Jardine Matheson Holdings Limited (J36) Earnings Call Transcript & Summary

Good morning to everyone here in Jardine House and to those online. Welcome to the Jardine Matheson 2024 Full Year Results Presentation. I'm John Witt, Group Managing Director, and I'm joined by Graham Baker, our Group Finance Director. Today, I'm going to talk about 2 things. Firstly, Jardine sharpened focus on its role as an investment company and our investment proposition. Secondly, I'll share some strategic updates from across the group. Graham will then take you through the financial performance of the group and our portfolio companies. We'll conclude with the outlook and a question-and-answer session. For those of you present in the room today, please hold your questions until the end of the presentation. And for those participating online, you should be able to see a Q&A box at the bottom of your page you could submit your questions as we go through the presentation, and we'll take them at the end. Jardine's long-term success is dependent on our ability to adapt to the changing environment. As we look to the future of the group, we now see the need for Jardine's to evolve once again. By sharpening our focus on our role as an engaged long-term investor we aim to deliver superior returns to our shareholders. We set challenging financial objectives for Jardine's to match these ambitions. These are set out on the right of the slide, and we believe they are the right metrics to assess our long-term performance. These objectives include delivering superior 5-year total shareholder returns, achieving high-quality, long-term growth in earnings and cash flows. Driving returns on invested capital above the relevant costs of capital and delivering growth in net asset value per share and progressive dividends. We will meet our financial objectives in a number of ways through decisive portfolio management, leveraging disciplined capital allocation and investment expertise I continue to influence strategy and driving accountability through Board representatives at our portfolio companies. By ensuring high caliber leadership teams are in place in our portfolio companies. And incentivizing those teams to build bigger, stronger businesses supported by boards, which include extensive industry expertise. Our approach to managing our portfolio is founded on a culture of integrity, of effective risk management and a sustainable approach to doing business. This is underpinned by strong balance sheets and excellent access to bank funding and capital markets. Historically, we focused on underlying earnings per share and dividends per share to review our performance over time. We have achieved 5-year growth of 3.7% per annum in underlying earnings per share and progressive 5-year dividend growth of 5.5% per annum. We're now focusing more on total shareholder returns as we place greater emphasis on capital appreciation. Our 5-year TSR performance has been disappointing even as our performance last year stabilized. Well, this in part reflects wider geopolitical and economic trends, this is very much in focus as I move to outline our strategic priorities which have changed to reflect our new approach. Our refreshed strategic priorities start with identifying developing and retaining high-caliber leadership for the group and our portfolio companies. Since the beginning of 2024, we've continued to evolve the Jardine Board. Welcome 2 New independent NEDs, Keyu Jin and Ming Lu. Keyu, who joined the Board in 2024 is a renowned economist, a professor at HKUST. Ming Lu, who joined us last month is senior advisory partner at KKR and previously its Chairman, Asia Pacific. Over the past 2 decades, Ming has done an exceptional job of building the KKR platform in Asia, not just in private equity, but across a number of asset classes. Both Keyu and Ming bring highly relevant regional and business experience to our Board. At the same time, we have made important leadership changes across our portfolio companies. With new CEOs and refreshed boards in 4 of our key companies, they've moved with pace to appoint strong teams and develop new strategies to build shareholder value. In support of this, we have implemented new long-term incentive structures in our listed companies to better align the performance of their leadership teams with shareholder interest. Following the established principle that JM Directors own a significant interest in the group, we have also introduced frameworks or executive management of our portfolio companies, including DFI, Hongkong Land and Astra to acquire and retain meaningful shareholdings in their companies. We have also sharpened our talent planning across the group to focus on senior leadership development, including programs co-designed with IMD and INSEAD. Our next priority includes influencing strategy and driving accountability across our portfolio companies. Jardines, through representation on the various boards of our portfolio companies, has played a role influencing the development and implementation of new company strategies. Let me share some key highlights in this area from the last year. Hongkong Land's new strategy focuses the business on ultra-premium integrated commercial properties in Asia's gateway cities. As part of this shift, Hongkong Land has prioritized simplifying its business by ending new investments in the build-to-sell segment and actively focusing on capital recycling. This has seen positive results with Hongkong Land achieving strong 1-year TSR and outperforming sector benchmarks in 5-year TSR despite the challenging property down cycle. A key element of this new strategy is Hong Kong Land's $1 billion tomorrow's central transformation of the Landmark Hong Kong portfolio. The group is also making significant progress on its 43% owned, USD 8 billion central development on the West Bund in Shanghai. DFI retail is streamlining its portfolio, divesting noncore businesses and focusing even more on strengthening its health and beauty and convenience businesses. In the year, DFI sold Hero supermarket in Indonesia and its stake in Yonghui Superstores, which completed last month. Mandarin Oriental is moving forward with pace on the expansion of its management business. They set an ambitious target to double its portfolio of hotels, resorts and residences worldwide by 2033, and has already crossed the milestone of 40 hotels. As part of its strategy to drive greater capital efficiency, Mandarin Oriental completed the disposal of its Paris hotel and retail properties for some $400 million during the year, while signing a new long-term hotel management contract. Astra has begun to focus more clearly on how each of its businesses can create long-term shareholder value. It has continued to actively pursue opportunities in existing core businesses as well as new growth sectors. Astra is committed to transitioning away from coal including into renewables, increasing its interest in Supreme Energy. It also expanded its investment in health care by acquiring a controlling stake in heartology cardiovascular hospital. Jardine Cycle & Carriage, which is our Southeast Asian investment arm, has been prioritizing active portfolio management and disciplined capital allocation to pay down debt and provide flexibility for further investments. In 2024, JC&C sold its interest in Siam City Cement, realizing $344 million. It also increased its interest in REE Corporation, which has a growing renewable energy portfolio to 41%. Jardine Pacific, which holds the group's unlisted companies, there has been continued progress on portfolio simplification. In 2024, Jardine Pacific sold its 50% stake in Jardine Aviation Services and Jardine Schindler disposed of its Taiwan Lifts business. Our third strategic priority is to evolve the group's portfolio to secure long-term sustainable growth by divesting nonstrategic or lower-yielding assets, capital can be directed towards strategic businesses. The group's diversified portfolio has allowed us to deliver resilient performance. We aim for portfolio companies to reinforce their standing in Asia's high potential markets and in sectors where they can achieve leadership, ensuring long-term value and sustainable growth. Our investment strategy focuses on building the group's presence in emerging markets like Indonesia and Vietnam, also leveraging developed markets, namely Hong Kong and Singapore. To reiterate, our capital allocation strategy which supports our objective of delivering 5-year TSR, we first prioritize organic investments within our portfolio companies to drive long-term growth and returns. We are also committed to growing dividends over time. Beyond that, we review M&A opportunities in new businesses and deepening investments within the existing portfolio companies side by side. In both cases, we consider value, we consider earnings growth and risk. All of this is underpinned by our commitment to maintaining a strong balance sheet, which gives us the confidence and flexibility to invest where and when we see the right opportunities throughout the business cycle. Finally, I should highlight our continued commitment to sustainability across Jardine. As an engaged investor, we expect our portfolio companies to take ownership of their respective sustainability strategies and commitments. We're working together to meet objectives. All of our portfolio companies have set short- and medium-term decarbonization targets and a number of them have achieved validation for their emissions targets from the science-based targets initiative. Good progress has also been made in achieving Scope 1 and 2 emissions reductions. During the year, we developed a framework for integrating sustainability into investment appraisals. We began measuring Scope 3 emissions and integrating climate risk into enterprise risk management. We were very pleased to see improved ESG ratings, both for Jardine Matheson overall and for our portfolio companies recognizing the progress we are making. I'll now hand over to Graham to go through the group's financial performance for the year. Graham?

