Half Yearly Report

To: Business Editor

6th August 2009

For immediate release

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

(unaudited)

Six months ended 30th June

2009

2008

Change

US$m

US$m

%

Sales

- subsidiaries

3,353

3,315

+1

- including associates

3,815

3,775

+1

Underlying profit attributable to shareholders

156

141

+10

Non-trading items

-

13

n/a

Profit attributable to shareholders

156

154

+1

Underlying PBIT to sales

5.6%

5.2%

US¢

US¢

%

Underlying earnings per share 

11.58

10.50

+10

Basic earnings per share

11.58

11.45

+1

Interim dividend per share

4.50

 4.00

+13

Dairy Farm International Holdings Limited

Consolidated Statement of Comprehensive Income

(unaudited)  

Six months ended 

30th June 

Year ended

31st

December

2009 

2008 

2008 

US$m 

US$m 

US$m 

Profit for the period

155.4 

154.3 

333.2 

Other comprehensive income

Revaluation of other investments

- gains arising during the period

- 

3.0 

2.2 

- transfer to profit and loss

- 

- 

(0.2)

Actuarial losses on employee pension plans

- 

- 

(69.5)

Net exchange translation differences

- gains/(losses) arising during the period

10.5 

1.4 

(14.3)

- transfer to profit and loss

- 

(1.0)

(2.0)

Cash flow hedges

- (losses)/gains arising during the period

(2.1)

3.2 

(3.0)

Tax relating to components of other

comprehensive income

0.5 

0.8 

11.9 

Other comprehensive income for the period

8.9 

7.4 

(74.9)

Total comprehensive income for the period

164.3 

161.7 

258.3 

Attributable to:

Shareholders of the Company

164.6 

161.5 

258.8 

Minority interests

(0.3)

0.2 

 (0.5)

164.3 

161.7 

258.3 

Dairy Farm International Holdings Limited

Consolidated Balance Sheet

(unaudited)

At 30th June

At 31st 

December

2009 

2008 

2008 

US$m 

US$m 

US$m 

Net Operating Assets

Intangible assets

316.9 

338.0 

304.2 

Tangible assets

659.4 

633.9 

636.9 

Associates and joint ventures

130.0 

127.8 

128.7 

Other investments

2.3 

3.3 

2.3 

Non-current debtors

106.6 

110.1 

105.3 

Deferred tax assets

17.6 

15.4 

18.0 

Pension assets

9.5 

72.1 

8.8 

Non-current assets

1,242.3

1,300.6 

1,204.2 

Stocks

636.0 

577.7 

649.0 

Current debtors

120.9 

108.6 

120.6 

Current tax assets

6.6 

7.6 

4.9 

Bank balances and other liquid funds

433.3 

351.8 

462.9 

1,196.8

1,045.7 

1,237.4 

Non-current assets classified as held for sale (note 8)

81.6

32.7 

65.2 

Current assets 

1,278.4 

1,078.4 

1,302.6 

Current creditors

(1,474.3)

(1,452.2)

(1,537.9)

Current borrowings

(79.9)

(34.8)

(62.6)

Current tax liabilities

(72.3)

(67.2)

(65.0)

Current provisions

(1.8)

(2.0)

(2.0)

Current liabilities

(1,628.3)

(1,556.2)

(1,667.5)

Net current liabilities

(349.9)

(477.8)

(364.9)

Long-term borrowings

(424.3)

(444.9)

(404.5)

Deferred tax liabilities

(35.8)

(42.8)

(36.6)

Pension liabilities

(30.0)

(27.2)

(27.0)

Non-current creditors

(19.9)

(1.1)

(20.7)

Non-current provisions

(16.9)

(17.1)

(17.0)

Non-current liabilities

(526.9)

(533.1)

(505.8)

365.5 

289.7 

333.5 

Total Equity

Share capital

74.8 

74.8 

74.8 

Share premium and capital reserves

35.0 

31.4 

32.6 

Revenue and other reserves

253.4 

180.1 

223.5 

Shareholders' funds 

363.2 

286.3 

330.9 

Minority interests

2.3 

3.4 

2.6 

365.5 

289.7 

333.5 

Dairy Farm International Holdings Limited

Consolidated Cash Flow Statement

(unaudited)

Six months ended

30th June

Year ended

31st

December

2009

2008

2008

US$m

US$m

US$m

Operating activities 

Operating profit (note 3)

186.8

185.9 

387.8 

Depreciation and amortization

68.5 

68.4 

136.4 

Other non-cash items

2.3 

(11.5)

(2.5)

(Increase)/decrease in working capital

(33.7)

