TIDMDFI TIDMJAR
RNS Number : 5207D
Dairy Farm International Hldgs Ltd
03 March 2022
Announcement
3rd March 2022
The following announcement was issued today to a Regulatory
Information Service approved by the Financial Conduct Authority in
the United Kingdom.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
2021 PRELIMINARY ANNOUNCEMENT OF RESULTS
Highlights
-- Underlying net profit for the Group's subsidiaries (excluding government
support) up 35%
-- Group underlying profit of US$105 million compared with US$276 million
in 2020
-- Group's results significantly impacted by US$90 million share of Yonghui's
losses
-- Continued progress in multi-year transformation
-- Strong underlying Grocery Retail performance
"2021 was another challenging year for DFI Retail Group, with
the pandemic impacting the Group's operations and, as a result, its
financial results. Continued progress in implementing the Group's
multi-year transformation plan, however, helped the business
deliver improvements in underlying performance. High levels of
uncertainty remain in respect of this year, given the continuing
impact of the pandemic. We remain confident, however, in the
medium- to long-term growth prospects of the Group."
Ben Keswick
Chairman
Results
Year ended 31st December
2021 2020 Change
US$m US$m %
Combined total sales including 100%
of associates and joint ventures 27,684 28,159 - 2
Sales 9,015 10,269 - 1 2
Underlying profit attributable to shareholders* 105 276 - 62
Profit attributable to shareholders 103 271 - 62
USc USc %
Underlying earnings per share* 7.73 20.38 - 62
Earnings per share 7.61 20.03 - 62
Dividends per share 9.50 16.50 - 42
* the Group uses 'underlying profit' in its internal financial
reporting to distinguish between ongoing business performance
and non- trading items, as more fully described in note 36
to the financial statements. Management considers this to be
a key measure which provides additional information to enhance
understanding of the Group's underlying business performance.
The final dividend of USc6.50 per share will be payable on 11th
May 2022, subject to approval at the Annual General Meeting to be
held on 5th May 2022, to shareholders on the register of members at
the close of business on 18th March 2022.
DAIRY F A RM INTERNATIONAL HOLDINGS LIMITED
PRELIMI NA R Y ANNOUNCEMENT OF RE SU LT S
FOR THE YEARED 31ST DECEMBER 2021
O V ER V IEW
2021 was another challenging year for DFI Retail Group, as the
pandemic continued to constrain normal store operations, reduce
store traffic and impact the customer experience and consumer
behaviours. These external factors, combined with a significant
loss incurred by key associate Yonghui and a reduced level of
government support compared with the prior year, have materially
affected the reported financial results of the Group.
The underlying financial performance of the Group's
subsidiaries, excluding government support, however, improved
year-on-year and the Group maintained focus on its multi-year
transformation plan throughout 2021, driving underlying
improvements in business fundamentals. These included enhancements
to operating efficiency, improvements to customer service standards
and the delivery of greater value for customers.
OPER A TI N G PERFORMANCE
The Group's subsidiaries reported sales of US$9.0 billion for
the year, 12% behind those of 2020. Excluding the impact on
reported sales of the steps taken to rationalise the Group's
business portfolio, subsidiaries' revenue reduced by 5%. This
reduction was primarily driven by ongoing challenges posed by the
continuing pandemic, including restrictions on customer movement,
store trading restrictions and the absence in 2021 of the panic
buying that occurred at the start of the pandemic in 2020. Total
sales, including 100% of associates and joint ventures, were
US$27.7 billion, 2% behind the prior year, with sales growth at
Maxim's and Yonghui able to mostly offset the reported sales
reduction of subsidiaries.
Net profit for the Group's subsidiaries in 2021 was US$145
million, a reduction of 27% relative to the prior year. Excluding
the impact of net subsidies[1] in both years, the net profit of
subsidiaries increased by 35% compared with the prior year, despite
the ongoing disruptions posed by the pandemic and the absence of
panic buying.
Net profit attributable to shareholders was US$105 million in
2021, compared to US$276 million in the prior year. Around 70% of
this reduction was due to a US$119 million adverse swing in the
Group's share of Yonghui's profits compared to 2020. Excluding the
impact of the reduction in the contribution from Yonghui, profit
attributable to shareholders would have been US$195 million,
compared to US$247 million last year. There was an encouraging
recovery by Maxim's in the period, with its contribution to the
Group's profit increasing to US$52 million from US$36 million last
year, despite a substantial reduction in the levels of government
support received compared with the prior year.
Underlying earnings per share of USc7.73 were 62% lower than the
prior year.
The Group 's cash flows from operating activities benefitted
from government assistance in 2020. This benefit did not accrue in
2021 which saw operating cash flow after lease payments reduce to
US$270 million compared to US$361 million in the prior year. Net
debt at the end of 2021 was US$844 million, up from US$817 million
at the end of last year.
The Board is recommending a final dividend of USc6.50 per share,
giving a total dividend of USc9.50 per share for the year, a 42%
reduction compared to 2020. The level of the dividend reflects the
challenging conditions faced by the Group, but the Board remains
confident in the medium- and long-term prospects of the
business.
F oo d - Gr oce r y R e ta il
Grocery Retail sales were US$4.2 billion in 2021, a reduction of
22% relative to the prior year. Over half of the decline in revenue
resulted from the Group's proactive management of its business
portfolio, including the divestment of Wellcome Taiwan at the end
of 2020 and the withdrawal from the Giant brand in Indonesia.
Revenues were also impacted by the absence of the panic buying
behaviour seen last year and ongoing disruptions caused by the
pandemic, particularly with respect to movement and trading in
parts of Southeast Asia.
Given the significant volatility in 2020 performance, a
comparison of performance in 2021 to 2019 provides a better
understanding of the progress made with respect to the Group's
transformation. Operating profit for the Grocery Retail division in
2021 was US$143 million, significantly surpassing the US$63 million
reported in 2019. This increase reflects the strong improvement in
underlying profitability achieved through the combination of
business improvement programmes, stronger store-level execution,
enhanced Own Brand penetration, and a groupwide approach to
customer loyalty in Hong Kong. Relative to 2020 levels, reported
operating profit reduced primarily due to normalisation of customer
buying behaviours as well as reduced levels of government
support.
Food - Convenience
Total sales for the Group's Convenience stores increased by 7%
to US$2.2 billion as a result of strong new store growth and
reinvigorated customer traffic into stores, particularly in Hong
Kong. Operating profit was US$54 million, a reduction of 5%
relative to the prior year primarily as a result of low levels of
profitability in Singapore and the Chinese mainland, where the rise
in COVID cases and resultant government-imposed restrictions on
movement, impeded sales momentum in the second half.
Health and Beauty
Total sales for the Health and Beauty division were US$1.8
billion. Excluding the impact of the Rose Pharmacy divestment,
total sales reduced by only 2%, despite the absence of panic buying
behaviour in the first half of 2021 which had taken place in the
equivalent period in 2020, and ongoing disruptions caused by the
pandemic. The sustained border closure with the Chinese mainland
continues to significantly impact Mannings' performance in Hong
Kong compared to pre-pandemic years. Reduced levels of customer
traffic also impacted Guardian performance in Southeast Asia.
Operating profit was US$56 million in 2021, a reduction of US$9
million relative to the prior year. However, profitability
increased by over 50% in the second half relative to the prior
comparable period, driven by improved sales and strong cost
control.
H o m e Furnishings
Home Furnishings reported sales revenue of US$816 million, only
marginally behind the prior year despite the negative impact caused
by government-imposed restrictions on trading as well as global
supply chain disruptions that have caused challenges to stock
availability. Ongoing store network expansion and strong e-commerce
growth largely offset the negative sales impact of
government-imposed movement restrictions and trading restrictions
on stores.
Operating profit was US$45 million, a reduction of 36% relative
to the prior year. The reduced profit was driven by ongoing
pandemic-induced restrictions and compromised range availability
caused by global supply chain constraints which impacted
like-for-like sales performance, as well as some additional
pre-opening expenses.
Associates
The Group's reported financial results, however, were materially
affected by the Group's share of losses incurred by Yonghui, which
was US$90 million. The reduction in the contribution from Yonghui
represented a US$119 million adverse swing compared to the prior
year. Yonghui's reported financial performance was impacted by a
combination of the normalisation of sales performance -
particularly in the first quarter; reduced margins resulting from
rising competition and investments in digital.
The contribution from 50%-owned Maxim's increased significantly
to US$52 million from US$36 million last year, as restaurant
patronage recovered, particularly in North Asia. While recent
government-imposed dining restrictions will have some impact on the
performance of Maxim's, we believe the business is well placed to
benefit when conditions normalise.
The Group's share of underlying results in Robinsons Retail
increased by 4% to US$14 million.
TRANSFORMATION AND BUSINESS D E V ELOPME N T S
Despite the ongoing challenges posed by the pandemic, the Group
has continued to focus on its multi-year transformation and
strengthening the underlying fundamentals of the business. During
the year, the Group continued to make good progress on delivering
its business transformation, improving store operating standards
and enhancing the customer experience.
Digital innovation and e-commerce remains a key forward-looking
focus for the Group. The yuu Rewards programme continues to exceed
expectations, with almost 4 million members. The programme has
supported an increase in cross-banner shopping of over 50% in the
year. Furthermore, yuu continues to expand its ecosystem with the
introduction of Maxim's, Chubb, Allianz and Shell as additional
partners. Daily e-commerce volume has more than doubled across the
Group in 2021 and the Group continues to trial new pilots focusing
on enhancing the customer experience.
The Group's 89.3%-owned subsidiary in Indonesia, PT Hero, was
restructured in the year. Following a detailed strategic review, PT
Hero pivoted focus towards its strong brands of IKEA, Guardian and
Hero Supermarkets, and away from the Giant banner. This change in
strategy was necessary given changing market circumstances. The
Giant banner in Indonesia ceased operations in July. Six stores
were subsequently successfully converted to the upscale Hero
banner. A number of other sites are scheduled to be transformed
into IKEA stores, the first of which was relaunched in Bali in the
fourth quarter. A number of stores were successfully divested to
third parties.
GOVERNANCE ENHANCEMENTS
The Group has an ongoing focus on enhancing its governance, and
in the past year it has made changes to the composition of its
Board, to reduce its size and to increase its diversity and bring
greater sector expertise through the appointment of new independent
non-executive directors. The Group has also established formal
Audit, Remuneration and Nominations Committees.
