Annual Report2013 Together the Best for Life Delhaize Group, a Leading Food Retailer
Total Page:16
File Type:pdf, Size:1020Kb
ANNUAL REPORT2013 TOGETHER THE BEST FOR LIFE DELHAIZE GROUP, A LEADING FOOD RETAILER DELHAIZE GROUP HAS LEADING POSITIONS IN FOOD RETAILING IN KEY MARKETS. OUR OPERATING COMPANIES HAVE ACQUIRED THESE POSITIONS THROUGH DISTINCT GO-TO-MARKET STRATEGIES. THE GROUP IS COMMITTED TO OFFER ITS CUSTOMERS A LOCALLY DIFFERENTIATED SHOPPING EXPERIENCE, TO DELIVER SUPERIOR VALUE AND TO MAINTAIN HIGH SOCIAL, ENVIRONMENTAL AND ETHICAL STANDARDS. OUR GROUP’S STRENGTH IS SUPPORTED BY THE CLOSE COOPERATION OF ITS OPERATING COMPANIES AT BOTH THE REGIONAL AND GLOBAL LEVELS. BELGIUM 852 STORES 16 227 ASSOCIATES SOUTHEASTERN USA EUROPE 1 514 STORES 1 051 STORES 108 053 ASSOCIATES 30 933 ASSOCIATES 160 883 3 534 € 21.1 bln NYSE ASSOCIATES STORES OF REVENUES EURONEXT BRUSSELS (+ 83 vs 2012) (TICKER SYMBOL: DELB) NEW YORK STOCK EXCHANGE (TICKER SYMBOL: DEG) CONTENT 02 Group 42 Governance(1) 02 Key Performance Indicators 42 Corporate Governance 04 Interview with the Chairman and the CEO 54 Remuneration Report 08 Segment Overview 62 Risk Factors(1) 10 Vision and Values 68 Financial Statements(1) 11 Strategy 12 Growth 168 Shareholder Information 18 Efficiency 24 Sustainability 172 Glossary 30 Review(1) 30 Financial Review 33 United States (1) These chapters contain the information required by the Belgian 36 Belgium Companies Code to be included in the Management Report on the consolidated financial statements and constitute in the aggregate 39 Southeastern Europe such Management Report. KEY PERFORMANCE INDICATORS NUMBER OF ASSOCIATES 10% 23% € 669 mio 160 883 FREE CASH FLOW 67% FINANCE United States Belgium SEE and Indonesia OPERATING PROFIT (in millions of €) + 2 % RESULTS ASSOCIATES 775 487 415 11 12 13 REVENUES 24% 15% € 21.1 bln ASSOCIATES 61% 2.3 % United States Belgium SEE OPERATING MARGIN ($ in millions except (€ in millions except Change per share amounts)(4) per share amounts) vs Prior Year 2013 2013 2012 2011 2013 2012 Results Revenues 28 033 21 108 20 991 19 519 +0.6% +7.5% Underlying operating profit 1 000 753 785 902 -4.0% -13.0% Operating profit 647 487 415 775 +17.3% -46.4% Net profit from continuing operations 299 226 160 465 +41.1% -65.6% Net profit (Group share) 237 179 104 472 +71.8% -78.0% Free cash flow(1) 888 669 773 -229 -13.4% N/A Financial Position Total assets 15 401 11 596 11 917 12 276 -2.7% -2.9% Total equity 6 741 5 076 5 188 5 416 -2.2% -4.2% Net debt(1) 1 956 1 473 2 072 2 660 -28.9% -22.1% Enterprise value(1)(3) 7 834 5 899 5 155 7 082 +14.4% -27.2% Per Share Information Group share in net profit (basic)(2) 2.35 1.77 1.03 4.69 +71.4% -78.0% Group share in net profit (diluted)(2) 2.34 1.76 1.03 4.65 +71.1% -77.9% Free cash flow(1)(2) 8.79 6.62 7.66 -2.28 -13.6% N/A Net dividend 1.55 1.17 1.05 1.32 +11.4% -20.5% Shareholders’ equity(3) 65.73 49.49 50.88 53.11 -2.7% -4.2% Share price (year-end) 57.37 43.20 30.25 43.41 +42.8% -30.3% Ratios (%) Operating margin 2.3% 2.0% 4.0% +33bps -199bps Net margin 0.8% 0.5% 2.4% +35bps -192bps Net debt to equity(1) 29.0% 39.9% 49.1% -10.9ppt -9.2ppt Currency information Average € per $ rate 0.7530 0.7783 0.7184 -3.3% +8.3% € per $ rate at year-end 0.7251 0.7579 0.7729 -4.3% -1.9% Other information Number of stores 3 534 3 451 3 408 +2.4% +1.3% Capital expenditures 565 681 754 -17.1% -9.6% Number of associates (thousands) 161 158 160 +1.9% -1.2% Full-time equivalents (thousands) 121 120 122 +0.7% -1.5% Weighted average number of shares (thousands) 101 029 100 777 100 684 +0.2% +0.1% (1) These are non-GAAP financial measures. (2) Calculated using the total number of shares at the end of the year. (3) Calculated using the weighted average number of shares over the year. (4) Calculated using an exchange rate of €1 = $1.3281. 