DFI Retail Group Holdings Limited

Good morning, everyone, and thank you for attending the DFI Retail Group 2024 Full Year Results presentation. I'm Karen Chan, Investor Relations Director. Joining us today is Mr. Scott Price, Group Chief Executive, and Mr. Tom Vander Lee, Group Chief Financial Officer, who will be providing remarks on our full year results, followed by a Q&A session. Today's presentation ends being webcast in its entirety. In addition, the full text of our results announcement and slide presentation have been uploaded on the investor relations section of our website. Before we start, I would like to remind you of the following information to be provided during the presentation. The information about to be presented is for information purposes only and is not intended to be investment advice for any person. There is no intention to invite for any dealings in any securities. There may be forward-looking statements mentioned in the presentation materials, which include statements regarding our intent, belief, or current expectations with respect to DFI Retail Group's business and operation, market condition, etc. You expressly advise not to rely on these forward-looking statements, as they are subjective views which are subject to risks and uncertainties. And with that, I'll pass it over to Scott. Scott, please.

Thank you, Karen. Good morning, everyone, and a pleasure to be with you here today to talk about our 2024 full-year results. I just wanted to start off with a few key business highlights. I'll unpack quite a bit of this in more detail as we progress through just a review of our strategy and our current format performance. Overall macro, we're a business that's balanced between North Asia and Southeast Asia, gravity towards North Asia. We clearly see some northbound consumption, in particular cross border from Hong Kong into China. We estimate roughly 5.5 meals a month have moved across the border, generally dining out, much less grocery coming back into Hong Kong. We think that we're balancing that and in fact saw growth in our food business in Q4. So I think that we're cycling that. A lot of competition from Chinese digital players and I think as one prepares for a broader greater Bay Area type of strategy, We're ensuring that we are set for success in Hong Kong as more and more customers can shop across the border. And that's two way. We believe there's some very attractive items that we sell that do well across the border in China. Number of steps taken to improve our profitability in 2024. Worked hard on cost savings. We very much applied to the everyday low cost mindset, including across our overhead. We expanded our margin from 1.7% to 2.3% between 2023 and 2024 and saw our digital business turn to profitability. Driving own brand. There is a flight to value. Customers across the region are concerned, and we see it in their buying behavior. For example, in the month of December in Hong Kong food, Although the total basket was basically flat in terms of number of items in the basket, the value per item went down by roughly 3%. And that's down trading. And what it means is that our own brand margin, which is actually quite healthy, higher than national brand benefits as customers trade down into the Meadows brands and other parts of our own brand portfolio. We're still optimistic in terms of 2025. You know, there's concerns around, well, what does it all mean? You know, my team well knows. I say people are still going to eat. They're still going to shower. They're still going to drink coffee. I think we're set with the right assortment. We think we'll continue to gain share in 2025 across our Hong Kong businesses, including restaurants, capturing growth in health and beauty and convenience. And we'll talk a little bit more about that. Ongoing cost optimization. We constantly focus on reducing our cost to serve our customers. We see franchise as an opportunity not only to continue growing, for example, 7-11 in South China, but expanding our franchises now into our health and beauty portfolio format and are looking at a couple of Southeast Asian markets where we think we can accelerate growth through franchise. Leveraging data, we have a very powerful YUU membership base of 5.3 million. Customers shop every single day, earning points. That data is now helping us not only be a better operator, but we think also offers opportunities for monetization of that data with our vendor base. And we're continuing to expand our omnichannel presence, and I'll talk in a few slides a little bit more about what we accomplished in 2024. But before we get to that part, I'd like to turn it over to Tom, who's now going to take you through the financials.

Thank you, Scott. I'll take you through the financials. A really strong year despite a macro backdrop. The underlying profit of $201 million is up 30% year-on-year, driven by the property improvement for food and convenience. The reported profit is impacted by one-offs, mostly non-cash. Subsidiary sales down 0.6%, excluding divestments and cigarette sales. This is a resilient performance given the macroeconomic backdrop and is driven by market share gains and benefits from a diversified retail portfolio. Strong health and beauty performance despite challenging market conditions. Convenience Delivered Double-Digit People Growth Across Market Driven By Strong Ways To Eat Offsetting The Decline In Lower Margin Cigarette Volumes Strong Profit Growth In Food Driven By Significant Earnings Recovery In Singapore Strength In Taiwan IKEA Plus Cost Savings Mitigating Sales Challenges In IKEA Hong Kong And Indonesia Strong E-Commerce Volume Growth With Profitability Turnaround An Important Milestone For Us Expanding the YUU partnership with encouraging sales momentum in retail media Continued net debt reduction After the completion of the Yonghui transaction, we are now in a positive net cash position Revenue and underlying profit The total revenue, including associates and joint ventures, is 24.9 billion It is down 6% year-on-year Excluding Young Way and the divestments, we are down 2% year-on-year. Subsidiaries, 8.9 billion, down 3%. Again, excluding divestments, we are down 2%. Subsidiaries underlying profit before IEV 16%. is $248 million, up 17% against last year, underpinned by strong profit growth in food and convenience, partially offset by weakness in home furnishing. Subsidiary underlying profit of $158 million, up 42%, and the share of associates and joint ventures, $43 million, marginally down 2%, Lower contribution for maxims partially offset by reduced losses in Yonghui and profit growth in Robertson Retail. The underlying profit to shareholders is 201 million, up 30% year-on-year, and in line with our guidance. And if you exclude the Yonghui and the divestments, the profit is 234 million last year, up 17%. The net non-trading items, a loss of 445 million, which I will elaborate on a bit later, and that resulted in the reported loss of 245 million. Underlying EPS, 14.91, up 30%, and the total dividend per share for the year, 10.50, also up 31%. And this demonstrated our commitment to drive sustainable, improved shareholder returns. If I move on to the net non-trading items of 445 million, the key one is largely driven by a $231 million impairment of our interest in Robinson Retail, $133 million goodwill impairment for our Macau and Cambodia food businesses, and $140 million fair value loss related to our Yonghui divestment. This is partially offset by gains from divestment of Singapore property assets and the group share of the one-off gain from Robinson's investments in BPI Bank. We do not foresee any material non-trading items adjustments in the near future.