Annual Report 2022
DFI Retail Group’s parent company, DFI Retail Group Holdings Limited, is incorporated in
Bermuda and has a primary listing in the standard segment of the London Stock Exchange,
with secondary listings in Bermuda and Singapore. The Group’s businesses are managed
from Hong Kong by DFI Retail Group Management Services Limited through its regional
offices. DFI Retail Group is a member of the Jardine Matheson Group.
A member of the Jardine Matheson Group
OUR GOAL
To give our customers
across Asia a store they
TRUST, delivering QUALITY,
SERVICE and VALUE.”
“
40
Financial Review
45
TCFD Report
51
Directors’ Profiles
53
Our Leadership
56
Financial Statements
128
Independent Auditors’ Report
138
Five Year Summary
139
Responsibility Statements
140
Corporate Governance
167
Shareholder Information
168
Retail Outlet Summary
169
Management and Offices
2
Corporate Information
3
DFI Retail Group At-a-Glance
4
Highlights
6
Chairman’s Statement
10
Group Chief Executive’s Review
16
Business Review
16
Food
22
Health & Beauty
28
Home Furnishings
34
Restaurants
38
Other Associates
CONTENTS
CORPORATE INFORMATION
Directors
Ben Keswick
Chairman
John Witt
Managing Director
Ian McLeod
Group Chief Executive
Clem Constantine
Dave Cheesewright
Weiwei Chen
Adam Keswick
Anthony Nightingale
Christian Nothhaft
Company Secretary
Jonathan Lloyd
Registered Office
Jardine House
33-35 Reid Street
Hamilton
Bermuda
DFI Retail Group Management
Services Limited
Directors
John Witt
Chairman
Ian McLeod
Group Chief Executive
Clem Constantine
Chief Financial Officer and Property Director
Chris Bush
Chief Executive Officer – DFI Retail Southeast Asia
Choo Peng Chee
Chief Executive Officer – DFI Retail North Asia
Martin Lindström
Chief Executive Officer – IKEA
Michael Wu
Chairman and Managing Director, Maxim’s
Graham Baker
Matthew Bland
(joined the Board on 1st April 2022)
David Hsu
(retired on 1st August 2022)
Anne O’Riordan
Y.K. Pang
Jeremy Parr
(retired on 31st March 2022)
Steve Sun
(joined the Board on 1st August 2022)
Corporate Secretary
Jonathan Lloyd
2
DFI Retail Group Holdings Limited Annual Report 2022
Taiwan
IKEA
Brunei
Guardian
Indonesia
Hero
Guardian
IKEA
Malaysia
Cold Storage
Giant
Mercato
TMC
Guardian
Maxim’s
Vietnam
Guardian
Maxim’s
Cambodia
Lucky
Guardian
Maxim’s
Thailand
Maxim’s
Macau
San Miu
7-Eleven
Mannings
IKEA
Maxim’s
Laos
Maxim’s
Chinese Mainland
Yonghui
7-Eleven
Mannings
Maxim’s
The Philippines
Robinsons
Singapore
Cold Storage
CS Fresh
Giant
Jason’s Deli
Market Place
7-Eleven
Guardian
Maxim’s
DFI RETAIL GROUP AT-A-GLANCE
Geographical
Locations
Grocery Retail
Convenience Stores
Health and Beauty
Home Furnishings
Restaurants
Other Retailing
Hong Kong
Market Place
Wellcome
7-Eleven
Mannings
IKEA
Maxim’s
Figures as at December 2022
10,663
outlets
(Including associates and joint ventures)
13
Asian markets
and territories
3
HIGHLIGHTS
2022
2021
Change
Results
US$m
US$m
%
Revenue
– subsidiaries
9,174
9,188
–
– including associates and joint ventures*
27,597
27,861
(1)
Underlying EBITDA†
1,070
1,200
(11)
Underlying profit attributable to shareholders‡
29
105
(72)
Net non-trading items
(143)
(2)
n/a
(Loss)/profit attributable to shareholders
(115)
103
n/a
Net debt
866
844
3
US¢
US¢
%
Underlying earnings per share‡
2.14
7.73
(72)
Basic (loss)/earnings per share
(8.51)
7.61
n/a
Dividends per share
3.00
9.50
(68)
Net asset value per share^
69.98
93.67
(25)
Store Network*
2022
2021
Net change
Food
5,620
5,506
+114
– Grocery Retail
2,024
1,956
+68
– Convenience Stores
3,596
3,550
+46
Health and Beauty
2,552
2,380
+172
Home Furnishings
23
19
+4
Restaurants
1,908
1,801
+107
Other Retailing
560
580
-20
10,663
10,286
+377
* Including 100% of associates and joint ventures.
† Underlying EBITDA represents underlying operating profit before depreciation and amortisation.
‡ The Group uses ‘underlying profit’ in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more
fully described in note 38 to the financial statements. Management considers this to be a key measure which provides additional information to enhance
understanding of the Group’s underlying business performance.
^ Net asset value per share is based on the book value of shareholders’ funds.
• Substantial sequential improvement in underlying profitability in
second half
• Lower full year underlying profit due to continuing impact of
pandemic, inflationary pressure, increased investment in digital
• Ongoing transformation programme continues to drive improvement
• Final dividend of US¢2.00 per share
4
DFI Retail Group Holdings Limited Annual Report 2022
Total Revenue*
Underlying Earnings per Share
Ordinary Dividends per Share
Underlying Profit Attributable to Shareholders
US$ 27.6 billion
US¢ 2.14
US¢ 3.00
US$ 29 million
21
15
18
12
6
9
3
24
27
30
US$b
0
2018
2019
2022
2021
2020
20
15
10
5
25
30
US¢
0
2018
2019
2022
2021
2020
US$m
300
200
100
400
0
2018
2019
2022
2021
2020
US¢
21
15
12
9
3
6
18
24
0
2018
2019
2020
2021
2022
Total Revenue*
-1 %
Underlying Profit
-72 %
Number of Stores*
10,663
Number of Employees*
some 216,000 people
Grocery Retail
Home Furnishings
Convenience Stores
Restaurants
Health and Beauty
Others
Interim dividend
Final dividend
5
CHAIRMAN’S STATEMENT
“While 2022 was another challenging year for DFI Retail Group,
with the pandemic continuing to impact the financial performance
of the Group’s subsidiaries and associates, profitability improved
substantially in the second half of the year. Continued progress in
implementing the Group’s ongoing transformation plan helped the
business deliver improvements in underlying performance. We expect
to see the Group’s performance to improve in 2023, although we will
continue to monitor the impact of inflationary pressures and changes
in consumer sentiment. The Group’s overall results will largely depend
on the recovery in Hong Kong of its health and beauty and restaurants
businesses, and an improved performance by its associate Yonghui
on the Chinese mainland. We remain confident in the medium- to
long-term growth prospects of the Group.”
Overview
2022 was another challenging year for the Group.
A combination of inflationary pressures and
customer behavioural shifts driven by the pandemic
significantly impacted first-half financial
performance, reducing profit contributions from
the Grocery Retail and Convenience divisions.
Results from the Group’s associates were also
similarly adversely affected.
There was, however, a substantial improvement
in profitability in the second half of the year, with
underlying profit of US$80 million for the period,
compared with an underlying loss of US$52 million
in the first half. The Group continues to adapt to
changes in consumer preferences and, despite the
external challenges, has increased investments
in digital in the year. While these investments
impacted profitability in the year, they are required
to meet customers’ evolving needs and to drive
long-term shareholder value.
