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DELHAIZE GROUP 2015 RESULTS

DELHAIZE GROUP 2015 RESULTS Fourth Quarter and Full Year 2015 Financial report Regulated Information March 3, :00 a.m. CET Financial Highlights 2015» Revenue growth of 15.6% at actual exchange rates
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DELHAIZE GROUP 2015 RESULTS Fourth Quarter and Full Year 2015 Financial report Regulated Information March 3, :00 a.m. CET Financial Highlights 2015» Revenue growth of 15.6% at actual exchange rates excluding the 53 rd week in the U.S. in 2014 (3.2% at identical exchange rates)» Comparable store sales growth of 2.2% in the U.S., 0.9% in Belgium and 3.5% in Southeastern Europe» Underlying operating profit of 872 million, an increase of 18.2% at actual exchange rates (+4.0% at identical exchange rates) excluding the 53 rd week in the U.S. in 2014» Free cash flow generation of 646 million excluding one-time elements ( 518 million including one-time elements)» Proposed full year gross dividend of 1.80 per share, a 12.5% increase compared to Financial Highlights Fourth Quarter 2015» Group revenue growth of 14.2% at actual exchange rates and excluding 53rd week in the U.S. in 2014 (4.9% at identical exchange rates)» Comparable store sales growth of 2.3% in the U.S., 5.1% in Belgium and 7.8% in Southeastern Europe» Underlying operating profit of 258 million, an increase of 28.4% at actual exchange rates (+18.0% at identical exchange rates) excluding the 53 rd week in the U.S. in 2014» CEO Comments Frans Muller, Chief Executive Officer of Delhaize Group, commented: Our full year results confirm our solid performance in We have been able to stabilize or grow market share in all our markets while at the same time investing 774 million in order to differentiate our banners, improve our infrastructure and expand our network. We generated a solid level of free cash flow of 646 million excluding one-time elements, bringing our total free cash flow generation to 2.7 billion over the last four years. Based on a 11.9% increase in our underlying Group share in net profit from continued operations and our policy to pay out approximately 35%, we propose a 2015 dividend of 1.80 per share, an increase of 12.5%. This year, we will further expand our Easy, Fresh & Affordable initiative at Food Lion and we plan to remodel 142 stores. In Belgium, the New Store Organization model will be implemented in all our company-operated stores, as per our Transformation Plan, and we aim to remodel 15 stores. Finally, we will continue our network expansion in Southeastern Europe. Overall, we plan to spend 825 million on capital expenditure (at identical exchange rates). These efforts will allow Delhaize Group to grow revenues, improve our market share and at the same time generate a solid level of free cash flow. For 2016, our main focus is to complete the merger with Royal Ahold on schedule. We are confident on the prospects of the merger given the complementarity of our store networks, the opportunity to accelerate innovation for our customers and the 500 million run-rate synergy potential. The next step in the merger process will be the Extraordinary General Meetings of both companies scheduled on March 14.» Financial Summary Actual Results Q (1) 2015 (1) At Actual Rates At Identical Rates in millions, except EPS (in ) Actual Results At Actual Rates At Identical Rates % +0.2% Revenues % +1.9% % +3.6% Underlying EBITDA % +1.8% % % Operating profit % +41.2% 3.1% - - Operating margin 2.9% % +5.3% Underlying operating profit % +0.7% 4.1% - - Underlying operating margin 3.6% % % Profit before taxes and discontinued operations % +54.8% % % Net profit from continuing operations % +65.2% 114 N/A N/A Group share in net profit % % 1.11 N/A N/A Basic earnings per share - Group share in net profit % % (1) The average exchange rate of the U.S. dollar against the euro strengthened by 14.1% in the fourth quarter of 2015 (1 = $1.0953) compared to the fourth quarter of 2014 and the 2015 full year average exchange rate (1 = $1.1095) strengthened by 19.7% compared to Delhaize Group Earnings Release Fourth Quarter and Full Year of 25 » Full Year 2015 Income Statement Revenues In 2015, Delhaize Group realized revenues of 24.4 billion. This represents an increase of 15.6% and 3.2% at actual and at identical exchange rates, respectively, excluding the 53 rd week in the U.S. in Including the 53 rd week in the U.S. in 2014, revenues rose by 14.2% and 1.9% respectively at actual and at identical exchange rates. Organic revenue growth was 3.2%. In 2015, revenue growth for Delhaize Group was the result of: Revenue growth of 2.2% in the U.S. in local currency (excluding the 53 rd week in 2014), supported by comparable store sales growth of 2.2%; Revenue growth of 1.3% in Belgium as a result of a comparable store sales growth of 0.9% and network expansion; and Revenue growth of 10.2% at identical exchange rates in Southeastern Europe driven by double-digit revenue growth in Romania and solid growth in Greece and Serbia. Comparable store