PEOPLE
Amid the ongoing difficulties associated with the pandemic
across our diverse markets, we would like to express our deep
gratitude for the continuing dedication and hard work of our team
members in putting our customers first.
Delman Lee, George J. Ho, YK Pang, Clive Schlee and Percy
Weatherall stepped down as Directors of the Company on 30th
November 2021. We would like to thank each of them for their
contribution to the Board during their time on the Board.
We were pleased to welcome Dave Cheesewright, Weiwei Chen and
Christian Nothhaft as Independent Non-Executive Directors of the
Company with effect from 30th November 2021. They bring many years
of valuable experience in retail businesses globally.
PROSPECTS
There remains significant uncertainty with respect to the
duration and extent of the COVID-19 pandemic, particularly given
the recent rise in Omicron cases in Hong Kong. Regardless of the
external environment, DFI Retail Group remains committed to its
multi-year transformation and its customer-focused strategy. We are
confident in the Group's ability to adapt to remain relevant and
competitive in each market and achieve long-term sustainable
recovery and growth in a post-pandemic environment.
Ben Keswick
Chair m an
GRO U P CHIEF EXECUTIVE'S REVIEW
INTRODUCTION
External trading conditions have remained challenging in 2021,
with the pandemic continuing to impact customer visits and tourism
traffic. We continue, however, to execute the multi-year
transformation of DFI Retail Group ('DFI') and remain focused on
strengthening the underlying fundamentals supporting the Group's
businesses, by enhancing operational efficiency, store operating
standards, range, value and the customer shopping experience.
Having made strong progress through the second phase of the
transformation (Delivering Consistently Well), we are now actively
progressing into the third phase (Driving the DFI Difference).
Net profit for the Group's subsidiaries reduced by 27% in the
year. This was driven by the absence of the panic buying behaviour
seen in the prior year, the reduction in government support, the
ongoing challenges of COVID-19 on customer traffic and supply chain
constraints, which particularly impacted IKEA. The Group's reported
results were materially impacted by losses incurred by key
associate Yonghui (where there was a US$119 million year-on-year
adverse movement for the Group). The profitability of Maxim's,
however, improved significantly. Total net profit for the Group
fell from US$276 million to US$105 million. We remain encouraged,
however, by the momentum built over the course of the Group
transformation and the resulting improvements in the underlying
performance of the business. In this context, excluding the impact
of government support received in 2020, net profit for the Group's
subsidiaries increased by 35% relative to the prior year. We
believe the Group is well positioned to grow sustainably when
external market conditions normalise.
PROGRESS ON BUSINESS IMPROVEMENT PROGRAMMES
Our business improvement programmes remain key enablers for the
Group and have already made a major contribution weathering the
external challenges caused by the pandemic. The savings generated
have partially offset pressure on the Group's profitability caused
by the pandemic, while at the same time providing the Group with
the flexibility to reinvest back into its businesses to drive
sustainable change for the customer and, in turn, enhance DFI's
competitive position. This 'flywheel' effect is the bedrock
underpinning a successful formula for leading retailers globally,
and is now being effectively deployed within DFI.
Throughout 2021, we have continued to make strong progress on
our key improvement programmes.
-- Fresh supply chain efficiency - Significant progress has been
made to enhance our fresh quality and standards, through
optimisation of our end-to-end supply chain, including sourcing,
enhancement of quality standards, range optimisation, improved
reporting and monitoring standards. This has culminated in an over
50% reduction in losses associated with food wastage since the
programme's start and a significant reduction in fresh shrinkage.
As a result of greater focus and improved fresh standards, fresh
like-for-like sales continue to outperform the overall Group sales
performance.
-- Labour productivity - Our programme to drive store labour
productivity and efficiency has continued to be rolled out in 2021,
with a greater focus on improved team member roster schedules. As a
result, cost savings in 2021 were more than double those achieved
in 2020.
-- Procurement centralisation - We continue to generate
efficiency savings in non-trade procurement executing around 1,000
separate projects across the Group in 2021. Significant savings
have been generated in supply chain, property management and
marketing in the year. Projects have included renegotiation of
transportation rates with third-party logistics providers, enhanced
processes to improve labour efficiency in warehouses, energy
savings initiatives, consolidation of point of sales marketing
print contracts.
-- Assortment optimisation - Our programmes to improve cost of
goods have been very successful. In 2021, around 1,700 rounds of
supplier discussions were conducted, generating significant savings
in cost of goods. Over the past three years, we have followed a
process of strategic category planning, and we have also introduced
enhanced governance and control mechanisms with respect to
supplier-led cost price increases, which have mitigated price
increases and provided additional savings for our customers.
PROGRESS ON STRATEGIC PRIORITIES
1) Gr owth in China
7-Eleven South China continued to expand, with over 200 new
stores opened during the year, whilst also strengthening the
foundations of the business. New product development continues to
accelerate, with around 1,000 SKUs launched, supported by the
development of important Own Brand strategic supply partnerships.
In the area of infrastructure, 7-Eleven completed a major upgrade
of its legacy IT systems with a new end-to-end agile IT solution,
to support both an improved customer shopping experience and its
future growth ambitions. 7-Eleven is also expanding its online
offering. Daily O2O transaction volume has quadrupled during the
year. In addition, a number of pilots with respect to online store
community groups have been initiated, with encouraging initial
performance.
Mannings China's like-for-like sales grew strongly in the first
half. However, the rise in the number of COVID-19 cases and
subsequent restrictions on movement since late May has impeded
sales momentum over the second half of the year. Following a
detailed review of our Mannings store portfolio across China, we
have undergone a period of space optimisation. The consolidation of
the store network into Guangdong province is now complete, and
supports an ability to not only focus growth in a more concentrated
geography, but also leverage the above-store infrastructure of
7-Eleven where it makes sense to do so. Cross-border e-commerce
sales growth continues to be strong, with additional capabilities
introduced and opportunities now being explored to enhance range
and value and improve the overall customer experience.
Yonghui's financial performance was materially impacted during
the year, but it continues to invest in enhancing its business
fundamentals with the ongoing strong growth of e-commerce; the
launch of new formats such as warehouse stores; and the ongoing
digitisation of its store operations.
2) Maintaining Hong K o n g S tr e n g th
Wellcome Hong Kong reported good sales growth and improvement in
profit in 2021 compared to 2019 levels, highlighting strong
underlying improvements in its business fundamentals. Relative to
2019 levels, Wellcome's sales significantly outperformed the
decline of the broader market as reported by official Hong Kong
retail sales statistics.
As a result of disciplined cost price reviews; the introduction
of quality Own Brand products at affordable prices; lower
negotiated cost of goods; and the introduction of the Low Prices
Locked campaign, Wellcome has continued to reinvest in prices, with
average selling prices reducing over the past 20 months. This has
resulted in annualised savings of over HK$300 million for our
customers.
Format development was another key area of focus in the year.
The new 'Wellcome Fresh' concept was introduced in October,
offering the best elements of both traditional wet markets and
modern grocery retail. In addition, the Group continued to progress
the upgrade of its upscale Market Place stores. Initial performance
of these new concepts has been encouraging, with a strong uplift in
sales, fresh participation, and basket sizes.
Mannings Hong Kong has continued to focus on local customers and
the delivery of strong value for these customers. Since the launch
of its price reinvestment campaign in July 2020, market share has
increased materially, with strong levels of sales and volume uplift
for key SKUs. Customer value perception has also improved steadily.
Like-for-like sales and profitability for Mannings improved
strongly in the second half relative to the first half. However,
performance of the business continued to be significantly behind
pre-pandemic levels, due to the impact of the pandemic and the
ongoing absence of Chinese mainland tourist traffic.
In 2021, 7-Eleven celebrated its 40th anniversary of serving the
Hong Kong community, and in July, it reached its 1,000th store
milestone, solidifying its position as the largest convenience
store chain in Hong Kong. The team continued to innovate for
customers throughout the year. Around 250 new Own Brand
ready-to-eat products were introduced to the market and a number of
successful customer engagement programmes, such as collectibles
campaigns for which the banner is now renowned, were launched. Good
sales momentum was achieved over the course of the year, with
like-for-like sales performance improving in the second half as the
restrictions on customer movement began to normalise in Hong
Kong.
IKEA's Hong Kong sales performance was impacted by reduced
traffic caused by the pandemic as well as global supply chain
constraints impacting availability, although e-commerce sales
remained strong. IKEA continues to innovate with both its format
and service offerings for the customer. For example, the upgraded
Market Place store in Discovery Bay saw the introduction of the
world-first 'IKEA Close to You' store-in-store concept. IKEA also
introduced its first IKEA compact store, a 500 square metre
location in Tai Po stocking both accessories and food, with
encouraging early results. Home planning services have been
launched across all Hong Kong stores during the year, providing
customers with one-stop professional home planning advice.
Maxim's remains committed to pursuing its multi-brand strategy.
During the year, Maxim's expanded its digital solutions for
customers such as mobile ordering to support its takeaway business,
as well as enhanced CRM capabilities through yuu Rewards and its
Eatizen app. Based on the success of its Shake Shack franchise,
which has now opened in Shenzhen, Macau, Beijing, Shanghai and Hong
Kong, Maxim's has announced a strengthened partnership with Shake
Shack and plans to expand into more locations across the Chinese
mainland.
3) R evi ta lising Southeast Asia
Our Southeast Asian Grocery Retail businesses saw strong
underlying performance in 2021 and, relative to 2019 levels, store
sales per square metre increased by 25%. A combination of a strong
improvement in underlying sales productivity, and efficiency
savings following the implementation of business improvement
programmes, has led to a significant positive swing in
profitability for Southeast Asia Grocery Retail relative to
2019.
In Singapore, we have seen strong improvements in both our
relative price position and customer perception scores following
the relaunch of the Giant brand in Singapore, combined with the
introduction of the Low Prices that Last programme. Within the key
fresh food category for Giant, we have also gained significant
market share. This has in turn translated to improved underlying
sales productivity and profitability and arrested the previous
trend of market share decline in the face of increased market
competition both online and offline. With strong foundations in
place, Giant is well positioned to grow in Singapore. In the fourth
quarter, Giant opened its first new store in Singapore in over four
years. Around half of our upscale stores in Singapore have either
been, or are in the process of being, refreshed and we have plans
to complete this process for most stores by the end of 2022.
Refreshed upscale stores have exhibited strong performance from the
perspective of both sales, customer count and basket uplift.
