This excerpt taken from the DEG 6-K filed Mar 17, 2006.
FULL YEAR 2005 INCOME STATEMENT
In 2005, net sales and other revenues of Delhaize Group increased by 4.2% to EUR 18.6 billion. Organic sales growth amounted to 2.1%, and net sales and other revenues increased at identical exchange rates by 4.1%, the third consecutive year of accelerating sales growth at identical exchange rates. This was due to:
Delhaize Group ended 2005 with a sales network of 2,636 stores compared to 2,565 stores at the end of 2004. The net increase of 71 stores was the result of 39 net store openings (including selective store closings), the acquisition of 43 Cash Fresh stores in Belgium and the divestiture of 11 Delvita stores in Slovakia.
Gross margin increased to 25.2% of net sales and other revenues (compared to 24.6% in 2004) primarily due to reduced inventory losses at Food Lion, continued margin management and price optimization at Food Lion and Hannaford, and expanded offerings in higher-margin departments. The implementation of the new inventory and margin management system ACIS allowed Food Lion to improve inventory results by USD 65 million in 2005 compared to the pre-ACIS period.
Selling, general and administrative expenses increased to 20.5% of net sales and other revenues (compared to 20.0% in 2004) primarily because of expenses related to the integration of Victory into Hannaford, the conversion of Kash n Karry stores to Sweetbay in Florida, higher utility and fuel prices throughout the Group, an increase in medical costs in the U.S. and a significant statutory increase in labor rates in Belgium. During the second half of 2005, the control over operating expenses improved by the use of strict cost management, the completion of the conversion of Victory stores to the Hannaford banner and lower depreciation and rents. These activities reduced selling, general and administrative expenses as a percentage of sales in the fourth quarter of 2005.
Other operating expenses increased from EUR 31.5 million in 2004 to EUR 44.4 million in 2005. In 2005, other operating expenses included asset impairment charges primarily in relation to Food Lion and Delvita (EUR 11.8 million), the closure of stores in the U.S. in the ordinary course of business (EUR 11.7 million) and losses on the disposal of fixed assets in the U.S. (EUR 18.7 million). The losses on the disposal of fixed assets were primarily related to the store closings and the market renewal activity by Food Lion. In 2005, Food Lion closed 32 stores in the ordinary course of business compared with 10 stores in 2004.
Delhaize Group maintained its operating margin at 4.8% of net sales and other revenues. Operating profit increased by 4.0% to EUR 898.0 million (also +4.0% at identical exchange rates) on the back of stronger sales and gross margin.
Net financial expenses decreased by 2.5% to EUR 300.8 million. While finance costs remained almost stable in 2005, income from investments grew to EUR 26.2 million as a result of more cash on hand and higher short-term interest rates.
The effective tax rate increased from 36.2% to 37.4%, including for both years the tax charge recorded as a result of the settlement reached with the Greek tax authorities at the end of 2005 by our Greek subsidiary Alfa-Beta. The increase is explained by the receipt of USD 5.6 million in interest on a U.S. tax refund in 2004, the increase in tax expense related to share based compensation in 2005, and taxes on increased dividends paid by Delhaize America to the parent company in 2005. These amounts were partially offset by the favorable resolution of state audits at our U.S. subsidiaries in 2005.
Net profit from continuing operations increased by 5.5% to EUR 373.6 million, or EUR 3.93 per basic share. The result from discontinued operations amounted to EUR -3.8 million compared to EUR -52.3 million the previous year. Discontinued operations include the Thai operations (divested on September 1, 2004), the Slovak operations (sold on June 30, 2005) and certain Kash n Karry stores closed in the first quarter of 2004.
In 2005, net profit increased by 23.4% to EUR 364.9 million. Per share, basic net earnings was EUR 3.89 (EUR 3.19 in 2004), an
increase of 21.8% and diluted net earnings EUR 3.71 (EUR 3.09 in 2004), an increase of 20.0%. The Board of Directors of Delhaize Group will propose at the Ordinary General Meeting of May 24, 2006, the payment of a gross dividend of EUR 1.20 per share. This is an increase of 7.1% versus prior year. After deduction of 25% Belgian withholding tax, the proposed net dividend is EUR 0.90.