DFI Retail Group Holdings Limited (D01) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the DFI Retail Group Holdings 2024 Half Year Results Briefing Conference Call. [Operator Instructions] I would now like to hand the conference over to your host today, Mr. Scott Price, Group Chief Executive of DFI Retail Group; and Mr. Clem Constantine, Group Chief Financial Officer and Property Director of DFI Retail Group. Please go ahead, gentlemen.

Good morning, everyone, and welcome to our 2024 half year results presentation. So I'd like to begin this morning by sharing some key highlights from the first half of 2024. We've reported an underlying profit of $76 million, which is a pretty healthy growth versus the same comparable period last year. As we've stated in our press release, a good portion of that profit improvement was in the food and convenience store, but as well reduced losses in Yonghui our substantial ownership in that China retail business. Overall, subsidiary sales were down 2% when you exclude the Malaysia food divestment impact, putting a little color around that revenue number because growth is important in retail. There was an unplanned change in cigarette taxes by the Hong Kong government. We are, obviously, as the largest convenience store seller chain in Hong Kong, we also substantially sell cigarettes. If you exclude the impact upon revenue from that change in cigarette sales tax, our revenue would have been relatively flat, pretty close to flat, which I take again, given some of the market dynamics as a very positive indication that as consumer confidence returns, we are well positioned. Very encouraging profit improvement for the food retail business, led by Singapore, where we have put quite a bit of effort in improving not only the overall store proposition, but also in talent. Food will see now a handover from Mr. Chu Pence, who has been with DFI for many, many years. Will retire in the coming months to be replaced by Curtis Liu. Curtis a long time Asia retailer food, including in Walmart. And so expect to see continued progress there. Our convenience stores posted double-digit operating profit. So Danny Pierce and the team have done a great job there. Yes, we've had a decline in cigarette sales, but it's low margin. They have moved very quickly to push a very strong ready-to-eat proposition with very high margins. As a result, you see the flow-through into our profit. Health and beauty has had some strong comparables. So last year, in particular, our main market of Hong Kong for Mannings, the government in April put out some consumption vouchers across the entire business. And as a result, we had a very strong profit, which obviously had an impact. But I would call out the fact that if you look at a 2-year stack, we're an 11% CAGR revenue on the Health and Beauty business. So again, a lot of opportunity moving forward. Home Furnishings, Martin Lundstrom and the team there, high interest rates, obviously continuing to mute growth in areas that generally tie very closely to people moving out. So kitchen renovations, bathroom renovations and heavy furniture. We do expect to see that to recover as interest rates come down and the residential markets begin to recover. Great growth in volume on our e-commerce. I'll talk a little bit more about that later, but a 40% volume growth and importantly, pivoted to a sustained model that ensures that our profit on e-commerce is not dilutive to our brick-and-mortar. Associate businesses overall delivered improving underlying profit. Those are quite different mixes of portfolios across Asia. So an interesting type of movement from those businesses. And then we have a pretty healthy reduction in our overall net debt position. So with that, I'm going to turn it over to Clem, who will take us through the financial results.