The pandemic has heavily impacted performance for Malaysia
Grocery Retail, with government-imposed restrictions on movement
impacting traffic and trading limitations in areas such as general
merchandise, apparel and beer, wine and spirits. The pandemic has
also impacted supply chain capacity and the progress of some of our
transformation initiatives, with contract work being heavily
constrained. Despite the challenges and delay caused by COVID-19,
the Giant brand in Malaysia was relaunched in the first half with a
greater focus on fresh, range enhancements and a detailed
reapportionment of space. Subsequently, we have seen very positive
customer feedback, which has supported a strong improvement in
customer perception scores. In November, Giant Malaysia launched
its own Low Prices that Last price reinvestment programme, which
led to strong volume and sales growth for key SKUs.
In May, PT Hero, the Group's 89.3%-owned subsidiary in
Indonesia, announced that, following a strategic review, it would
be pivoting its trading operations away from the Giant banner by
increasing investment in its strong brands of IKEA, Guardian and
Hero Supermarkets. This change in strategy is a decisive and
necessary response to changing market dynamics, particularly given
the move away from the hypermarket format by Indonesian consumers
in recent years. During the third quarter, PT Hero successfully
executed the restructure of Giant in Indonesia. As a result, six
stores have been successfully converted to the Hero banner, with
the first IKEA conversion in Bali now open. A number of stores have
been successfully divested.
Guardian's performance across Southeast Asia has continued to be
affected by the pandemic and its impact on both tourism and mall
traffic. Despite these challenges, the Guardian team has remained
focused on improving the underlying fundamentals of the business.
During 2021, the Low Prices Locked programme was introduced in all
key markets, improving Guardian's already strong price position
relative to competitors and driving double-digit volume growth on
key SKUs. Customer perception scores have also improved since the
launch of these programmes.
In addition, the Guardian team has begun to execute its
multi-year range and sales optimisation programme. Leveraging deep
research on customer insights as well as analysis on changing
shopping behaviour by cluster, Guardian will focus on driving range
simplification, improved promotional efficiency and a more tailored
product mix according to demographic cluster. It will also focus on
introducing additional innovation and newness to its range. The
hard work which has been put in by the team in continuing to serve
our customers in Malaysia has been rewarded by customers voting
Guardian the winner of the Platinum award in the 2021 Putra Brand
Awards.
IKEA's performance in Indonesia was impacted in the year by a
combination of reduced traffic and supply chain constraints
impacting availability. However, we believe the foundations have
been laid to support strong growth when the external environment
normalises. IKEA's total network space in Indonesia has more than
doubled since the start of the year, following the opening of the
Bandung and Jakarta Garden City stores. In November, IKEA opened
its first Giant conversion outside of Java Island in Bali. This
expansion reflects IKEA's strategic imperatives of being more
accessible and affordable to the people of Indonesia, and we
believe these stores will generate good returns for shareholders
over time.
Robinsons Retail has exhibited some continued improvement in
quarterly performance indicative of the recovery of the Philippines
economy. The integration of Rose Pharmacy is making good progress.
The company is also continuing to build on its digital strategy
with strong growth in e-commerce and is further enhancing online
capabilities to serve and fulfill customer needs.
4) Building Capability
Since the start of our transformation, the Group has balanced
both internal promotions and the introduction of external
capability, and the change in leadership within the organisation
has brought depth of experience and thinking to the Group. Having
made strong progress through the second phase of the transformation
(Delivering Consistently Well), we are now actively progressing
into the third phase (Driving the DFI Difference). Consequently,
there is a greater need to optimise the balance between the
consistency brought about by centralisation and the agility
afforded to businesses allowed to operate a higher degree of
autonomy. Some adjustments to our organisation design were made in
the year to support greater levels of regional autonomy, which we
believe will drive even stronger transformation success in the
future.
We have focused on enhancing capabilities for team members both
in our Store Support Centre as well as team members in stores. In
this regard, we have made significant investments in training and
improving systems and processes to upskill our store team members
and serve our customers better. To give a sense of the magnitude of
change, total training investment for team members exceeded 300,000
hours in 2021. This was more than double 2019 levels. In 2021,
additional capabilities in digital and CRM have been added to the
team, which will support the acceleration of the Group's digital
transformation to adapt to the rapidly changing environment. In
August, Johnny Wong joined the Group as CEO of DFI Digital,
bringing strong experience gained in a number of leading
organisations in this area. Digital innovation remains an area of
ongoing focus for the Group, and we expect to make ongoing
investments in capability to support our development.
5) D r ivi n g Digital Inn ov at io n
The yuu Rewards programme continues to exceed expectations and
now has almost four million members, representing over 60% of Hong
Kong's adult population. The programme is attracting high levels of
engagement, with over 130 billion points issued and 64 billion
points redeemed since launch. All brands have benefitted from
stronger levels of customer engagement relative to previous
programmes, including the successful Mannings Mann Card programme.
Further, the common loyalty currency of yuu points is now
supporting an over 50% increase in cross-banner shopping relative
to the start of 2021. Since its launch, yuu has continued to expand
its ecosystem through the inclusion of Maxim's as a partner, the
introduction of yuu Insure and Shell as fuel partner, as well as
the launch of yuu-to-me e-commerce functionality on the app.
E-commerce remains a key focus area for the Group as we continue
to adapt and improve our customer service proposition. Overall
daily e-commerce orders for the Group have more than doubled.
E-commerce sales growth continues at double-digit pace for IKEA. In
some markets, IKEA's e-commerce penetration has exceeded 20%. In
Hong Kong, we have introduced pilots offering customers the choice
between delivery within 60 minutes and delivery within 24 hours, to
tailor to different shopping occasions. Within Grocery Retail in
Hong Kong, our average order volume has increased by over 120%.
We are continuing to experiment through alternative e-commerce
offerings for customers. In Singapore we have piloted CART, a brand
new shopping experience bringing our key brands in Singapore onto
one platform. Customers can now shop over 20,000 products from Cold
Storage, CS Fresh, Giant, Guardian on one app.
In addition to focusing on e-commerce growth, the Group is
continuing to upgrade and enhance existing legacy IT systems, to
improve the digitisation of in-store operations. 7-Eleven South
China successfully completed the upgrade of its IT systems for all
stores and distributions centres in August, future-proofing further
business expansion plans. In partnership with leading Chinese
omnichannel digital service provider Dmall, the new system was
purpose-built for convenience retail to provide a digital operating
system to support all aspects of 7-Eleven's value chain. Over the
course of the year, we have begun to upgrade elements of Wellcome's
IT systems to enhance in-store efficiency.
6) Own Brand Development
One of the key drivers of value for our customers has been the
ongoing momentum and success of Own Brand development. Within
Grocery Retail, over 2,000 Own Brand SKUs have been launched since
2019, and over 1,300 SKUs have been launched in the past year.
Meadows is now the number one brand across the whole Group, with
over four items now being sold every second! Key highlights for
2021 include:
-- Own Brand penetration has now reached double-digits in volume terms.
-- During the year, we relaunched both Yu Pin King and Giant Own
Brand product ranges. We also launched the Meadows Essentials
range, providing our customers with additional choice through
different levels of pricing tiers within our Own Brand range.
-- Meadows is now the number one brand for nuts in Hong Kong and
the number one snacks brand across Singapore.
-- Our Own Brand products hold number one positions across
multiple categories within the Group, including condiments, water,
snacks and frozen food categories.
-- As a testament to our strong international sourcing
credentials, our Own Brand products were awarded over 80
international food quality awards. In addition, our relaunched Yu
Pin King rice was judged best-tasting rice by the World Rice
Conference.
Own Brand development within Health and Beauty has also been an
area of focus. A full strategic review has been conducted, and
plans are now in place to launch over 1,000 re-developed or new
Health and Beauty products during 2022. The first relaunches took
place in the fourth quarter of 2021 in two major commodity
categories: cotton and paper. An integrated development and launch
plan through commercial, sourcing, product marketing and strong
in-store execution has resulted in strong double-digit sales growth
relative to prior sales levels, and we expect momentum to
accelerate over the course of 2022.
CORPORATE SOCIAL RESPONSIBILITY
The purpose of our transformation plan started four years ago
was to transform the organisation across multiple retail sectors,
countries and territories and create a business that is more
relevant to our customers and competitive within each of our
markets, and of which our team members feel proud to be a part.
Whilst we are doing all we can to improve the service we offer to
our customers, we recognise that we can do more, both addressing
the many challenges we face as a business and recognising the
responsibilities we have outside the company. As a large
enterprise, we have a duty to think about the needs of those around
us - our team members, customers and our communities within our
markets - as well as the impact we have on the world.
We are therefore thinking more carefully about not just our
business and financial responsibilities, but also our broader
social responsibilities. In this context, we have developed our
Corporate Social Responsibility (CSR) mission: to provide
communities we serve with benefits that help them and help the
environment too. Our approach is to build change that matters,
harness our team's passion and strive to make a difference. We have
identified the key pillars and priorities of our CSR approach:
serving communities, sustaining the planet and sourcing
responsibly. We are now dedicating significant resource towards
building programmes that make a difference in each of these
areas.
We have made some encouraging progress so far in the area of
serving our communities. In Hong Kong, there are over 1.6 million
people who are living at or below the poverty line. In November,
Wellcome teamed up with long-term partner Foodlink to launch a Rice
Donation Charity Programme called 'Sik Jor Fan Mei', which is a
traditional Cantonese greeting meaning 'Have you eaten yet?'. As
part of the programme, Wellcome pledges to donate HKc50 for every
kilogram of Yu Pin King brand rice sold at its stores to help those
in need. The aim of the programme is to raise HK$5 million within a
year. The generosity of our customers has enabled Wellcome to raise
funds at a much faster rate than expected. As of February 2022, we
are now over 75% of the way towards achieving our original target.
Following this successful introduction, we aim to introduce
impactful programmes across other subsidiary business units over
time.
Maxim's is also committed to serving the communities that it
operates in. Maxim's was the first bakery chain to launch its
Surplus Bread Donation Programme in 2009 and has since saved and
donated over 5.6 million bread items, partnering with nearly 90
NGOs. In 2021, Maxim's expanded its volunteer network to over 30
corporate partners, distributing over 280,000 bakery items to
vulnerable groups in the community.
