Morning, everyone, and thank you for attending the DFI Retail Group 2026 half-year results presentation. I am Karen Chan, Strategy and Investor Relations Director. Joining us today is Mr. Scott Price, Group Chief Executive Officer, and Mr. Tom van der Lee, Group Chief Financial Officer, who will be providing prepared remarks on our half-year results, followed by a Q&A session. Today's presentation is being broadcast in its entirety. In addition, the full deck of results and presentation slides are already uploaded onto the IR website. Before we start, I would like to remind you of the following forward-looking statement. The information about to be presented is for information purposes only and is not intended to be investment advice for any person. There is no intention to invite for any dealings in any securities.
There may be forward-looking statements mentioned in the presentation materials, which include statements regarding our intent, belief, or current expectations with respect to the company's business, operations, and market conditions. You are expressly advised not to rely on these forward-looking statements as they are subjective views, which are subject to risks and uncertainties. With that, I will now pass the mic over to Scott. Scott, please.
Thank you, Karen, and good morning, everyone. Welcome to the DFI first half results. Let me first take you through some key highlights. Overall, solid performance on revenue, a consistent improvement in our like-for-like, and that includes a 3% with the impact of cigarettes as well included, and quite pleased with that performance. Overall margins improved across for the most part in the business. We are comfortable where we sit and on our way towards the midpoint guidance that we gave in December of last year in our Investor Day. So see margin expansion as an opportunity continuing moving forward. Health and beauty deepened its penetration of wellness products. For those of you who have attended previous events or have been to one of our stores with the derma, we see great margin opportunity coming out of the health and beauty.
Convenience and home furnishing through 18-24 months of effort behind not only assortment but also investment in pricing. Both of those formats return to growth. Our Hong Kong food business, where 18 months ago we sat at roughly a 15% premium to a basket in Greater Bay Area, Shenzhen four formats. We sat at about a 3% discount. So we have removed the value of anyone going across the border. During the first half, we gained volume share, meaning absolute volume. We are going to look now through our efforts at that increased traffic to gain value share moving forward. Access to customers continue to open stores and focus on CapEx light in South China and Indonesia. The digital ecosystem, I will talk about that in a few more minutes in more detail, though, that I think has done very well.
And we will talk a bit about not only the retail media, but the overall digital ecosystem P&L. Lean and agile, we continue to drive everyday low cost. It is an important part of our business model that allows us to not only take those savings to invest back into pricing for customers, but to also invest in increased margin for shareholders. Finally, we end the first half with a very strong balance sheet, allowing us, therefore, flexibility as we see inorganic opportunities moving forward. A bit more highlights in terms of the key financials before I turn it over to Tom. Overall, underlying profit increased 44%. Subsidiary revenue grew 4.3% or 3% on a like-for-like. Very strong health and beauty performance in terms of market share gains across all of our key markets.
Convenience store like-for-like at a +2%, driven by the higher margin ready-to-eat and exclusive collectibles versus the replacement of much lower margin tobacco sales. We did, as I mentioned, invest in pricing, and achieved in Hong Kong, a 0.5% like-for-like growth in the second quarter, even though overall for the first half, it was flat. Very strong performance in IKEA. We put quite a bit of work in that, talk about that in a couple more minutes, but a 4% growth like-for-like in a category that is generally seen as challenged. I think we have the right formula there. E-commerce, DFIQ Media, 35% of our revenue growth. Now that ecosystem is margin accretive to stores, meaning that the margin out of that digital ecosystem is higher than our store margins. 6.9% penetration of e-commerce, and we have 300% increase in our DFIQ Media.
Excluding the impact from cost reallocation, we declined 15% our SG&A. Again, as I said, a consistent and constant focus upon everyday low cost. Finally declaring an increase to our interim dividend of 77% to $ 0.062 , and reaffirm our guidance on a 70% dividend policy. With that, I am going to hand it over to Tom.
Thank you, Scott. Let me take you through the key financials. Starting with income statement, a very strong first half of 2026. It shows that we are delivering a strategy which we set out at the Investor Days. This puts us firmly on track to deliver the top end of our 2028 guidance we have given last year in December. To ensure an apple to apple comparison, we provided a restated 2025 base that excludes the divestment of Singapore Food, the closure of Mannings China, and the disposal of Robinsons Retail.
Starting with revenue from subsidiaries, $ 4.1 billion, up 4% year-on-year. The same for Maxim's, $ 1.4 billion, also here up 4% year-on-year. Both Maxim's and subsidiaries, strong growth on top line. On the underlying profit from subsidiaries, $ 101 million, up 49%, that is on the back of a strong earning recovery of IKEA, food and lower SG&A and financing cost. Maxim's is up 15% to $16 million, and it gives a total underlying profit of $117 million, up 44%.