Thank you, Scott, and good morning, everyone. Let me take you through the results for DFI for the 6 months to the end of June '4. Let's start with revenue and underlying profit. Total revenue, including associates and JVs was at $12.6 billion, down 6%, primarily driven by lower sales in Yonghui and the divestment of our Malaysian grocery business, which we completed in March last year. If we exclude these, group sales were down by just 1%. Subsidiary revenues were at $4.45 billion, down 4%. But again, if we take out the divestment of our food businesses, sales are down by 2%. Our subsidiaries operating profit was at $121 million, up 40% on last year, underpinned by strong growth of CVS and Food, as Scott just mentioned. After deducting tax accounting and finance charges, our subsidiaries underlying profit was at $73 million, up from $40 million last year. Our share of associates and JVs underlying profit was at $3 million, a swing of $10 million from last year. And again, as Scott mentioned, primarily driven by significantly reduced losses in Yonghui. Underlying profit attributable to shareholders was $76 million, 127% better than last year, an encouraging $43 million profit swing. And net not trading items were $19 million, and this was largely driven by a $16 million one-off gain from Robinson's investments in the Bank of Philippines Islands, which was completed earlier in the year. Our reported profit attributable to shareholders was therefore $95 million, up from $8 million last year. Our underlying EPS was at $5.62 from 2.47% last year. And our interim dividend per share is at $3.5, up 17% on last year, demonstrating our commitment to driving sustainable, improved shareholder return. Let me turn to sales. And as I've mentioned, total sales were marginally down on the year. If we take them one at a time, and we start with food. Food sales were at $1.579 billion, minus 6% on the year and minus 2% on a like-for-like basis. Overall, food sales performance has remained largely stable, particularly in Hong Kong, despite the outflow of local residents to the Chinese mainland on weekends. Our convenience sales were at $1.168 billion, 1% on the year and down 3% on a like-for-like basis. But overall, what we've seen is robust sales in the Chinese mainland in Singapore, offset by lower cigarette sales in Hong Kong as a result of the tax increases in late February. Now if we take the cigarette sales out, we're actually at plus 4% in sales and convenience. So a pretty strong underlying healthy business. In terms of Health and Beauty, our Health and Beauty sales were at $ 1.211 billion level on the year and minus 1% on a like-for-like basis. Hong Kong Mannings second quarter sales growth was impacted by the strong comparables from last year due to the disbursement of the consumption vouchers back in April '23. But if we take those out, our Health and Beauty like-for-like sales are actually plus 1% on the year. Our home furnishing sales were at $349 million, down 13% on the year. And here, what we're seeing is the impact of recent consumer confidence in Hong Kong, a downturn in the property market and disruptions from the earthquake in Taiwan. Now in terms of our key associates Maxim's, Maxim sales were at $1.369 billion, in line with last year. And in essence, were impacted by increased outbound travel and reduced weekend dining out in Hong Kong as well as weak consumer confidence and sentiment in the Chinese mainland, but this was offset by good growth in expanding Southeast Asia businesses. Yonghui were a touch over $5 billion, down 13% on. Despite the lower sales in Yonghui, the underlying loss substantially narrowed as the result of cost optimization and ongoing rationalization of the store portfolio begin to come through. Robinsons Retail sales were $1.744 billion in line with last year, performing relatively well. Turning to subsidiaries operating profit. Our food profit was at $26 million, up 90% the year driven by significant profit recovery in our Singapore business and a resilient performance in Hong Kong. Our convenience profit saw a growth to $47 million, up $20 million on the year. And this -- we've seen through margin improvements across all our markets. So Beauty profit was $103 million, up $3 million on the year. And here, we've seen strong profit growth across all our health and beauty businesses despite a softer-than-expected tourism recovery in Hong Kong and Singapore and obviously, the large outflow of residents from Hong Kong. Home furnishing profit was at $3 million from $14 million, obviously impacted by the sales shortfall. Our SG&A ended at $57 million, an $11 million improvement on the year, and this was largely driven by significant cost savings in digital. Operating profit pre-IFRS 16 was $121 million, up 40%, a very encouraging profit performance. And operating profit post IFRS 16 was $168 million, up $41 million on the year. Our operating margins have now moved to 3.8%, a 100 basis points improvement on the year. Finally, turning to cash flow. Our EBITDA improved to $580 million from $542 million last year. Operating cash flow has increased to $155 million, mainly driven by the better profit performance of our subsidiaries. The group remains disciplined with respect to CapEx. $94 million was invested in the first half of the year, down from $104 million in the same period last year. Free cash flow was $61 million, a close to 40% year-on-year increase. And after taking account of investments and dividends, our net debt, as Scott has mentioned, has ended at $549 million, a $330 million improvement on last year, down from $883 million. Summary, despite a relatively challenging retail environment, we were able to grow our earnings and strengthen our balance sheet. Thank you. I'll now hand you back to Scott.

