27th Jul 2006 10:05
Dairy Farm International Hldgs Ld27 July 2006 To: Business Editor 27th July 2006 For immediate release The following announcement was today issued to the London Stock Exchange. DAIRY FARM INTERNATIONAL HOLDINGS LIMITEDINTERIM REPORT 2006 Highlights • Earnings per share up 12% • Good results in all major markets • Maxim's performing strongly, with contribution from Genki Sushi "All of Dairy Farm's businesses are trading well and the prospects are positivefor the remainder of the year. With a sound base in its major markets, the Groupwill build scale in its newer operations while remaining open to furthergeographic expansion as opportunities arise." Simon Keswick, Chairman27th July 2006 Results-------------------------------------------------------------------------------- (unaudited) Six months ended 30th June 2006 2005 Change US$m US$m %-------------------------------------------------------------------------------- Sales- subsidiaries 2,496 2,282 +9- including associates 2,881 2,675 +8 Profit attributable to shareholders 86 76 +13 EBITDA to sales 6.1% 6.1% --------------------------------------------------------------------------------- USc USc %--------------------------------------------------------------------------------Earnings per share 6.42 5.73 +12Interim dividend per share 2.60 2.30 +13-------------------------------------------------------------------------------- The interim dividend of USc2.60 per share will be payable on 22nd November 2006to shareholders on the register of members at the close of business on 18th August 2006. The ex-dividend date will be on 16th August 2006, and the shareregisters will be closed from 21st to 25th August 2006, inclusive. DAIRY FARM INTERNATIONAL HOLDINGS LIMITEDINTERIM REPORT 2006 OVERVIEW Dairy Farm benefited from a generally favourable trading environment in thefirst six months of 2006, and achieved further growth in sales and recordearnings. PERFORMANCE Sales, including associates, increased by 8% to US$2.9 billion in the firsthalf. Net profit for the period increased at a higher rate of 13% to US$86million. Earnings per share for the period were USc6.42, up 12% from USc5.73last year. The Board has declared an increased interim dividend of USc2.60 per share, up by13% over last year's interim dividend of USc2.30 per share. OPERATIONS Further growth was achieved in South Asia where sales and profit rose by 16% and12% respectively. Malaysia and Singapore performed well, and there wascontinuing improvement in Indonesia. Three new Giant hypermarkets were opened inIndonesia during the first half of the year. There are now 44 Giant hypermarketsin South Asia, and 14 more planned for the second half. In Malaysia, recentapprovals for additional outlets provide the opportunity for further growth inthe successful hypermarket and health and beauty formats. In Singapore, 7-Eleven is enhancing its competitive position through a strategicalliance with Shell. The alliance will provide an excellent new source of growthfor 7-Eleven as it progressively takes over 65 convenience stores located atShell petrol stations. In India, the Group's supermarket and health and beauty businesses opened eightoutlets, and have committed increased resources to securing new sites.Remodelled formats in both sectors are already showing robust growth inlike-for-like sales and the outlook is encouraging. In Thailand, Guardian openedseven new stores to finish the first half with ten outlets. In July 2006, the Group took its first steps in the promising Vietnamese marketwhen it was granted a licence to operate as a wholly foreign-owned company. Thenew venture will begin supermarket operations in the second half. In addition,the Group is to enter Brunei where it will open a Giant hypermarket in 2007. The Group's operations in North Asia also enjoyed steady growth with salesincreasing by 5%. Excluding the significant pre-opening expenses, mainly for thelarge IKEA store in Hsin Chuang, Taiwan, profit would have increased by 6%. In Hong Kong, all major businesses performed well. Wellcome and Manningsproduced increased earnings. 7-Eleven, which opened its 700th store in June,maintained its growth in store numbers, sales and profit. Wellcome Taiwan's results also improved, despite the continuing highlycompetitive environment. In Guangdong Province, 7-Eleven maintained itsexpansion programme and had 250 stores in operation at the end of June, whileMannings had 11 stores. 