Sligro Food Group achieves 10% profit growth despite adverse conditions

In the first half of 2004, Sligro Food Group N.V. saw its net profit after tax and amortisation of goodwill increase by 10% to €18.9 million. Turnover fell by 0.8% to €650.8 million.

Chairman of the Executive Board Abel Slippens commented, 'Sligro Food Group has performed better than expected in difficult market conditions with heavy pressure on prices in the food industry and with a low level of consumer confidence. The pressure on the results of our food retail activities as a result of the price war has been absorbed by improved results in our food service activities.'

Turnover on food retail activities declined by 5.1% to €218.6 million, partly as a result of fewer supermarkets being served and the price war which reduced turnover at existing stores. Turnover on food service activities increased by 1.6% to €432.2 million. New or expanded branches, long-term contracts with new, large customers and growth in sales to small and medium-sized businesses drove the sales performance. In contrast, there was a fall in sales of tobacco products.

Despite the price pressure, the gross margin rose from 18.0% to 18.5% of turnover. This was mainly as a result of a change in the proportions of turnover generated by the different groups and a different mix of customers and ranges in the food service activities. This development also meant that overall selling and administrative expenses increased by 3.9% to €91.3 million or from 13.4% to 14.0% of turnover. Cost control is an area of continuing attention for maintaining our cost leadership position in the industry.

Operating profit was virtually unchanged at almost €30 million. As a percentage of turnover, this increased from 4.5% to 4.6%.

Interest income and charges fell by almost 80% to €0.6 million as a result of a lower level of debt, better results on participating interests and a charge of € 1 million in 2003 relating to the revaluation of interest rate swaps.

Earnings per share, determined on the basis of the average number of shares in issue, amounted to €0.92 compared with €0.85 in the same period in 2003, an increase of 8.2%.

We expect that growth in turnover in the second half of the year will increase compared with the first half, and so there will be some increase in turnover for the full year. In addition, the second half of 2004 is a 27 week period compared with 26 weeks in the equivalent period in 2003. We are assuming that the pressure on margins will not worsen and that cost control will continue to be strict. Interest income and charges in the second half of 2004 will be at about the same level as in the first half of the year and the second half of 2003.

The gain on a property transaction, which had previously been announced, was completed shortly after the end of the first half of 2004. This generates a non recurring gain of €5.9 million after tax in the second half of 2004.

Including that gain, we expect net profit after tax for the full year 2004 will grow by 15% to 20%. Net profit in 2003 was € 44.8 million. On 14 October 2004 we will provide further details of developments expected in the second half of the year.

Veghel, 15 July 2004

On behalf of the Executive Board of Sligro Food Group N.V.
A.J.L. Slippens
H.L. van Rozendaal
Tel. +31 41 334 3500
www.sligrofoodgroup.com

See Half-year reports for annex