Thanks, Clem. I'd like to now review just an update around the business. Reminding everyone the DFI strategic framework, the same slide that we shared with you for second half '23, full year '23 in March of this year. Customer first, people-led, shareholder-driven, which is quite a powerful internal focus as well, important part of how we are allocating our focus in the business. On the customer first, it is a difficult, challenging time right now for consumers. So we see a lot in North Asia, a consumer customer who is quite nervous. They're very value focused, but at the same time, oriented towards convenience. So very pleased with some of the steps that we've taken around one, the proposition that we're putting across all of our formats, ensuring that we leverage a reset food own brand strategy through Meadows and ensuring that as we build a convenient digital proposition for our customers, we do so in a way that is neutral to accretive to our overall brick-and-mortar profit margins for the business, which to me is critical. I'll talk a little bit about how we're doing that. People led, moving much more to a reflection that our local leadership should reflect our customers. It creates in retail, the most powerful understanding of how we quickly anticipate changes in local tastes. So we are moving towards much more of a local leadership and then aligning to, I think, an important cultural pivot towards [indiscernible] leadership, where we keep our customer and our frontline team members at the core of all of our decisions in the business. In retail store, culture is critical, and we want our customers to feel that we have the very best people who are oriented towards serving them. In terms of shareholder, pleased with the first half EPS gains and where we are targeting our growth. We have prioritized over the next few years, growth across the formats and markets where we believe those sales have the highest return on investment potential for the business. Importantly, we're keeping an eye upon our overall ESG commitments on the sustainability, Scope 123 commitment. We are participating in a global forum, the consumer goods forum. I'm co-sponsoring the towards net zero forum as a relatively modest sized retailer in Asia. We cannot create all the solutions on our own. So as we think about protecting the future profitability of our business, how do we participate in platforms where we can leverage the scale, the knowledge and the expertise of global retailers to not only help us achieve our commitment but do so in a manner that maintains our shareholder proposition moving forward. Just moving into a little detail around each one of those. So on customer first, I think I call out the double-digit sales growth in the ready-to-eat for 7-Eleven. We've had some, I think, interesting growth in our ready-to-eat. 7-Eleven is obviously very powerfully known across our markets in Asia, in Japan. I think a large portion, greater than 50% of our customers have probably been to a 7-Eleven in Japan who are subject matter experts in ready-to-eat. We have collaborated with them, brought a lot of those menus. Some items for those who are familiar with Japanese food, Onigiri, we have a 90% growth in revenue. So again, as cigarettes play less in our portfolio from a revenue base, we have an enormous opportunity to replace that with ready-to-eat. We are seeing, in essence, the opportunity for our 7-Elevens to become convenient quick service restaurants, which is a different strategy for growth, but one that I think will become very attractive in terms of the economics moving forward. Our own brand is delivering much stronger margins. We have, I think, reset this program to focus on a much better product development cycle that is tied very much towards customer feedback and focus groups with a clear steely eye on scale and profit. We are going to be doing own brands unless they are margin accretive to our business. And as a result, we probably shrunk the portfolio about 15%, but significantly gained in margins. We're beginning to now leverage the yuu data. We have a lot of data. I'll talk a little bit later on that, but that data-driven assortment is not only helping us become more productive retailers. It's also offering to our vendors an opportunity for them to pay us to guide on much more effective promotions in the future. Our Health and Beauty services expansion, we, in fact, had a pretty significant milestone this month. We are partnering with a major insurer in Hong Kong that will now allow us access to 170,000 residents with pharmacy that will have a pretty significant improvement in terms of not only our food traffic. But in our experience, a pharmacy customer also stops to add 1 or 2 items to their basket. So we are beginning to focus very much on the pharma care market and as well looking for incremental services, and we'll begin to talk through those more in the future. We're accelerating our omnichannel presence across all the formats. We launched Food Panda in