TIDMDFI TIDMJAR TIDMJDS
RNS Number : 4109R
Dairy Farm International Hldgs Ltd
28 February 2019
To: Business Editor 28th February 2019
For immediate release
PT HERO SUPERMARKET TBK
FULL YEAR 2018 RESULTS
The following announcement was issued today by the Company's
85.8%-owned subsidiary, PT Hero Supermarket Tbk.
For further information, please contact:
Dairy Farm Management Services Limited
Neil Galloway (852) 2299 1896
Kirsten Molyneux (852) 2299 1884
Brunswick Group Limited
Zhou Yi (852) 3512 5042
South Tangerang, 28(th) February 2019
PT HERO SUPERMARKET TBK
FULL YEAR 2018 RESULTS
Highlights
-- Net revenue down 0.5% at Rp 12,970 billion
-- Strong performance from Guardian and IKEA
-- Food business Rp 1,380 billion restructuring charge following strategic review
-- Net loss of Rp 1,250 billion
Results
Full Year
2018 2017 Change
---------------------
Rp billion Rp billion %
--------------------- ---------------------- ------------ ------------ -------
Net Revenue 12,970 13,034 -0.5
Gross Profit 3,694 3,442 7.3
(Loss) / Profit for
the year Underlying 130 (191) n.m.
Restructuring charge (1,380) - n.m.
Total (1,250) (191) n.m.
-------------------------------------------- ------------ ------------ -------
Rp Rp %
--------------------- ---------------------- ------------ ------------ -------
Loss per share (299) (46) n.m.
--------------------------------------------- ------------ ------------ -------
Note: numbers are taken from the audited financial statements
except underlying profit. Underlying profit is Total profit minus
Restructuring charge.
n.m. = not meaningful
PRESIDENT DIRECTOR'S STATEMENT
Introduction
Overall our sales declined by 0.5% in 2018. There were solid
performances from Guardian and IKEA but these were offset by
persistent weakness in our Supermarket and Hypermarket business.
Like many other retailers, we face challenges as the food industry
adapts to shifts in customer preferences. Customers now want access
to products through a multitude of channels, in different formats,
ranges and locations and we are paying the price for historically
being slow in responding to changing consumer dynamics. This is
something we need urgently to address. There is an essential need
to reshape and re-energise the competitiveness of our customer
offer in our Food business, in order to meet changes in consumer
demand, while at the same time significantly improving the supply
chain, productivity and operating standards of our stores.
Strategic review
During 2018 we undertook a strategic review across our
businesses. While the review highlighted many opportunities to
improve our performance, the Food business was clearly the one
requiring the greatest level of focus. Change in our Food business
is now essential to enable us to compete well.
The biggest issue rests within our Giant brand, which has a
strong heritage but now needs to be reenergized to keep pace with
the preferences of today's customers. We need to invest in our
stores, increasing competitiveness, lowering costs and improving
productivity, to ensure that we have an effective and efficient
structure to serve our customers consistently well.
Tackling these challenges will take time. There will be few
"quick fixes" and no "silver bullets", but by implementing a
multi-year transformation programme and delivering long-term
improvements, supported by our team members across the company, we
will build a better, more profitable and sustainable business over
time.
Whilst we are making changes to the dynamics of our Food
business, we will continue to invest in the growth of both our
Guardian Health and Beauty and our IKEA home furnishing businesses,
which are performing well and have good growth potential for the
future.
Strengthening for the future
During the year we began the urgent work required to rebalance
our Food proposition to prevent further deterioration of our
businesses. We have begun addressing key areas where we have fallen
behind, most notably in store format development. As an example,
with stronger consumer insight and intelligence to analyse our
customer offering and product selection, we will make better
decisions on store space growth. We are also in the process of
redesigning our proposition in Fresh and Grocery and streamlining
General Merchandise and Apparel. We have pilot propositions already
underway and are redefining space and trialing a range of
innovations in our formats. This will place greater emphasis on
fresh food, range optimization and, where relevant, even
repurposing the space altogether. While it remains very early days
for our re-modelled stores, the initial customer response has been
encouraging.