Thank you, John. Good morning, everyone. The group delivered a resilient performance in 2024. Although underlying profit fell by 11% to $1.5 billion, this was significantly impacted by noncash impairments at Hongkong Land on its build-to-sell portfolio in the Chinese Mainland. Excluding these, underlying net profit was just 1% down as anticipated at the half year or 3% up at constant exchange rates. Total revenue was $35.8 billion, marginally down, principally due to the impact of disposals and a weaker Indonesian repair. Revenues in ongoing businesses grew by 3% at constant exchange rates. Underlying earnings per share were $5.07, down 12% or 2% excluding Hongkong Land's impairments. The Board is recommending a final dividend of $1.65 per share, which produces an unchanged full year dividend of $2.25. Looking across the portfolio, Astra delivered record profits, up 1% at their level in local currency despite a soft auto market and lower coal prices. Astra's contribution to Jardine's grew by 3%, more than offsetting headwinds from a stronger U.S. dollar because of our increased stake in JC&C. We also saw an encouraging strong recovery at DFI. However, highly competitive market conditions in the Chinese Mainland new car market mean we've recorded significantly lower earnings at Zhongsheng. Contributions from other businesses and corporate costs were broadly stable. Within corporate costs, overheads were 8% lower, offset by higher financing costs on parent company net debt. Outside underlying earnings, the group recorded a net nontrading loss for the year of $1.9 billion. The largest component, as in prior years, was a net fair value loss from revaluation of investment properties, primarily Hongkong Land's central office portfolio as a result of continuing soft market rental conditions. The group also made a number of impairment provisions outside underlying earnings totaling $568 million, principally against the carrying value of associate investments. DFI's disposal of its interest in Yonghui also resulted in a loss recorded among other nontrading items. The sale has now completed with over $610 million net proceeds received and marks a significant milestone in DFI's ongoing portfolio simplification and strategy to drive improved shareholder returns. After all nontrading items, the group reported a net loss attributable to shareholders of $468 million compared with a net profit of $686 million in '23. Turning now to the group's balance sheet. Net borrowings, excluding Astra's financial services companies fell by $1.1 billion to $7.3 billion, and gearing reduced by 1% to 14%. This was driven by debt reductions at almost all portfolio companies, led by JC&C where consolidated debt fell by $910 million with proceeds from the sale of Siam City Cement, property sales in Malaysia and each share of the enhanced 2023 dividend received during the year from Astra. Group cash flow from operating activities was $5 billion, up 9% as a result of lower working capital, principally in Astra, lower tax outgoings and increased dividends into Astra from its associates and joint ventures. Investing activities outflows were substantially lower than the prior year at $971 million. Capital expenditure, principally organic investments by our portfolio companies continues to be the group's highest priority deployment of capital. While the group invested over $2 billion of CapEx in 2024, this was below the prior year, principally as a result of the new strategy focus at Hongkong Land, which saw no new development site acquisitions and also the capital cycle at Astra, which had seen a substantial capital refresh by United Tractors in 2022 and '23. Higher spend on financing activities mainly reflected outflows for increased shareholdings in JC&C and Mandarin Oriental as well as increased dividends to noncontrolling interests paid in the year by Astra. The group has over $12 billion in liquidity headroom to finance future growth, a little less than the prior year as portfolio companies took the opportunity from improved balance sheet positions to trim surplus facilities. Overall, the group's portfolio companies continue to be highly cash generative, supported by strong balance sheet and access to considerable liquidity. Now turning to Jardine Matheson's corporate balance sheet and cash flows at the parent company level. As a reminder, net dividend income at this level reflects dividends from the group's portfolio companies and associates, net of parent company operating costs and financing charges. Net dividend income increased 12% in the year to nearly $900 million, following strong business performance recovery in 2023. As anticipated at the half year, cash cover for the Jardine Matheson dividend rose to 2x. Net debt at parent company level rose to $1.3 billion at year-end primarily due to the purchases of 6.7% of JC&C, taking our holding to 84.6% and 7.8% of Mandarin Oriental, taking our position to 88%. Parent company borrowings are financed by 10- and 15-year bonds, totaling $1.2 billion issued in 2021 at an effective interest rate of 2.6%, topped up with a small amount of bilateral bank facilities. I'll now briefly go through the individual performance of each portfolio company for detail. Please refer to the portfolio company results briefings, which you can access via the Jardine's corporate website. Starting with Astra, I'll begin by reminding that the group holds its interest in Astra through JC&C. And the numbers on this slide reflect the contribution made by Astra to JC&C. Astra delivered a resilient performance in 2024, the underlying net profit contribution to JC&C however, was 3% lower, impacted by a weaker Indonesian rupiah. In local currency terms, Astra reported record earnings reflecting improved performances from most of its businesses, in particular, motorcycle sales, financial services and infrastructure and logistics. Contributions from United Tractors heavy equipment, mining, construction and energy segment decreased to $376 million. The drop primarily reflected a fall in Komatsu heavy equipment sales, and coal mining, which despite an 11% increase in sales volume saw lower revenue and profits due to falling coal prices. UT benefited from 32% higher gold sales and also started to record nickel mining profits from Stargate and Nickel Industries. Although M&A investments were lower in 2024, Astra will continue to prioritize value-accretive opportunities to expand its interest in HEMCE. The contribution from automotive decreased by 3% to $330 million with a higher 2-wheel contribution offset by the impact of a weak car market. Astra's market share for motorcycles and cars both remained stable, at 78% and 56% of the total market, respectively. Astra's Financial Services business remained stable despite the headwind from foreign exchange as the consumer finance business grew new amounts financed by 9% and underlying net profit by 6% on a local currency basis. There was a 31% increase in the contribution from infrastructure and logistics, primarily from higher toll road earnings. Astra has interest in 396 kilometers of toll roads and is seeing strong growth as these investments mature and its toll road operating service business grows. Turning now to Hongkong Land. Underlying profit fell to $410 million. As already mentioned, this primarily reflected noncash impairments in its build-to-sell business in China. However, I'll begin with the Prime properties Investments segment as this is, of course, both the largest and the key ongoing business segment at Hongkong