TIDMDFI TIDMJAR TIDMJDS
RNS Number : 5497G
Dairy Farm International Hldgs Ltd
05 March 2015
To: Business Editor 5th March 2015
For immediate release
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
2014 PRELIMINARY ANNOUNCEMENT OF RESULTS (UNAUDITED)
Highlights
-- Sales up 5% with growth in all divisions
-- Underlying profit 4% above last year
-- Good results from Health and Beauty, Home Furnishings and
Restaurants, offset by lower performance in Food
-- Strategic investment in Yonghui Superstores in China announced
"Challenging trading conditions continue in some key businesses
and markets, particularly in the supermarket and hypermarket sector
in Southeast Asia. Progress is being made in repositioning the
Company for future growth with strategic corporate, supply chain
and IT investments. Dairy Farm's market-leading positions in most
of its major businesses, broad retail footprint across Asia, strong
balance sheet and growing focus on mainland China make it well
placed to deliver long-term growth."
Ben Keswick
Chairman
Results
Year ended 31st December
2014 2013 Change
US$m US$m %
(unaudited)
Sales
- subsidiaries 11,008 10,357 +6
- including associates and joint
ventures(+) 13,103 12,432 +5
Underlying profit attributable
to shareholders* 500 480 +4
Profit attributable to shareholders 509 501 +2
USc USc %
Underlying earnings per share* 36.98 35.52 +4
Basic earnings per share 37.65 37.05 +2
Dividends per share 23.00 23.00 -
+ on a 100% basis.
* 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 1 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 USc16.50 per share will be payable on 13th
May 2015, subject to approval at the Annual General Meeting to be
held on 6th May 2015, to shareholders on the register of members at
the close of business on 20th March 2015.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31ST DECEMBER 2014
(UNAUDITED)
OVERVIEW
In 2014, Dairy Farm took a number of strategic initiatives,
notably in mainland China and the Philippines, to improve the
Group's positioning for sustained growth. In parallel, there was
continued investment in the existing store network, supply chain
infrastructure and IT systems and people to deliver a superior
consumer offer and to provide a compelling shopping experience for
customers.
PERFORMANCE
Sales, including 100% of associates and joint ventures,
increased by 5% to US$13.1 billion in 2014 with growth achieved in
all divisions. Underlying profit was US$500 million, 4% better than
2013. Underlying earnings per share were USc36.98 as compared to
USc35.52 in 2013.
The Group's overall performance was mixed in 2014. The Food
division reported lower profits despite increasing sales. Improved
profitability in Greater China and Malaysia was more than offset by
reductions in Indonesia, Singapore and the Philippines. By
contrast, the Health and Beauty, Home Furnishings and Restaurants
divisions reported further growth in sales and profits even in the
face of margin pressures.
The profit of US$509 million attributable to shareholders in
2014, included a net non-trading gain of US$9 million arising
mainly from the disposal of properties, was 2% above 2013.
The Group's financial position remains strong with net cash of
US$475 million at the end of 2014. The reduction in net cash from
the previous year was mainly due to higher investing activities,
which included increased capital expenditure on stores and
infrastructure, additional investment in Rustan Supercenters and
the acquisition of a 49% interest in Rose Pharmacy in the
Philippines.
The Board is recommending a final dividend of USc16.50 per
share, unchanged from the previous year, maintaining the total
ordinary dividend for 2014 at USc23.00 per share.
BUSINESS DEVELOPMENTS
A cohesive culture is being implemented across the Group which,
together with the sharing of best practice, will enable the overall
strength and scale of the Group to be brought to bear. This will be
evidenced in terms of enhanced branding, improved supply chain
discipline, a stronger private label programme, and an improved
range and availability of products for customers.
The Group continues to expand its store network across all
formats, and to renovate existing stores to enhance the shopping
experience for customers. During the year, Dairy Farm opened 124
net new stores and acquired 238 retail outlets. As at 31st December
2014, Dairy Farm operated over 6,100 stores in 11 countries and
territories. Significant investment is also being made in IT
infrastructure and systems as well as the supply chain to improve
efficiency and increase productivity.
The Food business had another challenging year in 2014. There
was good growth in Greater China, particularly in Hong Kong.
Malaysia benefited from measures being taken to enhance the
fundamentals of the business, but in Singapore there was reduced
profitability in a challenging environment. The performance in the
Philippines was weaker due to rising costs, increased competition
and store refurbishment. While there was modest like-for-like sales
growth in Indonesia, significant cost inflation and higher stock
provisions led to a material decline in profitability. Programmes
are underway across the food businesses to increase the focus on
fresh produce and corporate brands so as to provide a more
distinctive offer.
In the Health and Beauty division, Hong Kong and Macau had
another record year in both sales and profits, but profits declined
in Malaysia in the face of greater competition. Expansion continues
with the net addition of 81 outlets in the continuing operations.
Good progress is being made in aligning the Mannings and Guardian
brands to improve strategic positioning and execution. Store
enhancements are taking place across the portfolio and investment
is being made in the corporate brand programme.
In Home Furnishings, IKEA's store in Indonesia was opened in
Jakarta in mid-October, and initial trading has been encouraging.
The IKEA businesses in Hong Kong had a good year. In Taiwan, IKEA
produced a strong performance as it benefited from the first
full-year's contribution from the new Tai Chungstore opened in
September 2013.
In the Restaurant division, Maxim's produced a steady
performance, although it saw weaker trading in the fourth quarter
due to softer mooncake sales in mainland China and the negative
impact of the Occupy Central activity on several Hong Kong
restaurants. The Group is continuing to expand Starbucks in Hong
Kong and Vietnam, and is also growing its casual dining and
Japanese restaurant chains in Hong Kong and mainland China. In May,
it announced that it had entered into a new franchise relationship
with The Cheesecake Factory, and expects to open the first store in
2016.
CORPORATE DEVELOPMENTS
Several strategic initiatives were taken during the year to
re-position the Dairy Farm portfolio.
Agreement was reached in August to establish a strategic
partnership with Yonghui Superstores Co., Ltd and to acquire a
19.99% shareholding in the company for an investment of RMB5.69
billion (approximately US$925 million). Yonghui is one of China's
fastest growing food retailers, and both companies have agreed to
work closely together to drive operating synergies. The investment
will provide Yonghui with expansion capital and give Dairy Farm
exposure to thelarge and growing PRC food retail sector. Regulatory
approvals in China are being sought, and the transaction is
expected to close during the first half of 2015.
In the Philippines, in August the Group acquired an additional
16% interest in Rustan Supercenters, Inc., increasing its
shareholding to 66%. In November, the Group entered the Philippines
Health and Beauty market with the acquisition of a 49% interest in
Rose Pharmacy Inc., providing it with a material presence in
another key market in Asia.
In July, Dairy Farm exited the Indian market with the sale of
its Foodworld and Health and Glow joint venture interests to its
local partner.
REGULATORY DEVELOPMENTS
Following shareholder approval at a Special General Meeting held
in April, the transfer of the Company's listing on the Main Market
of the London Stock Exchange to the standard listing category was
completed on 27th May 2014.
PEOPLE
Dairy Farm's performance in 2014, in the face of significant
market challenges, reflects the hard work and dedication of our
employees. On behalf of the Board, I would like to thank them for
their efforts and wish them well in the year ahead.
