Exhibit 99.1
 | Half Year Financial Reporting Second Quarter 2015 Regulated Information July 30, 2015 – 7:00 a.m. CET |
DELHAIZE GROUP SECOND QUARTER 2015 RESULTS
Financial Summary Second Quarter 2015 | |
| » Revenue growth of 18.1% at actual and 3.2% at identical exchange rates | |
| » Comparable store sales growth of 2.5% in the U.S., -0.6% in Belgium and 1.6% in Southeastern Europe | |
| » Group operating profit growth of 544.6% (442.2% at identical exchange rates) | |
| » Group underlying operating profit growth of 25.7% (8.6% at identical exchange rates) | |
| » Group operating margin of 3.1%, an increase compared to 0.6% in the second quarter of 2014 | |
| » Group underlying operating margin of 3.7%, an increase compared to 3.4% in the second quarter of 2014 | |
Financial Summary First Half 2015 | |
| » Revenue growth of 17.0% at actual and 2.7% at identical exchange rates | |
» Group operating margin of 2.8% (1.9% last year) » Group underlying operating margin of 3.3% (3.4% last year) | |
Other highlights | |
| » On June 24, 2015, Royal Ahold and Delhaize Group announced the intention to merge | |
| » | CEO Comments |
Frans Muller, President and Chief Executive Officer of Delhaize Group, commented: “3.2% revenue growth, 8.6% underlying operating profit growth at identical exchange rates and €308 million free cash flow generation represents a solid performance for Delhaize Group in the second quarter of 2015.
With a 3.4% real growth, Delhaize America experienced continued sales momentum both at Food Lion and at Hannaford. At Delhaize Belgium, our market share continued to improve compared to the end of 2014. Our Southeastern European operations’ performance was robust, helped by continued high growth in Romania and positive comparable store sales growth and network growth in Greece. Our performance in Serbia was stable.
We are making good progress with the two strategic initiatives highlighted earlier this year. The execution of our Transformation Plan at Delhaize Belgium continues to go according to plan and at Food Lion we remain on schedule to launch our “Easy, Fresh and Affordable” strategy in the Raleigh market in the fourth quarter of this year. Our first half year performance puts us in a good position to realize our ambitions for the year and we are looking forward to merging our operations with Ahold as announced on June 24, 2015.”
| » | Financial Summary |
| Q2 2015(1) | YTD 2015(1) | |||||||||||||||||||||||
| Actual Results | At Actual Rates | At Identical Rates(2) | In millions of €, except EPS (in €) | Actual Results | At Actual Rates | At Identical Rates(2) | ||||||||||||||||||
| 6 114 | +18.1 | % | +3.2 | % | Revenues | 11 934 | +17.0 | % | +2.7 | % | ||||||||||||||
| 393 | +21.9 | % | +5.9 | % | Underlying EBITDA | 732 | +16.7 | % | +1.3 | % | ||||||||||||||
| 187 | +544.6 | % | +442.2 | % | Operating profit | 331 | +74.3 | % | +45.8 | % | ||||||||||||||
| 3.1 | % | - | - | Operating margin | 2.8 | % | - | - | ||||||||||||||||
| 223 | +25.7 | % | +8.6 | % | Underlying operating profit | 396 | +15.4 | % | -0.9 | % | ||||||||||||||
| 3.7 | % | - | - | Underlying operating margin | 3.3 | % | - | - | ||||||||||||||||
| 145 | N/ | A | N/ | A | Profit before taxes and discontinued operations | 194 | +88.8 | % | +50.6 | % | ||||||||||||||
| 106 | N/ | A | N/ | A | Net profit from continuing operations | 142 | +184.9 | % | +126.1 | % | ||||||||||||||
| 106 | N/ | A | N/ | A | Group share in net profit | 134 | +287.7 | % | +207.1 | % | ||||||||||||||
| 1.03 | N/ | A | N/ | A | Basic earnings per share - Group share in net profit | 1.31 | +283.7 | % | +204.0 | % | ||||||||||||||
(1) The average exchange rate of the U.S. dollar against the euro strengthened by 24.0% in the second quarter of 2015
(€1 = $1.1053) compared to the second quarter of 2014 and strengthened in the first half of 2015 by 22.8% (€1 = $1.1158) compared to the same period in 2014.
(2) Values at identical exchange rate are calculated by converting the results of our operations denominated in a currency other than the euro at the average exchange rate prevailing for the comparative period. For instance; YTD 2015 revenues at identical exchange rates were calculated by converting the YTD 2015 revenues of our U.S., Romanian and Serbian operations at the YTD 2014 average exchange rate.
1 of 21
| » | Second Quarter 2015 Income Statement |
Revenues
In the second quarter of 2015, Delhaize Group’s revenues increased by 18.1% and 3.2% at actual and identical exchange rates, respectively. The latter equals the organic revenue growth.
In the U.S., revenues grew by 3.2% in local currency, supported by comparable store sales growth of 2.5% excluding a 0.7% positive calendar impact. The 2.5% U.S. comparable store sales growth was fueled by positive real growth at both Food Lion and Hannaford and was partly offset by negative retail inflation (-0.9%). Revenues at Delhaize Belgium decreased by 0.3%, with comparable store sales evolution of -0.6%, a marked improvement compared to previous quarters. Retail inflation in Belgium turned positive and stood at 0.6%. Revenues in Southeastern Europe grew by a strong 7.9% at actual and 9.0% at identical exchange rates, driven by comparable store sales growth of 1.6%, store network expansion and a 0.4% positive calendar impact.
Gross margin
Gross margin was 24.4% of revenues, an increase of 30 basis points at actual and 9 basis points at identical exchange rates, mainly as a result of better supplier terms in Belgium and Southeastern Europe and lower supply chain costs in Belgium, partly offset by price investments in the U.S. and Belgium and higher shrink in the U.S.
Other operating income
Other operating income was €28 million, slightly lower than last year due to lower gains on disposal of assets.
Selling, general and administrative expenses
Selling, general and administrative expenses (SG&A) were 21.2% of revenues, an increase of 3 basis points at actual and a decrease of 13 basis points at identical exchange rates compared to last year, primarily as a result of higher revenues and lower benefits in the U.S., partly offset by higher depreciation and advertising expenses in Belgium.
Other operating expenses
Other operating expenses were €38 million compared to €154 million last year, which included €150 million of impairment losses at Delhaize Serbia.
Operating profit
Operating profit increased from €29 million to €187 million primarily because last year included €150 million of impairment losses at Delhaize Serbia.
Operating margin was 3.1% of revenues compared to 0.6% in the second quarter of 2014.
Underlying operating profit
Underlying operating profit was €223 million, an increase of 25.7% at actual exchange rates and 8.6% at identical exchange rates.
The increase in underlying operating profit was due to increases in the U.S. and Southeastern Europe, while Delhaize Belgium underlying operating profit was almost stable compared to last year. Underlying operating margin was 3.7% of revenues compared to 3.4% in the second quarter of 2014.
Net financial expenses
Net financial expenses stood at €43 million and were €1 million lower than last year at actual exchange rates or €9 million lower at identical exchange rates, primarily due to interest savings resulting from the February tender offer.
2 of 21
Income tax
In the second quarter of 2015, the effective tax rate (from continued operations) was 26.6% compared to a negative 185.2% last year which was impacted by the non-deductible goodwill impairment loss at Delhaize Serbia.
Net profit (loss) from continuing operations
Net profit from continuing operations was €106 million compared to a loss of €43 million in last year´s second quarter. This resulted in €1.03 basic earnings per share compared to a loss of €0.43 per share in the second quarter of 2014.
Net profit (loss)
Group share in net profit amounted to €106 million compared to a loss of €45 million last year. Basic and diluted net profit per share was €1.03 and €1.02 respectively for the second quarter of 2015, compared to a loss per share of €0.44 for both last year.
EBITDA
EBITDA increased by 10.2% to €357 million (a decrease of 5.6% at identical exchange rates), while underlying EBITDA increased by 21.9% to €393 million (+5.9% at identical exchange rates).
| » | First Half 2015 Income Statement |
Revenues
In the first half of 2015, Delhaize Group’s revenues increased by 17.0% and 2.7% at actual and identical exchange rates, respectively. Organic revenue growth was also 2.7%.
