are those contracts that transfer significant insurance risk.
Premiums on insurance contracts are recognized as revenue proportionately over the period of coverage. The portion of
premium received on in-force contracts that relates to unexpired risks at the balance sheet date is reported as the unearned
premium liability. Claims and loss adjustment expenses are charged to profit and loss as incurred based on the estimated
liabilities for compensation owed to contract holders or third parties damaged by the contract holders. They include direct
and indirect claims settlement costs and arise from events that have occurred up to the balance sheet date even if they have
not yet been reported to the Group. The Group does not discount its liabilities for unpaid claims. Liabilities for unpaid claims
are estimated using the input of assessments for individual cases reported to the Group and statistical analyzes for the
claims incurred but not reported.
Financial guarantee contracts under which the Group accepts significant risk from a third party by agreeing to compensate
that party on the occurrence of a specified uncertain future event are accounted for in a manner similar to insurance
contracts. Provisions are recognized when it is probable that the Group has obligations under such guarantees and an
outflow of resources embodying economic benefits will be required to settle the obligations.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset
and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or
the counterparty.
42
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Non-trading items
Non-trading items are separately identified to provide greater understanding of the Group’s underlying business
performance. Items classified as non-trading items include fair value gains or losses on revaluation of investment
properties; gains and losses arising from the sale of businesses, investments and properties; impairment of non-
depreciable intangible assets and other investments; provisions for the 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 underlying business performance.
Earnings per share
Basic earnings per share are calculated on profit attributable to shareholders and on the weighted average number of shares
in issue during the year. The weighted average number excludes the Company’s share of the shares held by subsidiaries and
the shares held by the Trustee under the Senior Executive Share Incentive Schemes. For the purpose of calculating diluted
earnings per share, profit attributable to shareholders is adjusted for the effects of the conversion of dilutive potential
ordinary shares of subsidiaries, associates or joint ventures, and the weighted average number of shares is adjusted for the
number of shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes
based on the average share price during the year.
Dividends
Dividends proposed or declared after the balance sheet date are not recognized as a liability at the balance sheet date.
The nominal amount of the ordinary shares issued as a result of election for scrip is capitalized out of the share premium
account or other reserves, as appropriate.
Revenue recognition
Revenue is measured at the fair value of the consideration received and receivable and represents amounts receivable for
goods and services provided in the normal course of business, net of discounts and sales related taxes.
(i) Revenue from the sale of goods, including properties for sale, is recognized on the transfer of significant risks and
rewards of ownership, which generally coincides with the time when the goods are delivered to customers.
(ii) Receipts under operating leases are accounted for on an accrual basis over the lease terms.
(iii) Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.
(iv) Revenue from consumer financing and financing leases is recognized over the term of the respective contracts based on
a constant rate of return on the net investment.
(v) Interest income is recognized on a time proportion basis taking into account the principal amounts outstanding and the
interest rates applicable.
(vi) Dividend income is recognized when the right to receive payment is established.
Pre-operating costs
Pre-operating costs are expensed as they are incurred.
43
Jardine Matheson | Annual Report 2016 2 Financial Risk Management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk
and price risk), credit risk and liquidity risk.
The Group’s treasury function co-ordinates, under the directions of the board of Jardine Matheson Limited, financial risk
management policies and their implementation on a group-wide basis. The Group’s treasury policies are designed to
manage the financial impact of fluctuations in interest rates and foreign exchange rates and to minimize the Group’s
financial risks. The Group uses derivative financial instruments, principally interest rate swaps, caps and collars, cross-
currency swaps, forward foreign exchange contracts and foreign currency options as appropriate for hedging transactions
and managing the Group’s assets and liabilities in accordance with the Group’s financial risk management policies.
Financial derivative contracts are executed between third party banks and the Group entity that is directly exposed to
the risk being hedged. Certain derivative transactions, while providing effective economic hedges under the Group’s risk
management policies, do not qualify for hedge accounting under the specific rules in IAS 39. Changes in the fair value of any
derivative instruments that do not qualify for hedge accounting under IAS 39 are recognized immediately in the profit and
loss account. It is the Group’s policy not to enter into derivative transactions for speculative purposes. The notional amounts
and fair values of derivative financial instruments at 31st December 2016 are disclosed in note 34.
(i) Market risk
Foreign exchange risk
Entities within the Group are exposed to foreign exchange risk from future commercial transactions, net investments in
foreign operations and net monetary assets and liabilities that are denominated in a currency that is not the entity’s
functional currency.
Entities in the Group use cross-currency swaps, forward foreign exchange contracts and foreign currency options in a
consistent manner to hedge firm and anticipated foreign exchange commitments and manage their foreign exchange risk
arising from future commercial transactions. The Group does not usually hedge its net investments in foreign operations
except in circumstances where there is a material exposure arising from a currency that is anticipated to be volatile and the
hedging is cost effective. Group entities are required to manage their foreign exchange risk against their functional currency.
Foreign currency borrowings are swapped into the entity’s functional currency using cross-currency swaps except where the
foreign currency borrowings are repaid with cash flows generated in the same foreign currency. The purpose of these hedges
is to mitigate the impact of movements in foreign exchange rates on assets and liabilities and the profit and loss account of
the Group.
Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that
is not the functional currency. At 31st December 2016 the Group’s Indonesian rupiah functional entities had United States
dollar denominated net monetary assets of US$371 million (2015: US$274 million). At 31st December 2016, if the United
States dollar had strengthened/weakened by 10% against the Indonesian rupiah with all other variables unchanged, the
Group’s profit after tax would have been US$28 million higher/lower (2015: US$21 million higher/lower), arising from foreign
exchange gains/losses taken on translation. The impact on amounts attributable to the shareholders of the Company would
be US$4 million higher/lower (2015: US$3 million higher/lower). This sensitivity analysis ignores any offsetting foreign
exchange factors and has been determined assuming that the change in foreign exchange rates had occurred at the balance
sheet date. The stated change represents management’s assessment of reasonably possible changes in foreign exchange
rates over the period until the next annual balance sheet date. There are no other significant monetary balances held by
Group companies at 31st December 2016 that are denominated in a non-functional currency. Differences resulting from the
translation of financial statements into the Group’s presentation currency are not taken into consideration.
Since the Group manages the interdependencies between foreign exchange risk and interest rate risk of foreign currency
borrowings using cross-currency swaps, the sensitivity analysis on financial impacts arising from cross-currency swaps is
included in the sensitivity assessment on interest rates under the interest rate risk section.
44
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Interest rate risk
The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets.
These exposures are managed partly by using natural hedges that arise from offsetting interest rate sensitive assets and
liabilities, and partly through fixed rate borrowings and the use of derivative financial instruments such as interest rate
swaps, caps and collars. The Group monitors interest rate exposure on a monthly basis by currency and business unit, taking
into consideration proposed financing and hedging arrangements. The Group’s guideline is to maintain 40% to 60% of its
gross borrowings, exclusive of the financial services companies, in fixed rate instruments. At 31st December 2016 the
Group’s interest rate hedge exclusive of the financial services companies was 39% (2015: 39%), with an average tenor of
seven years (2015: eight years). The financial services companies borrow predominately at a fixed rate. The interest rate
profile of the Group’s borrowings after taking into account hedging transactions are set out in note 30.
Cash flow interest rate risk is the risk that changes in market interest rates will impact cash flows arising from variable rate
financial instruments. Borrowings at floating rates therefore expose the Group to cash flow interest rate risk. The Group
manages this risk by using forward rate agreements to a maturity of one year, and by entering into interest rate swaps, caps
and collars for a maturity of up to five years. Forward rate agreements and interest rate swaps have the economic effect of
converting borrowings from floating rate to fixed rate, caps provide protection against a rise in floating rates above a
pre-determined rate, whilst collars combine the purchase of a cap and the sale of a floor to specify a range in which an
interest rate will fluctuate.
Fair value interest rate risk is the risk that the value of a financial asset or liability and derivative financial instruments will
fluctuate because of changes in market interest rates. The Group manages its fair value interest rate risk by entering into
interest rate swaps which have the economic effect of converting borrowings from fixed rate to floating rate, to maintain the
Group’s fixed rate instruments within the Group’s guideline.
At 31st December 2016, if interest rates had been 100 basis points higher/lower with all other variables held constant, the
Group’s profit after tax would have been US$16 million (2015: US$7 million) higher/lower, and hedging reserves would have
been US$82 million (2015: US$97 million) higher/lower as a result of fair value changes to cash flow hedges. The sensitivity
analysis has been determined assuming that the change in interest rates had occurred at the balance sheet date and had
been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at
that date. There is no significant sensitivity resulting from interest rate caps and collars. The 100 basis point increase or
decrease represents management’s assessment of a reasonably possible change in those interest rates which have the most
impact on the Group, specifically the United States, Hong Kong and Indonesian rates, over the period until the next annual
balance sheet date. In the case of effective fair value hedges, changes in the fair value of the hedged items caused by
interest rate movements balance out in the profit and loss account against changes in the fair value of the hedging
instruments. Changes in market interest rates affect the interest income or expense of non-derivative variable-interest
financial instruments, the interest payments of which are not designated as hedged items of cash flow hedges against
interest rate risks. As a consequence, they are included in the calculation of profit after tax sensitivities. Changes in the
market interest rate of financial instruments that were designated as hedging instruments in a cash flow hedge to hedge
payment fluctuations resulting from interest rate movements affect the hedging reserves and are therefore taken into
consideration in the equity-related sensitivity calculations.
45
Jardine Matheson | Annual Report 2016 Price risk
The Group is exposed to securities price risk because of listed and unlisted investments which are available for sale and held
by the Group at fair value. Gains and losses arising from changes in the fair value of available-for-sale investments are
recognized in other comprehensive income. The performance of the Group’s listed and unlisted available-for-sale
investments are monitored regularly, together with an assessment of their relevance to the Group’s long-term strategic
plans. Details of the Group’s available-for-sale investments are contained in note 17.
Available-for-sale investments are unhedged. At 31st December 2016, if the price of listed and unlisted available-for-sale
investments had been 25% higher/lower with all other variables held constant, total equity would have been US$357 million
(2015: US$283 million) higher/lower unless impaired. The sensitivity analysis has been determined based on a reasonable
expectation of possible valuation volatility over the next 12 months.
The Group is exposed to financial risks arising from changes in commodity prices, primarily coal, steel rebar and copper.
The Group considers the outlook for coal, steel rebar and copper prices regularly in considering the need for active financial
risk management. The Group’s policy is generally not to hedge commodity price risk, although limited hedging may be
undertaken for strategic reasons. In such cases the Group uses forward contracts to hedge the price risk. To mitigate or
hedge the price risk, Group entities may enter into a forward contract to buy the commodity at a fixed price at a future date,
or a forward contract to sell the commodity at a fixed price at a future date.
(ii) Credit risk
The Group’s credit risk is primarily attributable to deposits with banks, credit exposures to customers and derivative
financial instruments with a positive fair value. The Group has credit policies in place and the exposures to these credit risks
are monitored on an ongoing basis.
The Group manages its deposits with banks and financial institutions and transactions involving derivative financial
instruments by monitoring credit ratings and capital adequacy ratios of counterparties, and limiting the aggregate risk to any
individual counterparty. The utilization of credit limits is regularly monitored. At 31st December 2016, over 57% (2015: 51%)
of deposits and balances with banks and financial institutions were made to institutions with credit ratings of no less than
A- (Fitch). Similarly transactions involving derivative financial instruments are with banks with sound credit ratings and
capital adequacy ratios. In developing countries it may be necessary to deposit money with banks that have a lower credit
rating, however the Group only enters into derivative transactions with counterparties which have credit ratings of at least
investment grade. Management does not expect any counterparty to fail to meet its obligations.
In respect of credit exposures to customers, the Group has policies in place to ensure that sales on credit without collateral
are made principally to corporate companies with an appropriate credit history and credit insurance is purchased for
businesses where it is economically effective. The Group normally obtains collateral over vehicles from consumer financing
debtors towards settlement of vehicle receivables. Customers give the right to the Group to sell the repossessed collateral
or take any other action to settle the outstanding receivable. Sales to other customers are made in cash or by major
credit cards.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet after
deducting any impairment allowance.
46
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) (iii) Liquidity risk
Prudent liquidity risk management includes managing the profile of debt maturities and funding sources, maintaining
sufficient cash and marketable securities, and ensuring the availability of funding from an adequate amount of committed
credit facilities and the ability to close out market positions. The Group’s ability to fund its existing and prospective debt
requirements is managed by maintaining diversified funding sources with adequate committed funding lines from high
quality lenders, and by monitoring rolling short-term forecasts of the Group’s cash and gross debt on the basis of expected
cash flows. In addition long-term cash flows are projected to assist with the Group’s long-term debt financing plans.
At 31st December 2016, total available borrowing facilities amounted to US$19.4 billion (2015: US$19.5 billion) of which
US$11.2 billion (2015: US$11.0 billion) was drawn down. Undrawn committed facilities, in the form of revolving credit and
term loan facilities, and undrawn uncommitted facilities totalled US$5.4 billion (2015: US$5.5 billion) and US$2.8 billion
(2015: US$3.0 billion), respectively.
The following table analyzes the Group’s non-derivative financial liabilities, net-settled derivative financial liabilities and
gross-settled derivative financial instruments into relevant maturity groupings based on the remaining period at the balance
sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual
maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Between
one and
two years
Between
two and
three years
Between
three and
four years
Between
four and
five years
Beyond
Total
five undiscounted
cash flows
years
US$m
US$m
US$m
US$m
US$m
US$m
Within
one
year
US$m
4,797
6,881
1,695
1,684
161
4,477
6,469
1,805
85
2,064
65
1
–
–
667
659
–
299
278
–
715
37
–
133
122
–
1,932
84
1,606
65
1,056
24
2
1
–
–
1,459
1,444
154
717
700
–
518
498
–
218
203
–
At 31st December 2016
Borrowings
Creditors
Net settled derivative
financial instruments
Gross settled derivative
financial instruments
– inflow
– outflow
Estimated losses on
insurance contracts
At 31st December 2015
Borrowings
Creditors
Net settled derivative
financial instruments
Gross settled derivative
financial instruments
– inflow
– outflow
Estimated losses on
insurance contracts
550
13
–
68
59
–
711
33
–
133
120
–
2,793
33
12,724
7,114
–
1
1,655
1,644
4,517
4,446
–
161
2,925
87
12,707
6,762
–
3
1,724
1,692
4,769
4,657
–
154
47
Jardine Matheson | Annual Report 2016
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern whilst
seeking to maximize benefits to shareholders and other stakeholders. Capital is equity as shown in the consolidated
balance sheet plus net debt.
The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and
shareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing
and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic
investment opportunities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, purchase Group shares, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the Group’s consolidated gearing ratio and consolidated interest cover. The
gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings less bank balances
and other liquid funds. Interest cover is calculated as underlying operating profit and share of results of associates and joint
ventures divided by net financing charges. The ratios are monitored both inclusive and exclusive of the Group’s financial
services companies, which by their nature are generally more highly leveraged than the Group’s other businesses. The Group
does not have a defined gearing or interest cover benchmark or range.
The ratios at 31st December 2016 and 2015 are as follows:
Gearing ratio exclusive of financial services companies (%)
Gearing ratio inclusive of financial services companies (%)
Interest cover exclusive of financial services companies (times)
Interest cover inclusive of financial services companies (times)
2016
2015
4
11
22
26
6
14
21
27
Fair value estimation
(i) Financial instruments that are measured at fair value
For financial instruments that are measured at fair value in the balance sheet, the corresponding fair value measurements
are disclosed by level of the following fair value measurement hierarchy:
(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (‘quoted prices in active markets’)
The fair values of listed securities, which are classified as available-for-sale, are based on quoted prices in active markets at
the balance sheet date. The quoted market price used for listed investments held by the Group is the current bid price.
(b) Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly
(‘observable current market transactions’)
The fair values of derivative financial instruments are determined using rates quoted by the Group’s bankers at the balance
sheet date. The rates for interest rate swaps and caps, cross-currency swaps, forward foreign exchange contracts and credit
default swaps are calculated by reference to market interest rates and foreign exchange rates.
The fair values of unlisted investments, which are classified as available-for-sale and mainly include club and school
debentures, are determined using prices quoted by brokers at the balance sheet date.
(c) Inputs for assets or liabilities that are not based on observable market data (‘unobservable inputs’)
The fair values of other unlisted securities, which are classified as available-for-sale, are determined using valuation
techniques by reference to observable current market transactions (including price-to earnings and price-to book ratios of
listed securities of entities engaged in similar industries) or the market prices of the underlying investments with certain
degree of entity specific estimates. The fair value of convertible component of convertible bonds held is made reference to
the quoted price of the underlying shares and estimation on volatility.
There were no changes in valuation techniques during the year.
48
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) The table below analyzes financial instruments carried at fair value, by the levels in the fair value measurement hierarchy.
2016
Assets
Available-for-sale financial assets
– listed securities
– unlisted investments
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Liabilities
Contingent consideration payable
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
2015
Assets
Available-for-sale financial assets
– listed securities
– unlisted investments
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Liabilities
Contingent consideration payable
Derivative designated at fair value
– through other comprehensive income
– through profit and loss
Quoted
prices in active
markets
Observable
current market
transactions
Unobservable
inputs
US$m
US$m
US$m
1,327
–
1,327
–
–
1,327
–
–
–
–
1,032
–
1,032
–
–
1,032
–
–
–
–
–
44
44
102
17
163
–
(21)
(8)
(29)
–
43
43
273
23
339
–
(69)
(7)
(76)
–
56
56
–
–
56
(10)
–
–
(10)
–
55
55
–
–
55
(27)
–
–
(27)
There were no transfers among the three categories during the year ended 31st December 2016 and 2015.
Total
US$m
1,327
100
1,427
102
17
1,546
(10)
(21)
(8)
(39)
1,032
98
1,130
273
23
1,426
(27)
(69)
(7)
(103)
49
Jardine Matheson | Annual Report 2016 Movements of financial instruments which are valued based on unobservable inputs during the year ended
31st December are as follows:
At 1st January
Exchange differences
Additions
Disposal
Payment of contingent consideration
Net change in fair value during the year
– included in other comprehensive income
– included in profit and loss
Adjustment of contingent consideration
At 31st December
2016
2015
Available-for-
sale financial
assets
Contingent
consideration
payable
US$m
US$m
55
(1)
1
–
–
1
–
–
56
(27)
–
(1)
–
–
–
15
3
(10)
Available-for-
sale financial
assets
Contingent
consideration
payable
US$m
189
(6)
5
(164)
–
31
–
–
55
US$m
(67)
(1)
(2)
–
1
–
42
–
(27)
The contingent consideration payable mainly arose from Astra’s acquisition of a 60% interest in PT Duta Nurcahya in 2012
and represents the fair value of service fee payable for mining services to be provided by the vendor.
(ii) Financial instruments that are not measured at fair value
The fair values of current debtors, bank balances and other liquid funds, current creditors and current borrowings are
assumed to approximate their carrying amounts due to the short-term maturities of these assets and liabilities.
The fair values of long-term borrowings are based on market prices or are estimated using the expected future payments
discounted at market interest rates.
50
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Financial instruments by category
The fair values of financial assets and financial liabilities, together with carrying amounts at 31st December 2016 and 2015
are as follows:
Loans and
receivables
Derivatives
used for
hedging
Available-
for-sale
Other
financial
instruments
fair value
through
profit and
loss
Other
financial
instruments
at amortized
cost
US$m
US$m
US$m
US$m
US$m
2016
Assets
Other investments
Debtors
Bank balances and other
liquid funds
Liabilities
Borrowings (excluding
finance lease liabilities)
Finance lease liabilities
Trade and other payables
excluding non-financial
liabilities
2015
Assets
Other investments
Debtors
Bank balances and other
liquid funds
Liabilities
Borrowings (excluding
finance lease liabilities)
Finance lease liabilities
Trade and other payables
excluding non-financial
liabilities
–
8,271
5,543
13,814
–
–
–
–
–
7,417
4,782
12,199
–
–
–
–
–
119
–
119
–
–
(29)
(29)
–
296
–
296
–
–
(76)
(76)
1,427
–
–
1,427
–
–
–
–
–
–
–
–
(11,129)
(55)
(7,104)
(18,288)
1,130
–
–
1,130
–
–
–
–
–
–
–
–
(10,890)
(96)
(6,735)
(17,721)
Total
carrying
amount
US$m
Fair value
US$m
1,427
8,402
1,427
8,323
5,543
5,543
15,372
15,293
(11,129)
(55)
(11,214)
(55)
–
12
–
12
–
–
(10)
(10)
(7,143)
(7,143)
(18,327)
(18,412)
–
11
–
11
–
–
1,130
7,724
1,130
7,644
4,782
4,782
13,636
13,556
(10,890)
(96)
(11,002)
(96)
(27)
(27)
(6,838)
(6,838)
(17,824)
(17,936)
51
Jardine Matheson | Annual Report 2016 3 Critical Accounting Estimates and Judgements
Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant effect on the carrying amounts of assets and liabilities are discussed below.
