Dfi Retail Intl Regulatory News (DFI)

7 Aug 2007 10:05

Dairy Farm International Hldgs Ld07 August 2007 To: Business Editor 7th August 2007 For immediate release The following announcement was issued today to a Regulatory Information Serviceapproved by the Financial Services Authority in the United Kingdom. DAIRY FARM INTERNATIONAL HOLDINGS LIMITEDINTERIM REPORT 2007 Highlights• Earnings per share up 17%• Good performance in all major markets• Strong cash flow• Special dividend declared "Dairy Farm's retail businesses continue to enjoy leading positions in theirmarket sectors, and the prospects for the remainder of the year are positive. Wewill build on the good results in the first half by continuing to cater for thegrowing demand from consumers in Asia." Simon Keswick, Chairman7th August 2007 Results-------------------------------------------------------------------------------- (unaudited) Six months ended 30th June 2007 2006 Change US$m US$m %--------------------------------------------------------------------------------Sales- subsidiaries 2,796 2,496 +12- including associates 3,211 2,881 +11 Profit attributable to shareholders 101 86 +17 EBITDA to sales 6.2% 6.1% +0.1%-------------------------------------------------------------------------------- USc USc %--------------------------------------------------------------------------------Earnings per share 7.52 6.42 +17Interim dividend per share 3.00 2.60 +15Special dividend per share 16.00 - n/a-------------------------------------------------------------------------------- The interim dividend of USc3.00 per share and the special dividend of USc16.00per share will be payable on 24th October 2007 to shareholders on the registerof members at the close of business on 31st August 2007. The ex-dividend datewill be on 29th August 2007, and the share registers will be closed from 3rd to7th September 2007, inclusive. DAIRY FARM INTERNATIONAL HOLDINGS LIMITEDINTERIM REPORT 2007 OVERVIEWDairy Farm achieved further growth in sales and profit in the first half of2007, benefiting from favourable trading environments in its major markets inAsia. PERFORMANCESales, including those of associates, increased by 11% to US$3.2 billion in thefirst half. Net profit for the period increased at a higher rate of 17% toUS$101 million. Earnings per share for the period were USc7.52, up 17% fromUSc6.42 last year. The Group's businesses in North Asia enjoyed good growth as sales increased by7% and operating profit grew 21%, while those in East Asia also performed well,with sales increasing by 19% and operating profit by 25%. In South Asia salesrose by 16%, although operating profit was only marginally higher due to areduced contribution from Singapore. The Board has declared an increased interim dividend of USc3.00 per share, a 15%increase over last year's interim dividend of USc2.60 per share. In addition, and in line with the Company's policy of maintaining an efficientbalance sheet and returning value to shareholders, the Board has declared aspecial dividend of USc16.00 per share, totaling US$215 million, payable withthe interim dividend. OPERATIONSThe Group's operations made good progress during the first half of 2007 withstore openings in all formats across the Region. In particular, Dairy Farm nowoperates a total of 57 Giant hypermarkets, with 34 in Malaysia, six in Singaporeand 17 in Indonesia. North AsiaThe Group's retail businesses in Hong Kong - Wellcome, Mannings, 7-Eleven andIKEA - each reported improved results. In June, Wellcome opened its first newformat supermarket under the Market Place banner. In Macau, 7-Eleven andMannings began generating positive contributions. In Taiwan, Wellcome'sperformance was in line with last year in a highly competitive market, while IKEA's sales benefited from opening two large stores in 2006, although its operating results remain below expectations. In Southern China, 7-Eleven augmented its organic expansion programme with theacquisition of the Quik convenience store chain. 