sales growth was 3.5%. Gross margin Gross margin was 24.3% of revenues and was stable at identical exchange rates. Gross margin was flat in the U.S., decreased in Belgium as a result of price investments and higher shrink, and increased in Southeastern Europe mainly supported by better supplier terms. Other operating income Other operating income was 115 million, a decrease of 4 million compared to last year mainly as a result of lower gains on disposal of assets. Selling, general and administrative expenses Selling, general and administrative expenses were 21.2% of revenues. Excluding the 53 rd week in the U.S. in 2014, SG&A as a percentage of revenues were 8 basis points lower than last year at identical exchange rates. Each segment decreased SG&A as a percentage of revenues with positive sales leverage in the U.S. and Southeastern Europe and Transformation Plan savings in Belgium partly offset by higher pre-opening expenses at Food Lion due to more stores being relaunched under the Easy, Fresh & Affordable initiative. Other operating expenses Other operating expenses were 171 million compared to 332 million in prior year included mainly 32 million Transformation Plan charges and a 25 million competition fine in Belgium, and 43 million merger related costs, while 2014 included 148 million impairment losses on goodwill and trade names at Delhaize Serbia and 137 million charges in connection with the Transformation Plan in Belgium. Underlying operating profit Underlying operating profit increased by 18.2% to 872 million (+4.0% at identical exchange rates) and underlying operating margin was 3.6% of revenues (3.5% last year) excluding the 53 rd week in the U.S. in Including the 53 rd week, underlying operating profit increased by 14.4% and 0.7% at actual and identical exchange rates, respectively. Operating profit Operating profit stood at 696 million, an increase of 64.5% and 41.2% at actual and identical exchange rates, respectively. EBITDA EBITDA increased by 19.4% to 1.4 billion (+4.8% at identical exchange rates). Underlying EBITDA increased by 14.9% (+1.8% at identical exchange rates) to 1.5 billion. Net financial expenses Net financial expenses were 236 million compared to 172 million last year as a result of the strengthening of the U.S. dollar and a 40 million one-off charge related to the debt tender transaction in February Effective tax rate In 2015, the effective tax rate on continuing operations was 21.0%, compared to the previous year s rate of 26.3%. The decrease compared to last year is mainly due to the non-deductible goodwill impairment charge in our Serbian operations in Delhaize Group Earnings Release Fourth Quarter and Full Year of 25 Net profit from continuing operations Net profit from continuing operations was 369 million or 3.59 basic earnings per share. This compares to 189 million net profit from continuing operations or 1.85 basic earnings per share in Group share in underlying net profit from continuing operations increased by 11.9% from 466 million to 521 million. Net profit Group share in net profit amounted to 366 million, an increase of 312.5% at actual exchange rates (+248.5% at identical exchange rates) compared to Per share, basic earnings were 3.57 ( 0.88 in 2014) and diluted net earnings were 3.54 ( 0.87 in 2014). Dividend In line with Delhaize Group s dividend policy to a payout ratio of approximately 35% of group share in underlying net profit from continuing operations, the Board of Directors will propose to the Ordinary Shareholders Meeting of May 26, 2016, the payment of a gross dividend of 1.80 per share. After deduction of the 27% Belgian withholding tax, the proposed net dividend is 1.31 per share. The net dividend of 1.31 per share will be payable to owners of ordinary shares against coupon no. 54. Delhaize Group ordinary shares will start trading ex-coupon on May 31, 2016 (opening of the market). The record date (i.e., the date at which shareholders are entitled to the dividend) is June 1, 2016 (closing of the market) and the payment date is June 2, 2016.» Full Year 2015 Cash Flow Statement and Balance Sheet Net cash provided by operating activities In 2015, net cash provided by operating activities was million, an increase of 127 million compared to 2014, mainly as a result of higher EBITDA ( 205 million), partly resulting from the higher US dollar, a favorable change in working capital ( 166 million) and lower tax payments ( 25 million), partially offset by one-time elements ( 85 million for the Transformation Plan, 25 million competition fine in Belgium and 32 million merger-related costs). Free cash flow As a result of capital expenditures of 774 million ( 606 million in 2014) and higher cash provided by operating activities, we generated 646 million free cash flow in 2015 excluding one-time elements ( 586 million in 2014 also excluding one-time elements), or 518 million including one-time elements. Net debt Compared to year-end 2014, net debt decreased by 216 million to 781 million mainly as a result of 518 million free cash flow generation which was