REG - DFI Retail Group Jardine Matheson Hdg - INTERIM MANAGEMENT STATEMENT

DFI Retail groupAnnouncement

14/11/2024 09:45

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RNS Number : 2753M  DFI Retail Group Holdings Ltd  14 November 2024

Announcement

 

The following announcement was issued today to a Regulatory Information
Service approved by the Financial Conduct Authority in the United Kingdom.

 

DFI RETAIL GROUP HOLDINGS LIMITED

Interim Management Statement

 

14 November 2024 - DFI Retail Group Holdings Limited today issues its Interim
Management Statement for the third quarter of 2024.

 

OVERVIEW

Overall macroeconomic conditions are evolving across the Group's key markets.
Within the Group's home market of Hong Kong, consumer behavioural changes and
increased levels of outbound travel, particularly into the Chinese mainland,
led to overall retail sales falling by approximately 10% year-on-year in the
third quarter. Within key South East Asian markets, consumer sentiment
continues to be adversely impacted by rising cost of living pressures,
although becoming more resilient.

 

The Group continues to advance its strategic initiatives by enhancing the
local relevance of assortment, strengthening its omnichannel presence and
refining its own brand offering.  For the third quarter, the Group reported
underlying net profit growth of 4% year-on-year, despite a 3% decline in
underlying subsidiary sales compared to the same period in 2023.  Improved
profit performance by subsidiaries was partially offset by lower contributions
from associates.

 

The recent announcement of the divestment of the Group's Yonghui stake
underscores the Group's commitment to disciplined capital allocation, which
aligns with its strategic and capital allocation framework.  The Group
continued to make good progress in reducing net debt to US$445 million as at
30 September 2024, down from US$549 million at 30  June 2024.

 

OPERATING PERFORMANCE

Subsidiaries

The Food division reported like-for-like ('LFL') sales slightly behind the
third quarter of 2023.  In Hong Kong, LFL sales were affected by increased
outbound travel during the summer holiday period.  Based on the Group's
internal estimates, current outbound travel is estimated to have a
mid-single-digit impact on meal consumption volumes for the Hong Kong
market.  Despite challenging trading conditions, Wellcome continued to gain
market share, benefitting from strong in-store execution and positive sales
momentum from its quick-commerce partnership with foodpanda, which was
launched in late May.  The Group expects the outbound travel impact to
normalise in the first quarter of 2025.  In Singapore, although soft consumer
sentiment continued to impact sales performance, an improved product mix and
disciplined cost control drove better profitability, with overall divisional
profit up by over 30% year-on-year.

 

Although LFL sales for the Convenience division in the third quarter declined
year-on-year, this was mainly due to a decline in lower-margin cigarette sales
following a tax increase in Hong Kong earlier this year.  The business,
however, is replacing cigarette revenue with significantly higher-margin
ready-to-eat ('RTE') products.  The 7-Eleven team remains focussed on
enhancing the customer shopping experience and expanding its product range,
with its recent launch of a pre-order online shop in Hong Kong.  LFL sales
for Macau, South China and Singapore were broadly in line with the same period
last year.  Despite lower sales, a favourable sales mix shift towards
higher-margin RTE products drove underlying profit before interest and tax
('PBIT') growth during the reporting period.

 

The Health and Beauty division reported LFL sales slightly below the third
quarter of last year.  Mannings Hong Kong's performance was affected by
strong comparables from the prior year, when the second disbursement of
consumption vouchers took place in July 2023, and increased outbound travel
during the summer holiday period.  Guardian achieved strong LFL performance
across key markets, particularly in Indonesia and Malaysia, driven by
effective promotional campaigns.  Improved gross margins and ongoing
disciplined cost control contributed to Guardian's profit growth of over 30%
for the quarter.

 

The Home Furnishings division reported a double-digit decline in underlying
profit, due to lower sales in Hong Kong.  Similar to the Food format, the
IKEA Hong Kong business is pivoting towards a more value-driven omnichannel
proposition, to compete with Chinese mainland digital players.  LFL sales
across all markets were adversely affected by high interest rates and basket
mix change, as consumers reduced purchases of big-ticket items and increased
home décor purchases.  Despite this trend, IKEA Taiwan demonstrated relative
resilience.  Amidst challenging trading conditions, IKEA continues to
implement cost control measures.  The Group believes IKEA remains
well-positioned to benefit from a recovery in home furnishings demand when
market conditions improve.

 

The Group continues to grow its digital business with an improving profit
contribution.  Daily e-commerce order volume grew by over 25% year-on-year in
the third quarter, reaching over 50,000 orders per day.  Retail Media
continues to build momentum, with over 30 targeted advertising campaigns
completed in the third quarter, close to triple that of the first half of
2024.

 

Associates

Maxim's, the Group's 50%-owned associate, reported revenue and profit below
the same period last year, primarily driven by a lower contribution from
mooncake sales and weaker restaurant performance on the Chinese mainland.

 

Yonghui's third-quarter sales and profit performance continued to be impacted
by soft consumer sentiment and intense competition.  Robinsons Retail
reported LFL sales and PBIT largely in line with the same period last year,
underpinned by robust growth in the Food and Drugstore segments, offset by a
lower contribution from department stores and others.   Reported profit
increased by double-digit year-on-year due to reduced losses from associates.

 

RECENT BUSINESS DEVELOPMENT

On 23 September 2024, the Group announced that it had entered into a
definitive agreement to divest its 21.08% stake in Yonghui to the MINISO
group, a global value retailer, for total cash consideration of RMB4,496
million.  The transaction aligns with the Group's strategic and capital
allocation framework, strengthening the Group's balance sheet, while focussing
capital to drive the growth of subsidiary businesses across its markets.  The
transaction is subject to satisfaction of MINISO shareholder approval
requirements and applicable regulatory conditions, including antitrust
approval.  Following the completion of the transaction, the Group will cease
to hold any interest in Yonghui.

 

OUTLOOK

The Group updates its full-year guidance to between US$190 million and US$220
million underlying profit attributable to shareholders.  While macro
uncertainties and increased levels of outbound travel are expected to remain
as near-term challenges, the Group remains focussed on growing market share
across all formats, enhancing operating efficiency, expanding omnichannel
presence and accelerating yuu monetisation initiatives.

 

DFI Retail Group (the 'Group') is a leading Asian retailer. As at 30 June
2024, the Group and its associates and joint ventures operated some 11,000
outlets, with more than 5,000 stores operated by subsidiaries.  Together with
associates and joint ventures, the Group employed over 200,000 people, with
some 47,000 employed by subsidiaries.  The Group had total annual revenue in
2023 exceeding US$26 billion and reported revenue exceeding US$9 billion.

 

The Group provides quality and value to Asian consumers by offering leading
brands, a compelling retail experience and great service, all delivered
through a strong store network supported by efficient supply chains.

 

The Group (including associates and joint ventures) operates under a number of
well-known brands across food, convenience, health and beauty, home
furnishings, restaurants and other retailing.

 

The Group's parent company, DFI Retail Group Holdings Limited, is incorporated
in Bermuda and has a primary listing in the equity shares (transition)
category of the London Stock Exchange, with secondary listings in Bermuda and
Singapore.  The Group's businesses are managed from Hong Kong. The Group is a
member of the Jardine Matheson Group.

 

- end -

 

For further information, please contact:

 

 Karen Chan (Investor Relations)                         (852) 2299 1380
 Christine Chung (Corporate Communications and Affairs)  (852) 2299 1056

 William Brocklehurst (Brunswick Group Limited)          (852) 5685 9881

 

This and other Group announcements can be accessed online at
'www.DFIretailgroup.com'.

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