Dfi Retail Intl Regulatory News (DFI)

RNS Number : 0752I

Dairy Farm International Hldgs Ld

04 March 2010

 

To: Business Editor	4th March 2010
	For immediate release

 

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

 

DAIRY FARM INTERNATIONAL HOLDINGS LIMITED

2009 PRELIMINARY ANNOUNCEMENT OF RESULTS

 

Highlights

·; Underlying earnings up 14%

·; Major markets performed well

·; Profit growth at Maxim's

·; Strong financial position with net cash

 

"Dairy Farm's businesses have established leading retail brand names in their markets, and enjoy strong customer recognition and support. This has underpinned the Group's performance in the recent challenging economic environment, and should provide the basis for further expansion as conditions improve. With its secure financial position, Dairy Farm's prospects for the coming year remain positive."

 

Simon Keswick, Chairman

4th March 2010

 

Results

	Year ended 31st December
	2009	2008		Change
	US$m	US$m		%
Sales
- subsidiaries	7,029	6,733		+4
- including associates	8,053	7,742		+4
Underlying profit attributable to shareholders	364	320		+14
Non-trading items	n/a	13		n/a
Profit attributable to shareholders	364	333		+9
Underlying PBIT to sales	6.0%	5.5%
	US¢	US¢		%
Underlying earnings per share	27.02	23.77		+14
Basic earnings per share	27.02	24.73		+9
Dividends per share	16.00	14.00		+14

The final dividend of US¢11.50 per share will be payable on 12th May 2010, subject to approval at the Annual General Meeting to be held on 5th May 2010, to shareholders on the register of members at the close of business on 19th March 2010. The ex-dividend date will be on 17th March 2010, and the share registers will be closed from 22nd to 26th March 2010, inclusive.

 

 

 

 

DAIRY FARM INTERNATIONAL HOLDINGS LIMITED

 

PRELIMINARY ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED 31ST DECEMBER 2009

 

OVERVIEW

In a challenging year for economies throughout Asia, Dairy Farm achieved another good result in 2009 with growth in both sales and profit. The Group's core business of selling goods that meet the everyday needs of Asian customers again proved resilient.

 

PERFORMANCE

Sales, including 100% of associates, increased by 4% to US$8.1 billion in 2009. Underlying profit for the year of US$364 million increased by 14%. Underlying earnings per share also rose by 14% to US¢27.02. There were no non-trading items in 2009, while in 2008 the profit attributable to shareholders of US$333 million included non-trading gains of US$13 million. The adverse effects of foreign currency movements that had affected the results in the first half were largely reversed by the year end.

 

The Group ended 2009 with net cash of US$34 million, having begun the year with net borrowings of US$4 million. Capital expenditure within the Group's businesses amounted to US$289 million, while asset disposals provided an inflow of US$47 million. The positive cash generation in 2009 was more than sufficient to meet business demands and to cover the relatively modest debt servicing needs.

 

The Board is recommending a final dividend of US¢11.50 per share, which would bring the total ordinary dividend for 2009 to US¢16.00 per share, an increase of 14%.

 

OPERATIONS

During the year the Group concentrated on maintaining margins in the face of a prolonged economic downturn. The Company also continued its strategy of building leading retail businesses across Asia, and opportunities were taken to add new stores in existing formats. The total number of stores in operation increased by a net 431 in 2009, passing the 5,000 store milestone late in the year. In larger format stores, Dairy Farm operated 94 Giant hypermarkets at the year end, comprising 51 in Malaysia, 35 in Indonesia, seven in Singapore and one in Brunei.

 

The Group's operations in North Asia produced mixed results, with overall sales increasing by 5% and profit by 1%. In Hong Kong, the health and beauty business performed well and supermarkets were steady, but convenience stores struggled. IKEA in Hong Kong produced an acceptable performance given the disruption caused by the relocation of a key store. In Taiwan, IKEA was able to consolidate the profitability of its operations, while Wellcome supermarkets did well to achieve further profit growth in a difficult market. 

 

A reduction in export activity in Southern China, and the resulting employment losses, had an adverse effect on sales and profit at 7-Eleven, particularly in the first half.  Mannings health and beauty stores, however, proved more resilient, and expansion of the chain continued with the number of outlets across mainland China reaching 120 by the year end.

 

After a slow start, restaurant associate Maxim's produced a good performance in the second half of the year as consumer sentiment improved and dining out regained popularity. Earnings growth was achieved, and the recent sales momentum has continued into 2010. In December 2009, Maxim's opened a food factory in Shenzhen, China to support its expansion on the Mainland.

 

In South Asia, sales rose by 5% and profits by 32%. In Singapore, results were particularly strong as both hypermarkets and supermarkets performed well, while government programmes to offset the impact of the economic downturn also proved effective. The Group's supermarket and health and beauty joint ventures in India both saw a return to reasonable sales growth, although the market is still very challenging.