In the U.S., revenue growth in local currency was 3.2%. U.S. comparable store sales growth was 2.5% excluding a 0.6% positive calendar impact. Revenues at Delhaize Belgium decreased by 1.3% and comparable store sales declined by 1.6%. Revenues in Southeastern Europe grew by 6.5% at actual and 7.4% at identical exchange rates.
Gross margin
Gross margin was 24.4% of revenues, increasing by 29 basis points at actual and 6 basis points at identical exchange rates. A higher gross margin in Southeastern Europe was partly offset by a lower gross margin at Delhaize Belgium, mainly due to price investments and higher logistic costs, while gross margin was flat at Delhaize America.
Other operating income
Other operating income was €53 million and decreased by €3 million compared to last year.
Selling, general and administrative expenses
Selling, general and administrative expenses (SG&A) were 21.5% of revenues, an increase of 26 basis points at actual and 12 basis points at identical exchange rates compared to last year, resulting from lower revenues and higher advertising and depreciation expenses at Delhaize Belgium, partly offset by the impact of higher revenues in the U.S.
Other operating expenses
Other operating expenses were €68 million including a €25 million fine from the Belgian Competition Authority compared to €159 million last year, which was impacted by €150 million impairment losses at Delhaize Serbia.
Operating profit
Operating profit increased by 74.3% from €190 million to €331 million primarily because last year included €150 million of impairment losses at Delhaize Serbia.
Operating margin was 2.8% of revenues compared to 1.9% in the first half of 2014.
Underlying operating profit
Underlying operating profit was €396 million and increased by 15.4% at actual exchange rates and decreased by 0.9% at identical exchange rates.
3 of 21
The underlying operating profit decrease at identical exchange rates is the result of lower profitability in Belgium and higher costs at Corporate, offset by higher profitability in the U.S. and Southeastern Europe. Underlying operating margin was 3.3% of revenues compared to 3.4% in the first half of 2014.
Net financial expenses
Net financial expenses were €139 million and included a €41 million one-off charge relating to the bond tender transaction which took place in February 2015. At actual exchange rates and excluding the one-off charge, net finance costs were €98 million compared to €88 million in the first half of last year due to the strengthening of the U.S. dollar partly offset by lower gross debt.
Income tax
During the first half of 2015, the effective tax rate (on continued operations) was 27.1% compared to the high 52.1% last year primarily as a result of the non-deductible goodwill impairment loss at Delhaize Serbia.
Net profit from continuing operations
Net profit from continuing operations was €142 million in the first half of 2015 compared to €50 million in the first half of 2014. This resulted in €1.38 basic earnings per share compared to €0.49 last year.
Net profit
Group share in net profit amounted to €134 million in the first half of 2015. Basic and diluted net profit per share were €1.31 and €1.30 respectively compared to €0.34 per share in both cases last year.
EBITDA
EBITDA increased by 7.7% to €674 million at actual exchange rates but decreased by 7.5% at identical exchange rates. Underlying EBITDA increased by 16.7% to €732 million (1.3% at identical exchange rates).
4 of 21
| » | Segment Information (at actual exchange rates) |
Q2 2015 | Revenues | Operating Margin | Operating Profit/(loss) | Underlying Operating Margin(3) | Underlying Operating Profit/(loss)(3) | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Q2 2015 | Q2 2014 | 2015/ 2014 | Q2 2015 | Q2 2014 | Q2 2015 | Q2 2014 | 2015/ 2014 | Q2 2015 | Q2 2014 | Q2 2015 | Q2 2014 | 2015/ 2014 | |||||||||||||||||||||||||||||||||||||||
United States(1) | $ | 4 459 | 4 321 | +3.2 | % | 3.9 | % | 3.8 | % | 172 | 163 | +5.5 | % | 3.9 | % | 3.7 | % | 175 | 162 | +8.1 | % | |||||||||||||||||||||||||||||||
United States(1) | € | 4 031 | 3 151 | +27.9 | % | 3.9 | % | 3.8 | % | 156 | 119 | +30.7 | % | 3.9 | % | 3.7 | % | 158 | 117 | +34.0 | % | |||||||||||||||||||||||||||||||
| Belgium | € | 1 255 | 1 257 | -0.3 | % | 2.1 | % | 3.3 | % | 26 | 41 | -36.8 | % | 3.2 | % | 3.2 | % | 40 | 40 | -1.2 | % | |||||||||||||||||||||||||||||||
Southeastern Europe(2) | € | 828 | 768 | +7.9 | % | 4.4 | % | (15.7 | %) | 36 | (120 | ) | N/A | 4.5 | % | 3.9 | % | 37 | 30 | +24.5 | % | |||||||||||||||||||||||||||||||
| Corporate | € | - | - | N/A | N/A | N/A | (31 | ) | (11 | ) | -191.9 | % | N/A | N/A | (12 | ) | (10 | ) | -12.5 | % | ||||||||||||||||||||||||||||||||
| TOTAL | € | 6 114 | 5 176 | +18.1 | % | 3.1 | % | 0.6 | % | 187 | 29 | +544.6 | % | 3.7 | % | 3.4 | % | 223 | 177 | +25.7 | % | |||||||||||||||||||||||||||||||
H1 2015 | Revenues | Operating Margin | Operating Profit/(loss) | Underlying Operating Margin(3) | Underlying Operating Profit/(loss)(3) | |||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2015 | 2014 | 2015/ 2014 | 2015 | 2014 | 2015 | 2014 | 2015/ 2014 | 2015 | 2014 | 2015 | 2014 | 2015/ 2014 | |||||||||||||||||||||||||||||||||||||||
United States(1) | $ | 8 822 | 8 549 | +3.2 | % | 3.7 | % | 3.7 | % | 328 | 320 | +2.6 | % | 3.9 | % | 3.8 | % | 340 | 323 | +5.3 | % | |||||||||||||||||||||||||||||||
United States(1) | € | 7 906 | 6 238 | +26.7 | % | 3.7 | % | 3.7 | % | 294 | 233 | +26.0 | % | 3.9 | % | 3.8 | % | 305 | 235 | +29.3 | % | |||||||||||||||||||||||||||||||
| Belgium | € | 2 432 | 2 464 | -1.3 | % | 0.9 | % | 3.2 | % | 22 | 79 | -72.5 | % | 2.3 | % | 3.2 | % | 56 | 78 | -27.9 | % | |||||||||||||||||||||||||||||||
Southeastern Europe(2) | € | 1 596 | 1 499 | +6.5 | % | 3.4 | % | (7.1 | %) | 54 | (106 | ) | N/A | 3.4 | % | 2.9 | % | 55 | 44 | +26.4 | % | |||||||||||||||||||||||||||||||
| Corporate | € | - | - | N/A | N/A | N/A | (39 | ) | (16 | ) | -147.9 | % | N/A | N/A | (20 | ) | (14 | ) | -41.7 | % | ||||||||||||||||||||||||||||||||
| TOTAL | € | 11 934 | 10 201 | +17.0 | % | 2.8 | % | 1.9 | % | 331 | 190 | +74.3 | % | 3.3 | % | 3.4 | % | 396 | 343 | +15.4 | % | |||||||||||||||||||||||||||||||
| (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. |
| (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 19 of this document. |
United States
In the second quarter of 2015, revenues in the U.S. increased by 3.2% to $4.5 billion (€4.0 billion). Comparable store sales increased by 2.5% (excluding a positive calendar impact of 0.7%). Both Food Lion and Hannaford experienced positive comparable store sales and real growth despite 0.9% of retail deflation for our U.S. operations overall. This was mainly driven by price declines in dairy, pork, seafood and produce.
During the first half of 2015, U.S. revenues increased by 3.2% in local currency.
In the second quarter of 2015, underlying operating profit increased by 8.1% in local currency and our underlying operating margin was 3.9% compared to 3.7% in prior year. A decrease in the gross margin, mainly due to price investments and higher shrink at Food Lion, was more than offset by an improvement in SG&A as a percentage of revenues, resulting from positive sales leverage, lower benefits and the timing of IT and advertising costs, which will partially reverse in the third quarter.