As you can see there, bottom the interim ordinary dividend per share is $ 0.062, that is up 77%, and it reflects a more even distribution to the interim dividend and the full year dividends. We still reconfirm our guidance of 70% full year payout on dividend. We can pay more in interim because the momentum is very strong, cash generation is very strong, and we are able to pay out this in October. Going into a bit more detail on the sales slide. You can see here we continue to deliver a strong growth in margins and returns, all of which are key building blocks for driving our TSR. Subsidiary like-for-like sales showed a consistent improvement with 3% growth in the first half of 2026. Strong momentum in health and beauty, return to growth in convenience and home furnishing, as well as continued improvement in food.
Some comments on the key formats. Health and beauty, 8% growth or 6% like-for-like. We continue to gain share in wellness, strong tourist and airport sales store growth, e-commerce growth in Southeast Asia. On a constant currency basis it is up 7%. On convenience, 4% up like-for-like or 2% on a like-for-like, sorry, 4% total, 2% like-for-like, and here the focus on higher margin, non-cig categories with RTE being the focus. Cigarettes though have stabilized, so cigarette sales stabilized year-on-year. Food, broadly stable if we exclude the divested businesses. We see continued improvement in the second quarter of this year, on the back of our EDLP pricing in Hong Kong, and that supported a 1.2% volume growth in the first half, despite ongoing pivot to value for our consumers.
Home furnishing, a very sharp turnaround, initiatives in price investments, expanding our food range and online presence resulted in 4% like-for-like sales compared to a 6% decline in the first half of last year and a 3% decline in the second half of last year. A turnaround for IKEA. Maxim's up 4% on the back of strong sales in Southeast Asia and a return to growth in China mainland. Hong Kong though was quite soft for Maxim's. We go to profit, operating profit by format. As part of our overhead optimization exercise, our cost reduction exercise, certain resources have been reallocated from the group to a format level, and that drives greater agility and more accountability. As a result of that, we have restated also prior year figures to make the year-on-year comparisons easier and understandable.
Starting with health and beauty, operating profit of $109 million, up 2% year-on-year. The margin though declined slightly with 40 basis points mainly because intensified competition in Malaysia and the growth of online from third-party marketplaces like TikTok and Shopee. However, we are confirming that the guidance we have given for 28, 9% to 11%, we are on track to deliver that. You will see the second half is going to be better than the first half for health and beauty. Convenience up 2% to $37 million with margins broadly stable. Food, here operating margin reached $17 million or 27% up year-on-year, and the operating margin improved 30 basis points year-on-year to 1.5%. In Hong Kong, margins are stable as we invested in price, and the price investments were paid for offset by lower cost price.
We do more direct sourcing with lower cost prices that help us to pay for the margin investment in price. Also, very strong cost discipline in the format to keep operating costs low for the first half. Cambodia, it doubled the operating profit on the back of double-digit growth of sales and strong improvement in margin rate. IKEA, the strongest improvement, 85% up year-on-year to $115 million for the first half. Top-line growth strong and cost optimization both on rental and overhead across the business drove the underlying performance for IKEA, and the operating margin rose 200 basis points to 4.3%, a strong performance for the first half for IKEA. We then move on to the sub profit and underlying profit.
The underlying profit for subsidiaries is $101 million, up 49%, at a 2.4% margin, up 70 basis points against the same period last year. The key drivers, one, earnings recovery in our key area of food at a higher level before, the SG&A savings, improving economics for digital, including retail media, and our reduced financing costs. The total underlying profit, including Maxim's, went up 44%, $217 million for the first half of this year. SG&A costs decline on a like-for-like basis, 15% year-on-year. We expect more reductions to come in the second half and the next years. Cash flow. Operating cash flow up 16% for the first half of the year. Free cash flow is slightly down to $85 million. That is because we have stepped up our CapEx in line with our full-year forecast, and I will share a bit later on where we have invested the CapEx in.
As we said in the Investor Day last year, our capital allocation principles are firm, and we follow those. Those principles are, we first invest in our core, so making sure we continue to renovate our stores, continue to grow our stores. We invest in the future. We are investing in AI and digital to make sure the future profits are secured. We are growing our dividends in line with our policy and our top-line and bottom-line growth. We pursue only TSR accretive M&A. If we cannot find those, we will return the money back to the shareholders. Capital expenditure. I have now shared a little more breakdown of where we spend the CapEx on. The CapEx is up to $93 million, in line with our full-year guidance of $200 million- $220 million. We are on track to deliver that commitment.
We invest in a few key areas. If you look at omnichannel and technology, that is the first dark blue building block. We added 1,200 screens in our stores in the first half for retail media. We have now 11,500 screens in all our stores across all our markets, on track to have 18,000 screens by the end of 2028. We invested in AI-enabled replenishment technology in all our markets. We are rolling out electronic shelf labeling, or ESL, in Hong Kong, in our Wellcome that helped us to reduce our store labor and improve productivity. On store refurbishments, we renovated 157 Mannings stores to drive wellness. For food, we are remodeling our larger stores in Hong Kong, driving top-line growth. For convenience, we have larger refurbs in Hong Kong. We added 128 new food bars in China.