Acquisition of subsidiaries, associates and joint ventures
The initial accounting on the acquisition of subsidiaries, associates and joint ventures involves identifying and determining
the fair values to be assigned to the identifiable assets, liabilities and contingent liabilities of the acquired entities. The fair
values of franchise rights, leasehold land, concession rights, tangible assets, investment properties and plantations are
determined by independent valuers by reference to market prices or present value of expected net cash flows from the
assets. Any changes in the assumptions used and estimates made in determining the fair values, and management’s ability
to measure reliably the contingent liabilities of the acquired entity will impact the carrying amount of these assets
and liabilities.
On initial acquisition or acquisition of further interests in an entity, an assessment of the level of control or influence
exercised by the Group is required. For entities where the Group has a shareholding of less than 50%, an assessment of the
Group’s level of voting rights, board representation and other indicators of influence is performed to consider whether the
Group has de facto control, requiring consolidation of that entity, or significant influence, requiring classification as
an associate.
Tangible fixed assets and depreciation
Management determines the estimated useful lives and related depreciation charges for the Group’s tangible fixed assets.
Management will revise the depreciation charge where useful lives are different to those previously estimated, or it will write
off or write down technically obsolete or non-strategic assets that have been abandoned.
Investment properties
The fair values of investment properties, which are principally held by Hongkong Land, are determined by independent
valuers on an open market for existing-use basis calculated on the discounted net income allowing for reversionary
potential. For investment properties in Hong Kong and Singapore, capitalization rates in the range of 3.20% to 3.85% for
office (2015: 3.50% to 4.20%) and 4.50% to 5.50% for retail (2015: 4.50% to 5.50%) are used by Hongkong Land in the fair
value determination.
Consideration has been given to assumptions that are mainly based on market conditions existing at the balance sheet date
and appropriate capitalization rates. These estimates are regularly compared to actual market data and actual transactions
entered into by the Group.
Impairment of assets
The Group tests annually whether goodwill and other assets that have indefinite useful lives suffered any impairment. Other
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the
asset exceeds its recoverable amount. The recoverable amount of an asset or a cash generating unit is determined based on
the higher of its fair value less costs to sell and its value in use, calculated on the basis of management’s assumptions and
estimates. Changing the key assumptions, including the amount of estimated coal reserves, the discount rates or the growth
rate assumptions in the cash flow projections, could materially affect the value-in-use calculations.
The results of the impairment reviews undertaken at 31st December 2016 on the Group’s indefinite life franchise rights
indicated that no impairment charge was necessary. If there is a significant increase in the discount rate and/or a significant
adverse change in the projected performance of the business to which these rights attach, it may be necessary to take an
impairment charge to profit and loss in the future.
In determining when an available-for-sale equity investment is impaired, significant judgement is required. In making this
judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is
less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as
industry and sector performance, changes in technology and operational and financing cash flow.
52
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the
worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination
is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in
which such determination is made.
Provision for deferred tax follows the way management expects to recover or settle the carrying amount of the related assets
or liabilities, which the management may expect to recover through use, sale or combination of both. Accordingly, deferred
tax will be calculated at income tax rate, capital gains tax rate or combination of both. There is a rebuttable presumption in
International Financial Reporting Standards that investment properties measured at fair value are recovered through sale.
Thus, deferred tax on revaluation of investment properties held by the Group are calculated at the capital gains tax rate.
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management’s expectation of
future taxable profit that will be available against which the tax losses can be utilized. The outcome of their actual utilization
may be different.
Pension obligations
The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using
a number of assumptions. The assumptions used in determining the net cost/income for pensions include the discount rate.
Any changes in these assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to
determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In
determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of
the related pension obligation.
Other key assumptions for pension obligations are based in part on current market conditions.
Non-trading items
The Group uses underlying business performance in its internal financial reporting to distinguish between the underlying
profits and non-trading items. The identification of non-trading items requires judgement by management, but follows the
consistent methodology as set out in the Group’s accounting policies.
53
Jardine Matheson | Annual Report 2016 4 Segmental Information
Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by
the executive directors of the Company for the purpose of resource allocation and performance assessment. The Group has eight
operating segments as more fully described on page 4 and 5. No operating segments have been aggregated to form the reportable
segments. Set out below is an analysis of the Group’s underlying profit, net debt and total equity by reportable segment.
2016
Revenue (refer note 5)
Net operating costs
Change in fair value of investment properties
Operating profit
Net financing charges
– financing charges
– financing income
Share of results of associates and joint ventures
– before change in fair value of investment
properties
– change in fair value of investment properties
Profit before tax
Tax
Profit after tax
Non-controlling interests
Profit attributable to shareholders
Net (debt)/cash (excluding net debt of financial
services companies)*
Total equity
2015
Revenue (refer note 5)
Net operating costs
Change in fair value of investment properties
Operating profit
Net financing charges
– financing charges
– financing income
Share of results of associates and joint ventures
– before change in fair value of investment
properties
– change in fair value of investment properties
Profit before tax
Tax
Profit after tax
Non-controlling interests
Profit attributable to shareholders
Net (debt)/cash (excluding net debt of financial
services companies)*
Total equity
Jardine
Pacific
US$m
2,356
(2,294)
–
62
(6)
–
(6)
89
–
89
145
(9)
136
(1)
135
(165)
651
2,463
(2,405)
–
58
(7)
–
(7)
104
–
104
155
(13)
142
–
142
(221)
669
Jardine
Motors
US$m
5,197
(5,037)
–
160
(11)
1
(10)
–
–
–
150
(37)
113
(3)
110
(110)
709
5,207
(5,099)
–
108
(12)
–
(12)
–
–
–
96
(19)
77
–
77
Jardine
Lloyd
Thompson
US$m
Hongkong
Land
US$m
–
–
–
–
–
–
–
56
–
56
56
–
56
–
56
1,994
(1,023)
–
971
(111)
42
(69)
117
–
117
1,019
(168)
851
(498)
353
Dairy
Farm
US$m
11,201
(10,749)
–
452
(23)
1
(22)
115
–
115
545
(85)
460
(163)
297
–
448
(2,008)
31,314
(641)
1,765
–
–
–
–
–
–
–
70
–
70
70
–
70
–
70
1,932
(938)
–
994
(115)
41
(74)
140
–
140
1,060
(151)
909
(535)
374
11,137
(10,702)
–
435
(15)
1
(14)
85
–
85
506
(84)
422
(148)
274
Mandarin
Oriental
US$m
597
(527)
–
70
(12)
1
(11)
11
–
11
70
(14)
56
(20)
36
(297)
1,276
607
(499)
–
108
(14)
2
(12)
11
–
11
107
(16)
91
(36)
55
Jardine
Cycle &
Carriage
US$m
2,154
(2,075)
–
79
(1)
1
–
148
–
148
227
(18)
209
(84)
125
91
1,223
2,016
(1,945)
–
71
–
–
–
126
–
126
197
(16)
181
(76)
105
(419)
578
–
519
(2,341)
28,720
(482)
1,642
(132)
1,335
42
1,106
Corporate
and other
interests
US$m
Intersegment
transactions
Underlying
businesses
performance
US$m
US$m
–
(64)
–
(64)
(2)
8
6
(1)
–
(1)
(59)
(3)
(62)
24
(38)
582
1,637
–
(47)
–
(47)
(4)
6
2
2
–
2
(43)
(3)
(46)
19
(27)
(58)
58
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(91)
(57)
57
–
–
–
–
–
–
–
–
–
–
–
–
–
37,051
(33,905)
–
3,146
(297)
146
(151)
734
–
734
3,729
(654)
3,075
(1,689)
1,386
37,007
(34,203)
–
2,804
(269)
134
(135)
838
–
838
3,507
(624)
2,883
(1,523)
1,360
506
1,407
–
(60)
Astra
US$m
13,610
(12,194)
–
1,416
(131)
92
(39)
199
–
199
1,576
(320)
1,256
(944)
312
461
10,805
13,702
(12,625)
–
1,077
(102)
84
(18)
300
–
300
1,359
(322)
1,037
(747)
290
75
9,584
Non-
trading
items
US$m
–
93
2,573
2,666
–
–
–
7
(56)
(49)
2,617
(5)
2,612
(1,495)
1,117
–
(59)
1,043
984
–
–
–
37
72
109
1,093
13
1,106
(667)
439
Group
US$m
37,051
(33,812)
2,573
5,812
(297)
146
(151)
741
(56)
685
6,346
(659)
5,687
(3,184)
2,503
(2,087)
49,737
37,007
(34,262)
1,043
3,788
(269)
134
(135)
875
72
947
4,600
(611)
3,989
(2,190)
1,799
(2,972)
45,500
*
Net (debt)/cash is total borrowings less bank balances and other liquid funds. Net debt of financial services companies amounted to US$3,554 million
at 31st December 2016 (2015: US$3,232 million) and relates to Astra.
54
55
Jardine Matheson | Annual Report 2016Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 4 Segment Information (continued)
Set out below are analyzes of the Group’s underlying profit attributable to shareholders and non-current assets,
by geographical areas:
Underlying profit attributable to shareholders:
Greater China
Southeast Asia
United Kingdom
Rest of the world
Corporate and other interests
Non-current assets*:
Greater China
Southeast Asia
United Kingdom
Rest of the world
*
Excluding financial instruments, deferred tax assets and pension assets.
2016
US$m
748
612
52
12
1,424
(38)
1,386
32,659
14,373
673
1,060
48,765
2015
US$m
734
557
78
18
1,387
(27)
1,360
29,869
13,622
772
881
45,144
56
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 5 Revenue
By business:
Jardine Pacific
Jardine Motors
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Intersegment transactions
By product and service:
Property
Motor vehicles
Retail and restaurants
Insurance broking and financial services
Engineering, construction and mining contracting
Hotels
Other
By geographical location of customers:
Greater China
Southeast Asia
United Kingdom
Rest of the world
Gross revenue
Revenue
2016
US$m
6,285
5,197
1,698
3,201
20,424
965
6,785
28,156
(274)
72,437
3,184
28,686
21,096
4,730
8,663
964
5,114
72,437
25,352
42,471
3,468
1,146
72,437
2015
US$m
6,173
5,207
1,763
3,114
17,907
959
5,443
25,252
(547)
65,271
3,102
24,659
18,546
4,677
8,323
958
5,006
65,271
22,434
38,231
3,536
1,070
65,271
2016
US$m
2,356
5,197
–
1,994
11,201
597
2,154
13,610
(58)
37,051
1,989
14,437
11,820
1,357
3,839
596
3,013
37,051
12,495
21,612
2,665
279
37,051
2015
US$m
2,463
5,207
–
1,932
11,137
607
2,016
13,702
(57)
37,007
1,930
14,315
11,726
1,284
4,058
606
3,088
37,007
12,218
21,903
2,638
248
37,007
Gross revenue comprises revenue together with 100% of revenue from associates and joint ventures.
57
Jardine Matheson | Annual Report 2016 6 Net Operating Costs
Cost of sales
Other operating income
Selling and distribution costs
Administration expenses
Other operating expenses
The following credits/(charges) are included in net operating costs:
Cost of stocks recognized as expense
Cost of properties for sale recognized as expense
Amortization of intangible assets
Depreciation of tangible assets
Depreciation of bearer plants
Impairment of intangible assets
Impairment of tangible assets
Impairment of other investments
Write down of stocks and work in progress
Reversal of write down of stocks and work in progress
Reversal of write down of properties for sale
Impairment of debtors
Operating expenses arising from investment properties
Employee benefit expense
– salaries and benefits in kind
– share options granted
– defined benefit pension plans (refer note 20)
– defined contribution pension plans
Net foreign exchange losses
Operating lease expenses
– minimum lease payments
– contingent rents
– subleases
Auditors’ remuneration
– audit
– non-audit services
Dividend and interest income from available-for-sale investments
Rental income from properties
Net operating costs included the following gains/(losses) from non-trading items:
Change in fair value of agricultural produce
Asset impairment
Sale and closure of businesses
Sale of other investments
Sale of property interests
Restructuring of businesses
Loss on dilution of interest in an associate
Acquisition-related costs
Fair value loss on convertible component of Zhongsheng bonds
Value added tax recovery in Jardine Motors
58
2016
US$m
(28,232)
659
(4,157)
(1,873)
(209)
(33,812)
(25,429)
(756)
(118)
(805)
(22)
(87)
(1)
–
(51)
36
3
(93)
(147)
(3,256)
(9)
(93)
(90)
(3,448)
(10)
(1,121)
(37)
48
(1,110)
(19)
(4)
(23)
54
38
22
(82)
5
–
151
3
(4)
(2)
–
–
93
2015
US$m
(28,394)
763
(4,190)
(1,751)
(690)
(34,262)
(25,679)
(762)
(113)
(831)
(19)
(19)
(373)
(188)
(59)
20
21
(114)
(134)
(3,117)
(10)
(88)
(87)
(3,302)
(3)
(1,105)
(23)
43
(1,085)
(19)
(4)
(23)
53
33
–
(176)
(8)
126
1
–
(2)
(2)
(1)
3
(59)
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 7 Net Financing Charges
Interest expense
– bank loans and advances
– other
Fair value losses on fair value hedges
Fair value adjustment on hedged items attributable to the hedged risk
Interest capitalized
Commitment and other fees
Financing charges
Financing income
8 Share of Results of Associates and Joint Ventures
By business:
Jardine Pacific
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
Share of results of associates and joint ventures included the following gains/(losses)
from non-trading items:
Change in fair value of investment properties
Asset impairment
Sale and closure of businesses
Sale of property interests
Litigation costs
Restructuring of businesses
Results are shown after tax and non-controlling interests in the associates and joint ventures.
2016
US$m
(135)
(120)
(255)
(10)
10
–
(255)
47
(89)
(297)
146
(151)
2015
US$m
(123)
(125)
(248)
(1)
1
–
(248)
46
(67)
(269)
134
(135)
2016
US$m
2015
US$m
71
46
59
119
11
148
232
(1)
685
(56)
(18)
3
32
(10)
–
(49)
103
66
210
85
11
168
302
2
947
72
42
11
–
–
(16)
109
59
Jardine Matheson | Annual Report 2016 9 Tax
Tax charged to profit and loss is analyzed as follows:
Current tax
Deferred tax
Greater China
Southeast Asia
United Kingdom
Rest of the world
Reconciliation between tax expense and tax at the applicable tax rate*:
Tax at applicable tax rate
Income not subject to tax
– change in fair value of investment properties
– other items
Expenses not deductible for tax purposes
– change in fair value of investment properties
– other items
Tax losses and temporary differences not recognized
Utilization of previously unrecognized tax losses and temporary differences
Recognition of previously unrecognized tax losses and temporary differences
Deferred tax assets written off
(Underprovision)/overprovision in prior years
Withholding tax
Fiscal assets revaluation in Indonesia
Land appreciation tax in mainland China
Change in tax rate
Other
Tax relating to components of other comprehensive income is analyzed as follows:
Remeasurements of defined benefit plans
Cash flow hedges
2016
US$m
(718)
59
(659)
(259)
(389)
(6)
(5)
(659)
2015
US$m
(733)
122
(611)
(219)
(381)
(8)
(3)
(611)
(1,077)
(710)
433
113
(10)
(98)
(34)
16
5
(2)
(8)
(54)
69
(14)
1
1
202
93
(26)
(67)
(59)
10
–
(1)
4
(51)
–
(5)
–
(1)
(659)
(611)
(10)
1
(9)
13
(5)
8
Share of tax charge of associates and joint ventures of US$221 million and credit of US$13 million (2015: charge of
US$257 million and US$4 million) are included in share of results of associates and joint ventures and share of other
comprehensive income of associates and joint ventures, respectively.
*
The applicable tax rate for the year was 19.0% (2015: 19.4%) and represents the weighted average of the rates of taxation prevailing in the territories
in which the Group operates.
60
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 10 Earnings per Share
Basic earnings per share are calculated on profit attributable to shareholders of US$2,503 million (2015: US$1,799 million)
and on the weighted average number of 374 million (2015: 373 million) shares in issue during the year.
Diluted earnings per share are calculated on profit attributable to shareholders of US$2,502 million (2015: US$1,798 million),
which is after adjusting for the effects of the conversion of dilutive potential ordinary shares of subsidiaries, associates or
joint ventures, and on the weighted average number of 375 million (2015: 374 million) shares in issue during the year.
The weighted average number of shares is arrived at as follows:
Weighted average number of shares in issue
Company’s share of shares held by subsidiaries
Weighted average number of shares for basic earnings per share calculation
Adjustment for shares deemed to be issued for no consideration under the
Senior Executive Share Incentive Schemes
Weighted average number of shares for diluted earnings per share calculation
Ordinary shares
in millions
2016
708
(334)
374
1
375
2015
696
(323)
373
1
374
Additional basic and diluted earnings per share are also calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
Profit attributable to shareholders
Non-trading items (refer note 11)
Underlying profit attributable to
US$m
2,503
(1,117)
2016
Basic
earnings
per share
US$
6.69
Diluted
earnings
per share
US$
6.68
2015
Basic
earnings
per share
US$
4.82
Diluted
earnings
per share
US$
4.81
US$m
1,799
(439)
shareholders
1,386
3.71
3.70
1,360
3.64
3.64
61
Jardine Matheson | Annual Report 2016 11 Non-trading Items
By business:
Jardine Pacific
Jardine Motors
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
An analysis of non-trading items after interest, tax and non-controlling interests
is set out below:
Change in fair value of investment properties
– Hongkong Land
– other
Change in fair value of agricultural produce
Asset impairment
Sale and closure of businesses
Sale of other investments
Sale of property interests
Restructuring of businesses
Loss on dilution of interest in an associate
Acquisition-related costs
Litigation costs
Fair value loss on convertible component of Zhongsheng bonds
Value added tax recovery in Jardine Motors
2016
US$m
(78)
143
(10)
1,043
6
(1)
(3)
17
–
1,117
1,043
18
1,061
4
(101)
5
–
158
3
(3)
(1)
(9)
–
–
1,117
2015
US$m
3
1
(4)
459
(2)
(1)
25
11
(53)
439
454
20
474
–
(126)
4
104
–
(16)
(1)
(2)
–
(1)
3
439
62
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Goodwill
US$m
Franchise
rights
US$m
Leasehold
land
Concession
rights
US$m
US$m
1,277
(4)
1,273
(12)
14
–
–
–
–
–
(83)
1,192
1,278
(86)
1,192
1,130
(4)
1,126
(73)
223
–
(1)
–
(2)
1,273
1,277
(4)
1,273
155
–
155
4
–
–
–
–
–
–
–
159
159
–
159
172
–
172
(17)
–
–
–
–
–
155
155
–
155
859
(179)
680
16
4
50
(8)
105
(84)
(36)
–
727
938
(211)
727
898
(163)
735
(70)
4
44
–
(33)
–
680
859
(179)
680
419
(25)
394
10
–
54
–
–
–
(2)
–
456
484
(28)
456
431
(23)
408
(41)
–
30
–
(3)
–
394
419
(25)
394
12
Intangible Assets
2016
Cost
Amortization and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposal
Revaluation surplus before transfer
to investment properties
Transfer from/(to) investment
properties
Amortization
Impairment charge
Net book value at 31st December
Cost
Amortization and impairment
2015
Cost
Amortization and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposal
Amortization
Impairment charge
Net book value at 31st December
Cost
Amortization and impairment
Goodwill allocation by business:
Jardine Pacific
Jardine Motors
Dairy Farm
Mandarin Oriental
Astra
Other
US$m
434
(183)
251
2
–
124
(2)
–
–
(80)
(4)
291
507
(216)
291
385
(147)
238
(14)
6
115
–
(77)
(17)
251
434
(183)
251
2016
US$m
71
54
708
39
320
Total
US$m
3,144
(391)
2,753
20
18
228
(10)
105
(84)
(118)
(87)
2,825
3,366
(541)
2,825
3,016
(337)
2,679
(215)
233
189
(1)
(113)
(19)
2,753
3,144
(391)
2,753
2015
US$m
153
51
718
40
311
1,192
1,273
63
Jardine Matheson | Annual Report 2016 Intangible Assets (continued)
12
Goodwill relating to Dairy Farm is allocated to groups of cash-generating units identified by banners or group of stores
acquired in each geographical segment. Cash flow projections for impairment reviews are based on budgets prepared on the
basis of assumptions reflective of the prevailing market conditions, and are discounted appropriately. Key assumptions used
for value-in-use calculations include budgeted gross margins between 21% and 28% and average growth rate between 2% to
5% to extrapolate cash flows, which vary across the group’s business segments and geographical locations, over a five-year
period and thereafter, and are based on management expectations for the market development; and pre-tax discount rates
between 6% and 16% applied to the cash flow projections. The discount rates used reflect business specific risks relating to
the relevant industry, business life-cycle and geographical location. On the basis of these reviews, management concluded
that no impairment has occurred.