7-Eleven will introduce franchising in Guangdong in thesecond half. In Macau, the new 7-Eleven and Mannings ventures recordedsatisfactory results. South Korean associate, Olive Young, opened six health andbeauty stores, reaching a total of 31 outlets, and achieved satisfactory gainsin like-for-like sales. IKEA in Hong Kong increased its profit despite a sluggish housing market. InTaiwan, IKEA's sales benefited from the opening of the large Hsin Chuang storein April, and another store will open in Kaohsiung before the year end. The Group's Hong Kong-based restaurant associate, Maxim's, enjoyed a strongprofit increase. A recovery in Chinese restaurants, following a restructuringprogramme over the last two years, was complemented by good contributions fromStarbucks and the newly-acquired Genki Sushi business. PROSPECTS In conclusion, the Chairman, Simon Keswick said, "All of Dairy Farm's businessesare trading well and the prospects are positive for the remainder of the year.With a sound base in its major markets, the Group will build scale in its neweroperations while remaining open to further geographic expansion as opportunitiesarise." ---------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Profit and Loss Account--------------------------------------------------------------------------------------- (unaudited) Year ended Six months ended 31st 30th June December 2006 2005 2005 US$m US$m US$m---------------------------------------------------------------------------------------Sales (note 2) 2,495.9 2,282.3 4,749.4Cost of sales (1,733.9) (1,617.5) (3,334.9) --------- --------- ---------Gross margin 762.0 664.8 1,414.5Other operating income 11.4 17.8 44.3Selling and distribution costs (577.2) (498.8) (1,034.8)Administration and other operating expenses (91.6) (86.2) (175.2) --------- --------- ---------Operating profit (note 2) 104.6 97.6 248.8Financing charges (10.8) (11.7) (25.7)Share of results of associates and joint ventures (note 3) 10.3 7.6 28.5 --------- --------- ---------Profit before tax 104.1 93.5 251.6Tax (note 4) (17.9) (16.8) (45.0) --------- --------- ---------Profit for the period 86.2 76.7 206.6 --------- --------- ---------Attributable to:Shareholders of the Company 86.1 76.5 205.3Minority interests 0.1 0.2 1.3 --------- --------- --------- 86.2 76.7 206.6 --------- --------- --------- --------------------------------------------------------------------------------------- USc USc USc--------------------------------------------------------------------------------------Earnings per share (note 5)- basic 6.42 5.73 15.34- diluted 6.40 5.70 15.25---------------------------------------------------------------------------------------Underlying earnings per share (note 5)- basic 6.42 5.73 14.23- diluted 6.40 5.70 14.15--------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Balance Sheet--------------------------------------------------------------------------------------- (unaudited) At 31st At 30th June December 2006 2005 2005 US$m US$m US$m-----------------------------------------------------------------------------------------Net Operating AssetsIntangible assets 230.6 203.1 226.8Tangible assets 474.3 446.3 463.4Associates and joint ventures 110.0 98.2 106.6Deferred tax assets 7.7 8.6 7.0Other non-current assets 53.7 47.7 54.3 --------- --------- ---------Non-current assets 876.3 803.9 858.1 Stocks 432.0 367.6 423.8Debtors and prepayments 154.6 128.4 157.3Current tax assets 2.3 2.5 2.1Bank balances 331.9 453.8 389.1 --------- --------- --------- 920.8 952.3 972.3 Non-current assets classified as held for sale 2.2 110.1 2.2 --------- --------- ---------Current assets 923.0 1,062.4 974.5 --------- --------- --------- Creditors and accruals (1,060.0) (980.5) (1,116.9)Current borrowings (47.3) (41.3) (35.9)Current tax liabilities (35.3) (22.7) (31.8) --------- --------- --------- (1,142.6) (1,044.5) (1,184.6)Liabilities directly associated with non-current assets classified as held for sale (0.5) (1.0) (0.5) --------- --------- ---------Current liabilities (1,143.1) (1,045.5) (1,185.1) --------- --------- --------- Net current (liabilities)/assets (220.1) 16.9 (210.6)Long-term borrowings (351.0) (619.5) (352.1)Deferred tax liabilities (36.1) (39.2) (34.9)Other non-current liabilities (19.0) (16.7) (17.4) --------- --------- --------- 250.1 145.4 243.1 --------- --------- ---------Total EquityShare capital 74.6 74.5 74.5Share premium and capital reserves 27.0 26.0 26.1Revenue and other reserves 128.2 21.5 123.5 --------- --------- ---------Shareholders' funds (note 6) 229.8 122.0 224.1Minority interests 20.3 23.4 19.0 --------- --------- --------- 250.1 145.4 243.1 --------- --------- -------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Statement of Recognized Income and Expense------------------------------------------------------------------------------------ (unaudited) Year ended Six months ended 31st 30th June December 2006 2005 2005 US$m US$m US$m --------------------------------Surplus on revaluation of intangible assets on business combination - 1.9 3.0Net