Last, for new stores, we opened 119 new stores in the first half of this year, up from 154 in the first half from last year. We also closed some stores, but the CapEx represents the gross investment in new stores. On shareholders, as announced earlier, our interim dividend will be $0.062 . Again, our full-year guidance will remain 70%, but that is a better balance between the interim and the full-year dividend. The return on capital, 11.7% in the first half, up from 9.4% end of last year. We are on track to deliver 15% by 2028, as we shared and committed in our Investor Day last year. With that, I turn over to Scott for the strategy and updates.
Thanks, Tom. Just want to spend a few minutes on the operating segments in a little bit more detail. I will start with health and beauty. 8% growth in sales. Obviously, we have opened some new stores, so the like-for-like store sales is +6%, representing market share gains across all of our key markets. Interestingly, Hong Kong and Macau growth at +5%. One is the wellness leadership, but also now we are seeing higher value tourists come back to Hong Kong. Our tourist stores had revenue growth of roughly 10%. I think that this is a bit of a trend that we are seeing, which is people are still traveling, but they are traveling closer to home. Southeast Asia business, very pleased with the growth that we are seeing there. +9%, and you will see in Indonesia and Vietnam, we had close to a 20% like-for-like growth.
We are seeing a pretty significant positive reaction to the health proposition that we are bringing forward, wellness. Gen Z, which a few of you probably in this room are Gen Z, maybe at the outer edge of it, far more attuned to wellness than necessarily previous generations. Exclusive distribution now announced with Holland & Barrett, which is a great brand. We are very pleased with that and believe that that will be a great part of our assortment as we expand that across several of our markets. In store, coverage now has expanded across our skin and scalp assessment tool, so that is an AI-driven tool that we developed in conjunction with Samsung. As I mentioned previously, a significantly higher basket value than a customer who does not participate. We have done about 20,000 of those. Over a 20% improvement, our own brand offers value in key commodities.
Although we are expanding into wellness, we are keeping in mind the value-based customer. Our own brand plays that position in the assortment and a great improvement in productivity. Importantly, though, in margin as well. Opened 41 stores in the first half. We will continue on that path, including two new franchise stores in Indonesia.
We are working very hard to ensure that the Indonesian market will have a profitable franchise model so that as we expand that out across second-tier cities, we have confidence that franchisees will become long-term businesses as opposed to in and in and out. Again, margin doesn't concern me at all. We strategically invested in the Malaysia business. We have a competitor who likes being number one. I am competitive. I would like to be number one. We are strategically investing where it's necessary. We have the margin flexibility to be able to do that in Malaysia.
Again, it was a thoughtful investment, and I think the right investment. Moving on to the convenience format. Again, as I mentioned, great performance as we return to growth, 4% year on year, 2% like for like as we increase our ready-to-eat sales penetration, which is now 24%, or if you exclude the cigarettes from our revenue base, a 34% penetration. It was very small a couple years ago. We have done a great job of bringing in a bit of the Japan themes. It seems like every second person in Asia, every other person in Hong Kong has been to Japan three times this year. Clearly, there is an affinity and we believe that that is having a very positive impact. Overall, Hong Kong like for like, great final impact in terms of putting behind us 10 consecutive quarters of decline.
The team there did an outstanding job pivoting away from, not too many years ago, guys, we were 50% of our revenue in convenience stores was cigarettes. Very low margin, but that is a revenue driver. We have now balanced out that assortment with not only a high level of ready-to-eat penetration, but collectibles. I am not the customer. I still don't get Labubu. But K-pop, these sorts of collectibles, it's bringing new traffic, new customers, and I think a new energy to our Hong Kong stores and it's going very well. Overall, Singapore, again, a great performance, 8% with same collectible strategy and as well some great promotions. We increased our store base by 112 in South China to nearly 2,000 and see a pathway to continuing to invest. We really, in Guangdong province, have just the three main cities covered.
We see lots of opportunity now to expand out and broaden the portfolio. Overall, the food bars are going well in southern China. We are giving QSRs a run for their money in terms of value meal. We have the convenience of the click and collect as well set up. We have tens of thousands of orders a day. I think that's right. 110,000 orders a day across our stores of click and collect each day of a convenience meal. You pick up a breakfast and a coffee or a breakfast and a beverage, pop in, grab it as you're on your way into the office. Good growth of online sales. Generally, this has been dilutive. I will talk about that in a couple of minutes when we get to the omni, but we are very pleased with the performance here.
You have to meet the customer where the customer wants to be met. These offline stores that refuse to engage with platforms and digital are not, I think, playing the right strategic game. Overall higher margin categories in franchise stores means that we continue to see opportunity to increase our margin as we think about the next couple of years to the guidance that we gave in December of last year. If I move on to food has probably been the most challenging format over the last couple of years as we have dealt with not only a divestment, but also just the fact that you see now, in particular in our market of Hong Kong and Macau, you have Shenzhen and Zhuhai right across the border, and a relatively convenient way to go and shop.