Land. The central office portfolio in Hong Kong remains highly sought after, with physical vacancy broadly unchanged in the year and committed vacancy levels significantly below the wider grade A central market. Office rents in Hong Kong fell again, but once again by less than the Grade A office average. As a result of the fall in office rents, the balance sheet value of the group's prime properties investment portfolio in Hong Kong declined by 5% excluding the impact of accounting reclassification for areas occupied by the group. Contributions from the luxury retail portfolio in Hong Kong were also lower due to planned tenant movements from the tomorrow Central transformation. But the ultra-high net worth retail segment remained resilient with higher customer spending. In Singapore, the office portfolio performed well with low vacancy rates. Average rent was up from the previous year and the valuation of the group's portfolio in Singapore remains stable. The group's performance in China was mixed, with a lower contribution from One Central Macau with an increased contribution from Wangfu Central in Beijing due to tenant mix optimization. Overall, underlying net profit from Prime Properties was down 5% at $930 million. Turning to the build-to-sell segment. As mentioned, Earnings were lower as a result of $314 million net noncash impairments in China. Excluding impairments, earnings from this segment, however, were 29% higher than the prior year, principally reflecting strong sales of residential units at the group's prime West Bund site in Shanghai. In Singapore, premium residential developments continued to attract strong market interest, although contracted sales were lower than the prior year due to limited inventory. It's worth noting that while committed to completing its existing portfolio of projects, Hongkong Land will no longer deploy capital into new build-to-sell opportunities across the region. Accordingly, there was no capital expenditure for new land site acquisitions in 2024. And we expect profit contribution from this segment to decline over time as capital is recycled to higher-value uses. We strongly support Hongkong Land's new strategy. While we've recognized short-term earnings headwinds, we're excited by the prospect of stronger recurring income streams from renovation of their existing super prime retail assets in Hong Kong and development of the West Bund project as well in the mid long term from new assets and businesses. DFI saw a strong recovery in 2024 delivering a 30% increase in underlying net profit. Health and Beauty business reported stable underlying profit of $211 million. Mannings in Hong Kong and Guardian in Southeast Asia, both saw increased earnings, but this was offset by weaker performance in Macau. Convenience profits rose by 17% as product assortment shifted towards higher-margin categories. In Hong Kong, operating profit grew by 10% as cigarette volumes fell in South China and Singapore, 7-Eleven saw stable like-for-like sales and a recovery in profit driven by product mix and ongoing cost control. South China, in particular, offers a significant earnings growth opportunity for DFI. In the Food division, revenue was 2% lower, excluding divestments, that Singapore saw improved sales mix and effective cost control, which led to a meaningful earnings recovery. IKEA reported an 11% decline in like-for-like sales and a 13% drop in operating profit as competition in Hong Kong and Indonesia are intensified. Among associates, Maxim's reported lower underlying profits, while Yonghui underlying losses reduced to $33 million. DFI completed the sale of its interest in Yonghui in February 2025. Jardine Pacific reported an underlying net profit of $149 million, 9% down primarily because of weaker results at Zung Fu and business disposals. Among the B2B businesses, JEC and Gammon both reported improved profits up 8% year-on-year. JEC saw higher sales with strong performance in Hong Kong, and encouraging contributions from the Trane joint ventures and newly acquired associate Krueger. Gammon's performance was driven by higher sales and tight cost control with its forward order book also growing during the year. Hactl also recorded an 8% increase in profit, driven by strong growth in the value of cargo handled in the year. Schindler's results primarily reflected top-up cost provisioning on a number of projects in Hong Kong and Singapore in 2024. Among Jardine Pacific's B2C businesses, both Zung Fu and Jardine Restaurants faced challenging conditions. Jardine Restaurant recorded a second year of losses, although these almost halved in 2024 with improvements starting to come through at Pizza Hut and KFC Hong Kong as sales recovered and cost control improved. Zung Fu, however, saw a significant deterioration in market conditions and reported a net loss as changes in tax concessions for electric vehicles in Hong Kong, particularly impacted sales of higher-end OEMs. There were, however, encouraging results from new brands, [Smart] and Denza. Portfolio simplification continued in JP with the sale of the group's 50% interest in Jardine Aviation Services, following the disposal of Greatview Aseptic packaging in the second half of 2023. JC&C reported resilient earnings in 2024 although growth was impacted by foreign exchange headwinds. In Indonesia, Astra whose performance I've covered already accounts for the vast majority of the contribution. In Vietnam, JC&C's businesses contributed $103 million, unchanged from 2023. REE's profits fell due to lower hydro power demand, the Taco's contribution rose 10%, as automotive profits recovered, benefiting in part from registration tax incentives. Despite disappointingly weak business confidence in Vietnam over the last few years, we continue to believe that it offers an important growth opportunity for the group looking forward. There was a stronger contribution from regional interests, which grew by 9% to $55 million principally reflecting higher profits at Cycle & Carriage Singapore. We recorded underlying profit from our 21% interest in Zhongsheng down 41% to $83 million, due to pressures on volume and margins in the new car business, only partially offset by growth in the aftersales and used car segments. We continue to believe in Zhongsheng's strong network, market positioning and operational capabilities. The group has made promising progress in the EV segment by partnering with Seres to distribute and service AITO electric vehicles. Turning finally to Mandarin Oriental. Underlying net profit was $75 million, 8% down from 2023. This was primarily due to reductions in one-off residents branding fees in the management business, and tax credits recognized in 2023. Importantly, though, recurring fee income in the management business grew by 15%, reflecting 3 new hotel openings and an additional hotel rebranding, as well as one new branded residents. These brought the total number of properties in operation across 26 markets to 41 hotels, 12 residences and 26 homes. Underlying earnings from the owned business was stable at $45 million, with solid revenue and profit growth at the majority of the group's owned hotels, particularly in Singapore, Tokyo and Madrid, offsetting the impact of sale of the Paris hotel and retail interests. Looking ahead, 8 new hotel and residence projects have been announced since the start of the group has a strong development pipeline of 32 hotels and 18 residences to drive further progress towards its target of doubling its portfolio. I'll now hand back to John.