Goodwill relating to Astra represents primarily goodwill arising from acquisition of shares in Astra which is regarded as an
operating segment. Accordingly, for the purpose of impairment review, the carrying value of Astra is compared with the
recoverable amount measured by reference to the quoted market price of the shares held. On the basis of this review and the
continued expected level of profitability, management concluded that no impairment has occurred.
Franchise rights are rights under franchise agreements with automobile and heavy equipment manufacturers. These
franchise agreements are deemed to have indefinite lives because either they do not have any term of expiry or their renewal
would be probable and would not involve significant costs, taking into account the history of renewal and the relationships
between the franchisee and the contracting parties. The carrying amounts of franchise rights, which included automotive
of US$57 million and heavy equipment of US$101 million, are not amortized as such rights will contribute cash flows for
an indefinite period. Management has performed an impairment review of the carrying amounts of franchise rights at
31st December 2016 and has concluded that no impairment has occurred. The impairment review was made by comparing
the carrying amounts of the cash-generating units in which the franchise rights reside with the recoverable amounts of the
cash-generating units. The recoverable amounts of the cash-generating units are determined based on value-in-use
calculations. These calculations use pre-tax cash flow projections based on budgets covering a three-year period. Cash flows
beyond the three-year period are extrapolated using growth rates between 3% and 4%. Pre-tax discount rates between 14%
and 16%, reflecting business specific risks, are applied to the cash flow projections.
Other intangible assets comprise trademarks, computer software, hotel development costs, deferred acquisition costs for
insurance contracts and customer contracts.
At 31st December 2016, the carrying amount of leasehold land pledged as security for borrowings amounted to US$4 million
(2015: US$7 million) (refer note 30).
The amortization charges are all recognized in arriving at operating profit and are included in cost of sales, selling and
distribution costs and administration expenses.
The remaining amortization periods for intangible assets are as follows:
Leasehold land
Concession rights
Computer software
Other
up to 83 years
by traffic volume over 29 to 31 years
up to 9 years
various
64
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Freehold
properties
Leasehold
properties
Leasehold
improve-
ments
Mining
properties
Plant &
machinery
Furniture,
equipment
& motor
vehicles
US$m
US$m
US$m
US$m
US$m
US$m
901
(98)
803
(59)
22
154
(22)
2,843
(549)
2,294
–
2
213
(10)
1,178
(701)
477
(23)
–
197
(6)
1,040
(688)
352
1
–
–
–
3,490
(2,232)
1,258
18
2
338
(8)
2,119
(1,217)
902
12
1
224
(18)
Total
US$m
11,571
(5,485)
6,086
(51)
27
1,126
(64)
–
2
–
–
–
–
2
13 Tangible Assets
2016
Cost
Depreciation and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposals
Revaluation surplus before transfer
to investment properties
Transfer from/(to) investment
properties, and stocks and work
in progress
Depreciation charge
Impairment charge
Reclassified to non-current assets
held for sale
–
(11)
–
(2)
(12)
(98)
–
–
–
(109)
–
–
536
–
(10)
–
–
–
(332)
(1)
(67)
(245)
–
(79)
(805)
(1)
–
–
(2)
343
1,275
809
6,239
Net book value at 31st December
885
2,391
Cost
Depreciation and impairment
988
(103)
3,030
(639)
1,377
(841)
1,058
(715)
3,769
(2,494)
1,951
(1,142)
12,173
(5,934)
885
2,391
536
343
1,275
809
6,239
2015
Cost
Depreciation and impairment
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposals
Transfer to stocks and work
in progress
Depreciation charge
Impairment charge
Net book value at 31st December
Cost
Depreciation and impairment
983
(94)
889
(76)
–
18
(16)
–
(10)
(2)
803
901
(98)
803
2,580
(520)
2,060
(147)
5
465
(1)
–
(85)
(3)
2,294
2,843
(549)
2,294
1,167
(671)
496
(21)
2
110
(6)
–
(103)
(1)
477
1,178
(701)
1,076
(340)
736
(18)
6
–
–
–
(20)
(352)
352
1,040
3,612
(2,121)
1,491
(130)
21
251
(4)
(3)
(353)
(15)
1,258
3,490
2,234
(1,216)
1,018
(85)
1
304
(29)
(47)
(260)
–
11,652
(4,962)
6,690
(477)
35
1,148
(56)
(50)
(831)
(373)
902
6,086
2,119
11,571
(688)
(2,232)
(1,217)
(5,485)
477
352
1,258
902
6,086
65
Jardine Matheson | Annual Report 2016 13 Tangible Assets (continued)
In 2015, as a result of the decline in coal prices as well as the subdued outlook, management had performed an impairment
review of the carrying amount of the mining properties and other tangible assets, and concluded that an impairment had
occurred. An impairment charge of US$370 million had been included in the 2015 profit and loss in the line ‘Other operating
expenses’. In 2016, no further impairment was recognized in view of the increase in coal price over the year, while
management assumptions about the long-term price trend remain largely unchanged.
The impairment review relating to mining properties is performed by comparing the carrying amount of the cash-generating
units of the mining properties with the recoverable amount. The cash-generating unit is determined based on the location of
the mining properties and the extent that they share infrastructure. The periods used in the cash flow forecast are based on
the depletion of reserves or the expiration of the concession period, whichever is earlier. The recoverable amount of
US$337 million at 31st December 2015, net of deferred tax, was determined based on the fair value less costs of disposal,
using a discounted cash flow method with unobservable inputs. Major assumptions used in the valuation were coal price
per tonne of US$52 to US$72 and post-tax discount rate of 12.8%.
Freehold properties include a hotel property of US$112 million (2015: US$105 million), which is stated net of a grant of
US$22 million (2015: US$23 million).
Net book value of leasehold properties, plant and machinery and motor vehicles acquired under finance leases amounted to
US$266 million, US$14 million and US$44 million (2015: US$276 million, US$41 million and US$45 million), respectively.
Rental income from properties and other tangible assets amounted to US$281 million (2015: US$304 million) including
contingent rents of US$3 million (2015: US$3 million).
Future minimum rental payments receivable under non-cancellable leases are as follows:
Within one year
Between one and two years
Between two and five years
Beyond five years
2016
US$m
122
67
69
6
264
2015
US$m
118
64
48
10
240
At 31st December 2016, the carrying amount of tangible assets pledged as security for borrowings amounted to
US$466 million (2015: US$555 million) (refer note 30).
66
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued)
14
Investment Properties
2016
At 1st January
Exchange differences
Additions
Disposal
Transfer from/(to) intangible assets and tangible assets
Change in fair value
At 31st December
Freehold properties
Leasehold properties
2015
At 1st January
Exchange differences
Additions
Disposal
Transfer from properties for sale
Change in fair value
At 31st December
Freehold properties
Leasehold properties
Completed
commercial
properties
Under
development
commercial
properties
Completed
residential
properties
US$m
US$m
US$m
24,128
(22)
133
(1)
96
2,577
851
(43)
242
–
–
(31)
26,911
1,019
22,922
(33)
95
(1)
–
1,145
24,128
834
(45)
185
–
–
(123)
851
651
(1)
2
–
–
27
679
553
(2)
1
–
78
21
651
Total
US$m
25,630
(66)
377
(1)
96
2,573
28,609
159
28,450
28,609
24,309
(80)
281
(1)
78
1,043
25,630
135
25,495
25,630
The Group measures its investment properties at fair value. The fair values of the Group’s investment properties at
31st December 2016 and 2015, which were principally held by Hongkong Land, have been determined on the basis of
valuations carried out by independent valuers who hold a recognized relevant professional qualification and have recent
experience in the locations and segments of the investment properties valued. Hongkong Land employed Jones Lang LaSalle
to value its commercial investment properties in Hong Kong, mainland China, Singapore, Vietnam and Cambodia which are
either freehold or held under leases with unexpired lease terms of more than 20 years. The valuations, which conform to the
International Valuation Standards issued by the International Valuation Standards Council and the HKIS Valuation Standards
issued by the Hong Kong Institute of Surveyors, were arrived at by reference to the net income, allowing for reversionary
potential, of each property. The valuations are comprehensively reviewed by Hongkong Land.
Fair value measurements of residential properties using no significant non-observable inputs
Fair values of completed residential properties are generally derived using the direct comparison method. This valuation
method is based on comparing the property to be valued directly with other comparable properties, which have recently
transacted. However, given the heterogeneous nature of real estate properties, appropriate adjustments are usually required
to allow for any qualitative differences that may affect the price likely to be achieved by the property under consideration.
Fair value measurements of commercial properties using significant unobservable inputs
Fair values of completed commercial properties in Hong Kong and Singapore are generally derived using the income
capitalization method. This valuation method is based on the capitalization of the net income and reversionary income
potential by adopting appropriate capitalization rates, which are derived from analysis of sale transactions and valuers’
interpretation of prevailing investor requirements or expectations. The prevailing market rents adopted in the valuation have
reference to valuers’ view of recent lettings, within the subject properties and other comparable properties.
Fair values of completed commercial properties in Vietnam and Cambodia are generally derived using the discounted cash
flow method. The net present value of the income stream is estimated by applying an appropriate discount rate which
reflects the risk profile.
67
Jardine Matheson | Annual Report 2016 Investment Properties (continued)
14
Fair values of under development commercial properties are generally derived using the residual method. This valuation
method is essentially a means of valuing the land by reference to its development potential by deducting development costs
together with developer’s profit and risk from the estimated capital value of the proposed development assuming
completion as at the date of valuation.
The Group’s policy is to recognize transfers between fair value measurements as of the date of the event or change in
circumstances that caused the transfer.
Information about fair value measurements of Hongkong Land’s investment properties using significant unobservable inputs
at 31st December 2016:
Commercial properties
Fair value
US$m
Valuation method
Completed
Hong Kong
26,096
Income capitalization
Singapore
518
Income capitalization
Vietnam and Cambodia
51
Discounted cash flow
Total
26,665
Range of
significant unobservable inputs
Prevailing market
rent per month
Capitalization/
discount rates
US$
%
4.8 to 39.1
per square foot
5.4 to 7.9
per square foot
21.0 to 50.9
per square metre
3.20 to 5.50
3.50 to 5.50
13.00 to 15.00
Under development Mainland China
Cambodia
Total
676
128
804
Residual
Residual
104.7
per square metre
30.0 to 59.0
per square metre
6.00
10.50
Prevailing market rents are estimated based on independent valuers’ view of recent lettings, within the subject properties
and other comparable properties. The higher the rents, the higher the fair value.
Capitalization and discount rates are estimated by independent valuers based on the risk profile of the properties being
valued. The lower the rates, the higher the fair value.
Rental income from investment properties amounted to US$860 million (2015: US$850 million) including contingent rents of
US$10 million (2015: US$11 million).
Future minimum rental payments receivable under non-cancellable leases are as follows:
Within one year
Between one and two years
Between two and five years
Beyond five years
2016
US$m
770
527
580
341
2015
US$m
768
545
502
362
2,218
2,177
Generally the Group’s operating leases in respect of investment properties are for terms of three or more years.
At 31st December 2016, the carrying amount of investment properties pledged as security for borrowings amounted to
US$676 million (2015: US$638 million) (refer note 30).
68
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 15 Bearer Plants
The Group’s bearer plants are primarily for the production of palm oil.
Movements during the year:
Cost
– as previously reported
– change in accounting policy (refer note 1(c))
– as restated
Depreciation
– as previously reported
– change in accounting policy (refer note 1(c))
– as restated
Net book value at 1st January
Exchange differences
New subsidiaries
Additions
Disposals
Depreciation charge
Net book value at 31st December
Immature bearer plants
Mature bearer plants
Cost
Accumulated depreciation
2016
US$m
2015
US$m
859
(263)
596
–
(111)
(111)
485
13
9
61
(49)
(22)
497
151
346
497
629
(132)
497
908
(321)
587
–
(104)
(104)
483
(48)
–
76
(7)
(19)
485
188
297
485
596
(111)
485
The Group’s bearer plants had not been pledged as security for borrowings at 31st December 2016 and 2015.
69
Jardine Matheson | Annual Report 2016 2016
US$m
254
635
221
89
1,199
1,207
2,406
998
3,404
618
93
711
6,350
7,061
130
7,191
2015
US$m
296
464
152
79
991
1,055
2,046
1,115
3,161
580
75
655
6,228
6,883
146
7,029
10,595
10,190
357
448
4,413
1,464
168
1,037
2,675
33
344
519
4,601
1,295
168
926
2,310
27
10,595
10,190
16 Associates and Joint Ventures
Listed associates
– Jardine Lloyd Thompson
– Yonghui
– Siam City Cement
– other
Unlisted associates
Share of attributable net assets
Goodwill on acquisition
Listed joint ventures
– Bank Permata
– PT Tunas Ridean
Unlisted joint ventures
Share of attributable net assets
Goodwill on acquisition
By business:
Jardine Pacific
Jardine Lloyd Thompson
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
70
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 16 Associates and Joint Ventures (continued)
Movements of associates and joint ventures
during the year:
At 1st January
Share of results after tax and non-controlling interests
Share of other comprehensive expense after tax
and non-controlling interests
Dividends received
Acquisitions, increases in attributable interests
and advances
Disposals, decreases in attributable interests and
repayment of advances
Employee share options schemes
Other
At 31st December
Fair value of listed associates/joint ventures
Associates
Joint ventures
2016
US$m
2015
US$m
2016
US$m
2015
US$m
3,161
402
(156)
(232)
222
(5)
14
(2)
3,404
3,122
1,496
417
(185)
(233)
1,676
(21)
14
(3)
3,161
3,240
7,029
283
(82)
(365)
424
(103)
–
5
7,191
651
7,385
530
(471)
(401)
351
(388)
–
23
7,029
469
(a) Investment in associates
The material associates of the Group are listed below. These associates have share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investments in material associates in 2016 and 2015:
Name of entity
Nature of business
Jardine Lloyd Thompson Group plc
(‘Jardine Lloyd Thompson’)
Yonghui Superstores Co., Limited
(‘Yonghui’)
Insurance and reinsurance
broking, risk management
and employee benefit
services
Supermarkets and
hypermarkets
Siam City Cement Public Company
Limited (‘Siam City Cement’)
Cement manufacturer
PT Astra Daihatsu Motor
Automotive
Country of incorporation/
principal place of business/
place of listing
United Kingdom/
Worldwide/
London
Mainland China/
Mainland China/
Shanghai
Thailand/
Thailand/
Thailand
Indonesia/
Indonesia/
Unlisted
% of ownership
interest
2016
42
2015
42
20
25
32
20
25
32
71
Jardine Matheson | Annual Report 2016 16 Associates and Joint Ventures (continued)
Summarized financial information for material associates
Summarized balance sheets at 31st December (unless otherwise indicated):
2016
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Financial liabilities*
Other non-current liabilities*
Total non-current liabilities
Current liabilities
Financial liabilities*
Other current liabilities*
Total current liabilities
Non-controlling interests
Net assets
2015
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Financial liabilities*
Other non-current liabilities*
Total non-current liabilities
Current liabilities
Financial liabilities*
Other current liabilities*
Total current liabilities
Non-controlling interests
Net assets
Jardine Lloyd
Thompson
US$m
Yonghui†
US$m
Siam City
Cement
US$m
PT Astra
Daihatsu
Motor
US$m
1,194
1,969
1,643
1,155
876
2,031
(864)
(260)
(1,124)
(108)
(1,562)
(1,670)
(28)
1,705
1,153
2,858
–
(21)
(21)
(68)
(1,487)
(1,555)
(9)
403
3,242
99
250
349
(179)
(132)
(311)
(585)
(210)
(795)
–
886
1,193
1,991
1,068
1,335
786
2,121
(911)
(221)
(1,132)
(42)
(1,650)
(1,692)
(27)
1,022
910
1,932
–
(13)
(13)
(54)
(1,491)
(1,545)
(8)
463
2,357
65
182
247
(29)
(203)
(232)
(35)
(160)
(195)
–
888
620
672
317
989
–
(54)
(54)
–
(562)
(562)
–
993
571
483
301
784
–
(43)
(43)
–
(375)
(375)
–
937
Total
US$m
5,426
3,631
2,596
6,227
(1,043)
(467)
(1,510)
(761)
(3,821)
(4,582)
(37)
5,524
4,823
2,905
2,179
5,084
(940)
(480)
(1,420)
(131)
(3,676)
(3,807)
(35)
4,645
*
Financial liabilities exclude trade and other payables and provisions, which are presented under other current and non-current liabilities.
†
Based on summarized balance sheets at 30th September 2016 and 2015.
72
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 16 Associates and Joint Ventures (continued)
Summarized statements of comprehensive income for the year ended 31st December (unless otherwise indicated):
2016
Revenue
Depreciation and amortization
Interest income
Interest expense
Profit from underlying business performance
Income tax expense
Profit after tax from underlying business
performance
Loss after tax from non-trading items
Profit after tax
Other comprehensive income/(expense)
Total comprehensive income
Dividends received from associates
2015
Revenue
Depreciation and amortization
Interest income
Interest expense
Profit from underlying business performance
Income tax expense
Profit after tax from underlying business
performance
Loss after tax from non-trading items
Profit after tax
Other comprehensive income/(expense)
Total comprehensive income
Dividends received from associates
Jardine Lloyd
Thompson
US$m
Yonghui†
US$m
Siam City
Cement
US$m
PT Astra
Daihatsu
Motor
US$m
1,698
(67)
3
(33)
232
(70)
162
(40)
122
17
139
38
1,763
(65)
2
(37)
259
(72)
187
(14)
173
13
186
40
7,292
(197)
20
(12)
168
(45)
123
–
123
1
124
18
3,218
(64)
9
(5)
49
(8)
41
–
41
(4)
37
16
969
(54)
1
(21)
129
(28)
101
–
101
(12)
89
24
660
(32)
1
(10)
114
(21)
93
–
93
–
93
25
3,807
(110)
25
–
356
(92)
264
–
264
2
266
75
3,337
(95)
30
–
329
(79)
250
–
250
(1)
249
59
Total
US$m
13,766
(428)
49
(66)
885
(235)
650
(40)
610
8
618
155
8,978
(256)
42
(52)
751
(180)
571
(14)
557
8
565
140
†
Based on summarized statements of comprehensive income for the twelve months ended 30th September 2016 in 2016 and based on six months
ended 30th September 2015 in 2015.
The information contained in the summarized balance sheets and statements of comprehensive income reflect the amounts
presented in the financial statements of the associates adjusted for differences in accounting policies between the Group
and the associates, and fair value of the associates at the time of acquisition. For associates acquired during 2016, the fair
value of the identifiable assets and liabilities at the acquisition date is provisional and will be finalized within one year after
the acquisition date.
73
Jardine Matheson | Annual Report 2016 16 Associates and Joint Ventures (continued)
Reconciliation of the summarized financial information
Reconciliation of the summarized financial information presented to the carrying amount of the Group’s interests in its
material associates for the year ended 31st December:
2016
Net assets
Adjustment for shares purchased for employee
benefit plans
Adjusted net assets
Interest in associates (%)
Group’s share of net assets in associates
Goodwill
Other
Carrying value
Fair value
2015
Net assets
Adjustment for shares purchased for employee
benefit plans
Adjusted net assets
Interest in associates (%)
Group’s share of net assets in associates
Goodwill
Other
Carrying value
Fair value
Jardine Lloyd
Thompson
US$m
Yonghui
US$m
Siam City
Cement
US$m
PT Astra
Daihatsu
Motor
US$m
403
208
611
42
255
193
–
448
1,064
463
243
706
42
296
223
–
519
1,206
3,242
–
3,242
20
648
388
(13)
1,023
1,352
2,357
–
2,357
20
471
417
(7)
881
1,265
886
–
886
25
221
345
–
566
435
888
–
888
25
221
343
–
564
514
993
–
993
32
317
–
–
317
N/A
937
–
937
32
299
–
–
299
N/A
Total
US$m
5,524
208
5,732
1,441
926
(13)
2,354
2,851
4,645
243
4,888
1,287
983
(7)
2,263
2,985
74
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 16 Associates and Joint Ventures (continued)
The Group has interests in a number of individually immaterial associates. The following table analyzes, in aggregate, the
share of profit and other comprehensive expense and carrying amount of these associates.
Share of profit
Share of other comprehensive expense
Share of total comprehensive income
Carrying amount of interests in these associates
Contingent liabilities relating to the Group’s interest in associates
Financial guarantee in respect of facilities made available to an associate
2016
US$m
209
(9)
200
1,050
2016
US$m
21
2015
US$m
240
(21)
219
898
2015
US$m
21
(b) Investment in joint ventures
The material joint ventures of the Group are listed below. These joint ventures have share capital consisting solely of ordinary
shares, which are held directly by the Group.