 

Sales in East Asia grew by 3% and profits by 26%. The strength of the Malaysian business was again demonstrated by growth in all formats, the opening of 28 new stores, and the completion of a dry goods distribution centre. In Indonesia, profits continued to improve and 51 new stores were added across the four retail banners. Brunei achieved its first year of profit in 2009, while we continue to explore avenues to expand in Vietnam.

 

PEOPLE

The continued strong results that have been achieved in 2009 reflect the hard work of all Dairy Farm employees. On behalf of the Board, I thank them for their efforts and wish them well in achieving further success in 2010.

 

Jonathan Gould retired as a Director at the end of June 2009 and we would like to thank him for his contribution. Giles White joined the Board on 1st July 2009.

 

PROSPECTS

Dairy Farm's businesses have established leading retail brand names in their markets, and enjoy strong customer recognition and support. This has underpinned the Group's performance in the recent challenging economic environment, and should provide the basis for further expansion as conditions improve. With its secure financial position, Dairy Farm's prospects for the coming year remain positive.

 

Simon Keswick

Chairman

4th March 2010

 

 

 

GROUP CHIEF EXECUTIVE'S REVIEW

 

The outset of 2009 was a time of considerable economic uncertainty, and it is therefore pleasing to report that Dairy Farm was able to complete the year with increased sales and earnings in each of its operating regions. At year end, Dairy Farm operated 27 separate businesses in ten territories across its three regions in Asia.

 

Apart from the improved financial results, there were other notable achievements in 2009:

·; We added a net 431 stores, including 16 Giant hypermarkets in Malaysia and Indonesia, to reach a total of 5,071 stores at the year end;

·; In Hong Kong, we completed the relocation of our IKEA store at Shatin, and preparations are underway for a new store to open in mid-2010 in Kowloon's MegaBox complex;

·; Mannings in Hong Kong reached a milestone by opening its 300th store in December;

·; In China, we expanded our Mannings health and beauty business and now operate 120 stores;

·; In Malaysia, we completed the construction of a major new distribution centre at Sepang, as well as the sale-and-leaseback of two major shopping centres anchored by Giant hypermarkets;

·; In Brunei, our hypermarket became profitable in just its second full year of operation, while the health and beauty business increased its scale and profitability;

·; We made good progress toward our goal of increasing significantly the proportion of convenience stores that are operated by franchisees;

·; We began a major modernization of our IT merchandising systems with the successful implementation of SAP Retail in Malaysia, to be followed by Indonesia in 2010; and

·; Our restaurant associate, Maxim's, opened a new food factory in Shenzhen, China, and increased its penetration of the important Mainland market.

 

REGIONAL REVIEW

 

NORTH ASIA

Hong Kong

After strong growth in 2008, when cost price inflation helped to boost sales, Wellcome supermarkets faced a more difficult year in 2009. Competitive conditions prevented full recovery of cost price increases, resulting in an adverse effect on gross margins. The introduction by the government of a selective scheme to charge for plastic bags also led to some loss of sales. A strict focus on operating costs was required to achieve an acceptable result for the year.

 

7-Eleven convenience stores had a very challenging year as comparable store sales declined. A major contributing factor was the substantial increase in tobacco duties imposed in the first half of the year, which reduced sales volume and margin. A number of initiatives are in hand to restore profitability, including 'Hot Shot' ready-to-eat sections, which had been installed in 340 stores by the year end.

 

Mannings health and beauty stores had an excellent year. The strength of the Mannings brand was again demonstrated by the loyalty of its customers to its traditional health and beauty offerings while promotions offering customers an economical alternative to salon-based beauty treatments proved very popular. 

 

The performance of IKEA was constrained in 2009 by the continuing renovation and partial relocation of the major Shatin store, which was completed in December. The performance in the two other locations was good, with the result that overall earnings were slightly below the previous year - an acceptable outcome in a challenging year for the home furnishings sector.

 

Maxim's faced difficulties early in the year as ingredient costs were at high levels and customers reduced their expenditure on dining out. The second half, however, saw a strong rebound in patronage in a generally more buoyant Hong Kong economy. Turnover improved in most formats and the important mid-Autumn mooncake sales went well, with encouraging growth in the Mainland. As a result, Maxim's was able to record an overall profit increase for the year of 10%.

 

Macau

Both 7-Eleven and Mannings expanded in Macau in 2009. Despite their relatively small scale, both businesses were consistently profitable, with Mannings making good gains in earnings during the year. There remains scope for moderate further expansion of these businesses.

 

Mainland China

7-Eleven suffered a decline in comparable store sales, with restrictions on sale of tobacco by foreign-invested enterprises affecting both sales and earnings. A number of actions are being taken to try to improve performance, but these will take time and the business returned to an operating loss in 2009. Mannings showed more encouraging sales results, and added 50 stores to reach 120 outlets by the year end.

 

Taiwan

Wellcome supermarkets achieved a reasonable result for the year, managing modest increases in sales and earnings in a continuing difficult market. The smaller format stores that have been added in recent years, together with Jasons MarketPlace superstores, are complementing the traditional Wellcome supermarket format and providing additional means of expansion despite the strong competition from other operators.

