| To: Business Editor | 18th March 1998 For immediate release |
The following announcement was today issued to the London Stock Exchange.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
1997 PRELIMINARY ANNOUNCEMENT OF RESULTS
Results
"The difficult economic conditions in Asian markets will inevitably affect Dairy Farm's performance, though they will also create opportunities for new investment. The results being achieved from our new formats in Australia, and the investments being made throughout the Group in systems and infrastructure should provide a sound base for future profit growth."
Simon Keswick, Chairman
18th March 1998
The final dividend of US¢4.35 per ordinary share will be payable on 17th June 1998, subject to approval at the Annual General Meeting to be held on 10th June 1998, to ordinary Shareholders on the register of members at the close of business on 9th April 1998 and will be available in cash with a scrip alternative. The ordinary share registers will be closed from 13th to 17th April 1998, inclusive.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31ST DECEMBER 1997
PERFORMANCE
Dairy Farm International Holdings Limited today announced that the Group's sales in 1997 were US$6,888 million, marginally below the prior year as steady growth achieved in underlying local currencies was offset by exchange rate movements, particularly the strengthening United States Dollar.
Profit before interest from continuing activities of US$209 million was 3% ahead of last year. This result reflects the significant improvement in Australia, partly offset by continuing start-up losses in Asia, higher corporate overheads and investment in systems. Non-recurring items of US$55 million in respect of discontinued activities were, however, significantly below the 1996 figure of US$111 million. As a result, profit before interest for the year ended 31st December 1997 was US$154 million, an increase of 70%. The consolidated net profit for the year, after taxation and minority interests, was US$129 million, compared with US$42 million in 1996.
Earnings per ordinary share were US¢6.45, being 4 times greater than last year. If the non-recurring items in both 1996 and 1997 were excluded, the earnings per share would have increased by 8% to US¢8.59.
In view of the Group's strong cash flow and the outlook for future years, the Directors believe it appropriate to maintain the dividend at the same level as 1996. A final dividend of US¢4.35 per ordinary share is therefore recommended, payable in cash with a scrip alternative, which, together with the interim dividend of US¢1.65 per ordinary share, will make a total annual dividend of US¢6.00 per ordinary share.
A dividend at the rate of 6.5% per annum will be payable on the Company's outstanding convertible preference shares on 8th May 1998 to holders registered at the close of business on 29th April 1998.
GROUP REVIEW
Turning to the operations, the Chairman, Simon Keswick, said that over the course of the year the Group advanced its core strategy of focus on retail in the Asia-Pacific Region and took steps to position itself to compete more effectively in an environment of increasing competition and difficult economic circumstances. The new Dairy Farm management team is working towards two main objectives.
The first is to ensure that the Group has the right blend of organisational structure and core competencies. As a result, a number of senior staff have been recruited for new roles both in the operating companies and in the corporate office. The Group is confident that this initiative will deliver future benefits, although it has an immediate impact on costs and accounts for much of the increase in corporate overheads.
The second objective is to improve the shopping experience in the Group's stores. This will require upgrading the quality of its outlets, improving service and product ranges and, in particular, upgrading the standards of its fresh food offer, which the Group believes is a key element for success in modern supermarketing.
During the year, the Group has redeployed certain of its assets, selling its 49% share in the manufacturing joint venture with Nestlé and its Spanish supermarket subsidiary, Simago, the latter transaction being completed in February 1998. Following detailed reviews of performance and potential, the Group also decided to discontinue its drugstore operations in Taiwan and its Japanese supermarket joint venture with Seiyu. On a more positive note, the Group has recently acquired an effective interest of 31% in PT Hero Supermarket, the leading supermarket chain in Indonesia, at a cost of US$36 million. This investment represents an excellent opportunity for the Group to expand its interests in Indonesia.
Capital expenditure in 1997 was US$235 million. During the year the Group opened 109 new stores, giving a year-end total (excluding discontinued activities) of 1,352, with a gross retail area of over 11.5 million sq. ft, an increase of 5%. Investment in infrastructure and information technology systems is a high priority which, together with store conversions in Australia and refurbishments in Hong Kong, will continue to represent the bulk of future spending.
In Australia, the repositioning of Franklins' business resulted in a profit before interest of US$15 million compared with the US$8 million loss in 1996. This improvement reflects the higher margins and productivity gains generated by the Fresh formats, which now account for over 52% of total sales. Based on this success, the programme of converting "No Frills" stores into the "Fresh" formats continues. Franklins is also well down the path of improving its business processes and merchandising practices, which will provide further efficiency gains. In New Zealand, Woolworths had another good year of steady growth in sales and profit.