Hong Kong in May for our welcome food banner, and we are already hitting about $1 million in revenue that is profitable revenue a month. And so very keen to see that growth moving forward. And then beginning to follow best practices around the world with large-scale retailers offering a retail media opportunity for our vendors in store. And we'll talk a little bit more about that in subsequent slides. If I move into people led, of course, obviously, there is an enormous opportunity as a business for retail to have the greatest Net Promoter Score. But from, I think, a market perspective, obviously, that will allow us to, one, ensure that we keep a close eye on SG&A costs, which are down 17%. Part of that is just a good structure and cost structure, but also the savings in our digital business, which we have reset. I'm focused very much on what I think to be core aspects in retail of training and development, ensuring that we empower local leaders to maintain local competitiveness. There are, I think, some outflows of hiring the frontline team members that has a little bit of supply-demand challenge across employment around the world. I think we're doing quite well in that area. Improving our leadership diversity. We now have 40% representation of women in our leadership team, and that includes Crystal Chan who has just joined us as our new Group Chief Technology and Information Officer. Overall, we are up 71% at a senior leadership level of female representation. So making good progress to a good balance. And then just building robust local succession. That, to me, is where we will ensure a sustainable, profitable business into the future that we have a strong internal succession plan. On the shareholder-driven, disciplined CapEx investment. I think we have already talked through. We continue to monetize our overall balance sheet were appropriate for capital efficiency where we sell buildings, locking into long-term attractive rental agreements. Net debt down as covered by Clem, we've increased our dividend by 17%. We continue to look at portfolio optimization as we think about the TSR of the future. Hero supermarket being an example where we continue to divest businesses where we do not believe it can be accretive to our overall TSR. Just a bit on the formats. I think on food, we've talked quite a bit. A few things. One, market share gains in Hong Kong. If you look at the modern trade only, we are at a 53.9% in the first half. That is 130 basis points improved at 52.6%. We are pivoting towards a view on the broader food market in Hong Kong, which would include wet markets, which would include the online and the digital. I prefer to look at that aspect because we're only roughly about one per share 18% share. I'd like us to think about how we go from 18% to 25% with a broader value-based proposition over the next several years as we see continued decline in wet market traffic as we see customers continue to graduate to a more reliable environment with a broader basket availability, including dry grocery in the modern trade. So quite keen to see some of the progress we expect there. Singapore food, we have made good progress. We actually year-to-date, have shut 7 loss-making shares -- loss-making stores. So from a revenue, a minor share loss. But again, with a shareholder-driven perspective, we have now, I think, created a portfolio from which we can create a much better profit proposition moving forward. E-commerce, I talked quite a bit about the double-digit growth, strong partnership, Foodpanda and quite excited about the opportunity that brings from a quick commerce, quite a different proposition, roughly a 35-minute delivery that we're getting across that revenue. And then our own brand, helping us, in particular, for customers who are value oriented, generally owned brands are at least 10% cheaper than the national brand and equal quality for us, a better gross profit. And then finally, the divestment of Hero. Moving on to convenience stores. As mentioned, when you removed the cigarette, a 4% like-for-like growth, which is, I think, very strong. There is an enormous opportunity, I believe, across 7-Eleven as we pivot towards a much more profitable, much more traffic driving ready-to-eat proposition. You see that in our profit growth of 73% year-over-year. The RTE is obviously a huge driver of the margin expansion and significantly better than cigarette margins. So happy to see the off-balancing where cigarettes come down and RTE goes up into the long term. The QSR market is where, again, we see ourselves competing. For example, in Hong Kong, the QSR market is roughly valued at $4 billion. We have 1,000 stores. So we have an enormous footprint from which we can offer, I think, a pretty exciting convenient proposition of both cold and hot foods. Profitable e-commerce, good digital touch points are planned. We have a number of apps that are being launched for each of our banners across South China. We've added 12 new stores, 1,765. We have a relatively