Thank you, Graham. Our portfolio of companies to recap, have sharpened their focus on building value. With Hongkong Land, DFI and Mandarin Oriental, all adopting and making strong early progress in executing new strategies. DFI, JC&C and Jardine Pacific have continued to focus on portfolio simplification with the divestments of Yonghui, Siam City Cement and Jardine Aviation. We took the opportunities to grow our stake in JC&C, increasing our effective interest in Astra and our Vietnam holdings, and we also increased our holdings in Mandarin Oriental. Looking forward, in 2025, we expect our results to be broadly stable, setting aside the 2024 impairments in Hongkong Land. With enhanced boards, strengthen leadership teams, exciting new strategies in many of our portfolio companies and to sharpen shareholder focus on return, Jardine Matheson is well positioned to drive mid and long-term growth. The future looks encouraging. Thank you. I will now take your questions. [Operator Instructions]

This is Jeff from CSA. Congrats for the great and resilience of results. So I have 2 questions. First one is regarding the change from own operator to investment manager. So can you help us understand how has Jardines influence on the underlying entities has changed on the back of this? And just any color would be appreciated. And second question would be about share buybacks. So DFI and Hongkong Land share price has gone up over the past 4 months, but the JM share price hasn't caught up as much. So just wonder what's your latest take on that?