 

IKEA continued its consolidation and made solid gains in sales and profitability in 2009, despite operating in a lacklustre local economy. The renewal of leases at the Asia World and Taoyuan stores enables the business to move ahead with secure occupancy in all locations. Management has made good progress on supply chain efficiencies and is now focused on raising sales levels in all stores.

 

SOUTH ASIA

Singapore

Despite concerns at the start of the year over consumer sentiment in Singapore, both Cold Storage and Shop N Save supermarkets achieved excellent results in 2009, producing strong growth in both sales and profit. Four stores were added during the year, to reach 95 stores at the year end.

 

Giant hypermarkets also recorded a very pleasing performance in 2009 as strong sales growth and good cost control led to further substantial gains in earnings and market share.

 

7-Eleven in Singapore was the Group's best-performing convenience chain, with a pleasing increase in earnings, while the Guardian chain managed a slight improvement in its result despite operating in an intensely competitive segment.

 

The Singapore government's temporary subsidy of some employment and occupancy costs in 2009 assisted all the businesses in meeting the year's economic challenges. 

 

India

Foodworld supermarkets managed to reduce its losses in a year that saw some market rationalization as a result of the failure of several competing chains. With stronger sales in the later part of the year, the business is planning for further improvement in 2010.

 

Health and Glow showed steady improvement with its health and beauty stores achieving profitability in the final quarter. We will continue the measured expansion of this business.

 

EAST ASIA

Malaysia

The Giant and Cold Storage hypermarket and supermarket businesses recorded pleasing expansion against a background of constrained customer spending for a large part of the year. Sales of general merchandise items, which tend to be more discretionary in nature, were the most affected by customers' response to the global economic disruption. Despite this, overall sales growth was reasonable and with stringent cost control the businesses were able to achieve a good improvement in earnings.

 

Guardian had an excellent year. The existing base of stores achieved good like-for-like sales increases, but licensing issues affected store expansion with only a net 16 outlets added in 2009. We anticipate stronger growth in store numbers in 2010 as Guardian continues to establish itself as Malaysia's leading pharmacy chain.

 

Indonesia

The results from both the Giant and Hero hypermarket and supermarket businesses improved substantially in 2009. The programme of converting selected Hero supermarkets to the Giant format, which was completed in the first half of 2009, has provided benefits to both banners in terms of sales and earnings. As was the case in Malaysia, sales of general merchandise categories suffered during the year as customers became cautious with non-essential spending, but sales in grocery and fresh categories were stronger and supported an excellent improvement in overall earnings. Expansion of store numbers also accelerated with the opening of 16 new outlets.

 

Guardian pharmacies also improved its results, benefiting from a net addition of 15 stores. We are continuing to invest in this format, which we believe has substantial scope for expansion.

 

Vietnam

Wellcome maintained its small supermarket operation while expansion plans were developed with a view to entering the hypermarket sector. Potential sites have been identified and submissions for approval are being pursued with the relevant authorities. While progress is slow, we believe that the market will be attractive in the medium term.

 

THE YEAR AHEAD

We were fortunate in 2009 that the Asian region was less affected than other areas by the consequences of the financial crisis. Also, our positioning as a retailer of predominantly non-discretionary items helped to insulate us from the effects of expenditure reductions seen in other areas of consumption. Our supermarket and health and beauty businesses, in particular, proved themselves to be largely immune to the economic difficulties affecting other sectors. 

 

In 2010, we hope for a continuation of the improvement in economic sentiment, and will base our expansion plans on the strategy of building on our leading positions in the markets we serve. Our capital expenditure will support development of the Giant hypermarket business in Malaysia and Indonesia, and will also be directed to achieving substantial improvements in our supply chain and IT systems.

 

The strength of our businesses should allow us to perform well in the coming year and beyond. Our achievements in 2009 were a result of the abilities and commitment of our work force. I would like to thank them sincerely for their efforts in achieving another rewarding year for the Group and its shareholders.

 

Michael Kok

Group Chief Executive

4th March 2010

 

 

 

Dairy Farm International Holdings Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2009
						2009		2008
						US$m		US$m
Sales (note 2)						7,028.5		6,732.5
Cost of sales						(4,910.9)		(4,713.3)
Gross margin						2,117.6		2,019.2
Other operating income (note 3)						117.0		104.5
Selling and distribution costs						(1,564.8)		(1,506.7)
Administration and other operating expenses						(246.1)		(229.2)
Operating profit (note 4)						423.7		387.8
Financing charges						(24.3)		(23.9)
Financing income						3.2		9.8
Net financing charges						(21.1)		(14.1)
Share of results of associates and joint ventures (note 5)						35.2		30.2
Profit before tax						437.8		403.9
Tax (note 6)						(75.0)		(70.7)
Profit after tax						362.8		333.2
Attributable to:
Shareholders of the Company						364.0		333.0
Minority interests						(1.2)		0.2
						362.8		333.2
						US¢		US¢
Earnings per share (note 7)
- basic						27.02		24.73
- diluted						26.99		24.71
Underlying earnings per share (note 7)
- basic						27.02		23.77
- diluted						26.99		23.75