Giles White will be retiring as a Director on 31st July 2015 and
we would like to thank him for his contribution.
PROSPECTS
Challenging trading conditions continue in some key businesses
and markets, particularly in the supermarket and hypermarket sector
in Southeast Asia. Progress is being made in repositioning the
Company for future growth with strategic corporate, supply chain
and IT investments. Dairy Farm's market-leading positions in most
of its major businesses, broad retail footprint across Asia, strong
balance sheet and growing focus on mainland China make it well
placed to deliver long-term growth.
Ben Keswick
Chairman
GROUP CHIEF EXECUTIVE'S REVIEW
Dairy Farm is a leading Asian retailer and operates across four
broad formats: Food (including Supermarkets, Hypermarkets, and
Convenience stores), Health and Beauty stores, Home Furnishings
stores and Restaurants. The Group operates multiple formats in most
markets to satisfy different market segments and customer needs,
and trades under well recognized brands, such as Wellcome, Cold
Storage, Giant, Hero, 7-Eleven, Mannings, Guardian, IKEA and
Maxim's. Dairy Farm strives to bring to Asian consumers the
benefits of modern retailing and to be pioneersacross each of our
formats.
The Group has strong market positions and cash generative
operations in 11 Asian countries and territories, and continues to
make significant investment in support of these businesses. In
addition to driving organic growth, the Group seeks further
investment opportunities in current and new markets in Asia. This
approach builds upon the Group's knowledge and expertise, as well
as providing a good balance of risk and return. By combining our
investment approach with a strong balance sheet, Dairy Farm seeks
sustained long-term earnings growth.
2014 PERFORMANCE
Sales, including 100% of associates and joint ventures,
increased by 5% to US$13.1 billion (2013:US$12.4 billion). Pleasing
like-for-like sales growth was achieved in the Health and Beauty,
Home Furnishings and Restaurants divisions, and also in the food
businesses in Greater China. All businesses experienced further
margin pressures, however, which restricted profit growth.
Challenging trading conditions for the food businesses in Southeast
Asia also held back profit growth. Underlying profit for 2014 of
US$500 million was 4% ahead of the prior year's US$480 million. At
constant rates of exchange, sales would have increased 7% to
US$13.4 billion, while underlying profits would have increased 5%
to US$504 million.
The Group's Food business saw a decline in underlying profits
mainly due to weaker performances in Indonesia, Singapore and the
Philippines. Wellcome and 7-Eleven in Hong Kong traded well. In
mainland China, 7-Eleven showed further improvement, while Wellcome
in Taiwan delivered positive results after some store consolidation
and a greater focus on the upscale segment. In Singapore, fragile
consumer confidence, challenges in the labour market and escalating
costs adversely affected the overall performance. Cold Storage was
broadly stable in the upscale segment, but Giant struggled against
its mid-market competitors. 7-Eleven had positive like-for-like
sales following its store rationalization and range improvements.
In Malaysia, profits improved due to better retail execution,
increased focus on the customer, sharper promotion activities and
tactical investments in margin to improve price perception and
drive sales. The supermarket operations in Cambodia performed
behind the prior year due to increased competition. In the
Philippines, sales were maintained but profits declined asseveral
key stores were under renovation during the year. Profitability was
also impacted by the investment needed to bring operations in line
with international practices. In Indonesia, while overall sales
growth was seen in PT Hero's food operations, like-for-like sales
were soft and profits were significantly lower following a material
increase in operating costs and overheads.
Solid sales and profit growth were seen in the Group's Health
and Beauty businesses. Mannings in Hong Kong and Macau had a strong
year, while improved results were achieved in mainland China. The
Guardian business in Malaysia achieved higher sales, but profits
were lower in a more competitive market. Guardian in Singapore and
Indonesia also delivered a positive sales performance. Two new
stores were added in Cambodia after the first opening at the end of
2013, while Vietnam added seven stores to its network and now
operates in both Ho Chi Minh City and Hanoi.
IKEA in Hong Kong and Taiwan reported strong like-for-like sales
growth. The new Tai Chung store which was opened in September 2013
continued to perform well in 2014. The first store in Indonesia
also opened in the fourth quarter, and initial trading has been
encouraging. Profits for the division were well up on the prior
year.
Our restaurant associate, Maxim's, delivered another solid set
of results. Expansion of the Chinese casual dining restaurants and
Japanese restaurants continues in mainland China, and additional
Starbucks stores were openedin Vietnam.
KEY DEVELOPMENTS
Significant effort is being made to build a cohesive culture
across the Dairy Farm Group by sharing six guiding principles
throughout the Company. Those principles highlight the key
priorities in terms of Consumers, Innovation, People, Teamwork,
Sustainable Results and Integrity. With these, and continuous
communication initiatives to share best practice, we are beginning
to leverage the overall strength and scale of the Group. Benefits
will include enhanced and more consistent branding, improved supply
chain discipline, a stronger corporate brand programme, and
improved range and on shelf availability for our customers.
Following the reorganization of Dairy Farm's businesses by
format in 2013, the past year has seen further action taken to
position the Group better for growth. Key corporate initiatives
include the sale of our operations in India, the planned expansion
of our Food business into China through a proposed investment in
Yonghui Superstores, the acquisition of an additional 16% of the
shares in Rustan Supercenters in the Philippines,and entry into the
health and beauty sector in the Philippines through a 49% stake in
Rose Pharmacy.
These initiatives are complemented by investments in human
resources, IT infrastructure and systems, supply chain
infrastructure, e-commerce and store renovations, which are
necessary to support the continued growth of the Group. The action
being taken is aimed at putting Asian consumers at the centre of
our business by providing meaningful innovation across all formats
so as to deliver a superior shopping experience.
The key developments during the year were:
-- In July we completed the sale of our operations in India
through the divestment of our 49% shareholding in Foodworld and 50%
shareholding in Health and Glow to our joint venture partner.
-- In August the Group acquired an additional 16% interest in
Rustan in the Philippines from its joint venture partner, bringing
its ownership to 66% and providing increased management control of
the business.
-- In August agreement was reached to establish a strategic
partnership with Yonghui Superstores Co., Ltd and to acquire a
19.99% shareholding in the company for an investment of
approximately RMB5.69 billion (US$925 million). Yonghui is one of
the leading food retailers in China with sales of RMB36.7 billion
in 2014 and 335 stores in 17 provinces as at 31st December 2014.
Many opportunities have been identified to collaborate and drive
benefits for both companies. The investment is subject to
regulatory approval in China, which is currently being sought. The
transaction is expected to close in the first half of 2015.
-- In November the Group acquired a 49% interest in Rose
Pharmacy, a leading Philippine pharmacy chain, which establishes an
entry point for the growing health and beauty segment in a key
Asian market.
-- During the year agreement was reached to divest 30% of the
ordinary shares in GCH Malaysia Sdn. Bhd., operator of the Group's
Malaysian Food business, to the Antah Group in order to meet local
regulatory requirements. This transaction, which completed in
February 2015, did not extend to the Group's Health and Beauty
activities in Malaysia.
-- A net 124 stores were added during the year which, together
with 238 Rose Pharmacy stores acquired in the Philippines, gave a
total store portfolio of 6,101 as at 31st December 2014. Despite
adding 39 7-Eleven stores in Southern China, the number of Food
business outlets declined by a net eight stores, mainly due to the
consolidation of the Group's convenience stores in Singapore and
Indonesia.
