· Hong Kong price war abating
· Impairment of Australian assets
· Other businesses performing well
· Sale of non-core assets
Results Year ended 31st December
2000US$m 1999US$m Change %
Sales 5,733 5,918 -3
Sales including associates
6,644 6,802 -2
Net (loss) / profit excluding non-recurring items (65) 77 n/a
Cash flows from operating activities
192 238 -19
Recurring EBITDA to sales
2.0% 3.5% -1.5%
Debt / equity ratio
42% 24% -18%
US¢ US¢ %
(Loss) / earnings per share excluding non-recurring items
(3.93) 4.28 n/a
(Loss) / earnings per share
(11.75) 2.08 n/a
Dividends per share
- 6.00 n/a
"Though the short-term economic outlook for Asia is mixed, we remain confident of the Region's potential for significant growth in the food, convenience and health and beauty retail sectors."
Simon Keswick, Chairman
OVERVIEW OF THE YEAR
In 2000 Dairy Farm encountered the most challenging operating conditions in Hong Kong and Australia the Group has had to face for many years. In Hong Kong the food retail industry has been engaged in a deep and prolonged price war, which has proved extremely costly to all market participants. In Australia the highly competitive environment continued to intensify, with Franklins struggling to maintain market share and margin.
RESULTS
Dairy Farm International Holdings Limited today announced that conditions were at their most difficult in the first half, when Dairy Farm reported a loss after tax before non-recurring items of US$51 million. Improvements in Wellcome Hong Kong and normal seasonal trends led to a much reduced loss of US$14 million before non-recurring items in the second half, representing a loss for the whole year of US$65 million. In view of the performance issues in Franklins an impairment charge of US$129 million has been made, which reduces the carrying value of Franklins' assets.
Recurring EBITDA, the Group's primary performance measure, fell from US$205 million to US$116 million, although second half EBITDA performance was much stronger than the first. Operating cash flow generated in the second half was US$209 million, after an outflow of US$17 million in the first half.
The Group's prudent approach to financing has ensured that its funding and liquidity position remains secure. The ratio of net debt to shareholders' funds peaked at 49% at 30th June 2000 and had reduced to 42% by the year end. The Group remains highly liquid with some US$400 million in short-term bank deposits.
In view of the uncertainties in Franklins and the unsettled situation in Wellcome Hong Kong, the Directors believe that it is in shareholders' interests to continue to conserve the Group's capital and therefore have recommended no dividend for 2000.
OPERATIONS
Turning to the operations, the Chairman, Simon Keswick, said that Wellcome Hong Kong's operations have been heavily impacted by the price war although there was a gradual and steady improvement in margins over the course of the year. The Hong Kong market will remain challenging in view of the significant expansion in food retail space over the last two years and low consumer confidence, which will continue to put pressure on margins.
In Australia, it has become clear that the cash investment required to continue the Franklins repositioning strategy will be significant. As a consequence, the Group is undertaking a strategic review which will be concluded by early second quarter. The Group will continue to provide Franklins and its team with the support they require.
Dairy Farm's other businesses all performed well in 2000, with particularly strong performances in South-east Asia and New Zealand. South-east Asia represents a key short to medium term growth region and will, along with 7-Eleven convenience stores in Southern China, be a high priority for investment.
OUTLOOK
In conclusion, Simon Keswick said, "Though the short-term economic outlook for Asia is mixed, we remain confident of the Region's potential for significant growth in the food, convenience and health and beauty retail sectors."