7-Eleven now operates 409stores, of which 24 have been franchised. Following the refinement of Mannings'format and product range, its 14 stores have begun to show improving results.South Korean associate, Olive Young, achieved encouraging like-for-like salesgrowth, and opened a further five health and beauty stores bringing the total to39. Hong Kong restaurant associate, Maxim's, enjoyed steady growth in sales andprofit. Its fast food operations continued to recover, complemented by increasedcontributions from its cake shops, Starbucks and Genki Sushi. East AsiaIn Malaysia, all formats achieved increases in sales and profit. Their activeexpansion continued with the opening of six new hypermarkets, three supermarketsand 21 Guardian health and beauty stores. Two years' focused development hasgrown the operations in East Malaysia to five hypermarkets, 11 supermarkets and26 Guardian stores. In Indonesia, earnings have yet to reach a satisfactory level and changes weremade in the first half that are expected to lead to an improvement inprofitability. In Vietnam, four supermarkets have been acquired, and these willform the foundation of a more substantial business in the future. In Brunei, theconstruction of the first hypermarket is on schedule for completion by earlynext year. South AsiaThe results from Singapore were affected by expenses incurred in the relocationof the head office and distribution centre, and costs in establishing two newGiant hypermarkets. The country's other retail formats are performing well. There-branding as 7-Eleven of the 62 convenience stores at Shell petrol stationshas been completed. The Group's supermarket and health and beauty joint ventures in India continuedto expand with the opening of 14 outlets, including a first gourmet store. Theprogramme for the remodelling of the older stores will be completed next year.In Thailand, Guardian now operates 13 stores in Greater Bangkok. PROSPECTSIn conclusion, the Chairman, Simon Keswick said, "Dairy Farm's retail businessescontinue to enjoy leading positions in their market sectors, and the prospectsfor the remainder of the year are positive. We will build on the good results inthe first half by continuing to cater for the growing demand from consumers inAsia." -----------------------------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Profit and Loss Account----------------------------------------------------------------------------------------------------------- (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m-----------------------------------------------------------------------------------------------------------Sales (note 2) 2,795.7 2,495.9 5,175.0Cost of sales (1,950.7) (1,733.9) (3,604.0) --------- --------- ---------Gross margin 845.0 762.0 1,571.0Other operating income 5.4 3.5 13.7Selling and distribution costs (637.7) (577.2) (1,155.2)Administration and other operating expenses (99.7) (91.6) (195.7) --------- --------- ---------Operating profit (note 3) 113.0 96.7 233.8 --------- --------- ---------Financing charges (13.2) (10.8) (23.0)Financing income 10.6 7.9 17.0 --------- --------- ---------Net financing charges (2.6) (2.9) (6.0)Share of results of associates and joint ventures (note 4) 11.4 10.3 27.7 --------- --------- ---------Profit before tax 121.8 104.1 255.5Tax (note 5) (20.9) (17.9) (44.5) --------- --------- --------- Profit for the period 100.9 86.2 211.0 --------- --------- ---------Attributable to:Shareholders of the Company 101.2 86.1 210.8Minority interests (0.3) 0.1 0.2 --------- --------- --------- 100.9 86.2 211.0 --------- --------- -------------------------------------------------------------------------------------------------------------------- USc USc USc-----------------------------------------------------------------------------------------------------------Earnings per share (note 6)- basic 7.52 6.42 15.70- diluted 7.51 6.40 15.66----------------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Balance Sheet----------------------------------------------------------------------------------------------------------- (unaudited) At 31st At 30th June December 2007 2006 2006 US$m US$m US$m------------------------------------------------------------------------------------------------------------Net Operating AssetsIntangible assets 268.6 230.6 266.1Tangible assets 562.2 474.3 