-- The Health and Beauty business opened a net 81 stores across
different markets, including 30 in mainland China and 33 in
Indonesia, in addition to those added by Rose Pharmacy.
-- The first IKEA store in Indonesia was opened in October with
an encouraging initial performance.
-- Maxim's opened 53 net new outlets during the year, including
23 in mainland China and nine Starbucks outlets in Vietnam. Maxim's
also signed an agreement with The Cheesecake Factory to bring this
leading U.S. casual dining concept to Asia. The first outlet is
expected to open in 2016.
BUSINESS REVIEW
FOOD
Food reported US$8.4 billion in total sales, an increase of 2%,
while operating profit declined by 6% to US$299 million,
principally driven by poor results in Singapore, Indonesia and the
Philippines within the supermarkets/hypermarkets formats.
There has been increased focus during the year on strengthening
the Group's fresh produce offering across all food formats, and
this has had positive results. In parallel, the Group's corporate
brand programme has been expanded significantly in key categories
to heighten differentiation and customer choice.
FOOD - SUPERMARKETS/HYPERMARKETS
Supermarkets/Hypermarkets reported US$6.5 billion in total
sales, representing an increase of 1%, while operating profit
declined by 9% to US$226 million.
In Hong Kong, Wellcome increased its market share in grocery and
fresh food with a strong increase in sales and good profit growth.
The number of Wellcome stores grew by ten to 318. Wellcome
maintained its low price strategy, while strengthening its fresh
food offer. Jasons rebalanced its product assortment strategy to
include more direct imported Western/European ranges which deliver
better margins. Although the outlook for 2015 is challenging,
Wellcome is investing in automation and people development to drive
further growth.
In Taiwan, full-year sales and operating profits grew, despite
having 17 fewer stores than last year, as like-for-like sales
improved. The Fresh Production Centre and the Dry Distribution
Centre were successfully integrated to enhance productivity,
product quality and overall service levels. The growth and
expansion of the high-end supermarket format Jasons, which at the
year end had 12 stores, was a key highlight in 2014.
In Indonesia, while full-year sales grew 11%, both new store and
like-for-like sales performance were weak particularly in the Giant
supermarket format. As a result of disappointing top line growth
and significant cost increases in labour and utilities, as well as
higher provisions to accelerate stock liquidation, operating
profits fell significantly. During the year, the Group opened new
distribution centre hubs in Medan, Lampung and Kalimantan and also
introduced decentralized buying teams to improve logistics
efficiency, strengthen the assortment and improve the quality of
fresh products. Migration to a new warehouse management system has
also improved efficiency, reduced handling costs and strengthened
key processes in the supply chain.
Giant gained market share as it expanded in cities outside Java.
Its focus on competitive pricing has enhanced its low price image
and improved sales. A shortage of electricity capacity in certain
cities, however, has either slowed expansion plans or increased
costs. Hero Supermarkets continued to improve its offer across
fresh, imported and exclusive ranges.
In Malaysia, 2014 was a year of transformation for the food
business, becoming more customer-centric through store
refurbishments, sharper pricing and enhanced assortments. Market
share and penetration has improved, although the discounting and
stock clearance activities have negatively affected margins. The
trading environment in Malaysia faces some uncertainties in 2015
with the introduction of the new Goods and Services Tax ('GST') on
1st April 2015. Nevertheless the Group remained positive about the
medium-term outlook and is making investments in existing stores,
in opening new stores and in its supply chain to strengthen further
its competitive position.
In the Philippines, the Group increased its shareholding in
Rustan Supercenters by 16% to 66%. Several benefits, including
group volume purchasing, IT infrastructure, supply chain know-how
and corporate brand have been brought to Rustan. Seven new stores
were opened during 2014. Particularly encouraging growth was
achieved in the Wellcome neighbourhood stores. Expansion was
principally in the greater Manila area, although three new stores
were also added in Cebu City. The Group ended the year with 51
stores in the Philippines. The Group continues to emphasize its
fresh credentials to drive differential in the market. In
recognition of its efforts, Rustan was awarded the 'Outstanding
Retailer Award' by the Philippines Retailer Association. Key
priorities in 2015 include further improvements to the fresh offer,
strengthening corporate label sales in targeted categories and
additional new units.
In Singapore, the retail environment remained challenging in
2014. Cold Storage achieved higher sales despite the forced closure
of a major store and extensive refurbishment work in other key
stores. Profitability at Cold Storage remained stable during the
year in the face of margin pressures from rising costs. Sales from
new stores opened in 2014 are expected to increase gradually over
2015 as they build on their core strengths in fresh and imported
products, and deployment of productivity-led initiatives including
electronic shelf labels, closed-loop cash handling machines and
self-scan checkouts. In the mid market Giant operations suffered
from rising wages and a shortage of manpower which impacted both
sales and profitability. The business is undergoing a
transformation with greater emphasis on fresh food and a
streamlined grocery range. Resources are also being invested to
standardize store equipment and programmes, and to simplify
operations. These changes, supported by sharper customer focus,
will put the business on a much stronger footing.
FOOD - CONVENIENCE STORES
Convenience Stores reported US$1.9 billion in total sales,
representing an increase of 4% over the previous year (2013: US$1.8
billion). Operating profit increased by 3% to US$73 million.
In Hong Kong, in the face of higher rent and labour costs,
7-Eleven did well to increase both sales and operating profits for
the year. With an extensive network of 921 stores as at the end of
December 2014, 7-Eleven remains the clear market leader. It
continued to innovate with themed promotions, the launch of Daily
Café coffee and innovation in Ready-To-Eat products. Full-year
sales and operating profits were also up in Macau.
In Southern China, 7-Eleven achieved record high one-day sales
on '7-11 day' (11th July), nearly double average daily sales.
Full-year sales and operating profits rose compared to 2013. Store
count increased by a net 39 to a total of 686 at the end of 2014.
In the coming year, 7-Eleven will focus on new ready-to-eat
products, building its network across Guangdong and expanding the
number of franchise stores.
In Singapore, 7-Eleven continued its store consolidation
programme, closing 50 loss-making stores during the year. The
business opened six new stores at strategic locations and
modernized or refurbished 61 additional stores. Like-for-like sales
were slightly positive. Plans for 2015 include an expanded
ready-to-eat offer and an increased range of services.
In Indonesia, Starmart's ready-to-eat offer produced positive
sales, while several loss making stores were closed. PT Hero is
reviewing its strategic options for Starmart.
HEALTH AND BEAUTY
Health and Beauty achieved another year of record sales and
profit, led by a particularly strong performance from Mannings in
Hong Kong and Macau. Sales increased 11% to US$2.5 billion while
operating profit rose by 11% to US$219 million (2013: US$198
million). The Group now operates 1,800 health and beauty stores
under the Mannings, Guardian and Rose Pharmacy brands across ten
countries and territories.
Significant effort has continued to be made during the year to
align the brand identities of Mannings and Guardian with adoption
of a common livery and a cohesive look, tone and feel to the
stores. Improved disciplines around stock management, space
planning, range and display, and supply chain processes have
delivered better on shelf availability for customers. Increased
investment is being made in corporate brand products, and in
sourcing exclusive lines as a point of difference in the
market.
