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DFI Retail Group: Half-Year Results and Special Dividend · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome to the Deep Dive, where we cut through the noise and get straight to
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  the insights you need. Today, we're plunging into something really fascinating.
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  The latest financial results from DFI Retail Group, a major player over in Asia.
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  Yeah, big company, lots happening there. Absolutely.
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  And the big headline, the one catching everyone's eye.
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  A massive 39% surge in their underlying earnings for the first half of 2025.
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  Pretty impressive jump. And get this, a special dividend, their first in 18
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  years. You heard that right? 18 years.
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  Wow. Okay. That's definitely notable.
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  Shareholders must be pleased. You'd think so. So how did they pull off such
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  a strong performance, especially with that dividend news? That's our mission today.
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  Unpack DFI Retail Group's half-year results for 2025.
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  We'll dive into the key financials, figure out the drivers behind them,
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  and look at what lies ahead for them.
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  And it's important to remember these results are for the six months ending June 30th, 2025.
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  So it's a fresh look at, well, a pretty complex business operating across different
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  areas in a market that's always changing. Definitely dynamic.
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  So yeah, this deep dive, we're aiming to go beyond just the headline numbers.
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  We want to get into the strategic decisions.
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  You know, what's really behind this performance and what it might mean going
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  forward. OK, let's unpack this then, because there's this interesting split
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  right at the start, isn't there? There really is. On one hand,
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  you've got this fantastic headline.
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  DFI's underlying profit attributable to shareholders shot up 39 percent, hitting U.S.
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  $105 million for H1 2025.
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  Big jump from U.S. $76 million last year.
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  And underlying earnings per share basically matched that growth at U.S.
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  7.79. Solid operational growth, yeah. But then, and this is the head scratcher,
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  the company actually reported a loss attributable to shareholders,
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  a loss of U.S. $38 million for the period.
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  How does that work? Going from a U.S. $95 million profit last year to a loss
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  this year, despite the underlying strength?
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  Right. That's the million dollar question, isn't it? Or maybe the $105 million
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  versus minus $38 million question.
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  Ah, yeah, something like that. Is it just accounting or something else?
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  It's mostly about how they define things.
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  When DFI talks about underlying profit, they're deliberately pulling out what
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  they call non-trading items.
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  Think of these as significant one-offs or accounting adjustments that don't
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  really reflect the day-to-day running of the business.
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  Okay, so the core business is doing well. Exactly. The underlying number shows
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  the operational health is strong.
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  That reported loss you mentioned, that was mainly driven by the divestment of
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  certain assets selling off parts of the business.
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  Those sales triggered accounting losses that had to be booked.
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  Ah, so it's a strategic move causing the reported loss, not a sign the shops
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  are failing. Precisely.
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  It's a consequence of strategic decisions, not operational weakness.
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  A really key distinction to make. OK, that clarity helps a lot.
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  And speaking of strategy, let's
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  look at the balance sheet because you can really see the impact there.
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  DFI went from having net debt of what, U.S.
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  468 million dollars at the end of 2024? Yeah, quite a bit of debt.
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  To a net cash position of U.S.
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  442 million dollars by June 30th, 2025.
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  That's a huge swing. massive turnaround over 900
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  million dollar difference and their free cash flow improved too
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  right a net inflow of us 89 million dollars
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  up from us 61 million dollars in
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  h1 2024 that's not just tweaking things that feels like a transformation it
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  absolutely is and that strengthening that swing to net cash it connects directly
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  back to what we were just talking about the why the main driver was the cash
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  coming in from selling off assets specifically their stakes in Young-Gui and
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  Robinson's retail. Right, the divestments. Exactly.
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  It shows they're being really disciplined with their capital.
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  They're moving money away from certain areas to strengthen their finances and,
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  you know, free up resources for growth where they really want to focus.
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  And that financial strength then leads to the shareholder news, that special dividend.
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  U.S. 44.30 per share, plus the regular interim one of U.S. 3.50.
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  That's big news, especially after 18 years.
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  Huge news. The group CEO, Scott Price, basically said as much.
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  His quote was, These decisions underscore our confidence in DFI's long-term
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  growth strategy and commitment to shareholder returns.
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  Seems like they're backing up their strategy talk with actual cash back to investors.
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  It's a very clear signal, yeah. It's not just about managing debt.
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  It's about broadcasting confidence
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  in their sort of reshaped business and their future earning power.
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  A special dividend after that long. It tells you they believe in the path ahead.
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  Okay, now for the part I find really interesting, the why. Let's get into the
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  performance drivers. Where did things go right?
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  Starting with Health and Beauty Manning's, Guardian, those brands.
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  Right, a key division for them. They saw strong like-for-like sales growth,
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  LFL, up 4% to U.S. $1.3 billion.
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  And even better, LFL profit growth was 8%, hitting U.S. $109 million.
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  What's the secret sauce there? What were they doing right? Well,
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  it seems less like secret sauce and more like smart strategy execution.
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  They've been positioning themselves as trusted advisors in health and wellness,
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  not just places to buy stuff.
