![]() #### 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 12 #### Asian markets #### and territories #### 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 13 #### Asian markets #### and territories Figures as at December 2022 10,663 #### outlets (Including associates and joint ventures) 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$b 0 2018 2019 202220212020 20 15 10 5 25 30 US¢ 0 2018 2019 202220212020 US$m 300 200 100 400 0 2018 2019 202220212020 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-digitpenetration 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 FurnishingsBusiness 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 20212020 Underlying EBITDA Net Asset Value per Share 202220212020 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, AdviceImplementation 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. 46 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. 47 \* 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 (