In Hong Kong, Mannings achieved record sales in 2014. Mannings
enjoys a strong brand equity, and is highly trusted by consumers at
a time when preventative health is becoming an increasingly
important issue.
In mainland China, the performance of Mannings improved further
with the net addition of 30 stores, enhancement to its assortment,
and double digit like-for-like sales growth.
In Singapore, 50 stores were renovated in the new Guardian
façade and a new pilot e-commerce site was launched in the fourth
quarter.
In Malaysia, increased competition, negative like-for-like sales
and significant cost increases impacted profits. Guardian
maintained its market leading position and protected top-line
performance with increased promotional activity.
In Indonesia, Guardian reported strong sales growth with solid
like-for-like sales. A new dedicated distribution centre was opened
and 33 net new stores were added. A strategic partnership is being
piloted with Melawai Pharmacy in Jakarta to combine their local
pharmacy strength with the broader health and beauty offering of
Guardian.
In Vietnam, seven net additional Guardian stores were added,
bringing the network to 25 stores at the year end. Two new Guardian
stores were opened in Cambodia during the year with three stores
trading at the end of the year.
In the Philippines, a 49% interest was acquired in Rose
Pharmacy, which provides an attractive entry to the health and
beauty category in the country.
The potential for further growth in the health and beauty sector
is very significant for the Group. Rising incomes, increased focus
on health and well-being, as well as broader awareness of beauty
and personal care products are all creating increased demand.
HOME FURNISHINGS
Home Furnishings achieved record sales and profit during the
year under review. Operating profit rose by 16% to a record US$51
million (2013: US$44 million), riding on increased sales of US$497
million, up 18% from US$422 million in 2013. The Group now operates
nine IKEA stores in Hong Kong, Taiwan and Indonesia.
The brand celebrated IKEA's 20th anniversary in Taiwan, where it
has established itself as the market leader. In October, the first
IKEA store was opened in Indonesia, the world's fourth most
populous country. Located in Alam Sutera in greater Jakarta, the
35,000 sq. m. store features over 7,000 home furnishing products,
55 inspirational room-settings and three complete home settings.
Initial trading has been encouraging.
Both Taiwan and Hong Kong recorded solid year-on-year growth,
despite sluggish local property markets. IKEA Hong Kong weathered
the effects of the Occupy Central protests on its Causeway Bay
store to deliver solid returns, while IKEA Taiwan benefited from a
full year of operations in 2014 from its IKEA store that opened in
Tai Chung in September 2013.
During the year, the Group focused on increasing quality and
continued pricing revisions to secure its positioning as the price
leader in each market, targeting greater volumes and increased
market shares. IKEA also ran aggressive campaigns to build consumer
awareness. These were independently recognized winning several
awards including: Service & Courtesy Award from the Hong Kong
Retail Management Association; PR Awards HK2014 and Marketing
Excellence Awards 2014; the Golden Award of Service Industry by
Taiwan's Common Wealth Magazine as well as marketing and PR awards
for IKEA's TV commercials and the 'IKEA House' concept in
Taiwan.
Looking ahead, the Group will focus on sustaining strong
like-for-like sales growth in existing stores, fine-tuning the
assortment and execution in Indonesia, and exploring opportunities
to improve customer accessibility in all territories in which we
operate.
RESTAURANTS
Restaurants reported US$1.7 billion in total sales, representing
an increase of 13% over the previous year (2013: US$1.6 billion),
while profit contribution increased by 3%.
The restaurant businesses overcame a number of challenging
external factors to deliver steady growth in 2014. Expansion into
China was the key growth driver during the year, as well as the
introduction of several innovative concepts including Urban Bakery
that created new dining experiences for customers. There was also
continued expansion of Starbucks in Vietnam.
Maxim's acquired the Wildfire brand and two restaurants in Hong
Kong, and subsequently opened an additional Wildfire outlet at
Victoria Peak. The Chinese cuisine concept Jade Garden expanded
from Guangzhou and Shenzhen into Shanghai and Chengdu, where it has
been enthusiastically received by local customers. Maxim's is also
preparing for the opening of its first Cheesecake Factory
restaurant in 2016, having reached agreement during the year to
franchise this well-known brand in Greater China.
The group recently completed construction of its third factory
in Hong Kong. Maxim's now operates three premises specializing in
various aspects of food manufacturing, including branded products,
cakes & bakery and food processing.
In recognition of its industry leading programmes, Maxim's
received a number of awards in 2014, including a Gold Award at the
HKMA Quality Awards, and the Outstanding Performance Award at the
Service & Courtesy Awards organized by the Hong Kong Retail
Management Association.
With increasing external challenges, including macroeconomic
uncertainty, labour costs and rental pressures, Maxim's anticipates
another challenging year, and will focus on building customer
relationship programmes and controlling costs to enhance
returns.
THE YEAR AHEAD
Trading conditions in some of the Group's major markets are
expected to remain challenging, especially for the Food businesses
in Southeast Asia. The Group's approach, however, is to drive sales
and profit growth in ways that build long-term value. To that end,
the Group continues to invest in new and existing stores,
strengthen its brands, improve operations and enhance the shopper
experience across all formats.
Dairy Farm expects to achieve organic growth across its formats
in existing markets as its primary source of growth. The Group
will, however, selectively consider acquisition opportunities where
they can enhance our current portfolio of brands and
businesses.
The Group's success depends critically on the passion,
commitment and hard work of its people. I want to thank them for
their tremendous contribution which ensured another year of strong
progress for Dairy Farm.