Perfect. Thanks, Jeff. Maybe I'll start and Graham, I'll hand to you. I think, first of all, in terms of as an engaged investor. What are we trying to achieve? I just want to reiterate that superior shareholder returns. And equally, we want to have strong accountability as we look into the portfolio of companies who is driving those shareholder returns. And so we've set up very strong leadership teams. They're supported by the Board. Now on those boards as Jardines, we participate, there are essentially 2 shareholder -- Jardine shareholder representatives on that Board. So well, that Board is very much the forum for key decision-making and agreements. That is the forum which Jardine has influence. Now as an engaged investor, we clearly want to look for long-term shareholder returns and shareholder value being driven. We are also remained preoccupied with leadership to ensure that future successors to the current leaders are being developed and very firmly in place. We also have an expectation, as I mentioned earlier, in terms of sustainability being a very important part of how we would like our portfolio companies to pursue their businesses to ensure those earnings growth are sustainable. As an engaged investor, I suppose say, if I contrast it to where we might have been a few years ago, but more black-and-white comparison I would say we have more focus on those longer-term returns, perhaps more detachment coming away from the individual businesses, focusing again on the impact on Jardine Matheson returns because ultimately, we benefit from stronger individual portfolio company returns. At the same time, to be very clear, while we influence and are very much committed to each of these individual portfolio companies, those individual boards we see as the owner operators of our businesses rather than Jardines itself.

