The profit for the year amounted to almost €70 million. That is down by almost €9 million or 11.1% compared with 2011. The reported profit however came in significantly higher than our original forecast. As announced on 2 January 2013, sales revenu in 2012 totalled €2,467 million, an increase of 1.9%. Like-for-like sales growth also amounted to 1.9%. In the second half of 2012, the pressure on profits eased considerably as a result of the action that had been taken. In the first half of 2012, profits were down by 22.6%, but by 2.3% in the second half.
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CEO Koen Slippens:
Despite difficult economic conditions, Sligro Food Group had, in the course of 2012, increasing success in limiting their impact. The present economic climate calls for change and decisive action. It is good to see that the direction we took began to bear fruit as the year progressed and our profits recovered in the second half of 2012.
The free cash flow in fact reached almost €95 million, the highest figure ever attained and representing an increase of 24% on 2011. This allows us to propose declaring a dividend of €1.05 per share. Things will not be easy in 2013 but the turnaround that we achieved in the course of 2012 gives us the strength to pursue the existing course and meet the challenges of the year ahead.’
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The gross margin was down by 0.7%, at €558 million. In percentage terms, the gross margin was 0.6 of a point down, at 22.6%, as a consequence of a general price squeeze and promotional discounts combined with shifts in the customer mix for Foodservice. There was a relative improvement in this situation in the second half of 2012, partly owing to the effect of the comparative figures for 2011. Total operating expenses as a percentage of revenu increased by 0.1 of a percentage point to 19.1%, chiefly as a consequence of increased social security charges as a result of government decisions. The operating profit was down by €15 million, at €90 million. as a percentage of revenue, this represents a decline of 0.7 of a point to 3.6%.
The Foodservice operating profit was down by €12 million, at €86 million. As a percentage of revenue, this represents a decline of 0.8 of a point to 5.3%. As already mentioned, this was mainly due to a general price squeeze and promotional discounts combined with shifts in the customer mix.
The Food Retail operating profit fell by €3 million, to €4 million. As a percentage of revenue, this represents a decline of 0.4 of a point to 0.5%. Again this was mainly due to a general price squeeze and promotional discounts. The decline in the operating profit is entirely attributable to the developments in the first half of 2012, as the second half of the year showed an improvement of €2 million, to €3 million, despite a drop in other operating income and tough market conditions. This significant improvement provides a good basis for further recovery.
Earnings per share came in at €1.59, compared with €1.78 in 2011, a decline of 10.7%. It is nevertheless proposed that the dividend be maintained at €1.05 per share, made up of €0.80 in normal dividend (2011: €0.85) and €0.25 in variable dividend (2011: €0.20). Net interestbearing debt was further reduced, by 38.5%, to €69 million, giving us an exceptionally sound financial position and high free cash flows, which is a good thing in the current climate.
Food Retail, medium-term plan
Sligro Food Group has been evaluating the success of the Food Retail Masterplan announced in 2009. The profitability targets set as part of the plan have not been achieved. However, Sligro Food Group sees plenty of scope for achieving substantial improvements in Food Retail profits in the years ahead, based on the measures to be taken in relation to sales revenue, gross margin and costs detailed in the 2013–2015 medium-term plan. The goal is to double the operating profit before amortisation as a percentage of revenue over the next three years to a level of 2.5–3.0%. And because the capital employed is expected to fall by around €40 million over the same period, we expect the operating profit before amortisation as a percentage of capital employed to increase
threefold over the next three years to more than 15%. Sligro Food Group also announces that the Executive Board position with special responsibility for Food Retail will not be filled. The management of Food Retail will be carried on by the existing management team of Johan van Heerebeek as sales manager and Kees Kiestra as operations manager and both gentlemen will become part of the group management team of Sligro Food Group Nederland B.V., reporting to Koen Slippens.
We are dependent, directly and indirectly, on consumer spending in the Netherlands. Economic conditions and the low level of consumer confidence mean that spending is depressed and we do not expect the situation to improve any in 2013, partly because of fiscal measures. The rate of food-related inflation is also appreciable and volumes are somewhat under pressure. We see this external environment as the new reality, with no real prospect of change in the foreseeable future. Businesses that are capable of accepting the new reality and changing their policy accordingly are in our eyes ideally placed to make a success of the situation. We believe we are in an excellent position to do so. Our theme for 2013 is accordingly ‘De knop om!’ (‘Switch on!’). Innovation, decisive action and a clear vision that is widely shared are in our eyes the ingredients for success.
We expect volumes in the food retail market at best to remain unchanged overall but the full-service segment will feel the effects of the economic climate to a greater extent. In the foodservice market, we expect not only volumes but also sales to decline, just as in recent years.
We have good grounds for assuming that we shall outperform the market in both segments, again as in recent years. In short, we do not see the external situation in 2013 differing significantly from that in 2012, and that also means that the competition will remain fierce.
There are a couple of particular circumstances that are relevant to the development in our sales revenue and results in 2013:
• The acquisition of Van Oers was finalised on 2 January 2013. Van Oers customers will be transferred gradually to Sligro in the course of the year. We expect this process to add around €20 million to sales in the first half of 2013 and €40 million in the second half. The efforts required to integrate Van Oers will have the effect of depressing results in the first half of 2013. Van Oers is expected to begin contributing to group profits in 2014.
• The changes in VAT on tobacco products which come into operation 1 July 2013 are expected to re- sult in a drop in sales of €30 million in the second half of 2013. That is an accounting effect and has no impact on profits.
• The pension costs will increase by around €5.5 million in 2013. This is the combined effect of lower interest rates, increased life expectancy and changes in the rules. The level of pension contributions will not change and the free cash flow will not be affected. This merely concerns transfers between the profit for the year and the other components of the recognised income and expense.
Apart from the effect on pension costs we expect to be able to keep costs well under control and we are expecting the pressures on gross margins to be somewhat reduced compared with recent years. As usual, we are not making any firm predictions concerning the profit for the year.
The 2012 annual report will be published on 5 February 2013.
Background to the full-year figures will be given today in a press conference and analysts’ meeting. The presentation given at these events has been posted on www.sligrofoodgroup.com.
We will provide more information on first-quarter 2013 developments in our trading update on 18 April. Our half-year figures will be published on 18 July 2013. Veghel, 24 January 2013.
On behalf of the Executive Board of Sligro Food Group N.V.
Huub van Rozendaal
Tel. +31 413 34 35 00
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