For the first six months of 2015, underlying operating profit of our U.S. operations increased by 5.3% to $340 million (€305 million) and the underlying operating margin was 3.9% (3.8% last year).
Belgium
In the second quarter of 2015, revenues in Belgium were €1.3 billion, a decrease of 0.3% compared to the second quarter of 2014, with comparable store sales evolution of -0.6%. Although our market share continued to be under pressure in the second quarter, we have seen further improvements in our market share trend. Retail inflation turned positive at +0.6%, driven mostly by the fruits and vegetables category.
During the first half of 2015, Delhaize Belgium revenues decreased by 1.3%.
In the second quarter of 2015, underlying operating profit decreased by 1.2% to €40 million. This is explained by slightly lower revenues and higher SG&A as a result of higher advertising expenses and accelerated depreciation due to remodelings. These were mostly offset by an improved gross margin due to better supplier terms and lower logistic costs, partly compensated by price investments. Underlying operating margin was 3.2%, flat compared to last year.
For the first six months of 2015, underlying operating profit decreased by 27.9% to €56 million and underlying operating margin was 2.3% (3.2% last year).
5 of 21
Southeastern Europe
In the second quarter of 2015, revenues in Southeastern Europe increased by 7.9% to €828 million (+9.0% at identical exchange rates), resulting from positive comparable store sales growth of 1.6%, driven by Greece and Romania and further network expansion. Comparable store sales growth was slightly negative in Serbia.
During the first half of 2015, revenues in Southeastern Europe increased by 6.5% (+7.4% at identical exchange rates).
During the second quarter of 2015, underlying operating profit increased by 24.5% to €37 million (+25.4% at identical exchange rates), while the underlying operating margin increased from 3.9% to 4.5%, thanks to positive operational leverage and better supplier terms in Greece and Romania. Profitability was maintained in Serbia.
For the first six months of 2015, underlying operating profit increased by 26.4% to €55 million (+27.4% at identical exchange rates) and the underlying operating margin was 3.4% (2.9% last year).
| » | 2015 Outlook |
In 2015, our Group continues to be focused on two key strategic initiatives: the further fine-tuning and roll-out of “Easy, Fresh & Affordable” in 160 additional Food Lion stores, and the implementation of the Transformation Plan in Belgium. In Belgium, we expect positive comparable store sales growth in the second half of the year.
We expect Group capital expenditures of approximately €700 million (at identical exchange rates of $1.33). We will continue to be disciplined with respect to operating costs, capital allocation and working capital, and plan to continue generating a healthy level of free cash flow.
| » | Delhaize Group |
Delhaize Group is a Belgian international food retailer present in seven countries on three continents. At the end of the second quarter of 2015, Delhaize Group’s sales network consisted of 3 445 stores. In 2014, Delhaize Group recorded €21.4 billion ($28.4 billion) in revenues and €89 million ($118 million) in net profit (Group share). At the end of 2014, Delhaize Group employed approximately 150 000 people. Delhaize Group’s stock is listed on NYSE Euronext Brussels (DELB) and the New York Stock Exchange (DEG).
| » | Financial Calendar |
| ● | Press release – 2015 third quarter results | October 29, 2015 |
| » | Contacts |
Investor Relations: + 32 2 412 2151 Media Relations: + 32 2 412 8669 |
6 of 21
DELHAIZE GROUP CONDENSED CONSOLIDATED FINANCIAL STATEMENT
| » | Condensed Consolidated Balance Sheet (Unaudited) |
(in millions of €) | June 30, 2015 | December 31, 2014 | June 30, 2014 | |||||||||
| Assets | ||||||||||||
| Non-current assets | 8 649 | 8 172 | 7 700 | |||||||||
| Goodwill | 3 381 | 3 147 | 2 843 | |||||||||
| Intangible assets | 792 | 763 | 703 | |||||||||
| Property, plant and equipment | 4 199 | 4 015 | 3 900 | |||||||||
| Investment property | 101 | 84 | 86 | |||||||||
| Investments accounted for using the equity method | 32 | 30 | 26 | |||||||||
| Financial assets | 21 | 29 | 29 | |||||||||
| Derivative instruments | 7 | 9 | 6 | |||||||||
| Other non-current assets | 116 | 95 | 107 | |||||||||
| Current assets | 3 766 | 3 955 | 3 267 | |||||||||
| Inventories | 1 447 | 1 399 | 1 318 | |||||||||
| Receivables | 642 | 623 | 571 | |||||||||
| Financial assets | 239 | 167 | 231 | |||||||||
| Derivative instruments | — | 2 | — | |||||||||
| Other current assets | 167 | 104 | 123 | |||||||||
| Cash and cash equivalents | 1 268 | 1 600 | 1 000 | |||||||||
| Assets classified as held for sale | 3 | 60 | 24 | |||||||||
| Total assets | 12 415 | 12 127 | 10 967 | |||||||||
| Liabilities | ||||||||||||
| Total equity | 5 817 | 5 453 | 4 997 | |||||||||
| Shareholders’ equity | 5 811 | 5 447 | 4 992 | |||||||||
| Non-controlling interests | 6 | 6 | 5 | |||||||||
| Non-current liabilities | 3 305 | 3 494 | 3 314 | |||||||||
| Long-term debt | 1 916 | 2 201 | 2 041 | |||||||||
| Obligations under finance lease | 487 | 475 | 472 | |||||||||
| Deferred tax liabilities | 369 | 302 | 395 | |||||||||
| Derivative instruments | 52 | 26 | 5 | |||||||||
| Provisions | 417 | 432 | 346 | |||||||||
| Other non-current liabilities | 64 | 58 | 55 | |||||||||
| Current liabilities | 3 293 | 3 180 | 2 656 | |||||||||
| Long-term debt - current portion | 10 | 1 | 2 | |||||||||
| Obligations under finance lease | 73 | 69 | 60 | |||||||||
| Accounts payable | 2 241 | 2 112 | 1 858 | |||||||||
| Provisions | 224 | 188 | 87 | |||||||||
| Other current liabilities | 745 | 770 | 638 | |||||||||
| Liabilities associated with assets held for sale | — | 40 | 11 | |||||||||
| Total liabilities and equity | 12 415 | 12 127 | 10 967 | |||||||||
| $ per € exchange rate | 1.1189 | 1.2141 | 1.3658 | |||||||||
7 of 21
| » | Condensed Consolidated Income Statement (Unaudited) |
| Q2 2015 | Q2 2014 | (in millions of €) | YTD 2015 | YTD 2014 | |||||||||||
| 6 114 | 5 176 | Revenues | 11 934 | 10 201 | |||||||||||
| (4 622 | ) | (3 929 | ) | Cost of sales | (9 022 | ) | (7 742 | ) | |||||||
| 1 492 | 1 247 | Gross profit | 2 912 | 2 459 | |||||||||||
| 24,4 | % | 24,1 | % | Gross margin | 24,4 | % | 24,1 | % | |||||||
| 28 | 30 | Other operating income | 53 | 56 | |||||||||||
| (1 295 | ) | (1 094 | ) | Selling, general and administrative expenses | (2 566 | ) | (2 166 | ) | |||||||
| (38 | ) | (154 | ) | Other operating expenses | ( 68 | ) | (159 | ) | |||||||
| 187 | 29 | Operating profit | 331 | 190 | |||||||||||
| 3,1 | % | 0,6 | % | Operating margin | 2,8 | % | 1,9 | % | |||||||
| (48 | ) | (49 | ) | Finance costs | (142 | ) | (95 | ) | |||||||
| 5 | 5 | Income from investments | 3 | 7 | |||||||||||
| 1 | - | Share of results of joint venture equity accounted | 2 | 1 | |||||||||||
| 145 | (15 | ) | Profit (loss) before taxes and discontinued operations | 194 | 103 | ||||||||||
| (39 | ) | (28 | ) | Income tax expense | (52 | ) | (53 | ) | |||||||
| 106 | (43 | ) | Net profit (loss) from continuing operations | 142 | 50 | ||||||||||
| - | ( 2 | ) | Result from discontinued operations, net of tax | (8 | ) | (15 | ) | ||||||||
| 106 | (45 | ) | Net profit (loss) | 134 | 35 | ||||||||||
| - | - | Net profit attributable to non-controlling interests | - | - | |||||||||||
| Net profit attributable to equity holders of the Group - | |||||||||||||||
| 106 | (45 | ) | Group share in net profit | 134 | 35 | ||||||||||
| (in €, except number of shares) | |||||||||||||||
| Group share in net profit (loss) from continuing operations: | |||||||||||||||
| 1,03 | (0,43 | ) | Basic earnings per share | 1,38 | 0,49 | ||||||||||