In Hong Kong, the Group's principal retail businesses, Wellcome supermarkets, 7-Eleven convenience stores and Mannings drugstores, achieved a 5% increase in total sales. Wellcome had a steady profit performance, and a much improved profit at 7-Eleven reflected the benefits of the recent systems upgrade. The Group will further enhance its fresh food offer with the completion of its US$50 million Fresh Food Processing Centre in the middle of this year.
Maxim's Caterers, the Group's 50% restaurant associate, produced another good result, achieving sales and profit growth in the difficult conditions which prevailed in the second half. The company now has 274 outlets in Hong Kong where it is the market leader, and 36 outlets in Mainland China.
In Taiwan, Wellcome supermarkets suffered a decline in sales as this competitive market continued to be influenced by a growing number of hypermarkets. The chain was, nevertheless, able to improve its profit performance. The Group's own hypermarket joint venture with Casino S.A. is expected to open its first store towards the end of 1998.
In South Asia, the Group's Singapore businesses performed well, and its supermarket joint venture in Malaysia continued to seek expansion opportunities. Dairy Farm's drugstore joint ventures in Malaysia and India progressed well, while in Indonesia, where it provides technical assistance to two retail chains, Mitra supermarkets and Guardian drugstores, trading was adversely affected by the economic situation.
In the United Kingdom, Kwik Save, the Group's 29%-owned associate, progressed with the implementation of its repositioning programme and has established a basis to develop its New Generation format. The proposed merger with Somerfield, if approved by the shareholders, will result in Dairy Farm owning an interest of some 11% in the enlarged group. The combined business will generate significant commercial benefits, which Dairy Farm expects to add value to its shareholding.
OUTLOOK
In conclusion, Simon Keswick said, "The difficult economic conditions in Asian markets will inevitably affect Dairy Farm's performance, though they will also create opportunities for new investment. The results being achieved from our new formats in Australia, and the investments being made throughout the Group in systems and infrastructure should provide a sound base for future profit growth."
Dairy Farm International Holdings Limited
Notes
1 BASIS OF PREPARATION
The financial information contained in this announcement has been based on the audited results for the year ended 31st December 1997 which have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets and in conformity with International Accounting Standards on the basis of the accounting policies set out in the Financial Statements.
2 SEGMENTAL INFORMATION
3 DISCONTINUED ACTIVITIES AND EXCEPTIONAL ITEMS
4 TAXATION
Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates. Taxation includes United Kingdom tax of US$14.6 million (1996: US$11.5 million).
5 EARNINGS PER ORDINARY SHARE
Earnings per ordinary share are calculated on the profit after taxation, minority interests and preference dividends of US$115.7 million (1996: US$27.9 million) and on the weighted average number of ordinary shares of 1,794.6 million (1996: 1,740.8 million) in issue during the year. The weighted average number excludes the Company's ordinary shares held by the Trustee under the Senior Executive Share Incentive Schemes.
Earnings per ordinary share excluding discontinued activities and exceptional items are calculated on the profit after taxation, minority interests and preference dividends and after adjusting for the discontinued activities and exceptional items of US$38.4 million (1996: US$110.4 million).
Full conversion of the convertible cumulative preference shares and full exercise of the options granted under the Senior Executive Share Incentive Schemes would not result in a material dilution of earnings per ordinary share.
6 ANNUAL REPORT
The Annual Report will be posted to Shareholders on or about 7th May 1998. Copies may be obtained from Butterfield Corporate Services Limited, P.O. Box HM 1540, Hamilton HM FX, Bermuda; IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU, England; Coopers & Lybrand, Level 8, 580 George Street, Sydney, NSW 2000, Australia and M & C Services Private Limited, 16 Raffles Quay #23-01, Hong Leong Building, Singapore 048581.
The final dividend of US¢4.35 per share will be payable on 17th June 1998, subject to approval at the Annual General Meeting to be held on 10th June 1998, to ordinary Shareholders on the register of members at the close of business on 9th April 1998 and will be available in cash with a scrip alternative. The ordinary share registers will be closed from 13th to 17th April 1998, inclusive. Ordinary Shareholders will receive their cash dividends in United States Dollars. Ordinary Shareholders registered on the Australia or United Kingdom branch registers also have the option to elect for Australian Dollars or Sterling respectively calculated by reference to rates prevailing ten business days prior to the payment date. Such Shareholders may make new currency elections by notifying any one of the Company's registrars or the UK transfer agent in writing by 29th May 1998. Ordinary 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 or the scrip alternative.
- end -
For further information, please contact:
| Dairy Farm Management Services Limited Ronald J Floto/Edouard Ettedgui |
(852) 2837 6401 (office) |
| Ludgate Asia Limited Martin Spurrier |
(852) 2543 5413 (office) |
Full text of the Preliminary Announcement of Results and the Preliminary Financial Statements for the year ended 31st December 1997 can be accessed through the Internet at "http://www.irasia.com/listco/sg/dairyfarm". This announcement is also available through "First Call".
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