surplus on revaluation of properties - 2.3 7.6Actuarial gains on defined benefit pension plans - - 3.0Net exchange translation differences 0.4 (1.7) (7.0)Gains on cash flow hedges 1.4 1.9 5.0Tax on items taken directly to equity - (0.6) (3.9) ------- -------- --------Net income recognized directly in equity 1.8 3.8 7.7Profit for the period 86.2 76.7 206.6 ------- -------- ---------Total recognized income and expense for the period 88.0 80.5 14.3 -------- -------- ---------Attributable to:Shareholders of the Company 87.9 80.3 213.0Minority interests 0.1 0.2 1.3 -------- -------- --------- 88.0 80.5 214.3 -------- -------- --------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedConsolidated Cash Flow Statement--------------------------------------------------------------------------------------------- (unaudited) Year ended Six months ended 31st 30th June December 2006 2005 2005 US$m US$m US$m -----------------------------------------Operating activitiesOperating profit (note 2) 104.6 97.6 248.8Interest income (7.9) (8.5) (16.3)Depreciation and amortization 54.6 49.9 103.2Other non-cash items 2.2 1.1 (5.9)(Increase)/decrease in working capital (56.2) 21.5 40.3Interest received 7.2 7.8 15.8Interest and other financing charges paid (10.5) (10.3) (25.6)Tax paid (15.3) (12.6) (31.8) -------- --------- --------- 78.7 146.5 328.5Dividends from associates and joint ventures 7.1 9.6 23.8 Cash flows from operating activities 85.8 156.1 352.3 Investing activitiesPurchase of tangible assets (69.6) (52.6) (112.2)Purchase of subsidiaries (note 8) (0.1) (12.7) (38.4)Store acquisitions - - (0.9)Purchase of associates and joint ventures - - (3.0)Sale of subsidiaries 0.5 - 95.9Sale of properties - 4.1 37.0Sale of other tangible assets 2.4 0.7 1.3Sale of other investments - - 2.3 Cash flows from investing activities (66.8) (60.5) (18.0) Financing activitiesIssue of shares 0.4 1.4 1.4Capital injection from minority shareholders 0.1 - -Drawdown of borrowings 396.2 958.8 1,386.4Repayment of borrowings (390.4) (651.2) (1,362.7)Dividends paid by the Company (note 7) (83.2) (404.5) (435.3) Cash flows from financing activities (76.9) (95.5) (410.2)Effect of exchange rate changes 2.0 (0.9) (0.4) -------- --------- --------- Net decrease in cash and cash equivalents (55.9) (0.8) (76.3)Cash and cash equivalents at beginning of period 378.3 454.6 454.6 -------- --------- ---------Cash and cash equivalents at end of period 322.4 453.8 378.3 -------- --------- ------------------------------------------------------------------------------------------------------ ----------------------------------------------------------------------------------------------Dairy Farm International Holdings LimitedNotes---------------------------------------------------------------------------------------------- 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial information contained in this announcement has been based on the unaudited interim condensed financial statements, which have been prepared in accordance with IAS 34, Interim Financial Reporting. In 2006, the Group adopted the following amendments and interpretation to existing standards which are relevant to its operations. IAS 39 (amended 2005) Cash Flow Hedge Accounting of Forecast Intragroup Transactions IAS 39 (amended 2005) The Fair Value Option IAS 39 and IFRS 4 (amended 2005) Financial Guarantee Contracts IFRIC 4 Determining whether an Arrangement contains a Lease There have been no changes to the accounting policies described in the 2005 annual financial statements as a result of adoption of the above amendments and interpretation. The Group's reportable segments are set out in notes 2 and 3. 2. SALES AND OPERATING PROFIT Sales Operating Profit --------------------- --------------------- Six months ended 30th June 2006 2005 2006 2005 US$m US$m US$m US$m ---------------------------------------------- Analysis by geographical area: North Asia 1,364.4 1,303.4 53.7 53.0 South Asia 1,131.5 978.9 51.0 45.4 --------- -------- --------- ------- 2,495.9 2,282.3 104.7 98.4 --------- -------- --------- ------- Support office (8.0) (9.3) Interest income 7.9 8.5 --------- ------- 104.6 97.6 --------- ------- Analysis by business: Supermarkets/hypermarkets 1,570.5 1,455.3 54.3 46.0 Health and beauty stores 378.6 345.7 28.8 25.6 Convenience stores 463.2 399.2 20.5 17.4 Home furnishings stores/property 83.6 82.1 1.1 9.4 -------- -------- -------- ------- 2,495.9 2,282.3 104.7 98.4 -------- -------- --------- ------- Dairy Farm operates in two regions: North Asia and South Asia, and accordingly, its primary segment reporting is geographical areas with secondary segment information reported by business. North Asia comprises Hong Kong, Mainland China, Macau, Taiwan and South Korea. South Asia comprises Singapore, Malaysia, Indonesia, India and Thailand. 3. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES Six months ended 30th June 2006 2005 US$m US$m -------------------------- Analysis by geographical area: North Asia 10.7 7.7 South Asia (0.4) (0.1) ------ ------ 10.3 7.6 ------ ------ Analysis by business: Restaurants 11.3 8.0 Retailing (1.0) (0.4) ------ ------ 10.3 7.6 ------ ------ Results are shown after tax and minority interests. Retailing is predominantly supermarkets and health and beauty stores. 4. TAX Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates. The Group has no tax payable in the United Kingdom (2005: nil). 5. EARNINGS PER SHARE Basic earnings per share are calculated on profit attributable to shareholders of US$86.1 million (2005: US$76.5 million) and on the weighted average number of 1,342.0 million (2005: 1,335.3 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$86.1 million (2005: US$76.5 million), and on the weighted average number of 1,346.2 million (2005: 1,340.4 million) shares in issue after adjusting for 4.2 million (2005: 5.1 million) shares which are deemed to be issued for no consideration under the Senior Executive Share Incentive Schemes based on the average share price during the period. 6. SHAREHOLDERS' FUNDS 2006 2005 US$m US$m --------------------- At 1st January 224.1 444.6 Recognized income and expense attributable to shareholders 87.9 80.3 Dividends (note 7) (83.2) (404.5) Employee share option schemes - value of employee services 0.6 0.2 - exercise of share options 0.4 1.4 ------ ------- At 30th June 229.8 122.0 ------ ------- 7. DIVIDENDS Six months ended 30th June 2006 2005 US$m US$m --------------------- Final dividend in respect of 2005 of USc6.20 (2004: USc5.30) per share 83.2 70.8 Special dividend of USc25.00 per share - 333.7 ----- ----- 83.2 404.5 ----- ----- An interim dividend in respect of 2006 of USc2.60 (2005: USc2.30) per share amounting to a total of US$34.9 million (2005: US$30.8 million) is declared by the Board. This amount will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2006. 8. PURCHASE OF SUBSIDIARIES Six months ended 30th June 2005 Fair value US$m ---------------- Intangible assets 27.3 Tangible assets 44.6 Deferred tax assets 5.2 Current assets 79.7 Current liabilities (69.6) Long-term borrowings (8.7) Deferred tax liabilities (12.6) Other non-current liabilities (8.8) --------------- Net assets 57.1 Adjustment for minority interests (24.4) --------------- Net assets acquired 32.7 Goodwill 9.1 --------------- Total consideration 41.8 Adjustment for carrying value of an associate (20.7) Adjustment to fair values relating to previously held interests (3.8) Cash and cash equivalents acquired (4.6) --------------- 12.7 --------------- In January 2005, the Group increased its direct shareholding in PT Hero Supermarket by 20.4% for a cash consideration of US$17.3 million. As at 30th June 2006, the Group has an attributable interest of 69.1% (June 2005: 57.2%) in PT Hero Supermarket. 9. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES At 31st At 30th June December 2006 2005 2005 US$m US$m US$m -------------------------------- Capital commitments 165.5 54.8 98.0 -------------------------------- 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. The interim dividend of USc2.60 per share will be payable on 22nd November 2006to shareholders on the register of members at the close of business on 18thAugust 2006. The ex-dividend date will be on 16th August 2006, and the shareregisters will be closed from 21st to 25th August 2006, inclusive. Shareholderswill receive their dividends in United States Dollars, unless they areregistered on the Jersey branch register where they will have the option toelect for Sterling. These shareholders may make new currency elections bynotifying the United Kingdom transfer agent in writing by 3rd November 2006. TheSterling equivalent of dividends declared in United States Dollars will becalculated by reference to a rate prevailing on 8th November 2006. Shareholdersholding their shares through The Central Depository (Pte) Limited ('CDP') inSingapore will receive United States Dollars unless they elect, through CDP, toreceive Singapore Dollars. -end- For further information, please contact: Dairy Farm Management Services LimitedRonald J Floto (852) 2299 1881Howard Mowlem (852) 2299 1896 email: [email protected] Matheson & Co LimitedMartin Henderson (44) 207 816 8135 GolinHarrisJohn Morgan (852) 2501 7939 email: [email protected] Weber Shandwick Square MileRichard Hews/Helen Thomas (44) 207 067 0700 This and other Group announcements can be accessed through the Internet at'www.dairyfarmgroup.com'. 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