Sligro Food Group net profit 22.6% up to almost €55 million
Sligro Food Group N.V.'s profit after tax and amortisation of intangible fixed assets increased by 22.6% to €54.9 million in 2004. As announced earlier, total turnover rose by 6.7% to €1,446.9 million. The 2004 financial year comprised 53 weeks, compared with 52 weeks in 2003. On an annualised like-for-like basis, food service turnover was up 3% and food retail turnover was down 5%.
Despite the pressure exerted on margins by poor market conditions, gross margin rose from 18.6% to 19.2% of turnover, reflecting a change in the turnover mix among the different group companies and the consolidation of VEN Groothandelcentrum from 1 October 2004.
Total costs increased from 13.1% to 13.9% of turnover, also due to the different turnover mix and the consolidation of VEN.
Other operating income included the previously announced non-recurring income of €8.9 million (€5.9 million after tax) related to the exercise of repurchase rights on property.
The result was in an increase in operating profit of €10.9 million to €84.2 million, up from 5.4% of turnover in 2003 to 5.8% in 2004. Excluding non-recurring income, operating profit rose to €75.3 million, or 5.2% of turnover. The tax burden was lower than in 2003, owing to the release of €1.5 million from the provision for deferred taxation in response to the reduction in the tax rate as from 1 January 2005.
Earnings per share based on the average number of shares in issue turned out at €2.67, compared with €2.23 in 2003, an improvement of 19.7%. It is proposed that a dividend of €1.00 per share be distributed for 2004, which represents an increase of 11.1% on 2003. At the shareholder's option, the dividend may be taken in cash or in shares at a ratio to be announced at a later date. The stock dividend will be roughly equal to the cash alternative.
Corporate governance
A number of proposals for significant amendments to the Articles of Association will be put to the Annual General Meeting to implement changes to the legislation and various provisions of the Corporate Governance Code. These will include winding up Stichting Prioriteit Sligro Groep and Stichting Preferente Aandelen Sligro Groep so that, after the amendment of the Articles of Association, Sligro Food Group will have no anti-takeover defences in place.
IFRS
Provisional calculations made in 2004 of the effect of IFRS on the result and financial position indicated that the net profit for 2004 on that basis would have been around €58.5 million. The difference of €3.6 million compared with the reported figure mainly reflects lower amortisation of goodwill and the valuation of investment property in accordance with IAS 40. Shareholders' equity would be some €7 million higher under IFRS, again mainly due to lower amortisation of intangible fixed assets and valuation of investment property in accordance with IAS 40.
Prospects
Market conditions continue to be challenging for both our food retail and food service activities. The price war in the supermarket sector may not have run its course, even though the downward trend is levelling off. Against this background, we expect little growth in overall like-for-like turnover in the first half of 2005. In our food retail operations, we expect to be able to absorb only part of the pressure on selling prices by negotiating better purchasing terms with our suppliers, but we should be able to cope well with this pressure in our food service activities, thanks partly to the acquisition of VEN.
We are confident that we can maintain tight control over costs with the help of our improvement programmes. We expect increasing cost synergy to flow from the acquisition of VEN from the second half of 2005 onwards.
While we predict an overall increase in net profit for the first half of 2005, it is too early to forecast the full-year results. The 2004 annual report will be published in printed form and electronically on www.sligrofoodgroup.nl on 24 February 2005. The Annual General Meeting will be held on 30 March 2005.
As is our custom, we shall issue a more concrete statement of our expectations for the first half of the year in a first-quarter trading update to be published on 21 April 2005.
Veghel, 27 January 2005
On behalf of the Executive Board,
A.J.L. Slippens
H.L. van Rozendaal
Tel: +31 413 34 3500
www.sligrofoodgroup.com