Graham Allan
Group Chief Executive
Dairy Farm International Holdings Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2014
(unaudited)
2014 2013
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$m
Sales (note
2) 11,008.3 - 11,008.3 10,357.4 - 10,357.4
Cost of sales (7,717.3) - (7,717.3) (7,270.4) - (7,270.4)
----------- ----------- ---------- ----------- ------- ---------
Gross margin 3,291.0 - 3,291.0 3,087.0 - 3,087.0
Other operating
income
(note 3) 155.3 13.4 168.7 149.6 29.0 178.6
Selling and
distribution
costs (2,508.4) - (2,508.4) (2,318.6) - (2,318.6)
Administration
and other
operating
expenses (413.6) (3.7) (417.3) (395.7) - (395.7)
----------- ----------- ---------- ----------- ------- ---------
Operating profit
(note 4) 524.3 9.7 534.0 522.3 29.0 551.3
Financing charges (8.6) - (8.6) (10.7) - (10.7)
Financing income 6.7 - 6.7 7.6 - 7.6
Net financing
charges (1.9) - (1.9) (3.1) - (3.1)
Share of results
of associates
and joint
ventures
(note 5) 68.9 - 68.9 68.9 (2.2) 66.7
----------- ----------- ---------- ----------- ------- ---------
Profit before
tax 591.3 9.7 601.0 588.1 26.8 614.9
Tax (note 6) (93.0) (0.3) (93.3) (101.3) (0.7) (102.0)
----------- ----------- ---------- ----------- ------- ---------
Profit after
tax 498.3 9.4 507.7 486.8 26.1 512.9
----------- ----------- ---------- ----------- ------- ---------
Attributable
to:
Shareholders
of the Company 500.1 9.0 509.1 480.1 20.8 500.9
Non-controlling
interests (1.8) 0.4 (1.4) 6.7 5.3 12.0
----------- ----------- ---------- ----------- ------- ---------
498.3 9.4 507.7 486.8 26.1 512.9
----------- ----------- ---------- ----------- ------- ---------
USc USc USc USc
Earnings per
share (note
7)
* basic 36.98 37.65 35.52 37.05
* diluted 36.97 37.63 35.48 37.02
----------- ---------- ----------- ---------
Dairy Farm International Holdings Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2014
(unaudited)
2014 2013
US$m US$m
Profit for the year 507.7 512.9
Other comprehensive expense
----------- ------------
Items that will not be reclassified
to profit or loss:
----------- ------------
Remeasurements of defined
benefit plans (16.0) 19.5
Tax relating to items that
will not be reclassified 2.0 (3.8)
(14.0) 15.7
Share of other comprehensive
expense of associates and
joint ventures (0.9) (0.1)
----------- ------------
(14.9) 15.6
----------- ------------
Items that may be reclassified
subsequently to profit or
loss:
Net exchange translation
differences
----------- ------------
- net loss arising during
the year (41.1) (132.8)
- transfer to profit and
loss 4.4 -
(36.7) (132.8)
Revaluation of other investments
- (loss)/gain arising during
the year (0.6) 0.6
Cash flow hedges
----------- ------------
- net gain arising during
the year 1.9 0.4
- transfer to profit and
loss (0.3) 0.8
1.6 1.2
Tax relating to items that
may be reclassified (0.2) (0.1)
Share of other comprehensive
expense of associates and
joint ventures (1.8) (7.9)
----------- ------------
(37.7) (139.0)
----------- ------------
Other comprehensive expense
for the year, net of tax (52.6) (123.4)
----------- ------------
Total comprehensive income
for the year 455.1 389.5
----------- ------------
Attributable to:
Shareholders of the Company 457.2 396.7
Non-controlling interests (2.1) (7.2)
----------- ------------
455.1 389.5
----------- ------------
Dairy Farm International Holdings Limited
Consolidated Balance Sheet
at 31st December 2014
(unaudited)
2014 2013
US$m US$m
Net operating assets
Intangible assets 566.1 407.5
Tangible assets 1,219.2 1,081.7
Associates and joint ventures 388.0 369.8
Other investments 5.2 5.8
Non-current debtors 179.7 138.2
Deferred tax assets 27.7 22.2
Pension assets - 7.2
------------ -----------
Non-current assets 2,385.9 2,032.4
Stocks 1,011.0 976.0
Current debtors 252.1 213.2
Current tax assets 4.0 6.6
Bank balances and other liquid
funds 662.0 728.4
------------ -----------
1,929.1 1,924.2
Non-current assets held for sale
(note 9) 1.3 6.9
------------ -----------
Current assets 1,930.4 1,931.1
------------ -----------
Current creditors (2,412.9) (2,309.3)
Current borrowings (93.4) (47.9)
Current tax liabilities (52.9) (58.2)
Current provisions (6.3) (11.0)
------------ -----------
Current liabilities (2,565.5) (2,426.4)
------------ -----------
Net current liabilities (635.1) (495.3)
Long-term borrowings (93.8) (42.9)
Deferred tax liabilities (46.7) (44.9)
Pension liabilities (37.7) (24.0)
Non-current creditors (16.5) (17.3)
Non-current provisions (33.6) (30.6)
Non-current liabilities (228.3) (159.7)
1,522.5 1,377.4
------------ -----------
Total equity
Share capital 75.1 75.1
Share premium and capital reserves 59.1 56.5
Revenue and other reserves 1,294.5 1,149.4
------------ -----------
Shareholders' funds 1,428.7 1,281.0
Non-controlling interests 93.8 96.4
-----------
1,522.5 1,377.4
------------ -----------
Dairy Farm International Holdings Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2014
Attributable
Attributable to shareholders of the Company to non-
Share Share Capital Revenue Hedging Exchange controlling Total
capital premium reserves reserves reserves reserves Total interests equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m
2014 (unaudited)
At 1st January 75.1 30.5 26.0 1,281.1 0.3 (132.0) 1,281.0 96.4 1,377.4
Total
comprehensive
income - - - 492.6 1.4 (36.8) 457.2 (2.1) 455.1
Dividends paid
by the Company
(note 10) - - - (311.0) - - (311.0) - (311.0)
Dividends paid
to
non-controlling
interests - - - - - - - (0.2) (0.2)
Employee share
option schemes - - 2.6 - - - 2.6 - 2.6
New subsidiaries - - - - - - - 0.9 0.9
Change in
interest in a
subsidiary - - - (1.1) - - (1.1) (1.2) (2.3)
At 31st December 75.1 30.5 28.6 1,461.6 1.7 (168.8) 1,428.7 93.8 1,522.5
2013
At 1st January 75.0 25.8 27.3 1,077.6 (0.9) (11.6) 1,193.2 46.0 1,239.2
Total
comprehensive
income - - - 515.9 1.2 (120.4) 396.7 (7.2) 389.5
Dividends paid
by the Company
(note 10) - - - (311.0) - - (311.0) - (311.0)
Dividends paid
to
non-controlling
interests - - - - - - - (0.2) (0.2)
Exercise of
options 0.1 - - - - - 0.1 - 0.1
Employee share
option schemes - - 3.4 - - - 3.4 - 3.4
Capital
contribution
from
non-controlling
interests - - - - - - - 58.2 58.2
Transaction
costs in
relation
to capital
contribution
from
non-controlling
interests - - - (1.5) - - (1.5) (0.3) (1.8)
Change in
interest in a
subsidiary - - - 0.1 - - 0.1 (0.1) -
Transfer - 4.7 (4.7) - - - - - -
------- ------- -------- -------- -------- -------- ------- ------------ -------
At 31st December 75.1 30.5 26.0 1,281.1 0.3 (132.0) 1,281.0 96.4 1,377.4
------- ------- -------- -------- -------- -------- ------- ------------ -------
Total comprehensive income included in revenue reserves comprises profit attributable
to shareholders of the Company of US$509.1 million (2013: US$500.9 million)
and net fair value loss on other investments of US$0.5 million (2013: net fair
value gain of US$0.5 million). Cumulative net fair value gain on other investments
amounted to US$4.1 million (2013: US$4.6 million).