| 1,02 | (0,43 | ) | Diluted earnings per share | 1,37 | 0,48 | ||||||||||
| Group share in net profit (loss): | |||||||||||||||
| 1,03 | (0,44 | ) | Basic earnings per share | 1,31 | 0,34 | ||||||||||
| 1,02 | (0,44 | ) | Diluted earnings per share | 1,30 | 0,34 | ||||||||||
| Weighted average number of shares outstanding: | |||||||||||||||
| 102 689 978 | 101 294 614 | Basic | 102 319 117 | 101 272 176 | |||||||||||
| 103 613 788 | 101 971 766 | Diluted | 103 277 776 | 101 839 384 | |||||||||||
| 103 766 860 | 102 732 803 | Shares issued at the end of the period | 103 766 860 | 102 732 803 | |||||||||||
| 102 945 430 | 101 610 427 | Shares outstanding at the end of the period | 102 945 430 | 101 610 427 | |||||||||||
| 1,1053 | 1,3711 | Average $ per € exchange rate | 1,1158 | 1,3703 | |||||||||||
8 of 21
| » | Condensed Consolidated Statement of Comprehensive Income (Unaudited) |
| Q2 2015 | Q2 2014 | (in millions of €) | YTD 2015 | YTD 2014 | |||||||||||
| 106 | (45 | ) | Net profit (loss) of the period | 134 | 35 | ||||||||||
| — | — | Total items that will not be reclassified to profit or loss | — | — | |||||||||||
| Items that are or may be reclassified subsequently to profit or loss | |||||||||||||||
| (5 | ) | (1 | ) | Unrealized gain (loss) on financial assets available for sale | (3 | ) | |||||||||
| — | — | Reclassification adjustment to net profit | — | — | |||||||||||
| — | — | Tax (expense) benefit | — | — | |||||||||||
| (5 | ) | (1 | ) | Unrealized gain (loss) on financial assets available for sale, net of tax | (3 | ) | — | ||||||||
| (169 | ) | 34 | Exchange gain (loss) on translation of foreign operations | 315 | 33 | ||||||||||
| — | (1 | ) | Reclassification adjustment to net profit | — | (1 | ) | |||||||||
| (169 | ) | 33 | Exchange gain (loss) on translation of foreign operations | 315 | 32 | ||||||||||
| (174 | ) | 32 | Total items that are or may be reclassified subsequently to profit or loss | 312 | 32 | ||||||||||
| (174 | ) | 32 | Other comprehensive income | 312 | 32 | ||||||||||
| — | — | Attributable to non-controlling interests | — | — | |||||||||||
| (174 | ) | 32 | Attributable to equity holders of the Group | 312 | 32 | ||||||||||
| (68 | ) | (13 | ) | Total comprehensive income for the period | 446 | 67 | |||||||||
| — | — | Attributable to non-controlling interests | — | — | |||||||||||
| (68 | ) | (13 | ) | Attributable to equity holders of the Group | 446 | 67 | |||||||||
9 of 21
| » | Condensed Consolidated Statement of Changes in Equity (Unaudited) |
(in millions of €, except number of shares) | Shareholders’ Equity | Non-controlling Interests | Total Equity | |||||||||
| Balances at January 1, 2015 | 5 447 | 6 | 5 453 | |||||||||
| Other comprehensive income | 312 | — | 312 | |||||||||
| Net profit | 134 | — | 134 | |||||||||
| Total comprehensive income for the period | 446 | — | 446 | |||||||||
| Capital increases | 59 | — | 59 | |||||||||
| Dividends declared | (165 | ) | — | (165 | ) | |||||||
| Treasury shares purchased | (23 | ) | — | (23 | ) | |||||||
| Treasury shares sold upon exercise of employee stock options | 36 | — | 36 | |||||||||
| Tax payment for restricted stock units vested | (1 | ) | — | (1 | ) | |||||||
| Excess tax benefit on employee stock options and restricted stock units | 5 | — | 5 | |||||||||
| Share-based compensation expense | 7 | — | 7 | |||||||||
| Balances at June 30, 2015 | 5 811 | 6 | 5 817 | |||||||||
| Shares issued | 103 766 860 | |||||||||||
| Treasury shares | 821 430 | |||||||||||
| Shares outstanding | 102 945 430 | |||||||||||
(in millions of €, except number of shares) | Shareholders’ Equity | Non-controlling Interests | Total Equity | |||||||||
| Balances at January 1, 2014 | 5 068 | 5 | 5 073 | |||||||||
| Other comprehensive income | 32 | — | 32 | |||||||||
| Net profit | 35 | — | 35 | |||||||||
| Total comprehensive income for the period | 67 | — | 67 | |||||||||
| Capital increases | 10 | — | 10 | |||||||||
| Dividends declared | (158 | ) | — | (158 | ) | |||||||
| Treasury shares sold upon exercise of employee stock options | 2 | — | 2 | |||||||||
| Tax payment for restricted stock units vested | (1 | ) | — | (1 | ) | |||||||
| Share-based compensation expense | 4 | — | 4 | |||||||||
| Balances at June 30, 2014 | 4 992 | 5 | 4 997 | |||||||||
| Shares issued | 102 732 803 | |||||||||||
| Treasury shares | 1 122 376 | |||||||||||
| Shares outstanding | 101 610 427 | |||||||||||
10 of 21
| » | Condensed Consolidated Statement of Cash Flows (Unaudited) |
| Q2 2015 | Q2 2014 | (in millions of €) | YTD 2015 | YTD 2014 | |||||||||||||
| Operating activities | |||||||||||||||||
| 106 | (45 | ) | Net profit | 134 | 35 | ||||||||||||
| Adjustments for: | |||||||||||||||||
| (1 | ) | - | Share of results of joint venture equity accounted | (2 | ) | (1 | ) | ||||||||||
| 170 | 149 | Depreciation and amortization | 336 | 293 | |||||||||||||
| - | 151 | Impairment | 7 | 167 | |||||||||||||
| 81 | 67 | Income taxes, finance costs and income from investments | 188 | 139 | |||||||||||||
| 6 | (3 | ) | Other non-cash items | 14 | - | ||||||||||||
| 211 | 29 | Changes in operating assets and liabilities | (54 | ) | (125 | ) | |||||||||||
| (58 | ) | (60 | ) | Interest paid | (92 | ) | (92 | ) | |||||||||
| 9 | 4 | Interest received | 12 | 7 | |||||||||||||
| (18 | ) | (88 | ) | Income taxes paid | (62 | ) | (98 | ) | |||||||||
| 506 | 204 | Net cash provided by operating activities | 481 | 325 | |||||||||||||
| Investing activities | |||||||||||||||||
| (6 | ) | (2 | ) | Business acquisitions, net of cash and cash equivalents acquired | (8 | ) | (6 | ) | |||||||||
| - | 136 | Business disposals, net of cash and cash equivalents disposed | 14 | 177 | |||||||||||||
| (196 | ) | (150 | ) | Purchase of tangible and intangible assets (capital expenditures) | (281 | ) | (229 | ) | |||||||||
| 4 | 32 | Sale of tangible and intangible assets | 9 | 39 | |||||||||||||
| (3 | ) | (3 | ) | Investment in debt securities | (3 | ) | (3 | ) | |||||||||
| - | (9 | ) | Sale and maturity of (investment in) term deposits, net | (24 | ) | (77 | ) | ||||||||||
| (1 | ) | 1 | Other investing activities | (27 | ) | 2 | |||||||||||
| (202 | ) | 5 | Net cash provided by (used in) investing activities | (320 | ) | (97 | ) | ||||||||||
| Financing activities | |||||||||||||||||
| 18 | 11 | Proceeds from the exercise of share warrants and stock options | 94 | 11 | |||||||||||||
| (2 | ) | - | Treasury shares purchased | (23 | ) | - | |||||||||||
| (165 | ) | (158 | ) | Dividends paid, including dividends paid by subsidiaries to non-controlling interests | (165 | ) | (158 | ) | |||||||||
| (18 | ) | (227 | ) | Repayments of long-term loans, net of direct financing costs | (470 | ) | (239 | ) | |||||||||
| - | 7 | Settlement of derivative instruments | 4 | 6 | |||||||||||||
| (167 | ) | (367 | ) | Net cash used in financing activities | (560 | ) | (380 | ) | |||||||||
| (30 | ) | 7 | Effect of foreign currency translation | 67 | 6 | ||||||||||||
| 107 | (151 | ) | Net increase (decrease) in cash and cash equivalents | (332 | ) | (146 | ) | ||||||||||
| 1 161 | 1 152 | Cash and cash equivalents at beginning of period | 1 600 | 1 147 | |||||||||||||
| 1 268 | 1 001 | (1) | Cash and cash equivalents at end of period | 1 268 | 1 001 | (1) | |||||||||||
(1) Includes €1 million in assets classified as held for sale |
11 of 21
| » | Selected Explanatory Notes |
General information
Delhaize Group is a Belgian international food retailer with operations in seven countries on three continents. The Company’s ordinary shares are listed under the symbol “DELB” on the regulated market NYSE Euronext Brussels and the American Depositary Shares (“ADSs”), evidenced by American Depository Receipts (“ADRs”), each representing one quarter of one ordinary share, are listed on the New York Stock Exchange under the symbol “DEG”.