Inevitably, there are significant adjustment costs associated
with this level of business correction but, in the longer term,
these essential changes will deliver the quality, service, value
and, most importantly, trust our customers expect. It will also
provide PT Hero with the greatest opportunity to deliver improving
and sustainable returns over time.
We remain committed to being a market leader and growing our
business in Indonesia. However, to be successful over the
long-term, we must realign and reshape our formats to ensure they
are fit for purpose and support the preferences of our customers.
By repurposing and remodeling our stores, we will build a stronger
Food business and the early progress achieved gives us confidence
that we are on the right track.
2018 Performance
Sales in Food declined by 5% to Rp 10,341 billion, with an
underlying loss (excluding restructuring charge) of Rp 157 billion,
Rp 276 billion better than in 2017. The significant challenges
faced by Giant Supermarkets and Hypermarkets resulted in lower
sales and increased losses, while our Hero stores contributed
positively to the business, as we raise operating standards in
quality, freshness, and availability.
Our Non-Food businesses performed well. Overall sales grew 21%
to Rp 2,629 billion, driven primarily by strong beauty category
promotions in our Health and Beauty businesses and supported by
increased visits to the IKEA Alam Sutera store, plus an increasing
contribution from e-commerce. This drove a 35% underlying profit
increase to Rp 380 billion.
We are very encouraged by the improvements in our Guardian
Health and Beauty business, which continues to provide a
significant growth opportunity. Having experienced trading
difficulties a couple of years ago, Guardian is now recovering well
and adding more network space to the store base. We plan to invest
further in the expansion and format development of our Health and
Beauty business in Indonesia.
We are also continuing to invest in our IKEA business,
accelerating the growth of our store network. We have also revamped
and relaunched our online platform. Construction has now started on
a second IKEA store on a site acquired in Jakarta Garden City, and
an additional site in Bandung has been secured. We are also in the
process of converting one of our Giant Hypermarkets into an IKEA
store as a pilot, in an effort to repurpose underperforming Food
space, while accelerating the development of the IKEA business.
Transforming Food
In recognition of the challenges facing our Food business, we
have taken decisive action to reset this business, which will have
a significant one-off financial impact on our reported 2018
results. We have impaired underperforming assets, written off poor
quality stock, and incurred various related business correction
costs in relation to resetting and reshaping this business,
allowing us to build for the future and draw a line under the
weakness of the past. In aggregate, we have incurred a non-trading
charge of Rp 1,380 billion to reset our Food business. It is worth
noting that the majority of this relates to non-cash items. This is
clearly a significant decision, but it is necessary if we are to
move forward, clear of legacy issues that will otherwise continue
to constitute a drag on future financial performance.
Restructuring charge 2018 (Rp billion)
Impairment of assets 1,287
Business correction costs 93
Total non-trading adjustments 1,380
Prospects
Looking to the year ahead, there is much work to do as we
address our many challenges, but I see distinct and clear
opportunities. Our comprehensive, strategic, fundamental multi-year
transformation plan is in place, and will move the company, and all
its potential, into a new era of retail. However, its successful
implementation will require time, effort, resolve and
determination.
Our business may be changing in the face of consumer demands,
but we remain firmly committed to offering the trust, quality,
value and service that our customers expect and providing valued
work opportunities to our team members. Through this transformation
we will build a more profitable and sustainable business, with the
right balance and mix in our retail portfolio, capable of
prospering despite the significant ongoing industry change.
Patrik Lindvall
President Director
28(th) February 2019
- end -
For further information contact:
Patrik Lindvall, President Director
PT Hero Supermarket Tbk
Tel: +62-21-8378 8388
E-mail: extcomm@hero.co.id
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END
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