Slide 1: 2005 First Half Results
2005 FIRST HALF RESULTS Analyst meeting – September 1st 2005 Presentation to Analysts / 01.09.2005 1
Slide 2: Summary
Summary What we have delivered so far in 2005 Section 1 The First Half 2005 numbers Section 2 The key issues going forward Section 3 Conclusion Section 4 Presentation to Analysts / 01.09.2005 2
Slide 3: What we have delivered so far in 2005
What we have delivered so far in 2005 Presentation to Analysts / 01.09.2005 3
Slide 4: In March, we said that we would accelerate our efforts
What we have delivered so far in 2005 In March, we said that we would accelerate our efforts • To improve our price image in French hypermarkets • To win market share in France • To improve further profitability and ROCE outside France (including cleaning up and upgrading our portfolio of assets) •
Slide 5: We are attracting more customers to our French hypermarkets
What we have delivered so far in 2005 We are attracting more customers to our French hypermarkets • An increase in customer transactions is evidence that our offer (price, assortment, range) is increasingly attractive to consumers 2,0% 1,5% 1,0% 0,5% 0,0% -0,5% H1 04 Q3 04 Q4 04 Q1 05 Q2 05 -1,0% -1
Slide 6: We have won market share in France
What we have delivered so far in 2005 We have won market share in France • The trend in the number of customer transactions in our French hypermarkets has continued to improve, driving market share gains. Strong organic growth in supermarkets, hard discount, and convenience stores, has also driven m
Slide 7: Improved profitability outside France (1/2)
What we have delivered so far in 2005 We have improved further profitability outside France (1/2) • Activity Contribution* outside France increased by 23.6% in the First Half • All regions contributed to this increase • Activity Contribution outside France as a % of sales increased by 37 basis point
Slide 8: Improved profitability outside France (2/2)
What we have delivered so far in 2005 We have improved further profitability outside France (2/2) We have cleaned up and upgraded our portfolio of assets Presentation to Analysts / 01.09.2005 8
Slide 9: Preparing for accelerated growth from 2006 (1/2)
What we have delivered so far in 2005 We have begun to prepare for accelerated growth from 2006 (1/2) • We are on track to add around 1.4 million square metres of new space in 2005 through new stores and extensions as well as through tactical acquisitions • We will open around one million square met
Slide 10: Preparing for accelerated growth from 2006 (2/2)
What we have delivered so far in 2005 We have begun to prepare for accelerated growth from 2006 (2/2) • So far this year, we have acquired 425,000 m2 of new space through tactical acquisitions in Poland, Italy, Turkey, Cyprus, Brazil and France. Together, these acquisitions would account for more th
Slide 11: The key operating results
What we have delivered so far in 2005 The key operating results Change H1 2005/ H1 2004 Sales ex. VAT + 2.6 % Pro forma sales ex. VAT* + 4.7% EBITDA (% of sales) 5.7 % - 0.9 % Activity contribution (% of sales) 3.6 % - 3.1 % *Adjusted for the deconsolidation of Mexico, Japan , and food service Franc
Slide 12: The key financial results
What we have delivered so far in 2005 The key financial results Change H1 2005/ H1 2004 Change in average net debt (€) -0.2 bn - 2.2 % Financial costs (€m) (218) - 9.9 % Tax rate 30.4% + 10.1 % Net income 687 - 6.9 % group share (€m) * * On reported 2005 and 2004 figures excluding non recurring item
Slide 13: In summary
What we have delivered so far in 2005 In summary • The progress we have made so far this year gives us confidence that a determined and consistent pricing policy will continue to deliver results • Cost control, and strong growth in profitability ex-France, are key to our new sales-driven economic mo
Slide 14: The First Half 2005 numbers
