Kho turns DFP into profitable venture

Dynamic reforms instituted under the management of general manager Michael Kho have turned Duty Free Philippines around from a losing venture from 1997 to 2000 to a profitable concern under his watch from 2001 till last year.

DFP is an attached agency of the Philippine Tourism Authority (PTA), a state firm implementing projects for the Department of Tourism (DOT).

In an accomplishment report for the years 2001-2004, Kho showed that net income posted by DFP rose from P403.5 million in 2001, P528 million in 2002 and P503 million last year. This is a full turnaround from losses incurred of P535 million in 1997, P1.151 billion in 1998, P205 million in 1999 and P212 million in 2000.

The three percent sales increase in 2002, the first since 1995, was effected through a continuing reform program aimed at reducing cost, improving profitability, improving store layouts, and introduction of new products and marketing focus. Their efforts paid off. Kho said, when Raven Fox Publications recognized them as the Best Travel Retail (Duty Free) Operator Operating in a Single Country at the Tax Free World Exposition Congress held in Singapore in 2002.

Kho said that among the cost reduction measures they adopted were the negotiations with suppliers for improved margins, increased efficiency in inventory turnover, and continuous negotiations with banks for credit line renewals and cuts in bank interests and charges. They also restructured their heavy debt burden with major creditors, and paid higher-interest-bearing loans, which reduced their debt from P4.4 billion in 2001 to P3 billion in June 2004. Interest charges were likewise lowered from P243 million in 2001 to some P120 million in 2004.

Prompt payment to suppliers and contractors resulted in rebates and discounts of P192 million in 2002, P205 million last year and P36.8 million in the first half of this year, Kho said. A regular procurement plan per division made for more efficient purchase of supplies. DFP also launched multi-supplier and multi-category partnerships to achieve not only benefits to each brand, but to the entire category.

Kho said their marketing efforts were redirected towards the Filipino traveler, keeping in mind their changing shopping habits.