 

 

 

Dairy Farm International Holdings Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2009
							2009				2008
							US$m				US$m
Profit for the year							362.8				333.2
Revaluation of other investments
- gains arising during the year							0.8				2.2
- transfer to profit and loss							-				(0.2)
							0.8				2.0
Actuarial gains/(losses) on employee pension plans							16.5				(64.6)
Net exchange translation differences
- gains/(losses) arising during the year							22.0				(14.3)
- transfer to profit and loss							-				(2.0)
							22.0				(16.3)
Cash flow hedges
- losses arising during the year							(2.5)				(3.0)
Share of other comprehensive income of associates
and joint ventures							3.8				(4.9)
Tax relating to components of other comprehensive income							(2.7)				11.9
Other comprehensive income for the year							37.9				(74.9)
Total comprehensive income for the year							400.7				258.3
Attributable to:
Shareholders of the Company							401.1				258.8
Minority interests							(0.4)				(0.5)
							400.7				258.3

 

 

Dairy Farm International Holdings Limited
Consolidated Balance Sheet
at 31st December 2009
								2009				2008
								US$m				US$m
Net operating assets
Intangible assets								319.3				304.2
Tangible assets								709.7				636.9
Associates and joint ventures								145.8				128.7
Other investments								3.1				2.3
Non-current debtors								113.3				105.3
Deferred tax assets								19.1				18.0
Pension assets								24.8				8.8
Non-current assets								1,335.1				1,204.2
Stocks								709.9				649.0
Current debtors								139.9				120.6
Current tax assets								1.2				4.9
Bank balances and other liquid funds								532.8				462.9
								1,383.8				1,237.4
Non-current assets classified as held for sale (note 9)								105.2				65.2
Current assets								1,489.0				1,302.6
Current creditors								(1,605.5)				(1,537.9)
Current borrowings								(133.8)				(62.6)
Current tax liabilities								(63.0)				(65.0)
Current provisions								(3.2)				(2.0)
Current liabilities								(1,805.5)				(1,667.5)
Net current liabilities								(316.5)				(364.9)
Long-term borrowings								(365.4)				(404.5)
Deferred tax liabilities								(43.6)				(36.6)
Pension liabilities								(31.1)				(27.0)
Non-current creditors								(16.9)				(20.7)
Non-current provisions								(18.6)				(17.0)
Non-current liabilities								(475.6)				(505.8)
								543.0				333.5
Total equity
Share capital								74.9				74.8
Share premium and capital reserves								36.6				32.6
Revenue and other reserves								429.3				223.5
Shareholders' funds								540.8				330.9
Minority interests								2.2				2.6
								543.0				333.5

 

 

Dairy Farm International Holdings Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2009
		Attributable to shareholders of the Company
										Asset								Attributable
		Share		Share		Capital		Revenue		revaluation		Hedging		Exchange				to minority		Total
		capital		premium		reserves		reserves		reserves		reserves		reserves		Total		interests		equity
		US$m		US$m		US$m		US$m		US$m		US$m		US$m		US$m		US$m		US$m
2009
As at 1st January 2009		74.8		7.4		25.2		248.8		16.8		(3.6)		(38.5)		330.9		2.6		333.5
Total comprehensive income		-		-		-		381.8		-		(1.9)		21.2		401.1		(0.4)		400.7
Dividends paid by the Company		-		-		-		(195.3)		-		-		-		(195.3)		-		(195.3)
Issue of shares		0.1		2.5		-		-		-		-		-		2.6		-		2.6
Employee share option schemes		-		-		1.5		-		-		-		-		1.5		-		1.5
Transfer		-		-		-		1.0		(1.0)		-		-		-		-		-
At 31st December 2009		74.9		9.9		26.7		436.3		15.8		(5.5)		(17.3)		540.8		2.2		543.0
2008
As at 1st January 2008		74.8		7.0		23.3		140.0		17.2		(1.3)		(22.9)		238.1		3.0		241.1
Total comprehensive income		-		-		-		276.7		-		(2.3)		(15.6)		258.8		(0.5)		258.3
Dividends paid by the Company		-		-		-		(168.3)		-		-		-		(168.3)		-		(168.3)
Issue of shares		-		0.4		-		-		-		-		-		0.4		-		0.4
Employee share option schemes		-		-		1.9		-		-		-		-		1.9		-		1.9
Change in attributable interest		-		-		-		-		-		-		-		-		0.1		0.1
Transfer		-		-		-		0.4		(0.4)		-		-		-		-		-
At 31st December 2008		74.8		7.4		25.2		248.8		16.8		(3.6)		(38.5)		330.9		2.6		333.5
Total comprehensive income included in revenue reserves comprises profit attributable to shareholders of the Company of US$364.0 million (2008: US$333.0 million), fair value gains on revaluation of other investments of US$0.7 million (2008: US$1.7 million) and actuarial gains on employee benefit plans of US$17.1 million (2008: losses of US$58.0 million).

