DFI Retail Group

• Substantial improvement in underlying profit
• Subsidiaries’ performance driven by recovery in Health and Beauty and Convenience
• Associates’ performance supported by Maxim’s recovery
• Final dividend of US¢5.00 per share

The past few years have been very challenging for DFI Retail, its customers, colleagues and shareholders. Following the pandemic, DFI Retail is resetting and aligning its business to a new ‘Customer First, People Led, Shareholder Driven’ strategic framework, which is crucial to supporting its capital allocation priorities and growth plans to improve performance over the coming years.

The group reported underlying profit after tax of US$155 million for the full year, a substantial improvement from the US$29 million reported in the prior year, supported by strong growth in profitability across subsidiaries and improved performance by associates. The group reported a non-trading loss of US$123 million, predominantly due to the goodwill impairment in respect of the Macau Food business and Giant Singapore, and foreign exchange losses associated with the divestment of the Malaysia Grocery Retail business. These losses were partially offset by gains from property divestments, resulting in total reported profits of US$32 million.

Food

Sales revenue for the Food division in 2023 was US$3.3 billion. Excluding the impact of the Malaysia Grocery Retail divestment, revenue for the division was 5% lower. Underlying operating profit for the division was US$45 million for the year, compared to US$91 million in the prior year.

Within North Asia, first half performance was impacted by the absence this year of the pantry-stocking seen during the fifth wave of COVID in Hong Kong in the equivalent period last year. North Asia’s performance, however, improved in the second half and profit during that period also increased compared to the prior year. South East Asia Food sales performance was adversely affected by intense competition and weakening consumer sentiment caused by rising cost of living pressures.

Convenience

Total Convenience sales were US$2.4 billion, an increase of 8% compared to the prior year. Like-for-like (‘LFL’) sales grew by 5% compared to the prior year. Convenience underlying operating profit was US$88 million for the year, an increase of 74% compared to the prior year.

Within Hong Kong, there were strong sales in the first half, with sales in the second half broadly in line with the prior year, as results were impacted by the rising frequency of outbound travel from Hong Kong residents, particularly during weekends. Operating profit improved strongly due to a favourable shift in mix away from cigarette sales, as well as ongoing strong cost control.

7-Eleven South China benefitted from the Chinese economy reopening. Profit increased significantly as a result of strong LFL sales growth, favourable margin impact from product mix shift and ongoing strong cost control. 7-Eleven Singapore also reported strong sales growth, as the business continued to benefit from the economy reopening and strong in-store execution, with profit almost doubling, despite labour and utility cost pressures.

Health and Beauty

Health and Beauty division revenue increased by 21% to US$2.4 billion, with LFL sales growing by over 20%. Underlying operating profit increased by 127% to US$213 million for the year.

The Mannings business, particularly in Hong Kong, benefitted from the recovery in the economy and increased tourism traffic. LFL sales were consistently strong over the course of the year, which supported positive market share momentum. Healthcare as a category performed strongly, representing over 50% of Mannings’ revenue. Mannings’ profit increased significantly due to strong sales growth, gross margin expansion, operating leverage and ongoing strong cost control.

Home Furnishings

IKEA reported sales revenue of US$794 million, 5% behind the prior year. Overall, LFL sales reduced by 7% in 2023, due to reduced home renovation and furniture demand, as a result of a softening in property market sentiment. Operating profit was US$19 million, US$27 million behind the prior year, primarily as a result of the revenue shortfall.

Associates

Maxim’s reported a strong recovery, as customers returned to dining out. Its contribution to the group’s underlying profit more than doubled relative to the prior year, to US$79 million.

The group’s share of Yonghui’s underlying losses was US$36 million for the year, compared to a US$80 million share of underlying losses in the prior year. The reduction in losses was underpinned by an improvement in gross margin and cost optimisation. Yonghui’s sales performance in the year continued to be impacted by challenging macroeconomic conditions and intense competition.

Robinsons Retail’s underlying profit contribution reduced from US$24 million to US$15 million. Robinsons Retail continued to report strong sales and core net earnings growth. For reporting purposes, however, DFI Retail’s share of Robinsons Retail’s underlying profits was adversely impacted by foreign exchange losses and higher net financing charges reported by Robinsons Retail.