partially offset by the payment of the dividend in the second quarter and the strengthening of the U.S. dollar.» Fourth Quarter 2015 Income Statement Revenues In the fourth quarter of 2015, Delhaize Group s revenues were 6.3 billion, an increase of 14.2% at actual exchange rates (+4.9% at identical exchange rates) compared to the fourth quarter of 2014 and excluding the result of the 53rd week in the U.S. in Organic revenue growth was 4.9%. Revenues in the U.S. increased by 2.6% in local currency excluding the impact of the 53rd week in 2014 and comparable store sales grew by 2.3%. In Belgium, revenues increased by 5.6% as a result of comparable store sales growth of 5.1% and a 0.3% positive calendar impact. Revenues in Southeastern Europe grew by 13.3% (+13.5% at identical exchange rates) as a result of a 7.8% comparable store sales growth and network expansion. Gross margin Gross margin was 24.1% of revenues, an increase of 6 basis points at identical exchange rates excluding the 53 rd week in 2014, mainly as a result of better supplier terms in Southeastern Europe and an improved gross margin in Belgium resulting from prior year disruptions, partly offset by price investments in the U.S. Other operating income Other operating income was 35 million, in line with last year. Delhaize Group Earnings Release Fourth Quarter and Full Year of 25 Selling, general and administrative expenses Selling, general and administrative expenses were 20.7% of revenues and were 61 basis points lower than last year (at identical exchange rates and excluding the 53 rd week in the U.S.) with all three segments decreasing SG&A as a % of revenues. Other operating expenses Other operating expenses were 52 million compared to 161 million in 2014 which mainly included a 137 million charge related to the Transformation Plan in Belgium. Other operating expenses in 2015 mainly included 20 million impairment charges and 15 million merger related costs. Underlying operating profit Underlying operating profit increased by 28.4% excluding the 53 rd week in 2014 (18.0% at identical exchange rates). Underlying operating margin was 4.1% of revenues compared to 3.6% in 2014 (3.9% including the 53 rd week). Including the 53 rd week, underlying operating profit increased by 14.5% and 5.3% at actual and identical exchange rates respectively. Operating profit Delhaize Group recorded an operating profit of 198 million in the fourth quarter of 2015, resulting in a 3.1% operating margin, compared to 49 million in the fourth quarter of EBITDA EBITDA increased by 80.5% to 383 million (+65.0% at identical exchange rates). Underlying EBITDA increased by 12.9% to 423 million (+3.6% at identical exchange rates). Net financial expenses Net financial expenses were 43 million, 6 million lower than last year at identical exchange rates mainly due to debt repayments which occurred in February Effective tax rate The effective tax rate on continuing operations was 27.3%. In 2014, Delhaize Group recognized 23 million of tax benefit on a pretax profit from continued operations of 5 million, as a result of the Transformation Plan charge. Net profit from continuing operations Net profit from continuing operations was 114 million or 1.11 basic earnings per share compared to basic earnings per share of 0.28 in the fourth quarter of Net profit (loss) Group share in net profit was 114 million. Basic net profit per share was 1.11 compared to a loss of 0.54 in the fourth quarter of Delhaize Group Earnings Release Fourth Quarter and Full Year of 25 » Segment Reporting (at actual exchange rates) 2015 Revenues (in millions) /2014 Underlying Operating Margin (3) Underlying Operating Profit/(Loss) (3) /2014 United States (1) $ % 4.0% 4.1% % United States (1) % 4.0% 4.1% % Belgium % 2.1% 2.4% % SEE (2) % 4.7% 4.4% % Corporate - - N/A N/A N/A (35) (33) -5.1% TOTAL % 3.6% 3.6% % Q Revenues (in millions) /2014 Underlying Operating Margin (3) Underlying Operating Profit/(Loss) (3) /2014 United States (1) $ % 4.1% 4.2% % United States (1) % 4.1% 4.2% % Belgium % 2.5% 1.9% % SEE (2) % 7.2% 7.1% % Corporate - - N/A N/A N/A (6) (15) +52.7% TOTAL % 4.1% 3.9% % (1) The segment United States includes the banners Food Lion and Hannaford. (2) The segment Southeastern Europe includes our operations in Greece, Serbia and Romania. Our operations in Indonesia are accounted for under the equity method. (3) For a definition of underlying operating profit, please refer to the Definitions page of this document. A reconciliation with reported operating profit is provided on page 20 of this document. United States In 2015, Delhaize America generated revenues of $17.8 billion ( 16.0 billion), an increase of 2.2% compared to 2014 in local currency excluding a 53 rd trading week in Comparable store sales growth in 2015 was 2.2%. The U.S. gross margin remained flat at 25.9% mainly as a result of cost savings offset by price investments and higher shrink resulting from Easy, Fresh & Affordable at Food Lion. Selling, general and administrative expenses as a percentage of revenues were 22.3% and decreased