Dairy Farm International Holdings Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2009
			2009				2008
			US$m				US$m
Operating activities
Operating profit (note 4)			423.7				387.8
Depreciation and amortization			143.4				136.4
Other non-cash items			9.2				(2.5)
(Increase)/decrease in working capital			(28.2)				36.9
Interest received			3.6				10.8
Interest and other financing charges paid			(24.0)				(23.8)
Tax paid			(70.9)				(47.5)
			456.8				498.1
Dividends from associates and joint ventures			24.5				25.1
Cash flows from operating activities			481.3				523.2
Investing activities
Purchase of tangible assets			(250.6)				(215.6)
Purchase of subsidiaries (note 11(a))			-				(42.0)
Store acquisitions (note 11(b))			-				(2.6)
Purchase of associates and joint ventures			(2.6)				(6.6)
Purchase of land use rights (note 11(c))			(30.7)				(33.7)
Purchase of other intangible assets			(7.9)				(7.9)
Sale of properties (note 11(d))			47.0				-
Sale of other tangible assets			0.6				1.0
Sale of associates and joint ventures (note 11(e))			-				20.5
Sale of other investments			-				1.0
Cash flows from investing activities			(244.2)				(285.9)
Financing activities
Issue of shares			2.6				0.4
Drawdown of borrowings			1,202.4				991.0
Repayment of borrowings			(1,181.9)				(990.3)
Dividends paid by the Company (note 10)			(195.3)				(168.3)
Cash flows from financing activities			(172.2)				(167.2)
Effect of exchange rate changes			2.7				(1.7)
Net increase in cash and cash equivalents			67.6				68.4
Cash and cash equivalents at 1st January			453.2				384.8
Cash and cash equivalents at 31st December			520.8				453.2

 

 

 

Dairy Farm International Holdings Limited
Notes
1.	ACCOUNTING POLICIES AND BASIS OF PREPARATION
	The financial information contained in this announcement has been based on the audited results for the year ended 31st December 2009 which have been prepared in conformity with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board.
	In 2009, the Group adopted the following standards, and amendments and interpretations to existing standards which are effective in the current accounting year and relevant to its operations:

 

	IFRS 8	Operating Segments
	IAS 1 (revised 2007)	Presentation of Financial Statements
	IAS 23 (revised 2007)	Borrowing Costs
	Amendments to IFRS 1 and	Cost of an Investment in a Subsidiary, Jointly Controlled
	IAS 27	Entity or Associate
	Amendment to IFRS 2	Vesting Conditions and Cancellations
	Amendments to IFRS 7	Improving Disclosures about Financial Instruments
	Improvements to IFRSs (2008)
	IFRIC 13	Customer Loyalty Programmes
	IFRIC 16	Hedges of a Net Investment in a Foreign Operation
	IFRS 8 'Operating Segments' supersedes IAS 14 'Segment Reporting' and requires the reporting of financial and descriptive information about an entity's reportable segments on the basis of internal reports that are regularly reviewed by its management. There is no change in the Group's reportable segments from 2008 as they remain consistent with the internal reporting provided to management. The Group's reportable segments are set out on page 18. No operating segments have been aggregated to form the reportable segments. The Group has also early adopted an amendment to IFRS 8 (effective from 1st January 2010) included in the 2009 improvement project. The amendment clarifies that a measure of total assets should be disclosed in the financial statements only if that amount is regularly provided to management.
	IAS 1 (revised 2007) 'Presentation of Financial Statements' replaces IAS 1 (as revised in 2003 and amended in 2005) and sets overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirement for their content. Two new primary statements, 'Consolidated Statement of Comprehensive Income' and 'Consolidated Statement of Changes in Equity' have been presented in these financial statements. The former replaces the 'Consolidated Statement of Recognized Income and Expense' presented in the 2008 financial statements. This change in presentation has no effect on reported profit or loss, total income and expense or net assets.
	Amendments to IFRS 1 and IAS 27 'Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate' remove the definition of the cost method from IAS 27 and allow an entity to recognize a dividend from subsidiary, jointly controlled entity or associate in profit and loss in its separate financial statements when its right to receive the dividend is established. There is no impact on the consolidated financial statements as the changes only affect the separate financial statements of the investing entity.
	Amendments to IFRS 7 'Improving Disclosures about Financial Instruments' require the disclosure of any change in valuation technique and the reason for that change, introduce a three-level hierarchy for fair value measurement disclosures, and require the disclosure of liquidity risk between non-derivative financial liabilities and derivative financial liabilities.
	IAS 36 (Amendment) 'Impairment of Assets' is part of the 2008 improvement project. It provides that where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made.
	IFRIC 13 'Customer Loyalty Programmes' addresses the accounting by entities that grant loyalty award credits to customers who buy goods or services. It requires the allocation of consideration receivable from the customer between the separately identifiable components of the sale transaction using fair values. There is no significant impact on the results of the Group on adoption of this interpretation.
	The adoption of IAS 23 (revised 2007) 'Borrowing Costs', Amendment to IFRS 2 'Vesting Conditions and Cancellations', amendments to other IFRSs included in the 2008 improvement project and IFRIC 16 'Hedges of a Net Investment in a Foreign Operation' does not have a material impact on the Group's accounting policies.

