DFI Retail Group Holdings Limited

Ladies and gentlemen, thank you for standing by and welcome to the DFI Retail Group Holdings 2023 Half-Year Results Briefing Conference Call. I would now like to have the conference over to your host today, Mr. Ian McLeod, Group Chief Executive of DFI Retail Group, and Mr. Clem Constantine, Chief Financial Officer and Property Director of DFI Retail Group. Thank you. Please go ahead, gentlemen.

okay well good morning everyone thank you for joining us this morning for the DFI Retail Group 2023 half year results presentation I'd just like to remind you of a number of the different conditions that apply to this particular call which I know you've seen before and then moving on quickly to the agenda I'll just run through some highlights for the half bring Clem in to talk through the financial results and I'll come back with some business updates for the different banners around the country and territories that we have, and then a brief look at the business outlook. So, moving on to the performance highlights. We've been very encouraged by the underlying performance of the business in the first half. The impact of Malaysia groceries excluded, underlying subsidiary sales actually increased by 4%. Even more encouraging is the substantial improvement in our profits against the same period last year. While Associates profitability improved significantly, with Maximus in particular performing well, We also delivered a five-fold increase in our subsidiary profits against the same period last year. In terms of grocery retail sales, they had a softer result when compared to last year, as they annualized exceptional sales performance in early 2022, given the panic buying of COVID wave 5. Our confidence in our underlying performance is demonstrated by the sales momentum in North Asia, which showed an improved performance in the second quarter as the analyzation impact cleared. After challenging quarter one for Southeast Asia, we also saw a much improved performance in their quarter two as well. We've also been encouraged by the significant improvement in health and beauty across both North Asia and Southeast Asia, with strong double-digit growth virtually across the board. As sales came back strongly, allowing us to leverage the cost base, we've benefited from profitability growing significantly faster than sales. We've also benefited from good light flight sales growth in each of our convenience markets too, as foot traffic in each market returned to more normal patterns. This improved market and sales dynamics have led to a very strong improvement in profitability when compared to last year. IKEA sales are broadly in line with last year as indeed with profit, which is supported by strong cost control and improving performance trend quarter on quarter. I'd now like to hand over to Clem to talk you through the financial highlights. Thank you.

Thank you, Ian. Good morning, everyone. I will take you through a summary of DFI's results for the first six months to June 23. Starting with revenue and profit, our total revenue, including associates and JVs, was at 13.488 billion, marginally down 4% year on year, primarily due to reduced revenues at Yung Wei. If we exclude Yung Wei, total revenues for the group were at plus 7% year on year. Our subsidiaries revenues were at 4.574 billion, in line with last year, but 4% up if we exclude our Malaysia grocery business, which we divested earlier this year in March. Subsidiaries operating profit was 86 million, more than doubled from 37 million last year. a very encouraging performance. After deducting tax, accounting, and finance charges, our subsidiary's underlying profit was 40 million, and as Ian mentioned, increased fivefold relative to the first half of last year. Share of associates and JV's underlying loss improved significantly from a loss of 60 million last year to a loss of 7 million this year, primarily driven by significant profit recovery from vaccines and reduced losses at Yung Wei. Underlying profit attributable to shareholders was 33 million, an 85 million positive profit swing compared to the first half of last year. Non-trading items were 25 million, a loss of 25 million, but mainly driven by the crystallization of 44 million foreign exchange losses from the disposal of our Malaysian grocery retail business. Reported profit attributable to shareholders was therefore 8 million compared to a loss of 58 million last year. And earnings per share was at 2.47 cents with total dividend declared at 3 cents up from 1 cent last year, highlighting our confidence in the underlying business. Now, turning to sales. Our total sales, our total food sales were at 2.870 billion, down 7% on last year. But if we exclude our Malaysian grocery business, this goes from minus seven to minus one down on the year. Our grocery retail sales were at 1.688 billion, down 16%. But again, excluding Malaysia, our grocery retail sales are down 7%. And as Ian mentioned, our grocery retail sales softened as we annualized exceptional sales in the first half of 22. But we are encouraged to see stronger LFL trends in grocery retail in the second quarter. Our convenience store sales were at 1.182 billion plus 9%, with all markets performing strongly. And our health and beauty sales were at 1.210 billion, up 23%, with strong LFL performances from all businesses. IKEA sales were at 400 million, down 2%, but broadly in line with last year, impacted by lower store visitations, particularly in Q1. We've seen sales trends improve in Q2. As for our key associates, Maxime's reported sales of 1.371 billion, a substantial 37% sales growth driven by the recovery of restaurant traffic across markets, particularly here in Hong Kong. Yung Wei sales were 5.758 billion, down 17%. The annualization of panic buying during COVID in China in the first half of 22 has had an acute impact on Yung Wei sales performance. However, profit has improved. And Robinson sales at 1.744 billion were up 9%. May I remind you that the results for Yung Wei and Robinson's are for the six month ending 31st of March. Now moving to our subsidiaries operating profit. Total food profit was 40 million, seven million down on last year. Our grocery retail profit was 14 million, 34 million down on last year. The shortfall was mainly driven by a reduction of profit in North Asia grocery as a result of annualization of exceptional sales in the first half of last year during COVID wave five. It's also worth noting that excluding digital investments, our underlying pivot for the first half of 23 would be broadly in line with the first half of 19. Our convenience store profit was 27 million, up 27 million on this time last year, driven by a strong recovery of foot traffic as borders reopened and tourists came back. Health and beauty profit was at 100 million, up 155% on last year, again underpinned by borders opening and increased tourist traffic. And Ikea profit was broadly in line this year with last year at 14 million. Our SG&A cost remained well controlled slightly up on last year at 68 million, but please bear in mind this number includes some of our digital investment costs. Overall, our operating profit post IFRS 16 was therefore 128 million, up 51 million from last year. Finally, turning to cash flow. Overall, the group's net debt position remains well managed. Our overall net debt is down to 883 million, an improvement of over 100 million on the first half of 22. This has mainly been driven by improved working capital, disciplined capex spending, and better trade. Our operating cash flow nearly doubled to 149 million from 76 million last year, and our free cash flow was at 44 million, a positive swing of nearly 100 million compared to the first half of 22. In summary, as borders reopen and things return to normal, it's very encouraging to see our businesses begin to bear fruit and make tangible improvements on our financial results. I'll now hand you back to Ian. Thank you.