There was a lot of noise, say 18 months ago, about that traffic happening. Overall, we have done well. I am really pleased with where we have landed. We were not in a good competitive position 24 months ago, 18 months ago. I think we are in an incredibly good competitive position. If you were to look at overall continuing a 1% growth, like for like +0.5% in the second quarter, we are accelerating the improvement. Volume share first, then value share second. Big price investments as a result of resetting our structure of our supply chain and where we source our goods. Hong Kong has been controlled by lots of trades and middlemen and various and sundry exclusive partnerships. We have worked our way around those, gone direct, meaning that we are able to get much lower costs that we can pass on to our customers.
That margin has now been protected through that direct sourcing. From 18 months ago when we were about a 15% premium to Shenzhen, if you pick, say, 250, 200 items, biggest selling items in Hong Kong, and you went across the border to Shenzhen and picked four retailers, and you shop there, it was 15% cheaper to go across the border. Hong Kong is now 3% cheaper. Now, one would say, how does that happen? It is because those retailers have to use the higher margin tier one city to pay for some of their lower margin loss-making tier two cities. We do not have that problem. We are only in Hong Kong. We have got the ability to deliver not only to our customers, but also to our shareholders. See margin expansion is a great opportunity as well for the food business.
Accelerating our omnichannel with a 35% increase in online orders. Quick commerce, which are smaller baskets, but we are able to charge a premium, is a good part of that growth. Finally, our Cambodia business is just growing by an extraordinarily high level. We are very pleased with that business. We are the only real modern food retailer in Cambodia, and we are seeing great financial performance. Finally, onto IKEA. Last but not least, it has been, the last few years, a bit of a problem child. The reason being that we did not necessarily have the right assortment at the right pricing with the right proposition. We did not necessarily have the strength in the categories that we needed to have in. Great credit to the team that has been running this IKEA business. A strong turnaround. Like-for-like sales growing at 4%.
That was negative 6% a year ago. Hong Kong, positive growth of 3%. Big pivot upon value, local relevance, food. Hong Kong, years ago, launched the durian ice cream. Another thing I will never get. In any event, we have taken that concept of how do you take the intersection of Scandinavian life and local taste, and create some interesting food opportunities, which we're driving, including Swedish-themed breakfasts in our stores. We're now seeing the traffic, and we're now seeing the progress from that. Taiwan, again, continues to be a stronghold for us, a great growth, and we see store expansion. We do not have yet the penetration that we could in terms of number of stores. We're back into investing in store growth in Taiwan. See, again, omnichannel, where we went on to Shopee, first-ever franchisee where we went out and put our proposition.
We have stores in Jakarta. We have stores in the major city. It's a huge country, 250 million+ people. We can't possibly get into all of the islands. Shopee is profitably allowing us to expand. Good food innovation, as I mentioned, and that Nordic theme, Scandinavian theme is drawing some great traffic into our stores. Overall, think that we have got through some of the efforts that we've made of divesting or eliminating assortment that was not relevant to our Asian markets, investing in items that, in collaboration with the franchise, I think have had powerful impact. People still want little treats, right? Still again, the number one selling IKEA item across our Asian markets. Again, I don't understand. Lamps. Why lamps? Don't know. If it makes you feel good, we'll sell it to you, right?
Again, that allows us to have deep insight as to how the average consumer is really starting to understand where can they afford to give them some treats. Apparently, I was on CNBC a little bit earlier, and I didn't know this, but apparently, that's the first thing decorators start with, their lamps. So there you go. That explains it, and we have got lots of great lamps at IKEA. Then again, we are focused on the portfolio and closing stores that we do not think are profitable. Finally, just wanted to talk a little bit about our digital ecosystem. We've talked about it quite a bit. Our digital ecosystem is made up of all of our e-commerce transaction, generally diluted. For 50 years, the customer did the fulfillment, the last mile of delivery for free. Now you got to pay somebody to do it.
You take those transactions. We have worked very hard at investing in technology that helps us make that very efficient. That business is relatively break even. For the first time after five years, we have now pushed that into break even. But the ecosystem is then made up of the yuu profitability, our retail media profitability, and the ability to, with 20 million transactions a week, we've got the ability to know more about our customers, and we're able to sell that data. That ecosystem was 35% of our revenue growth and is a higher margin than selling product in store. To me, this is what represents what a true omnichannel player does. What right do we have to play in media? It's a bit challenging in Asia. Very fragmented market. The media buying agencies generally do Pan Asia.
That led us to the decision to buy Cody. Cody is the advertising agency that controls, contractually, all of the media that you see on the buses, the KMB buses, and the subways here in Hong Kong. It was a little bit hard to break in. Now what happens with the close of this business, we see an opportunity to be able to bundle deals. New product launches, promotions, whatever it is, they come in, they want access there. We then add it with the thousands of screens that we have in store across our formats here. Giving us, I think, quite a competitive advantage to be able to really move quickly in Hong Kong in terms of retail media. It's a minor investment.
