Ahold Fourth Quarter and Full Year 2007 Earnings
We largely completed our planned divestments, returned EUR 4 billion to shareholders, and our investment grade rating was reinstated.
06/03/08 Ahold published its summary financial report for the full year and fourth quarter 2007. CEO John Rishton said: "Ahold exceeded the targets we set last year. We delivered an underlying retail operating margin of 4.6% against our 4% to 4.5% guidance. We largely completed our planned divestments, returned EUR 4 billion to shareholders, and our investment grade rating was reinstated. We restructured the company into two continental platforms and achieved reductions in Corporate Center costs ahead of schedule.
We are progressing with our strategy for profitable growth, largely thanks to the continuing hard work and commitment of all our employees. In the United States, we rolled out 70% of our VIP program at Stop & Shop and Giant-Landover by year-end while Giant-Carlisle continued its strong performance. In Europe, Albert Heijn continued to exceed expectations, and we saw promising first results from the repositioning program at Albert and Hypernova in the Czech Republic.
I am delighted that our improved performance has enabled us to reinstate an annual dividend. For 2007, the proposed dividend is EUR 0.16 per common share. We plan to increase future annual dividends while meeting the capital needs of the business and maintaining an efficient investment grade capital structure.
In 2008, our focus will be on the completion of the VIP program at Stop & Shop and Giant-Landover, the start of the remodeling of our Giant-Landover stores, further repositioning of Albert/Hypernova, and driving the growth of Albert Heijn. The VIP program will continue to impact margins with improvements expected later in the year. Underlying retail operating margin for the year is projected to be between 4.5% and 5.0%. Capital expenditure will be around EUR 1.1 billion. Gross debt will fall further in 2008 as we progress towards our announced EUR 2 billion debt reduction target. Net interest expense for the year is expected to be in the range of EUR 270 million to EUR 290 million.
Financial performance
Fourth quarter 2007
Net sales were EUR 6.6 billion, up 0.2% from the same period last year. At constant exchange rates, net sales increased by 6.5%.
Operating income was EUR 253 million, EUR 51 million higher than the same period last year. Retail operating income was EUR 289 million, a retail operating margin of 4.4% compared to 3.7% in the same period last year. Corporate Center costs were EUR 29 million for the quarter, down EUR 6 million from the same period last year.
Net income was EUR 262 million, up EUR 22 million from the same period last year, reflecting a higher operating income and lower net financial expense, partially offset by higher income taxes.
Cash flow before financing activities was EUR 582 million positive, EUR 239 million better than the same period last year, mainly as a result of the proceeds from the sale of Tops.
Full year 2007
Net sales were EUR 28.2 billion, up 1.2% compared to last year. At constant exchange rates, net sales increased by 6.1%.
Operating income was EUR 1.1 billion, EUR 71 million higher than last year. Retail operating income was EUR 1.3 billion, EUR 31 million higher compared to last year. Corporate Center costs were EUR 106 million, down EUR 26 million from a year ago.
Net income was EUR 2.9 billion, up EUR 2 billion compared to last year, mainly as a result of the divestment of U.S. Foodservice, Ahold's Polish operations and Tops.
Cash flow before financing activities was EUR 6.6 billion positive, EUR 5.6 billion better than last year, mainly as a result of the proceeds from the sale of U.S. Foodservice, Ahold's Polish operations and Tops.