 

	The Group also early adopted the following standard and amendment to an existing standard which are relevant to its operations:
	IFRS 3 (revised 2008)		Business Combinations
	IAS 27 (amended 2008)		Consolidated and Separate Financial Statements
	IFRS 3 (revised 2008) 'Business Combinations' and the related amendment to IAS 27 'Consolidated and Separate Financial Statements' (both effective prospectively from 1st July 2009) provide guidance for applying the acquisition method for business combinations. The major changes from the existing standards include: the immediate expensing of all acquisition-related costs, the inclusion in the cost of acquisition of the fair value at acquisition date of any contingent purchase consideration, the remeasurement of previously held equity interest in the acquiree at fair value in a business combination achieved in stages, and accounting for changes in a parent's ownership interest in a subsidiary that do not result in the loss of control as equity transactions. The early adoption of IFRS 3 (revised 2008) and the related amendment to IAS 27 has resulted in changes in the accounting policies for goodwill and change in attributable interests in subsidiaries. Until 31st December 2008, acquisition-related costs were included in the cost of a business combination; contingent purchase consideration was recognized in goodwill as incurred; the cost of each exchange transaction in a business combination achieved in stages was compared with the fair values of the acquiree's identifiable net assets to determine the amount of goodwill associated with that transaction; the difference between the cost of acquisition and the carrying amount of the proportion of minority interest acquired in respect of an increase in attributable interest in a subsidiary was recognized as goodwill or credited to profit and loss as discount on acquisition, where appropriate; and the difference between the proceeds and the carrying amount of the proportion sold in respect of a decrease in attributable interest in a subsidiary was recognized as profit or loss on disposal. The Group continues to measure minority interest in an acquiree in a business combination at the minority interest's proportionate share of the acquiree's identifiable net assets.
		The Group's reportable segments are set out in notes 2, 4 and 5.
		Certain comparative figures have been reclassified to conform with the current year presentation.

 

 

 

2.	SALES
		Including associates
		and joint ventures				Subsidiaries
		2009		2008		2009		2008
		US$m		US$m		US$m		US$m
	Analysis by operating segment:
	North Asia	3,666.7		3,502.8		3,666.7		3,502.8
	East Asia	1,957.8		1,892.9		1,957.8		1,892.9
	South Asia	1,459.8		1,395.0		1,404.0		1,336.8
		7,084.3		6,790.7		7,028.5		6,732.5
	Maxim's	968.3		950.9		-		-
		8,052.6		7,741.6		7,028.5		6,732.5
	Analysis by format:
	Supermarkets/hypermarkets	4,311.9		4,190.8		4,275.1		4,151.7
	Health and beauty stores	1,232.8		1,077.1		1,213.8		1,058.0
	Convenience stores	1,282.2		1,261.8		1,282.2		1,261.8
	Home furnishings stores	257.4		261.0		257.4		261.0
		7,084.3		6,790.7		7,028.5		6,732.5
	Restaurants	968.3		950.9		-		-
		8,052.6		7,741.6		7,028.5		6,732.5
	Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Board for the purpose of resource allocation and performance assessment. Dairy Farm operates in four operating segments: North Asia, East Asia, South Asia and Maxim's. North Asia comprises Hong Kong, Mainland China, Macau, Taiwan and Korea. East Asia comprises Malaysia, Indonesia, Vietnam and Brunei. South Asia comprises Singapore, India and Thailand. Maxim's is the Group's major associate, a leading Hong Kong restaurant chain. No operating segments have been aggregated to form the reportable segments.

 

3.	OTHER OPERATING INCOME
						2009		2008
						US$m		US$m
	Concession and service income					81.0		70.4
	Gain on sale of associates and joint ventures					-		14.2
	Rental income					15.9		12.5
	Exchange gain and others					20.1		6.5
	Gain on sale of other investments					-		0.9
						117.0		104.5

 

 

4.	OPERATING PROFIT
		2009		2008
		US$m		US$m
	Analysis by operating segment:
	North Asia	208.2		205.3
	East Asia	140.4		111.8
	South Asia	101.0		79.0
		449.6		396.1
	Support office	(25.9)		(23.4)
		423.7		372.7
	Non-trading items in North Asia:
	- Gain on sale of associates and joint ventures	-		14.2
	- Gain on sale of other investments	-		0.9
		423.7		387.8
	Analysis by format:
	Supermarkets/hypermarkets	251.7		209.2
	Health and beauty stores	108.9		94.1
	Convenience stores	60.8		70.2
	Home furnishings stores	12.3		10.1
	Other	15.9		12.5
		449.6		396.1
5.	SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
		2009		2008
		US$m		US$m
	Analysis by operating segment:
	Maxim's	38.2		34.7
	South Asia	(3.0)		(4.5)
		35.2		30.2
	Analysis by format:
	Restaurants	38.2		34.7
	Supermarkets	(2.9)		(3.9)
	Health and beauty stores	(0.1)		(0.6)
		35.2		30.2
	Results are shown after tax and minority interests in the associates and joint ventures.