minor share in South China. We are expanding through franchise. So expect to be growing in the 100 to 150 store a year into the future through franchise, which is a much more attractive return on capital, but also revenue growth as we think about how franchise store participation can help grow the business at a better shareholder return. Health and Beauty, we've talked about the one-timers 1%. That 11% CAGR over the last 2 years, I think, is a reflection of the underlying business. We do make good progress, I think, across services and corporate pharma relationships to grow traffic into the store. We continue to gain share across key Southeast Asian markets, which skew a little bit more towards beauty and derma than health. These 2 will mature into the future. Southeast Asia overall has been helped by a very strong performance in Indonesia. We are gaining share and see, I think, enormous upside opportunity into the future. Own brands, taking the best practices we've achieved over the last year in food, we're now applying to the health and beauty. I think, again, great opportunity to offer value to our customers relative to those who are looking for an option to a national brand with accretive margins to our business. Opened 37 stores and great growth in terms of the overall e-commerce. Home Furnishing, look, we're doing the fundamentals to make sure that, that business is very strong. This too will turn. This is really the most significant, in particular, North Asia challenge relative to the macro environment around residential. And I think that we are confident that we're in the right business with the right assortment. We're doing smart things in the interim as we think about how we ensure we continue to gain share during this time. We've taken some great cost initiatives. We can focus upon food. We're making sure that we are ready when the markets turn to continue to invest in the home furnishing. So I'm long on IKEA and home furnishing. Right now, we're going through 1 or 2 decade flat to decline, but this to me will turn. I mentioned a little bit about our O2O. We have completely reset our digital business and built out an ecosystem where it's very much surrounded around the yuu platform -- the yuu platform. Across all of our subsidiaries, if you think about the left direct distribution and the right, we're now at 52,000 orders a day, which is up 40% year-on-year with significant improvements across our profit contribution. We're continuing to launch other apps as we move forward. Some notable callouts. The 7-Eleven direct distribution on the left, we have recently launched a preorder shop, which allows for a pretty substantial collectibles business to become even more convenient that collectibles business drives quite a bit of traffic into store. On the WeChat bottom left mini program, we now have an 8% e-commerce penetration in South China. Overall, on the third-party platforms, the list here is not exhaustive. We are on more platforms, but the emerging quick commerce as being quite a different approach, which actually for brick-and-mortar retailers, we're going from the centralized fulfillment center kind of mindset to quick Commerce, which brings us back to brick-and-mortar and store fulfillment as being a competitive proposition moving forward, fulfilling a different customer mission. yuu monetization continue to be very excited about the opportunity here, beginning to leverage the power of our data now to enhance not only internally, our overall opportunity to run a better business. If you start with the customers on the left, we have 5 million members now in Hong Kong, 70% of the adult population. We have 1.7 million in Singapore and growing and continue to build out the partners. Our vendors are becoming quite interested in actually the monetization opportunities we offer them in terms of selling them data to be more productive in their overall promotions, but as well the opportunity to launch media not only on our app, but also in-store as we build out an omnichannel proposition in our stores. And then finally, again, on productivity. Helping our merchants run better category reviews to increase by category by bay in store. The overall gross profit, we've recently done quite a successful launch in yogurt, which is becoming quite a north star for everyone in terms of the opportunity, bringing encouraging sales and gross profit. On the retail monetization, we're really just following over a decade of best practices, again, not an exhaustive list, but retailers who have moved into the media area. This is relatively untapped in Hong Kong, where the vast majority of the digital market is controlled by Meta and Alphabet. So we believe we bring quite a unique proposition here and again, an opportunity to ensure that the profitability of our digital ecosystem, including e-commerce is shareholder and margin interesting long into the future. Finally, I'm going to turn it over to Clem who's going to give us a brief review on our business outlook.

