| To: Business Editor | 16th September 1998 For immediate release |
The following announcement was today issued to the London Stock Exchange.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
INTERIM REPORT 1998 HIGHLIGHTS
Results
"The quality of our major businesses in Hong Kong, Australia and New Zealand continues to improve. With our strong balance sheet, the Group is well placed to take advantage of new investment opportunities in the more difficult economic conditions in Asia Pacific, and we will continue to support our existing businesses by investing in procurement, systems and people."
Simon Keswick, Chairman
16th September 1998
The interim dividend of US¢1.65 per share will be payable on 24th November 1998 to Shareholders on the register of members at the close of business on 2nd October 1998. The share registers will be closed from 5th to 9th October 1998, inclusive.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
INTERIM REPORT 1998
PERFORMANCE
Dairy Farm International Holdings Limited today announced that good performances were achieved by its principal retail operations despite difficult market conditions in the Asia-Pacific Region. The reported results were enhanced by the profit on disposal of its European operations, although this was partly offset by exchange rate movements and translation differences.
Sales from continuing activities for the six months ended 30th June 1998 were US$2,889 million, a 10% decrease from the same period in 1997. Sales in underlying currencies increased by 2%, but this was more than offset by exchange rate movements, in particular in the weaker Australian and New Zealand Dollars.
The consolidated net profit, after taxation, minority interests and preference dividends, was US$87 million, an increase of 118% over the first half of 1997. Some US$40 million profit arose in respect of the disposal of Simago and the Company's shareholding in Somerfield after the reversal of US$72 million translation differences previously booked to reserves. This reversal had no impact on the Group's cash flow or Shareholders' funds.
Net profit from continuing activities of US$47 million was 6% above last year. The strong underlying performance of the key retail businesses in Australia, Hong Kong and New Zealand and higher interest income were offset in part by adverse exchange rate movements, higher corporate overheads and a reduced contribution from Maxim's.
Earnings per ordinary share for the first half were US¢4.74 compared with US¢2.26 in the first half of 1997. Earnings per ordinary share from continuing activities of US¢2.57 were 2% ahead of last year.
The Directors have declared an unchanged interim dividend of US¢1.65 per ordinary share, payable in cash. In view of the current strong cash position, the Board has decided not to offer a scrip dividend alternative.
GROUP REVIEW
Turning to the operations, the Chairman, Simon Keswick, said that the Group's energies are focussed on growing its retail businesses in the Asia-Pacific Region, and the disposal of operations in Spain and the United Kingdom were in line with that strategy. The Group has strengthened its investment in organisational structure and core competencies, and is confident that the resulting increased central costs will deliver benefits in the foreseeable future.
The improved operating performance at Franklins in Australia continues. This reflects the programme of converting "No Frills" stores into the "Fresh" formats, which now represent some 50% of Franklins' total sales area, and the upgrading of business and merchandising systems. Woolworths in New Zealand also produced improved sales and profit. At the Group level, however, the results of both Australia and New Zealand were adversely affected by the significant weakening of the local currencies.
In Hong Kong, all of the Group's retail businesses improved their contributions in the first half, although Sims Trading was affected by the more difficult economic conditions in the wholesale sector. Wellcome and Mannings increased their sales, while those at 7-Eleven remained in line with last year. The Fresh Food Processing Centre, which will greatly enhance the Group's fresh food offer, will open in October. The Group is consolidating its retail businesses in Hong Kong under a single management structure which will reduce costs and add value through the sharing of common services and through joint procurement and logistics. Results at Maxim's, the Group's 50% restaurant associate, were significantly affected by the economic slowdown in Hong Kong, but the company increased its share of the Hong Kong restaurant market. Dairy Farm's retail businesses in Mainland China continued to expand at a measured pace.
Sales at Wellcome in Taiwan declined as the performance of this business continued to be affected by competition from hypermarkets. The Group's own hypermarket joint venture with Casino S.A. is scheduled to open its first Géant store in December. The closure of the Mannings drugstore chain in Taiwan has been completed within the expected cost, and the exit from Wellsave in Japan should be completed during the second half of the year within existing provisions.
In Singapore, the Cold Storage supermarkets and 7-Eleven businesses have again performed steadily, although the Guardian drugstore business has been disappointing.