Dairy Farm International Holdings Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2014
(unaudited)
2014 2013
US$m US$m
Operating activities
----------- ---------
Operating profit (note 4) 534.0 551.3
Depreciation and amortization 202.8 196.1
Other non-cash items 4.0 0.2
Increase in working capital (17.4) (10.5)
Interest received 7.2 7.4
Interest and other financing charges
paid (8.6) (11.0)
Tax paid (93.8) (95.1)
----------- ---------
628.2 638.4
Dividends from associates and
joint ventures 47.7 44.5
Cash flows from operating activities 675.9 682.9
Investing activities
----------- ---------
Purchase of subsidiaries (note
11(a)) (23.8) -
Purchase of associates and joint
ventures (note 11(b)) (94.1) (17.7)
Purchase of intangible assets (47.5) (21.9)
Purchase of tangible assets (297.0) (296.2)
Sale of associates and joint ventures
(note 11(c)) 2.7 -
Sale of properties (note 11(d)) 26.3 49.8
Sale of tangible assets 0.9 1.0
Cash flows from investing activities (432.5) (285.0)
Financing activities
----------- ---------
Capital contribution from non-controlling
interests (note 11(e)) - 56.4
Change in interest in a subsidiary
(note 11(f)) (2.3) -
Drawdown of borrowings 1,311.3 1,528.1
Repayment of borrowings (1,290.8) (1,589.1)
Dividends paid by the Company
(note 10) (311.0) (311.0)
Dividends paid to non-controlling
interests (0.2) (0.2)
Cash flows from financing activities (293.0) (315.8)
Net (decrease)/increase in cash
and cash equivalents (49.6) 82.1
Cash and cash equivalents at 1st
January 711.2 664.9
Effect of exchange rate changes (5.0) (35.8)
----------- ---------
Cash and cash equivalents at 31st
December (note 11(g)) 656.6 711.2
----------- ---------
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 preliminary results for the year ended 31st
December 2014 which have been prepared in conformity with
International Financial Reporting Standards, including
International Accounting Standards and Interpretations adopted by
the International Accounting Standards Board.
The preliminary results for the year ended 31st December 2014
are unaudited.
The following amendments and interpretation which are effective
in the current accounting year and relevant to the Group's
operations are adopted in 2014:
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge accounting
IFRIC 21 Levies
The adoption of these amendments and interpretation does not
have a material impact on the Group's accounting policies and
disclosures.
Amendments to IAS 32 'Offsetting Financial Assets and Financial
Liabilities' are made to the application guidance in IAS 32 and
clarify some of the requirements for offsetting financial assets
and financial liabilities on the balance sheet. Specifically, the
amendments clarify the meaning of 'currently has a legally
enforceable right of offset' and 'simultaneous realization and
settlement'.
Amendments to IAS 36 'Recoverable Amount Disclosures for
Non-Financial Assets' set out the changes to the disclosures when
recoverable amount is determined based on fair value less costs of
disposal. The key amendments are (a) to remove the requirement to
disclose recoverable amount when a cash generating unit ('CGU')
contains goodwill or indefinite lived intangible assets but there
has been no impairment, (b) to require disclosure of the
recoverable amount of an asset or CGU when an impairment loss has
been recognized or reversed, and (c) to require detailed disclosure
of how the fair value less costs of disposal has been measured when
an impairment loss has been recognized or reversed.
Amendments to IAS 39 'Novation of Derivatives and Continuation
of Hedge Accounting' provide relief from discontinuing hedge
accounting when novation of a hedging instrument to a central
counterparty meets specified criteria.
IFRIC 21 'Levies' sets out the accounting for an obligation to
pay a levy that is not income tax. The interpretation clarifies
that the obligating event that gives rise to a liability to pay a
levy is the activity described in the relevant legislation that
triggers the payment of the levy.
2. SALES
Including associates
and joint ventures Subsidiaries
---------------------- ------------------
2014 2013 2014 2013
US$m US$m US$m US$m
Analysis by operating
segment:
Food 8,404.1 8,240.2 8,108.8 7,755.8
- Supermarkets/hypermarkets 6,544.5 6,459.3 6,249.2 5,974.9
- Convenience stores 1,859.6 1,780.9 1,859.6 1,780.9
Health and Beauty 2,454.5 2,218.5 2,402.1 2,179.9
Home Furnishings 497.4 421.7 497.4 421.7
Restaurants 1,746.8 1,551.3 - -
---------- ---------- -------- --------
13,102.8 12,431.7 11,008.3 10,357.4
---------- ---------- -------- --------
Sales including associates and joint ventures comprise 100% of
sales from associates and joint ventures.
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the Board for the purpose of resource allocation and performance
assessment. Dairy Farm operates in four segments: Food, Health and
Beauty, Home Furnishings and Restaurants. Food comprises
supermarket, hypermarket and convenience store businesses. Health
and Beauty comprises the health and beauty businesses. Home
Furnishings is the Group's IKEA businesses. Restaurants is the
Group's only associate, Maxim's, a leading Hong Kong restaurant
chain.
3. OTHER OPERATING INCOME
2014 2013
US$m US$m
Concession and service income 123.3 119.1
Rental income from properties 28.9 28.0
Profit on sale of properties 11.6 29.0
Profit on sale of Indian businesses 1.8 -
Foreign exchange gains and others 3.1 2.5
----- -----
168.7 178.6
----- -----
4. OPERATING PROFIT
2014 2013
US$m US$m
Analysis by operating segment:
Food 298.6 318.7
- Supermarkets/hypermarkets 225.9 247.9
- Convenience stores 72.7 70.8
Health and Beauty 218.8 197.7
Home Furnishings 50.7 43.6
------ ------
568.1 560.0
Support office (43.8) (37.7)
524.3 522.3
Non-trading items:
- profit on sale of properties 11.6 29.0
- profit on sale of Indian
businesses 1.8 -
- loss on deemed disposal of
joint ventures (3.1) -
* expenses relating to transfer of listing segment of
the Company's shares (0.6) -
------ ------
534.0 551.3
------ ------
5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
2014 2013
US$m US$m
Analysis by operating segment:
Food - Supermarkets/hypermarkets (7.5) (8.3)
Health and Beauty (1.1) (0.5)
Restaurants 77.5 75.5
----- -----
68.9 66.7
----- -----
In 2013, share of results of associates and joint ventures
included our share of restructuring cost of a business of US$2.2
million classified as non-trading item (note 8).
Results are shown after tax and non-controlling interests in the
associates and joint ventures.
6. TAX
2014 2013
US$m US$m
Tax charged to profit and loss
is analyzed as follows:
Current tax (90.6) (105.9)
Deferred tax (2.7) 3.9
------ -------
(93.3) (102.0)
------ -------
Tax relating to components of other
comprehensive income/(expense)
is analyzed as follows:
Remeasurements of defined benefit
plans 2.0 (3.8)
Revaluation of other investments 0.1 (0.1)
Cash flow hedges (0.3) -
------ -------
1.8 (3.9)
------ -------
Tax on profit has been calculated at rates of taxation
prevailing in the territories in which the Group operates. Share of
tax charge of associates of US$17.1 million (2013: US$15.9 million)
and share of tax credit of joint ventures of US$0.1 million (2013:
US$0.9 million) are included in share of results of associates and
joint ventures.
7. EARNINGS PER SHARE
Basic earnings per share are calculated on profit attributable
to shareholders of US$509.1 million (2013: US$500.9 million), and
on the weighted average number of 1,352.1 million (2013: 1,351.8
million) shares in issue during the year.
Diluted earnings per share are calculated on profit attributable
to shareholders of US$509.1 million (2013: US$500.9 million), and
on the weighted average number of 1,352.7 million (2013: 1,353.0
million) shares in issue after adjusting for 0.6 million (2013: 1.2
million) shares which are deemed to be issued for no consideration
under the Senior Executive Share Incentive Schemes based on the
average share price during the year.