I don't know that we've announced the investment amount, so I'm not going to say it, so I don't get into trouble later with Tom and Karen. But look, it is mildly dilutive in the year one. I think within 12- 18 months, it'll be profitable. But if you add it up into the overall retail media P&L, it's a great accretive part of that business, and we'll continue to look for those inorganic opportunities that, to me, represent a very strategic chance to continue to build not only our proposition for customers, but also for shareholders. With that, I'll turn it back over to Tom.
Thank you, Scott. Let me take you to the outlook for 2026. Based on a very strong first half, we are revising upwards our guidance for sales and for profit. Sales, the previous guidance was 2%-3% organic growth. We're upping it to 3%-4% for the full year. The same for the underlying profit, between $ 270 million-$ 300 million, the previous guidance. The current guidance will be $ 285 million- $ 305 million. We are confident that we're going to make sure we're going to deliver those numbers. CapEx, dividend, and ROC, those all remain unchanged. With that, I think we are ready for the Q&A. Karen?
Thank you, Scott and Tom. With that, we'll open up the floor for Q&A. If you wish to ask a question, please raise your hand, and we'll have someone to assist you. We kindly ask you to please indicate your name and the company name you represent. For those participating online, you may submit your question on the platform, and we will direct them to the speakers. First question?
Yes. This is Brian from Citi. Hi, Scott. Hi, Tom. I have two questions. First question is about the margin profile. If I use your numbers in your presentation, we can see that health and beauty margin is pressured by the Malaysia price promotion, right? And the convenience stores drop a little bit. I do not know if that is a rounding issue or not, and would improve on direct sourcing. Could you share more color on the margin profile progress we had in the first half and, in the second half, what we should be looking at? Is there any other factors that we are missing that might harm our operating margin for that? That is the first question on margin. My second question is about the management change.
We have had quite a big change in the management, and I wanted to know the rationale behind it. Quotes from the filing, it says, for the next phase of growth. I just wanted to know what that is. Andrew is from health and beauty, right? It was a high growing business, and it is switching to IKEA. Do we have any other changes? I just want to know if for health and beauty, are we not accelerating? I just want to know the rationale behind all these management changes. Yeah.
Great.
That is it.
Well, I will answer the second question first, and then turn the margin over to Tom. The first, retail is fast moving, and my job is to develop our leadership team and develop the skill set of our leadership team, in conjunction with our board. Each one of our formats, compared to two years ago, I call it, we went from DFI 1.0 to DFI 2.0. AI, technology, competition, customers, means that we have to focus on this next phase of competitiveness, and I call it DFI 3.0. Each one of our businesses have great skills, and new leaders bring in a different perspective. I can tell you, as Andrew goes into IKEA, he sees enormous opportunity to take some of the things that he learned in health and beauty and grow. Curtis, the last time I looked, is an intensely competitive human being.
Sometimes we have to coach him not to be so competitive. I'm joking. I've never done that. He comes out of JD.com, he comes out of Walmart. His job has been fixing the food business. Tom is now going to challenge himself to grow that business. I think, overall, we're in good position to be able to test our leadership and our management while continuing to be able to deliver to shareholders. As I said in December, I am a big underpromise and overdeliver. I think our first half reflects we're moving from strength to strength. I think with this leadership team, who are an A team, best team I've ever worked with, we will continue to do that. On the margin piece.
Yes, on the margin. Let me just take you the key performance. Health and beauty, a slightly lower margin. However, Malaysia will recover at some point. We expect that the intensity will come down at some point and margins in Malaysia will recover. The other point on health and beauty is the e-com platforms. We are driving really hard our own e-com platforms where margins are much better. That's the growth opportunity that will improve margins. For health and beauty, we expect the second half to be much better than the first half, and will end up in the range of giving you in the Investor Day for health and beauty. Same for convenience. It's a small rounding for the first half. For convenience, the second half, and you can see in the past, always significantly better than the first half.
We also expect that to happen for this year, and margins will be better for the full year. We are on track over the next few years as we grow RTE and grow non-food, margin mix improves, and we'll get to the range we also indicated in our analyst presentation Investor Day last year. Same for food. Here, also we expect margins to improve in the second half, and IKEA will be flat. Overall, the second half is going to be better than the first half, and we are on track to deliver the margins we indicated in our Investor Day last year in December. The question on headwinds-
Go ahead, please.
Look, there's always headwinds. If you ask CFO, I only see risks. On the headwinds, you see that cost prices do increase sometimes of the oil price increases. We are, first of all, pushing back on cost price increase to our suppliers. Secondly, if we pass them on, we being selective. We will not hurt margins, but we also don't want to hurt demand. It's an art to make sure that's the right balance. Even that, in the first half, we have played that really well, and we see the margins actually are quite stable and demand is still there, which is most important.
The only thing I'd add is, as a retailer, the worst thing you can do is to have a margin expansion commitment with no lever support. The reality is, we have an enormously agile portfolio. We are fully focused on daily essentials. No matter what happens, people are going to eat, they're going to bathe, they're going to want a bottle of water, and for some reason, they want a new lamp. In that environment, we have the flexibility to continue to meet our market commitments while also ensuring we have the ability to invest in market in a particular format that we think deserves the attention to gain share.