16.3 

36.9 

Interest received

2.4 

6.6 

10.8 

Interest and other financing charges paid

(11.4)

(12.3)

(23.8)

Tax paid

(25.9)

(17.8)

(47.5)

189.0 

235.6 

498.1 

Dividends from associates and joint ventures

9.0 

9.6 

25.1 

Cash flows from operating activities 

198.0 

245.2 

523.2 

Investing activities

Purchase of tangible assets

(120.3)

(100.7)

(215.6)

Store acquisitions (note 10a)

- 

(2.6)

(2.6)

Purchase of subsidiaries (note 10b)

- 

(42.0)

(42.0)

Purchase of associates and joint ventures 

- 

(6.2)

(6.6)

Purchase of land use rights (note 10c)

(9.4)

(34.9)

(33.7)

Purchase of other intangible assets

(4.3)

(3.9)

(7.9)

Sale of associates and joint ventures (note 10d)

- 

20.5 

20.5 

Sale of other investments

- 

0.8 

1.0 

Sale of other tangible assets

0.4 

0.5 

1.0 

Cash flows from investing activities

(133.6)

(168.5)

(285.9)

Financing activities

Issue of shares

1.6 

0.2 

0.4 

Drawdown of borrowings

610.7 

605.8 

991.0 

Repayment of borrowings

(569.5)

(612.9)

(990.3)

Dividends paid by the Company (note 9)

(134.7)

(114.4)

(168.3)

Cash flows from financing activities

(91.9)

(121.3)

(167.2)

Effect of exchange rate changes 

0.5 

2.2 

(1.7)

Net (decrease)/increase in cash and 

cash equivalents

(27.0)

(42.4)

68.4 

Cash and cash equivalents at beginning of period

453.2 

384.8 

384.8 

Cash and cash equivalents at end of period

426.2 

342.4 

453.2 

Dairy Farm International Holdings Limited

Notes to Condensed Financial Statements

1.

ACCOUNTING POLICIES AND BASIS OF PREPARATION

The condensed financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting'. The condensed financial statements have not been audited or reviewed by the Group's auditor pursuant to the UK Auditing Practices Board guidance on the review of interim financial information.

In 2009, the Group adopted the following standards, and amendments and interpretations to existing standards which are relevant to its operations:

IFRS 8

Operating Segments

IAS 1 (revised 2007)

Presentation of Financial Statements

IAS 23 (revised 2007)

Borrowing Costs

Amendments to IFRS 1 and

Cost of an Investment in a Subsidiary, Jointly

IAS 27

Controlled Entity or Associate

Amendment to IFRS 2

Vesting Conditions and Cancellations

Amendments to IFRS 7

Improving Disclosures about Financial Instruments

IFRIC 13

Customer Loyalty Programmes

IFRIC 16

Hedges of a Net Investment in a Foreign Operation

Improvements to IFRS (2008)

With the exception of amendments to IFRS 1 and IAS 27 and IFRIC 13, there are no changes in accounting policies that affect the Group's financial statements resulting from adoption of the above standards, amendments and interpretations as they are consistent with the policies already adopted by the Group.

IFRS 8 'Operating Segments' supersedes IAS 14 'Segment Reporting' and requires the reporting of financial and descriptive information about an entity's reportable segments on the basis of internal reports that are regularly reviewed by its management. There is no change in the Group's reportable segments from 2008 as they remain consistent with the internal reporting provided to management. The Group's reportable segments are set out on page 13. No operating segments have been aggregated to form the reportable segments.

As a result of adoption of IAS 1 (revised 2007), two new primary statements, 'Consolidated Statement of Comprehensive Income' and 'Consolidated Statement of Changes in Equity' have been presented in these interim financial statements. The former replaces the 'Consolidated Statement of Recognized Income and Expense' presented in the 2008 annual financial statements. This change in presentation has no effect on reported profit or loss, total income and expense or net assets for any period presented.

Amendments to IFRS 1 and IAS 27 'Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate' remove the definition of the cost method from IAS 27 and allow an entity to recognize a dividend from subsidiary, jointly controlled entity or associate in profit and loss in its separate financial statements when its right to receive the dividend is established. There is no impact on the consolidated financial statements as the changes only affect the separate financial statements of the investing entity.

IFRIC 13 'Customer Loyalty Programmes' addresses the accounting by entities that grant loyalty award credits to customers who buy goods or services. It requires that the consideration receivable from the customer is allocated between the separately identifiable components of the sale transaction using fair values. There is no significant impact on the results of the Group on adoption of this interpretation.

