All due to "control weakness''.
According to CIMB, a shortfall in control led to an accounting issue which soured 2H12 results. More importantly, Dairy Farm turned in a sound operating performance. We see catalysts from easing competition in Malaysia.
FY12 results were 17% short of CIMB's forecast as 2H came in at 38%, below their and consensus expectations due to a reversal of Giant Malaysia’s supplier income, which had been booked incorrectly over the past few years.
Here's more from CIMB:
Notwithstanding the accounting issue, Dairy Farm did well in FY12. Sales (incl.100% of associates & JVs) rose by 10% to US$11.5bn.
Hong Kong performed strongly, with profit growth in all banners. Indonesia was also upbeat. The drag came from challenging operating conditions in Malaysia and a sluggish Singapore.
A final DPS of 16.5 US cts was declared, bringing total DPS for 2012 to 23 UScts (+10% yoy) or 69% payout.
The accounting issue was due to control weakness between the procurement (too aggressive in recognising supplier income) and finance departments of Giant Malaysia.
This episode was flagged by a whistleblower and we view it as an isolated event. Steps have been taken to tighten control and senior management changes have been implemented.
Excluding the effects of the reversed supplier income, adjusted core net profit would have risen 13% from US$450m in FY11 to US$506m in FY12.
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