Final Results

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

DAIRY FARM INTERNATIONAL HOLDINGS LIMITED

2009 PRELIMINARY ANNOUNCEMENT OF RESULTS

Highlights

·; Underlying earnings up 14%

·; Major markets performed well

·; Profit growth at Maxim's

·; Strong financial position with net cash

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

Simon Keswick, Chairman

4th March 2010

Results

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

DAIRY FARM INTERNATIONAL HOLDINGS LIMITED

PRELIMINARY ANNOUNCEMENT OF RESULTS

FOR THE YEAR ENDED 31ST DECEMBER 2009

OVERVIEW

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

PERFORMANCE

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

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

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

OPERATIONS

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

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

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

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

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

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

PEOPLE

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

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

PROSPECTS

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

Simon Keswick

Chairman

4th March 2010

GROUP CHIEF EXECUTIVE'S REVIEW

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

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

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

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

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

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

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

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

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

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

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

REGIONAL REVIEW

NORTH ASIA

Hong Kong

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

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

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

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

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

Macau

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

Mainland China

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

Taiwan

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

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

SOUTH ASIA

Singapore

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

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

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

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

India

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

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

EAST ASIA

Malaysia

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

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

Indonesia

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

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

Vietnam

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

THE YEAR AHEAD

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

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

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

Michael Kok

Group Chief Executive

4th March 2010