The First Half 2005 numbers These numbers are reported under IFRS. Please refer to the appendices for a reconciliation between H1 2004 results under French Gaap 2004 and IFRS Presentation to Analysts / 01.09.2005 14
Slide 15: Net income fell in H1
The First Half 2005 numbers Net income fell in H1 H1 2005 Change H1 2004 Net Sales 35 440 + 2.6 % 34 549 Commercial Margin 7 971 + 1.2 % 7 874 EBITDA 2 008 - 0.9 % 2 026 Activity Contribution* 1 262 - 3.1 % 1 302 Net Income group share (m€) 687 -6.9 % 737 Net Income from recurring 688 +0.1% 687 oper
Slide 16: Sales grew 2.6% in the First Half
The First Half 2005 numbers In the First Half 2005, sales grew 2.6% (+4.7% pro forma) Presentation to Analysts / 01.09.2005 16
Slide 17: Other revenues increased slightly
The First Half 2005 numbers Other revenues increased slightly 2005 Change 2004 Other revenues 468 +3.8% 451 • The increase in Other Revenues was mainly due to an increase in the revenue contribution of financial subsidiaries Presentation to Analysts / 01.09.2005 17
Slide 18: Price investment caused commercial margin to decline
The First Half 2005 numbers As anticipated, significant price investment caused commercial margin to decline H1 2005 Change H1 2004 Commercial margin 7 971 + 1.2 % 7 874 in % of sales 22.5% 22.8% • Commercial margin in France fell 90 basis points, reflecting significant price cuts across all formats
Slide 19: SG&A as a % of sales decreased
The First Half 2005 numbers SG&A as a % of sales decreased H1 2005 Change H1 2004 SG & A (5 968) +2% (5 853) in % of sales 16.8 % 16.9% • SG&A in France fell by €60m, despite an increase in wage rates • Overall, labour costs as a percentage of sales were flat Presentation to Analysts / 01.09.2005 19
Slide 20: Group Activity Contribution was down slightly
The First Half 2005 numbers Mainly as a result of our pricing activity, Group Activity Contribution was down slightly H1 2005 Change H1 2004 Activity contribution 1 262 - 3.1 % 1 302 in % of sales 3.6 % 3.8% Presentation to Analysts / 01.09.2005 20
Slide 21: Activity Contribution outside France increased
The First Half 2005 numbers Activity Contribution outside France increased, largely compensating for a decline in France Presentation to Analysts / 01.09.2005 21
Slide 22: Non recurring items were flat
The First Half 2005 numbers Non recurring items were flat H1 2005 Change H1 2004 Non recurring items 5 + 9.5 % 4 • Non recurring items represents the net result of non recurring income (mainly capital gains on disposals) and non recurring costs i.e. provisions on tangible and intangible assets in Tu
Slide 23: Financial costs decreased by 10%
The First Half 2005 numbers Financial costs decreased by 10% 2005 Change 2004 Financial costs (218) - 10% (243) • Average net debt fell by €0.2bn • The average cost of borrowing fell from 4.07% to 3.84% Presentation to Analysts / 01.09.2005 23
Slide 24: Pro forma tax charge and contribution from associates declined
The First Half 2005 numbers The pro forma tax charge and the contribution from associates both declined H1 2005 Change H1 2004 Tax rate 30.4% + 10.1 % 27.6% Equity acctd cies 13.9 - 9.7 % 15.4 • The pro forma tax charge is down from 31.2% to 30.1%, reflecting the mix of earnings between France and t
Slide 25: Minorities increased
The First Half 2005 numbers Minorities increased H1 2005 Change H1 2004 Minorities (56.6) 16.2 % (48.7) • Minority interests increased by €8m, principally as a result of an improvement in profitability in Turkey Presentation to Analysts / 01.09.2005 25
Slide 26: Earnings per share declined in line with net income
The First Half 2005 numbers Earnings per share declined in line with net income H1 2005 Change H12004 Net Income 687 -6.9% 737 Group Share EPS Group share 0.96 - 6.4% 1.03 (after dilution)* *On reported 2005 and 2004 figures excluding non recurring items, EPS Group share was flat at €0.96 versus €0.