We have the ability to invest in AI as we think about the ability to grow our business and personalize relationship to our customer and make strategic investments without harming that commitment to the market. I see that the flexibility and the scale of our business is actually a competitive advantage, because we don't have to have a trade-off between a strategic investment and our return to our shareholders.
Thanks, Brian.
Next question, please.
Thanks, Scott. Thanks, Tom. This is Jeff from CLSA. First on food. Now I think we are seeing our basket size is showing a discount to the GBA area. Just trying to pick your brain on how do we think about price investment going forward. Is it going to stabilize or are we still going head-to-head on onshore retailers here? That's my first question. The second is more on the Malaysia health and beauty promotional spending. Just want to understand the nature of that. Is it a price investment or are we ramping up the sales force there? Any color on that will be helpful. Thank you.
On the first question, we have achieved the right margin mix and price to customers, where I believe now with that 3% discount and certainly the price comparisons that we do to our competitors here in Hong Kong, we don't need significant investment in price. As a result now, we have the ability to pivot maybe more towards own brand and continue to expand our own brand. We may look at potentially opening new stores again for the first time in a long time here in Hong Kong. I believe, again, margin expansion is an opportunity here in Hong Kong. We don't see the need now to invest into further volume share without value share, and positive revenue growth. On Malaysia, it is a highly promotional market. As an everyday low price proponent, I find over-promotion confusing for customers.
You go in, you buy one, you get one for free. All that does is it goes in your pantry. If I get buy one, get one free shampoo, I'm not washing my hair more often, right? You're forcing me to put more dollar in my pantry than an everyday low price. We are looking how do we strategically migrate towards that, understanding we're not number one in the market. We've got a competitor who loves that kind of, I think, superficial value. We are selectively investing in those promotions where we have to, but also in terms of moving more towards an everyday low price model. So it's not an infrastructural investment in terms of significant labor increases or anything. It's very much around this pricing pivot.
Just one more thing on Malaysia. The Malaysian government issued vouchers called MySARA, and those vouchers can only be spent at supermarkets, not in health and beauty stores. Some of the volumes on basic shampoos and basic HNB items moved away from health and beauty channels to supermarkets. As a result of that, it intensified the competition within the HNB channel. That we think is temporary, because those vouchers are not being issued every week, right? This year, they might stop at some point in the future. It is temporary, but we're going to make sure, as we can, we have to hold on to market share in this period, right? We can say, oh, we want to drive profit, but if you drive profit today, you might be at a big loss tomorrow. It's a balance.
Next question.
Thank you. Also, congrats to your good result. This is John from UBS. I just have one question. It's more about the store counts by segment. I'm not sure you mentioned, because about the store addition and also the store closure by each of the segment. Just want to gauge about your CapEx attitude by different segment. Thank you.
Yeah. I don't have the details at hand, John, but where we see the store. Look, we're always closing stores. Every retailer, unprofitable stores, we will close, right? At the same time, we're growing stores. The major growth in the first half this year is mainly in China, 7-Eleven, where we can on franchise also own stores. Secondly is Indonesia. Yes, we also grow in stores in Malaysia and other markets, but the bigger growth comes from those two markets in line with our growth ambitions we set out earlier last year. We see still that the payback for new stores is very strong. We see around two years for new store payback. Actually, they improved the last two years, and they're quite stable as we speak.
Just adding on to that. Asia is quite unique, which is the opportunity to own stores is pretty low. You go to major mature markets around the world, and a big retailer, for the most part, will own a portion of their real estate. It's all rental. If we go back a couple of years ago, we talked about the fact that we brought rents down.
Yeah.
But we have three plus three, so we have a good part of our portfolio every year up for renewal, and that gives us the opportunity, when the landlord comes in with a rent increase, potentially, to say, you know what? We can go somewhere else. So it gives us a great flexibility. We do want to increase our store count, where we see opportunity to continue to grow market share. But what we're finding is that as we have refined our assortment, as we have increased our transactions, and we've increased our market share, landlords want us in their malls. Landlords want us in their businesses, which has given us a greater negotiating position, and, as a result, I think, ends with the ability to continue to grow profitably, in terms of shareholder returns.
Yeah. Maybe last comment on Indonesia, because people are very concerned about Indonesia. Actually, our health and beauty in Indonesia is the best performing business across all the markets. Like for like are really, really high. Profits are exceptionally high, too. Because people still want to spend the little money they have on those things that make them feel good, be it lipstick, be it cosmetics, be it vitamins. That is still very, very essential. So these stores in Indonesia, across all our formats and all our areas, are actually doing particularly well. So we're actually quite confident that growth will continue.
A big part of that assortment is locally sourced and therefore does not have the currency risk if you are an entirely import-driven business. A bit of a challenge for us on IKEA, but we've mapped a path that we think works well.