In the area of sustaining the planet, the Group has placed
significant emphasis on energy efficiency in 2021, which has also
generated material cost savings. Wellcome installed the largest
solar panel system in Hong Kong on the rooftop of its Fresh Food
Processing Centre, generating one million kWh of electricity per
year - enough to meet the annual electricity needs of nearly 250
households. Campaigns to change energy behaviours were introduced
in key markets, and led to DFI receiving Smart Energy Awards from
its key energy supplier, CLP Group, in 2021. Plans have also been
developed to significantly improve energy efficiency in future
years.
Our IKEA franchise continues to work with Inter IKEA Group to
achieve its ambitions of becoming people and planet positive.
Strong progress has been made in new product ranges such as
introduction of new, more energy-efficient LED bulbs and increase
in plant-based food offerings. In addition, IKEA is working hard
towards a systematic shift towards a circular economy to reduce the
environmental footprint of furniture. We have introduced circular
hubs in all of our markets to sell returned or display furniture.
In addition, new furniture leasing services are currently being
trialed.
In addition, significant work has been undertaken to understand
our carbon emissions and our future sustainability targets, areas
we hope to share with our key stakeholders in the near future.
BUSINESS RE V IEW
FOO D
FOOD - GROCERY R ETAIL
Reported sales for the Grocery Retail division in 2021 were
US$4.2 billion. Consistent with the Group's strategy of proactively
managing our business portfolio, the Wellcome Taiwan business was
successfully divested at the end of 2020. In addition, following a
detailed strategic review, the Group exited its Giant Indonesia
operations in July. These portfolio actions accounted for over half
of the 22% reduction in reported sales for the Grocery Retail
division in 2021. The remaining reduction in revenue was
attributable to the normalisation of customer buying behaviours and
government-imposed restrictions on movement and trading,
particularly in parts of Southeast Asia.
Nevertheless, the headline reduction in revenues masks the
underlying improvements in the performance of the business units.
Underlying sales productivity has improved by over 20% in 2021
relative to 2019 levels. Own Brand participation continued to gain
traction, reflecting our sustained efforts to expand offerings and
build a strong brand that resonates with customers.
Reported operating profit for the Grocery Retail division was
US$143 million. A headline reduction in profitability of 46% was
primarily driven by normalisation of customer buying behaviours and
a reduction in the level of government support received compared
with the prior year. Operating profit for the division relative to
2019 levels, a better indicator of underlying performance of the
business, more than doubled. This was driven by strong improvements
in sales productivity and good progress with business improvement
programmes that have been introduced to enhance product range,
operating efficiency, customer service standards and the overall
customer shopping experience.
All key banners continued to focus on delivering enhanced levels
of value for customers in 2021, through a combination of ongoing
price reinvestment campaigns, disciplined cost price reviews and
the introduction of quality Own Brand products at affordable
prices.
FOOD - CONVENIENCE
Total convenience sales increased 7% to U$2.2 billion due to a
combination of like-for-like sales recovery in Hong Kong and the
Chinese mainland, and strong network expansion. Operating profit
was US$54 million. The slight reduction of US$3 million in
operating profit relative to the prior year was primarily due to
lower levels of profitability in the Chinese mainland and
Singapore, as the ongoing continuation of the pandemic has impacted
customer traffic over the course of the year. Profitability in Hong
Kong increased relative to the prior year, as the reduction in
transmission of local COVID-19 cases in the year saw customer
traffic normalise.
HEALTH AND BEAUTY
The reduction in reported sales revenue for the Health and
Beauty division was driven predominantly by the successful
integration of Rose Pharmacy into Robinsons Retail in the second
half of 2020. Overall reported sales for the division were US$1.8
billion in 2021, a reduction of 9% relative to the prior year.
However, sales reduced only 2% excluding the impact of the Rose
Pharmacy divestment. Like-for-like sales momentum improved in the
second half, as external conditions began to improve. However,
relative to historical levels, divisional performance was affected
by ongoing disruptions caused by the COVID-19 pandemic to movement
and tourism.
Overall like-for-like sales for Mannings in North Asia were
ahead of prior year despite an ongoing lack of custom from
tourists. Like-for-like sales performance improved significantly in
the second half, with strong growth in the fourth quarter. Both
Mannings Macau and China also grew strongly in the first half. In
Macau in particularly, the easing of border restrictions in the
first half significantly benefitted performance. However, the rise
in COVID cases impacted movement in the second half and impeded
sales momentum. In Hong Kong, Mannings has focused on driving local
customer sales with price investment programmes driving over 80%
uplift in volume of key SKUs and significant market share
gains.
Guardian like-for-like sales were impacted by the ongoing
pandemic, government-imposed restrictions on movement and low
levels of mall visitations. Like-for-like sales momentum, however,
did improve in the second half as movement restrictions became less
severe.
Operating profit was US$56 million in 2021, a reduction of US$9
million relative to the prior year. Encouragingly, profitability
increased over 50% in the second half relative to same period last
year, driven by improved sales performance and ongoing disciplined
cost control, with particularly strong profit growth in Hong Kong.
Whilst 2021 has remained a challenging year for the Health and
Beauty division, the improved performance in the second half gives
us reason to be optimistic when conditions normalise.
HOME FURNISHINGS
Challenges posed by COVID-19 severely impacted sales performance
for IKEA with forced closures impacting stores in Taiwan and
Indonesia operating hour restrictions in Indonesia and limitations
to dine-in services across all markets. In addition, global supply
chain disruptions have led to continued challenges on stock
availability, particularly top selling items. Despite these
challenges, IKEA reports sales revenue of US$816 million, only 2%
lower than the prior year.
E-commerce sales growth continues to remain strong, with
double-digit percentage growth overall. In addition, IKEA continued
to expand its store network in the year. In Indonesia, IKEA has
more than doubled its store space following the openings of both
the Bandung and Jakarta Garden City stores. In May, IKEA opened a
larger replacement store in Neihu, Taipei City, which is almost
double the size of the store that it replaced.
Operating profit was US$45 million for the year. The decline in
profitability relative to the prior year was due to combination of
lower like-for-like sales as a result of COVID-19 related
disruptions, reduced availability due to supply chain constraints
and higher pre-opening expenses for new stores.
RESTAURANTS
The sales performance of Maxim's improved in the year due to
stronger levels of restaurant patronage, particularly in Hong Kong,
and encouraging levels of mooncake sales during the Mid-Autumn
Festival. Whilst recent government-imposed dining restrictions
introduced in January 2022 will have some impact on Maxim's
performance, we believe Maxim's is well placed to benefit when
conditions normalise.
In Southeast Asia, sales were impacted by the rising number of
COVID-19 cases, which curtailed patronage. However, a gradual
easing of government-imposed restrictions did support improvement
in the fourth quarter.
As a result of improving sales performance, particularly in
North Asia as well as good growth in branded product sales such as
mooncakes, Maxim's underlying profitability increased significantly
relative to the prior year.
OTHER ASSOCIATES
The Group's reported financial results for the year were
significantly impacted by its share of Yonghui's losses,
representing a US$119 million swing in profit relative to the prior
year. Yonghui's financial performance was impacted by a combination
of normalisation of sales performance particularly in the first
quarter, reduced margins resulting from rising competition, as well
as investments in digital.
The Group's share of Robinsons Retail's profit increased by 4%
relative to the prior year. Robinsons Retail financial performance
has been impacted by the normalisation of sales revenues in its
supermarket business segment in the first quarter. However, the
company reported strong growth in net income in the third quarter,
with continued improvement in quarterly performance indicative of
the recovery of the Philippines economy. The integration of Rose
Pharmacy is making good progress.
THE YEAR AHEAD
Our transformation, which began four years ago, has been a tough
journey and one which is not yet complete. External market
conditions over the past two and a half years have increased the
challenges, and the Group's results have been impacted materially
by the performance of Yonghui in 2021. However, we remain confident
that the plans we have in place and the progress we have made put
DFI Retail Group in a strong position to drive sustainable growth
over the medium- to long-term.
There remain a number of areas of uncertainty with respect to
the extent and duration of the pandemic, particularly following the
recent spread of the Omicron variant. However, we remain optimistic
when conditions normalise.
I would like to take this opportunity to thank each and every
team member for their ongoing tireless efforts during what
continued to be a challenging 2021 as well as the last four years
of our transformation journey to drive sustainable improvements for
our shareholders and customers.