The Group also early adopted the following standard and amendment to an existing standard which are relevant to its operations:

IFRS 3 (revised 2008)

Business Combinations

Amendment to IAS 27

Consolidated and Separate Financial Statements

IFRS 3 (revised) and the related amendment to IAS 27 (both effective prospectively from 1st July 2009) require the immediate expensing of all acquisition-related costs, the inclusion in the cost of acquisition of the fair value at acquisition date of any contingent purchase consideration, the remeasurement of previously held equity interest in the acquiree at fair value in a business combination achieved in stages, and accounting for changes in a parent's ownership interest in a subsidiary that do not result in the loss of control as equity transactions. The early adoption of IFRS 3 (revised) and the related amendment to IAS 27 has resulted in changes in the Group's accounting policies for goodwill and change in attributable interests in subsidiaries. Until 31st December 2008, acquisition-related costs were included in the cost of a business combination; contingent purchase consideration was recognized in goodwill as incurred; the difference between the cost of acquisition and the carrying amount of the proportion of minority interest acquired in respect of an increase in attributable interest in a subsidiary was recognized as goodwill or credited to the consolidated profit and loss account as discount on acquisition, where appropriate; and the difference between the proceeds and the carrying amount of the proportion sold in respect of a decrease in attributable interest in a subsidiary was recognized in the consolidated profit and loss account as profit or loss on disposal. The Group continues to measure minority interest in an acquiree in a business combination at the minority interest's proportionate share of the acquiree's identifiable net assets.

In addition, on implementation of IFRS 8, the Group early adopted an amendment to IFRS 8 'Operating Segments' (effective from 1st January 2010) included in the 2009 improvement project. The amendment clarifies that a measure of total assets should be disclosed in the financial statements only if that amount is regularly provided to management.

There have been no other changes to the accounting policies described in the 2008 annual financial statements. Certain comparative figures have been reclassified to conform with the current period presentation.

2.

SALES 

Including associates

and joint ventures

Subsidiaries only

Six months ended 30th June

2009

2008

2009

2008 

US$m

US$m

US$m

US$m 

Analysis by operating segments:

North Asia

1,757.6

1,695.6 

1,757.6

1,685.3 

East Asia

915.7

960.8 

915.7

960.8 

South Asia

706.0

699.8 

680.0

669.0 

Maxim's

436.0

418.9 

-

-

3,815.3

3,775.1 

3,353.3

3,315.1 

Analysis by business:

Supermarkets/hypermarkets

2,079.6

2,094.2 

2,062.6

2,073.6 

Health and beauty stores

568.3

526.5 

559.3

506.0 

Convenience stores

614.4

608.9 

614.4

608.9 

Home furnishings stores

117.0

126.6 

117.0

126.6 

Restaurants

436.0

418.9 

-

-

3,815.3

3,775.1 

3,353.3

3,315.1 

Dairy Farm operates in four operating segments: North Asia, East Asia, South Asia and Maxim's. North Asia comprises Hong Kong, Mainland China, Macau, Taiwan and Korea. East Asia comprises Malaysia, Indonesia, Vietnam and Brunei. South Asia comprises Singapore, India and Thailand. Maxim's is the Group's major associate, a Hong Kong leading restaurant chain.

3.

OPERATING PROFIT 

Six months ended 30th June 

2009

2008

US$m

US$m

Analysis by operating segments:

North Asia

95.4 

90.4 

East Asia

65.9 

60.8 

South Asia

39.3 

33.1 

200.6 

184.3 

Support office

(13.8)

(13.3)

186.8

171.0 

Non-trading items in North Asia:

- Gain on sale of associates and joint ventures

-

14.2 

- Gain on sale of other investments

-

0.7 

186.8

185.9 

Analysis by business:

Supermarkets/hypermarkets

112.1

98.3 

Health and beauty stores

49.2

45.1 

Convenience stores

27.3

29.8 

Home furnishings stores

4.7

5.6 

Property

7.3

5.5 

200.6

184.3 

4.

SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES

Six months ended 30th June

2009

2008

US$m

US$m

Analysis by operating segments:

Maxim's

11.9 

13.7 

South Asia

(1.5)

(2.4)

10.4 

11.3 

Analysis by business:

Restaurants

11.9 

13.7 

Supermarkets

(1.4)

(2.2)

Health and beauty stores

(0.1)

(0.2)

10.4 

11.3 

Results are shown after tax and minority interests in the associates and joint ventures.

5.