 

6.	TAX
		2009		2008
		US$m		US$m
	Current	71.5		70.1
	Deferred	3.5		0.6
		75.0		70.7
	Geographical analysis:
	North Asia	32.8		35.8
	East Asia	25.7		21.2
	South Asia	16.5		13.7
		75.0		70.7
	Tax relating to components of other comprehensive income is analyzed as follows:
	Employee benefit plans	(3.2)		11.5
	Cash flow hedges	0.6		0.7
	Revaluation of other investments	(0.1)		(0.3)
		(2.7)		11.9
	Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates. Share of tax of associates and joint ventures of US$9.3 million (2008:US$7.7 million) related to Maxim's is included in share of results of associates and joint ventures and share of other comprehensive income of associates and joint ventures respectively.
	The Group has no tax payable in the United Kingdom (2008: nil).
7.	EARNINGS PER SHARE
	Basic earnings per share are calculated on profit attributable to shareholders of US$364.0 million (2008: US$333.0 million), and on the weighted average number of 1,347.0 million (2008: 1,346.4 million) shares in issue during the year. The weighted average number excludes the shares held by the Trustee under the Senior Executive Share Incentive Schemes.
	Diluted earnings per share are calculated on profit attributable to shareholders of US$364.0 million (2008: US$333.0 million), and on the weighted average number of 1,348.8 million (2008: 1,347.7 million) shares in issue after adjusting for 1.8 million (2008: 1.3 million) 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.
	There were no non-trading items for the year ended 31st December 2009. Additional basic and diluted earnings per share are also calculated for the year ended 31st December 2008 based on underlying profit attributable to shareholders of US$320.1 million. A reconciliation of earnings is set out below:

 

		2008
				Basic earnings		Diluted earnings
				per share		per share
		US$m		US¢		US¢
	Profit attributable to shareholders	333.0		24.73		24.71
	Non-trading items (note 8)	(12.9)
	Underlying profit attributable
	to shareholders	320.1		23.77		23.75
8.	NON-TRADING ITEMS
	There were no non-trading items in 2009. An analysis of non-trading items after interest, tax and minority interests for the year ended 31st December 2008 is set out below:
						US$m
	Sale of 50% shareholding in CJ Olive Young					12.2
	Sale of other investments					0.7
						12.9
9.	NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
	The major classes of assets classified as held for sale are set out below:
				2009		2008
				US$m		US$m
	Intangible assets - land use rights			47.6		15.1
	Tangible assets			57.6		50.1
	Total assets			105.2		65.2
	At 31st December 2008, the non-current assets classified as held for sale represented two retail properties in Malaysia.
	Another retail property in Malaysia was classified as held for sale during the first half of 2009. This property, together with one of the properties previously held for sale at the end of 2008, were sold for a total cash proceeds of US$47.0 million (note 11(d)) during the year. The newly completed dry goods distribution centre in Sepang, Malaysia was classified as held for sale in December 2009.
	At 31st December 2009, the balance represented a retail property and the Sepang distribution centre, both in Malaysia, which are expected to be sold in 2010.

 

 

10.	DIVIDENDS
				2009		2008
				US$m		US$m
	Final dividend in respect of 2008 of US¢10.00
	(2007: US¢8.50) per share			134.7		114.4
	Interim dividend in respect of 2009 of US¢4.50
	(2008: US¢4.00) per share			60.6		53.9
				195.3		168.3
	A final dividend in respect of 2009 of US¢11.50 (2008: US¢10.00) per share amounting to a total of US$154.9 million (2008: US$134.7 million) is proposed by the Board. The dividend proposed will not be accounted for until it has been approved at the Annual General Meeting. This amount will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2010.
11.	NOTES TO CONSOLIDATED CASH FLOW STATEMENT
	(a)	Purchase of subsidiaries
		In April 2008, the Group paid US$42.0 million in cash under a put option agreement to settle an acquisition of 25.2% interests in PT Hero Supermarket from minority shareholders.
						2008
						Fair
						Value
						US$m
	(b)	Store acquisitions
		Tangible assets				0.2
		Current assets				0.8
		Fair value of operating assets acquired				1.0
		Goodwill				1.6
		Total consideration				2.6
		In 2008, Giant TMC (B), a wholly-owned subsidiary, acquired the store operating assets of seven Guardian stores in Brunei for a total cash consideration of US$2.6 million.
	(c)	Purchase of land use rights
		Purchase of land use rights in 2009 represented leasehold land for hypermarket developments in Malaysia and Indonesia.
		Purchase of land use rights in 2008 related to a distribution centre in Malaysia.
	(d)		Sale of properties
			During the year, the Group disposed of two retail properties in Malaysia classified as non-current assets held for sale at carrying value for a cash consideration of US$47.0 million.
	(e)		Sale of associates and joint ventures
			In February 2008, the Group completed the sale of its 50% shareholding in CJ Olive Young to its partner, CJ Corp, for a cash consideration of US$20.5 million.
12.	CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
	Total capital commitments at 31st December 2009 amounted to US$283.4 million (2008: US$212.3 million).
	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.
13.	RELATED PARTY TRANSACTIONS
	The parent company of the Group is Jardine Strategic Holdings Limited and the ultimate parent company is Jardine Matheson Holdings Limited. Both companies are incorporated in Bermuda.
	The most significant of such transactions relate to the renting of properties from Hongkong Land Holdings Limited ('Hongkong Land'). The gross annual rentals paid by the Group to Hongkong Land in 2009 were US$8.5 million (2008: US$5.0 million).
	There were no other related party transactions that might be considered to have a material effect on the financial position or performance of the Group that were entered into or changed during the year.