6
DFI Retail Group Holdings Limited Annual Report 2022
16%
6%
9%
1%
51%
17%
1%
15%
5%
21%
39%
19%
2022
Sales Mix
†
2022
Profit Mix
‡
Grocery Retail
Convenience Stores
Health and Beauty
† Sales of goods, including share of associates and joint ventures.
‡ Based on operating profit before effect of adopting IFRS 16 and share of results of associates
and joint ventures, excluding selling, general and administrative expenses and non-trading items.
Home Furnishings
Restaurants
Other Retailing
Operating performance
Total revenue for the Group, including 100% of
associates and joint ventures, was US$27.6 billion,
slightly behind 2021 levels. Reported subsidiary
sales were US$9.2 billion, broadly in line with the
prior year. Strong revenue growth in Health and
Beauty was partially offset by lower sales within
the Grocery Retail division. The fall in sales in
Grocery Retail was primarily driven by the easing of
movement restrictions in Southeast Asia, which led
to a reduction in eating at home by customers, and
by store disruptions in Singapore due to essential
renovations to improve our Cold Storage offering.
The Group reported an underlying profit after
tax of US$29 million for the full year, inclusive of
US$35 million losses attributable to associates and
joint ventures. The Group reported encouraging
performance in the second half, with underlying
profit after tax of US$80 million, representing a
US$132 million increase in profitability relative
to the first half. The Group’s reported loss of
US$115 million reflected an impairment loss of
US$171 million in respect of the Group’s investment
in Robinsons Retail.
7
Chairman’s Statement
The profitability of the Health and Beauty division
increased significantly, due to strong growth
in revenue in Hong Kong and Southeast Asia.
Profitability for the Grocery Retail division, however,
was adversely impacted by lower like-for-like sales,
reflecting spikes in demand in the prior year, as well
as inflationary pressures, which affected cost of
goods sold as well as operating costs. Grocery
Retail profit was, however, higher than 2019 levels.
The full year profitability of both Convenience and
IKEA was broadly in line with the prior year.
Convenience, however, saw profits increase
significantly in the second half relative to breakeven
levels in the first half. This was due to gradual
normalisation of customer traffic following the
easing of movement restrictions across our key
markets, particularly Hong Kong.
Operating cash flow for the period, after lease
payments, was a net inflow of US$279 million,
compared with US$270 million in 2021. As at
31st December 2022, the Group’s net debt was
US$866 million, compared with US$844 million
at 31st December 2021. The Group continues to
balance the priority of maintaining a strong
balance sheet position with the need to support
ongoing investments in business and digital
transformation.
The Board recommends a final dividend for 2022 of
US¢2.00 per share (2021 final dividend: US¢6.50).
Business developments
Driving digital innovation remains a key strategic
priority for the Group. During the year, the Group
invested significant resources both in building
capability and in progressing operational initiatives
to enhance our e-commerce and digital offering, in
order to drive enhanced customer loyalty and more
meaningful customer relationships. In May 2022,
we launched yuu-to-me, offering customers an
integrated one-stop online shopping experience.
Following the success of the rollout of the yuu
Rewards loyalty programme in Hong Kong, the
Group launched yuu Rewards in Singapore in
October 2022. The programme in Singapore
benefits from partnerships with a number of
leading local brands. The Group expects to
continue investing in digital initiatives across its
markets to drive long-term value for shareholders.
Key programmes continued to be introduced
throughout the year to support the Group’s
Corporate Social Responsibility priorities of serving
communities, sustaining the planet and sourcing
responsibly. The Group is committed to
a near-term target of halving our Scope 1 and 2
carbon emissions by 2030 and to achieving net-zero
by 2050. DFI is making good progress in reducing
carbon emissions, reducing Scope 1 and 2
emissions by 10% between 2021 and 2022.
The Group is also working on a plan to reduce
Scope 3 emissions.
8
DFI Retail Group Holdings Limited Annual Report 2022
In February 2023, the Group announced that it had
entered into an agreement to sell its Malaysian
Grocery Retail businesses to a leading local retail
group, led by successful local entrepreneur, Datuk
Andrew Lim. The Group remains fully committed
to its other retail businesses in Malaysia and will
continue to accelerate growth in the Health and
Beauty segment through Guardian stores.
People
We would like to express our deep gratitude for the
continuing dedication and hard work of our team
members in putting our customers first, despite the
ongoing difficulties associated with the pandemic
across our markets.
Prospects
The Group has been encouraged by the significant
improvement in performance in the second half of
2022. We expect to see the Group’s performance
improve in 2023, although we will continue to
monitor the impact of inflationary pressures and
changes in consumer sentiment. The Group’s
overall results will largely depend on the recovery
in Hong Kong of its Health and Beauty and
Restaurants businesses, and an improved
performance by its associate Yonghui on the
Chinese mainland. We remain confident in the
medium- to long-term growth prospects of
the Group.
Ben Keswick
Chairman
2nd March 2023
9
GROUP CHIEF EXECUTIVE’S REVIEW
“Despite challenges faced in 2022, there was encouraging
improvement in profitability in the second half of the year. Our
teams across the Group have continued to focus on delivering
against the Group’s transformation objectives, working hard
to manage our various businesses day-to-day, in highly volatile
and unpredictable trading circumstances. Overall, the return
to pre-pandemic normality in our markets, combined with the
effective execution of our business strategy, give us confidence
in the medium- to long-term trading prospects of the Group.”
Introduction
2022 was another extremely challenging year for
the Group, from the perspective both of operational
disruption and macroeconomic headwinds. The
Group’s businesses in our home market of Hong
Kong were badly impacted by the fifth COVID wave
and related lockdown restrictions, which hit the
city during the first quarter of the year. We saw
significant shifts in customer behaviour, creating
strain on both the supply chain and store operations.
Life in Hong Kong has, however, returned to some
form of normality as the year has progressed and
pandemic restrictions have lifted.
The Group continued to see underlying losses from
its investment in Yonghui, although they were
reduced from the previous year. Yonghui’s sales and
profits improved in the first half of the year, but its
performance in the second half was impacted by
pandemic restrictions, the slowdown in the overall
macroeconomic environment and its investments
in digital. Pandemic-related restrictions also
adversely affected our 7-Eleven and Mannings
businesses on the Chinese mainland.
In Southeast Asia (‘SEA’), we faced a different set
of challenges. The economies in our SEA markets
began reopening at the beginning of the year,
10
DFI Retail Group Holdings Limited Annual Report 2022
59%
6%
6%
2%
17%
1%
9%
83%
3%
3%
2%
4% 5%
Grocery Retail
Convenience Stores
Health and Beauty
* Including 100% of associates and joint ventures.
Home Furnishings
Store Support Centre
and Shared Services
Restaurants
Other Retailing
some
216,000
people
Total
Employees*
>120million
square feet
Total Gross
Trading Area*
supporting sales recovery for some retail formats.
Pent-up demand for travel and other services,
however, reduced demand for eating at home
and, thus, impacted performance in Grocery Retail.
The Group faced unprecedented cost inflation in the
period, impacting the cost of goods, our operating
costs and consumer sentiment, particularly in
our SEA Grocery Retail business. The pandemic
has also accelerated customer preferences for
shopping online. We are therefore balancing the
need to invest in digital capacity and capability and
concurrently ensuring that we remain competitive
by being disciplined in spending.