Nature of investments in material joint ventures in 2016 and 2015:
Nature of business
Country of incorporation and
principal place of business
% of ownership interest
2015
2016
Hongkong Land
Property investment Macau
– Properties Sub F, Ltd
– BFC Development LLP
Property investment Singapore
– Central Boulevard Development Pte Ltd Property investment Singapore
Property investment Singapore
– One Raffles Quay Pte Ltd
Astra
– PT Astra Honda Motor
– PT Bank Permata Tbk
Indonesia
Indonesia
Automotive
Commercial and
retail bank
49
33
33
33
50
45
49
33
33
33
50
45
As at 31st December 2016, the fair value of the Group’s interest in PT Bank Permata Tbk, which is listed on the Indonesian
Stock Exchange, was US$411 million (2015: US$363 million) and the carrying amount of the Group’s interest was
US$654 million (2015: US$616 million).
75
Jardine Matheson | Annual Report 2016 16 Associates and Joint Ventures (continued)
Summarized financial information for material joint ventures
Set out below are the summarized financial information for the Group’s material joint ventures.
Summarized balance sheets at 31st December:
Central
Boulevard
Properties Development Development
Pte Ltd
Sub F, Ltd
BFC
LLP
US$m
US$m
US$m
One
Raffles
Quay
Pte Ltd
US$m
PT Astra
Honda
Motor
US$m
PT Bank
Permata
Tbk
US$m
Total
US$m
2016
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Financial liabilities*
Other non-current liabilities*
Total non-current liabilities
Current liabilities
Financial liabilities*
Other current liabilities*
Total current liabilities
1,374
3,301
2,547
2,526
1,479
3,502
14,729
44
32
76
(16)
(144)
(160)
–
(42)
(42)
11
3
14
32
9
41
(1,175)
–
(1,175)
(1,118)
(20)
(1,138)
–
(64)
(64)
(6)
(31)
(37)
15
1
16
(717)
(184)
(901)
(4)
(47)
(51)
432
388
820
–
(229)
(229)
–
(664)
(664)
1,677
7,086
8,763
(486)
(47)
(533)
2,211
7,519
9,730
(3,512)
(624)
(4,136)
–
(10,350)
(10,350)
(10)
(11,198)
(11,208)
Net assets
1,248
2,076
1,413
1,590
1,406
1,382
9,115
2015
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current liabilities
Financial liabilities*
Other non-current liabilities*
Total non-current liabilities
Current liabilities
Financial liabilities*
Other current liabilities*
Total current liabilities
1,574
3,373
2,605
2,580
1,395
5,199
16,726
20
48
68
(35)
(166)
(201)
(1)
(38)
(39)
8
5
13
41
14
55
(1,196)
–
(1,196)
(1,135)
(19)
(1,154)
(1)
(65)
(66)
(6)
(38)
(44)
11
1
12
(727)
(188)
(915)
(3)
(44)
(47)
213
376
589
–
(221)
(221)
–
(583)
(583)
1,750
6,236
7,986
(473)
(80)
(553)
2,043
6,680
8,723
(3,566)
(674)
(4,240)
(149)
(11,180)
(11,329)
(160)
(11,948)
(12,108)
Net assets
1,402
2,124
1,462
1,630
1,180
1,303
9,101
*
Financial liabilities exclude trade and other payables and provisions, which are presented under other current and non-current liabilities.
76
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued)
16 Associates and Joint Ventures (continued)
Summarized statements of comprehensive income for the year ended 31st December:
Central
Boulevard
Properties Development Development
Pte Ltd
Sub F, Ltd
BFC
LLP
US$m
US$m
US$m
One
Raffles
Quay
Pte Ltd
US$m
PT Astra
Honda
Motor
US$m
PT Bank
Permata
Tbk
US$m
2016
Revenue
Depreciation and amortization
Interest income
Interest expense
Profit/(loss) from underlying
business performance
Income tax expense
Profit/(loss) after tax from
underlying business
performance
Loss after tax from
non-trading items
Profit/(loss) after tax
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Dividends received from
joint ventures
2015
Revenue
Depreciation and amortization
Interest income
Interest expense
Profit/(loss) from underlying
business performance
Income tax expense
Profit/(loss) after tax from
underlying business
performance
Profit after tax from
non-trading items
Profit/(loss) after tax
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Dividends received from
joint ventures
86
(8)
–
(1)
45
(5)
40
(169)
(129)
168
–
–
(46)
85
(14)
71
(4)
67
106
–
–
(29)
51
(8)
43
(4)
39
121
–
–
(22)
71
(12)
59
(3)
56
(1)
(33)
(37)
(36)
4,560
(134)
24
–
580
(125)
455
–
455
3
1,226
(19)
–
–
(661)
162
(499)
–
(499)
Total
US$m
6,267
(161)
24
(98)
171
(2)
169
(180)
(11)
(7)
(111)
(130)
12
94
(7)
–
(2)
47
(6)
41
2
43
1
44
26
34
27
161
–
–
(52)
70
(12)
58
43
101
2
17
192
–
–
(24)
90
(15)
75
113
188
20
20
120
–
–
(22)
64
(11)
53
30
83
458
(506)
(122)
131
–
207
4,257
(106)
20
–
425
(104)
321
–
321
1,332
(19)
–
–
(15)
(3)
(18)
–
(18)
6,156
(132)
20
(100)
681
(151)
530
188
718
(148)
(96)
(110)
(2)
(4)
(359)
(47)
20
92
42
(27)
319
(22)
359
18
123
6
235
The information contained in the summarized balance sheets and statements of comprehensive income reflect the amounts
presented in the financial statements of the joint ventures adjusted for differences in accounting policies between the Group
and the joint ventures, and fair value of the joint ventures at the time of acquisition.
77
Jardine Matheson | Annual Report 2016
16 Associates and Joint Ventures (continued)
Reconciliation of the summarized financial information
Reconciliation of the summarized financial information presented to the carrying amount of the Group’s interests in its
material joint ventures for the year ended 31st December:
Central
Boulevard
Properties Development Development
Pte Ltd
Sub F, Ltd
BFC
LLP
US$m
US$m
US$m
2016
Net assets
Shareholders’ loans
Adjusted net assets
Interest in joint ventures (%)
Group’s share of net assets
in joint ventures
Goodwill
Carrying value
2015
Net assets
Shareholders’ loans
Adjusted net assets
Interest in joint ventures (%)
Group’s share of net assets
in joint ventures
Goodwill
Carrying value
1,248
16
1,264
49
619
–
619
1,402
35
1,437
49
704
–
704
2,076
1,175
3,251
33
1,084
–
1,084
2,124
1,196
3,320
33
1,107
–
1,107
1,413
–
1,413
33
471
–
471
1,462
–
1,462
33
487
–
487
One
Raffles
Quay
Pte Ltd
US$m
1,590
93
1,683
33
561
–
561
1,630
95
1,725
33
575
–
575
PT Astra
Honda
Motor
US$m
PT Bank
Permata
Tbk
US$m
1,406
–
1,406
50
703
–
703
1,180
–
1,180
50
590
–
590
1,382
–
1,382
45
617
37
654
1,303
–
1,303
45
580
36
616
Total
US$m
9,115
1,284
10,399
4,055
37
4,092
9,101
1,326
10,427
4,043
36
4,079
The Group has interests in a number of individually immaterial joint ventures. The following table analyzes, in aggregate, the
share of profit and other comprehensive income and carrying amount of these joint ventures.
Share of profit
Share of other comprehensive expense
Share of total comprehensive income
Carrying amount of interests in these joint ventures
Commitments and contingent liabilities in respect of joint ventures
The Group has the following commitments relating to its joint ventures as at 31st December:
Commitment to provide funding if called
2016
US$m
304
(116)
188
3,099
2016
US$m
453
2015
US$m
233
(104)
129
2,950
2015
US$m
492
There were no contingent liabilities relating to the Group’s interest in the joint ventures at 31st December 2016 and 2015.
78
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued)
17 Other Investments
Available-for-sale financial assets
Listed securities
– Asia Commercial Bank
– Rothschild & Co
– Schindler Holdings
– The Bank of N.T. Butterfield & Son
– Zhongsheng
– other
Unlisted securities
Held-to-maturity financial assets
Listed securities
Non-current
Current
Analysis by geographical area of operation:
Greater China
Southeast Asia
Rest of the world
Movements during the year:
At 1st January
Exchange differences
Additions
Disposals and capital repayments
Unwinding of discount
Change in fair value
At 31st December
2016
US$m
58
114
222
75
297
561
1,327
100
1,427
7
1,434
1,369
65
1,434
402
613
419
2015
US$m
60
108
217
47
147
453
1,032
98
1,130
7
1,137
1,105
32
1,137
259
498
380
1,434
1,137
1,137
8
292
(115)
(1)
113
1,434
1,372
(48)
123
(307)
(2)
(1)
1,137
In 2014, a wholly-owned subsidiary of Jardine Strategic purchased new shares in Zhongsheng Group Holdings Limited
(‘Zhongsheng’) which represents an initial 11% equity interest. Together with the convertible bonds held (refer note 18), this
investment would enable the subsidiary to further increase its interest upon exercising the bonds. An impairment charge of
US$188 million was made against the investment in Zhongsheng through profit and loss during 2015 as a result of a
prolonged decline in its market value. The market value of Zhongsheng had increased in 2016 and the fair value gain was
recognized in other comprehensive income.
Movements of available-for-sale financial assets which were valued based on unobservable inputs during the year are
disclosed in note 2. There was no sale of these assets in 2016. Profit on sale of these assets in 2015 amounted to
US$126 million and was credited to profit and loss.
The fair value of held-to-maturity financial assets was US$7 million (2015: US$7 million).
79
Jardine Matheson | Annual Report 2016 18 Debtors
Consumer financing debtors
– gross
– provision for impairment
Financing lease receivables
– gross investment
– unearned finance income
– net investment
– provision for impairment
Financing debtors
Trade debtors
– third parties
– associates
– joint ventures
– provision for impairment
Other debtors
– third parties
– associates
– joint ventures
– provision for impairment
Non-current
Current
Analysis by geographical area of operation:
Greater China
Southeast Asia
United Kingdom
Rest of the world
Fair value:
Consumer financing debtors
Financing lease receivables
Financing debtors
Trade debtors
Other debtors*
*
Excluding prepayments, rental and other deposits, and other non-financial debtors.
80
2016
US$m
4,660
(182)
4,478
398
(51)
347
(14)
333
4,811
2,423
26
96
2,545
(48)
2,497
2,237
7
91
2,335
(10)
2,325
9,633
2,936
6,697
9,633
1,457
7,962
105
109
9,633
4,444
335
4,779
2,497
1,047
8,323
2015
US$m
4,079
(183)
3,896
542
(67)
475
(14)
461
4,357
2,191
21
52
2,264
(59)
2,205
2,229
3
140
2,372
(10)
2,362
8,924
3,263
5,661
8,924
1,357
7,399
93
75
8,924
3,834
469
4,303
2,205
1,136
7,644
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 18 Debtors (continued)
Trade and other debtors excluding derivative financial instruments are stated at amortized cost. The fair value of these
debtors other than convertible bonds in Zhongsheng and short-term debtors is estimated using the expected future receipts
discounted at market rates ranging from 4% to 14% (2015: 4% to 15%) per annum. The fair value of convertible bonds in
Zhongsheng is estimated by reference to market interest rate and the quoted price of the underlying shares. The fair value of
short-term debtors approximates their carrying amounts. Derivative financial instruments are stated at fair value.
Financing debtors
Financing debtors comprise consumer financing debtors and financing lease receivables. They relate primarily to Astra’s
motor vehicle and motorcycle financing. Before accepting any new customer, the Group assesses the potential customer’s
credit quality and sets credit limits by customer using internal scoring systems. These limits and scoring are reviewed
periodically. The Group obtains collateral in the form of motor vehicles and motorcycles from consumer financing debtors
who give the Group the right to sell the repossessed collateral or take any other action to settle the outstanding debt.
The loan period ranges from 6 to 60 months for motor vehicles and motorcycles. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or financial reorganization and default or delinquency in payment
are considered indicators that the debtor is impaired. An allowance for impairment is made based on the estimated
irrecoverable amount by reference to past default experience. The Group has the right to repossess the assets whenever its
customers default on their instalment obligations. It usually exercises its right if monthly instalments are overdue for 30 days
for motor vehicles and 60 days for motorcycles. Management has considered the balances against which collective
impairment provision is made as impaired.
The maturity analysis of consumer financing debtors at 31st December is as follows:
Including related finance income
Within one year
Between one and two years
Between two and five years
Beyond five years
Excluding related finance income
Within one year
Between one and two years
Between two and five years
Beyond five years
Financing lease receivables
An analysis of financing lease receivables is set out below:
Lease receivables
Guaranteed residual value
Security deposits
Gross investment
Unearned lease income
Net investment
2016
US$m
3,188
1,672
1,135
–
5,995
2,357
1,324
979
–
4,660
2016
US$m
398
201
(201)
398
(51)
347
2015
US$m
2,856
1,489
855
6
5,206
2,132
1,193
749
5
4,079
2015
US$m
542
228
(228)
542
(67)
475
81
Jardine Matheson | Annual Report 2016 18 Debtors (continued)
The maturity analyzes of financing lease receivables at 31st December are as follows:
Within one year
Between one and two years
Between two and five years
2016
2015
Gross
investment
Net
investment
Gross
investment
Net
investment
US$m
US$m
US$m
US$m
251
105
42
398
213
95
39
347
320
174
48
542
272
158
45
475
The fair value of the financing debtors is US$4,779 million (2015: US$4,303 million). The fair value of financing debtors is
determined based on a discounted cash flow method using unobservable inputs, which are mainly rates of 6% to 34% per
annum (2015: 6% to 33% per annum). The higher the rates, the lower the fair value.
Financing debtors are due within five years (2015: five years) from the balance sheet date and the interest rates range from
6% to 34% per annum (2015: 6% to 33% per annum).
Trade and other debtors
The average credit period on sale of goods and services varies among Group businesses and is generally not more than 60
days. Before accepting any new customer, the individual Group business assesses the potential customer’s credit quality
and sets credit limits by customer using internal credit scoring systems. These limits and scoring are reviewed periodically.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization,
and default or delinquency in payment are considered indicators that the debtor is impaired. An allowance for impairment of
trade and other debtors is made based on the estimated irrecoverable amount.
At 31st December 2016, consumer financing debtors of US$44 million (2015: US$32 million), financing lease receivables
of US$16 million (2015: US$18 million), trade debtors of US$78 million (2015: US$103 million) and other debtors of
US$11 million (2015: US$15 million) were impaired. The impaired consumer financing debtors and financing lease
receivables were covered by provisions for impairment of these debtors which are assessed collectively.
At 31st December 2016, consumer financing debtors of US$385 million (2015: US$350 million), financing lease receivable
of US$90 million (2015: US$135 million), trade debtors of US$626 million (2015: US$663 million) and other debtors of
US$50 million (2015: US$18 million), respectively, were past due but not impaired. The ageing analysis of these debtors is
as follows:
Trade debtors
Other debtors
2016
US$m
266
119
65
176
626
2015
US$m
318
137
72
136
663
2016
US$m
2015
US$m
9
8
1
32
50
8
2
3
5
18
Consumer
financing debtors
2015
2016
US$m
Financing
lease receivables
2015
2016
US$m
US$m
283
56
11
–
350
US$m
86
37
7
5
135
61
21
8
–
90
Below 30 days
Between 31 and 60 days
Between 61 and 90 days
Over 90 days
311
62
12
–
385
82
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 18 Debtors (continued)
The risk of trade and other debtors that are neither past due nor impaired at 31st December 2016 becoming impaired is low
as they have a good track record with the Group. Based on past experience, management believes that no impairment
allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the
balances are still considered fully recoverable.
Other debtors
Other debtors are further analyzed as follows:
Convertible bonds in Zhongsheng
Derivative financial instruments
Restricted bank balances and deposits
Loans to employees
Other amounts due from associates
Other amounts due from joint ventures
Repossessed assets of finance companies
Other receivables
Financial assets
Prepayments
Reinsurers’ share of estimated losses on insurance contracts
Rental and other deposits
Other
2016
US$m
397
119
68
37
7
91
25
350
1,094
796
76
207
152
2,325
2015
US$m
391
296
48
34
3
140
26
224
1,162
836
79
210
75
2,362
The convertible bonds in Zhongsheng with a nominal value of HK$3,092 million (US$399 million), held by a wholly-owned
subsidiary, carry interest at 2.85% per annum and are unsecured. The bonds are convertible, at the option of the holders,
into ordinary shares of Zhongsheng at a conversion price of HK$12.96 per share on or after the date falling 180 days after the
issue date of 25th April 2014 up to the close of business on the date falling 10 days prior to the maturity. The bonds will
mature on 25th April 2017.
Movements in the provisions for impairment are as follows:
Consumer
financing debtors
2015
2016
US$m
Financing
lease receivables
2015
2016
US$m
At 1st January
Exchange differences
Additional provisions
Unused amounts
reversed
Amounts written off
(183)
(4)
(95)
–
100
US$m
(202)
20
(94)
–
93
(14)
1
(8)
1
6
At 31st December
(182)
(183)
(14)
Trade debtors
Other debtors
2016
US$m
2015
US$m
2016
US$m
2015
US$m
(59)
(1)
(13)
22
3
(48)
(44)
4
(35)
13
3
(59)
(10)
–
(1)
1
–
(11)
1
(1)
–
1
(10)
(10)
US$m
(29)
2
–
3
10
(14)
At 31st December 2016, the carrying amount of consumer financing debtors, financing lease receivables, trade debtors
and other debtors pledged as security for borrowings amounted to US$1,783 million, US$86 million, nil and US$9 million
(2015: US$1,703 million, US$134 million, US$1 million and US$6 million), respectively (refer note 30).
83
Jardine Matheson | Annual Report 2016 19 Deferred Tax Assets/(Liabilities)
Accelerated
tax
depreciation
Fair value
gains/
losses
US$m
US$m
Losses
US$m
Provisions
and other
temporary
differences
Employee
benefits
US$m
US$m
2016
At 1st January
– as previously reported
– change in accounting policy for
bearer plants
– as restated
Exchange differences
Credited/(charged) to profit and loss
Credited/(charged) to other
comprehensive income
Other
At 31st December
Deferred tax assets
Deferred tax liabilities
2015
At 1st January
– as previously reported
– change in accounting policy for
bearer plants
– as restated
Exchange differences
New subsidiaries
Credited to profit and loss
Credited/(charged) to other
comprehensive income
Other
At 31st December
Deferred tax assets
Deferred tax liabilities
(155)
(338)
8
(147)
3
79
–
–
(65)
159
(224)
(65)
88
(250)
(4)
–
1
–
(253)
(50)
(203)
(253)
(155)
(440)
9
(146)
(1)
–
–
–
–
(147)
98
(245)
(147)
99
(341)
15
(4)
85
(5)
–
(250)
(44)
(206)
(250)
36
–
36
–
(6)
–
–
30
30
–
30
33
–
33
(2)
–
5
–
–
36
28
8
36
99
–
99
1
6
(10)
–
96
90
6
96
84
–
84
(7)
–
9
13
–
99
83
16
99
87
(3)
84
4
(20)
–
(1)
67
146
(79)
67
88
(3)
85
(10)
–
23
–
(14)
84
150
(66)
84
Total
US$m
(271)
93
(178)
4
59
(9)
(1)
(125)
375
(500)
(125)
(390)
105
(285)
(5)
(4)
122
8
(14)
(178)
315
(493)
(178)
Deferred tax balances predominantly comprise non-current items. Deferred tax assets and liabilities are netted when the
taxes relate to the same taxation authority and where offsetting is allowed.
Deferred tax assets of US$157 million (2015: US$156 million) arising from unused tax losses of US$648 million (2015:
US$650 million) have not been recognized in the financial statements. Included in the unused tax losses, US$246 million
have no expiry date and the balance will expire at various dates up to and including 2036.
Deferred tax liabilities of US$480 million (2015: US$462 million) arising on temporary differences associated with
investments in subsidiaries of US$4,800 million (2015: US$4,623 million) have not been recognized as there is no current
intention of remitting the retained earnings of these subsidiaries to the holding companies in the foreseeable future.
84
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 20 Pension Plans
The Group operates defined benefit pension plans in the main territories in which it operates, with the major plans in Hong
Kong and the United Kingdom. Most of the pension plans are final salary defined benefits, calculated based on members’
length of service and their salaries in the final years leading up to retirement. In Hong Kong, the pension benefits are usually
paid in one lump sum. With the exception of certain plans in Hong Kong, all the defined benefit plans are closed to new
members. In addition, although all plans are impacted by the discount rate, liabilities in Hong Kong are driven by salary
growth, whilst the United Kingdom plans are driven by inflationary rates.