Ian McLeod
Group Chief E x ecuti v e
Dairy Farm International Holdings Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2021
2021 2020
Underlying Non- Underlying Non-
business trading business trading
performance items Total performance items Total
US$m US$m US$m US$m US$m US$m
Sales (note 2) 9,015.4 - 9,015.4 10,268.5 - 10,268.5
Cost of sales (6,145.7) - (6,145.7) (7,077.7) - (7,077.7)
----------- ------- --------- ----------- ------- ---------
Gross margin 2,869.7 - 2,869.7 3,190.8 - 3,190.8
Other operating
income (note 3) 207.1 28.4 235.5 355.4 75.2 430.6
Selling and
distribution
costs (2,310.1) - (2,310.1) (2,575.8) - (2,575.8)
Administration
and other
operating
expenses (452.9) (31.4) (484.3) (558.8) (98.7) (657.5)
----------- ------- --------- ----------- ------- ---------
Operating profit
(note 4) 313.8 (3.0) 310.8 411.6 (23.5) 388.1
Financing charges (119.5) - (119.5) (145.1) - (145.1)
Financing income 0.7 - 0.7 2.4 - 2.4
Net financing
charges
(note 5) (118.8) - (118.8) (142.7) - (142.7)
Share of results
of associates and
joint ventures
(note 6) (40.4) (1.4) (41.8) 76.0 8.9 84.9
----------- ------- --------- ----------- ------- ---------
Profit before tax 154.6 (4.4) 150.2 344.9 (14.6) 330.3
Tax (note 7) (60.0) 1.1 (58.9) (74.2) 0.4 (73.8)
----------- ------- --------- ----------- ------- ---------
Profit after tax 94.6 (3.3) 91.3 270.7 (14.2) 256.5
----------- ------- --------- ----------- ------- ---------
Attributable to:
Shareholders of
the Company 104.6 (1.7) 102.9 275.7 (4.7) 271.0
Non-controlling
interests (10.0) (1.6) (11.6) (5.0) (9.5) (14.5)
----------- ------- --------- ----------- ------- ---------
94.6 (3.3) 91.3 270.7 (14.2) 256.5
----------- ------- --------- ----------- ------- ---------
US c US c US c US c
Earnings per
share
(note 8)
* basic 7.73 7.61 20.38 20.03
* diluted 7.73 7.61 20.37 20.03
----------- --------- ----------- ---------
Dairy Farm International Holdings Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2021
2021 US$m 2020 US$m
Profit for the year 91.3 256.5
Other comprehensive income
--------- ---------
Items that will not be reclassified
to profit or loss:
--------- ---------
Remeasurements of defined benefit
plans 22.1 16.3
Tax relating to items that will not
be reclassified (3.5) (2.7)
18.6 13.6
Share of other comprehensive income
of associates and joint ventures 1.0 2.2
--------- ---------
19.6 15.8
--------- ---------
Items that may be reclassified subsequently
to profit or loss:
Net exchange translation differences
--------- ---------
- net (loss)/gain arising during the
year (19.8) 109.4
- transfer to profit and loss - (16.9)
(19.8) 92.5
Cash flow hedges
--------- ---------
- net gain/(loss) arising during the
year 10.1 (11.6)
- transfer to profit and loss 11.6 2.8
21.7 (8.8)
Tax relating to items that may be
reclassified (3.3) 1.8
Share of other comprehensive (expense)/
income of associates and joint ventures (1.1) 0.5
(2.5) 86.0
--------- ---------
Other comprehensive income for
the year, net of tax 17.1 101.8
--------- ---------
Total comprehensive income for the
year 108.4 358.3
--------- ---------
Attributable to:
Shareholders of the Company 120.1 373.9
Non-controlling interests (11.7) (15.6)
--------- ---------
108.4 358.3
--------- ---------
Dairy Farm International Holdings Limited
Consolidated Balance Sheet
at 31st December 2021
2021 US$m 2020
US$m
Net operating assets
Intangible assets 411.9 420.6
Tangible assets 803.3 771.9
Right-of-use assets 2,747.6 2,872.1
Associates and joint ventures 2,164.3 2,256.5
Other investments 11.5 6.0
Non-current debtors 113.2 114.8
Deferred tax assets 14.7 15.5
Pension assets 13.3 -
Non-current assets 6,279.8 6,457.4
Stocks 781.9 778.7
Current debtors 232.0 303.6
Current tax assets 15.6 28.0
Cash and bank balances 210.4 277.6
--------- ---------
1,239.9 1,387.9
Non-current assets held for sale
(note 10) 85.1 55.2
--------- ---------
Current assets 1,325.0 1,443.1
--------- ---------
Current creditors (2,081.3) (2,060.5)
Current borrowings (743.5) (852.0)
Current lease liabilities (640.3) (684.1)
Current tax liabilities (26.6) (84.7)
Current provisions (49.2) (43.8)
--------- ---------
Current liabilities (3,540.9) (3,725.1)
--------- ---------
Net current liabilities (2,215.9) (2,282.0)
Long-term borrowings (310.8) (242.3)
Non-current lease liabilities (2,320.0) (2,386.3)
Deferred tax liabilities (44.0) (44.3)
Pension liabilities (7.5) (13.4)
Non-current creditors (11.4) (43.2)
Non-current provisions (103.0) (110.0)
Non-current liabilities (2,796.7) (2,839.5)
---------
1,267.2 1,335.9
--------- ---------
2021 US$m 2020
US$m
Total equity
Share capital 75.2 75.1
Share premium and capital reserves 60.2 59.6
Revenue and other reserves 1,131.8 1,187.6
Shareholders' funds 1,267.2 1,322.3
Non-controlling interests - 13.6
--------- -------
1,267.2 1,335.9
--------- -------
Dairy Farm International Holdings Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2021
Attributable
Revenue Attributable to
Share Share Capital and other to shareholders non-controlling Total
capital premium reserves reserves of the Company interests equity
US$m US$m US$m US$m US$m US$m US$m
2021
At 1st January 75.1 34.1 25.5 1,187.6 1,322.3 13.6 1,335.9
Total
comprehensive
income - - - 120.1 120.1 (11.7) 108.4
Dividends paid by
the Company
(note 11) - - - (196.2) (196.2) - (196.2)
Dividends paid to
non-controlling
interests - - - - - (1.9) (1.9)
Exercise of
options 0.1 (0.1) - - - - -
Share-based
long-term
incentive plans - - 0.7 - 0.7 - 0.7
Change in
interests in
associates and
joint ventures - - - 20.3 20.3 - 20.3
Transfer - 1.6 (1.6) - - - -
At 31st December 75.2 35.6 24.6 1,131.8 1,267.2 - 1,267.2
2020
At 1st January 75.1 34.1 25.1 1,074.9 1,209.2 30.3 1,239.5
Total
comprehensive
income - - - 373.9 373.9 (15.6) 358.3
Dividends paid by
the Company
(note 11) - - - (263.8) (263.8) - (263.8)
Unclaimed
dividends
forfeited - - - 0.5 0.5 - 0.5
Share-based
long-term
incentive plans - - 1.2 - 1.2 - 1.2
Change in
interest in a
subsidiary - - - (0.8) (0.8) (1.1) (1.9)
Change in
interests in
associates and
joint ventures - - - 2.1 2.1 - 2.1
Transfer - - (0.8) 0.8 - - -
-------- -------- --------- ---------- ---------------- ----------------- -------
At 31st December 75.1 34.1 25.5 1,187.6 1,322.3 13.6 1,335.9
-------- -------- --------- ---------- ---------------- ----------------- -------
Revenue and other reserves at 31st December 2021 comprised revenue reserves of US$1,363.1 million (2020:
US$1,417.5 million), hedging reserves of US$9.0 million gain (2020: US$9.4 million loss) and exchange
reserves of US$240.3 million loss (2020: US$220.5 million loss).
----------------------------------------------------------------------------------------------------------
Dairy Farm International Holdings Limited
Consolidated Cash Flow Statement
for the year ended 31st December 202 1
202 1 20 20
US$m US$m
Operating activities
--------- ---------
Operating profit (note 4) 310.8 388.1
Depreciation and amortisation 885.7 983.4
Other non-cash items (63.7) (16.6)
Increase in working capital (10.4) (102.1)
Interest received 0.8 3.5
Interest and other financing charges paid (117.2) (146.3)
Tax paid (110.1) (110.4)
--------- ---------
895.9 999.6
Dividends from associates and joint ventures 46.4 67.6
Cash flows from operating activities 942.3 1,067.2
Investing activities
--------- ---------
Purchase of a subsidiary (note 12(a)) - (21.4)
Purchase of associates and joint ventures
(note 12(b)) (1.6) (18.3)
Purchase of other investments (note 12(c)) (5.0) -
Purchase of intangible assets (26.9) (20.7)
Purchase of tangible assets (185.1) (227.2)
Sale of subsidiaries (note 12(d)) - 193.1
Sale of properties (note 12(e)) 86.3 2.8
Sale of tangible assets 7.6 5.3
Cash flows from investing activities (124.7) (86.4)
Financing activities
--------- ---------
Change in interest in a subsidiary (note
12(f)) - (1.9)
Drawdown of borrowings 1,248.3 1,115.9
Repayment of borrowings (1,308.2) (918.5)
Net increase/(decrease) in other short-term
borrowings 88.7 (268.1)
Principal elements of lease payments (672.0) (706.5)
Dividends paid by the Company (note 11) (196.2) (263.8)
Dividends paid to non-controlling interests (1.9) -
Cash flows from financing activities (841.3) (1,042.9)
Net decrease in cash and cash equivalents (23.7) (62.1)
Cash and cash equivalents at 1st January 234.2 288.3
Effect of exchange rate changes (0.5) 8.0
--------- ---------
Cash and cash equivalents at 31st December
(note 12(g)) 210.0 234.2
--------- ---------
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
2021 which have been prepared in conformity with International
Financial Reporting Standards ('IFRS'), including International
Accounting Standards ('IAS') and Interpretations adopted by the
International Accounting Standards Board.
Given the magnitude of Yonghui's contribution to the Group's
financial results for the year ended 31st December 2021, the
Group's external auditors, PricewaterhouseCoopers, determined that
a full scope audit of Yonghui's results was required as part of
their audit of the Group's financial statements for the year ended
31st December 2021. This has previously not been required given
Yonghui's levels of profit. The Group equity accounts for its share
of Yonghui's results on a three-month lag such that Yonghui's
results for the 12 months ended 30th September 2021 are included in
the Group's results for the year ended 31st December 2021. Yonghui
management concluded that it was impractical for this additional
audit to be conducted given the extent of the time and effort
required. As a result of this additional audit not being possible,
a qualified audit opinion for limitation of scope has been issued
by PricewaterhouseCoopers on the Group's financial statements for
the year ended 31st December 2021. Yonghui's own independent
auditors, Ernst & Young, are performing their audit of Yonghui
for the year ended 31st December 2021 to satisfy Yonghui's own
reporting obligations.
The Group has adopted the following amendments for the annual
reporting period commencing 1st January 2021.
Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16 (effective 1st January 2021)
The amendments provide practical expedient from certain
requirements under the IFRSs as a result of the reform which
affects the measurement of financial assets, financial liabilities
and lease liabilities, and a number of reliefs for hedging
relationships. The Group applied the amendments from 1st January
2021 and there is no significant impact on the Group's consolidated
financial statements.
COVID-19 Related Rent Concessions beyond 30th June 2021:
Amendment to IFRS 16 Leases (effective 1st April 2021)
The Group adopted and applied the practical expedient of the
COVID-19 Related Rent Concessions: Amendment to IFRS 16 Leases,
published in June 2020 ('2020 amendment'), in the 2020 annual
financial statements. The 2021 amendment extends the practical
expedient in the 2020 amendment to eligible lease payments due on
or before 30th June 2022. By using the 2021 amendment, the Group
continues to apply the practical expedient consistently to all
lease contracts with similar characteristics and in similar
circumstances, and does not assess these concessions as lease
modifications.
Apart from the above, there are no other amendments which are
effective in 2021 and relevant to the Group's operations, that have
a significant impact on the Group's results, financial position and
accounting policies.
The Group has not early adopted any other standards,
interpretations or amendments that have been issued but not yet
effective.