Our teams across the Group have continued to focus
on delivering against the Group’s transformation
objectives, working hard to manage our various
businesses day-to-day, in highly volatile and
unpredictable trading circumstances. I am grateful
to all our colleagues for the commitment they
have shown, as well as their many achievements
during the year.
2022 performance
The Group reported total sales revenue from
its subsidiaries of US$9.2 billion, broadly in line
with the prior year. Total revenue for the Group,
including 100% of associates and joint ventures,
was US$27.6 billion, slightly behind 2021 levels.
11
Group Chief Executive’s Review
The Group reported a subsidiaries underlying profit
of US$64 million for the full year. Inclusive of
US$35 million underlying losses attributable to
associates and joint ventures, the Group reported
underlying profit of US$29 million for the full
year. There was an encouraging improvement
in second-half underlying profit to US$80 million,
over 10% higher than the same period last year,
and representing a US$132 million increase in
profitability from the US$52 million underlying
loss incurred in the first half.
Our Health and Beauty business saw double-digit
sales growth and over 60% profit growth for the
full year, as Mannings in Hong Kong continued to
gain market share and Guardian in SEA benefitted
from markets reopening. The performance of the
business was, however, still considerably behind that
of 2019. The profitability of our Convenience and
IKEA businesses was broadly in line with the prior
year, despite significant COVID-related disruption,
particularly in the first half in Hong Kong, as well as
availability challenges as a result of extensive supply
chain disruption. IKEA’s sales and profits were also
ahead of its performance in 2019. Grocery Retail,
which benefitted from restaurant dining restrictions
last year, saw lower profits in 2022. Profitability
was also impacted by inflationary pressures, which
affected cost of goods sold as well as operating
costs. Although Grocery Retail profits reduced year
on year, the transformation programme that began
five years ago has laid strong foundations for
the Group’s businesses, supporting significantly
enhanced levels of profit for the Grocery Retail
division in 2022 compared to those of 2019.
The Group’s share of underlying losses from
associates and joint ventures was US$35 million, as
key associates continued to be impacted by COVID-
related disruption in the year. Maxim’s saw its profits
impacted by social distancing restrictions in Hong
Kong and China in the first quarter, which led to a
loss in the first half. Maxim’s profitability recovered
strongly in the second half, however, demonstrating
the underlying resilience of the business and its
diversified pan-Asian portfolio. The Group’s share
of underlying Yonghui’s losses was US$80 million,
as its performance was impacted by pandemic
restrictions, as well as its ongoing investment in
digital transformation. Robinsons Retail reported
strong revenue and profit growth, as it benefitted
from the reopening of the Philippines economy.
Business initiatives and developments
Own brand
The Group’s Own Brand business is performing
increasingly strongly, with significant effort
invested in driving profitable growth in this area.
New contemporary designs for the Meadows brand
have highlighted the brand’s quality and ensured
on-shelf credibility and impact. Every new product
over the last three years across Grocery, General
Merchandise and Health and Beauty has included
a completely new pack design: almost 10,000 in all,
covering the launch of around 3,500 SKUs. With
over 2,300 new and relaunched Grocery Own Brand
items on the shelf, volume penetration has increased
by more than 50% compared to three years ago
and is now in the double-digit range.
12
DFI Retail Group Holdings Limited Annual Report 2022
Health and Beauty has followed the success of the
Own Brand relaunches in Food by introducing new
ranges of both Mannings and Guardian products
at pace in 2022. There are now over 1,300 new or
revised items in stores with new design and market
positioning, and over 900 more items are planned
for 2023. The new ranges have been very well
received, with Own Brand now accounting for
one in every four Mannings items purchased by
our customers and our Own Brand cotton range
achieving the number one market share position
not just in Mannings but throughout Hong Kong.
Digital
Driving digital innovation remains a key strategic
priority for the Group. Since its launch in July 2020,
the performance of the yuu Rewards coalition
loyalty programme has exceeded expectations,
with over four million members having signed up.
The yuu-niverse has continued to expand over the
past two years, with the addition of restaurant,
insurance and fuel partners. In January 2023,
yuu Rewards expanded its scope further, with travel
partner Agoda joining the programme. We remain
excited about the future prospects of yuu Rewards
and look forward to expanding the yuu-niverse
further as we unlock additional partnership
opportunities.
In May 2022, yuu-to-me e-commerce functionality
was launched on the yuu app, offering customers
an integrated one-stop online shopping experience
and home delivery across leading Hong Kong
brands to customers. Initial performance has
been encouraging, with strong growth in order
values and per-user spending. The team has also
worked hard to drive significant improvements
in operational excellence and the online customer
shopping experience, with over 96% of orders now
delivered ‘on time’ and 87% ‘in full’, and product
fulfilment of all orders reaching almost 99%.
The Group has also invested in capability to support
our digital ambitions. We have recruited a number
of high calibre individuals who bring extensive
relevant global digital retail experience, in areas
including online warehousing, online platforms,
social media platforms and traditional offline retail
digital transformation.
The Group has built on the success of the yuu
Rewards loyalty programme in Hong Kong by
launching yuu Rewards in Singapore in October
2022. We have entered partnerships with minden.ai,
a tech venture founded by Temasek, BreadTalk
Group, DBS Bank, PAssion Card, Mandai Wildlife
Group and Singtel. The coalition loyalty programme
unites some of Singapore’s most popular brands,
offering customers an effortless way to earn rewards
on everyday purchases across over 1,000 outlets.
Initial performance has been very encouraging,
with over one million members joining since launch.
13
Group Chief Executive’s Review
Business portfolio optimisation
On 23rd February 2023, the Group announced that
it had entered into an agreement to transition its
Malaysian Grocery Retail businesses to a leading
local retail group led by successful local
entrepreneur, Datuk Andew Lim. Completion of the
transaction is expected to take place in early March
2023, and will provide further growth opportunities
to our team members and enable greater
competitiveness, service and value for customers in
Malaysia. The Group remains fully committed to its
other retail businesses in Malaysia and
will enhance its strategic focus on the fast-growth
health and beauty segment through Guardian stores.
Corporate social responsibility
Over the course of 2022, we have continued to
make strong progress in supporting our Corporate
Social Responsibility (CSR) mission to provide
environmental and social benefits to the communities
we serve. A number of programmes have been
introduced to support our key CSR focus areas:
serving communities, sustaining the planet and
sourcing responsibly. 2022 was also the first year
the Group began to disclose a comprehensive set
of quantitative ESG metrics with reference to
the Global Reporting Initiative standard and the
United Nations Sustainable Development Goals.
Serving communities
The Group’s businesses are important cornerstones
of the communities we serve and our first CSR
focus area of serving communities reflects our
mission to improve people’s lives – especially those
in underprivileged communities. Over the course of
the past 18 months, a number of new programmes
have been introduced to make a tangible and
lasting impact on the communities we serve.
In November 2021, Wellcome teamed up with
long-term partner Foodlink to launch Sik Jor Fan Mei,
a Rice Donation Charity Programme. Under the
programme, Wellcome pledges to donate HK¢50 for
every kilogram of Yu Pin King brand rice sold
at its stores to help those in need. The aim of the
programme was originally to raise HK$5 million
within 365 days. We have achieved our targets
significantly earlier – only five months after the
launch.