The Group’s defined benefit plans are either funded or unfunded, with the assets of the funded plans held independently of
the Group’s assets in separate trustee administered funds. Plan assets held in trusts are governed by local regulations and
practices in each country. Responsibility for governance of the plans, including investment decisions and contribution
schedules, lies jointly with the company and the boards of trustees. The Group’s major plans are valued by independent
actuaries annually using the projected unit credit method.
The amounts recognized in the consolidated balance sheet are as follows:
Fair value of plan assets
Present value of funded obligations
Present value of unfunded obligations
Net pension liabilities
Analysis of net pension liabilities:
Pension assets
Pension liabilities
2016
US$m
901
(1,104)
(203)
(211)
(414)
5
(419)
(414)
2015
US$m
926
(1,127)
(201)
(210)
(411)
5
(416)
(411)
85
Jardine Matheson | Annual Report 2016 20 Pension Plans (continued)
The movement in the net pension liabilities is as follows:
2016
At 1st January
Current service cost
Interest income/(expense)
Past service cost and gains on settlements
Administration expenses
Exchange differences
Remeasurements
– return on plan assets, excluding amounts included in interest income
– change in financial assumptions
– experience gains
Contributions from employers
Contributions from plan participants
Benefit payments
Settlements
At 31st December
2015
At 1st January
Current service cost
Interest income/(expense)
Past service cost and gains on settlements
Administration expenses
Exchange differences
Disposal
Remeasurements
– return on plan assets, excluding amounts included in interest income
– change in financial assumptions
– experience losses
Contributions from employers
Contributions from plan participants
Benefit payments
Settlements
Transfer from other plans
At 31st December
Fair value
of plan
assets
US$m
Present
value of
obligations
US$m
926
–
34
–
(3)
31
957
(56)
41
–
–
41
50
4
(86)
(9)
(1,337)
(67)
(59)
2
–
(124)
(1,461)
59
–
(37)
19
(18)
–
(4)
100
9
Total
US$m
(411)
(67)
(25)
2
(3)
(93)
(504)
3
41
(37)
19
23
50
–
14
–
901
(1,315)
(414)
1,006
–
38
–
(3)
35
1,041
(28)
(3)
(56)
–
–
(56)
43
4
(70)
(6)
1
(1,333)
(66)
(56)
(1)
–
(123)
(1,456)
54
3
–
4
(27)
(23)
–
(4)
84
6
(1)
(327)
(66)
(18)
(1)
(3)
(88)
(415)
26
–
(56)
4
(27)
(79)
43
–
14
–
–
926
(1,337)
(411)
86
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 20 Pension Plans (continued)
The weighted average duration of the defined benefit obligations at 31st December 2016 is 12 years (2015: 12 years).
Expected maturity analysis of undiscounted pension benefits at 31st December is as follows:
Less than a year
Between one and two years
Between two and five years
Beyond five years
2016
US$m
89
93
304
5,683
6,169
The principal actuarial assumptions used for accounting purposes at 31st December are as follows:
Hong Kong
United Kingdom
Others
2016
%
3.3
4.8
N/A
2015
%
3.0
5.0
N/A
2016
%
2.6
–
3.4
2015
%
3.7
–
2.9
2016
%
7.3
6.2
N/A
Discount rate
Salary growth rate
Inflation rate
2015
US$m
112
85
314
6,724
7,235
2015
%
8.4
7.6
N/A
Life expectancy for pensioners in the United Kingdom plans at the age of 65 for male and female are 22 years and 24 years,
respectively (2015: 22 years and 24 years). As participants of the plans relating to Hong Kong usually take lump sum
amounts upon retirement, mortality rate is not a principal assumption for these plans.
The sensitivity of the defined benefit obligations to changes in the weighted principal assumptions is:
Discount rate
Salary growth rate
Inflation rate
Change in
assumption
%
1
1
1
(Increase)/decrease on defined benefit obligations
Increase in
assumption
US$m
136
(92)
(21)
Decrease in
assumption
US$m
(165)
77
17
The above sensitivity analyzes are based on a change in an assumption while holding all other assumptions constant.
In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the
sensitivity of the defined benefit obligations to significant actuarial assumptions the same method (present value of the
defined benefit obligations calculated with the projected unit credit method at the end of the reporting period) has been
applied as when calculating the pension liability recognized within the balance sheet.
87
Jardine Matheson | Annual Report 2016 20 Pension Plans (continued)
The analysis of the fair value of plan assets at 31st December is as follows:
Asia
Pacific
US$m
Europe
US$m
North
America
US$m
Global
US$m
Total
US$m
2016
Quoted investments
Equity instruments
Debt instruments
– government
– corporate bonds
– investment grade
Investment funds
Unquoted investments
Investment funds
Total investments
Cash and cash equivalents
Benefits payable and other
87
49
20
69
73
229
8
237
46
–
88
88
124
258
4
262
10
–
4
4
110
124
2
126
10
2
–
2
46
58
172
230
153
51
112
163
353
669
186
855
48
(2)
901
88
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued)
20 Pension Plans (continued)
Asia
Pacific
US$m
Europe
US$m
North
America
US$m
Global
US$m
Total
US$m
2015
Quoted investments
Equity instruments
Debt instruments
– government
– corporate bonds
– investment grade
Investment funds
Unquoted investments
Debt instruments
– government
– corporate bonds
– investment grade
– non-investment grade
Investment funds
Total investments
Cash and cash equivalents
Benefits payable and other
106
34
18
52
50
208
7
2
–
2
9
7
16
224
51
–
105
105
122
278
16
8
1
9
25
3
28
306
11
1
–
1
117
129
7
13
3
16
23
2
25
154
10
–
–
–
16
26
2
–
–
–
2
175
177
203
178
35
123
158
305
641
32
23
4
27
59
187
246
887
41
(2)
926
The defined benefit plans in Hong Kong have two strategic asset allocations for its open and closed plans. The open plans
have an equity/debt allocation of 70/30 whilst the closed plans have a 55/45 split.
The strategic asset allocation is derived from the asset-liability modeling (‘ALM’) review, done triennially to ensure the plans
can meet future funding and solvency requirements. The last ALM review was completed in 2015, with modified strategic
asset allocations adopted in 2015. The next ALM review is scheduled for 2018.
As at 31st December 2016, the Hong Kong plans had assets of US$471 million (2015: US$481 million). These assets were
invested 27% in Asia Pacific, 10% in Europe and 21% in North America (2015: 25%, 14% and 27%, respectively). Within
Asia Pacific, 49% (2015: 58%) was invested in Hong Kong equities. 66% (2015: 55%) and 34% (2015: 45%) of the
investments were in quoted and unquoted instruments, respectively. The high percentage of quoted instruments provides
liquidity to fund drawdowns and benefit payments. Within the quoted equity allocation, the plan is well diversified in terms
of sectors, with the top three being financials, technology and industrials, with a combined fair value of US$38 million
(2015: US$ 46 million).
89
Jardine Matheson | Annual Report 2016
20 Pension Plans (continued)
In the United Kingdom, the defined benefit plans have strategic asset allocations for equities, fixed income and diversified
growth funds of 40/30/30 for Matheson & Co. and 40/40/20 for Jardine Motors. The majority of the equity investments are
in passive funds with a significant percentage in developed economies. Matheson & Co. has 87% (2015: 89%) of their
investments in developed and 13% (2015: 11%) in emerging economies. The regional splits are 10% (2015: 9%) in Asia
Pacific, 45% (2015: 44%) in Europe, 14% (2015: 14%) in North America and 31% (2015: 33%) globally. All of their investments
were in quoted instruments, unchanged from 2015. Jardine Motors had 95% of the investments in developed economies and
all of their investments were in quoted instruments, similar to 2015. Their regional splits are 5% in Asia Pacific, 85% in
Europe, 5% in North America and 5% globally, also similar to 2015. The top three sectors of the quoted equity instruments at
the end of both 2016 and 2015 were financials, consumer goods and industrials, with combined fair values of US$39 million
and US$46 million, respectively.
Through its defined benefit pension plans, the Group is expected to be exposed to a number of risks such as asset volatility,
changes in bond yields, inflation risk and life expectancy, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets
underperform this yield, this will create a deficit. The Group’s defined benefit plans hold a percentage of equities,
which are expected to outperform corporate bonds in the long-term, whilst generating volatility and risk in the short-term.
In Hong Kong, where the Group has open and closed plans, the assets and liabilities mix are distinct to reduce the level of
investment risk to each plan. In 2016, the plans rebalanced from their overweight allocations in hedge funds to their
underweight allocations in equities, bonds and cash. The plans also restructured their fixed income portfolios by reducing
the allocation to global bonds and increasing the allocation to cash and Asian bonds to reduce risks. The open plans
retained a higher exposure to equities to generate higher returns to meet pension obligations. Management believes that
the long-term nature of the plan liabilities and the strength of the Group supports a level of equity investment as part of the
Group’s long term strategy to manage the plans efficiently.
Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the
value of the plans’ bond holdings.
Inflation risk
Only the Group’s United Kingdom plans’ benefit obligations are linked to inflation, specifically CPI, where a higher CPI leads
to higher liabilities. Although CPI has remained benign in 2016, the long-term outlook is for a higher inflation assumption.
The rest of the Group’s plan assets are unaffected by inflation.
Life expectancy
Life expectancy risk is only applicable to the United Kingdom plans, where increase in longevity assumptions results in an
increase in the plan’s liabilities. The Hong Kong plans mainly provide for a lump-sum benefit payment at retirement.
The Group ensures that the investment positions are managed within an ALM framework that is developed to achieve
long-term returns that are in line with the obligations under the pension schemes. Within the ALM framework, the Group’s
objective is to match assets to the pension obligations by investing in a well-diversified portfolio that generates sufficient
risk-adjusted returns that match the benefit payments. The Group also actively monitors the duration and the expected yield
of the investments to ensure it matches the expected cash outflows arising from the pension obligations.
Investments across the plans are well diversified, such that the failure of any single investment would not have a material
impact on the overall level of assets.
The Group maintains an active and regular contribution schedule across all the plans. The contributions to all its plans in
2016 were US$50 million and the estimated amount of contributions expected to be paid to all its plans in 2017 is
US$50 million.
90
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 21 Properties for Sale
Properties in the course of development
Completed properties
2016
US$m
2,052
263
2,315
2015
US$m
2,661
102
2,763
As at 31st December 2016, properties in the course of development amounting to US$1,484 million (2015: US$2,067 million)
were not scheduled for completion within the next twelve months.
At 31st December 2016, the Group’s properties for sale had not been pledged as security for borrowings (2015: US$796 million)
(refer note 30).
22 Stocks and Work in Progress
Finished goods
Work in progress
Raw materials
Spare parts
Other
2016
US$m
3,013
41
65
80
82
3,281
2015
US$m
3,052
41
63
89
86
3,331
At 31st December 2016, the Group’s stocks and work in progress had not been pledged as security for borrowings
(2015: US$1 million) (refer note 30).
91
Jardine Matheson | Annual Report 2016 23 Bank Balances and Other Liquid Funds
Deposits with banks and financial institutions
Bank balances
Cash balances
Analysis by currency:
Chinese renminbi
Euro
Hong Kong dollar
Indonesian rupiah
Japanese yen
Macau patacas
Malaysian ringgit
New Taiwan dollar
Philippine peso
Singapore dollar
United Kingdom sterling
United States dollar
Other
2016
US$m
2,532
2,893
118
5,543
1,188
19
193
1,771
20
29
74
58
26
501
38
1,598
28
5,543
2015
US$m
3,026
1,654
102
4,782
934
49
167
920
37
26
25
52
20
473
38
2,006
35
4,782
The weighted average interest rate on deposits with banks and financial institutions is 1.8% (2015: 2.7%) per annum.
2016
US$m
250
2016
US$m
175
3
178
2015
US$m
250
2015
US$m
173
2
175
Ordinary shares
in millions
2016
2015
702
12
714
691
11
702
24 Share Capital
Authorized:
1,000,000,000 shares of US¢25 each
Issued and fully paid:
At 1st January
Scrip issued in lieu of dividends
At 31st December
92
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 25 Share-based Long-term Incentive Plans
Share-based long-term incentive plans (‘LTIP’) have been put in place to provide incentives for selected executives. Awards
take the form of share options to purchase ordinary shares in the Company with exercise prices based on the then prevailing
market prices, however, share awards which will vest free of payment may also be made. Awards normally vest on or after the
third anniversary of the date of grant and may be subject to the achievement of performance conditions.
The 2015 LTIP was adopted by the Company on 5th March 2015. During 2016, awards were granted in the form of options with
exercise prices based on the then prevailing market prices, and no free shares were granted. Prior to the adoption of the
2015 LTIP, The Jardine Matheson International Share Option Plan 2005 and The Jardine Matheson Holdings Limited Approved
Share Option Plan 2005 provided selected executives with options to purchase ordinary shares in the Company.
The exercise prices of the options granted during 2016, and in prior years, were based on the average market prices for the
five trading days immediately preceding the dates of grant of the options. Options normally vest in tranches over a period of
three to five years, and are exercisable for up to ten years following the date of grant.
Movements during the year:
At 1st January
Granted
Exercised
At 31st December
2016
2015
Weighted
average
exercise
price
US$
48.0
54.0
26.0
51.3
Options
in millions
2.2
0.7
(0.2)
2.7
Weighted
average
exercise
price
US$
44.3
61.1
23.5
48.0
Options
in millions
2.3
0.2
(0.3)
2.2
The average share price during the year was US$57.4 (2015: US$56.4) per share.
Outstanding at 31st December:
Expiry date
2016
2017
2018
2020
2021
2022
2023
2024
2025
2026
Total outstanding
of which exercisable
Exercise
price
US$
18.2
21.7
27.3
32.2
45.7 – 46.8
51.2
64.9
59.6
52.8 – 63.4
53.9 – 56.6
Options
in millions
2016
2015
–
0.1
0.1
0.2
0.3
0.5
0.4
0.2
0.2
0.7
2.7
1.2
0.1
0.1
0.2
0.2
0.3
0.5
0.4
0.2
0.2
–
2.2
1.0
The fair value of options granted during the year, determined using the Trinomial valuation model, was US$8 million (2015:
US$3 million). The significant inputs into the model, based on the weighted average number of options issued, were share
price of US$54.4 (2015: US$61.0) at the grant dates, exercise price shown above, expected volatility based on the last seven
years of 23.9% (2015: 28.6%), dividend yield of 2.7% (2015: 2.4%), option life disclosed above, and annual risk-free interest
rate of 1.7% (2015: 1.8%). Options are assumed to be exercised at the end of the seventh year following the date of grant.
93
Jardine Matheson | Annual Report 2016 26 Share Premium and Capital Reserves
2016
At 1st January
Capitalization arising on scrip issued in lieu of dividends
Employee share option schemes
– exercise of share options
– value of employee services
Transfer
At 31st December
2015
At 1st January
Capitalization arising on scrip issued in lieu of dividends
Employee share option schemes
– exercise of share options
– value of employee services
Transfer
At 31st December
Share
premium
US$m
Capital
reserves
US$m
21
(3)
1
–
1
20
20
(2)
2
–
1
21
137
–
–
22
(4)
155
118
–
–
22
(3)
137
Total
US$m
158
(3)
1
22
(3)
175
138
(2)
2
22
(2)
158
Capital reserves represent the value of employee services under the Group’s employee share option schemes. At 31st
December 2016, US$26 million (2015: US$22 million) related to the Company’s Senior Executive Share Incentive Schemes.
27 Dividends
Final dividend in respect of 2015 of US¢107.00 (2014: US¢107.00) per share
Interim dividend in respect of 2016 of US¢38.00 (2015: US¢38.00) per share
Company’s share of dividends paid on the shares held by subsidiaries
Shareholders elected to receive scrip in respect of the following:
Final dividend in respect of previous year
Interim dividend in respect of current year
2016
US$m
752
270
1,022
(481)
541
515
185
700
2015
US$m
739
266
1,005
(465)
540
480
173
653
A final dividend in respect of 2016 of US¢112.00 (2015: US¢107.00) per share amounting to a total of US$800 million
(2015: US$752 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved
at the 2017 Annual General Meeting. The net amount after deducting the Company’s share of the dividends payable on the
shares held by subsidiaries of US$382 million (2015: US$352 million) will be accounted for as an appropriation of revenue
reserves in the year ending 31st December 2017.
94
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 28 Own Shares Held
Own shares held of US$4,100 million (2015: US$3,596 million) represent the Company’s share of the cost of 406 million
(2015: 396 million) ordinary shares in the Company held by subsidiaries and are deducted in arriving at shareholders’ funds.
29 Non-controlling Interests
By business:
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Jardine Strategic
Other
Less own shares held attributable to non-controlling interests
2016
US$m
18,224
631
417
534
7,893
1,019
25
28,743
(806)
27,937
2015
US$m
16,808
597
481
491
7,016
932
22
26,347
(733)
25,614
Summarized financial information on subsidiaries with material non-controlling interests
Set out below are the summarized financial information for each subsidiary that has non-controlling interests that are
material to the Group.
Summarized balance sheets at 31st December:
Hongkong
Land
US$m
Dairy
Farm
US$m
Mandarin
Oriental
US$m
Astra
US$m
Jardine
Strategic
US$m
2016
Current
Assets
Liabilities
Total current net assets/(liabilities)
Non-current
Assets
Liabilities
Total non-current net assets
Net assets
Non-controlling interests
2015
Current
Assets
Liabilities
Total current net assets/(liabilities)
Non-current
Assets
Liabilities
Total non-current net assets
Net assets
Non-controlling interests
4,616
(1,791)
2,825
32,339
(3,850)
28,489
31,314
20
4,647
(1,722)
2,925
29,725
(3,930)
25,795
28,720
35
1,628
(2,782)
(1,154)
3,512
(779)
2,733
1,579
74
1,440
(3,150)
(1,710)
3,380
(215)
3,165
1,455
79
288
(151)
137
1,573
(537)
1,036
8,267
(6,616)
1,651
11,462
(2,501)
8,961
1,173
10,612
4
2,094
406
(152)
254
1,477
(499)
978
1,232
5
7,616
(5,513)
2,103
10,445
(3,152)
7,293
9,396
1,788
16,124
(11,758)
4,366
53,784
(7,944)
45,840
50,206
24,064
14,959
(10,892)
4,067
49,790
(7,995)
41,795
45,862
21,943
95
Jardine Matheson | Annual Report 2016 29 Non-controlling Interests (continued)
Summarized profit and loss for the year ended 31st December:
2016
Revenue
Profit after tax from underlying business
performance
Profit/(loss) after tax from non-trading items
Profit after tax
Other comprehensive (expense)/income
Total comprehensive income
Total comprehensive (expense)/income
allocated to non-controlling interests
Dividends paid to non-controlling interests
2015
Revenue
Profit after tax from underlying business
performance
Profit/(loss) after tax from non-trading items
Profit after tax
Other comprehensive (expense)/income
Total comprehensive income
Total comprehensive (expense)/income
allocated to non-controlling interests
Dividends paid to non-controlling interests
Hongkong
Land
US$m
Dairy
Farm
US$m
Mandarin
Oriental
US$m
Astra
US$m
Jardine
Strategic
US$m
1,994
11,201
597
13,610
29,552
851
2,494
3,345
(295)
3,050
(5)
(4)
460
10
470
(68)
402
4
(4)
56
(2)
54
(58)
(4)
(1)
–
1,283
57
1,340
125
1,465
243
(101)
2,917
2,586
5,503
(56)
5,447
2,824
(726)
1,932
11,137
607
13,702
29,391
909
1,097
2,006
(432)
1,574
(9)
(6)
422
(4)
418
(192)
226
(17)
–
90
(1)
89
(60)
29
–
–
1,049
38
1,087
14
1,101
2,733
1,106
3,839
(1,728)
2,111
73
(137)
913
(851)
96
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 29 Non-controlling Interests (continued)
Summarized cash flows at 31st December:
2016
Cash flows from operating activities
Cash generated from operations
Interest received
Interest and other financing charges paid
Tax paid
Other operating cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at 1st January
Effect of exchange rate changes
Cash and cash equivalents at 31st December
2015
Cash flows from operating activities
Cash generated from operations
Interest received
Interest and other financing charges paid
Tax paid
Other operating cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net (decrease)/increase in cash and
cash equivalents
Cash and cash equivalents at 1st January
Effect of exchange rate changes
Cash and cash equivalents at 31st December
Hongkong
Land
US$m
Dairy
Farm
US$m
Mandarin
Oriental
US$m
Astra
US$m
Jardine
Strategic
US$m
3,522
36
(111)
(141)
(2,210)
1,096
(245)
(442)
409
1,566
(77)
1,898
2,008
41
(119)
(175)
(859)
896
(146)
(795)
(45)
1,658
(47)
1,566
459
1
(22)
(85)
190
543
(428)
(43)
72
257
(6)
323
431
2
(15)
(90)
372
700
(1,365)
277
(388)
657
(12)
257
68
1
(10)
(19)
68
108
(223)
(7)
(122)
309
(4)
183
107
2
(12)
(19)
62
140
(124)
(23)
(7)
324
(8)
309
1,731
88
(126)
(365)
287
1,615
(1,138)
(273)
204
1,963
18
2,185
1,113
83
(98)
(449)
1,480
2,129
(812)
(920)
397
1,666
(100)
1,963
5,447
135
(272)
(660)
(1,235)
3,415
(2,110)
(707)
598
4,568
(75)
5,091
3,562
136
(248)
(784)
1,306
3,972
(2,927)
(1,341)
(296)
5,050
(186)
4,568
The information above is the amount before inter-company eliminations.