540.0Associates and joint ventures 122.3 110.0 113.9Deferred tax assets 9.1 7.7 9.4Other non-current assets 61.0 53.7 62.2 --------- -------- ---------Non-current assets 1,023.2 876.3 991.6 --------- -------- ---------Stocks 489.6 432.0 472.1Debtors and prepayments 209.4 154.6 200.9Current tax assets 9.4 2.3 5.0Bank balances 462.8 331.9 456.5 --------- -------- --------- 1,171.2 920.8 1,134.5Non-current assets classified as held for sale - 2.2 0.5 --------- -------- ---------Current assets 1,171.2 923.0 1,135.0 --------- -------- ---------Creditors and accruals (1,294.7) (1,060.0) (1,219.6)Current borrowings (47.1) (47.3) (47.0)Current tax liabilities (46.1) (35.3) (33.7) --------- -------- --------- (1,387.9) (1,142.6) (1,300.3)Liabilities directly associated with non-current assets classified as held for sale - (0.5) (0.1) --------- -------- --------- Current liabilities (1,387.9) (1,143.1) (1,300.4) -------- -------- --------- -------- -------- ---------Net current liabilities (216.7) (220.1) (165.4)Long-term borrowings (408.7) (351.0) (389.5)Deferred tax liabilities (40.0) (36.1) (41.3)Other non-current liabilities (22.8) (19.0) (67.1) -------- -------- --------- 335.0 250.1 328.3 -------- -------- --------- Total Equity Share capital 74.7 74.6 74.7Share premium and capital reserves 28.6 27.0 27.8Revenue and other reserves 227.7 128.2 221.5 -------- -------- ---------Shareholders' funds (note 7) 331.0 229.8 324.0Minority interests 4.0 20.3 4.3 -------- -------- --------- 335.0 250.1 328.3 -------- -------- ------------------------------------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Statement of Recognized Income and Expense--------------------------------------------------------------------------------------------------------------- (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m-------------------------------------------------------------------------------------------------------------Net deficit on revaluation of properties - - (2.6)Net actuarial gains on defined benefit pension plans - - 11.7Net exchange translation differences (4.4) 1.5 2.8Gains/(losses) on cash flow hedges 0.9 1.4 (2.8)Tax on items taken directly to equity - - (1.9) ------- ------- ---------Net income recognized directly in equity (3.5) 2.9 7.2Profit for the period 100.9 86.2 211.0 ------- ------- ---------Total recognized income and expense for the period 97.4 89.1 218.2 ------- ------- ---------Attributable to:Shareholders of the Company 97.7 87.9 216.1Minority interests (0.3) 1.2 2.1 ------- ------- --------- 97.4 89.1 218.2 ------- ------- ---------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Cash Flow Statement-------------------------------------------------------------------------------------------------------------- (unaudited) Year ended Six months ended 31st 30th June December 2007 2006 2006 US$m US$m US$m--------------------------------------------------------------------------------------------------------------Operating activities --------- --------- ---------Operating profit (note 3) 113.0 96.7 233.8Depreciation and amortization 59.5 54.6 110.3Other non-cash items 2.2 2.2 10.3Decrease/(increase) in working capital 4.3 (56.2) (11.4)Interest received 10.3 7.2 15.7Interest and other financing charges paid (12.4) (10.5) (21.9)Tax paid (14.1) (15.3) (45.8) ------- ------- ------- 162.8 78.7 291.0Dividends from associates and joint ventures 10.9 7.1 21.2 --------- --------- --------- Cash flows from operating activities 173.7 85.8 312.2 Investing activities --------- --------- ---------Purchase of tangible assets (83.2) (69.6) (156.6)Purchase of subsidiaries (note 8) (3.5) (0.1) (0.3)Store acquisitions (0.9) - (17.3)Purchase of associates and joint ventures (8.4) - (0.5)Purchase of intangible assets (0.8) - (2.6)Sale of subsidiaries - 0.5 0.6Sale of properties 3.5 - 8.0Sale of other tangible assets 0.5 2.4 0.9 --------- --------- --------- Cash flows from investing activities (92.8) (66.8) (167.8) Financing activities --------- --------- ---------Issue of shares 0.1 0.4 1.1Capital injection from minority shareholders - 0.1 1.1Drawdown of borrowings 496.6 396.2 682.8Repayment of borrowings (479.7) (390.4) (651.4)Dividends