The condensed interim financial statements of the Group for the six months ended June 30, 2015 were authorized for issue by the Board of Directors on July 29, 2015.
This interim report only provides an explanation of events and transactions that are significant to an understanding of the changes in financial position and reporting since the last annual reporting period, and should therefore be read in conjunction with the consolidated financial statements for the financial year ended on December 31, 2014.
Basis of presentation and accounting policies
These condensed interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting, as issued by the International Accounting Standards Board (IASB), and as adopted by the European Union (EU).
The condensed interim financial statements are presented in millions of euros, the Group’s presentation currency, except where stated otherwise.
The accounting policies applied in this report are consistent with those of the previous financial year except for the following new, amended or revised IFRS standards and IFRIC interpretations that have been adopted as of January 1, 2015:
| ● | Amendments to IAS 19 Defined Benefit Plans: Employee Contributions; |
| ● | Annual Improvements 2010-2012 Cycle and 2011-2013 Cycle. |
The adoption of these new, amended or revised pronouncements did not have a significant impact on the condensed financial statements of the Group.
Delhaize Group did not early adopt any new IASB pronouncements that were issued but not yet effective at the balance sheet date.
Segment reporting
Delhaize Group believes “underlying operating profit” is a measure that, for external users of the financial statements, offers a more detailed view than “operating profit” of the operating performance of the period for the Group as it adjusts for a number of elements that management considers as non-representative of underlying operating performance.
| Q2 2015 | ||||||||||||||||||||||||
(in millions) | United States | United States | Belgium | SEE | Corporate | TOTAL | ||||||||||||||||||
| $ | € | € | € | € | € | |||||||||||||||||||
| Revenues | 4 459 | 4 031 | 1 255 | 828 | - | 6 114 | ||||||||||||||||||
| Operating profit (as reported) | 172 | 156 | 26 | 36 | (31 | ) | 187 | |||||||||||||||||
| Operating margin | 3.9 | % | 3.9 | % | 2.1 | % | 4.4 | % | N/A | 3.1 | % | |||||||||||||
| Add/(subtract): | ||||||||||||||||||||||||
| Store closing expenses (reversals) | (1 | ) | (1 | ) | — | — | — | (1 | ) | |||||||||||||||
| Reorganization expenses (reversals) | 3 | 3 | 2 | — | — | 5 | ||||||||||||||||||
| (Gains)/losses on disposal of fixed assets | 1 | — | — | 1 | — | 1 | ||||||||||||||||||
| Other | — | — | 12 | — | 19 | 31 | ||||||||||||||||||
| Underlying operating profit | 175 | 158 | 40 | 37 | (12 | ) | 223 | |||||||||||||||||
| Underlying operating margin | 3.9 | % | 3.9 | % | 3.2 | % | 4.5 | % | N/A | 3.7 | % | |||||||||||||
12 of 21
| Q2 2014 | ||||||||||||||||||||||||
| (in millions) | United States | United States | Belgium | SEE | Corporate | TOTAL | ||||||||||||||||||
| $ | € | € | € | € | € | |||||||||||||||||||
| Revenues | 4 321 | 3 151 | 1 257 | 768 | - | 5 176 | ||||||||||||||||||
| Operating profit (as reported) | 163 | 119 | 41 | (120 | ) | (11 | ) | 29 | ||||||||||||||||
| Operating margin | 3.8 | % | 3.8 | % | 3.3 | % | (15.7 | %) | N/A | 0.6 | % | |||||||||||||
| Add/(subtract): | ||||||||||||||||||||||||
| Store closing expenses (reversals) | (1 | ) | (1 | ) | — | — | — | (1 | ) | |||||||||||||||
| Fixed assets impairment changes (reversals) | 1 | — | — | 150 | — | 150 | ||||||||||||||||||
| (Gains)/losses on disposal of fixed assets | — | — | (1 | ) | — | — | (1 | ) | ||||||||||||||||
| Other | (1 | ) | (1 | ) | — | — | 1 | — | ||||||||||||||||
| Underlying operating profit | 162 | 117 | 40 | 30 | (10 | ) | 177 | |||||||||||||||||
| Underlying operating margin | 3.7 | % | 3.7 | % | 3.2 | % | 3.9 | % | N/A | 3.4 | % | |||||||||||||
| YTD Q2 2015 | ||||||||||||||||||||||||
(in millions) | United States | United States | Belgium | SEE | Corporate | TOTAL | ||||||||||||||||||
| $ | € | € | € | € | € | |||||||||||||||||||
| Revenues | 8 822 | 7 906 | 2 432 | 1 596 | - | 11 934 | ||||||||||||||||||
| Operating profit (as reported) | 328 | 294 | 22 | 54 | (39 | ) | 331 | |||||||||||||||||
| Operating margin | 3.7 | % | 3.7 | % | 0.9 | % | 3.4 | % | N/A | 2.8 | % | |||||||||||||
| Add/(subtract): | ||||||||||||||||||||||||
| Store closing expenses (reversals) | 1 | 1 | - | — | — | 1 | ||||||||||||||||||
| Reorganization expenses (reversals) | 6 | 6 | 2 | — | — | 8 | ||||||||||||||||||
| Fixed assets impairment charges (reversals) | 3 | 3 | 4 | — | — | 7 | ||||||||||||||||||
| (Gains)/losses on disposal of fixed assets | 2 | 1 | - | 1 | — | 2 | ||||||||||||||||||
| Other | — | — | 28 | — | 19 | 47 | ||||||||||||||||||
| Underlying operating profit | 340 | 305 | 56 | 55 | (20 | ) | 396 | |||||||||||||||||
| Underlying operating margin | 3.9 | % | 3.9 | % | 2.3 | % | 3.4 | % | N/A | 3.3 | % | |||||||||||||
| YTD Q2 2014 | ||||||||||||||||||||||||
(in millions) | United States | United States | Belgium | SEE | Corporate | TOTAL | ||||||||||||||||||
| $ | € | € | € | € | € | |||||||||||||||||||
| Revenues | 8 549 | 6 238 | 2 464 | 1 499 | - | 10 201 | ||||||||||||||||||
| Operating profit (as reported) | 320 | 233 | 79 | (106 | ) | (16 | ) | 190 | ||||||||||||||||
| Operating margin | 3.7 | % | 3.7 | % | 3.2 | % | (7.1 | %) | N/A | 1.9 | % | |||||||||||||
| Add/(subtract): | ||||||||||||||||||||||||
| Fixed assets impairment charges (reversals) | 3 | 2 | — | 150 | — | 152 | ||||||||||||||||||
| (Gains)/losses on disposal of fixed assets | 1 | 1 | (2 | ) | — | — | (1 | ) | ||||||||||||||||
| Other | (1 | ) | (1 | ) | 1 | — | 2 | 2 | ||||||||||||||||
| Underlying operating profit | 323 | 235 | 78 | 44 | (14 | ) | 343 | |||||||||||||||||
| Underlying operating margin | 3.8 | % | 3.8 | % | 3.2 | % | 2.9 | % | N/A | 3.4 | % | |||||||||||||
In the first half of 2015, the caption “Other” mainly consists of a fine of €25 million imposed by the Belgian Competition Authority and €19 million advisory and consulting costs related to the planned merger with Royal Ahold N.V.