Following the success of the Sik Jor Fan Mei
programme in Hong Kong, we have launched
similar charity programmes in Singapore and
Malaysia. Working with The Food Bank Singapore,
a non-profit organisation that provides free meals
and dry rations to families in need, we launched
the Have You Eaten? programme, under which
DFI donates SG¢10 for every kilogram of Meadows
Own Brand rice sold, with a goal of donating a
million meals to help those in hardship over the next
two years. In Malaysia, the Sudah Makan? Initiative
was launched in the same month, in collaboration
with The Lost Food Project.
In the second half of the year, Guardian launched
its community service programme Guardiancares
across SEA, aimed at raising the self-esteem of
children from low-income families. Under this
initiative, donations to buy bath care products
for those in need will be made for every one litre
of Guardian bath care product sold. The aim is
to provide enough products for 20 million baths
for underprivileged children across SEA.
14
DFI Retail Group Holdings Limited Annual Report 2022
Sustaining the planet
The Group has set ambitious climate targets,
aligned with the Paris Agreement, to prevent the
harm caused by climate change to ecosystems and
societies. The Group is committed to a near-term
target of halving our Scope 1 and 2 emissions by
2030 and to achieving net zero by 2050. DFI has
already made good progress in reducing its emissions,
reducing Scope 1 and 2 emissions by 10% between
2021 and 2022. The Group is working on a plan to
reduce Scope 3 carbon emissions. A range of
energy saving and efficiency enhancement
initiatives have been implemented in 2022, which
are expected to reduce consumption in 2023.
The Group is supporting the transition towards a
circular economy by reducing and managing waste.
Food waste and loss are significant drivers of global
food insecurity and climate change. Since 2018 the
Group has adopted a holistic strategy for reducing
food waste, through its Fresher for Customers
programme. The programme focusses on
improving supply chain, warehouse, logistics and
operational management to deliver fresher produce
to customers and reduce the ratio of food loss
significantly. Overall, food waste has been reduced
by nearly 40% since 2017. In addition to food waste
reduction, the Group aims to increase the
proportion of diverted waste to 80% by 2030.
The Group is changing the way we develop and
source products and packaging to reduce plastic
consumption. We are working to switch our
Own Brand products to more environmentally
friendly materials or reusable packaging, reducing
unnecessary plastic packaging and increasing
the use of recycled content. The Group is exploring
ways of transitioning away from single use plastic
bags and also encouraging increased recycling
from customers.
Sourcing responsibly
The Group’s responsible sourcing initiatives focus
on safeguarding animal welfare, respecting human
welfare and protecting biodiversity. The Group is
working hard with our suppliers to offer customers
products sourced in an ethical, transparent and
responsible way. We are committed to no animal
testing in all our Own Brand products, except
where it is legally required. On limiting the scale
of deforestation, we have obtained international
certifications to protect forest ecosystems,
including certified paper from sustainable forestry
sources and Rainforest Alliance certified coffee for
our Convenience business in Hong Kong. To protect
marine life, 34% of our Own Brand seafood
products have obtained certifications such as
Marine Stewardship Council (MSC), where 100%
of canned tuna are certified.
The year ahead
The lifting of pandemic restrictions on the Chinese
mainland is having a positive impact on the Hong
Kong and Chinese mainland economies and the
Group is cautiously optimistic that the Group will
see improved overall performance in 2023. There
remain additional market challenges, however,
including rising interest rates, inflationary and wage
pressures and uncertainty as to the impact these
factors will have on consumer sentiment. Overall,
the return to pre-pandemic normality in our
markets, combined with the effective execution
of our business strategy, give us confidence in
the medium- to long-term trading prospects of
the Group.
Ian McLeod
Group Chief Executive
2nd March 2023
15
BUSINESS REVIEW
The Group has been encouraged by underlying
performance, with Grocery Retail profitability
significantly above 2019 levels, supported
by the Group’s transformation initiatives.
Encouragingly, Convenience profitability
in the second half improved significantly
compared to the first half.
FOOD
16
DFI Retail Group Holdings Limited Annual Report 2022
51%
17%
5%
21%
Wellcome’s underlying operating metrics
continued to strengthen and market
share has also continued to increase
Group Sales*
Group Profit†
Grocery Retail
Convenience Stores
* Sales of goods, including share of associates and joint ventures.
† Based on operating profit before effect of adopting IFRS 16 and share of results of associates
and joint ventures, excluding selling, general and administrative expenses and non-trading items.
68%
26%
17
Cambodia
Malaysia
Indonesia
Chinese Mainland
Hong Kong
Macau
The Philippines
Singapore
Operating Profit
US$ 141 million
Store Network
‡
5,620 stores
Total Sales of Goods
‡
US$ 20.7 billion
‡ Including 100% of associates and joint ventures.
Convenience Stores
Grocery Retail
DFI Retail Group’s Grocery
Retail business has been
serving our customers for
over 70 years striving to
achieve our goal of giving
customers a proposition
they trust, delivering
quality, service and value.
Grocery Retail
Reported sales for the Grocery Retail division in
2022 were US$3.9 billion. Excluding the impact
of the Giant Indonesia restructure, revenue for
the division reduced by 4%. Underlying operating
profit for the division was US$91 million for the
year. Profitability was lower than the prior year,
primarily due to the absence of the panic buying
seen in 2021, further compounded by rising cost
of goods sold and operating expenses. Despite
the challenges faced throughout 2022, however,
the Group has been encouraged by underlying
performance, with Grocery Retail profitability
significantly above 2019 levels, supported by
the Group’s transformation initiatives.
There was mixed performance by Wellcome
Hong Kong in 2022. Wellcome reported strong
like-for-like (‘LFL’) sales growth in the first quarter,
as the fifth wave of the pandemic and related
restaurant restrictions drove strong demand
from customers for core grocery and protective
products. This surge in demand created significant
operational challenges, which were overcome
by extraordinary team effort and dedication.
18
DFI Retail Group Holdings Limited Annual Report 2022
Business Review Food
Wellcome’s
re-modelled
stores continue
to perform well,
with double-digit
sales uplifts
When demand was at its peak, with LFL volume
growth of up to 40%, our store operations and
supply chain teams experienced staff shortage
levels of 40%, due to a rise in COVID infections
and the impact of quarantine requirements. This
placed immense pressure on the remaining team
members to continue to serve the community.
There were also significant disruptions to the
vendor supply chain, requiring our commercial
teams to adapt quickly to ensure enough
availability on shelf. During the peak of the
fifth wave our supplier service levels halved,
with global lead times for replenishment stock
also increasing significantly. It was a testament
to the tireless efforts of our team that we were
able to continue to serve the community during
this crucial time and restore supply levels much
faster than originally anticipated.
19
Grocery Retail Own Brand penetration has
now reached double-digit in volume terms,
almost double the levels at the beginning
of 2020
Wellcome Hong Kong operations and LFL sales
began to normalise during the second quarter,
as the economy reopened. Over the course of
2022, Wellcome’s underlying operating metrics
continued to strengthen and market share has
also continued to increase. This has been
supported by rising customer perception scores
over the course of the year, driven by our Every
Day Low Prices campaign and strong execution on
our Own Brand ranges. Own Brand penetration
has now reached double-digit percentages in
volume terms, almost double the levels seen
at the beginning of 2020. Re-modelled stores
continue to perform well, with double-digit
sales uplifts.
