Each day at noon, a single shot is fired into the sea in Hong Kong’s Causeway Bay. The sounding of the Noonday Gun is a 140-year-old tradition, immortalised in a song by Noel Coward and as closely linked with the territory as it is with Jardine Matheson, one of its oldest companies in the region.
Legend dictates that many years ago, every time one of Jardines’ taipans – as foreign businessman or traders in China are often still known – arrived in or departed from Hong Kong, a salvo was fired to herald their arrival or departure. It is said that the arrangement annoyed a senior naval officer, who ordered the firm to fire the gun every midday as a kind of punishment, but also as a time signal.
The firing of the gun still continues, largely as a tourist attraction. However a month today there will be something of a return to tradition as Jardines uses the occasion to mark the departure of one of its most senior taipans.
The only difference this time will be that the taipan gets to fire the gun himself.
After eight years in post Norman Lyle leaves his role as group finance director of Jardine Matheson Holdings at the end of next month. The territory has seen many changes since Lyle arrived in 1997. The Asian currency crisis of the late 1990s affected its economy badly even if the Hong Kong dollar itself survived relatively unscathed thanks to its US dollar peg. Bird flu and, much more seriously, the outbreak of SARS had a significant affect and has dented confidence in an economy that thrives on sentiment.
In that time, Jardines has taken the opportunity to restructure itself and redirect capital into Asia. It disposed of its interest in KwikSave supermarket in the UK and reinvested in its share price and Asian businesses. With fingers in so many pies, Jardines felt the pain more than most. Lyle uses its hotels business to illustrate just how damaging some of those issues could be. ‘At the Mandarin hotel there might only have been three of four guests during the SARS epidemic. And that’s a 550-room hotel.’
But it hasn’t just been crisis management for Lyle during his time in Hong Kong; he has played a key role in delivering shareholder value over that period. These sorts of things are always said when someone senior retires. But you sense a degree of understatement in the comments by Jardine Matheson MD Percy Weatherall on the announcement of Lyle’s retirement at the end of last year: ‘Norman Lyle has made a significant contribution to the group since joining in 1997, for which we are grateful, and we wish him well in his retirement.’ After all it was only a year ago that Lyle reached 57 and was asked to stay on beyond the company’s normal retirement age.
And more than most, he has also seen international financial reporting standards come to the fore. With its primary listing in London and secondary listings in Bermuda and Singapore – as well as subsidiary companies in every country in Asia – Jardines has subscribed to IFRS for longer than most.
‘We’ve been using them for 10 years,’ says Lyle. ‘We’ve been involved in the development of IFRS because we’re a really diverse group – we employ more than 20,000 people and have businesses ranging from property through Hongkong Land, hotels with Mandarin Oriental and the largest retail business in Asia. We’ve also got many other service type activities – financial services, ports. In Indonesia we’ve got manufacturing and plantations. We’re exposed to a host of accounting standards. To some extent whenever we introduce these accounting standards we find there are issues that need to be addressed when it comes to practical application of the standard. The dialogue we have with the IASB is very positive.’
Lyle points to IAS 40 as an example. ‘We have a large investment property portfolio in central Hong Kong through Hongkong Land,’ he says, clearly concerned that the group might have had to carry the value at depreciated cost. ‘Many of these properties were bought 100 years ago. If you carry an investment property at depreciated cost on your balance sheet it can give the completely wrong message to the investing public. And investors – particularly in Asia – tend to look at net asset value. We pointed this out to the IASB and a year ago they revised that standard to allow people to carry leasehold investment properties at market value.’
He is no IAS apologist, however, and wants to see further reform as changes in valuation of investment properties still goes through the P&L. After all, investment property prices – after hitting rockbottom, at least by Hong Kong standards – leaped by 25-35% last year.
‘That’s a movement through your P&L account and these movements are hundreds of millions of dollars. That can give a misleading impression of your earnings. We think it’s important to show those separately from underlying earnings. And we think that may happen over time.