97
Jardine Matheson | Annual Report 2016 30 Borrowings
Current
– bank overdrafts
– other bank advances
– other advances
Current portion of long-term borrowings
– bank loans
– bonds and notes
– finance lease liabilities
– other loans
Long-term borrowings
– bank loans
– bonds and notes
– finance lease liabilities
– other loans
2016
2015
Carrying
amount
US$m
12
2,028
34
2,074
1,313
874
51
11
2,249
4,323
2,876
3,962
4
19
6,861
Fair
value
US$m
12
2,028
34
2,074
1,313
874
51
11
2,249
4,323
2,882
4,041
4
19
6,946
Carrying
amount
US$m
9
1,917
14
1,940
1,481
533
31
6
2,051
3,991
2,916
4,009
65
5
6,995
Fair
value
US$m
9
1,917
14
1,940
1,481
533
31
6
2,051
3,991
2,922
4,115
65
5
7,107
11,184
11,269
10,986
11,098
The fair values are based on market prices or are estimated using the expected future payments discounted at market
interest rates ranging from 0.1% to 12.0% (2015: 0.1% to 11.3%) per annum. This is in line with the definition of ‘observable
current market transactions’ under the fair value measurement hierarchy. The fair value of current borrowings approximates
their carrying amount, as the impact of discounting is not significant.
Secured
Unsecured
2016
US$m
3,942
7,242
2015
US$m
3,760
7,226
11,184
10,986
Secured borrowings at 31st December 2016 included Hongkong Land’s bank borrowings of US$265 million which were
secured against its investment properties (2015: US$195 million, against investment properties and properties for sale),
Mandarin Oriental’s bank borrowings of US$476 million (2015: US$436 million) which were secured against its tangible
assets, and Astra’s bonds and notes of US$1,617 million (2015: US$1,328 million) which were secured against its various
assets as summarized on the next page and bank borrowings of US$1,584 million (2015: US$1,801 million) which were
secured against its various assets.
98
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 30 Borrowings (continued)
By currency:
2016
Chinese renminbi
Hong Kong dollar
Indonesian rupiah
Malaysian ringgit
Philippine peso
Singapore dollar
United Kingdom sterling
United States dollar
Other
2015
Chinese renminbi
Hong Kong dollar
Indonesian rupiah
Malaysian ringgit
Philippine peso
Singapore dollar
United Kingdom sterling
United States dollar
Other
Fixed rate borrowings
Weighted
average
interest rates
Weighted
average period
outstanding
Floating
rate
borrowings
%
5.0
3.2
8.6
4.1
3.1
2.7
1.3
2.1
2.4
5.6
3.1
8.6
3.9
3.6
3.0
1.6
1.5
3.3
Years
US$m
US$m
–
8.2
1.2
–
–
3.2
–
1.7
10.6
–
9.1
1.3
–
0.9
4.2
–
1.4
4.5
–
2,128
3,589
–
–
181
–
341
3
6,242
–
2,142
3,500
–
74
183
–
235
8
6,142
278
2,016
1,292
194
91
204
108
753
6
4,942
249
1,860
867
85
20
415
86
1,256
6
4,844
Total
US$m
278
4,144
4,881
194
91
385
108
1,094
9
11,184
249
4,002
4,367
85
94
598
86
1,491
14
10,986
The weighted average interest rates and period of fixed rate borrowings are stated after taking into account hedging
transactions.
99
Jardine Matheson | Annual Report 2016 30 Borrowings (continued)
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at 31st December after
taking into account hedging transactions are as follows:
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Beyond five years
The finance lease liabilities are as follows:
Within one year
Between one and five years
Future finance charges on finance leases
Present value of finance lease liabilities
Current
Non-current
2016
US$m
7,008
1,040
1,045
247
–
1,844
2015
US$m
6,518
1,285
869
234
235
1,845
11,184
10,986
Present value of
finance lease liabilities
2015
2016
US$m
US$m
51
4
55
51
4
55
31
65
96
31
65
96
Minimum lease payments
2015
2016
US$m
US$m
53
4
57
(2)
55
33
71
104
(8)
96
100
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 30 Borrowings (continued)
Details of the bonds and notes outstanding at 31st December 2016 are as follows:
Maturity
Interest rates %
Nominal values
US$m
US$m
US$m
US$m
2016
2015
Current
Non-
current
Current
Non-
current
Hongkong Land
3.86% 8-year notes
4.135% 10-year notes
4.1875% 10-year notes
4.25% 10-year notes
4.22% 10-year notes
4.24% 10-year notes
3.43% 10-year notes
3.95% 10-year notes
4.28% 12-year notes
3.86% 10-year notes
4.50% 10-year notes
3.00% 10-year notes
2.90% 10-year notes
3.95% 10-year notes
3.95% 10-year notes
4.625% 10-year notes
4.10% 15-year notes
4.50% 15-year notes
3.75% 15-year notes
4.00% 15-year notes
4.04% 15-year notes
3.95% 15-year notes
3.15% 15-year notes
4.22% 15-year notes
4.40% 15-year notes
4.11% 20-year notes
4.125% 20-year notes
4.00% 20-year notes
5.25% 30-year notes
2017
2019
2019
2019
2020
2020
2020
2020
2021
2022
2022
2022
2022
2023
2023
2024
2025
2025
2026
2027
2027
2027
2028
2028
2029
2030
2031
2032
2040
S$50 million
3.86
HK$200 million
4.135
HK$300 million
4.1875
HK$300 million
4.25
HK$500 million
4.22
HK$500 million
4.24
S$150 million
3.43
HK$500 million
3.95
HK$500 million
4.28
HK$410 million
3.86
US$500 million
4.50
HK$305 million
3.00
2.90
HK$200 million
3.95 HK$1,100 million
HK$300 million
3.95
US$400 million
4.625
HK$300 million
4.10
US$600 million
4.50
HK$302 million
3.75
HK$785 million
4.00
HK$473 million
4.04
HK$200 million
3.95
HK$300 million
3.15
HK$325 million
4.22
HK$400 million
4.40
HK$800 million
4.11
HK$200 million
4.125
HK$240 million
4.00
HK$250 million
5.25
Astra Sedaya Finance
2017
Berkelanjutan I Tahap I bonds
2016
Berkelanjutan I Tahap III bonds
2016
Berkelanjutan II Tahap I bonds
Berkelanjutan II Tahap II bonds
2017
Berkelanjutan II Tahap III bonds 2018
Berkelanjutan II Tahap IV bonds 2017
2018
Berkelanjutan II Tahap V bonds
Berkelanjutan III Tahap I bonds
2019
Berkelanjutan III Tahap II bonds 2019
Singapore Dollars Guaranteed
bonds
Euro Medium Term Note
2017
2018
8.6
7.75
7.75
9.75
10.5 – 10.6
10.5
9.25
7.95 – 8.5
7.25 – 7.95
Rp2,250 billion
Rp1,120 billion
Rp950 billion
Rp370 billion
Rp778 billion
Rp1,430 billion
Rp775 billion
Rp2,000 billion
Rp1,640 billion
2.12
2.88
Rp930 billion
Rp4,031 billion
35
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
167
–
–
28
52
106
–
57
63
69
–
–
25
39
39
67
64
104
64
67
52
488
39
26
141
39
406
38
614
39
99
61
26
38
42
51
103
25
30
32
–
–
–
–
6
–
58
91
59
–
300
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81
62
63
–
–
54
–
–
–
–
36
25
39
39
69
64
106
64
70
52
488
39
26
141
39
408
38
615
39
99
61
26
38
42
51
103
25
30
32
163
–
–
24
56
103
56
–
–
70
300
101
Jardine Matheson | Annual Report 2016 30 Borrowings (continued)
Details of the bonds and notes outstanding at 31st December 2016 are as follows (continued):
Maturity
Interest rates %
Nominal values
US$m
US$m
US$m
US$m
2016
2015
Current
Non-
current
Current
Non-
current
Federal International Finance
2016
Berkelanjutan I Tahap II bonds
2017
Berkelanjutan I Tahap III bonds
2018
Berkelanjutan II Tahap I bonds
2018
Berkelanjutan II Tahap II bonds
Berkelanjutan II Tahap III bonds 2019
Berkelanjutan II Tahap IV bonds 2019
SAN Finance
Berkelanjutan I Tahap I bonds
Berkelanjutan I Tahap II bonds
Berkelanjutan I Tahap III bonds
Berkelanjutan II Tahap I bonds
Serasi Auto Raya
III bonds
Astra Otoparts (‘AOP’) Medium
Term Notes
2016
2017
2018
2019
2016
7.75
10.5
9.25
9.25
8.5 – 9.15
7.25 – 7.95
Rp1,690 billion
Rp745 billion
Rp1,971 billion
Rp587 billion
Rp3,300 billion
Rp2,025 billion
9.75
10.5
9.4
8.25 – 9.0
Rp391 billion
Rp1,000 billion
Rp443 billion
Rp1,530 billion
8.75
Rp148 billion
AOP Medium Term Note Seri B
2019
9.0
Rp350 billion
–
55
–
–
65
65
–
74
–
38
–
–
–
–
146
43
180
86
–
–
33
76
–
26
122
–
68
49
–
–
24
–
–
–
10
–
–
54
142
43
–
–
–
65
29
–
–
–
874
3,962
533
4,009
The Astra Sedaya Finance bonds were issued by a partly-owned subsidiary of Astra and are collateralized by fiduciary
guarantee over financing debtors of the subsidiary amounting to 60% of the total outstanding principal of the bonds. The
ASF Euro Medium Term Note were unsecured.
The Federal International Finance bonds were issued by a wholly-owned subsidiary of Astra and are collateralized by
fiduciary guarantee over financing debtors of the subsidiary amounting to 60% of the total outstanding principal of
the bonds.
The SAN Finance bonds were issued by a partly-owned subsidiary of Astra and are collateralized by fiduciary guarantee over
financing debtors of the subsidiary amounting to 60% of the total outstanding principal of the bonds.
The AOP Medium Term Notes were unsecured and issued by a wholly-owned subsidiary of Astra.
102
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 31 Creditors
Trade creditors
– third parties
– associates
– joint ventures
Accruals
Other amounts due to joint ventures
Rental and other refundable deposits
Contingent consideration payable
Derivative financial instruments
Other creditors
Financial liabilities
Gross estimated losses on insurance contracts
Net amount due to customers for contract work
Proceeds from properties for sale received in advance
Rental income received in advance
Other income received in advance
Deferred warranty income
Unearned premiums on insurance contracts
Other
Non-current
Current
Analysis by geographical area of operation:
Greater China
Southeast Asia
United Kingdom
Rest of the world
2016
US$m
4,123
81
194
4,398
1,677
175
421
10
29
433
7,143
161
42
943
29
221
12
352
251
9,154
440
8,714
9,154
3,385
5,292
282
195
9,154
2015
US$m
3,939
60
178
4,177
1,586
154
392
27
76
426
6,838
154
39
892
20
204
12
313
219
8,691
430
8,261
8,691
3,287
4,916
299
189
8,691
Derivative financial instruments are stated at fair value. Other creditors are stated at amortized cost. The fair values of these
creditors approximate their carrying amounts.
103
Jardine Matheson | Annual Report 2016 32 Provisions
2016
At 1st January
Exchange differences
Additional provisions
Unused amounts
reversed
Utilized
At 31st December
Non-current
Current
2015
At 1st January
Exchange differences
Additional provisions
Unused amounts
reversed
Utilized
At 31st December
Non-current
Current
Motor
vehicle
warranties
Closure
cost
provisions
Obligations
under
onerous
leases
Reinstate-
ment and
restoration
costs
Statutory
employee
entitlements
US$m
US$m
US$m
US$m
US$m
Others
US$m
Total
US$m
39
(1)
12
–
(4)
46
–
46
46
35
(3)
11
(1)
(3)
39
–
39
39
8
–
7
(3)
(4)
8
1
7
8
5
–
7
(2)
(2)
8
1
7
8
16
(1)
2
–
–
17
11
6
17
12
(3)
7
–
–
16
13
3
16
45
(1)
10
–
(2)
52
45
7
52
46
(4)
4
–
(1)
45
40
5
45
101
3
7
(1)
(2)
108
84
24
108
101
(9)
10
–
(1)
101
74
27
101
20
–
15
(1)
(2)
32
10
22
32
16
(1)
10
–
(5)
20
17
3
20
229
–
53
(5)
(14)
263
151
112
263
215
(20)
49
(3)
(12)
229
145
84
229
Motor vehicle warranties are estimated liabilities that fall due under the warranty terms offered on sale of new and used
vehicles beyond that which is reimbursed by the manufacturers.
Closure cost provisions are established when legal or constructive obligations arise on closure or disposal of businesses.
Provisions are made for obligations under onerous operating leases when the properties are not used by the Group and the
net costs of exiting from the leases exceed the economic benefits expected to be received.
Other provisions principally comprise provisions in respect of indemnities on disposal of businesses and legal claims.
104
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 33 Notes to Consolidated Cash Flow Statement
(a) Depreciation and amortization
By business:
Jardine Pacific
Jardine Motors
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
(b) Other non-cash items
By nature:
(Profit)/loss on sale of subsidiaries
Profit on sale of other investments
Profit on sale of tangible assets
Loss on sale of repossessed assets
Loss on sale of bearer plants and related assets
Fair value gain on reclassification of properties
Fair value gain on contingent consideration
Fair value gain on agricultural produce
Impairment of intangible assets
Impairment of tangible assets
Impairment of other investments
Impairment of debtors
Write down of stocks and work in progress
Reversal of write down of stocks and work in progress
Reversal of impairment of joint ventures
Reversal of write down of properties for sale
Change in provisions
Net foreign exchange (gains)/losses
Options granted under employee share option schemes
Other
By business:
Jardine Pacific
Jardine Motors
Hongkong Land
Dairy Farm
Mandarin Oriental
Jardine Cycle & Carriage
Astra
Corporate and other interests
2016
US$m
31
30
3
213
60
10
598
945
2016
US$m
(16)
(7)
(143)
60
38
–
(15)
(22)
87
1
–
93
51
(36)
–
(3)
36
(15)
9
2
120
75
(145)
(5)
8
3
18
161
5
120
2015
US$m
30
30
3
212
53
10
625
963
2015
US$m
6
(133)
(8)
67
3
(63)
(42)
–
19
373
188
114
59
(20)
(14)
(21)
31
50
10
1
620
21
(2)
(98)
25
2
16
589
67
620
105
Jardine Matheson | Annual Report 2016 33 Notes to Consolidated Cash Flow Statement (continued)
(c) (Increase)/decrease in working capital
Increase in concession rights
Decrease in properties for sale
Increase in stocks and work in progress
(Increase)/decrease in debtors
Increase in creditors
Increase in pension obligations
(d) Purchase of subsidiaries
Intangible assets
Tangible assets
Bearer plants
Non-current debtors
Current assets
Deferred tax liabilities
Current liabilities
Long-term borrowings
Fair value of identifiable net assets acquired
Adjustment for non-controlling interests
Goodwill
Total consideration
Deposit paid
Adjustment for contingent consideration
Payment for contingent consideration
Adjustment for deferred consideration
Cash and cash equivalents of subsidiaries acquired
Net cash outflow
2016
US$m
(61)
350
(75)
(917)
580
29
(94)
2015
US$m
(29)
14
(404)
39
425
31
76
2016
Fair value
US$m
2015
Fair value
US$m
4
27
9
–
11
–
(17)
–
34
–
14
48
12
(1)
1
–
–
60
10
35
–
2
116
(4)
(91)
(3)
65
(28)
223
260
–
–
1
(26)
(20)
215
For the subsidiaries acquired during 2016, the fair values of the identifiable assets and liabilities at the acquisition dates are
provisional and will be finalized within one year after the acquisition dates.
The fair values of the identifiable assets and liabilities at the acquisition dates of certain subsidiaries acquired during 2015
as included in the comparative figures were provisional. The fair values were finalized in 2016. As the difference between the
provisional and the finalized fair values were not material, the comparative figures have not been adjusted.
Net cash outflow for purchase of subsidiaries in 2016 included US$46 million for Jardine Motors’ acquisition of various
motor dealership businesses in the United Kingdom during the second quarter of 2016, and US$12 million deposit paid for
Astra’s acquisition of an 80% interest in PT Suprabari Mapanindo Mineral, a coal mining company, to be completed in 2017.
Goodwill arising from the acquisition of motor dealership businesses was attributable to the expected synergies with its
existing retail network. None of the goodwill is expected to be deductible for tax purposes.
106
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 33 Notes to Consolidated Cash Flow Statement (continued)
(d) Purchase of subsidiaries (continued)
Revenue since acquisition in respect of subsidiaries acquired during the year amounted to US$116 million with insignificant
contribution to profit after tax. Had the acquisitions occurred on 1st January 2016, consolidated revenue for the year ended
31st December 2016 would have been US$37,138 million. There was no impact on the consolidated profit after tax for the
year ended 31st December 2016.
Net cash outflow in 2015 included US$147 million for Dairy Farm’s acquisition of a 100% interest in San Miu Supermarket
Limited (‘San Miu’), which operates a supermarket chain in Macau, in March 2015, and US$57 million for Astra’s acquisition
of a 50.1% interest in PT Acset Indonusa, a construction company in Indonesia, in January 2015.
The goodwill arising from the acquisition of San Miu amounted to US$182 million and was attributable to its leading market
position and retail network in Macau. The goodwill arising from the acquisition of PT Acset Indonusa of US$33 million was
attributable to the expected synergies from combining its operations with Astra’s existing businesses. None of the goodwill
is expected to be deductible for tax purposes.
(e) Purchase of associates and joint ventures in 2016 included US$190 million for Dairy Farm’s further investment in Yonghui,
US$240 million for Astra’s subscription to rights issue and capital advance to PT Bank Permata, US$70 million for Hongkong
Land’s investment in mainland China, US$74 million for Astra’s investment in Indonesia, and US$57 million for Hongkong
Land’s and Astra’s 50% joint investment in an Indonesian residential project.
Purchase in 2015 included US$100 million for Hongkong Land’s investment in mainland China, US$912 million for Dairy
Farm’s acquisition of a 19.99% interest in Yonghui, US$615 million for Jardine Cycle & Carriage’s acquisition of a 24.9%
interest in Siam City Cement Public Company Limited, a cement manufacturer in Thailand, and US$65 million for Astra’s
acquisition of 25% interest in PT Trans Marga Jateng, a toll road operator in Indonesia.
(f) Purchase of other investments in 2016 mainly included US$208 million for Astra’s acquisition of securities and
US$84 million for Jardine Strategic’s acquisition of an additional 4% interest in Zhongsheng.
Purchase in 2015 mainly included acquisition of securities by Astra.
(g) Advance to associates and joint ventures in 2016 mainly included Hongkong Land’s advance to its property joint ventures.
Advance in 2015 comprised US$215 million for Hongkong Land’s advance to its property joint ventures and US$69 million for
Mandarin Oriental’s loan to its hotel joint venture.
(h) Advance and repayment from associates and joint ventures in 2016 and 2015 mainly included advance and repayment
from Hongkong Land’s property joint ventures.
(i) Sale of other investments in 2016 comprised Astra’s sale of securities.
Sale in 2015 mainly included US$102 million for Astra’s sale of securities and US$166 million for Jardine Strategic’s sale of
ACLEDA Bank.
107
Jardine Matheson | Annual Report 2016
33 Notes to Consolidated Cash Flow Statement (continued)
(j) Change in interests in subsidiaries
Increase in attributable interests
– Jardine Strategic
– Mandarin Oriental
– Jardine Cycle & Carriage
– other
Decrease in attributable interests
2016
US$m
(235)
(67)
(23)
(37)
23
(339)
2015
US$m
(215)
–
(41)
(19)
34
(241)
Increase in attributable interests in other subsidiaries in 2016 included US$35 million for Hongkong Land’s acquisition of an
additional 5% interest in Hongkong Land Macau Property Company Limited, increasing its controlling interest to 100%.
Increase in 2015 included US$18 million for Dairy Farm’s acquisition of an additional 2.86% interest in PT Hero Supermarket.
