Sligro Food Group net profit for first half up 16%
Sligro Food Group N.V. saw sales rise by 0.5% in the first half of 2006 to a total of €757 million. The profit after tax increased by €3 million, or 16%, to €21.8 million.
Sales reported by the food retail activities were almost unchanged, at €212 million. Foodservice sales, however, were up by 0.8%, at €546 million. There was also a gradual improvement in sales during the first half of 2006, partly as a result of the success of our investments in the VEN outlets. On an organic basis, there was a decline in sales of 0.8% for the group as a whole. Inversco was included in the consolidation for a period of four weeks and therefore also affected the composition of the results to a degree.
Despite the continuing squeeze on margins in the market generally, the gross margin increased by €6.6 million, or 4.5%, to €155 million. As a proportion of sales, this represents an increase of 0.8 of a percentage point to 20.5%. Apart from the Inversco effect, this was the result of an improved product mix and rebates from suppliers.
Total operating expenses increased by only €1.8 million, or 1.4%. Related to sales, this represents an increase of 0.2 of a percentage point to 16.6%. Without Inversco, costs would in fact have been lower. This is the result of structural efficiency measures, particularly concerning the former VEN activities. Further steps to optimise the logistics infrastructure will be completed in the second six months.
The overall effect was to increase the operating profit by 12.5% to €32.3 million, up from 3.8% of sales in 2005 to 4.3% in 2006. There was a substantial improvement concerning both the foodservice and the food retail activities. With a profit after tax of €21.8 million, representing an increase of 16%, we came in well above our April forecast. The profit recovery in the second quarter was strong. Earnings per share for the first half amounted to €1.03, an increase of 14.4%.
Prospects
We expect market conditions for the foodservice activities to show a further improvement in the second half, and the basis for comparison of the sales figures will also gradually become simpler. Market conditions for the food retail activities are less easy to predict, owing to the major realignments about to take place in the Dutch market. For both gross margin and the development in costs we expect to see an upward trend, similar to the first half. Inversco will be included in the consolidation for the entire second six months. Since Inversco's operating profit is higher than the group average, there will be an improvement in the overall operating profit. The inclusion of Inversco does, however, mean that net financial expenses will be higher, but we still expect a splendid profit contribution.
We expect the takeover of the Edah activities by S&S Winkels B.V., in which Sligro Food Group and Sperwer Holding each have a 50% stake, to be completed in the third quarter. That will mark the start of a gradual process of transferring a part of the stores. There are bound to be some start-up losses for the converted stores plus the financing costs on our contribution to S&S Winkels, which amounts to €80 million. It is difficult to forecast our share in the results of the 50% joint venture S&S Winkels in the short term.
We expect to be able to sell off some of the superfluous property with a book profit during the second half.
The half-year results will be presented at a press conference and in an analysts' meeting to be held today. The presentation can also be found on www.sligrofoodgroup.com. The trading update for the third quarter will be published on 19 October.
A conference call will be hosted at 15:30 hours CET.
Veghel, 20 July 2006
Sligro Food Group N.V.
A.J.L. Slippens
H.L. van Rozendaal
Tel. +31 (0)413 34 35 00
www.sligrofoodgroup.com
Click here for the complete press release (in pdf).