paid by the Company (note 9) (91.5) (83.2) (118.1) --------- --------- --------- Cash flows from financing activities (74.5) (76.9) (84.5)Effect of exchange rate changes (0.1) 2.0 3.8 ------- ------- ---------Net increase/ (decrease) in cash and cash equivalents 6.3 (55.9) 63.7 Cash and cash equivalents at beginning of period 442.0 378.3 378.3 ------- ------- ---------Cash and cash equivalents at end of period 448.3 322.4 442.0 ------- ------- ------------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------Dairy Farm International Holdings LimitedNotes--------------------------------------------------------------------------------1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information contained in this announcement has been based on the unaudited interim condensed financial statements, which have been prepared in accordance with IAS 34, Interim Financial Reporting. In 2007, the Group adopted the following standards and interpretations to existing standards which are relevant to its operations: ----------------------------------------------------------------------------- IFRS 7 Financial Instruments: Disclosures IAS 1 (amended 2005) Presentation of Financial Statements - Capital Disclosures IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment ----------------------------------------------------------------------------- There have been no changes to the accounting policies described in the 2006 annual financial statements as a result of adoption of the above standards and interpretations. The Group's reportable segments are set out in notes 2, 3 and 4. 2. SALES Including associates and joint ventures Subsidiaries only -------------------- -------------------- Six months ended 30th June 2007 2006 2007 2006 US$m US$m US$m US$m -------------------- -------------------- Analysis by geographical area: North Asia 1,844.5 1,723.9 1,459.7 1,364.4 East Asia 798.6 669.7 798.6 669.7 South Asia 567.4 487.0 537.4 461.8 -------- -------- -------- -------- 3,210.5 2,880.6 2,795.7 2,495.9 -------- -------- -------- -------- Analysis by business: Supermarkets/ hypermarkets 1,765.5 1,589.0 1,744.3 1,570.5 Health and beauty stores 461.2 403.1 426.3 378.6 Convenience stores 515.8 463.2 515.8 463.2 Home furnishings stores 109.3 83.6 109.3 83.6 Restaurants 358.7 341.7 - - -------- -------- -------- -------- 3,210.5 2,880.6 2,795.7 2,495.9 -------- -------- -------- -------- Dairy Farm operates in three regions: North Asia, East Asia and South Asia, andaccordingly, its primary segment reporting is by geographical areas withsecondary segment information reported by business. North Asia comprises HongKong, Mainland China, Macau, Taiwan and South Korea. East Asia comprisesMalaysia, Indonesia, Vietnam and Brunei. South Asia comprises Singapore, Indiaand Thailand. 3. OPERATING PROFIT Six months ended 30th June 2007 2006 US$m US$m -------------------------------- Analysis by geographical area North Asia 64.9 53.7 East Asia 38.1 30.4 South Asia 20.7 20.6 ----------- ----------- 123.7 104.7 Support office (10.7) (8.0) ----------- ----------- 113.0 96.7 ----------- ----------- Analysis by business: Supermarkets/hypermarkets 62.5 54.3 Health and beauty stores 33.2 28.8 Convenience stores 23.7 20.5 Home furnishings stores/ 4.3 1.1 property ----------- ----------- 123.7 104.7 ----------- ----------- 4. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES Six months ended 30th June 2007 2006 US$m US$m -------------------------------- Analysis by geographical area: North Asia 12.5 10.7 South Asia (1.1) (0.4) --------- ----------- 11.4 10.3 --------- ----------- Analysis by business: Restaurants 13.0 11.3 Retailing (1.6) (1.0) --------- ----------- 11.4 10.3 --------- ----------- Results are shown after tax and minority interests. Retailing is predominantly supermarkets and health and beauty stores. 5. TAX Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates. The Group has no tax payable in the United Kingdom (2006: nil). 6 EARNINGS PER SHARE Basic earnings per share are calculated on profit attributable to shareholders of US$101.2 million (2006: US$86.1 million) and on the weighted average number of 1,344.9 million (2006: 1,342.0 million) shares in issue during the period. 