2010 L REPORT REPORT L A ANNU Sligro Food Group N.V. ANNUAL REPORT 2010 75 years of Sligro Food Group We survived the crisis undamaged and clearly outperformed the market Ongoing investments in our premises Pleasing acquisition of Sanders Amsterdam delivery service back on track after challenging setbacks Long-term funding significantly strengthened; dividend to increase We are confident about the future SUMMARY OF 2010 Sligro Food Group N.V. encompasses food retail and Highlights of 2010 foodservice companies selling to the entire Dutch food and beverages market. Key figures • Market share + 0.8% 18.2% • Major investments in 5 cash-and-carry • Amsterdam and Nieuwegein € million ∆% delivery centres Net sales 2,286 1.3 • Paresto contract EBITDA 146 (2.2) EBIT 91 (7.4) Net profit 70 (5.5) EPS €1.59 (5.4) • 50 stores reFreshed • LFL sales +6.1% We strive to be a high-quality company achieving • Acquisition of Sanders steady, managed growth for all our stakeholders. • Master plan on track 1 summery of 2010 The slogan for 2010 was ...and now seize the moment Koen Slippens FOREWORD market segments, however, Sligro Food Group was able to achieve significant growth and so strengthen its position in the market. …and now seize the moment! Although Dutch supermarkets recorded a slight increase in volumes, this was primarily at the expense of specialist retailers and the foodservice market. If a market remains stable over a longer period of time or even reduces in size, as in the case of the foodservice market , it always leads to particularly fierce competition corporate governance on prices. Parties lagging behind the market may seek to use the price weapon in what may be a desperate bid to achieve a turn-around in their fortunes. Supermarkets are in any event always highly focused on price. And it can be questioned whether consumers’ price focus in recent years has been driven by demand or by supply. This price effect was further reinforced in 2010 by the We worked extremely hard throughout many format changes at a local level, primarily as a 2010 to achieve a pleasing growth in sales result of the acquisition of Super de Boer. in a very challenging market climate. And this certainly did not happen The market leader is clearly in the strongest position automatically as, contrary to our and leaves other parties little room for manoeuvre. expectations, Dutch consumers remained However, thanks to the successful strategy of the food cautious about spending money on food retail master plan, EMTÉ is one of the few formats that during the year. has managed to continue growing solidly, despite the powerful impact of prices and communications in Total spending on food stabilised at around the 2009 the market. After like-for-like growth of 7.6% in 2009, level, which itself was no higher than in 2008. In both its the figure recorded for 2010 was 6.1%. 2 The slogan for 2010 was ...and now seize the moment Koen Slippens 3 rganic growth in O sales of 3.6% The underlying market growth of around 2% in 2010 percentage of consumer spending, contracted by 2%. was substantially lower than the 3.5% recorded in 2009. However, these figures include a price rise that exceeds As these figures demonstrate, EMTÉ maintained its the increase seen in sales in the wholesale segment. We strong outperformance in 2010. We have now been estimate that overall sales in the wholesale segments of performing significantly better than the market for two most importance to us fell by around 4% in 2010. years in succession, and that gives us every confidence The growth we achieved of around 3% demonstrates, that we are on the right track in the improvements we therefore, that our policy of seizing the moment is clearly are making to the EMTÉ format! When the opportunity proving beneficial, certainly given that we also arose to acquire Sanders Supermarkten we grasped this established the basis in 2010 for stronger growth and chance to continue reinforcing EMTÉ, having already more efficient operations over the coming years. In the started converting the Golff stores to the EMTÉ format. foodservice market, too, pressure on volumes led to By the end of 2011 we will have 130 EMTÉ stores and a fierce price competition, which in turn squeezed margins market share of around 3%. even further. This was particularly evident in our delivery services. An additional factor during the year was that, as Sligro is the only party in the foodservice market that was well as the various non-recurring integration costs that able to achieve more than marginal organic growth had been predicted, the merger of all our delivery service during the year. The market as a whole, expressed as a activities in the Amsterdam region also involved certain 4 unforeseen costs being incurred in order