SEA Grocery Retail performance in the year was
adversely impacted by sales normalisation from
the higher base previously seen as a result of
pandemic restrictions, as well as by the disruption
caused by renovation work to our stores and
reduced consumer spending appetite due to rapid
interest rate hikes and significant inflationary
pressure. Inflationary pressure has affected
top-line sales revenue and also created margin
pressure. The inflation rate in Singapore reached
its highest level in 14 years in the period and led
to pressure on both labour and utility costs.
20
DFI Retail Group Holdings Limited Annual Report 2022
Business Review Food
With over 40 years of delivering the
convenience shopping experience,
DFI Retail Group operates the 7-Eleven
franchise in Hong Kong, Macau, South
China and Singapore and offers innovative
products and services to customers.
Convenience
Total Convenience sales were US$2.3 billion,
an increase of 1% compared to the prior year.
Convenience underlying operating profit was
US$51 million for the year, broadly in line with the
prior year. Encouragingly, profitability in the second
half improved significantly compared to the first
half, with the Group reporting US$51 million profit
compared to the breakeven result in the first half.
The Convenience division experienced contrasting
operating trends to our Grocery Retail businesses in
their respective regions. In Singapore, our businesses
saw a strong recovery as the economy reopened.
Throughout the course of the year, we have seen
accelerating LFL sales trends, with double-digit LFL
growth over the past three quarters. Profitability in
Singapore has also increased significantly as a result.
Within Hong Kong, the fifth wave led to negative
LFL sales in the first quarter, which significantly
impacted profitability. However, as Hong Kong
has progressively removed pandemic restrictions,
we have seen LFL sales improve over
the remainder of the year. As a result, profitability
for 7-Eleven in Hong Kong in the second half was
nearly four times as much as that reported in the
first half.
While each of our businesses has been impacted
by the pandemic and the related movement and
trading restrictions, none have been more affected
than our businesses in the Chinese mainland. In the
first quarter, the COVID wave across several cities
led to services for around 300 stores being suspended,
or to their hot ready-to-eat meals offer being
heavily restricted. More recently, in November,
the situation worsened, with the number of COVID
cases in Guangdong hitting all-time highs. Drastic
measures were imposed in the city and more
than 600 of our stores experienced severe trading
disruptions. Despite the inherent challenges arising
from the lifting of restrictions in recent weeks, stores
can now begin trade with some degree of normality
once more. We are encouraged by the more recent
performance following the lifting of pandemic
restrictions on the Chinese mainland.
7-Eleven Concept — Palawan Beach, Sentosa, Singapore
21
BUSINESS REVIEW
Health and Beauty division revenue
increased by 12%, driven by strong
double-digit LFL sales growth.
Underlying profit increased by 66%.
HEALTH
& BEAUTY
22
DFI Retail Group Holdings Limited Annual Report 2022
Mannings celebrated its 50th
anniversary and remains focussed
on delivering quality, service and value
to our customers, paving our way to
becoming the most trusted health
and beauty retailer
Health & Beauty
Group Sales*
Group Profit†
* Sales of goods, including share of associates and joint ventures.
† Based on operating profit before effect of adopting IFRS 16 and share of results of associates
and joint ventures, excluding selling, general and administrative expenses and non-trading items.
16%
39%
23
Cambodia
Vietnam
Malaysia
Brunei
Indonesia
Chinese Mainland
Hong Kong
Macau
The Philippines
Singapore
Operating Profit
US$ 94 million
Store Network
‡
2,552 stores
Total Sales of Goods
‡
US$ 2.6 billion
‡ Including 100% of associates and joint ventures.
Health & Beauty
DFI Retail Group’s Health
and Beauty business
operates across Asia
through well-established
and trusted brands such
as Mannings and GNC in
North Asia, and Guardian
in Southeast Asia, serving
our customers with a
wide range of health,
beauty, personal care
and baby care products.
Health & Beauty
Health and Beauty division revenue increased
by 12% to US$2.0 billion, driven by strong
double-digit LFL sales growth. Underlying
operating profit increased by 66% to US$94
million, driven by solid sales growth.
In Hong Kong, the Mannings business benefitted
from strong demand for COVID-related items
(such as medicines, vitamins, paper products,
masks, hand sanitiser and cold & flu medication)
in the first quarter. Like the Wellcome team, the
Mannings team also exhibited extraordinary
resilience in the face of COVID-related challenges.
At the peak of demand, staff shortages at the
Mannings distribution centre reached over 40%,
24
DFI Retail Group Holdings Limited Annual Report 2022
Business Review Health & Beauty
and out-of-stocks were between 25% and 40%,
depending on the product category. The Mannings
team continues to execute its offering well, with
record high market share levels. At the same time,
customer promotions are also being optimised, with
a balance between full-price sales and promotion
participation. On Own Brand, Mannings has also
made some encouraging progress, achieving strong
volume penetration.
Health and Beauty Own Brand products
now accounting for
one in every four
Mannings items
purchased by
our customers
25
In SEA, LFL sales for our Guardian business saw
double-digit growth, with profitability also
growing strongly. The performance of our
Guardian business over the past two years has
been severely hampered by COVID and associated
restrictions. As countries within SEA have removed
pandemic restrictions, however, traffic has grown
and there has been an associated LFL sales
improvement. Guardian Singapore reported
strong double-digit LFL sales growth, driven by
Mannings’
Own Brand
cotton range achieved the no. 1 market
share position in Hong Kong
26
DFI Retail Group Holdings Limited Annual Report 2022
Business Review Health & Beauty
LFL sales for our
Guardian business
saw double-digit
growth, with
profitability also
growing strongly
strong demand for COVID-related items, as well as
a recovery in the performance of tourist stores.
Guardian Malaysia reported strong growth in sales
and profitability as result of a recovery in both
tourist and mall store sales. Guardian Indonesia
reported over 30% growth in LFL sales, supported
by a recovery in mall foot traffic.
27
BUSINESS REVIEW
IKEA reported sales revenue was 3%
ahead of the prior year. Operating
profit was slightly ahead of the prior
year, despite challenging external
conditions and supply chain
constraints impacting availability.
HOME
FURNISHINGS
28
DFI Retail Group Holdings Limited Annual Report 2022
IKEA’s business performance, particularly
in the first half, was hampered by the
impact of COVID and global supply chain
constraints. Throughout the second
half, however, we began to see some
improvements in traffic and sales
Home Furnishings
* Sales of goods, including share of associates and joint ventures.
† Based on operating profit before effect of adopting IFRS 16 and share of results of associates
and joint ventures, excluding selling, general and administrative expenses and non-trading items.
Group Sales*
Group Profit†
6%
19%
29
Indonesia
Hong Kong
Taiwan
Macau
Operating Profit
US$ 46 million
Store Network
‡
23 stores
Total Sales of Goods
‡
US$ 839 million
‡ Including 100% of associates and joint ventures.
Home Furnishings
The world’s largest furniture
retailer, IKEA, is operated
by DFI Retail Group in
Hong Kong, Macau, Taiwan
and Indonesia. Renowned
for design, functionality
and quality at affordable
prices, IKEA offers a
comprehensive range
of attractive home
furnishing products,
underpinned by a
solid commitment to
sustainability.
Home
Furnishings
IKEA reported sales revenue of US$839 million, 3%
ahead of the prior year. Overall, LFL sales for the
year were impacted by COVID-related restrictions
in the first half and supply chain constraints,
which impacted stock availability. Operating
profit was US$46 million, slightly ahead of the
prior year, primarily due to strong cost control.