Thank you again, Scott. Now in terms of our full year 2024 outlook. We are encouraged by the relative resilience of our business. It certainly demonstrated that over the first half. That said, we continue to face challenging trading conditions in the second half. And as a result, we expect our subsidiaries revenue for the second half to follow a similar growth trend to the first half. With respect to the other metrics on this page, we see no change. Underlying profit attributable to shareholders, we still guide at $180 million to $220 million. CapEx, $224 million to $240 million. Our net debt, continued reduction, you've seen that here and absolute dividend growth. And again, you've begun to see that here. So with that, I will now move the session on to Q&A. Ray, can you please go ahead?

[Operator Instructions] Our first question comes from Chee Zheng Feng from DBS Bank.

Just 2 questions here. So the first one would be on your guidance range. So what's the broad thinking behind the low end and high end? So essentially, what you believe we have to see in the second half to see at the low end and the high end? So that's the first one. And the second one, with the first month of third quarter over, maybe you could share some broad color on what's happening in the retail chain, especially in Hong Kong after this, I would say, somewhat soft second quarter, which was affected by weather?

Clem, why don't you cover off guidance, and I'll talk a little bit about Q3.

In terms of guidance, I mean, the range of $180 million to $220 million really reflects what may or may not happen in the second half around our sales performance. I mean you've seen the first half being quite sluggish. We had the benefit in the first half and the first quarter of effectively trading against pre-COVID for the first couple of months. And Q3 and Q4 of last year was new to us in terms of COVID restrictions released, borders opening, people traveling. So it's quite difficult to guide to a range. And we just feel, given the kind of macro uncertainties and the fact that we're still in a high interest rate environment, and we still have this high outbound travel that's having a guidance of between $180 million to $220 million is where we think we will land. We obviously want to end up at the higher end. But it just gives you a range.

And in terms of the initial sort of month of Q3, I mean, obviously, we don't want to take 1 month and project across an entire half. But we have, I think, 3 aspects to the revenue in the second half that we saw in the first half. So first half, in terms of an underlying, we're going to have to remove the Malaysia divestment from our revenue. The second is the ongoing impact from the cigarette tax. Relative to that, you would have seen a pretty flat revenue in the first half of the year, Q1, Q2 net. I think that customers and consumers continue to be very nervous. There's a lot of talk about going across the border from Hong Kong into Shenzhen and from Singapore into Johor Bahru. I've done that trip myself over the last couple of weeks to really understand the underlying risk there. I think it is a bit trendy. Ultimately, though, daily shop across our portfolio other than home furnishing is really around convenience and fitting it into your life. So I do think that we'll see a value push, which means volume is not going down. People aren't going to eat less or bathe less, but they're going to be looking for more value, whether it be owned brands. So revenue will, I think, continue to be modest for the second half. But I think consumer confidence in some of the macroeconomic, I think interest rate moves across the world could affect that both positively, but potentially negatively, which is why we continue to hold to a similar trend to the first half as being probably the most likely outcome that we can see today.

[Operator Instructions] Our next question comes from Selviana Aripin from HSBC Global Research.

My question is with regards to your retail media path to profitability, how would you think about the path to profitability? And I guess, probably a related question to that is your guidance for 2024, does that include assumption around profits for retail media? So that's broadly my first question. My second question is around digital spending? I know you mentioned that some of that SG&A sort of declined is because of significant cost savings from digital. Now in terms of cost spending, I understand that there is a change in how you actually approach the digital side of initiatives. But I wanted to understand, I guess, how should we see the trend for the rest of the year? Like are we expecting -- should we expect single-digit decline, double-digit decline from a nominal dollar perspective? How should we think about in terms of the numbers?

Could I clarify when you say single double-digit decline in what the…

Percentage. Probably that's my question. When you talked about cost savings in digital, are we actually talking about spending less? Is that the right -- is that how we should understand it? Probably that will help to clarify.

So in terms of your first question on Retail Media, we are in the emerging days of this area. We are, I think, obviously taking on some pretty powerful competitors in the digital only. And so we're being thoughtful around our revenue projections at this point. And so I think if I think -- if I look at the next 6 months, it will not yet be material. It is included in our forecast. This is a long game, and it is a combination of the opportunity to leverage the 3 million active users on yuu. The fact that we are now going to have an app for each one of our banners as a portal or as a screen that will offer media. But what I get excited about is combining that with the in-store as we begin to build our omni experience where in store, we have the ability to place appropriate technology and screens to sell media as well in stores, that the totality of that, I think, over the next few years will be material. I think that as we go into maybe 2025, we will be able to add a little bit more color as to what we think from a multiyear forecast, how that will play in. So we share it with you only because we think it is a competitive opportunity given the unique nature of yuu not ready yet to put revenue or profit around that. In terms of digital, we are growing the digital business. And what I would say is that we were on a path that the cost per transaction was going up, not down. And that's not good. And when you step back and you truly look at what are the customer missions and what is the assortment we can win with, we trimmed our sales to be a little bit more focused upon where we believe across our formats, we have an opportunity to win versus other players and instead focused upon scale opportunity to bring down the cost. The economic model that we are planning is that we have the ability to ensure that when you add data monetization, retail monetization and obviously, the dilutive nature of an e-commerce basket. Look, 10 years ago, the customer did the fulfillment in the last mile delivery for free. Now someone else is doing that and delivering it to the customer. Some instances, the customer is collecting it, which eliminates part of that cost. Offsetting that cost with our data monetization and media monetization means that we should achieve e-commerce transaction growth that is neutral to the brick-and-mortar margins. As a result then, rather than the challenge of brick-and-mortar businesses who are trying to figure out how to manage growth in a dilutive e-commerce transaction, we will be happily building it because it is neutral to slightly accretive. So the pivot is bringing down the cost per transaction, which was our previous trend. Thus, you see a 40% growth in transaction volume with improving profitability. We're not at a point to talk about buy format profitability of digital baskets maybe at some point we are or will be, but aren't ready today.