On buybacks, as John highlighted, Jeff, we think about buybacks routinely as part of our capital allocation framework. That starts with organic investment in the portfolio companies, supporting the progress of the dividend. And then we think about buybacks on a level playing field with external investment opportunities. And you saw in 2024, we spent more than we've done for some time, deepening our investments in JC&C. And we also were offered a couple of blocks in Mandarin Oriental that we took the opportunity to pick up. We will continue to do as we have always done. We don't -- we're not immune to the opportunities that are represented both in our own share price and indeed in the value that sits in the portfolio companies. But in the near term, you also saw that our parent company level net debt level has pushed up and reflecting our strong commitment to the quality of the group's and parent company's balance sheets. We do want to probably prioritize in the near term some recovery on the parent company balance sheet before we move forward. We do think about the parent company on an ongoing basis also in relation to neutralizing scrip. We actually did a little bit less on that last year, partly as a result of the extra capital that we put into JC&C and Mandarin Oriental, but that hasn't changed the overall position that on a long-term basis, we would look to neutralize the effect of scrip and the effect that, that has on earnings. But again, in the near term, we're pretty focused on parent company balance sheet in order to bring the flexibility to invest again. We want to keep the parent company. Our long-standing commitment is that holding companies in the group should not carry net debt. And we've been there with net debt at both the parent company and JC&C level for a little while, and we want to make some headway on that in 2024.

This is Karl Chan from JPMorgan. So just a follow-up on your comments on the capital allocation, right? So there are various way for you to allocate the capital. Just now you mentioned that we might prioritize in debt reduction at the parent level. So -- but then versus, let's say, investing in your own companies, for example, you have been increasing stake in JC&C and versus share buyback. Just curious among all the various ways to allocate your capital, I understand that it seems like debt reduction may be the first priority. But then after that, how would you prioritize that? Because from our perspective, we would still be very keen to hear a bit more about buyback and all the stuff. So that's my first question. And then the second question is about the new leadership in the various subsidiaries that we have. So just curious, in the coming year, what may be the key KPI for the new CEOs and in particular for Hongkong Land because we have some very exciting long-term targets from Hongkong Land. So just curious what's your thoughts on how they might be able to execute the new strategies because I guess in the near term, the rates higher for longer, that may be a bit difficult for Hongkong Land to execute some very accretive capital recycling activities. So just wondering from your perspective, how do you see the new strategy coming out potentially this year?

You start with that, John.

I think, again, each of the chief executives, Hongkong Land Chief Executive, certainly among them are incentivated based on short-term and long-term performance, and we have very specific targets to match. What is immensely important for us, particularly in the property business and I always say that the property business requires an enormous amount of patients from time to time. And I suspect we're in one of these periods. But nonetheless, the emphasis is on doing things right to build longer-term shareholder value. So that's what the Board of Hongkong Land has said, and that is what will be the key test of success at Hongkong Land and indeed at each of the other individual portfolio companies. I would say in respect of 2025, its strategy execution. I think this is what you -- and we as shareholders will be monitoring for Hongkong Land. Is that capital recycling? Is that the progress being made in tomorrow Central and West Bund, because these are the key aspects. We were very supportive of the recent management changes being put into place in terms of West Bund because West Bund, while it won't impact the results in a very positive way for a couple of years, that is an immensely value-creative project that we see a sort of are very much something for the next 5 to 10 years. But seeing how that strategy gets executed Mandarin Oriental, what we will be looking for by contrast is just the number of new hotel management contracts signed, including residences, we'd be looking at the increase in management fees on an ongoing basis, really with an emphasis on building out that very earnings attractive investment-light proposition. In effect of DFI, third example, very much looking at where the value is being driven, particularly in 2 businesses that we find really exciting, the health and beauty business, both in North Asia and in South Asia and convenience store. Convenience store constantly in the news at the moment because of the larger transaction that's constantly being debated, but we, too, share a real enthusiasm for that business. Guangzhou, the business in South China had a really good start. We're very confident of the business model. And so seeing how that gets executed even as we -- at the DFI board level continue to look to evolve that portfolio. These are the sort of, I suppose, a rough indication of the KPIs that we think are going to be very important in terms of 2025. And I suppose with that in mind and Graham, you'll will chip in, yes, share buybacks are very important for us as and we look at them on an ongoing basis. But so too do we look at other investment opportunities, both in the portfolio companies, but also the Jardine Matheson level. We're looking at, as we said, the returns may be a focus more on the medium and longer-term returns rather than the short term, given the nature of the investor that we are. We're looking at the risks. We're looking at how best to deploy our capital to generate the most shareholder value over a mid- and long-term basis. And given the volatility of market conditions that really changes. So no recipe card for answering that question.