Thank you. Let's move on to online for a second. Your next question comes from Matt Candy of CGS International. I have two questions. First, given the stronger revenue outlook for 2026, does that change your thinking on the 2028 targets? Specifically, could that be room for upside to your 2%-3% three-year revenue CAGR guidance? My second question is on the Cody Hong Kong acquisition. Your retail media strategy so far has centered on apps, in-store screens, and omnichannel, while Cody brings outdoor ad inventory on buses and trams. Could you help us understand how out-of-home advertising fits into the broader DFIQ Media strategy? Thank you.
I will answer the second one and then pass the first one to Tom. We are not getting into outdoor advertising through the Cody acquisition. What we are doing is we are accessing a pool of media dollars that we were not able to break into without having that ability to drive. This should not be seen as DFI suddenly wanting to be in the media business in terms of terrestrial out of home. Very little interest. It is an industry that I think is volatile and, again, not something that is part of our core proposition. It was a very good strategic buy. I made clear, I think, in our Investor Day and potentially this time six months ago, we have got a history of having purchased many minority positions where you influence them. It just does not work for us.
We are going to stay Asia focused. We are going to stay in the formats in which we are in. We are going to look for retail media that drives the app and the in-store opportunity for growth. We are not going to acquire anything unless it is TSR accretive in the short term. That is, I think, a good set of principles, and Cody will fall to within that. It does not signal a sectoral pivot in terms of where we want to put more capital.
Yeah. Just on Cody, I can say some numbers. We spent less than $4 million . It is a very, very minor acquisition, and we will be close to breakeven next year, so it will not be dilutive. It is a very small investment, won't be dilutive, but it unlocks a lot of potential for our retail media cross-platform. I think-
Help the P&L, that retail media.
Absolutely. That will help to drive the other. Back on the first question on guidance, we are not ready to revise our guidance, but as I said earlier, we are quite confident that we will deliver at least the top end of the guidance. When we are ready, we will come back to the community to share our revised guidance. For now, the top end, I think, you should take into account.
The next question comes from Jayden Vantarakis from Macquarie. I have two questions here. First, the restatement of corporate overheads into operating segments this half. How much was that impact in absolute terms, and where did most of the allocations go? Second question on retail media, how much was the current revenue contribution from retail media, given it is now contributing close to 35% growth, and where this was recognized, please? Thank you.
I was trained, I call it the foot of Walmart. Sam Walton was a great guy. There are a lot of very powerful truths in their economic model. The first powerful truth is that every dollar of overhead must be correlated to profit. If you cannot, you should not be spending it. We had a quite general liberal view as to what our overhead is. Tom and the finance team went through a very disciplined process and said, where is this adding value in the P&L? If that is adding value to the food P&L, then the food needs to pay for it, not have it allocated to health and beauty or to 7-Eleven. If everyone believes that they are getting value from it, then we all have to agree their allocation has a return on investment.
That process resulted in a very, very clean P&L, where we started at 1.8%, I think we announced, with a commitment by 2028 to get that 1%. So shared overhead will be less than 1%. Everything else is directly attributable to the margin path each one of our format and business segments have committed to. So very, very comfortable that we have the right model, and it is going to be, to me, the best way, as we think about AI and technology investments, is making sure that the technology team is investing dollars, that the cost of that investment is going to be borne by those P&Ls, and not buried in general overhead, which to me is very dangerous as an everyday low-cost player. When it comes to the retail media, my second lesson from Walmart, it is a shadow P&L. We manage it internally.
We will talk about it in generally. We report only segments. So I am not going to talk about a retail media P&L. I am not going to talk about a data monetization P&L. I am not going to talk about yuu P&L. That doesn't help us serve our customers better, and nor does it help us guide our shareholders better. So in general, we will talk about that media as a part of that digital ecosystem. I think to say that it is 35% of our revenue growth and it is a higher margin than the rest of our business, is as much guidance as I want to give.
Maybe on the overhead, to give more detail. So back to Jayden's question. So we allocate overhead to the formats because they can make it more agile. So they can take it on, then they can lower the cost. That is the first principle. If you look at the allocation, it is roughly $9 million, which we reallocated from the center back to the formats. By format, roughly $3 million for health and beauty. Similar amounts for food. $2 million for convenience, about 0.6, 0.8 to IKEA. And you get a number for that fee. So it is not only just trying to make it look better for the center, but making sure that the formats can deal with overhead to reduce them and to make sure they are put at work.
Thank you, Scott and Tom. Your next question comes from Mcrid Wang of Bank of America. Just want to follow up on settlement margins on health and beauty. Can you elaborate a little bit more about drivers to drive a much better health and beauty margin in second half? Second question is on CVS. Despite higher RTE and online sales penetration versus first half of last year, can you elaborate on the reason why margin remains broadly stable year-on-year? Thank you.