4 DELHAIZE GROUP ANNUAL REPORT 2013 GROUP FROM CHANGES TO CHOICES Interview with the Chairman of the Board and the Chief Executive Officer FOR DELHAIZE GROUP, 2013 WILL UNDOUBTEDLY BE gained traction and turned 2013 into a year REMEMBERED AS A YEAR OF SIGNIFICANT CHANGE; of recovery. The energy and will to succeed of our associates and our local leaders were CHANGE AT THE LEVEL OF THE GROUP’S OPERATING clear drivers for this improvement. COMPANIES AS WELL AS ITS MANAGEMENT TEAM. FM: This energy and determination were TOGETHER WITH THE DELHAIZE GROUP CHAIRMAN indeed the sentiments I sensed when I OF THE BOARD, MATS JANSSON, THE INCOMING CEO arrived at Delhaize Group in mid October. FRANS MULLER SHARES HIS INSIGHTS ON WHAT HAS The dynamic I felt when I visited the different BEEN AND ON WHAT IS YET TO COME. operations convinced me of the possibilities and opportunities that lay within this com- pany. At the same time, the warm welcome I received from associates I met in the early With Food Lion turning the corner, Delhaize days of my arrival and beyond convinced me Belgium safeguarding its market share, Alfa that they truly understand what this business is Beta’s continuing growth in a difficult economic all about: people. environment, Mega Image accelerating its You are both seasoned retailers, how expansion and Maxi further strengthening its would you describe the climate in the foundations; many strategic initiatives began food retail business today? yielding fruit. And with the arrival of the new Group President and CEO, Frans Muller, there MJ: For many years, the food industry sector were changes in the executive committee as generated good cash flow, multiples were well. high, companies paid a solid dividend... It was a sector that seemed to be recession-proof. How would you describe 2013 in one Today, this is no longer the case. Similar to the word? airline industry, the food retail sector suffers MJ: I think the best way to describe 2013 from overcapacity and this impacts margins. It for Delhaize Group is that it was a year of also reflects on the multiples and valuations of Watch the video interview on http://annualreport.delhaizegroup.com rebound. This can be seen in our underlying the companies in the sector. That being said, if results and in the performance of our stock we look back on 2013, Delhaize Group clearly price. So while 2012 turned out to be a very improved its performance compared to 2012, tough year for Delhaize Group, we were especially in the U.S. and more particularly at already noticing in the last quarter of 2012 Food Lion. Our investments there are clearly some early signs of improvement that soon delivering. 4 DELHAIZE GROUP ANNUAL REPORT 2013 GROUP DELHAIZE GROUP ANNUAL REPORT 2013 INTERVIEW 5 FM: I agree. The marketplace is definitely the search process. We knew that it would be the company to achieve both top line growth getting more crowded over the years. This of the utmost importance to have a smooth and profitability. As a modern leader, Frans is means that a food retailer needs to be much transition. The Board of Directors, together with also capable of harmoniously integrating both more precise in positioning itself. For Delhaize the Remuneration and Nomination Committee his personal skills and his professional skills Group, we need to ask ourselves questions and with Pierre-Olivier Beckers, dedicated a to achieve results. For example, he is a great like: who are our target customers, what is the lot of time and energy to this process. Thanks listener and that is a very important skill for purpose of our existence, how do we remain to the efforts and commitment of all people both our customers and associates. relevant? We also need to be flexible to offer involved we were able to announce the our customers the best value proposition and in appointment of Frans Muller as the new CEO How did you experience your arrival order to do that we need to be very efficient in after only four months, which was an unusu- at the headquarters of Delhaize our capital expenditure and competitive in our ally swift process. Group in Brussels? cost structure. Finally, we need to understand FM: I enjoyed the benefit of a good transfer And why was Frans Muller the best that the cycles of change are much faster than period with Pierre-Olivier before I took on the candidate for this role? before in the food retail sector. As a conse- responsibility of being CEO. The time and quality MJ: The decision to appoint Frans Muller as quence we need to be agile and able to adapt of the preparation was very good and so was swiftly. This requires talented people. the new CEO of Delhaize Group was taken the transfer of duties. Although the decision on unanimously by the Board largely thanks to my appointment was taken very rapidly, I nev- Talking about talent, 2013 was a year his proven track record. When establishing ertheless took the time to get to know Delhaize that for many will be remembered the selection process and criteria, we set our as the year in which, after 15 years, standards very high in searching for the right Group better before I came to Brussels.