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  Moving beyond just selling pills and shampoo. Exactly. They enhanced their product
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  mix, especially in popular wellness areas like supplements and derma skincare
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  things people are increasingly seeking out.
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  So they're tapping into that whole wellness trend. Makes sense.
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  And it wasn't just about what they sold, but how.
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  They focused on improving the customer experience, which led to bigger basket sizes.
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  Plus, they integrated their own brand teams across food and health and beauty,
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  which helped with product relevance and crucially, cost efficiency.
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  Better margins per item, basically. So smarter products, better experience,
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  more efficiency. Got it.
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  What about the food division? Brands like Welcome, Marketplace.
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  Revenue was down slightly, U.S. $1.5 billion, but they said sales started growing again in Q2.
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  Yeah, a bit of a turnaround within the period.
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  And despite the slightly lower revenue overall, LFL profit grew 14% to U.S. $24 million.
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  How did they manage that? Growing profit when revenue is flat or slightly down?
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  That's where operational improvements really shine.
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  A key tactic was what they call investing in pricing. Now, that doesn't just
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  mean slashing prices across the board.
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  It's more about optimizing prices to offer better value to consumers.
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  So targeted price adjustments.
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  Kind of, yeah. Enough to get more people through the door. Footfall in Hong
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  Kong was up 2.5% in May, 3.4% in June, and encouraged them to put more items
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  in their basket each time.
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  Okay, so driving volume and transaction size. Right. And another interesting
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  piece was a new partnership with Ding Dong Limited, DDL. They're a big online
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  grocery player in China.
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  The idea is to offer a wider range of fresh stuff at better prices.
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  This feeds into their whole strategy of resetting sourcing to improve margins.
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  Better buying means they can offer value and make more profit.
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  Clever. And it wasn't just their main divisions, right?
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  Associates chipped in too. Maxim's profits were up, U.S. $14 million from U.S. $8 million.
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  And Robinson's Retail added U.S. $18 million, an improvement of U.S. $9 million.
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  Yeah, those associate contributions helped the overall picture.
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  How did these fit into the grand plan, though? Especially Robinson's,
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  which they then sold. Good question.
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  Maxim's improvement came from, you know, good old-fashioned cost control and
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  running things more efficiently.
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  Standard stuff, but effective. For Robinson's Retail, that U.S.
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  $18 million contribution actually included two extra months compared to the
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  previous period, right before they finalized the sale at the end of May.
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  Ah, okay. So a timing effect there. Partly, yeah.
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  But it also shows how they're actively managing the portfolio.
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  Even as they're selling an asset, they're still focused on its contribution until the deal closes.
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  It's about making sure every piece is working effectively or,
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  you know, getting redeployed strategically.
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  Which leads us neatly into the core theme, really.
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  DFI shifting from being just a portfolio investor to a focused operating company.
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  One of their big goals is evolving portfolio, prioritizing capital returns and
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  shareholder value. It's clearly central to everything they're doing right now.
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  And we see it in action with the divestments.
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  Young Wee and Robinson's retail brought in around U.S. $900 million together.
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  And selling the Singapore food business is set to add another,
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  what, U.S. $93 million in cash?
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  Significant amounts, yeah. Real capital being unlocked. It definitely sounds
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  strategic and the balance sheet reflects it. But is there a risk here?
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  Are they selling off potential future growth engines just because they aren't core right now?
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  That's always the debate with divestments, isn't it? The risk versus reward.
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  But DFI's argument, and the strategy seems to be, is that this lets them prioritize
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  capital on high-margin businesses and growth initiatives.
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  Focusing their bets. Exactly.
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  By selling these assets, they gain strategic flexibility, they can invest more
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  heavily in the areas showing better returns, like health and beauty or their
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  food division improvements, or digital.
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  And it gives them firepower for new opportunities, maybe acquisitions,
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  that fit their tighter focus.
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  It's about being maybe leaner, but potentially more powerful in specific areas.
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  Makes sense. And speaking of focus, their digital side seems to be powering ahead.
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  E-commerce is now about 5% of sales. Daily orders are up 85% year-on-year,
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  over 96,000 orders a day.
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  Huge growth there. And crucially, it's contributing more profit.
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  Plus, DFIQ, their retail media arm, did over 160 campaigns compared to just 12 before.
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  That's not just tinkering anymore, is it? Not at all. This digital progress is key.
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  It's not just another sales channel. It's about building that seamless omni-channel
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  experience customers expect now.
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  And DFIQ, the retail media part, shows they're getting smarter about using their
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  customer data, monetizing it, basically.
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  It creates new revenue streams and makes them a more valuable partner for suppliers, too.
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  Right. Leveraging their assets in new ways. OK, let's circle back to that reported
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  loss, the U.S. $38 million.
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  We established it was mainly non-trading items.
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  Can you give us the slightly simplified version of what those were? Sure.
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  The main thing, the big driver, was the accounting loss on divestments of associates.
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  So the loss booked when they sold Youngwee and Robinson's retail.
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  But didn't the DeSales bring in cash? How was there a loss? Ah, accounting rules.