Additional basic and diluted earnings per share are also
calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
2014 2013
----------------------------- ------------------------------
Basic Diluted Basic Diluted
earnings earnings earnings earnings
per share per share per share per share
US$m USc USc US$m USc USc
Profit attributable
to shareholders 509.1 37.65 37.63 500.9 37.05 37.02
Non-trading
items (note
8) (9.0) (20.8)
----- ------
Underlying
profit attributable
to shareholders 500.1 36.98 36.97 480.1 35.52 35.48
----- ------
8. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include gains and losses arising
from the sale of businesses, investments and properties; impairment
of non-depreciable intangible assets and other investments;
provisions for the closure of businesses; acquisition-related costs
in business combinations; and other credits and charges of a
non-recurring nature that require inclusion in order to provide
additional insight into underlying business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2014 2013
US$m US$m
Profit on sale of properties 10.9 23.0
Profit on sale of Indian businesses 1.8 -
Loss on deemed disposal of joint
ventures (3.1) -
Expenses relating to transfer of
listing segment of the Company's
shares (0.6) -
Share of restructuring cost of a
business - (2.2)
9.0 20.8
----- -----
9. NON-CURRENT ASSETS HELD FOR SALE
At 31st December 2014, the non-current assets held for sale
represented a retail property in Taiwan. The sale of this property
is expected to be completed in 2015 at an amount not materially
different from its carrying value.
At 31st December 2013, the non-current assets held for sale
mainly represented three retail properties in Singapore. These
properties were sold during the year at a profit of US$10.1
million.
10. DIVIDENDS
2014 2013
US$m US$m
Final dividend in respect of 2013
of USc16.50
(2012: USc16.50) per share 223.1 223.1
Interim dividend in respect of
2014 of USc6.50
(2013: USc6.50) per share 87.9 87.9
----- -----
311.0 311.0
----- -----
A final dividend in respect of 2014 of USc16.50 (2013: USc16.50)
per share amounting to a total of US$223.1 million (2013: US$223.1
million) is proposed by the Board. The dividend proposed will not
be accounted for until it has been approved at the Annual General
Meeting. This amount will be accounted for as an appropriation of
revenue reserves in the year ending 31st December 2015.
11. NOTES TO CONSOLIDATED CASH FLOW STATEMENT
(a) Purchase of subsidiaries
2014
US$m
Intangible assets 9.6
Tangible assets 80.4
Non-current debtors 37.5
Deferred tax assets 4.4
Current assets 74.5
Current liabilities (120.0)
Pension liabilities (2.9)
Non-current provisions (0.1)
Non-current liabilities (79.6)
-------
Fair value of identifiable net assets
acquired 3.8
Adjustment for fair value of previously
held investments (94.6)
Adjustment for non-controlling interests (0.9)
Goodwill 126.4
-------
Consideration paid 34.7
Cash and cash equivalents at the date
of acquisition (10.9)
-------
Net cash outflow 23.8
-------
For the subsidiaries acquired during the year, the fair values
of the identifiable assets and liabilities at the acquisition date
are provisional and will be finalized within one year after the
acquisition dates.
Net cash outflow for purchase of subsidiaries in 2014 included
US$23.4 million for acquisition of an additional 16% interest in
Rustan Supercenters, Inc. ('Rustan'), operating a supermarket and
hypermarket chain in the Philippines in late August 2014, and
US$0.4 million for acquisition of the remaining 51% shareholding of
Asia Investment and Supermarket Trading Company Limited ('AISTC'),
operating a Giant hypermarket in Vietnam, from the joint venture
partner in January 2014.
The goodwill arising from the acquisitions of Rustan and AISTC
amounted to US$124.5 million and US$1.9 million respectively. This
was mainly attributable to the leading market position and the
retail network in the Philippines.
None of the goodwill is expected to be deductible for tax
purposes.
Sales and loss after tax since acquisitions in respect of the
subsidiaries acquired during the year amounted to US$176.9 million
and US$7.7 million, respectively. Had the acquisitions occurred on
1st January 2014, consolidated sales and consolidated profit after
tax for the year ended 31st December 2014 would have been
US$11,289.5 million and US$502.8 million, respectively.
(b) Purchase of associates and joint ventures in 2014 mainly
related to the Group's investment in a 49% shareholding in Rose
Pharmacy, Inc. which operates health and beauty business in the
Philippines.
Purchase of associates and joint ventures in 2013 mainly related
to the Group's investment for a 30% shareholding in Jutaria
Gemilang Sdn Bhd which operates mini-marts in Malaysia.
(c) Sale of associates and joint ventures
In July 2014, the Group disposed of its 49% interest in
Foodworld Supermarkets Private Limited and 50% interest in Health
and Glow Retailing Private Limited in India to its joint venture
partner for net proceeds of US$2.7 million.
(d) Sale of properties
Sale of properties in 2014 included disposal of three properties
in Singapore, a property in Taiwan, partial proceeds received from
disposal of a property in Malaysia last year and retention money
received from disposal of a property in Indonesia last year for a
total cash consideration of US$26.3 million.
Sale of properties in 2013 included disposal of a property in
Indonesia, and a piece of land and a property in Malaysia for a
total consideration of US$49.8 million.
(e) Capital contribution from non-controlling interests
In 2013, PT Hero Supermarket Tbk ('PT Hero') completed a
US$304.0 million rights issue to support its store expansion, repay
its borrowings and fund its working capital requirements in
Indonesia. Capital contribution from non-controlling interests
amounted to US$56.4 million after issuance costs.
(f) Change in interest in a subsidiary
During the year, the Group acquired an additional 0.26% interest
in PT Hero for a consideration of US$2.3 million.
(g) Analysis of balances of cash and cash equivalents
2014 2013
US$m US$m
Bank balances and other liquid funds 662.0 728.4
Bank overdrafts (5.4) (2.0)
Less: Bank deposits with maturity
of three months or more - (15.2)
656.6 711.2
----- ------
12. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
Total capital commitments at 31st December 2014 amounted to
US$217.9 million (2013: US$181.7 million).
In addition, the Group entered into an agreement in August to
acquire, by way of subscription of new shares, 19.99% of the
enlarged share capital of Yonghui Superstores Co., Ltd ('Yonghui')
for a consideration of RMB5.69 billion (approximately US$925
million). Listed on the Shanghai Stock Exchange, Yonghui is a
hypermarket and supermarket operator in mainland China. The
investment requires certain regulatory approvals in mainland China.
The regulatory approval process is expected to complete in the
first half of 2015.
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.
13. RELATED PARTY TRANSACTIONS
The parent company of the Group is Jardine Strategic Holdings
Limited and the ultimate parent company is Jardine Matheson
Holdings Limited ('JMH'). Both companies are incorporated in
Bermuda.
In the normal course of business the Group undertakes a variety
of transactions with JMH and its subsidiaries, associates and joint
ventures. The more significant of such transactions are described
below.
Under the terms of a Management Services Agreement, the Group
paid a management fee of US$2.5 million (2013: US$2.5 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$0.4 million in
2014 (2013: US$0.4 million) to JML.
The Group rents properties from Hongkong Land Holdings Limited
('HKL'), a subsidiary of JMH. The gross annual rentals paid by the
Group to HKL in 2014 were US$2.2 million (2013: US$3.2 million).
The Group's 50%-owned associate, Maxim's Caterers Limited
('Maxim's'), also paid gross annual rentals of US$9.7 million
(2013: US$8.8 million) to HKL in 2014.