2. Sales
Including associates
and joint ventures Subsidiaries
---------------------- -----------------
2021 2020 2021 2020
US$m US$m US$m US$m
Analysis by operating
segment:
Food 21,390.9 22,106.2 6,394.4 7,447.2
- Grocery retail 19,047.2 19,900.5 4,151.4 5,347.5
- Convenience stores 2,343.7 2,205.7 2,243.0 2,099.7
Health and Beauty 2,361.2 2,400.8 1,805.3 1,989.7
Home Furnishings 815.7 831.6 815.7 831.6
Restaurants 2,455.1 2,064.2 - -
Other Retailing 661.3 756.3 - -
27,684.2 28,159.1 9,015.4 10,268.5
---------- ---------- ------- --------
Sales including associates and joint ventures comprise 100% of
sales from associates and joint ventures.
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the Board for the purpose of resource allocation and performance
assessment. DFI Retail Group operates in five segments: Food,
Health and Beauty, Home Furnishings, Restaurants and Other
Retailing. Food comprises grocery retail and convenience store
businesses (including the Group's associate, Yonghui, a leading
grocery retailer in the Chinese mainland). Health and Beauty
comprises the health and beauty businesses. Home Furnishings is the
Group's IKEA businesses. Restaurants is the Group's food and
beverage associate, Maxim's, a leading Hong Kong restaurant chain.
Other Retailing represents the department stores, specialty and
Do-It-Yourself ('DIY') stores of the Group's Philippines associate,
Robinsons Retail.
Sales and share of results of Yonghui and Robinsons Retail
represent 12 months from October 2020 to September 2021 (2020:
October 2019 to September 2020), based on their latest published
announcements (note 6).
Set out below is an analysis of the Group's sales by
geographical locations:
Including associates
and joint ventures Subsidiaries
---------------------- -----------------
2021 2020 2021 2020
US$m US$m US$m US$m
Analysis by geographical
area:
North Asia 21,334.1 21,122.6 6,129.5 6,802.9
Southeast Asia 6,350.1 7,036.5 2,885.9 3,465.6
---------- ---------- ------- --------
27,684.2 28,159.1 9,015.4 10,268.5
---------- ---------- ------- --------
The geographical areas covering North Asia and Southeast Asia,
are determined by the geographical location of customers. North
Asia comprises Hong Kong, the Chinese mainland, Macau and Taiwan.
Southeast Asia comprises Singapore, Cambodia, the Philippines,
Thailand, Malaysia, Indonesia, Vietnam and Brunei.
3. Other Operating Income
2021 US$m 2020 US$m
Concession and service income 118.4 126.8
Rental income from properties 11.0 12.3
Profit on sale of businesses - 75.2
Profit on sale of properties 27.2 -
Government grants and rent concessions 53.6 207.2
Change in fair value of equity investments 0.5 -
Net foreign exchange gains and others 24.8 9.1
--------- ---------
235.5 430.6
--------- ---------
In relation to the COVID-19 pandemic, the Group had received
government grants and rent concessions of US$9.5 million (2020:
US$138.7 million) and US$43.4 million (2020: US$68.5 million),
respectively, for the year ended 31st December 2021.
4. Operating Profit
2021 US$m 2020 US$m
Analysis by operating segment:
Food 197.2 324.2
- Grocery retail 143.2 267.4
- Convenience stores 54.0 56.8
Health and Beauty 56.4 65.7
Home Furnishings 45.0 70.5
--------- ---------
298.6 460.4
Selling, general and administrative expenses (68.2) (119.8)
Underlying operating profit before IFRS
16 (*) 230.4 340.6
IFRS 16 adjustment(^) 83.4 71.0
Underlying operating profit 313.8 411.6
Non-trading items:
- business restructuring costs (30.7) (58.8)
- impairment of intangible assets - (38.6)
- profit on sale of businesses - 75.2
- profit/(loss) on sale of properties 27.2 (0.5)
* change in fair value of equity investments 0.5 (0.8)
310.8 388.1
--------- ---------
Set out below is an analysis of the Group's underlying operating
profit by geographical locations:
2021 US$m 2020 US$m
Analysis by geographical area:
North Asia 277.0 388.5
Southeast Asia 21.6 71.9
--------- ---------
298.6 460.4
Selling, general and administrative expenses (68.2) (119.8)
Underlying operating profit before IFRS
16 (*) 230.4 340.6
IFRS 16 adjustment(^) 83.4 71.0
Underlying operating profit 313.8 411.6
--------- ---------
(*) Property lease payments and depreciation of reinstatement
costs under the lease contracts were included in
the Group's analysis of operating and geographical
segments' results.
(^) Represented the reversal of lease payments which
were accounted for on a straight-line basis, adjusted
by the lease contracts recognised under IFRS 16 'Leases',
primarily for the depreciation charge on right-of-use
assets.
5. Net Financing Charges
2021 US$m 2020 US$m
Interest expense
- bank loans and advances (22.0) (28.3)
- lease liabilities (90.3) (111.0)
- other loans (1.2) (0.8)
(113.5) (140.1)
Commitment and other fees (6.0) (5.0)
--------- ---------
Financing charges (119.5) (145.1)
Financing income 0.7 2.4
(118.8) (142.7)
--------- ---------
6. Share of Results of Associates and Joint Ventures
2021 US$m *2020 US$m *
Analysis by operating segment:
Food (91.9) 46.7
- Grocery retail (90.2) 47.5
- Convenience stores (1.7) (0.8)
Health and Beauty 0.9 1.3
Restaurants 51.7 36.4
Other Retailing (2.5) 0.5
--------- ---------
(41.8) 84.9
--------- ---------
Share of results of associates and joint ventures included the
following gains/(losses) from non-trading items (note 9):
2021 US$m *2020 US$m *
Change in fair value of Yonghui's equity
investments 12.3 0.6
Change in fair value of Robinsons Retail's
equity investments 0.1 0.3
Impairment charge of Yonghui's investments (13.9) -
Net gain from divestment of an investment
by Yonghui - 7.8
Net gain from divestment of a subsidiary
by Robinsons Retail - 0.2
Net gains from sale of debt investments
by Robinsons Retail 0.1 -
--------- ---------
(1.4) 8.9
--------- ---------
Results are shown after tax and non-controlling interests in the
associates and joint ventures.
In relation to the COVID-19 pandemic, included in share of
results of associates and joint ventures were the Group's share of
the government grants and rent concessions of US$13.7 million
(2020: US$76.1 million) and US$18.1 million (2020: US$28.6
million), respectively, for the year ended 31st December 2021.
* Included 12 months results from October 2020 to September 2021
(2020: October 2019 to September 2020) for Yonghui and Robinsons
Retail (note 2).
7. Tax
2021 US$m 2020 US$m
Tax charged to profit and loss is analysed
as follows:
Current tax (64.7) (64.4)
Deferred tax 5.8 (9.4)
--------- ---------
(58.9) (73.8)
--------- ---------
Tax relating to components of other comprehensive
income is analysed as follows:
Remeasurements of defined benefit plans (3.5) (2.7)
Cash flow hedges (3.3) 1.8
--------- ---------
(6.8) (0.9)
--------- ---------
Tax on profits has been calculated at rates of taxation
prevailing in the territories in which the Group operates. Share of
tax charge of associates and joint ventures of US$2.9 million
(2020: US$9.9 million) is included in share of results of
associates and joint ventures.
8. Earnings per Share
Basic earnings per share are calculated on profit attributable
to shareholders of US$102.9 million (2020: US$271.0 million), and
on the weighted average number of 1,352.9 million (2020: 1,352.7
million) shares in issue during the year.
Diluted earnings per share are calculated on profit attributable
to shareholders of US $102.9 million (2020: US$271.0 million) , and
on the weighted average number of 1,353.1 million (2020: 1,353.3
million) shares in issue after adjusting for 0.2 million (2020: 0.6
million) shares which are deemed to be issued for no consideration
under the share-based long-term incentive plans based on the
average share price during the year.
Additional basic and diluted earnings per share are also
calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
2021 2020
------------------------------ -----------------------------
Basic Diluted Basic Diluted
earnings earnings earnings earnings
p er share per share per share per share
US$m USc USc US$m USc USc
Profit attributable
to shareholders 102.9 7.61 7.61 271.0 20.03 20.03
Non-trading
items (note
9) 1.7 4.7
----- -----
Underlying
profit attributable
to shareholders 104.6 7.73 7.73 275.7 20.38 20.37
----- -----
9. Non-trading Items
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include fair value gains and losses
on equity investments which are measured at fair value through
profit and loss; gains and losses arising from the sale of
businesses, investments and properties; impairment of
non-depreciable intangible assets, properties, associates and joint
ventures, and other investments; provisions for the closure of
businesses; acquisition-related costs in business combinations; and
other credits and charges of a non-recurring nature that require
inclusion in order to provide additional insight into underlying
business performance.
An analysis of non-trading items in operating profit and profit
attributable to shareholders is set out below:
Profit attributable
Operating profit to shareholders
2021 US$m 2020 US$m 2021 US$m 2020 US$m
Business restructuring costs
- impairment of right-of-use
assets - (30.5) - (27.2)
* impairment of tangible assets (7.0) (18.8) (6.2) (16.7)
- other (23.7) (9.5) (21.6) (7.0)
--------- --------- ---------- ---------
(30.7) (58.8) (27.8) (50.9)
Impairment of intangible assets - (38.6) - (36.6)
Profit on sale of businesses - 75.2 - 75.2
Profit/(loss) on sale of properties
(note 12(e)) 27.2 (0.5) 27.0 (0.5)
Change in fair value of equity
investments 0.5 (0.8) 0.5 (0.8)
Share of change in fair value
of Yonghui's equity investments - - 12.3 0.6
Share of change in fair value
of Robinsons Retail's equity
investments - - 0.1 0.3
Share of impairment charge of
Yonghui's investments - - (13.9) -
Share of net gain from divestment
of
an investment by Yonghui - - - 7.8
Share of net gain from divestment
of
a subsidiary by Robinsons Retail - - - 0.2
Share of net gains from sale
of debt investments by Robinsons
Retail - - 0.1 -
(3.0) (23.5) (1.7) (4.7)
--------- --------- ---------- ---------
Following a strategic review recommendation, management decided
to withdraw its Giant brand investment in Indonesia during the
year. Exit costs of US$36.9 million mainly relating to impairment
charge against tangible assets, landlord compensation and the
payments to employees were charged to the profit and loss.
Business restructuring costs in 2020 related to the Group's
restructuring of its Grocery Retail business in Indonesia after the
store performance review. The charges mainly comprised impairment
charges on the carrying value of tangible assets and right-of-use
assets as well as closure cost provisions which mainly represented
rent compensation and expected payments to employees.