In Indonesia, the Company completed the acquisition of a 32% effective interest in P.T. Hero Supermarket in February and, while businesses in that country were disrupted by the social unrest in the first half of the year, the effects have not significantly impacted performance. The Company remains confident that Hero, as the leading supermarket chain in Indonesia, is well positioned to benefit from any market improvement, although clearly the future will be influenced by economic and political developments.
CORPORATE EVENTS
In view of its strong balance sheet and cash position, the Group redeemed its outstanding convertible preference shares at a total cost of US$208 million in July.
YEAR 2000
As reported in the 1997 Annual Report, the Group has a process in place to address its exposure to the Year 2000 issue. Work is progressing to ensure that millennium compliance is achieved for all business critical activities, and the Board continues to monitor progress on a regular basis. Costs are expensed as incurred and were some US$2 million in the first half. The total costs associated with this programme are currently estimated to be some US$30 million to US$40 million.
OUTLOOK
In conclusion, Simon Keswick said, "The quality of our major businesses in Hong Kong, Australia and New Zealand continues to improve. With our strong balance sheet, the Group is well placed to take advantage of new investment opportunities in the more difficult economic conditions in Asia Pacific, and we will continue to support our existing businesses by investing in procurement, systems and people."
1. BASIS OF PREPARATION
The unaudited half-year results have been prepared in conformity with International Accounting Standards. In accordance with the revised International Accounting Standard 12, deferred taxation is provided, using the liability method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying values. This is a change in accounting policy as in previous years deferred taxation is provided to the extent that a liability or an asset is expected to be payable or receivable in the foreseeable future. The comparative figures for 1997 have been restated to reflect the change in policy. The effect of this change has been to increase the profit after taxation and outside interests for the six months ended 30th June 1997 by US$1.6 million, but reduced the profit for the year ended 31st December 1997 by US$3.3 million and the Shareholders' funds at 31st December 1997 by US$8.6 million. There have been no other changes to the accounting policies described in the 1997 Financial Statements.
2. SEGMENTAL INFORMATION
* Corporate includes goodwill amortisation of US$1.9 million (1997: US$1.0 million).
3. DISCONTINUED ACTIVITIES
* In accordance with International Accounting Standard 21, cumulative historic exchange differences arising from the retranslation of net assets of foreign entities have been transferred from exchange reserves to the profit and loss account on disposal. This accounting adjustment has no impact on the Group's cash flows and Shareholders' funds.
4. TAXATION
Tax on profits has been calculated at rates of taxation prevailing in the territories in which the Group operates and includes United Kingdom tax of US$1.2 million (1997: US$6.8 million).
5. EARNINGS PER ORDINARY SHARE
Earnings per ordinary share are calculated on the profit after taxation, minority interests and preference dividends of US$86.8 million (1997: US$39.9 million) and on the weighted average number of ordinary shares in issue of 1,830.0 million (1997: 1,762.2 million) during the period. 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 from continuing activities are calculated on the profit after taxation, minority interests and preference dividends of US$46.9 million (1997: US$44.3 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 dilution of the earnings per ordinary share.
6. NOTES TO CONSOLIDATED CASH FLOW STATEMENT
7. INTERIM REPORT
The Interim Report will be posted to Shareholders on or about 8th October 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 interim dividend of US¢1.65 per share will be payable on 24th November 1998 to Shareholders on the register of members at the close of business on 2nd October 1998. The share registers will be closed from 5th to 9th October 1998, inclusive. Shareholders will receive their dividends in United States Dollars, unless they are registered on the Australia or United Kingdom branch registers where they will have the option to elect for Australian Dollars or Sterling respectively. These Shareholders may make new currency elections by notifying the Australian registrar or the United Kingdom transfer agent in writing by 5th November 1998. The Australian Dollar and Sterling equivalent of dividends declared in United States Dollars will be calculated by reference to rates prevailing ten business days prior to the payment date. 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. There is no scrip alternative being offered in respect of the current dividend. Those Shareholders who have made a permanent scrip election will be notified separately of their dividend payment arrangement.
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 this announcement can be accessed through the Internet at
"http://www.irasia.com/listco/sg/dairyfarm". It is also available through "First Call".
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