30
DFI Retail Group Holdings Limited Annual Report 2022
Business Review Home Furnishings
Strong
e-commerce
growth and
double-digit
penetration
31
IKEA’s business performance, particularly in the
first half, was hampered by the impact of COVID
through reduced customer visits, operating capacity
constraints and shortened trading hours. In addition,
global supply chain constraints continued to impact
stock availability. Throughout the second half,
however, we began to see some improvements
in traffic and sales, especially in Indonesia.
32
DFI Retail Group Holdings Limited Annual Report 2022
Business Review Home Furnishings
Business Review Home Furnishings
In Indonesia,
total trading
area increasing
by over 150%
against 2019
levels
In Indonesia, the Group has invested significant
capital over the past two to three years to grow its
IKEA footprint, with total trading area increasing
by over 150% against 2019 levels. While recent
trading performance has been impacted by COVID
as well as global supply chain constraints, the
Group remains optimistic that performance will
improve as external conditions normalise and IKEA
is well-positioned to be a significant player in the
Indonesian market over time.
33
Maxim’s has become more resilient after
mooncake sales season and easing of
dining restriction in 2nd half.
RESTAURANTS
BUSINESS REVIEW
34
DFI Retail Group Holdings Limited Annual Report 2022
Maxim’s remains committed to
pursuing its multi-brand strategy
* Sales of goods, including share of associates and joint ventures.
† Based on operating profit before effect of adopting IFRS 16 and share of results of associates
and joint ventures, excluding selling, general and administrative expenses and non-trading items.
Group Sales*
Group Profit†
Restaurants
9%
15%
35
Cambodia
Laos
Thailand
Vietnam
Malaysia
Chinese Mainland
Hong Kong
Macau
Singapore
Share of Results
US$ 52 million
Store Network
‡
1,908 stores
Sales
‡
US$ 2.5 billion
‡ Including 100% of associates and joint ventures.
Restaurants
Founded in 1956, Maxim’s
is a household name
in Hong Kong, famous
for its mooncakes and
successful restaurants,
bakeries, cafes and
catering. The Maxim’s
network has expanded
across Asia Pacific, with
over 1,900 outlets in
Hong Kong, Macau,
Chinese mainland,
Vietnam, Cambodia,
Laos, Thailand, Singapore
and Malaysia.
Restaurants
Maxim’s reported strong
sales performance in SEA
due to restriction-free social
distancing measures and
border reopening to
international travellers
36
DFI Retail Group Holdings Limited Annual Report 2022
Business Review Restaurants
The performance of Maxim’s for the full year was
severely hampered by a very challenging first
quarter as result of the fifth wave in Hong Kong,
which led to a large number of restrictions on
movement and dining. LFL sales were significantly
impacted and the Group’s share of underlying
Maxim’s losses was US$26 million in the first half.
Maxim’s performance improved as the year
progressed, due to a solid mooncake sales
performance and the easing of dining restrictions.
The Group’s overall share of Maxim’s underlying
profits was US$38 million for the full year,
representing a significant turnaround from the
US$26 million loss reported in the first half.
37
BUSINESS REVIEW
The Group’s investment in Yonghui
and Robinsons Retail continued to
demonstrate our diversified business
portfolio strategy. Underlying
results from our associates improved
relative to last year.
OTHER
ASSOCIATES
38
DFI Retail Group Holdings Limited Annual Report 2022
The Group’s share of underlying Yonghui losses
was US$80 million for the year, compared to a
US$90 million underlying share of losses in the
prior year. Yonghui’s LFL sales improved in the
first half of the calendar year, which translated
into improved profitability. Performance in
the second half, however, was impacted by
pandemic restrictions which severely disrupted
store trading hours, as well as the slowdown
in the overall macroeconomic environment.
Yonghui’s profitability was also impacted by
investments in its digital transformation and
by margin dilution from a greater level of
e-commerce sales.
Robinsons Retail reported strong growth in
2022, as it benefitted from the reopening of
the Philippines economy, which has supported
rising customer traffic and increased tourism.
Improved product mix and strong cost control
led to an increase in operating margin expansion.
Despite inflationary pressures, the retail climate
in the Philippines remains healthy, and the
reopening of the country has translated
into higher volumes. Robinsons Retail’s
underlying profit contribution to the Group
was US$24 million in 2022, an over 60%
increase relative to the US$14 million
contribution in 2021.
Other Associates
Chinese Mainland
The Philippines
39
Accounting policies
The accounting policies are consistent with those
of the previous year except for the reclassification
of revenue as stated in note 1 to the financial
statements. The Directors continue to review
the appropriateness of the accounting policies
adopted by the Group, regarding developments in
International Financial Reporting Standards (‘IFRS’).
In 2022, the Group has applied Covid-19-Related
Rent Concessions beyond 30th June 2021
(Amendment to IFRS 16) that extends, by one year,
the May 2020 amendment. The amendment allows
reduction in lease payments that affects payments
originally due on or before 30th June 2022, which
are granted as a direct consequence of the
COVID-19 pandemic, to be recognised in the profit
and loss over the period in which they cover, subject
to satisfying specific conditions, rather than as a
modification of the lease following IFRS 16 ‘Leases’.
The adoption of the Amendment results in the
recognition of US$15 million (2021: US$43 million)
of rent concessions in other operating income
during the year.
Results
2022 was another challenging year for
DFI Retail Group, with the Group’s reported
financial results impacted by the continuation of
the COVID-19 pandemic as well as macroeconomic
challenges and inflationary pressures. However,
the Group has been encouraged by significant
improvement in underlying profitability in the
second half of the year, which has been underpinned
by strengthened underlying fundamental following
implementation of transformation initiatives.
“The Group has been encouraged by significant
improvement in underlying profitability in the second
half of the year, which has been underpinned by
strengthened underlying fundamental following
implementation of transformation initiatives.”
North Asia
Southeast Asia
* Sales of goods, including share of associates and joint ventures.
† Including 100% of associates and joint ventures.
28%
72%
46%
54%
2022
Sales Mix*
2022
Retail Outlet Mix
†
FINANCIAL REVIEW
40
DFI Retail Group Holdings Limited Annual Report 2022
Strong sales growth in the Health and Beauty
business was driven by double-digit like-for-like sales
growth in key markets. In Hong Kong, Mannings
business benefitted from effective in-store
execution and strong demand for COVID-related
items. In Southeast Asia, profitability for Guardian
increased due to strong sales growth and recovery
in the tourist store sales.
Sales in Home Furnishings business were 3% ahead
of last year while the operating profit increased
by 1%. The overall business performance was
impacted by COVID-related restrictions as well as
the global supply chain constraints that caused
challenges to stock availability.
Net financing charges increased by US$3 million
compared to 2021, reflecting the higher interest
rates on external borrowings, offset by the lower
interest expenses charged on leases resulting from
the front-loaded characteristics of IFRS 16 ‘Leases’.
The Group’s share of the underlying results of
associates and joint ventures was US$35 million
loss, with underlying performance improving in the
second half.
Contribution from Maxim’s underlying results
decreased by 27% to US$38 million in 2022,
primarily as a result of the government-imposed
restrictions on movements and dining in first half.
Revenue, excluding those of associates and joint
ventures, totalled US$9.2 billion, which was broadly
in line with last year. Total revenue, including 100%
of associates and joint ventures, was 1% down at
US$27.6 billion.
