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Dairy Farm posts 35% drop in 1H earnings to US$115 mil on pandemic-related restrictions

Samantha Chiew
Samantha Chiew • 3 min read
Dairy Farm posts 35% drop in 1H earnings to US$115 mil on pandemic-related restrictions
Dairy Farm's 1H earnings dropped 35% to US$115 million as its convenience stores and health and beauty businesses suffered from Covid-19 restrictions.
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Supermarket and convenience store operator Dairy Farm, a Jardine Matheson company, today announced that its 1H20 earnings have dropped by 35% to US$115 million ($158.3 million) from US$178 million in 1H19.

Stripping off the one-offs, underlying earnings for 1H20 was US$105 million, 40% lower than US$177 million in 1H19.

Revenue for the first half of the financial year came in at US$5.2 billion, 9% lower than US$5.8 billion in the previous year, primarily due to the annualised impact of the stores closures in 2019 under the group’s space optimisation plan in Southeast Asia, as well as reduced revenues from Convenience Stores and Health and Beauty as a result of pandemic-related restrictions. This was partially offset by improved profits from the Grocery Retail and Home Furnishings businesses.

The Grocery Retail business reported strong like-for-like sales and strong profit growth during the period, underpinned by the ongoing execution of the group’s transformation plan and improvement programmes, as well as changing customer behaviours as a result of the pandemic. Grocery retail in Malaysia and Singapore maintained its strong turnaround momentum, while market conditions in Indonesia remain challenging.

Sales in the Home Furnishings business were higher than the equivalent period last year, as strong e-commerce growth and the annualised impact of new stores opened in the prior year more than compensated for the impact on customer visits of pandemic-related restrictions, including temporary store closures. Profitability grew strongly due to the contribution from new stores, enhancements in margin mix and lower cost of goods.

However, the Convenience Stores, as well as Health and Beauty businesses were impacted in the first half by movement restrictions and physical distancing requirements, as well as temporary store closures on the Chinese mainland and reduced customer numbers in Hong Kong and Singapore.

Combining total sales including 100% of associates and joint ventures, revenue would be US$14.5 million, 6% higher than US$13.8 million a year ago, due to higher contributions from Robinsons Retail and Yonghui.

Jardine Matheson’s transformation plan for Dairy Farm, including cost improvement programmes, stronger retail execution and improved ways of working, together with the diversity of the group’s business portfolio, supported the performance of the group’s subsidiaries, despite the significant challenges faced as a result of the pandemic.

During the period, Dairy Farm also launched Meadows, its new own-brand offering. Over 300 items have already been launched across banners and markets at lower prices.

As at end-June, Dairy Farm’s cash and cash equivalents stood at US$246.5 million.

The board has declared an interim dividend of 5 US cents per share, lower than 6.5 US cents per share declared in the same period a year ago.

Jardine Matheson chairman Ben Keswick says, “Overall profits were significantly lower in the first half due to reduced contributions from Health and Beauty, Maxim’s and Convenience Stores as a result of Covid-19 and its impact on customer behaviours. There were, however, strong performances from the Grocery Retail and Home Furnishings businesses. Trading conditions in the second half are expected to continue to be challenging, but we are confident in the strength of Dairy Farm’s businesses and remain committed to its multi-year transformation plan.”

Shares in Dairy Farm closed at US$4.15, while shares in Jardine Matheson closed at US$41.00 on July 29.

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