Decrease in attributable interests in other subsidiaries in 2016 comprised US$15 million for Hongkong Land’s sale of a
6% interest in Wangfu Central Real Estate Development Company Limited, reducing its controlling interest to 84%, and
US$8 million for Astra’s sale of a 20% interest in PT Balai Lelang Serasi, reducing its controlling interest to 70%.
Decrease in 2015 comprised Dairy Farm’s sale of a 15% economic interest in GCH Retail (Malaysia) Sdn Bhd, reducing its
controlling interest to 85%.
(k) Analysis of balances of cash and cash equivalents
Bank balances and other liquid funds (refer note 23)
Bank overdrafts (refer note 30)
2016
US$m
5,543
(12)
5,531
2015
US$m
4,782
(9)
4,773
108
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 34 Derivative Financial Instruments
The fair values of derivative financial instruments at 31st December are as follows:
Designated as cash flow hedges
– forward foreign exchange contracts
– interest rate swaps and caps
– cross currency swaps
Designated as fair value hedges
– interest rate swaps and caps
– cross currency swaps
Non-qualifying as hedges
– forward foreign exchange contracts
2016
2015
Positive
fair
value
US$m
Negative
fair
value
US$m
Positive
fair
value
US$m
Negative
fair
value
US$m
–
2
100
102
3
14
17
–
2
–
19
21
–
8
8
1
1
–
272
273
6
17
23
–
1
3
65
69
–
7
7
–
Forward foreign exchange contracts
The contract amounts of the outstanding forward foreign exchange contracts at 31st December 2016 were US$658 million
(2015: US$111 million).
Interest rate swaps and caps
The notional principal amounts of the outstanding interest rate swap and cap contracts at 31st December 2016 were
US$604 million (2015: US$562 million).
At 31st December 2016, the fixed interest rates relating to interest rate swaps and caps vary from 0.9% to 3.5% (2015: 0.6%
to 3.3%) per annum.
The fair values of interest rate swaps are based on the estimated cash flows discounted at market rates ranging from 0.7% to
2.3% (2015: 0.2% to 2.1%) per annum.
Cross currency swaps
The contract amounts of the outstanding cross currency swap contracts at 31st December 2016 totalled US$3,241 million
(2015: US$3,814 million).
109
Jardine Matheson | Annual Report 2016 35 Commitments
Capital commitments:
Authorized not contracted
– joint ventures
– other
Contracted not provided
– joint ventures
– other
2016
US$m
–
1,065
1,065
453
600
1,053
2,118
2015
US$m
1
1,220
1,221
491
649
1,140
2,361
At 31st December 2015, Dairy Farm had an investment commitment of RMB1.3 billion (approximately US$199 million) to
further invest in Yonghui. The transaction was completed in August 2016 at a consideration of US$190 million with
Dairy Farm’s interest in Yonghui remains at 19.99%.
Operating lease commitments:
Total commitments under operating leases
– due within one year
– due between one and two years
– due between two and three years
– due between three and four years
– due between four and five years
– due beyond five years
2016
US$m
2015
US$m
916
649
337
195
150
522
862
611
376
202
147
610
2,769
2,808
Total future sublease payments receivable relating to the above operating leases amounted to US$42 million
(2015: US$42 million).
In addition, the Group has operating lease commitments with rentals determined in relation to sales. It is not possible to
quantify accurately future rentals payable under such leases.
36 Contingent Liabilities
Various Group companies are involved in litigation arising in the ordinary course of their respective businesses. Having
reviewed outstanding claims and taking into account legal advice received, the Directors are of the opinion that adequate
provisions have been made in the financial statements.
110
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) 37 Related Party Transactions
In the normal course of business the Group undertakes a variety of transactions with certain of its associates and joint
ventures. The more significant of such transactions are described below:
The Group purchases motor vehicles and spare parts from its associates and joint ventures in Indonesia including
PT Toyota-Astra Motor, PT Astra Honda Motor and PT Astra Daihatsu Motor. Total cost of motor vehicles and spare parts
purchased in 2016 amounted to US$5,325 million (2015: US$5,471 million). The Group also sells motor vehicles and
spare parts to its associates and joint ventures in Indonesia including PT Astra Honda Motor, PT Astra Daihatsu Motor
and PT Tunas Ridean. Total revenue from sale of motor vehicles and spare parts in 2016 amounted to US$601 million
(2015: US$841 million).
The Group uses Jardine Lloyd Thompson to place certain of its insurance. Brokerage fees and commissions, net of rebates,
paid by the Group in 2016 to Jardine Lloyd Thompson were US$5 million (2015: US$5 million).
The Group manages six (2015: six) associate and joint venture hotels. Management fees received by the Group in 2016 from
these managed hotels amounted to US$13 million (2015: US$13 million).
PT Bank Permata provides banking services to the Group. The Group’s deposits with PT Bank Permata at 31st December 2016
amounted to US$328 million (2015: US$417 million).
Amounts of outstanding balances with associates and joint ventures are included in debtors and creditors, as appropriate
(refer notes 18 and 31).
Details of Directors’ remuneration (being the key management personnel compensation) are shown on page 117 under the
heading of Directors’ Appointment, Retirement, Remuneration and Service Contracts.
38 Summarized Balance Sheet of the Company
Included below is certain summarized balance sheet information of the Company disclosed in accordance with Bermuda law.
Subsidiaries
Share capital (refer note 24)
Share premium and capital reserves (refer note 26)
Revenue and other reserves
Shareholders’ funds
Current liabilities
Total equity and liabilities
Subsidiaries are shown at cost less amounts provided.
2016
US$m
741
178
46
499
723
18
741
2015
US$m
1,061
175
43
826
1,044
17
1,061
111
Jardine Matheson | Annual Report 2016 Proportion of ordinary
shares and voting powers at
31st December 2016 held by
non-controlling
interests
the Group
39 Principal Subsidiaries
The Group’s principal subsidiaries at 31st December 2016 are set out below:
Dairy Farm International
Holdings Ltd
Country of
incorporation/
principal place
of business
Bermuda/
Greater China and
Southeast Asia
Hongkong Land Holdings Ltd Bermuda/
Jardine Cycle & Carriage Ltd
Jardine Matheson Ltd
Jardine Motors Group
Holdings Ltd
Jardine Pacific Holdings Ltd
Greater China and
Southeast Asia
Singapore/
Southeast Asia
Bermuda/
Hong Kong
Bermuda/
Greater China and
United Kingdom
Bermuda/
Greater China and
Southeast Asia
Attributable
interests
2016
%
65
2015
%
64
42
42
63
62
Nature of business
Supermarkets,
hypermarkets,
convenience stores,
health and beauty
stores, home
furnishings stores and
restaurants
Property development
& investment, leasing
& management
A 50.1% interest in
PT Astra International
Tbk, motor trading and
construction
%
78
50
75
Group management
100
100
100
Motor trading
100
100
100*
100
100
100
Engineering &
construction, transport
services, restaurants,
property and IT services
Jardine Strategic Holdings Ltd† Bermuda/
Holding
84
83
Mandarin Oriental
International Ltd
Matheson & Co., Ltd
Greater China and
Southeast Asia
Bermuda/
Worldwide
Hotel management &
ownership
England/
United Kingdom
Holding and
management
PT Astra International Tbk
Indonesia/
Indonesia
Automotive, financial
services, agribusiness,
heavy equipment and
mining, infrastructure
and logistics,
information technology,
and property
65
61
100
100
31
31
84
77
100
50
%
22
50
25
–
–
–
16
23
–
50
All subsidiaries are included in the consolidation.
Attributable interests represent the proportional holdings of the Company, held directly or through its subsidiaries, in the
issued share capitals of the respective companies, after the deduction of any shares held by the trustees of the employee
share option schemes of any such company and any shares in any such company owned by its wholly-owned subsidiaries.
*
Jardine Motors is directly held by the Company. All other subsidiaries are held through subsidiaries.
†
Jardine Strategic held 57% (2015: 56%) of the share capital of the Company.
112
Jardine Matheson | Annual Report 2016Notes to the Financial Statements (continued) Independent Auditors’ Report
To the members of Jardine Matheson Holdings Limited
Report on the Consolidated Financial Statements
Our opinion
In our opinion, Jardine Matheson Holdings Limited’s consolidated financial statements (the ‘financial statements’):
• present fairly, in all material respects, the financial position of the Group as at 31st December 2016 and of its financial
performance and its cash flows for the year then ended; and
• have been properly prepared in accordance with International Financial Reporting Standards (‘IFRSs’) and The Companies
Act 1981 (Bermuda).
What we have audited
The financial statements, included within the Annual Report, comprise:
• the Consolidated Balance Sheet as at 31st December 2016;
• the Consolidated Profit and Loss Account and the Consolidated Statement of Comprehensive Income for the year then ended;
• the Consolidated Cash Flow Statement for the year then ended;
• the Consolidated Statement of Changes in Equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law in
Bermuda and IFRSs as issued by the International Accounting Standards Board (‘IASB’).
In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example in
respect of significant accounting estimates. In making such estimates, they have made assumptions and considered
future events.
Responsibilities for the Financial Statements and the Audit
Our responsibilities and those of the Directors
As explained more fully in the Responsibilities Statement set out on page 115, the Directors are responsible for the preparation
and fair presentation of the financial statements in accordance with IFRSs and The Companies Act 1981 (Bermuda).
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinion, has been prepared for and only for the Company’s members as a body for in accordance
with Section 90 of the Companies Act 1981 (Bermuda) and for no other purpose. We do not, in giving this opinion, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come, including without limitation under any contractual obligations of the Company, save where expressly agreed by our
prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and
adequately disclosed;
• the reasonableness of significant accounting estimates made by the Directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our
own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using
sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a
combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies
with the audited financial statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our report.
PricewaterhouseCoopers LLP
Chartered Accountants
London
United Kingdom
2nd March 2017
(a) The maintenance and integrity of the Jardine Matheson Holdings Limited website is the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have
occurred to the financial statements since they were initially presented on the website.
(b) Legislation in Bermuda governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
113
Jardine Matheson | Annual Report 2016 Five Year Summary
Profit and Loss*
Revenue
Profit attributable to shareholders
Underlying profit attributable to
shareholders
Earnings per share (US$)
Underlying earnings per share (US$)
Dividends per share (US$)
Balance Sheet*
Total assets
Total liabilities
Total equity
Shareholders’ funds
Net debt (excluding net debt of
financial services companies)
Net asset value per share (US$)
Cash Flow
Cash flows from operating activities
Cash flows from investing activities
Net cash flow before financing
Cash flow per share from operating
2016
US$m
37,051
2,503
1,386
6.69
3.71
1.50
2016
US$m
71,523
(21,786)
49,737
21,800
2,087
58.15
2016
US$m
3,950
(2,063)
1,887
2015
US$m
37,007
1,799
1,360
4.82
3.64
1.45
2015
US$m
66,581
(21,081)
45,500
19,886
2,972
53.30
2015
US$m
4,089
(3,200)
889
2014
US$m
39,921
1,712
1,531
4.62
4.13
1.45
2014
US$m
66,032
(21,547)
44,485
19,196
2,483
51.60
2014
US$m
3,285
(2,234)
1,051
2013
US$m
39,465
1,565
1,499
4.26
4.08
1.40
2013
US$m
63,387
(20,942)
42,445
18,313
2,601
49.64
2013
US$m
4,133
(2,305)
1,828
2012
US$m
39,593
1,678
1,459
4.60
4.00
1.35
2012
US$m
62,898
(20,948)
41,950
17,711
3,413
48.28
2012
US$m
2,674
(2,729)
(55)
activities (US$)
10.56
10.96
8.87
11.24
7.33
*
Figures prior to 2016 have been restated due to a change in accounting policy upon adoption of the amendments to IAS 16 and IAS 41
‘Agriculture: Bearer Plants’. Figures for 2012 have been restated due to a change in accounting policy upon adoption of IAS 19 (amended 2011)
‘Employee Benefits’.
114
Jardine Matheson | Annual Report 2016 Responsibility Statement
The Directors of the Company confirm to the best of their knowledge that:
(a) the consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards, including International Accounting Standards and Interpretations adopted by the International Accounting
Standards Board; and
(b) the sections of this Report, including the Chairman’s Statement, Managing Director’s Review and Principal Risks and
Uncertainties, which constitute the management report include a fair review of all information required to be disclosed
by the Disclosure Guidance and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Conduct Authority of the
United Kingdom.
For and on behalf of the Board
Ben Keswick
John Witt
Directors
2nd March 2017
115
Jardine Matheson | Annual Report 2016 Corporate Governance
Jardine Matheson Holdings Limited is incorporated in Bermuda. The majority of the Group’s business interests are in Greater
China and Southeast Asia. The Company’s equity shares have a standard listing on the Main Market of the London Stock
Exchange, and secondary listings in Bermuda and Singapore. The Company’s share capital is 57%-owned by Jardine Strategic
Holdings Limited (‘Jardine Strategic’), a Bermuda incorporated 84%-owned subsidiary of the Company similarly listed in
London, Bermuda and Singapore. The Disclosure Guidance and Transparency Rules (the ‘DTRs’) issued by the Financial
Conduct Authority of the United Kingdom (the ‘FCA’) require that this Report address all relevant information about the
corporate governance practices applied beyond the requirements under Bermuda law.
The Company attaches importance to the corporate stability that is fundamental to the Group’s ability to pursue a long-term
strategy in its Asian markets. It is committed to high standards of governance based on its approach developed over
many years.
The Management of the Group
The Company is the parent company of the Jardine Matheson Group. Its management is therefore concerned both with the
direct management of Jardine Matheson’s own activities, and with the oversight of the operations of other listed companies
within the wider Group.
The structural relationship between the Group companies is considered to be a key element to the Group’s success.
By coordinating objectives, establishing common values and standards and sharing experience, contacts and business
relationships, the Group aims to optimize opportunities across the Asian countries in which it operates. The Company’s
system of governance is based on a well-tried approach to oversight and management, in which the individual subsidiaries
and affiliates benefit from the Group’s strategic guidance and professional expertise, while at the same time, the
independence of their boards is respected and clear operational accountability rests with their executive
management teams.
The Directors have the full power to manage the business affairs of the Company, with the exception of matters reserved to
be exercised by the Company in general meeting under Bermuda legislation or the Company’s Bye-laws. Among the matters
on which the Board decides are the Group’s business strategy, its annual budget, dividends and major corporate activities.
Operational management is delegated to the appropriate level, and coordination with the Group’s listed subsidiaries is
undertaken by the board of the Group management company, Jardine Matheson Limited (‘JML’). The JML board meets
regularly in Hong Kong and is chaired by the Managing Director. It currently has five other members, whose names appear on
page 124 of this Report, which include the Deputy Managing Director, the Group Finance Director, the Group Strategy Director
and the Group General Counsel.
The Board
The Company currently has a Board of 14 Directors. Their names and brief biographies appear on page 27 of this Report.
The Board composition and operation provide stability, allowing the Company to take a long-term view as it seeks to grow its
business and pursue investment opportunities.
The Chairman’s role is to lead the Board as it oversees the Group’s strategic and financial direction. The role of Managing
Director, with the support of the Deputy Managing Director, is to implement the strategy set by the Board and to manage the
Group’s operations. An important part of this is undertaken by the Managing Director in his capacity as chairman of the
board of JML to which responsibility for implementing the Group’s strategy within designated financial parameters has
been delegated.
The Board is scheduled to hold four meetings in 2017 and ad hoc procedures are adopted to deal with urgent matters.
In 2016 one meeting was held in Bermuda and three were held in Asia. The Board receives high quality, up to date
information for each of its meetings. In addition, certain Directors who are not members of the board of JML and who are
based outside Asia regularly visit Asia and Bermuda to discuss the Group’s business, as well as to participate in four annual
Group strategic reviews that precede the regular Board meetings. These Directors are not directly involved in the operational
management of the Group’s business activities, but their knowledge and close oversight of the Group’s affairs reinforces the
process by which business is reviewed before consideration at Board meetings.
116
Jardine Matheson | Annual Report 2016 Directors’ Appointment, Retirement, Remuneration and Service Contracts
Candidates for appointment as executive Directors of the Company or as executive directors of JML may be sourced internally
or externally, including by using the services of specialist executive search firms. The aim is to appoint individuals who
combine international best practice with familiarity of or adaptability to Asian markets. When appointing non-executive
Directors, the Board pays particular attention to the Asian business experience and relationships that they can bring.
Each new Director is appointed by the Board and, in accordance with the Company’s Bye-laws, each new Director so
appointed is subject to retirement at the first annual general meeting after appointment. Thereafter, Directors are subject to
retirement by rotation under the Bye-laws whereby one-third of the Directors retire at the annual general meeting each year.
These provisions apply to both executive and non-executive Directors, but the requirement to retire by rotation does not
extend to the Chairman or Managing Director.
Jeremy Parr was appointed as a Director of the Company with effect from 1st February 2016. James Riley stepped down
as Group Finance Director on 31st March 2016 and John Witt joined the Board in his place on 1st April 2016. David Hsu
was appointed as a Director of the Company with effect from 5th May 2016. On 1st August 2016, Y.K. Pang succeeded
Adam Keswick as Deputy Managing Director (the latter remaining as a Director of the Company).
In accordance with Bye-law 84, Adam Keswick, Simon Keswick and Dr Richard Lee retire by rotation at this year’s Annual
General Meeting and, being eligible, offer themselves for re-election. In accordance with Bye-law 91, David Hsu will also
retire, and, being eligible, offers himself for re-election. David Hsu, Adam Keswick and Simon Keswick each has a service
contract with a subsidiary of the Company that has a notice period of six months. Dr Richard Lee does not have a service
contract with the Company or its subsidiaries.
Lord Leach of Fairford, who had been a Director of the Company since 1984, passed away on 12th June 2016.
The Company’s policy is to offer competitive remuneration packages to its senior executives. It is recognized that, due to
the nature of the Group and its diverse geographic base, a number of its senior executives are required to be offered
international terms and the nature of the remuneration packages is designed to reflect this. Executive Directors joining from
outside the Group may be offered an initial fixed-term service contract to reflect any requirement for them to relocate.
Recommendations and decisions on remuneration and other benefits payable or made available to executive Directors result
from consultations between the Chairman and the Managing Director as well as with other Directors as may be considered
appropriate. Directors’ fees which are payable to the Chairman and all other Directors (other than full-time salaried
Directors) are decided upon by shareholders in general meeting as provided for by the Company’s Bye-laws. A motion to
increase the fees payable to Directors (other than full-time salaried Directors) to US$60,000 each per annum and the fee for
the Chairman to US$85,000 per annum with effect from 1st January 2017 will be proposed at the forthcoming Annual
General Meeting.
Certain Directors are discretionary objects under a trust created in 1947 (the ‘1947 Trust’) which holds 35,915,991 ordinary
shares in the Company representing 5.03% of the Company’s issued share capital. Under the terms of the 1947 Trust, its
income is to be distributed to senior executive officers and employees of the Company and its wholly-owned subsidiaries.
For the year ended 31st December 2016, the Directors received US$68.9 million (2015: US$67.0 million) in aggregate being
distributions from the 1947 Trust of US$52.1 million (2015: US$50.4 million) and Directors’ fees and employee benefits from
the Group of US$16.8 million (2015: US$16.6 million). Directors’ fees and employee benefits included US$0.4 million (2015:
US$0.4 million) in Directors’ fees, US$13.4 million (2015: US$13.4 million) in short-term employee benefits including salary,
bonuses, accommodation and deemed benefits in kind, US$1.5 million (2015: US$1.6 million) in post-employment benefits
and US$1.5 million (2015: US$1.2 million) in share-based payments. The information set out in this paragraph forms part of
the audited financial statements.
Share-based long-term incentive plans have also been established to provide incentives for executive Directors and senior
managers. Share options are granted at the then prevailing market prices and they normally vest on or after the third
anniversary of the date of grant. Grants may be made in a number of instalments. Share options are not granted to non-
executive Directors.
117
Jardine Matheson | Annual Report 2016 Corporate Governance (continued)
The Company purchases insurance to cover its Directors against their costs in defending themselves in civil proceedings
taken against them in that capacity and in respect of damages resulting from the unsuccessful defence of any proceedings.
To the extent permitted by law, the Company also indemnifies its Directors. Neither the insurance nor the indemnity provides
cover where the Director has acted fraudulently or dishonestly.
Audit Committee
The Board has established an Audit Committee, the current members of which are Anthony Nightingale, Adam Keswick and
Lord Sassoon; they have extensive knowledge of the Group but are not directly involved in operational management. The
Company’s Managing Director, Deputy Managing Director, Group Finance Director, Group Strategy Director and Group
General Counsel, together with representatives of the internal and external auditors, also attend the Audit Committee
meetings by invitation. The Audit Committee meets and reports to the Board semi-annually.
Prior to completion and announcement of the half-year and year-end results, a review of the Company’s financial information
and any issues raised in connection with the preparation of the results, including the adoption of any new accounting
policies, is undertaken by the Audit Committee with the executive management and a report is received from the external
auditors. The external auditors also have access to the full Board and other senior executives, and to the boards of the
Group’s operating companies.