‘That’s not to say there aren’t improvements that could be made to some of the standards. But the way I look at it is that it’s much better to move towards convergence.’
Three years ago Lyle took part in an Accountancy Age feature called ‘Week in the Life of’. His week took him to Shanghai, London, Paris and Kenya. He has had to grow used to international travel, having work overseas before – in Kenya and Malaysia. Before joining Jardines he was general manager, finance, of Zeneca Group. He retired from there in 1997. ‘But I was offered this job in HK,’ he says. ‘My wife and I had to decide whether we went back to Asia. After much consideration over a period of a year we decided to join Jardines.’
From Hong Kong, Lyle keeps abreast of developments in the UK, including the current merger talks, which he supports. As a former CIMA president he led negotiations on the aborted attempt to merge CIMA and the ICAEW in the mid 1990s and he regrets it didn’t come off. ‘I thought it would have been a very good international body,’ he says. Now he sees ‘a tremendous opportunity’ for the UK accountancy bodies to unite and bring expertise to China. ‘I don’t think any of the bodies on their own can meet this challenge,’ he says.
For now, though, Lyle has one more round of results to get through before he leaves, and he insists he is unsure what the future holds. But with Hong Kong currently suffering a shortage of financial brains – which seems to be afflicting everyone at the moment – and recent corporate governance reforms that require listed local companies to have someone with financial experience on the board, Lyle will have no shortage of offers of non-executive directorships. ‘I’ve no doubt I may end up accepting one or two, but I haven’t decided yet what I’m going to do.’
Or maybe another role beckons. He intends to stay in Hong Kong, a place he has clearly fallen for. A keen equestrian in his spare time, he points to the territory’s country parks, so often overlooked, that account for more acreage than the more familiar high rises. ‘It’s like Scotland, but with better weather,’ he jokes.
He has already been awarded an OBE for helping foster Hong Kong-UK business relationships, and there is no veneer to the enthusiasm with which he talks about his adoptive home.
‘Hong Kong has developed,’ he enthuses. ‘It’s still a major international financial centre, a major logistics centre and a major tourist centre. It’s a very cosmopolitan city. It’s also got the rule of law, which is incredibly important. It’s got a very professional civil service and is corruption free. It’s an ideal place to establish a business.’
And if, as most commentators agree, China is a business opportunity waiting to happen – and Hong Kong wants to market itself as the gateway to China – then it might just need a business ambassador. Lyle – who as a former chairman of the British Chamber of Commerce in Hong Kong knows a thing or two about glad handing – modestly laughs off the idea. But don’t rule it out.
If you’ve set foot in Asia you will have transacted with Jardine Matheson. Whether you’ve stayed in a hotel or bought a carton of milk, driven a car or eaten a pizza, you would have dealt with one of Asia’s largest conglomerates.
As well as a main share listing in London and domicile in Bermuda – chosen ahead of the handover of Hong Kong back to China to maintain corporate governance under a British legal system – it does, of course, have global reach. However, Asia is its traditional market and Hong Kong its home.
Jardines is one of the oldest of Hong Kong’s diversified trading companies. Formed in Canton in 1832 by William Jardine and James Matheson, it promoted the founding of Hong Kong four years later and in 1841 purchased the first plot of land in the territory for £565. Since then its growth has been exponential. Through companies as well known as Jardine Pacific, Jardine Motors Group, and Hongkong Land, its business interests take in engineering and construction, transport services, motor trading, property, retailing, restaurants, hotels and insurance broking.
More than that it is woven into the local fabric. Jardine’s Bazaar and Jardine’s Crescent are among the best known shopping areas. Even the Noonday Gun was introduced by Jardines.
The share price has been on an upwards curve since mid-2003, while its interim 2004 results showed good results from Dairy Farm, Jardine Pacific and Astra and a 15% rise in the value of its Hongkong Land property portfolio. It all added up to a 5% rise in first-half revenue to $4.4bn (£2.36bn) and a bottom line turnaround that saw profits of $441m. Annual results, to be released on 1 March, should confirm that recovery.
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