The Group uses Jardine Lloyd Thompson Limited ('JLT'), an
associate of JMH, to place certain of its insurance. Brokerage fees
and commissions, net of rebates, paid by the Group to JLT in 2014
were US$2.3 million (2013: US$2.2 million).
The Group sources information technology infrastructure and
related services from Jardine OneSolution ('JOS'), a subsidiary of
JMH. The total fees paid by the Group to JOS in 2014 amounted to
US$12.1 million (2013: US$8.9 million).
The Group also consumes repairs and maintenance services from
Jardine Engineering Corporation ('JEC'), a subsidiary of JMH. The
total fees paid by the Group to JEC in 2014 amounted to US$4.7
million (2013: US$5.5 million).
Maxim's supplies ready-to-eat products at arm's length to
certain subsidiaries of the Group. In 2014, these amounted to
US$24.6 million (2013: US$21.5 million).
In addition, Gammon Construction ('GC'), a joint venture of JMH,
has engaged in a building contract with Maxim's for a commercial
building development in Cheung Sha Wan during the year. The total
construction fees paid by Maxim's to GC in 2014 amounted to US$39.6
million (2013: US$1.8 million).
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.
14. POST BALANCE SHEET EVENT
In December 2014, the Group agreed to sell 30% of the ordinary
share capital in GCH Retail (Malaysia) Sdn Bhd (the Group's
hypermarkets, superstores and supermarkets operator in Malaysia) to
Circular Assets Sdn Bhd (a wholly-owned subsidiary of Syarikat
Pesaka Antah Sdn Bhd) in order to maintain compliance with the
'Guidelines on Foreign Participation in the Distributive Trade
Services Malaysia' issued by the Malaysian Ministry of Domestic
Trade, Co-operatives and Consumerism. This transaction was
completed on 27th February 2015.
Dairy Farm International Holdings Limited
Principal Risks and Uncertainties
The Board has overall responsibility for risk management and
internal control. The process by which the Group identifies and
manages risk will be set out in more detail in the Corporate
Governance section of the Company's 2014 Annual Report (the
'Report'). The following are the principal risks and uncertainties
facing the Company as required to be disclosed pursuant to the
Disclosure 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 and Group Chief Executive's
Review.
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 on the
Group's joint venture partners, franchisors, bankers, suppliers or
customers. These developments can result in recession, inflation,
deflation, currency fluctuations, restrictions in the availability
of credit, business failures, or increases in financing costs, oil
prices and in the cost of raw materials and finished products. Such
developments might increase operating costs, reduce revenues, lower
asset values or result in the Group's businesses being unable to
meet in full their strategic objectives.
Commercial Risk and Financial Risk
Risks are an integral part of normal commercial practices, and
where practicable steps are taken to mitigate such risks. These
risks are further pronounced when operating in volatile
markets.
A number of the Group's businesses make significant investment
decisions in respect of developments or projects that take time to
come to fruition and achieve the desired returns and are,
therefore, subject to market risks.
The Group's businesses operate in areas that are highly
competitive, and failure to compete effectively in terms of price,
product specification or levels of service can have an adverse
effect on earnings. Significant pressure from such competition may
lead to reduced margins. The quality and safety of the products and
services provided by the Group's businesses are also important and
there is an associated risk if they are below standard.
The 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
A number of the Group's businesses and projects are reliant on
concessions, franchises, management or other key contracts.
Cancellation, expiry or termination, or the renegotiation of any
such concessions, franchises, management or other key contracts,
could have an adverse effect on the financial condition and results
of operations of certain subsidiaries, associates and joint
ventures of the Group.
Regulatory and Political Risk
The Group's businesses are subject to a number of regulatory
environments in the territories in which they operate. Changes in
the regulatory approach to such matters as foreign ownership of
assets and businesses, exchange controls, planning controls,
emission regulations, tax rules and employment legislation have the
potential to impact the operations and profitability of the Group's
businesses. Changes in the political environment in such
territories can also affect the Group's businesses.
Terrorism, Pandemic and Natural Disasters
A number of the Group's operations are vulnerable to the effects
of terrorism, either directly through the impact of an act of
terrorism or indirectly through the impact of generally reduced
economic activity in response to the threat of or an actual act of
terrorism.
All Group businesses would be impacted by a global or regional
pandemic which could be expected to seriously affect economic
activity and the ability of our businesses to operate smoothly. In
addition, many of the territories in which the Group operates can
experience from time to time natural disasters such as earthquakes
and typhoons.
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 2014 Annual Report, including
the Chairman's Statement, Group Chief Executive's Review, Business
Review and Principal Risks and Uncertainties, which constitute the
management report include a fair review of all information required
to be disclosed by the Disclosure 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
Graham Allan
Neil Galloway
Directors
The final dividend of USc16.50 per share will
be payable on 13th May 2015, subject to approval
at the Annual General Meeting to be held on
6th May 2015, to shareholders on the register
of members at the close of business on 20th
March 2015. The shares will be quoted ex-dividend
on the Singapore Exchange and the London Stock
Exchange on 18th and 19th March 2015, respectively.
The share registers will be closed from 23rd
to 27th March 2015, inclusive.
Shareholders will receive their dividends in
United States dollars, unless they are registered
on the Jersey branch register where they will
have the option to elect for sterling. These
shareholders may make new currency elections
for the 2014 final dividend by notifying the
United Kingdom transfer agent in writing by
24th April 2015. The sterling equivalent of
dividends declared in United States dollars
will be calculated by reference to a rate prevailing
on 29th April 2015. Shareholders holding their
shares through The Central Depository (Pte)
Limited ('CDP') in Singapore will receive 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 20th
March 2015, must submit the relevant documents
to M & C Services Private Limited, the Singapore
branch registrar, no later than 5.00 p.m. (local
time) on 19th March 2015.
Dairy Farm
Dairy Farm is a leading pan-Asian retailer. At 31st December
2014, the Group and its associates and joint ventures operated over
6,100 outlets and employed over 100,000 people. It had total annual
sales in 2014 exceeding US$13 billion.
The Group operates under a number of well-known brands across
four divisions. The principal brands are:
Food
-- Supermarkets - Wellcome in Hong Kong, Taiwan and the
Philippines, Cold Storage in Singapore and Malaysia, Giant in
Malaysia, Indonesia, Singapore and Brunei, Hero in Indonesia;
-- Hypermarkets - Giant in Malaysia, Indonesia, Singapore, Brunei and Vietnam;
-- Convenience stores - 7-Eleven in Hong Kong, Singapore, Southern China and Macau;
Health and Beauty
-- Mannings in Greater China, Guardian in the rest of Asia and
Rose Pharmacy in the Philippines;
Home Furnishings
-- IKEA in Hong Kong, Taiwan and Indonesia; and
Restaurants
-- Maxim's in Hong Kong, mainland China and Vietnam.
Dairy Farm International Holdings Limited is incorporated in
Bermuda and has a standard listing on the London Stock Exchange as
its primary listing, 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. Dairy Farm is a member of the Jardine Matheson Group.
- end -
For further information, please contact:
Dairy Farm Management Services
Limited
Graham Allan (852) 2299 1881
Neil Galloway (852) 2299 1896
Brunswick Group Limited
Siobhan Xiaohui Zheng (852) 3512 5044
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2014 can be accessed through the Internet at
'www.dairyfarmgroup.com'.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BSGDXLBGBGUS
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