Half-Year Results

1st August 2024

The following announcement was issued today to a Regulatory Information Service approved by the Financial Conduct Authority in the United Kingdom.

DFI RETAIL GROUP HOLDINGS LIMITED

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2024

Highlights

·    Underlying Group profit attributable to shareholders of US$76 million, up from
US$33 million in the prior year

·    Good profit growth in Food and Convenience

·    Health and Beauty profit contribution grew 3%

·    Continued net debt reduction

·    Interim dividend of US¢3.50 per share

"We are pleased to report strong first half underlying profit growth to US$76 million.  Despite a challenging retail backdrop, our Hong Kong food business continued to see market share gain with improving profitability.  Good underlying profit growth in the Convenience segment and robust profit contribution from Health and Beauty demonstrate the benefit of our diversified portfolio as we continue to navigate the evolving consumer landscape effectively with our strategic initiatives and accelerating omnichannel presence."

Scott Price

Group Chief Executive

Results

The interim dividend of US¢3.50 per share will be payable on 16th October 2024 to shareholders on the register of members at the close of business on 23rd August 2024.

DFI RETAIL GROUP HOLDINGS LIMITED

HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2024

OVERVIEW

The Group reported first half underlying profit of US$76 million, up from US$33 million in the same period last year, primarily driven by the Convenience and Food divisions.  Associates' performance also improved due to reduced loss from Yonghui.

Total first half revenue for the Group, including 100% of associates and joint ventures, declined by 6% year-on-year to US$12.6 billion, primarily driven by lower sales in Yonghui.  Subsidiary sales, excluding the impact of the divestment of the Group's Malaysia food business in March 2023, came in 2% below the prior year.

The underlying profit of subsidiaries was US$73 million for the first half, up over 80% year-on-year.  The Group's associates reported an underlying profit of US$3 million, an improvement of US$10 million from the same period last year, resulting in an underlying profit attributable to shareholders of US$76 million for the first half.

Operating cash flow, after lease payments, for the period was a net inflow of US$155 million, compared with US$149 million in the first half of 2023.  As at 30th June 2024, the Group's net debt was US$549 million, down from US$618 million at 31st December 2023.

The Group declared an interim dividend of US¢3.50 per share, representing an increase of 17% compared to the same period last year.

OPERATING PERFORMANCE

Subsidiaries

Revenue for the Group's Food division in the first half reduced marginally to US$1.6 billion, after excluding the impact of the divestment of the Group's Malaysia food business last year.  Divisional profit increased to US$26 million driven by improved sales mix and disciplined cost control.  Hong Kong sales remained largely stable year-on-year, despite the outflow of residents to the Chinese mainland at weekends and pent-up demand for outbound travel during holiday periods.  This sales performance has been supported by continued market share gain, strong in-store execution and some growth in basket sizes.  The Wellcome team continues to evolve its range and assortment by introducing new local brands to appeal to evolving customer needs and leveraging data to assist in the decision-making process.  To expand its channels to market, Wellcome also launched a partnership with Foodpanda in May to provide a 45-minute click-and-deliver service for both fresh product and everyday essentials with encouraging sales momentum.  While Singapore food like-for-like ('LFL') sales performance continued to be affected by challenging consumer sentiment, a better product margin mix and strong cost control significantly improved profitability. 

Revenue for the Convenience division was marginally lower compared to the corresponding period in 2023.  In Hong Kong, LFL sales performance was affected by reduced cigarette volumes following tax increases that came into effect at the end of February, while 7-Eleven Singapore and South China reported robust LFL sales growth, driven by increased foot traffic and strong performance in non-cigarette categories led by ready-to-eat ('RTE').  Overall, non-cigarette LFL sales increased by approximately 4% for the period, with RTE sales growing 13%.  Favourable product mix shift towards non-cigarette categories supported margin accretion and profit growth across all markets.  As a result, Convenience profit grew 73% in the first half compared to the same period last year.

Sales for the Health and Beauty division were broadly in line with the same period last year, with profit up 3% year-on-year.  The division reported good LFL sales performance in the first quarter which then decelerated in the second quarter, particularly in Hong Kong.  Mannings Hong Kong performance in the second quarter was affected by a strong comparable period last year due to consumption voucher disbursements which occurred in April 2023, outbound travel during the extended holiday period of Easter and Ching Ming Festival, and to a lesser extent, weaker performance from tourist cluster stores due to adverse weather conditions for the majority of the second quarter.  Mannings Macau LFL sales performance was adversely affected by a strong comparable in the prior year, with profits reducing as a result.  Guardian reported solid LFL sales growth for the first half, driven by effective in-store execution and promotions, particularly in Indonesia, with continued market share gain across key South East Asian markets.  Guardian also reported good profit growth in the first half, driven predominantly by strong performance in Indonesia and Singapore.  The integration of the Own Brand team for Food and Health and Beauty is expected to further strengthen the Group's competitive advantage through synergy, scalability and cost optimisation.