Underlying profit for the Group’s subsidiaries was
US$64 million, a 56% reduction compared with prior
year. This was primarily due to the combination
of inflationary pressures and customer behavioural
shifts driven by the pandemic, particularly in the
first half.
Grocery Retail business reported operating profit
reduction primarily due to the absence of the panic
buying seen last year, further compounded by the
inflationary pressure on rising inventories costs and
operating expenses. Despite the challenges faced
throughout 2022, however, the Group has been
encouraged by underlying performance, with
Grocery Retail profitability significantly above
2019 levels, supported by the Group’s ongoing
transformation programme.
Sales and profitability in Convenience business
were broadly in line with last year. Significant
improvements were seen in second half of the year
as the Group began to experience normalisation
of customer traffic following easing of movement
restrictions across our key markets, particularly in
Hong Kong.
400
1,200
800
1,600
US$m
0
2018 2019
2022
2021
2020
Underlying EBITDA
Net Asset Value per Share
2022
2021
2020
2019
US¢
2018
90
30
60
120
0
41
Financial Review
The Group’s share of Yonghui’s underlying losses
was US$80 million for the year, compared to
US$90 million in the prior year. Yonghui’s profitability
was impacted by store disruption caused by the
pandemic, investments costs associated with digital
transformation and margin dilution from a greater
level of e-commerce sales. The Group’s interest in
Yonghui, increased from 21.08% to 21.13%, following
a share buyback by Yonghui during the year.
The Group’s share of underlying results in Robinsons
Retail increased by 66% to US$24 million. Strong
growth was due to the reopening of the Philippines
economy resulting from the rising customer traffic
and increased tourism. During the year, the Group’s
interest in Robinsons Retail also increased from
20.76% to 21.30% following a share buyback by
Robinsons Retail. Despite the encouraging results,
the Group recorded a non-trading impairment
charge of US$171 million with respect to the
holding value of its investment in Robinsons Retail
as rising interest rates globally have impacted
valuations across all asset classes.
The tax charge for 2022 was US$31 million, 47%
lower than 2021, mainly due to overall decrease in
operating profit during the year.
Non-trading items of US$143 million were reported
in 2022, principally from the impairment charge
of the Group’s Robinsons Retail investment, partly
offset by the profit on disposal of certain properties
in Hong Kong, Malaysia, Singapore and Indonesia,
together with other gains on the changes in interests
in associates and joint ventures.
Underlying profit attributable to shareholders was
US$29 million, down 72% from US$105 million in
2021. Underlying earnings per share of US¢2.14
were also down by 72%, as compared with US¢7.73
in 2021.
Cash flow
2022
2021
Summarised Cash Flow
US$m
US$m
Underlying operating
profit
209
314
Depreciation and
amortisation
861
886
Increase in working
capital
(7)
(10)
Net interest and
other financing
charges paid
(121)
(116)
Tax paid
(43)
(110)
Dividends received
from associates
45
46
Other
(4)
(68)
Cash flows from
operating activities
940
942
Principal elements of
lease payments
(661)
(672)
Cash flows from
operating activities
after lease payments
279
270
Normal capital
expenditure
(244)
(212)
Investments
(28)
(7)
Disposals
71
94
Cash flows from
investing activities
(201)
(125)
Cash flows before
financing but after
lease payments
78
145
42
DFI Retail Group Holdings Limited Annual Report 2022
The Group maintained solid cash flows from
operating activities after lease payments of
US$279 million in the year, compared with
US$270 million in 2021. Normal capital expenditure
was higher at US$244 million versus US$212 million
in 2021 principally due to the investment in digital
capacity and refurbishment of the existing estate.
Balance sheet
Total assets, excluding cash and bank balances,
were US$7.1 billion, down US$299 million compared
to 2021. The decrease was mainly due to the
impairment charge on the Group’s investment in
Robinsons Retail and the unfavourable exchange
movements in Asian currencies on translation to
the reported currency, United States dollar, partly
offset by the increased inventory balances due to
stock piling for early Chinese New Year in 2023.
Net operating assets were US$941 million at the
end of 2022, a 26% drop from previous year.
The Group ended the year with net debt of
US$866 million, broadly in line with last year’s level.
Dividend
The Board is recommending a final dividend of
US¢2.00 per share, giving a total dividend of
US¢3.00 per share for the year.
Financing
As of 31st December 2022, the Group had a
gross debt of US$1,096 million, an increase of
US$42 million from 2021. The gross debt is funded
by total committed and uncommitted lines of
US$3,051 million, with US$1,403 million committed
and US$552 million uncommitted facilities being
unused and available. The Group had cash
balances of US$231 million. The available undrawn
committed facilities and the cash pooling scheme
continued to provide good support and flexibility
to the Group for cash and liquidity needed for
the operation.
Where required, and typically for working capital
purposes, borrowings are normally taken out in local
currencies by the Group’s operating subsidiaries to
fund daily operations. Borrowings to fund any
strategic expansion of the Group are managed
centrally and typically funded in United States
dollars and Hong Kong dollars, with hedging of
foreign exchange and interest rate risk as may be
appropriate depending on the investment.
48%
10%
15%
21%
6%
Grocery Retail
Convenience Stores
Health and Beauty
Home Furnishings
IT / Distribution Centres
US$244
million
2022
Normal Capital
Expenditure
At 31st December 2022, the Group’s businesses,
including associates and joint ventures, operated
a total of 10,663 stores across all formats in 13
markets, compared with 10,286 stores at the end
of 2021. Included in this total are 1,074 Yonghui
stores, 1,908 Maxim’s stores and 2,261 Robinsons
Retail stores.
43
Financial Review
Despite the ongoing challenges posed by pandemic,
the Group remains encouraged by the momentum
of its ongoing transformation and is confident
that it is delivering sustainable improvements to
the business over-time which will drive medium-
to long-term growth.
Audit opinion
With Yonghui’s contribution to the Group’s
financial results, the Group’s external auditors,
PricewaterhouseCoopers, determined that a full
scope audit of Yonghui’s results is required as part
of their audit of the Group’s financial statements.
The Group equity accounts for its share of Yonghui’s
results on a three-month lag such that Yonghui’s
results for the 12 months ended 30th September
are included in the Group’s financial results for the
calendar year.
A full scope audit for Yonghui could not be done
in 2021 as Yonghui’s management concluded that
it was impractical for an additional audit to be
conducted given the extent of the time and efforts
required. Consequently, the Group’s 2021 audit
opinion was qualified to reflect this fact.
In 2022, the Group has engaged Ernst & Young
to perform a full scope audit for the 12 months
ended 30th September 2022 with the consent
from Yonghui’s management, with audit results
fully reported to PricewaterhouseCoopers as Group
auditor. Accordingly, an unqualified opinion on
the Group’s financial statements for the year ended
31st December 2022 is issued, with a qualification
on the comparability of the financial results with
those for the year ended 31st December 2021.
Financial risk management
A comprehensive discussion of the Group’s financial
risk management policies is included in note 40
to the financial statements. The Group manages
its exposure to financial risk using a variety of
techniques and instruments. The main objectives
are to limit exchange and interest rate risks and
to provide a degree of certainty about costs. It is
our policy not to engage in speculative derivative
transactions. The investment of the Group’s cash
resources is managed to minimise risk while seeking
to enhance yield. Overall, the Group’s funding
arrangements are designed to keep an appropriate
balance between equity and debt (short and
long-term), to maximise flexibility for the future
development of the business.