Yeah. On health and beauty, as I've covered up, we made a strategic investment in Malaysia. I don't know exactly what the change would've been if we had not made that investment. I know numerically we're tracking that. But to Tom's point, this is at episodic, which is as we grapple with the decision by the government to offer, excluding health and beauty, a set of free vouchers to the average Malaysian. It had an impact. We pivoted, we strategically invested. As I mentioned, if you look at the midpoint that we guided on health and beauty in December of last year, we're still below that. Midpoint is a good starting point in terms of where we would obviously want to be in 2027. We are continuing to invest in own brand. We're continuing to invest in wellness, which have higher margin.
We're continuing to invest in the AI that is bringing in new traffic, health pods bringing in new traffic. There's a lot of upside on the margin. This is a one-time event in the first half, and very confident moving forward. In terms of the CVS margin, we again are rebalancing our go-to-market strategy. As we mentioned, in Hong Kong, we had 10 quarters of negative growth, which meant that of course, overhead as a percent of revenue was going up, labor cost as a percent of revenue is going up. You have all of these headwinds when you're not growing a business. The fact that we have pivoted to growth in Hong Kong, that we had great performance in Singapore, means that it's the virtuous cycle of retail. Which is revenue goes up, your gross profit improves as a result of that going up.
You have the ability to reduce the overhaul costs as a percent of revenue, which means that you've got the ability to increase your margins. It was pretty stable because, again, we still have, I think, a pretty significant competitive situation in some of our markets. China is incredibly competitive. As you think about the platforms and the battles that the platforms have been under, in terms of Alibaba, JD.com, Pinduoduo, et cetera, we have been very thoughtful of how we engage, and as a result, have had to invest in pricing though.
China is an incredibly competitive market, as you know. But that's the value of a portfolio. We can pull levers here and there, still deliver an overall, I think, good performance. Same as health and beauty. If you look at where we guided, in December of last year at the midpoint, we are below that, and I think that's a reasonable target as a guideline as we think about 2027.
Yeah. On health, on the CVS, we were surprised a bit in the first half that cigarette sales are stable. Actually, cigarette sales in Singapore increased. Singapore government bans vaping. We are really strict on it. What do people do? Go back to cigarettes. Where can they buy them? In 7-Eleven. Yes, it is lower margin, but every dollar counts, right? So I am okay with lower margin percentage if that means more margin in overall margin. So that is, I think, what we saw a decline last year, it is actually stabilized. Not what we expected in the first half this year.
Somebody needs to tell Gen Z vaping is not good for you. I do not get it.
Thank you. Next question comes from Zheng Feng Chee of DBS. SG&A as percentage of sales now at 1% ahead of 2028 target. Can we expect to see further cost savings moving forward? Thank you. Tom?
Yeah. SG&A will be a bit higher second half, but overall, the full year will be lower. We expect that those cost savings that started last year, they are coming through, as you can see them line down 15%, and we expect more to come in the second half. These cost saving programs are large and they are multi-year, so the first results you see now, the next years you see probably more.
We started another saving program in the start of this year where we see results next year coming through. I am confident that we will definitely beat the target we set ourselves for 2028 on overheads. Not only overheads on the total level, but also overheads in the formats. Some of that we might reinvest in AI or reinvest in price, but we need that flexibility for us to make decisions. To answer the question, yes, overhead will come down further in the period ahead.
Thank you, Tom. Due to the interest of time, we will be taking the last question from online of HSBC, Selviana. Her question is on Cody Hong Kong. Given the business was loss-making in 2024 and 2025, what is the plan around turning the company around and achieve positive accretion within the next 12 to 18 months?
Yeah. First, it is a standalone business with overhead we do not need, systems we do not need, et cetera. So we have the ability to bring it in in terms of revenue. It is gross profit positive in terms of the contracts that they have with the out-of-home providers. So as we have looked at it, we are very clear that we have the ability to run it, just at a much lower cost. We have signed on management, which is, I think, important to bring over that key management personnel. We do not acquire anything unless we believe in the business case. And as Tom mentioned, we believe that business should be break-even within 18 months. But it is, from day one, bringing more revenue to a very healthy margin retail media business across all of our stores. We are not yet ready to announce.
At some point, I think it will be an important statistic. As you look at the totality of our screens across all of our markets, we are at 12,000, roughly. We have got a commitment to get to 18,000. We are selling 10, 20, and 30-second segments. We are open 10 hours a day, 12 hours a day. We have calculated the total capacity. So at some point, we are going to be ready to talk about what is the capacity utilization in terms of paid media.
Right now, we are not ready for that because it is not high yet. Huge upside. Now, we do fill it with our own brand, we fill it with promotions, et cetera. That will also be part of the balance. A good part of this Cody acquisition is giving us the opportunity to be able to increase the paid media penetration that we have across all of our stores here in Hong Kong.
Thank you. Ladies and gentlemen, this would conclude our session today. As a small token of appreciation, please remember to take a goodie bag before you leave. For those participating online, you may now disconnect. Thank you, and we look forward to seeing you at the next analyst briefing.
Before anyone disconnects, my microphone's off, it's back on. To thank Tom for his two years of service as Chief Financial Officer, he adds up pretty well. It's gone well, and welcome to Kai Wu, who will be sitting here with me six months from now. Thank you.
Thank you.