I'll just reinforce that again, John, by reminding everybody that the vast majority of capital that gets deployed in the Jardines Group is deployed by the portfolio companies to drive them becoming bigger stronger business is with a strong sustainable earnings growth trajectory ahead of them. What we do around the edge is in terms of deploying capital into new businesses can occasionally be significant when we privatized the shareholding in Jardine Strategic a few years ago, we deployed significant capital there. And we have also deployed significant amounts of capital over the years last few years into deepening our shareholdings and some of the portfolio companies and buying back JM shares, but nobody should get distracted in any of that. The real way that we will drive value for the group and its shareholders at Jardines level is by helping the businesses become successful in executing great strategies exposed to growing markets in our key sectors in Asia. And so that's where the vast majority of capital will be deployed. Everything else, I understand the financial excitement around it, it makes spreadsheets work, but that's our first capital priority.

This is Raymond Liu from HSBC. I've got 3 questions. The first question is about company structure. So can management share with us, is there any review on the existing shareholding structures across its portfolios? Say for example, like JM increased the stake on JC&C by 6.7%, as you mentioned in PPT. And the second question is on synergy. So one of the largest portfolio evolvement in the past 12 months is related to Hongkong Land. So can management share a bit more color on how much synergies that is going to create under the transformation to the whole group. And the last question is about the impairment. So on -- if you look at the underlying earnings, one of the key drag is about the impairments, of course, like both Hongkong Land as well as some in DFI as well. So did you see any -- do you see any risk of any other like provisions or impairments in the next 12 months' time?

Right. I suppose in respect of our company structure, I mean, together with everything else, we monitor our company structures on an ongoing basis. But as I said earlier, we like very much the accountability of the individual companies focused on their specific sector. I mean everything else is, again, looking at the opportunities in front of us and weighing the advantages and disadvantages of various courses of where we can deploy our capital. I mean I would say on synergies, synergies is not how we see significant value creation across the Jardine portfolio of companies. Now there are significant synergies within some of our portfolio companies. I think the Astra ecosystem where to put it in very simple terms, selling a 2-wheel motorcycle at the same time, ensuring that a customer has financed to buy that motorcycle, ensuring at the same time, insurance is provided for that customer. Clearly, that ecosystem generates significant revenue synergies and indeed some cost synergies in the back office. And it's not to say there are not sort of some cost synergies to be got Graham has been leading the creation of the past 2 or 3 years of the Jardine Service Center, where we aim to get a very high quality output to provide back-office services from any of our group companies, cost has certainly been an attractive feature of it, but it's to ensure that it's the most modern, the most flexible cost efficient, yes, but it's really not something we generally talk of as a significant source of shareholder value for Jardines. I think if I look, you mentioned Hongkong Land, and I think there's been very much conversations between Hongkong Land and Mandarin Oriental. Clearly, Mandarin Oriental see branded residences as a way they can provide value to the owners and developers of residential real estate. Inevitably, there should be further opportunities for Hongkong Land with its focus on that same ultra-premium, high end to find opportunities to work closely with Mandarin Oriental. Here in Central, Hongkong Land and Mandarin Oriental have a very synergistic way of working in Central, and I think there's more to come on that. But I would say it's incremental rather than a really core way of where we see driving value. So synergies, yes, I've pointed to a few. Astra that ecosystem is really fundamental, but Jardines across its portfolio companies are really not a key focus. Probably more inefficiency to find those synergies rather than great synergies in and of themselves. Impairments. I mean the impairments in -- I will speak is Hongkong Land was a, I think, a key focus for management, not so much impairments, but monitoring the condition of the market in Mainland China and the impact on its various assets. And you saw Hongkong Land come at that issue very quickly as we came into 2024 and conditions continue to deteriorate. No doubt, we have every confidence in Hongkong Land management to continue to monitor the market. And I think if I listened closely indeed, both in the recent presentation and around the boardroom table, maybe a sense of a bit more stability than 12 months ago, but I think it will be to management to continue to monitor market conditions, looking for the opportunities, but also assessing the risks as we go forward.