The second quarter of 2014 was primarily impacted by €150 million impairment losses in Serbia (part of the “Southeastern Europe” segment) and related to goodwill and trade names for respectively €140 million and €10 million.
Business combinations
During the first six months of 2015, Delhaize Group made minor final payments relating to prior year business acquisitions and signed several new agreements in Southeastern Europe that were accounted for as business combinations. The total consideration transferred for these transactions was €8 million (of which €6 million in the second quarter) and resulted in an increase of goodwill of €7 million (completely in the second quarter).
13 of 21
Divestitures and discontinued operations
Disposal of Bottom Dollar Food
In the first quarter of 2015, Delhaize Group completed its agreement with ALDI Inc. to sell its 66 Bottom Dollar Food locations (“Bottom Dollar Food”), for a total sales price of $15 million (€14 million) in cash, which resulted in an insignificant settlement loss during 2015.
In addition, equipment relating to these stores (carrying amount of €2 million), classified as held for sale in 2014, was sold to third parties in the first quarter of 2015 and did not result in any impact on the profit and loss.
Discontinued operations
The overall “Result from discontinued operations” and corresponding net cash flows of the entities classified as discontinued operations are summarized as follows:
| (in millions of €, except per share information) | YTD 2015 | YTD 2014(1) | ||||||
| Revenues | 8 | 649 | ||||||
| Cost of sales | (10 | ) | (504 | ) | ||||
| Other operating income | — | 6 | ||||||
| Selling, general and administrative expenses | (9 | ) | (152 | ) | ||||
| Other operating expenses | — | (2 | ) | |||||
| Net financial costs | (2 | ) | 2 | |||||
| Result before tax | (13 | ) | (1 | ) | ||||
| Income taxes | 5 | — | ||||||
| Result of discontinued operations (net of tax) | (8 | ) | (1 | ) | ||||
| Pre-tax loss recognized on re-measurement of assets of disposal groups | — | (14 | ) | |||||
| Income taxes | — | — | ||||||
| Result from discontinued operations (net of tax), fully attributable to equity holders of the Group | (8 | ) | (15 | ) | ||||
| Basic earnings per share from discontinued operations | (0.08 | ) | (0.15 | ) | ||||
| Diluted earnings per share from discontinued operations | (0.07 | ) | (0.14 | ) | ||||
| Operating cash flows | (2 | ) | (30 | ) | ||||
| Investing cash flows | 2 | 8 | ||||||
| Financing cash flows | — | 10 | ||||||
| Total cash flows | — | (12 | ) | |||||
| (1) | Includes, besides Bottom Dollar Food results, also the result of the U.S. banner Sweetbay, Harveys and Reid’s, the Bulgarian operations and Delhaize Bosnia & Herzegovina which were sold in 2014. |
While in the first half of 2014, the Group recognized an impairment loss of €14 million to write down the carrying value of its Bulgarian operations and Delhaize Bosnia & Herzegovina to their estimated fair value less cost to sell, no similar write down was necessary during 2015.
| » | Balance Sheet and Cash Flow Statement |
Capital expenditures
During the first half of 2015, Delhaize Group incurred capital expenditures of €281 million, consisting of €250 million in property, plant and equipment and €31 million in intangible assets. In the second quarter of 2015, Delhaize Group incurred capital expenditures of €196 million, consisting of €177 million in property, plant and equipment and €19 million in intangible assets.
In addition, the Group added property under finance leases in the first half of 2015 for a total amount of €11 million (€3 million in the second quarter of 2015). The carrying amount of tangible and intangible assets that were sold or disposed in 2015 was €7 million (€4 million for the second quarter of 2015).
14 of 21
Equity
In the first half of 2015, Delhaize Group issued 947 807 new shares (251 960 during the second quarter), purchased 341 192 treasury shares (29 140 during the second quarter) and used 634 856 treasury shares (88 784 during the second quarter) to satisfy the exercise of stock options that were granted as part of the share-based incentive plans. At June 30, 2015, the Group owned 821 430 treasury shares.
During 2015, the Group sold euro denominated call options on its own shares that it had acquired to partially hedge the potential exposure (for the grant years 2008 and 2009) arising from the possible future exercise of stock options granted to employees of non-U.S. operating companies for €4 million. At the same time, the Group acquired new euro denominated call options (for the grant years 2007, 2010 and 2011) for an identical amount. These call options met the requirements of IFRS to qualify as equity instruments and are recognized in share premium at their initial transaction cost.
Dividends
At Delhaize Group’s shareholders meeting on May 28, 2015, Delhaize Group’s shareholders approved the distribution of a €1.60 gross dividend per share for financial year 2014. After deduction of a 25% withholding tax, this resulted in a net dividend of €1.20 per share. The dividend was paid in June 2015.
Financial instruments
Repayment of long-term debts
During the first quarter of 2015, Delhaize Group completed a tender offer for cash and purchased (i) $278 million of the 6.50% bonds due 2017 at a price of 111.66% and (ii) $170 million of the 4.125% senior notes due 2019 at a price of 107.07%. This resulted in a one-time charge to profit and loss of €41 million.
Derivative financial instruments and hedging
As a result of the above mentioned partial repurchases, Delhaize Group entered into the following transactions during the first quarter of 2015:
| ● | Unwinding of an amount of $170 million interest rate swaps relating to the 4.125% senior notes due 2019 that were entirely hedged by interest rate swaps for fair value hedge purposes. The unwinding resulted in a cash inflow of €2 million with an insignificant impact on profit and loss. |
| ● | New counter cross-currency interest rate swaps (“CCIRS”), exchanging the principal and interests on the repurchased amounts of the 6.50% bonds due in 2017, to offset foreign currency exposure arising from a $450 million intragroup loan. |
Further, in the first quarter of 2015, Delhaize Group entered into interest rate swaps to hedge $72 million of its exposure to changes in the fair value of the remaining $172 million bonds due 2017 due to variability in market interest rates (“hedged risk”). The maturity date of the interest rate swap arrangements (“hedging instrument”) match those of the underlying debt (“hedged item”). The Group designated and documented these transactions as fair value hedges.
Finally, during the first quarter of 2015, a foreign exchange forward contract to purchase $12 million in exchange for €9 million matured and resulted in a cash inflow of €2 million, with insignificant impact on profit and loss.
15 of 21
Financial instruments measured at fair value by fair value hierarchy:
| June 30, 2015 | ||||||||||||||||
| (in millions of €) | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||
| Financial Assets | ||||||||||||||||
| Non-Current | ||||||||||||||||
| Derivative instruments | — | 7 | — | 7 | ||||||||||||
| Current | ||||||||||||||||
| Financial assets – measured at fair value | 170 | — | — | 170 | ||||||||||||
| Total financial assets measured at fair value | 170 | 7 | — | 177 | ||||||||||||
| Financial assets measured at amortized cost | 2 000 | |||||||||||||||
| Total financial assets | 2 177 | |||||||||||||||
| Financial Liabilities | ||||||||||||||||
| Non-Current | ||||||||||||||||
| Derivative instruments | — | 52 | — | 52 | ||||||||||||
| Total financial liabilities measured at fair value | — | 52 | — | 52 | ||||||||||||
| Financial liabilities being part of a fair value hedge relationship | 405 | |||||||||||||||
| Financial liabilities measured at amortized cost | 4 322 | |||||||||||||||
| Total financial liabilities | 4 779 | |||||||||||||||
In 2015, there were no transfers between fair value hierarchy levels and there were no changes in the valuation techniques and inputs applied.