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$101.2 million (2006: US$86.1 million), and on the weighted average number of 1,346.5 million (2006: 1,346.2 million) shares in issue after adjusting for 1.6 million (2006: 4.2 million) shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average share price during the period. 7. SHAREHOLDERS' FUNDS 2007 2006 US$m US$m -------------------------- At 1st January 324.0 224.1 Recognized income and expense attributable to shareholders 97.7 87.9 Dividends (note 9) (91.5) (83.2) Employee share option schemes - value of employee services 0.7 0.6 - exercise of share options 0.1 0.4 --------- --------- At 30th June 331.0 229.8 --------- --------- 8. PURCHASE OF SUBSIDIARIES Six months ended 30th June 2007 Book Fair value Fair amount adjustments value US$m US$m US$m --------- --------- --------- Tangible assets 1.3 (0.4) 0.9 Current assets 1.7 - 1.7 Current liabilities (3.1) - (3.1) --------- --------- --------- Net assets acquired (0.1) (0.4) (0.5) --------- --------- Goodwill 4.1 --------- Total consideration 3.6 Cash and cash equivalent acquired (0.1) --------- 3.5 --------- In March 2007, the Group acquired a 100% interest in Guangzhou Lianhua QuikConvenience Co. Ltd. from a third party for a total cash consideration ofUS$3.6m. 9. DIVIDENDS Six months ended 30th June 2007 2006 US$m US$m -------------------------- Final dividend in respect of 2006 of USc6.80 (2005: USc6.20) per share 91.5 83.2 ------- ------- An interim dividend in respect of 2007 of USc3.00 (2006: USc2.60) per shareamounting to a total of US$40.4 million (2006: US$34.9 million) and a specialdividend of USc16.00 (2006: nil) per share amounting to a total of US$215.2million (2006: nil) are declared by the Board. These dividends will be accountedfor as an appropriation of revenue reserves in the year ending 31st December2007. 10 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES At 31st At 30th June December 2007 2006 2006 US$m US$m US$m ----------------------------------------------- Capital commitments 136.8 165.5 112.6 ---------- --------- ---------- Various Group companies are involved in litigation arising in the ordinarycourse of their respective businesses. Having reviewed outstanding claims andtaking into account legal advice received, the Directors are of the opinion thatadequate provisions have been made in the financial statements. --------------------------------------------------------------------------------The interim dividend of USc3.00 per share and the special dividend of USc16.00per share will be payable on 24th October 2007 to shareholders on the registerof members at the close of business on 31st August 2007. The ex-dividend datewill be on 29th August 2007, and the share registers will be closed from 3rd to7th September 2007, inclusive. Shareholders will receive their dividends inUnited States Dollars, unless they are registered on the Jersey branch registerwhere they will have the option to elect for Sterling. These shareholders maymake new currency elections by notifying the United Kingdom transfer agent inwriting by 5th October 2007. The Sterling equivalent of dividends declared inUnited States Dollars will be calculated by reference to a rate prevailing on10th October 2007. Shareholders holding their shares through The CentralDepository (Pte) Limited ('CDP') in Singapore will receive United States Dollarsunless they elect, through CDP, to receive Singapore Dollars.-------------------------------------------------------------------------------- -end- For further information, please contact: Dairy Farm Management Services LimitedMichael Kok (852) 2299 1881Howard Mowlem (852) 2299 1896 email: hmowlem@dairy-farm.com.hk Matheson & Co Limited (020) 7816 8136Philip Hawkins phawkins@matheson.co.uk GolinHarrisJohn Morgan (852) 2501 7939 email: john.morgan@golinharris.com.hk Weber Shandwick FinancialRichard Hews/ Georgia Dempsey (020) 7067 0700 email: rhews@webershandwick.com This and other Group announcements can be accessed through the Internet at'www.dairyfarmgroup.com'. 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