In addition, certain balance of restructuring costs relating to
the Group's 2018 restructuring of its Southeast Asia Food business
was included in other restructuring cost in 2021 and 2020. There
were also costs related to exit of some stores in the Chinese
mainland in 2019.
In 2020, the impairment of intangible assets represented the
impairment of goodwill associated with PT Hero Supermarket Tbk ('PT
Hero') after the impairment review.
Profit on sale of businesses in 2020 comprised US$97.2 million
profit on disposal of 100% interest in Wellcome Taiwan Company
Limited ('Wellcome Taiwan') to a third party and US$22.0 million
loss on disposal of 100% interest in Rose Pharmacy, Inc. ('Rose
Pharmacy') to a subsidiary of Robinsons Retail (note 12 (d)).
10. Non-current Assets Held for Sale
At 31st December 2021, the non-current assets held for sale
represented 18 properties in Indonesia, three properties in Hong
Kong and one retail property in Malaysia. The sale of
theseproperties is highly probable in 2022.
At 31st December 2020, the non-current assets held for sale
represented six retail properties in Malaysia and three retail
properties in Taiwan. These properties were sold during the year at
a profit of US$5.5 million.
11. Dividends
2021 US$m 2020 US$m
Final dividend in respect of 2020 of USc11.50
(2019: USc14.50) per share 155.6 196.1
Interim dividend in respect of 2021 of USc3.00
(2020: USc5.00) per share 40.6 67.7
--------- ---------
196.2 263.8
--------- ---------
A final dividend in respect of 2021 of USc6.50 (2020: USc11.50)
per share amounting to a total of US$87.9 million (2020: US$155.6
million) is proposed by the Board. The dividend proposed will not
be accounted for until it has been approved at the 2022 Annual
General Meeting. This amount will be accounted for as an
appropriation of revenue reserves in the year ending 31st December
2022.
12. Notes to Consolidated Cash Flow Statement
(a) Purchase of a subsidiary
Net cash outflow for purchase of a subsidiary of US$21.4 million
in 2020 represented the settlement of deferred consideration for
the Group's acquisition of the 100% interest in San Miu Supermarket
Limited, a supermarket chain in Macau, in 2015.
(b) Purchase of associates and joint ventures in 2021 mainly
related to the capital injection of US$1.6 million in the Group's
health and beauty business in Vietnam.
Purchase in 2020 mainly related to capital injections of US$15.0
million in a newly established digital joint venture to support the
Group's e-commerce development and drive its digital innovation,
and US$3.3 million in the Group's newly set up health and beauty
joint venture in Thailand.
(c) Purchase of other investments in December 2021 mainly
related to the Group's investment in Pickupp Limited, a delivery
platform founded in Hong Kong.
(d) Sale of subsidiaries
2020 US$m
Intangible assets 109.5
Tangible assets 31.1
Right-of-use assets 105.1
Non-current debtors 8.3
Deferred tax assets 2.6
Current assets 105.6
Current liabilities (111.2)
Non-current liabilities (94.5)
Net assets disposed of 156.5
Release of exchange reserves (16.9)
Profit on disposals 75.2
Net sale proceeds 214.8
Cash and cash equivalents of the subsidiaries
disposed of (35.1)
Costs payable 13.4
Net cash inflows 193.1
---------
In October 2020, the Group deepened its strategic partnership
with Robinsons Retail, an associate of the Group, by disposing of
its 100% interest in Rose Pharmacy, operating a health and beauty
chain in the Philippines, to a subsidiary of Robinsons Retail, for
a net cash inflow of US$83.8 million.
In December 2020, the Group disposed of its 100% interest in
Wellcome Taiwan, operating a supermarket chain in Taiwan, to a
third party, for a net cash inflow of US$109.3 million.
(e) Sale of properties
Sale of properties in 2021 mainly related to disposal of six
properties in Malaysia, three properties in Taiwan, two properties
in Hong Kong and two properties in Indonesia for a total cash
consideration of US$86.3 million.
Sale of properties in 2020 related to disposal of a property in
Malaysia.
(f) Change in interest in a subsidiary
In 2020, the Group acquired an additional 0.8% interest in PT
Hero for a total consideration of US$1.9 million.
(g) Analysis of balances of cash and cash equivalents
2021 US$m 2020 US$m
Cash and bank balances 210.4 277.6
Bank overdrafts (0.4) (43.4)
210.0 234.2
--------- ---------
13. Capital Commitments and Contingent Liabilities
Total capital commitments at 31st December 2021 amounted to
US$174.6 million (20 20 : US$137.5 million).
In addition, the Group entered into an agreement to subscribe a
five-year convertible bond of Pickupp Limited with a principal of
US$10.0 million in November 2021. The transaction was completed in
January 2022.
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.
14. Related Party Transactions
Jardine Strategic Limited ('JSL') became the parent company of
the Group following the completion of the simplification of the
Group's parent company structure in April 2021. Jardine Strategic
Holdings Limited and JMH Bermuda Limited, a wholly-owned subsidiary
of the Group's ultimate parent company, Jardine Matheson Holdings
Limited ('JMH'), amalgamated under the Bermuda Companies Act to
form JSL, a wholly-owned subsidiary of JMH. Both JMH and JSL are
incorporated in Bermuda.
In the normal course of business, the Group undertakes a variety
of transactions with JMH and certain of its subsidiaries,
associates and joint ventures. The more significant of such
transactions are described below.
Under the terms of a Management Services Agreement, the
management fee payable by the Group was US$0.5 million (2020:
US$1.4 million) to Jardine Matheson Limited ('JML'), a wholly-owned
subsidiary of JMH, based on 0.5% of the Group's profit attributable
to shareholders in consideration for certain management consultancy
services provided by JML. The Group also paid directors' fees of
US$0.3 million in 2021 (2020: US$0.4 million) to JML.
The Group rents properties from Hongkong Land Holdings Limited
('HKL'), a subsidiary of JMH. The lease payments paid by the Group
to HKL in 2021 were US$2.7 million (2020: US$2.6 million). The
Group's 50%-owned associate, Maxim's Caterers Limited ('Maxim's'),
also paid lease payments of US$10.6 million (2020: US$10.2 million)
to HKL in 2021.
The Group obtains repairs and maintenance services from Jardine
Engineering Corporation ('JEC'), a subsidiary of JMH. The total
fees paid by the Group to JEC in 2021 amounted to US$2.9 million
(2020: US$1.2 million).
Maxim's supplies ready-to-eat products at arm's length to
certain subsidiaries of the Group. In 2021, these amounted to
US$33.8 million (2020: US$28.8 million).
The Group's newly established digital joint venture, Retail
Technology group, implements point-of-sale system and provides
consultancy services to the Group. The total fees paid by the Group
to Retail Technology group in 2021 amounted to US$5.0 million
(2020: nil).
In October 2020, the Group disposed of its 100% interest in Rose
Pharmacy to its associate, Robinsons Retail, and a loss of US$22.0
million was recognised.
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.
Amounts of outstanding balances with associates and joint
ventures are included in debtors and creditors, as appropriate.
Dairy Farm International Holdings Limited
Principal Risks and Uncertainties
The following are the principal risks and uncertainties facing
the Company as required to be disclosed pursuant to the Disclosure
Guidance and Transparency Rules issued by the Financial Conduct
Authority in the United Kingdom and are in addition to the matters
referred to in the Chairman's Statement, Group Chief Executive's
Review and other parts of the Company's 2021 Annual Report (the
'Report').
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 such
developments might have on the Group's joint venture partners,
associates, franchisors, bankers, suppliers or customers. These
developments could include recession, inflation, deflation,
currency fluctuations, restrictions in the availability of credit,
business failures, or increases in financing costs, oil prices, the
cost of raw materials or finished products. Such developments might
increase operating costs, reduce revenues, lower asset values or
result in some or all of the Group's businesses being unable to
meet their strategic objectives.
Mitigation Measures
-- Monitor the volatile macroeconomic environment and consider
economic factors in strategic and financial planning processes.
-- Make agile adjustments to existing business plans and explore
new business streams and new markets.
-- Review pricing strategies and keep conservative assumptions.
-- Insurance programme covering property damage and business interruption.
Commercial Risk
Risks are an integral part of normal commercial activities and
where practicable steps are taken to mitigate them. Risks can be
more pronounced when businesses are operating in volatile markets.
While the Group's regional diversification does help to mitigate
some risks, a significant portion of the Group revenues and profits
continue to be derived from our operations in Hong Kong.
A number of the Group's businesses make significant investment
decisions regarding developments or projects, which are subject to
market risks. This is especially the case where projects are
longer-term in nature and take more time to deliver returns.
The Group's businesses operate in areas that are highly
competitive and failure to compete effectively, whether in terms of
price, product specification, technology, property site or levels
of service, failure to manage change in a timely manner or to adapt
to changing consumer behaviours, including new shopping channels
and formats, can have an adverse effect on earnings. Significant
competitive pressure may also lead to reduced margins.
It is essential for the products and services provided by the
Group's businesses to meet appropriate quality and safety
standards, and there is an associated risk if they do not,
including the risk of damage to brand equity or reputation, which
might adversely impact the ability to achieve acceptable revenues
and profit margins.
While social media presents significant opportunities for the
Group's businesses to connect with customers and the public, it
also creates a whole new set of potential risks for companies to
monitor, including damage to brand equity or reputation, affecting
the Group's profitability.
Mitigation Measures
-- Utilise market intelligence and deploy digital strategies for
business-to-consumer businesses.
-- Establish customer relationship management programme and digital
commerce capabilities.
-- Engage in longer-term contracts and proactively approach suppliers
for contract renewals.
-- Re-engineer existing business processes.
Financial and Treasury Risk
The Group's activities expose it to a variety of financial
risks, including market risk, credit risk and liquidity risk.
The market risk the Group faces includes i) foreign exchange
risk from future commercial transactions, net investments in
foreign operations and net monetary assets and liabilities that are
denominated in a currency that is not the entity's functional
currency; ii) interest rate risk through the impact of rate changes
on interest bearing liabilities and assets; and iii) securities
price risk as a result of its equity investments and limited
partnership investment funds which are measured at fair value
through profit and loss, and debt investments which are measured at
fair value through other comprehensive income.