Fair value of financial instruments not measured at fair value:
| (in millions of €) | Carrying amount | Fair value | ||||||
| Financial liabilities being part of a fair value hedge relationship | 405 | 443 | ||||||
| Financial liabilities at amortized cost | 1 521 | 1 890 | ||||||
| Total long-term debt | 1 926 | 2 333 | ||||||
The fair value of the receivables, other financial assets, cash and cash equivalents and accounts payable, all measured at amortized cost, approximate their carrying amounts.
Employee Benefits
During the second quarter of 2015, Delhaize Group granted 494 087 performance stock units (or 123 522 when expressed in Delhaize Group shares), to senior management of its U.S. operating companies under the “Delhaize America 2012 Restricted Stock Unit Plan” and 88 432 performance stock units to senior management of its non-U.S. operating companies under the “Delhaize Group 2014 European Performance Stock Unit Plan.” The fair value of the performance stock units was $20.88 for the U.S. operating companies and €76.46 for the non-U.S. operating companies, based on the share price at grant date. In 2015, Delhaize Group did not grant any stock options or warrants to its employees.
Performance stock units are restricted stock units, with additional performance conditions. The cliff-vesting of these performance stock units is linked to the achievement of a non-market financial performance condition (Shareholder Value Creation targets over a cumulative 3-year period) which is taken into account when estimating the number of awards that will vest. Shareholders Value Creation has been defined by the Group as six times underlying EBITDA minus the net debt. When the award vests, the associate receives – at no cost to the associate – ADRs or shares equal to the number of restricted stock units that have vested, free of any restrictions.
16 of 21
Provisions
In the second quarter of 2014, Delhaize Group announced its intention to implement significant changes to its Belgium operations (the Transformation Plan). The announcement fell under the so-called “Law Renault”, which requires that an employer that intends to implement a collective dismissal must first inform and consult its employees or their representatives before taking any decision on the collective dismissal. The consultation process is followed by negotiation and implementation phases. End 2014, the Group reached a protocol agreement with the blue collar work force and signed a preliminary agreement for its white collars, which was finalized at the beginning of 2015. In 2014, Delhaize Group recognized a provision of €137 million, representing management’s best estimate of the expected costs in connection with the agreed upon voluntary early retirement and voluntary departure of approximately 1 800 employees. The Group is currently in the implementation phase. During a first wave which ended on March 31, 2015, approximately 1 500 employees applied (of which almost 1 000 opted for early retirement). A second wave will occur during the fourth quarter of 2015. During the second quarter of 2015, the total expected costs were updated to €140 million (an addition of €3 million), of which €11 million has been paid thus far.
In June 2015, the Group accepted to pay a fine of €25 million imposed by the Belgian Competition Authority in final settlement of the antitrust investigation regarding the coordination of price increases of certain health and beauty products sold in Belgium between 2002 and 2007. The Group recognized an additional charge of €9 million in the second quarter of 2015, increasing the existing provision to reflect the final outcome of the settlement. Payment was made in the third quarter of 2015.
| » | Income Statement |
Other operating income
| Q2 2015 | Q2 2014 | (in millions of €) | YTD 2015 | YTD 2014 | |||||||||||
| 15 | 13 | Rental income | 29 | 26 | |||||||||||
| 5 | 5 | Income from waste recycling activities | 10 | 10 | |||||||||||
| 2 | 1 | Services rendered to wholesale customers | 3 | 3 | |||||||||||
| 1 | 4 | Gain on sale of property, plant and equipment | 2 | 6 | |||||||||||
| 5 | 7 | Other | 9 | 11 | |||||||||||
| 28 | 30 | Total | 53 | 56 | |||||||||||
Other operating expenses
| Q2 2015 | Q2 2014 | (in millions of €) | YTD 2015 | YTD 2014 | |||||||||||
| 1 | 1 | Store closing expenses | (1 | ) | - | ||||||||||
| (5 | ) | - | Reorganization expenses | (8 | ) | - | |||||||||
| - | (150 | ) | Impairment | (7 | ) | (152 | ) | ||||||||
| (2 | ) | (3 | ) | Loss on sale of property, plant and equipment | (4 | ) | (5 | ) | |||||||
| (32 | ) | (2 | ) | Other | (48 | ) | (2 | ) | |||||||
| (38 | ) | (154 | ) | Total | (68 | ) | (159 | ) | |||||||
For the first half of 2015, the caption “Other” mainly includes a fine of €25 million imposed by the Belgian Competition Authority and €19 million advisory and consulting costs incurred so far in connection with the planned merger with Royal Ahold N.V announced in June 2015.
Income taxes
During the first half of 2015, the effective tax rate (on continued operations) was 27.1%, compared to previous year’s rate of 52.1%. The decrease is primarily the result of the non-deductible goodwill impairment loss in Serbia recorded in 2014.
17 of 21
Related party transactions
In the second quarter of 2015, an aggregate number of 22 005 (equivalent of 88 018 ADS) and 30 300 U.S. and European performance stock units, respectively, were granted to members of the Executive Committee.
| » | Contingencies, Commitments and Guarantees |
Following the closing of Delhaize Group’s agreed sale of Sweetbay, Harveys and Reid’s and Bottom Dollar Food, the Group will continue to provide guarantees for a number of existing operating or finance lease contracts, which extend through 2037. In the event of a future default of the buyer, Delhaize Group will be obligated to pay rent and otherwise perform the guaranteed leases. The future minimum lease payments over the non-cancellable lease term of the guaranteed leases, excluding other direct costs such as common area maintenance expenses and real estate taxes, amount to $420 million (€375 million) as of June 30, 2015. Currently, the Group does not expect to be required to pay any amounts under these guarantees.
Except for changes mentioned in these interim financial statements, other contingencies are materially unchanged from those described in Note 34 on pages 151 and 152 of the 2014 Annual Report.
| » | Subsequent Events |
No significant events occurred after balance sheet date.
18 of 21
OTHER FINANCIAL AND OPERATING INFORMATION (UNAUDITED)
| » | Use of non-GAAP (Generally Accepted Accounting Principles) Financial Measures |
Delhaize Group uses certain non-GAAP measures in its financial communication. Delhaize Group does not consider these measures as alternative measures to net profit or other financial measures determined in accordance with IFRS. These measures as reported by Delhaize Group may differ from similarly titled measures used by other companies. We believe that these measures are important indicators of our business performance and are widely used by investors, analysts and other interested parties., the non-GAAP measures are reconciled to financial measures prepared in accordance with IFRS.
