Dairy Farm profits up 0.2% to $244.86m in H1

Revenue was affected by the deconsolidation of Rustan’s in Q4.

Dairy Farm’s net profit for the first half of 2019 rose 0.2% YoY to $244.86m (US$178m) from $244.31m (US$177.6m) in the same period last year, its financial statement revealed. Core earnings grew 5.9% YoY to $246.24m (US$179m) on the back of a 2.8% decline in revenue.

Revenue was affected by the deconsolidation of Rustan’s in 4Q2018 and space optimisation at Dairy Farm’s food business in Southeast Asia. Moreover, operating profit declined by 5.2% YoY to $321.91m (US$234m) on higher operating expenses and business transformation costs.

Higher associate/joint venture (JV) income (which grew 40.3% YoY to US$74m) came from Yonghui and Robinson’s Retail in the Philippines which also helped to lift core earnings. An interim dividend of 8.9 cents (6.5 US cents) was declared.

DBS Group Research noted that food revenue declined 8.4% YoY to $5.23b (US$3.8b), led by supermarkets/hypermarkets segment affected by the deconsolidation of Rustan’s in the Philippines. “Southeast Asia is showing signs of turning around along with sales growth in Hong Kong, whilst Taiwan sales remain challenging,” commented analyst Alfie Yeo.

Operating margins for this division improved 0.1ppt to 1% as transformation plan is being progressively implemented. Convenience stores’ sales grew 5% YoY to $1.51b (US$1.1b) with contribution from all markets particularly Mainland China.

Operating profit margin for this division was slightly lower at 3.1% (-2ppts) due to the increase in rents. Overall food operating margin inched up 1ppt to 1.6% led by margin improvement from supermarkets/hypermarkets.

Meanwhile, health & beauty sales grew 10.3% YoY to $2.2b (US$1.6b) driven by North Asia. Operating margins also expanded by 0.2ppt to 10.5%.

Home furnishing’s operating margin fell as IKEA saw same store sales growth with revenue growing 7% YoY to $510.44m (US$371m), but profitability was lower on higher COGS and pre-opening expenses for Taiwan and Indonesia stores. Operating margin dropped to 5.2% (-4.6ppts).

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