The Group's credit risk is primarily attributable to deposits
with banks, contractual cash flows of debt investments carried at
amortised cost and those measured at fair value through other
comprehensive income, credit exposures to customers and derivative
financial instruments with a positive fair value.
The Group may face liquidity risk if its credit rating
deteriorates or if it is unable to meet its financing
commitments.
Mitigation Measures
-- Limiting foreign exchange and interest rate risks to provide a degree of certainty about costs.
-- Management of the investment of the Group's cash resources so as to minimise risk, while seeking to enhance
yield.
-- Adopting appropriate credit guidelines to manage counterparty risk.
-- When economically sensible to do so, taking borrowings in local currency to hedge foreign exchange
exposures on investments.
-- A portion of borrowings is denominated in fixed rates. Adequate headroom in committed facilities is
maintained to facilitate the Group's capacity
to pursue new investment opportunities and to provide some protection against market uncertainties.
-- The Group's funding arrangements are designed to keep an appropriate balance between equity and debt from
banks and capital markets, both short
and long term in tenor, to give flexibility to develop the business. The Company also maintains sufficient
cash and marketable securities,
and ensures the availability of funding from an adequate amount of committed credit facilities and the
ability to close out market positions.
-- The Group's treasury operations are managed as cost centres and are not permitted to undertake speculative
transactions unrelated to underlying
financial exposures.
The detailed 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.
Concessions, Franchises and Key Contracts Risk
A number of the Group's businesses and projects rely on
concessions, franchises, management or other key contracts.
Accordingly, cancellation, expiry or termination, or the
renegotiation of any such concessions, franchises, management or
other key contracts could adversely affect the financial condition
and results of operations of certain subsidiaries, associates, and
joint ventures of the Group.
Mitigation measures
-- Sustaining and strengthening relationships with franchisors.
-- Monitor sales performance and compliance with franchise terms.
-- Regular communication with franchisees and concessionaires, including performance
management.
Regulatory and Political Risk
The Group's businesses are subject to several regulatory regimes
in the territories they operate. Changes in such regimes, in
relation to matters such as foreign ownership of assets and
businesses, exchange controls, licensing, imports, planning
controls, emission regulations, tax rules and employment
legislation, could have the potential to impact the operations and
profitability of the Group's businesses.
Changes in the political environment, including political or
social unrest, in the territories where the Group operates, could
adversely affect the Group's businesses.
Mitigation Measures
-- Stay connected and informed of relevant new and draft regulations.
-- Engage external consultants and legal experts where necessary.
-- Assessing impact on the business and taking appropriate measures.
-- Raise awareness with regular updates on new regulations that
may have been implemented in other markets.
Pandemic and Natural Disasters Risk
The Group's businesses could be impacted by a global or regional
pandemic which seriously affects economic activity or the ability
of businesses to operate smoothly. In addition, many of the
territories in which the Group operates can experience natural
disasters such as earthquakes, floods, and typhoons from time to
time.
Mitigation Measures
-- Business Continuity Teams are in place to deal with incidents as they arise.
-- Business Continuity plans are in place, tested and updated regularly.
-- Insurance programmes that provide robust cover for natural disasters.
-- Engage external consultants for climate risk, to assess the
risk to the business and implement solutions accordingly.
Cybersecurity and Technology Risk
The Group faces increasing numbers of cyberattacks from groups
targeting individuals and businesses. As a result, the privacy and
security of customer and corporate information are at risk of being
compromised through a breach of our or our suppliers' IT systems or
the unauthorised or inadvertent release of information, resulting
in brand damage, impaired competitiveness or regulatory action.
Cyberattacks may also adversely affect our ability to manage our
business operations or operate information technology and business
systems, resulting in business interruption, lost revenues, repair
or other costs.
The Group is heavily reliant on its IT infrastructure and
systems for the daily operation of its business. Any major
disruption to the Group's IT systems could significantly impact
operations. The ability to anticipate and adapt to technology
advancements or threats is an additional risk that may also impact
the business.
Mitigation Measures
-- Continued investment in upgrading of technology and IT infrastructure.
-- Defined cybersecurity programme and centralised function to provide oversight, manage cybersecurity
matters,
and strengthen cyber defences and security measures.
-- Perform regular vulnerability assessment and/or penetration testing by third parties to identify
weaknesses.
-- Arrange regular security awareness training and phishing testing to raise users' cybersecurity awareness.
-- Maintain disaster recovery plans and backup for data restoration.
-- Regular external and internal audit reviews.
Talent Risk
The competitiveness of the Group's businesses depends on the
quality of the people that it attracts and retains. Unavailability
of needed human resources may impact the ability of the Group's
businesses to operate at capacity, implement initiatives and pursue
opportunities.
E-commerce growth has heightened demand and competition across
industries for various skillsets, particularly in IT and logistics.
Pandemic-related travel restrictions and a more stringent approach
to issuing work visas to non-locals in some of the key markets have
also disrupted the availability of labour across borders,
exacerbating labour shortages as economies rebound.
Mitigation Measures
-- Competitive pay and benefits commensurate with market benchmarks.
-- Proactive manpower planning and succession planning are in place.
-- Enhanced employer branding, training for team members and talent development plans.
-- Promote diversity and inclusion across the Group.
Environmental and Climate Risk
Global climate change has led to a trend of increased frequency
and intensity of potentially damaging natural events for the
Group's assets and operations. With interest in sustainability
surging in recent years from investors, governments and other
interested parties, expectations by regulators and other
stakeholders for accurate corporate sustainability reporting and
commitments towards carbon neutrality and other sustainability
related goals are growing.
Mitigation Measures
-- A Corporate Social Responsibility (CSR) strategy framework is in place, which addresses environmental
and climate risk.
-- Cross functional working groups are in place to devise and implement plans, to reduce the impact
of environmental and climate risk.
-- Adherence to relevant national and international laws and regulations.
Dairy Farm International Holdings Limited
Responsibility Statement
The Directors of the Company confirm to the best of their
knowledge that:
a. the consolidated 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 2021 Annual Report, including the Chairman's Statement, Group
Chief Executive's Review, Business Review and the Principal Risks and Uncertainties, which constitute
the management report, include a fair review of all information required to be disclosed by
the Disclosure Guidance and Transparency Rules 4.1.8 to 4.1.11 issued by the Financial Conduct
Authority in the United Kingdom.
For and on behalf of the Board
Ian McLeod
Clem Constantine
Directors
Dairy Farm International Holdings Limited
Dividend Information for Shareholders
The final dividend of USc6.50 per share will be payable on 11th
May 2022, subject to approval at the Annual General Meeting to be
held on 5th May 2022, to shareholders on the register of members at
the close of business on 18th March 2022. The shares will be quoted
ex-dividend on 17th March 2022, and the share registers will be
closed from 21st to 25th March 2022, inclusive.
Shareholders will receive their cash dividends in United States
Dollars, except when elections are made for alternate currencies in
the following circumstances.
Shareholders on the Jersey branch register
Shareholders registered on the Jersey branch register will have
the option to elect for their dividends to be paid in Sterling.
These shareholders may make new currency elections for the 2021
final dividend by notifying the United Kingdom transfer agent in
writing by 22nd April 2022 . The Sterling equivalent of dividends
declared in United States Dollars will be calculated by reference
to a rate prevailing on 27th April 2022.
Shareholders holding their shares through CREST in the United
Kingdom will receive their cash dividends in Sterling only as
calculated above.
Shareholders on the Singapore branch register who hold their
shares through The Central Depository (Pte) Limited ('CDP')
Shareholders who are on CDP's Direct Crediting Service
('DCS')
Those shareholders who are on CDP's DCS will receive their cash
dividends in Singapore Dollars unless they opt out of CDP Currency
Conversion Service, through CDP, to receive United States
Dollars.
Shareholders who are not on CDP's DCS
Those shareholders who are not on CDP's DCS will receive their
cash dividends in United States Dollars unless they elect, through
CDP, to receive Singapore Dollars.
Shareholders on the Singapore branch register who wish to
deposit their shares into the CDP system by the dividend record
date, being 18th March 2022, must submit the relevant documents to
M & C Services Private Limited, the Singapore branch registrar,
by no later than 5.00 p.m. (local time) on 17th March 2022.
Dairy Farm International Holdings Limited
About DFI Retail Group
DFI Retail Group (the 'Group') is a leading pan-Asian retailer.
At 31st December 2021, the Group and its associates and joint
ventures operated over 10,200 outlets and employed some 230,000
people. The Group had total annual sales in 2021 exceeding US$27
billion.
The Group provides quality and value to Asian consumers by
offering leading brands, a compelling retail experience and great
service; all delivered through a strong store network supported by
efficient supply chains.
The Group (including associates and joint ventures) operates
under a number of well-known brands across five divisions. The
principal brands are:
Food
-- Grocery retail - Wellcome in Hong Kong S.A.R.; Yonghui in Chinese mainland; Cold Storage in Malaysia and
Singapore;
Giant in Malaysia and Singapore; Hero in Indonesia; and Robinsons in the Philippines.
-- Convenience stores - 7-Eleven in Hong Kong and Macau S.A.R., Singapore and Southern China.
Health and Beauty
-- Mannings in Chinese mainland, Hong Kong and Macau S.A.R.; Guardian in Brunei, Cambodia, Indonesia,
Malaysia,
Singapore and Vietnam.
Home Furnishings
-- IKEA in Hong Kong and Macau S.A.R., Indonesia and Taiwan.
Restaurants
-- Hong Kong Maxim's group in Chinese mainland, Hong Kong and Macau S.A.R., Cambodia, Malaysia, Singapore,
Thailand
and Vietnam.
Other Retailing
-- Robinsons in the Philippines operating department stores,
specialty and DIY stores.
The Group's parent company, Dairy Farm International Holdings
Limited, is incorporated in Bermuda and has a primary listing on
the London Stock Exchange, 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. DFI Retail Group is a member of the Jardine Matheson
Group.
- end -
For further information, please contact:
Dairy Farm Management Services Limited
Christine Chung (852) 2299 1056
Brunswick Group Limited
Sunitha Chalam (852) 3512 5050
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2021 can be accessed through the Internet at
www.dairyfarmgroup.com.
[1] Net subsidies are government subsidies less additional costs
incurred by the business in continuing to operate through the
pandemic
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END
FR GIGDXSXGDGDX
(END) Dow Jones Newswires
March 03, 2022 04:33 ET (09:33 GMT)
Dfi Retail (LSE:DFIJ)
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