by 5 basis points (excluding the 53 rd week in 2014) as positive volume growth and good cost control offset preopening costs for Easy, Fresh & Affordable at Food Lion. The underlying operating margin of our U.S. business increased by 4 basis points to 4.0% (3.9% in 2014 excluding the 53 rd week) and underlying operating profit increased by 3.3% to $710 million ( 640 million) excluding the 53 rd week in Including the 53 rd week in 2014, underlying operating profit decreased by 1.3%. In the fourth quarter of 2015, revenues in the U.S. increased by 2.6% to $4.4 billion ( 4.1 billion) excluding a 53 rd trading week in Comparable store sales growth was 2.3% despite retail deflation of 1.0%, driven by planned price investments in both banners, and mild weather. Both Food Lion and Hannaford continued to report positive real sales growth of over 3%. Underlying operating profit reached $180 million ( 164 million), an increase of 8.5% excluding the 53 rd week in Underlying operating margin for the quarter was 4.1% compared to 3.8% in 2014 (4.2% including the 53 rd week) as a result of positive volume growth partly offset by price investments at both banners and preopening expenses at Food Lion. Delhaize Group Earnings Release Fourth Quarter and Full Year of 25 Belgium Delhaize Belgium posted revenues of 5.0 billion in 2015, an increase of 1.3% compared to 2014, resulting from comparable store sales growth of 0.9% and network growth. Delhaize Belgium s gross margin decreased by 17 basis points to 18.8% of revenues as a result of price investments and higher shrink, partly offset by better procurement terms. Selling, general and administrative expenses as a percentage of revenues decreased by 9 basis points to 17.5% as a result of the first Transformation Plan savings, partly offset by higher advertising and depreciation expenses. Underlying operating profit decreased by 10.4% to 106 million and the underlying operating margin of Delhaize Belgium decreased from 2.4% to 2.1%. In the fourth quarter of 2015, revenues in Belgium were 1.3 billion, an increase of 5.6% compared to the fourth quarter of 2014, with comparable store sales growth of 5.1% (adjusted for a positive calendar impact of 0.3%). Internal retail inflation reached 1.8%. Our market share showed a good progression in the fourth quarter and stood at 24.0% for the full year, almost stable compared to Underlying operating profit in Belgium increased by 36.9% to 32 million and the underlying operating margin was 2.5% (1.9% last year) as a result of positive volume growth compared to the fourth quarter of Our performance in the fourth quarter 2014 was impacted by disruptions and strikes related to the Transformation Plan negotiations with the unions. Southeastern Europe In 2015, revenues in Southeastern Europe increased by 9.5% to 3.4 billion (+10.2% at identical exchange rates), mainly as a result of expansion in Greece and in Romania and 3.5% comparable store sales evolution. Gross margin increased by 54 basis points to 24.6% due to improved supplier terms and reducing low margin sales in Serbia. Selling, general and administrative expenses as a percentage of revenues decreased by 16 basis points to 20.4% as a result of higher sales and cost savings. Underlying operating margin was 4.7% (4.4% in 2014) while underlying operating profit was 161 million, a strong increase of 19.7% at identical exchange rates. In the fourth quarter of 2015, revenues in Southeastern Europe increased by 13.3% (+13.5% at identical exchange rates) to 942 million. Comparable store sales growth remained strong at 7.8% for the segment (adjusted for a 1.0% positive calendar impact) and we also realized network expansion in every country. Underlying operating profit increased by 15.5% at identical exchange rates to 68 million due to a combination of a higher gross margin and lower SG&A as a percentage of revenues, and the underlying operating margin increased from 7.1% to 7.2% driven by improvements in Serbia and Romania, as the Greek market was very promotional. Delhaize Group Earnings Release Fourth Quarter and Full Year of 25 » 2016 Outlook Our focus this year will be to complete the merger with Ahold by mid-2016 as planned. In addition, we will continue to expand our Easy, Fresh & Affordable initiative at Food Lion and will remodel 142 stores in In Belgium, the New Store Organization will be implemented in all our company-operated stores by October, as detailed in our Transformation Plan, and we aim to remodel 15 stores. Finally, we will continue our network expansion in Southeastern Europe. For 2016, we expect Group cash capital expenditures of approximately 825 million at identical exchange rates. We intend to grow revenues and market shares while continuing to generate a solid level of free cash flow.» Conference Call and Webcast Delhaize Group s management is hosting an analyst conference call starting at 11:00 am CET on March 3, The conference call can be followed by calling +44 (0) (U.K.), +32 (0) (Belgium) or (U.S.), wi
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