TAX

Six months ended 30th June

2009

2008 

US$m

US$m 

Tax charged to profit and loss is analyzed as follows:

Current tax

31.8 

37.7 

Deferred tax

0.5 

(1.6)

32.3 

36.1 

Analysis by operating segments:

North Asia

13.9 

11.9 

East Asia

12.2 

18.1 

South Asia

6.2 

6.1 

32.3 

36.1 

Tax relating to components of other comprehensive income is analyzed as follows:

Cash flow hedges

0.5 

- 

Effect of tax rate change:

- Actuarial gains on employee benefit plans

- 

0.7 

- Revaluation of fixed assets

- 

0.1 

0.5 

0.8 

Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates. Share of tax of associates and joint ventures of US$2.9 million (2008: US$2.9 million) related to Maxim's are included in share of results of associates and joint ventures.

6.

EARNINGS PER SHARE

Basic earnings per share are calculated on profit attributable to shareholders of US$156.0 million (2008: US$154.2 million) and on the weighted average number of 1,346.9 million (2008: 1,346.2 million) shares in issue during the period. The weighted average number excludes the shares held by the Trustee under the Senior Executive Share Incentive Schemes.

Diluted earnings per share are calculated on profit attributable to shareholders of US$156.0 million (2008: US$154.2 million), and on the weighted average number of 1,348.3 million (2008: 1,348.0 million) shares in issue after adjusting for 1.4 million (2008: 1.8 million) shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average share price during the period.

There are no non-trading items for the six months ended 30th June 2009. Additional basic and diluted earnings per share are calculated for the six months ended 30th June 2008 based on underlying profit attributable to shareholders of US$141.4 million. A reconciliation of earnings is set out below:

Six months ended 30th June 2008 

Basic earnings

per share

Diluted earnings

per share

US$m 

US¢

US¢

Profit attributable to shareholders

154.2 

11.45

11.44

Non-trading items (note 7)

(12.8)

Underlying profit attributable to 

shareholders

141.4 

10.50 

10.49 

7.

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 gains and losses arising from the sale of businesses, investments and properties; impairment of non-depreciable intangible assets 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 after interest, tax and minority interests for the six months ended 30th June 2008 is set out below:

US$m

Sale of 50% shareholding in CJ Olive Young

12.2

Sale of other investments

0.6

12.8

8.

NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

At 31st December 2008, the non-current assets classified as held for sale represented two retail properties in Malaysia. At 30th June 2009, another retail property in Malaysia was classified as held for sale. All three properties are expected to be disposed of during the second half of 2009.

9.

DIVIDENDS

Six months ended 30th June

2009

2008 

US$m 

US$m 

Final dividend in respect of 2008 of US¢10.00

(2007: US¢8.50) per share

134.7

114.4 

An interim dividend in respect of 2009 of US¢4.50 (2008: US¢4.00) per share amounting to a total of US$60.6 million (2008: US$53.9 million) is declared by the Board, and will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2009.

10.

NOTES TO CONSOLIDATED CASH FLOW STATEMENTS

Six months ended 

30th June 2008 

Fair value 

US$m 

(a)

Store acquisitions

Tangible assets

0.2

Current assets

0.8

Net assets acquired

1.0

Goodwill 

1.6

Total cash consideration

2.6

Total cash consideration of US$2.6 million represented seven Guardian stores in Brunei acquired from a third party in February 2008.

(b)

Purchase of subsidiaries

In April 2008, the Group paid US$42.0 million in cash to acquire an additional 25.2% interest in PT Hero Supermarket, pursuant to an option agreement.

(c)

Purchase of land use rights

For the six months ended 30th June 2009, the amount represented leasehold land purchased for hypermarket development in Indonesia.

For the six months ended 30th June 2008, the amount represented leasehold land purchased for hypermarket and distribution centre developments in Malaysia.

(d)

Sale of associates and joint ventures

In February 2008, the Group completed the sale of its 50% shareholding in CJ Olive Young to its partner, CJ Corp, for a cash consideration of US$20.5 million.

11.

CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

Total capital commitments at 30th June 2009 and 31st December 2008 amounted to US$295.5 million and US$212.3 million respectively.

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 condensed financial statements.

12.

RELATED PARTY TRANSACTIONS

There have been no related parties transactions that have taken place in the first six months of the current financial year or any changes in the related parties transactions described in the last Annual Report that have had or could have a material effect on the financial position or performance of the Group.

Dairy Farm International Holdings Limited

Principal Risks and Uncertainties

The Board has overall responsibility for risk management and internal control. The following have been identified previously as the areas of principal risk and uncertainty facing the Company, and they remain relevant in the second half of the year.

•

Economic Risk

•

Commercial and Financial Risk

•