Slide 27: Net debt remained stable on constant accounting principles
The First Half 2005 numbers Thanks to strong cash flow, and despite higher capital expenditure and dividends, net debt remained stable on constant accounting principles H1 2005 H1 2004 Net debt opening (in €bn) (6 770) (7 851) Cash Flow 1 535 1 487 Cash flow from operations (600) 170 Capex (1 226) (
Slide 28: The balance sheet remains strong
The First Half 2005 numbers The balance sheet* remains strong, with stable net debt on constant accounting principles, even with higher capital expenditure and dividends • Net debt at end H1 increased by €0.7bn as a result of the first time application of IAS 32/39 • Stock increased by 0.9 days, ref
Slide 29: Financial ratios have again improved
The First Half 2005 numbers Financial ratios have again improved H1 2005 H1 2005 H1 2004 without IAS 32/39 Activity contribution bef depreciation / Fin. result 9.8 x 9.8 x 8.8 x Activity contribution / Financial result 6.2 x 6.2 x 5.6 x Cash Flow / Net debt 15.6 % 16.4 % 15.8 % Gearing 120 % 108 % 1
Slide 30: In summary
The First Half 2005 numbers In summary • Activity Contribution outside France increased significantly and largely compensated for a decline in contribution from France, as price investments weighed on commercial margin • Net debt at the end of the period was stable on pro forma accounting principles
Slide 31: The key issues going forward
The key issues going forward Presentation to Analysts / 01.09.2005 31
Slide 32: We remain cautious and realistic about the environment
The key issues going forward We remain cautious and realistic about the environment • The economy: we have seen deflation and weak volumes across most of Europe since the end of last year. These trends were even more apparent in the second quarter, and are unlikely to ease in the second half • Compe
Slide 33: The trend in French profitability in H2 and beyond (1/2)
The key issues going forward The trend in French profitability in H2 and beyond (1/2) • The main price repositioning in dry grocery and fresh in hypermarkets is behind us, although ongoing price leadership in our hypermarkets remains a priority • The main focus of hypermarket price repositioning tod
Slide 34: The trend in French profitability in H2 and beyond (2/2)
The key issues going forward The trend in French profitability in H2 and beyond (2/2) • Tight control of costs, and SG&A improvement, is key to our ability to finance these investments • In the Second Half, Activity Contribution in France is likely to trend in the same direction as in the First Half
Slide 35: How we adapt our supermarkets (1/4)
The key issues going forward How we adapt our supermarkets to new market conditions (1/4) • We believe that supermarkets continue to offer good opportunities for growth • However, supermarkets can grow only if they are able to differentiate versus other formats • We have already begun to upgrade the
Slide 36: Adapting supermarkets: France (2/4)
The key issues going forward How we adapt our supermarkets to new market conditions (2/4) France • Champion is one of the few supermarkets in France to win market share in 2004 (+0.2%) and over the first six months of 2005 (+0.2%). • We are expanding and upgrading the Champion store portfolio, as we
Slide 37: Adapting supermarkets: Spain (3/4)
The key issues going forward How we adapt our supermarkets to new market conditions (3/4) Spain • We are adopting radical solutions to eliminate losses in our Spanish supermarket business • Between 2001 and 2004, we suffered from a “stop and go” policy, opening 69 stores and closing 69 • Our strateg
Slide 38: Adapting supermarkets: Italy (4/4)
The key issues going forward How we adapt our supermarkets to new market conditions (4/4) Italy • We are strengthening GS through organic growth, new format development, and through acquisitions • We will open 6 new supermarkets this year. In addition, we are converting our larger stores to a mini h
Slide 39: The opportunity for profitable growth from 2006 (1/2)
The key issues going forward The opportunity for profitable growth from 2006 (1/2) • We need average sales growth between 2006 and 2008 of 5-10% 2004 (%) 2006 Ö (%) Status New space 3 3–5 On track Like for like 1 1–3 Initiatives underway Acquisitions 0 1–2 Achieved in 2005 for 2006 Total 4 5 – 10 Pr
Slide 40: The opportunity for profitable growth from 2006 (2/2)
The key issues going forward The opportunity for profitable growth from 2006 (2/2) • The new economic model of the group is based on growing Activity Contribution in line with sales, without putting at risk our competitive pricing position • We will continue to drive growth outside of France, as we
Slide 41: Conclusion
Conclusion Presentation to Analysts / 01.09.2005 41
Slide 42: Our convictions
Conclusion Our convictions • We will be consistent and determined in the application of our strategy focused on customers and growth. We have abandoned the “stop and go” policies of the past (prices, expansion, allocation of resources). We will continue to do what we have promised to do • In the Sec