Challenging residential property market activity remains an overhang on the sales performance and profitability of the Home Furnishings division.  Sales in Hong Kong and Indonesia were adversely impacted by subdued property market sentiment and reduced customer traffic.  IKEA Taiwan reported slightly lower LFL sales than the prior year, due to temporary disruption caused by the Hualien earthquake in early April, with a quick business recovery thereafter.  Despite strong cost control measures in place, the challenging sales environment materially affected IKEA's profit during the reporting period.

Digital

As part of the Group's digital strategy reset, we have relaunched a Wellcome app and website in Hong Kong and will also be relaunching apps for our other major brands in the second half.  We have also expanded our quick commerce service in our Food and Convenience networks, providing a refined omnichannel experience for customers.  The Group's daily e-commerce order volume reached over 52,000 in the first half of the year, growing by close to 40% relative to the same period last year.  Growing e-commerce volumes sustainably has been a key priority for the management team, with the e-commerce profit contribution also seeing substantial improvement in the first half.

The yuu Rewards programme continues to grow with over 5 million members and is close to 3 million monthly active members in Hong Kong, in addition to 1.7 million members in Singapore.  The Group is beginning to leverage the rich data from the loyalty programme to enhance in-store operations, particularly in areas such as improving range and assortment.  During the first half, the Group expanded its own Retail Media network and successfully executed more than ten targeted marketing campaigns on the yuu platform in Hong Kong.  These initiatives drove improved sales performance for the Group's retail businesses and generated incremental advertising revenue. 

Associates

The Group's share of Maxim's underlying profit was US$8 million for the first half, a year-on-year decline of 31%.  The performance of Maxim's was adversely affected by challenging trading conditions due to increased outbound travel and reduced weekend dining out in Hong Kong as well as weak consumer sentiment on the Chinese mainland. 

The Group's share of Yonghui's underlying loss was US$8 million, a significant improvement from US$17 million loss during the same period last year, driven by ongoing optimisation efforts in relation to costs and store footprints. 

The Group's share of Robinsons Retail's underlying profit increased 14% to US$8 million in the first half, driven by improved sales mix and disciplined cost control. 

PEOPLE

Clem Constantine will retire from his role as Group Chief Financial Officer on 1st October 2024.  Clem has been instrumental in shaping the financial and strategic landscape of the organisation, overseeing improvements in financial performance and playing a pivotal role in defining and executing DFI's long-term strategic initiatives, driving sustained growth and value creation.  Tom van der Lee will succeed Clem as Group Chief Financial Officer with effect from 1st October 2024.  Tom joined DFI in January 2016 and has held a range of senior financial roles within the organisation over the past eight years, including Finance Director for Singapore, Finance Director for South East Asia, and Finance Director for DFI Retail Group.

After years of exemplary service and invaluable contributions to our organisation, Choo Peng Chee will retire from his role as Chief Executive Officer, Food on 1st September 2024.  With Choo's retirement, Curtis Liu will succeed as Chief Executive Officer, Food.  Curtis has over 24 years of retail experience across Chinese mainland and Taiwan, having previously served as Merchandise and Marketing Director for Wellcome Taiwan from 2004 to 2013.  Curtis' recent roles at JD.com, Meicai, and Walmart China have equipped him with significant expertise in O2O omnichannel strategies and data-driven customer analysis.

The Group thanks both Clem and Choo for their years of service and significant contributions to the organisation.

BUSINESS DEVELOPMENTS

The disposal of the Group's Hero supermarket business in Indonesia was completed at the end of June.  The transaction aligns with the Group's strategic framework.  Post-completion, DFI's operations in Indonesia will fully pivot to the Guardian and IKEA businesses.  The Group remains confident in the long-term prospects of these two businesses and the opportunity for future market share gain.

OUTLOOK

The Group expects second half outlook to remain challenging given macro uncertainties, shifting customer behaviours and increased levels of outbound travel, particularly into the Chinese mainland from Hong Kong.  Nevertheless, our streamlined, format-focussed organisation provides us with the agility needed to respond swiftly to the evolving consumer landscape.  These actions include improving the local relevance across our assortment, tapping into larger addressable markets where we see earnings accretive opportunities, strengthening our omnichannel experience and accelerating monetisation initiatives from our yuu Rewards loyalty programme.  With our diversified business portfolio, strong brand equity, a sharpening focus on operating efficiency and our revamped digital strategy, we are confident that the Group is well-positioned to deliver sustained, profitable growth and shareholder returns in the long term.

The Group reiterates its guidance for 2024 underlying profit attributable to shareholders to be between US$180 million and US$220 million.

Scott Price

Group Chief Executive