Principal risks and uncertainties
A review of the principal risks and uncertainties
facing the Group is set out on pages 161 to 166 of
the annual report.
Clem Constantine
Chief Financial Officer
2nd March 2023
44
DFI Retail Group Holdings Limited Annual Report 2022
45
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (‘TCFD’)
To manage physical and transition climate risks proactively, DFI Retail Group has completed a climate risk analysis as
per the recommendations of the Task Force on Climate-Related Financial Disclosures (‘TCFD’). This report represents our
climate related financial disclosures consistent with the TCFD recommendations. Further work is underway to enhance
the assessment and the mapping of climate risks over the short, medium, and long term.
Governance
Climate Task
Force 1
Eliminating Harmful
Refrigerants
(Scope 1 Emissions)
Climate Task
Force 2
Reducing Fuel
Usage
(Scope 1 Emissions)
Climate Task
Force 3
Reducing Energy
Usage
(Scope 2 Emissions)
Climate Task
Force 4
Tracking and
Reporting
DFI Board
DFI Leadership Team
Positive Action Group: Sustaining the Planet
Sustainability Leadership Council (‘JM’)
Climate Action Working Group(‘JM’)
Oversight, Advice
Implementation
DFI has implemented a governance framework as illustrated above.
The Board’s oversight of climate-related risks and opportunities
DFI Board is ultimately responsible for ensuring the Group is managing its climate risks, Greenhouse Gas (‘GHG’)
emissions, and sustainability objectives. The Board manages this through considering and approving key initiatives.
For example, in 2022 they have approved the Company’s carbon footprint baseline, and Net Zero plans including the
necessary capital expenditure for 2022 and 2023. Furthermore, they receive updates on climate and sustainability risks
and mitigation measures.
The Sustainability Leadership Council (‘SLC’) comprises of the Chief Executives of all Jardine Matheson (‘JM’) Business
Units, which includes DFI. Meeting twice a year, the SLC serves as a collaboration platform for the senior management
from across the JM Group to exchange insights and perspectives on sustainability strategy, planning, and direction for the
JM Group including DFI.
The SLC receives updates on global and regional climate and sustainability trends, policies, initiatives, and activities
undertaken by JM Group businesses including DFI. Progress on climate risk assessments, and identified climate risks
and opportunities are also provided to the SLC to inform their discussion of sustainability strategy and priorities.
Sustainability-related policies, including JM Group’s Climate Change Policy, were reviewed by the SLC and published
in 2022. All sustainability-related policies are periodically reviewed by executive management and updated as required.
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DFI Retail Group Holdings Limited Annual Report 2022
TCFD Report
Management’s role in assessing and managing climate-related risks and opportunities
DFI’s Leadership Team will review progress against DFI’s Net Zero targets at least twice a year starting in 2023. Actual
results will be reviewed and plans to deliver the short, medium, and long-term targets will be discussed. The time horizons
to analyse climate-related risks and opportunities are defined as short term (between now and 2025), medium term
(2025-2030), and long term (2030-2050 and onwards).
The Positive Action Group (‘PAG’) for Sustaining the Planet is chaired by the Group Chief Executive and meets every 6 weeks
to discuss progress, provide clarity on priorities, remove obstacles that might prevent progress, and make decisions if needed.
This makes sure that we stay on track to deliver our short, medium, and long term objectives.
The Climate Action Working Group (‘CAWG’) fosters collaboration between the various Business Units (‘BU’) of JM and
creates a community of expertise. Comprising enthusiastic and committed representatives from each BU, the CAWG
meets on a quarterly basis to collaborate on the Climate strategy and to drive a shared agenda forward. DFI’s Climate
Task Force teams regularly contribute to the CAWG, including sharing initiatives to reduce scope 1 and 2 emissions, and
learning from other Business Units that have already taken action.
The organisation’s processes for managing climate-related risks
The Climate Task Forces (‘CTF’) are responsible for the implementation of the plans needed to deliver DFI’s climate targets.
The CTF are sponsored by the group CFO and chaired by senior leaders: the Construction Director leads the Eliminating
Harmful Refrigerants CTF, our Supply Chain Directors the Reducing Fuel Usage CTF, our Facilities Management Director
the Reducing Energy Usage CTF and our Head of ESG Reporting the Tracking and Reporting CTF. The CTFs meet bi-weekly
and are supported by our Sustainability Lead, Head of ESG Reporting, and Senior Finance Director.
Risk Management
How processes for identifying, assessing, and managing climate-related risks are integrated into the
organisation’s overall risk management
DFI’s existing risk management approach adopts the ISO 31000 and COSO principles. The DFI Risk Management team
manage this approach, which consists of a bi-annual exercise, where DFI business units are required to revisit their respective
risk registers. This process entails the identification of new risks, the review of existing risks, and risk mitigation strategies.
These risk registers then form the basis of our consolidated view of DFI Group’s risk profile, and are reported for consolidation
at JM Group. Both Physical and Transition Risk have been integrated into this existing DFI risk management approach.
The organisation’s processes for identifying and assessing climate-related risks
In 2022 both Physical and Transition Risk workshops were held for the first time with senior business leaders, with the
objective of aligning on both DFI’s climate strategy and the planned mitigations to each risk. The results of these
workshops have been incorporated into the risk management approach, and these workshops will be held on an
annual basis.
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* These scenarios are in line with the Representative Concentration Pathways, indicating GHG concentrations used by the IPCC. RCP4.5, RCP 6.0, and
RCP8.5 correlate with temperature rises of 1.8°C, 2.2°C, 3.7°C by 2100.
The metrics used by the organization to assess climate-related risks and opportunities are in line with its
strategy and risk management process
In order to help quantify and prioritise climate risks, a risk assessment model has been established across 3 different
climate scenarios*: 1.8 °C, 2.2 °C, and 3.7 °C increase by 2100 (with financial impact of each of these scenarios over
the short, medium, and long term). We have chosen these scenarios as we understand them to be science based and
in line with the Representative Concentration Pathways used by the Intergovernmental Panel on Climate Change (‘IPCC’).
All of these scenarios are considered possible depending on the volume of GHG emitted in the years to come.
Transitioning to a net-zero economy will bring about regulatory, technological, legal, market, and reputational changes
that we believe will likely impact DFI in the medium to long term. These risks are higher in the 1.8 °C and 2.2 °C increase
scenarios. However, physical risks will likely be greater in the 2.2 °C and 3.7 °C increase scenarios due to increased
likelihood of extreme weather events.
Strategy
The impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and
financial planning
We believe that climate risks are emerging in the short term, but are most likely to materialise in the medium and
long-term. In response, we have formulated a strategy for responding to climate risk in the short term, and further work
is underway to mitigate these risks over the medium and long term. We understand that this is not fully consistent with
the additional TCFD guidance for all sectors, but we will continue to improve our disclosure in DFI’s 2023 TCFD report.
The resilience of the organisation’s strategy, taking into consideration different climate-related scenarios
The risk assessment model considers DFI’s store and distribution centre geographical footprint, where the exposure of
each location to extreme weather events is calculated by the likelihood of each of these events (increasing in probability
as temperatures increase over the short, medium, and long term in each temperature scenario) multiplied by the
potential financial impact of each event occurring in any given year. Potential financial impacts include owned asset
damage, and business and supply chain disruption.
Based on the outcomes of the assessment we have concluded that the financial impact of physical risks on our asset
values is not likely to be significant (