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  The loss included large amounts of something called cumulative exchange translation losses.
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  Basically, over the years, they owned these assets. Currency fluctuations like
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  the Chinese yuan or Philippine peso versus the U.S.
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  Dollar created unrealized losses on paper. When they sold the assets,
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  these past paper losses had to be officially recognized or reclassified into
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  the profit and loss statement.
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  So it's like crystallizing old currency effects, not a loss from running the stores badly that year.
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  Exactly. It's an accounting impact reflecting historical currency moves,
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  not current operational performance.
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  It's a one-time hit required by accounting standards when you sell,
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  reflecting the change in value due to FX over the entire holding period.
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  Okay, that distinction is crucial.
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  Now, it wasn't all smooth sailing. Some areas did face headwinds,
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  right? Convenience stores, 7-Eleven mainly.
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  Sales down 4% LFL to U.S. $1.1 billion.
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  Yeah, that segment saw some pressure.
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  And the main reason cited was a big cigarette tax hike in Hong Kong.
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  Profit for convenience dropped quite a bit too, down 18% to U.S. $38 million.
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  Sounds like that tax change hit hard. It did. It's a good example of an external
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  factor impacting results.
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  To give it context, they said if you took cigarettes out of the equation,
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  LFL sales for convenience were actually pretty much flat.
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  Ah, so it really was the cigarette volume driving the decline. Largely, yes.
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  Yeah. And the profit drop was also made worse because the comparison period,
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  H1 2024, had a one-off gain from cigarette inventory related to a previous tax change.
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  So, tough comparables, as they say. Right. What are they doing about it?
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  They're focusing on higher-margin stuff like ready-to-eat meals and expanding
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  their food bar format, trying to shift the sales mix away from the low-margin
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  tax-it categories. Again, strategically adapting.
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  And finally, Home Furnishings, that's their IKEA business. Sales still challenged.
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  Yeah, that segment continued to find things tough.
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  Intense competition, changes in what people are buying, especially noted in
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  Hong Kong and Indonesia.
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  But did profit hold up? Actually, yes. They mentioned that good cost control
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  helped the underlying profit for the division recover somewhat,
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  despite the sales pressure.
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  And Taiwan was apparently more resilient. So even in a tough spot,
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  they're managing costs to protect profitability where they can.
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  Okay, so looking ahead now, DFI seems confident they can navigate the market,
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  banking on their strategic initiatives.
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  What's the plan, basically? Well, they're doubling down on what seems to be
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  working, strengthening value for customers, using data to get the product mix
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  right, building out that omni-channel
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  experience, and pushing the digital monetization, like with DFIQ.
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  It's about building a more resilient, adaptable business for the long haul.
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  Makes sense, but there was a slight twist in the full-year guidance,
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  wasn't there? They lowered their revenue growth outlook? They did, yeah.
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  They revised the full-year organic revenue growth forecast down slightly to
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  between 0.5% and 1.0%. That's down from around 2% previously.
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  They cited, you know, general economic uncertainty and that bigger than expected
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  hit from cigarette sales.
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  So more cautious on the top line. But, and this is the interesting part,
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  they actually raised the bottom end of their full year underlying profit guidance.
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  Oh, how does that work? Lower revenue, but potentially higher profit.
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  The new profit guidance is U.S. $250 million to U.S. $270 million.
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  Previously, it was U.S. $230 million to U.S. $270 million.
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  So they tightened the range upwards. So they expect to be more efficient.
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  That's the message. They believe enhanced operational efficiency and tight cost
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  control will deliver better profitability, even if revenue growth is a bit slower than first hoped.
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  It really underlines that shift in focus, prioritizing profitable growth,
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  perhaps even over chasing pure revenue volume in uncertain times. Right.
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  So wrapping up the outlook, the commitment seems to be delivering sustainable,
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  profitable growth, balancing investment in key areas with giving back to shareholders
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  like that special dividend shows.
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  So pulling it all together, what we've really seen today is DFI Retail Group
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  in the midst of a significant strategic transformation.
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  They're actively shedding assets that don't hit the core plan,
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  sharpening their focus on higher margin businesses like health and beauty and
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  really pushing digital growth.
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  Yeah, very deliberate pivot. And this pivot has resulted in strong underlying
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  operational profit growth and a much healthier balance sheet.
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  Even though we had those sort of confusing one-off accounting losses from the
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  divestments muddying the waters of the reported bottom line,
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  it feels like a company actively reshaping itself. Definitely.
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  Which leads us nicely to our final thought for you, the listener, to chew on.
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  Consider DeFi's decision here. They took a short-term hit on their reported
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  profit, driven by those accounting rules around divestments,
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  as part of a strategic choice. A calculated move. Yeah, exactly.
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  So how might this kind of portfolio clean up this prioritization of future operational
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  focus, where they put their capital, actually position them to thrive long-term?
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  Especially in the face of that shifting retail landscape and their own revised
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  outlook, cautious on sales but more confident on profit. What does this kind
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  of bold strategic pruning tell
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  us about the future of major retail groups navigating complexity in Asia?
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  Music.