Slide 43: Our convictions: operational priorities
Conclusion Our convictions • Going forward, we will focus on the operational priorities already outlined in the First Half ¾ Developing a closer relationship with our customers ¾ Restoring customers’ confidence in our ability to offer great everyday value ¾ Strengthening our non-food offer ¾ Reinfor
Slide 44: Our convictions
Conclusion Our convictions • We have done our homework in the First Half. We are realistic. There is much to do and it will take time. However, we are optimistic that with the quality of our people, the means at our disposal, and with a determined attitude, we can make the transition from an economi
Slide 45: Appendices
Appendices Presentation to Analysts / 01.09.2005 45
Slide 46: Breakdown of H1 profit and loss account
Breakdown of H1 profit and loss account H1 2005 H1 2004 Net Sales 35 440 34 549 Other revenues 468 451 Cost of sales (27 937) (27 126) Commercial margin 7 971 7 874 SG&A (5 968) (5 853) EBITDA 2 008 2 026 Depreciation & provisions (741) (719) Activity contribution 1 262 1 302 Non recurring items 5 4
Slide 47: Earnings per share details
Earnings per share details H1 2005 Change H1 2004 EPS from recurring operations Gp sh. (bef. dilution) 0.98 - 0.5% 0.98 EPS from recurring operations Gp sh. (after dilution) 0.96 - 0.2% 0.96 EPS Group share (bef. dilution) 0.97 - 7.3% 1.05 EPS Group share (after dilution) 0.96 - 6.4% 1.03 • Number o
Slide 48: Breakdown of H1 balance sheet
Breakdown of H1 balance sheet (m €) H1 2005 H1 2004 H1 2005 H1 2004 Intangible + 26 784 25 317 Shareholders 8 205 7 517 fixed assets equity + financials Inventories 5 539 5 238 Provisions 2 658 2 411 & deffered tax Bank loans 3 283 3 009 Net debt 9 876 9 184 portfolio Net trade 9 678 9 491 payables
Slide 49: Stores under banner (incl. Franchisees and partners)
Stores under banner (incl. Franchisees and partners) Presentation to Analysts / 01.09.2005 49
Slide 50: Sales incl. VAT under banners per format / zone
Sales incl. VAT under banners per format / zone Presentation to Analysts / 01.09.2005 50
Slide 51: Consolidated store network at end of June 2005
Consolidated store network at end of June 2005 Presentation to Analysts / 01.09.2005 51
Slide 52: Consolidated net sales per format / zone
Consolidated net sales per format / zone Presentation to Analysts / 01.09.2005 52
Slide 53: Activity contribution and EBIT per zone
Activity contribution and EBIT per zone Presentation to Analysts / 01.09.2005 53
Slide 54: New store openings in H1 2004
New store openings in H1 2004 Presentation to Analysts / 01.09.2005 54
Slide 55: Breakdown of organic new square metres by format and zone
Breakdown of organic new square metres by format and zone Presentation to Analysts / 01.09.2005 55
Slide 56: Reconciliation between IFRS and French GAAP
Reconciliation between IFRS and French GAAP Presentation to Analysts / 01.09.2005 56
Slide 57: Income Statement at June 30th, 2004
Income Statement at June 30th, 2004 J04 J04 Amortiz. Classification Adjustments IFRS FR GAAP / 40 ans changes proforma Net sales 34 548,7 34 548,7 Other revenues (0,1) 451,5 451,4 Revenues of ordinary activities (0,1) 451,5 35 000,0 Cost of sales (27 004,1) (5,3) (116,6) (27 126,0) Commercial margin
Slide 58: Income Statement at June 30th, 2004 - Adjustments
Income Statement at June 30th, 2004 - Adjustments Employee End of GW Leases Inventories Stock-options Accrued Other Adjustments benefits amortization (IAS 17) (IAS 2) (IFRS 2) expenses ajustments (IAS 19) Net sales Other revenues (0,1) (0,1) Revenues of ordinary activities (0,1) (0,1) Cost of sales
Slide 59: Income Statement at June 30th, 2004 – Classification changes
Income Statement at June 30th, 2004 – Classification changes Integration of Classification Classification financial Others changes of non recurring companies Net sales Other revenues 451,5 247,9 203,6 Revenues of ordinary activities 451,5 247,9 203,6 Cost of sales (116,6) (94,9) (21,7) Commercial ma
Slide 60: Balance Sheet at June 30th, 2004
Balance Sheet at June 30th, 2004 In €m J2004 J2004 Classification J2004 Amortization Assets Adjustments IFRS FR GAAP changes IFRS / 40 ans pro forma Intangible assets 10 045 153 (363) 9 988 9 835 Tangible assets 12 385 (349) 63 11 750 77 12 176 Financial assets 2 289 (270) 489 2 238 2 508 Investment
Slide 61: Balance Sheet at June 30th, 2004 - Adjustments
Balance Sheet at June 30th, 2004 - Adjustments In €m Financial Investment Employee Preopenings Deferred End of GW Leases Inventories Assets companies properties benefits costs and taxes Others amortization (IAS 17) (IAS 2) (IAS 27) (IAS40) (IAS 19) rebates (IAS 8) (IAS 12) Intangible assets 159 (6)
Slide 62: Shareholders equity at June 30th, 2004
Shareholders equity at June 30th, 2004 FR GAAP (before appropriation) 8 104 IAS 2 (Inventories) (405) IAS 19 (Employee benefits) (327) IAS 27 (Integration of financial companies) 186 IAS 12 (Deferred taxes) (82) IAS 8 (accrued expenses) (40) IAS 17 (leases) (41) End of goodwill amortization 159 Othe