I think you've covered the key thing there, John, in impairments across the whole group, it's ultimately driven by the market. We're not in an accounting world of 30 years ago, where in one blow, you can clear the decks and say every asset, there's only upside on it from here on in. We have to follow market valuations. And clearly, in a number of places, we've seen those under pressure. I will say that in pulling it out as a key feature within the 2024 numbers, I'm hoping that there won't be a regular feature at that scale of our results. We do have to watch the market. There are balance sheet values that are very large on the Jardines balance sheet. And if the market were to calamitously change in a way that we don't anticipate you would expect us to properly reflect that in the value of our balance sheet, which is what we've done. So I can't offer any guarantees but I can say that at this point, based on the market conditions that we've seen and look forward to in the near future. I believe that our portfolio company balance sheets are well stated.

Certainly, not our base case, Graham.

This is John Lam from UBS. I have 3 questions here. First of all, regarding on simplification. So looking back over the past 5 years, there have been a lot of business simplification in terms of business disposal and also privatization of Chinese strategic. Looking ahead, is there any further room that we could see further simplification maybe a bit more directly is about for JC&C and also MO, the shareholding has increased to more than 80%. Would that be also opportunity to privatize the above companies? The second one is regarding on the geographical exposure. So looking ahead, maybe in the next 3 to 5 years, how should we think about the exposure for Hong Kong, China combined versus the Southeast Asia? And then the third one is about -- on the power plant, I think you mentioned about the long-term earnings growth, quality earnings growth. And also if there's any quantitative numbers that you shared in the investor regarding on how much will be earnings growth here?

Right. Maybe if I start off. I mean I think simplification is something that each of the boards of our portfolio companies are talking about. Looking at the businesses that will add and create value going forward and looking for noncore, nonstrategic often low-yielding assets that we should be disposing to a better owner. That very much continues. That's very much in line with the focus across the portfolio of companies, Boards and managements on total shareholder return. I think it's a much more vigorous capital allocation, including the capital we've already allocated approach. And I can see this as a continuing important theme across the portfolio of companies for 2025. I would say in terms of the broader question you raised, really, I sort of come back to the answer we gave a few moments ago in terms of we continue to look at the overall structure of the group taking into consideration other opportunities that we have, the returns and risk, but really focus it through a lens of driving shareholder return. That's essentially the -- our views on simplification. More simplification to come at each of the individual portfolio companies level. I would say in terms of geographic exposure, geography, we see ultimately as an output rather than an input to be very clear. What does that mean? It means that we're in each of the individual portfolio companies focusing on where to build good businesses, strong businesses, return -- attractive return businesses we're really not deciding that's better because it's in Vietnam or better because it's in China, not at all. We start very much with the business opportunity in mind. I would tell you, if I look the results of 2024, I mean that dominance now of Southeast Asia, led by Astra, we would see continuing certainly in the visible future. Southeast Asia, I think, is having a strong moment. We see it continue to be well positioned. Astra for us, is a very core investment holding. We're enthusiastic about further investment opportunities, of which the leadership team in Astra is looking at and Vietnam, as we said, we continue to be enthusiastic. So I would see sort of more to come from our existing businesses and new opportunities in Southeast Asia. Now having said that, I want to say China is really important for us. We have disposed of a Yonghui. But don't take that as at all a China view, take it as our investment in Yonghui view. And in respect of China, in fact, I'd look at our enthusiasm going forward. As we noted in the presentation, West Bund, is our largest new investment being made across the group at the moment. And that will take a few years to come to fruition. It's not only West Bund, the other Hongkong Land projects, Suzhou onward. These are sizable commitments in which we are looking for good returns to come out in the midterm. And I said earlier, we need a bit of patience with real estate, given the development cycle in the business. Similarly, I we're -- our convenience store business is very well placed in Southern China, and we will continue to absolutely look in China. And of course, Hong Kong, where we sit here, we are absolutely confident of the future of Hong Kong and our B2B businesses, particularly are taking advantage of that. We'd like to see a bit more office -- new office leasing coming into the market, frankly. But equally, Hong Kong's position as an international financial services city, I think, is underlying and this should be the trough of which we begin to build over time.