SINGAPORE (Mar 8): Dairy Farm, a member of the Jardine group, reported a 14% decline in FY17 earnings to US$404 million ($531.7 million) from US$496 million a year ago on the back of business change costs, which were incurred due to underperforming stores and stock clearance in the Food Division over the year.
In a Thursday filing, the group refers to its FY17 results as “disappointing” given combined total sales, including 100% of associates and joint ventures, of US$21.8 million for FY17. This represents a 7% improvement from US$20.4 million in FY16, driven by positive performances in most of the group’s formats and key associates.
Sales for the year by the group’s subsidiaries of US$11.3 billion were largely unchanged from the US$11.2 billion seen in 2016.
The rise in total sales figures was however offset by weakness in the group’s Supermarket and Hypermarket businesses mainly in Malaysia, Singapore and Indonesia.
Home Furnishings notably recorded higher sales and trading profit, but reported a profit decline mainly due to costs associated with the opening of the fourth Ikea store in Hong Kong in October.
In the Health and Beauty Division, sales and profit were higher.
This was principally due to strong performances in Hong Kong, Macau and Indonesia, together with improvements in mainland China. An increasing focus on the beauty category and the continued development of the division’s Own Brand range have helped to drive growth, says Dairy Farm.
Over FY17, US$64 million of business change costs were recognised due to the closure of underperforming stores and stock clearance in the Food Division.
These were largely recorded over 4Q17 when Dairy Farm closed a series of loss-making stores in Indonesia, Singapore and Malaysia, and a major clearance exercise was undertaken across Southeast Asia to liquidate excess old stock, predominantly in general merchandise.
Excluding the business change costs, underlying profit would have been 1% higher compared to FY17’s 13% decline to US$403 million from US$460 million a year ago, says the group.
Ben Keswick, chairman of Dairy Farm, notes substantial progress in delivering against the group’s existing strategic initiatives in spite of continued market challenges.
“After a disappointing year in 2017 for our Food businesses in Southeast Asia, actions are being taken to improve their long-term performance. All of the group’s other formats and markets are trading well and growth opportunities are being pursued, in mainland China and elsewhere,” says Keswick.
“With our established market positions in a range of retail formats, our strong balance sheet and our determination to adapt to meet our customers’ needs, we are well placed to benefit from the growth prospects in the region,” he adds.
Shares in Dairy Farm closed 5 cents higher at US$8.22 on Thursday.