 

 

 

Dairy Farm International Holdings Limited
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 will be set out in more detail in the Corporate Governance section of the Company's 2009 Annual Report (the 'Report'). The following are the principal risks and uncertainties facing the Company as required to be disclosed pursuant to the Disclosure and Transparency Rules issued by the Financial Services Authority in the United Kingdom and are in addition to the matters referred to in the Chairman's Statement and Group Chief Executive's Review.
1.	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 and finished products. 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.
2.	Commercial 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 failure to compete effectively in terms of price, product specification or levels of service can have an adverse effect on earnings. Significant pressure from such competition may lead to reduced margins. The quality and safety of the products and services provided by the Group's businesses are also important and there is an associated risk if they are below standard.
	The steps taken by the Group to manage its exposure to financial risk will be set out in the Financial Review and in a note to the Financial Statements in the Report.
3.	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.
4.	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.
5.	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.
Responsibility Statement
The Directors of the Company confirm to the best of their knowledge that:
a.	the condensed 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 the Company's 2009 Annual Report, including the Chairman's Statement, Group Chief Executive'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 and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Services Authority of the United Kingdom.

 

For and on behalf of the Board

Michael Kok

Howard Mowlem

Directors

4th March 2010

 

The final dividend of US¢11.50 per share will be payable on 12th May 2010, subject to approval at the Annual General Meeting to be held on 5th May 2010, to shareholders on the register of members at the close of business on 19th March 2010. The ex-dividend date will be on 17th March 2010, and the share registers will be closed from 22nd to 26th March 2010, inclusive. Shareholders will receive their 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 2009 final dividend by notifying the United Kingdom transfer agent in writing by 23rd April 2010. The sterling equivalent of dividends declared in United States Dollars will be calculated by reference to a rate prevailing on 28th April 2010. Shareholders holding their shares through The Central Depository (Pte) Limited ('CDP') in Singapore will receive United States Dollars unless they elect, through CDP, to receive Singapore Dollars.

 

Dairy Farm
Dairy Farm is a leading pan-Asian retailer. At 31st December 2009, the Group and its associates operated over 5,000 outlets, employed over 76,000 people in the region, and had total annual sales exceeding US$8 billion.
The Group operates supermarkets, hypermarkets, health and beauty stores, convenience stores, home furnishings stores and restaurants under well-known local brands, including:
·;	Supermarkets - Wellcome in Hong Kong, Taiwan and Vietnam, ThreeSixty and Oliver's The Delicatessen in Hong Kong, Jasons MarketPlace in Singapore, Taiwan and Hong Kong, Cold Storage in Singapore and Malaysia, Giant in Malaysia and Indonesia, Shop N Save in Singapore, Hero in Indonesia, and Foodworld in India;
·;	Hypermarkets - Giant in Malaysia, Singapore, Indonesia and Brunei;
·;	Health and beauty stores - Mannings in Hong Kong, Macau and China, Guardian in Singapore, Malaysia, Indonesia and Brunei, and Health and Glow in India;
·;	Convenience stores - 7-Eleven in Hong Kong, Macau, Southern China and Singapore, and Starmart in Indonesia; and
·;	Home furnishings stores - IKEA in Hong Kong and Taiwan.
The Group has a 50% interest in Maxim's, Hong Kong's leading restaurant chain.
Dairy Farm International Holdings Limited is incorporated in Bermuda and has its primary share listing in London, with secondary listings in Bermuda and Singapore. The Group's businesses are managed from Hong Kong by Dairy Farm Management Services Limited through its regional offices. Dairy Farm is a member of the Jardine Matheson Group.
- end-

 

 

For further information, please contact:
Dairy Farm Management Services Limited
Michael Kok	(852) 2299 1881
Howard Mowlem	(852) 2299 1896
	email: hmowlem@dairy-farm.com.hk
GolinHarris
John Morgan	(852) 2501 7939
	email: john.morgan@golinharris.com.hk
Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 2009 can be accessed through the Internet at 'www.dairyfarmgroup.com'.