[Operator Instructions] Our next question comes from Adrian Loh from UOB Kay Hian.

I just had a couple of questions around your key associates. In terms of Maxim's, could you just give us an idea what are the various countries and brands that you are opening into and how that growth is coming through? Second question is around Yonghui. I just wanted to ask what is the level of, I guess, management integration into DFI and how you guys are engaging to try to, again, drive that sort of turnaround to see profitability in that business?

So on Maxim's, obviously, in a time of soft consumer sentiment and an overall decrease or flight to value when you have a broad portfolio of brands at various price points like Maxim's, you do have sort of an impact at the upper end, moving a little bit to the lower end. Overall, if you look at the northbound consumption from Hong Kong, their core market into Shenzhen China, which does happen to be some of the weekend entertainment behavior. We have seen a soft performance in North Asia. But in Southeast Asia, we are seeing some good growth across the portfolio. So as you look at the capital allocation model, Maxim's sensibly is focusing new store growth into Southeast Asia, where we have, I think, a relatively good start to a business. We have, obviously, for North Asia, a seasonal mooncake. This is going to be an interesting year in terms of how gifting holds up in China, in Hong Kong because the mooncake has traditionally been a very strong part of the Maxim's portfolio. So in general, I think Maxim's is holding up much like we are very much focused tightly on cost control, sensible investments and putting capital into longer-term growth opportunities with opportunity for share into the future in Southeast Asia. On Yonghui, look, I think China is a challenging environment, and I've spent quite a bit of time in China and have had the opportunity to have conversations with both the chair of Yonghui, other Board members and management. I think that in general, hypermarkets, and of course, we are not the only hypermarket chain through Yonghui are having to reposition themselves as the digital takes over quite a bit of the general merchandise. There has been, I think, a recent announcement by Yonghui around a tie-up with a retailer called Donglai out of Hunan-province -- and I was there just last week myself looking at those stores. And I think it's quite an interesting proposition. And I think that some of the transformation plans at Yonghui has underway gives me confidence that they are on the path to be one of the winners of what needs to occur in China as the overall large-scale hypermarkets reposition themselves moving forward. So we support as appropriate. We are not a majority shareholder. Yonghui is publicly held. So obviously, we have to be thoughtful around how we speak of Yonghui. They have an independent process by which they manage results. But I am becoming quietly confident in Yonghui pursuing a path to be an accretive part of the DFI portfolio into the future.

[Operator Instructions] There are no further questions at this time. I would now like to hand the conference back to your host today, Scott and Clem. Please continue.

Thanks, Ray, and thank you, everyone, for joining. Again, I think a pretty strong first half result in terms of how DFI and a rather large portfolio of format has performed across markets that are a little bit economic challenged. But as I look at the fundamentals that we're putting in place, the fact that we are gaining share in this environment, I believe that we will see consumer confidence come back, and we are taking the steps to ensure that in that process, DFI will continue to be not only a winner, but the result of our portfolio allows those who invest into our business to have a nice position in terms of a format and market exposure through the DFI share price. Thank you very much for joining us, and we look forward to sharing the second half first year results in the future.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.