The Audit Committee also keeps under review the nature, scope and results of the audits conducted by the internal audit
function and the findings of the various Group audit committees. The Audit Committee’s responsibilities extend to reviewing
the effectiveness of both the internal and the external audit functions; considering the independence and objectivity of the
external auditors; and reviewing and approving the level and nature of non-audit work performed by the external auditors.
The terms of reference of the Audit Committee can be found on the Company’s website at www.jardines.com.
Risk Management and Internal Control
The Board has overall responsibility for the Group’s systems of risk management and internal control. The Board has
delegated to the Audit Committee responsibility for providing oversight in respect of risk management activities. The Audit
Committee considers the Group’s principal risks and uncertainties and potential changes to the risk profile, and reviews the
operation and effectiveness of the Group’s systems of internal control and the procedures by which these risks are
monitored and mitigated. The Audit Committee considers the systems and procedures on a regular basis, and reports to the
Board semi-annually. The systems of internal control are designed to manage, rather than eliminate, business risk; to help
safeguard the Group’s assets against fraud and other irregularities; and to give reasonable, but not absolute, assurance
against material financial misstatement or loss.
Executive management oversees the implementation of the systems of internal control within the Group’s operating
companies, the responsibility for which rests with each company’s board and its own executive management. The
effectiveness of these systems is monitored by the internal audit function, which is independent of the operating
companies, and by a series of audit committees that operate in each major business unit across the Group. The internal
audit function also monitors the approach taken by the business units to risk. The findings of the internal audit function and
recommendations for any corrective action required are reported to the relevant audit committee and, if appropriate, to the
Audit Committee of the Company.
The Group has in place an organizational structure with defined lines of responsibility and delegation of authority. Across the
Group there are established policies and procedures for financial planning and budgeting; for information and reporting
systems; for assessment of risk; and for monitoring the Group’s operations and performance. The information systems in
place are designed to ensure that the financial information reported is reliable and up to date.
The Company’s policy on commercial conduct underpins the Group’s internal control process, particularly in the area of
compliance. The policy is set out in the Group’s Code of Conduct, which is a set of guidelines to which every employee must
adhere, and is reinforced and monitored by an annual compliance certification process.
The Audit Committee has also been given the responsibility to oversee the effectiveness of the formal procedures for
employees to raise any matters of serious concern and is required to review any reports made under those procedures that
are referred to it by the internal audit function.
The principal risks and uncertainties facing the Company are set out on page 122.
118
Jardine Matheson | Annual Report 2016 Directors’ Responsibilities in respect of the Financial Statements
The Directors are required under the Bermuda Companies Act to prepare financial statements for each financial year and to
present them annually to the Company’s shareholders at the annual general meeting. The financial statements are required
to present fairly in accordance with International Financial Reporting Standards (‘IFRS’) the financial position of the Group at
the end of the year and the results of its operations and its cash flows for the year then ended. The Directors consider that
applicable accounting policies under IFRS, applied on a consistent basis and supported by prudent and reasonable
judgments and estimates, have been followed in preparing the financial statements. The financial statements have been
prepared on a going concern basis.
Code of Conduct
The Group conducts business in a professional, ethical and even-handed manner. Its ethical standards are clearly set out in
its Code of Conduct. The code requires that all Group companies comply with all laws of general application, all rules and
regulations that are industry specific and proper standards of business conduct. The code prohibits the giving or receiving of
illicit payments, and requires all employees to be treated fairly, impartially and with respect. It also requires that all
managers must be fully aware of their obligations under the code and establish procedures to ensure compliance at all
levels within their organizations. The Group has in place procedures by which employees can raise, in confidence, matters of
serious concern in areas such as financial reporting or compliance.
Directors’ Share Interests
The Directors of the Company in office on 2nd March 2017 had interests (within the meaning of the EU Market Abuse
Regulation (‘MAR’), which applies to the Company as it is listed on the London Stock Exchange) as set out below in the
ordinary share capital of the Company. These interests included those notified to the Company in respect of the Directors’
closely associated persons (as that term is used under MAR).
Sir Henry Keswick
Ben Keswick
Y.K. Pang
Mark Greenberg
David Hsu
Adam Keswick
Simon Keswick
Dr Richard Lee
Anthony Nightingale
Percy Weatherall
11,578,123
43,309,613(a) (b) (c)
315,000
43,678
35,237
36,162,168(a) (b)
2,778,046(a) (c)
117,987
1,186,780
36,551,841(a) (b)
Notes:
(a) Includes 1,950,004 ordinary shares held by a family trust, the trustees of which are closely associated persons of Ben Keswick, Adam Keswick,
Simon Keswick and Percy Weatherall.
(b) Includes 31,318,946 ordinary shares held by family trusts, the trustee of which is a closely associated person of Ben Keswick, Adam Keswick and
Percy Weatherall.
(c) Includes 473,571 ordinary shares held by a family trust, the trustee of which is a closely associated person of Ben Keswick and Simon Keswick.
In addition, Ben Keswick, Y.K. Pang, Mark Greenberg, David Hsu, Adam Keswick, Jeremy Parr, Lord Sassoon and John Witt
held options in respect of 240,000, 180,000, 190,000, 96,667, 130,000, 50,000, 75,000 and 190,000 ordinary shares,
respectively, issued pursuant to the Company’s share-based long-term incentive plans.
119
Jardine Matheson | Annual Report 2016 Corporate Governance (continued)
Substantial Shareholders
As a non-UK issuer, the Company is subject to the DTRs pursuant to which a person must in certain circumstances notify the
Company of the percentage of voting rights attaching to the share capital of the Company that he holds. The obligation to
notify arises if that person acquires or disposes of shares in the Company which results in the percentage of voting rights
which he holds reaching, exceeding, or falling below, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.
The Company has been informed of the following holdings of voting rights of 5% or more attaching to the Company’s issued
ordinary share capital: (i) Jardine Strategic and its subsidiary undertakings are directly and indirectly interested in
406,027,584 ordinary shares carrying 56.84% of the voting rights; and (ii) the 1947 Trust is interested in 35,915,991 ordinary
shares carrying 5.03% of the voting rights. Apart from these shareholdings, the Company is not aware of any holders of
voting rights of 5% or more attaching to the issued ordinary share capital of the Company as at 2nd March 2017.
There were no contracts of significance with corporate substantial shareholders during the year under review.
Governance Principles
The Company’s primary listing on the London Stock Exchange is a standard listing on the Main Market. Under a standard
listing, the Company is subject to the UK Listing Rules (other than those which apply only to companies with a premium
listing), the DTRs, the UK Prospectus Rules and MAR. The Company, therefore, is bound by the rules in relation to continuous
disclosure, periodic financial reporting, disclosure of interests in shares and market abuse, including the rules governing
insider dealing, market manipulation and the disclosure of inside information. The Company is also subject to regulatory
oversight from the FCA, as the Company’s principal securities regulator, and is required to comply with the Admission and
Disclosure Standards of the Main Market of the London Stock Exchange.
When shareholders approved the Company’s move to a standard listing from a premium listing in 2014, the Company stated
that it intended to maintain certain governance principles on the same basis as was then applicable to the Company’s
premium listing, as follows:
1. When assessing a significant transaction, being a larger transaction which would be classified as a class 1 transaction
under the provisions of the UK Listing Rules, the Company will engage an independent financial adviser to provide a fairness
opinion on the terms of the transaction.
2. In the event of a related party transaction, being a transaction with a related party which would require a sponsor to
provide a fair and reasonable opinion under the provisions of the UK Listing Rules, the Company will engage an independent
financial adviser to confirm that the terms of the transaction are fair and reasonable as far as the shareholders of the
Company are concerned.
3. Further, as soon as the terms of a significant transaction or a related party transaction are agreed, an announcement will
be issued by the Company providing such details of the transaction as are necessary for investors to evaluate the effect of
the transaction on the Company.
4. At each annual general meeting, the Company will seek shareholder approval to issue new shares on a non-pre-emptive
basis for up to 33% of the Company’s issued share capital, of which up to 5% can be issued for cash consideration.
5. The Company will continue to adhere to its Securities Dealing Rules. These rules, which were based on the UK Model Code,
have since been revised to follow the provisions of MAR with respect to market abuse and disclosure of interests in shares.
6. The Company will continue its policies and practices in respect of risk management and internal controls.
120
Jardine Matheson | Annual Report 2016 Related Party Transactions
Details of transactions with related parties entered into by the Company during the course of the year are included in note 37
to the financial statements on page 111.
Securities Purchase Arrangements
The Directors have the power under the Bermuda Companies Act and the Company’s Memorandum of Association to
purchase the Company’s shares. Any shares so purchased shall be treated as cancelled and, therefore, reduce the issued
share capital of the Company. The Board considers on a regular basis the possibility for share repurchases or the acquisition
of further shares in Group companies, including shares in Jardine Strategic. When doing so, it considers the potential for the
enhancement of earnings or asset values per share. When purchasing such shares, the Company is subject to the provisions
of MAR.
Takeover Code
The Company is subject to a Takeover Code, based on London’s City Code on Takeovers and Mergers. The Takeover Code
provides an orderly framework within which takeovers can be conducted and the interests of shareholders protected.
The Takeover Code has statutory backing, being established under the Acts of incorporation of the Company in Bermuda.
Annual General Meeting
The 2017 Annual General Meeting will be held at Rosewood Tucker’s Point, Bermuda on 4th May 2017. The full text of the
resolutions and explanatory notes in respect of the meeting are contained in the Notice of Meeting which accompanies
this Report. A corporate website is maintained containing a wide range of information of interest to investors at
www.jardines.com.
Power to amend Bye-laws
The Bye-laws of the Company can be amended by the shareholders by way of a special resolution at a general meeting of
the Company.
121
Jardine Matheson | Annual Report 2016 Principal Risks and Uncertainties
The Board has overall responsibility for risk management and internal control. The process by which the Group identifies and
manages risk is set out in more detail on page 118 of the Corporate Governance section of this Report. The following are the
principal risks and uncertainties facing the Company as required to be disclosed pursuant to the Disclosure Guidance and
Transparency Rules issued by the Financial Conduct Authority of the United Kingdom and are in addition to the matters
referred to in the Chairman’s Statement and Managing Director’s Review.
Economic Risk
Most of the Group’s businesses are exposed to the risk of negative developments in global and regional economies and
financial markets, either directly or through the impact on the Group’s joint venture partners, franchisors, bankers, suppliers
or customers. These developments can result in recession, inflation, deflation, currency fluctuations, restrictions in the
availability of credit, business failures, or increases in financing costs, oil prices and in the cost of raw materials. Such
developments might increase operating costs, reduce revenues, lower asset values or result in the Group’s businesses being
unable to meet in full their strategic objectives.
Commercial Risk and Financial Risk
Risks are an integral part of normal commercial practices, and where practicable steps are taken to mitigate such risks.
These risks are further pronounced when operating in volatile markets.
A number of the Group’s businesses make significant investment decisions in respect of developments or projects that take
time to come to fruition and achieve the desired returns and are, therefore, subject to market risks.
The Group’s businesses operate in areas that are highly competitive and evolving rapidly, and failure to compete effectively
in terms of price, tender terms, product specification, application of new technologies or levels of service can have an
adverse effect on earnings or market share. Significant pressure from such competition may also lead to reduced margins.
The quality and safety of the products and services provided by the Group’s businesses are important and there is an
associated risk if they are below standard, while the potential impact on a number of the Group’s businesses of the
disruption to IT systems or infrastructure, whether by cyber-crime or other reasons, may be significant.
The steps taken by the Group to manage its exposure to financial risk are set out in the Financial Review on pages 25 to 26
and note 2 to the financial statements on pages 44 to 51.
Concessions, Franchises and Key Contracts
A number of the Group’s businesses and projects are reliant on concessions, franchises, management or other key contracts.
Cancellation, expiry or termination, or the renegotiation of any such concession, franchise, management or other key
contracts, could have an adverse effect on the financial condition and results of operations of certain subsidiaries,
associates and joint ventures of the Group.
Regulatory and Political Risk
The Group’s businesses are subject to a number of regulatory environments in the territories in which they operate. Changes
in the regulatory approach to such matters as foreign ownership of assets and businesses, exchange controls, planning
controls, emission regulations, tax rules and employment legislation have the potential to impact the operations and
profitability of the Group’s businesses. Changes in the political environment in such territories can also affect the Group’s
businesses.
Terrorism, Pandemic and Natural Disasters
A number of the Group’s operations are vulnerable to the effects of terrorism, either directly through the impact of an act of
terrorism or indirectly through the impact of generally reduced economic activity in response to the threat of or an actual act
of terrorism.
All Group businesses would be impacted by a global or regional pandemic which could be expected to seriously affect
economic activity and the ability of our businesses to operate smoothly. In addition, many of the territories in which the
Group operates can experience from time to time natural disasters such as earthquakes and typhoons.
122
Jardine Matheson | Annual Report 2016 Shareholder Information
Financial Calendar
2016 full-year results announced
Shares quoted ex-dividend on the Singapore Exchange
Shares quoted ex-dividend on the London Stock Exchange
Share registers closed
2016 final dividend scrip election period closes
Annual General Meeting to be held
2016 final dividend payable
2017 half-year results to be announced
Shares quoted ex-dividend on the Singapore Exchange
Shares quoted ex-dividend on the London Stock Exchange
Share registers to be closed
2017 interim dividend scrip election period closes
2017 interim dividend payable
*
Subject to change
2nd March 2017
15th March 2017
16th March 2017
20th to 24th March 2017
21st April 2017
4th May 2017
11th May 2017
4th August 2017*
23rd August 2017*
24th August 2017*
28th August to 1st September 2017*
29th September 2017*
19th October 2017*
Dividends
The dividends will be available in cash with a scrip alternative. Shareholders will receive their cash dividends in United
States dollars, unless they are registered on the Jersey branch register where they will have the option to elect for sterling.
These shareholders may make new currency elections for the 2016 final dividend by notifying the United Kingdom transfer
agent in writing by 21st April 2017. The sterling equivalent of dividends declared in United States dollars will be calculated by
reference to a rate prevailing on 26th April 2017. Shareholders holding their shares through CREST in the United Kingdom will
receive their cash dividends in sterling only. Shareholders holding their shares through The Central Depository (Pte) Limited
(‘CDP’) in Singapore will receive their cash dividends in United States dollars unless they elect, through CDP, to receive
Singapore dollars.
Registrars and Transfer Agent
Shareholders should address all correspondence with regard to their shareholdings or dividends to the appropriate registrar
or transfer agent.
Principal Registrar
Jardine Matheson International Services Limited
P.O. Box HM 1068
Hamilton HM EX
Bermuda
Jersey Branch Registrar
Capita Registrars (Jersey) Limited
12 Castle Street
St Helier, Jersey JE2 3RT
Channel Islands
United Kingdom Transfer Agent
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU, United Kingdom
Singapore Branch Registrar
M & C Services Private Limited
112 Robinson Road #05-01
Singapore 068902
Press releases and other financial information can be accessed through the internet at www.jardines.com.
123
Jardine Matheson | Annual Report 2016 Group Offices
Jardine Matheson Ltd
48th Floor, Jardine House
G.P.O. Box 70
Hong Kong
Telephone
Email
Website
(852) 2843 8288
jml@jardines.com
www.jardines.com
Directors
Ben Keswick, Chairman
Y.K. Pang, Deputy Chairman
Mark Greenberg
David Hsu
Jeremy Parr
John Witt
3 Lombard Street
London EC3V 9AQ
United Kingdom
25th Floor, Devon House
Taikoo Place
979 King’s Road
Quarry Bay
Hong Kong
25th Floor, Devon House
Taikoo Place
979 King’s Road
Quarry Bay
Hong Kong
The St Botolph Building
138 Houndsditch
London EC3A 7AW
United Kingdom
8th Floor
One Exchange Square
Central
Hong Kong
11th Floor, Devon House
Taikoo Place
979 King’s Road
Quarry Bay
Hong Kong
7th Floor
281 Gloucester Road
Causeway Bay
Hong Kong
239 Alexandra Road
Singapore 159930
Group Corporate Secretary
Neil McNamara
Telephone
Email
Website
(44 20) 7816 8100
enquiries@matheson.co.uk
www.matheson.co.uk
Adam Keswick
Telephone
Email
(852) 2579 2888
jpl@jardines.com
Anna Cheung
Telephone
Email
(852) 2579 2888
jmg@jardines.com
Y.K. Pang
Telephone
Email
Website
(44 20) 7528 4444
corporate_communications@jltgroup.com
www.jlt.com
Dominic Burke
Telephone
Email
Website
(852) 2842 8428
gpobox@hkland.com
www.hkland.com
Robert Wong
Telephone
Email
Website
(852) 2299 1888
groupcomm@dairy-farm.com.hk
www.dairyfarmgroup.com
Graham D. Allan
Telephone
Email
Website
(852) 2895 9288
asia-enquiry@mohg.com
www.mandarinoriental.com
James Riley
Telephone
Email
Website
(65) 6473 3122
corporate.affairs@jcclgroup.com
www.jcclgroup.com
Alex Newbigging
Jl. Gaya Motor Raya No. 8
Sunter II, Jakarta 14330
Indonesia
Telephone
Email
Website
(62 21) 652 2555
purel@ai.astra.co.id
www.astra.co.id
Prijono Sugiarto
Matheson & Co., Ltd
Jardine Pacific Ltd
Jardine Motors Group Ltd
Jardine Lloyd Thompson Group plc
Hongkong Land Ltd
Dairy Farm Management Services Ltd
Mandarin Oriental Hotel Group
International Ltd
Jardine Cycle & Carriage Ltd
PT Astra International Tbk
124
Jardine Matheson | Annual Report 2016 Bermuda
Jardine Matheson International Services Ltd
Cambodia
Jardine Matheson Ltd
(Representative Office)
Hong Kong SAR
Jardine Matheson Ltd
Indonesia
Jardine Matheson Ltd
(Representative Office)
Mainland China
Jardine Matheson (China) Ltd
(Representative Office)
Malaysia
Jardine Matheson (Malaysia) Sdn Bhd
Myanmar
Jardine Matheson Management (SEA) Pte. Ltd
Netherlands
Jardine Matheson Europe B.V.
4th Floor, Jardine House
33-35 Reid Street
Hamilton HM 12
P.O. Box HM 1068
Hamilton HM EX
7th Floor, Exchange Square
No. 19 & 20 Street 106
Sangkat Wat Phnom
Khan Daun Penh
Phnom Penh
48th Floor, Jardine House
G.P.O. Box 70
Hong Kong
Telephone (1 441) 292 0515
Philip Barnes
Telephone (855 23) 986 804
Peter Beynon
Telephone (852) 2843 8288
Ben Keswick
Level 17, World Trade Centre I
Jalan Jendral Sudirman Kav. 29-31
Jakarta 12920
Telephone (62 21) 522 8981/2
Jonathan Chang
Rm 3702
China World Office 1
China World Trade Centre
No. 1 Jianguomenwai Avenue
Chaoyang District
Beijing 100004
Suite 7.01, Level 7 Wisma E&C
No. 2 Lorong Dungun Kiri
Bukit Damansara
50490 Kuala Lumpur
No. 1/4 Parami Road, Level 2
Hlaing Township
Yangon
Atrium Building
Strawinskylaan 3007
1077 ZX Amsterdam
Telephone (86 10) 6505 2801
David Hsu
Telephone (60 3) 2094 2168
Rossana Annizah Binti Ahmad Rashid
Telephone (95 1) 661 083
Peter Beynon
Telephone (31 20) 470 0258
Pim Bertels
Philippines
Jardine Matheson Ltd
(Representative Office)
2nd Floor, 111 Paseo de Roxas Building
Paseo de Roxas corner Legaspi Street
Legaspi Village, Makati City 1229
Telephone (63 2) 706 8503
A.B. Colayco
Singapore
Jardine Matheson (Singapore) Ltd
239 Alexandra Road, 3rd Floor
Singapore 159930
Telephone (65) 6220 4254
Y.C. Boon
Taiwan
Jardine Matheson Ltd
(Representative Office)
Thailand
Jardine Matheson (Thailand) Ltd
United Kingdom
Matheson & Co., Ltd
Vietnam
Jardine Matheson Ltd
6th Floor, 39 Jinan Road
Section 2, Taipei 10059
Telephone (886 2) 2393 1166
Liang Chang
21-03, 21st Floor, Times Square Building
246 Sukhumvit Road, KIong Toey
Bangkok 10110
Telephone (66 2) 254 0674
Dr Pisit Leeahtam
3 Lombard Street
London EC3V 9AQ
5th Floor, CJ Building
6 Le Thanh Ton Street
District 1, Ho Chi Minh City
Telephone (44 20) 7816 8100
Adam Keswick
Telephone (84 8) 3822 2340
Alain Cany
www.jardines.com