| » | Number of Stores |
| End of 2014 | End of Q1 2015 | Change Q2 2015 | End of Q2 2015 | |||||||||||||
| United States | 1 361 | 1 294 | -3 | 1 291 | ||||||||||||
| Belgium & Luxembourg | 880 | 878 | +3 | 881 | ||||||||||||
| Greece | 308 | 316 | +17 | 333 | ||||||||||||
| Romania | 410 | 411 | +14 | 425 | ||||||||||||
| Serbia | 387 | 388 | +1 | 389 | ||||||||||||
| Indonesia | 122 | 123 | +3 | 126 | ||||||||||||
| Total | 3 468 | 3 410 | +35 | 3 445 | ||||||||||||
| » | Organic Revenue Growth Reconciliation |
| Q2 2015 | Q2 2014 | % Change | (in millions of €) | YTD 2015 | YTD 2014 | % Change | |||||||||||||||||
| 6 114 | 5 176 | +18,1 | % | Revenues | 11 934 | 10 201 | +17,0 | % | |||||||||||||||
| (771 | ) | Effect of exchange rates | (1 454 | ) | |||||||||||||||||||
| 5 343 | 5 176 | +3,2 | % | Revenues at identical exchange rates | 10 480 | 10 201 | +2,7 | % | |||||||||||||||
| 5 343 | 5 176 | +3,2 | % | Organic revenue growth | 10 480 | 10 201 | +2,7 | % | |||||||||||||||
| » | EBITDA and Underlying EBITDA Reconciliation |
| Q2 2015 | Q2 2014 | (in millions of € at actual exchanges rates) | YTD Q2 2015 | YTD Q2 2014 | |||||||||||
| 106 | (45 | ) | Net profit (loss) | 134 | 35 | ||||||||||
| Add/substract: | |||||||||||||||
| — | 2 | Loss from discontinued operations, net of tax | 8 | 15 | |||||||||||
| 39 | 28 | Income tax expense | 52 | 53 | |||||||||||
| 48 | 49 | Finance costs | 142 | 95 | |||||||||||
| (5 | ) | (5 | ) | Income from investments | (3 | ) | (7 | ) | |||||||
| (1 | ) | — | Share of results of joint venture equity accounted | (2 | ) | (1 | ) | ||||||||
| 187 | 29 | Operating profit | 331 | 190 | |||||||||||
| 170 | 145 | Depreciation and amortization | 336 | 284 | |||||||||||
| — | 150 | Impairment | 7 | 152 | |||||||||||
| 357 | 324 | EBITDA | 674 | 626 | |||||||||||
| 36 | (2 | ) | Underlying operating profit adjustments (excluding impairment as already adjusted above) as defined and detailed in the “segment reporting” | 58 | 1 | ||||||||||
| 393 | 322 | Underlying EBITDA | 732 | 627 | |||||||||||
19 of 21
| » | Identical Exchange Rates Reconciliation(1) |
(in millions of €, except per share amounts) | Q2 2015 | Q2 2014 | 2015/2014 | |||||||||||||||||||||||
| At Actual Rates | Impact of Exchange Rates | At Identical Rates | At Actual Rates | At Actual Rates | At Identical Rates | |||||||||||||||||||||
| Revenues | 6 114 | (771 | ) | 5 343 | 5 176 | +18,1 | % | +3,2 | % | |||||||||||||||||
| Operating profit | 187 | (30 | ) | 157 | 29 | +544,6 | % | +442,2 | % | |||||||||||||||||
| Net profit (loss) from continuing operations | 106 | (16 | ) | 90 | (43 | ) | N/ | A | N/ | A | ||||||||||||||||
| Basic EPS from continuing operations | 1,03 | (0,16 | ) | 0,87 | (0,43 | ) | N/ | A | N/ | A | ||||||||||||||||
| Group share in net profit (loss) | 106 | (16 | ) | 90 | (45 | ) | N/ | A | N/ | A | ||||||||||||||||
| Basic EPS from Group share in net profit | 1,03 | (0,15 | ) | 0,88 | (0,44 | ) | N/ | A | N/ | A | ||||||||||||||||
| Free cash flow | 308 | (27 | ) | 281 | 221 | +39,5 | % | +26,9 | % | |||||||||||||||||
(in millions of €, except per share amounts) | YTD 2015 | YTD 2014 | 2015/2014 | |||||||||||||||||||||
| At Actual Rates | Impact of Exchange Rates | At Identical Rates | At Actual Rates | At Actual Rates | At Identical Rates | |||||||||||||||||||
| Revenues | 11 934 | (1 454 | ) | 10 480 | 10 201 | +17,0 | % | +2,7 | % | |||||||||||||||
| Operating profit | 331 | (54 | ) | 277 | 190 | +74,3 | % | +45,8 | % | |||||||||||||||
| Net profit from continuing operations | 142 | (30 | ) | 112 | 50 | +184,9 | % | +126,1 | % | |||||||||||||||
| Basic EPS from continuing operations | 1,38 | (0,28 | ) | 1,10 | 0,49 | +184,2 | % | +125,5 | % | |||||||||||||||
| Group share in net profit | 134 | (28 | ) | 106 | 35 | +287,7 | % | +207,1 | % | |||||||||||||||
| Basic EPS from Group share in net profit | 1,31 | (0,27 | ) | 1,04 | 0,34 | +283,7 | % | +204,0 | % | |||||||||||||||
| Free cash flow | 215 | (51 | ) | 164 | 308 | -30,2 | % | -46,9 | % | |||||||||||||||
(in millions of €) | June 30, 2015 | December 31, 2014 | Change | |||||||||||||||||||||
| Net debt | 1 035 | 16 | 1 051 | 997 | +3.9 | % | +5.5 | % | ||||||||||||||||
(1) Values at identical exchange rate are calculated by converting the results of our operations denominated in a currency other than the euro at the average exchange rate prevailing for the comparative period. For instance; YTD 2015 revenues at identical exchange rates were calculated by converting the YTD 2015 revenues of our U.S., Romanian and Serbian operations at the YTD 2014 average exchange rate.
20 of 21
DEFINITIONS
| ● | American Depositary Share (ADS): An American Depositary Share represents ownership in the common share of a non-U.S. corporation. The underlying common shares are held by a U.S. bank, as depositary agent. The holder of an ADS benefits from dividend and voting rights pertaining to the underlying common share through the bank that issued the ADS. Four Delhaize ADSs represent one share of Delhaize Group common stock and are traded on the New York Stock Exchange |
| ● | Basic earnings per share: profit or loss attributable to ordinary equity holders of the parent entity divided by the weighted average number of ordinary shares outstanding during the period. Basic earnings per share are calculated on profit (loss) from continuing operations less non-controlling interests attributable to continuing operations, and on the group share in net profit or loss |
| ● | Comparable store sales: sales from the same stores, including relocations and expansions, and adjusted for calendar effects |
| ● | Diluted earnings per share: is calculated by adjusting the profit or loss attributable to ordinary equity shareholders and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares, including those related to convertible instruments, options or warrants or shares issued upon the satisfaction of specified conditions |
| ● | EBITDA: operating profit plus depreciation, amortization and impairment |
| ● | Free cash flow: cash flow before financing activities, investment in/sale and maturity of debt securities, term deposits and derivative related collaterals. |
| ● | Net financial expenses: finance costs less income from investments |
| ● | Organic revenue growth: sales growth, excluding sales from acquisitions and divestitures, at identical currency exchange rates |
| ● | Outstanding shares: the number of shares issued by the Company, excluding treasury shares |
| ● | Underlying EBITDA: Underlying operating profit plus depreciation and amortization less any depreciation or amortization that has been excluded from underlying operating profit |
| ● | Underlying operating profit: operating profit excluding fixed assets impairment charges, reorganization charges, store closing expenses, gains/losses on disposal of fixed assets and businesses and other items that management considers as not being representative of the Group’s operating performance of the period. |
| ● | Weighted average number of shares: number of shares outstanding at the beginning of the period less treasury shares, adjusted by the number of shares cancelled, repurchased or issued during the period multiplied by a time-weighting factor |
| ● | Working capital: inventories plus receivables and other current assets, minus accounts payable and other current liabilities |
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements that are included or incorporated by reference in this press release and other written and oral statements made from time to time by Delhaize Group and its representatives, other than statements of historical fact, which address activities, events and developments that Delhaize Group expects or anticipates will or may occur in the future, including, without limitation, the intention to merge with Ahold, anticipated savings from any restructurings, anticipated investments in Delhaize Group’s operations, timing or savings from store closures, and the anticipated benefits from any new strategies and operating profit guidance, are “forward-looking statements” within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as “guidance,” “outlook,” “projected,” “believe,” “target,” “predict,” “estimate,” “forecast,” “strategy,” “may,” “goal,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. Although such statements are based on current information, actual outcomes and results may differ materially from those projected depending upon a variety of factors, including, but not limited to, changes in the general economy or the markets of Delhaize Group, in strategy, in consumer spending, in inflation or currency exchange rates or in legislation or regulation; competitive factors; adverse determination with respect to claims; inability to timely develop, remodel, integrate, open, convert or close stores; and supply or quality control problems with vendors. Additional risks and uncertainties that could cause actual results to differ materially from those stated or implied by such forward-looking statements are described in Delhaize Group’s most recent Annual Report on Form 20-F and other filings made by Delhaize Group with the U.S. Securities and Exchange Commission, which risk factors are incorporated herein by reference. Delhaize Group disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, including guidance with respect to underlying operating profit, SG&A, net finance costs, capital expenditures, store openings and free cash flow, or to make corrections to reflect future events or developments.
21 of 21