to maintain the increase the payout to around 50% of net profit and in quality of our services. We are pleased to announce that principle to pay only a cash dividend. In view of the the integration process is now on track, while stability has group’s cash-generating ability, we believe we can been restored to the activities and we are on course, as combine a higher dividend with continued funding of forecast, to start reaping the benefits from mid-2011 our growth ambitions from the operational cash flow. onwards. The combination of this integration and the Although we do not yet see many clear signs of an planned opening of a delivery-service outlet at the increase in food spending by consumers in the former Sanders distribution centre in Enschede will Netherlands, we find it hard to imagine that the create an excellent infrastructure for delivery services, foodservice market will contract for a third year in with nationwide cover. During 2010 we also invested succession. Thanks to contracts that have been signed, additional amounts in further strengthening our already the solid base we created for our activities in 2010 and well-positioned, national network of cash-and-carry the strength of our Sligro format we expect our stores. foodservice sales to grow faster in 2011 than in 2010. Meanwhile the investments we have made in the To summarise the year, net group sales rose by 1.3% to infrastructure and quality of our services in recent years €2,286.3 million, representing an organic increase of 3.6%. will also start proving their worth. The foodservice operating profit fell by €15.0 million On the food retail side, we completed the process of rganicsales growth of 3.6% in to €77.7 million, with much of this decrease being disposing of unprofitable stores or stores not suited to O attributable to fierce price competition and to the the EMTÉ format in 2010, although some of these stores non-recurring costs and one-off items in Amsterdam. contributed to sales during the year. The loss of these We estimate this amounts to a total of around sales will be more than offset by sales in the Sanders €10 million, more than half of which relates to outlets. These latter activities will be part of the group non-cash items. The underlying trend, however, for the full year in 2011, whereas in 2010 they only presents a more positive picture. contributed to sales in the fourth quarter. The combination of these developments means that growth The food retail operating profit rose in 2010 by will accelarate in 2011, while we are also looking for €7.7 million to €13.2 million. This improvement is largely opportunities to further reinforce our position through attributable to the success of the food retail master plan, acquisitions. We at Sligro Food Group have established which was achieved despite the price pressure a solid base for achieving our medium-term growth emanating from the market leader, and to a further ambitions. Some years ago we stopped giving forecasts increase in sales in response to folder promotions. for short-term results as we did not wish to offer a false sense of security. We are confident, however, going into The group’s 2010 net profit decreased by 5.5% to the year 2011. €70.2 million, which means the year failed to live up to our expectations. At the same time, however, we were pleased that Sligro Food Group was able to stabilise its Our slogan for 2011 is… profit at around €70 million despite the worst economic THINK, DARE, DO! crisis in recent history. During this period we also managed to continue increasing our market share and The successful approach adopted in the food retail further strengthening our market position, while also master plan, the integration of Sanders Supermarkten continuing to invest so that we can benefit from into EMTÉ and the completion of the integrated opportunities for growth in the future. national foodservice network are all excellent examples of Think, Dare, Do. In our entrepreneurial culture you During 2010 we arranged additional long-term funding need to take time to Think through your plans, to in the form of a (second) US private placement. In this Dare to follow your chosen route with courage and way Sligro Food Group proved it can fund its capital confidence and to Do what you have set out to achieve. requirements on attractive conditions even in uncertain times. Veghel, 27 January 2011 After maintaining the same dividend policy for over Koen Slippens twenty years, the group is now proposing gradually to Executive Board Chairman 5 I work in a close-knit team Fina Dudok CONTENTS Foreword 2 Financial statements 88 Profile 8 Key figures 9 Consolidated Important dates 10 Consolidated profit and loss account for 2010 90 Locations 11 Consolidated statement of recognised The