Survey on European Modern Grocery Retail Operations

Transcription

1 Survey on European Modern Grocery Retail Operations Brussels, ITALY REPORT in cooperation with Slide 1 AIM AIM

2 Introduction Further to the European Commission investigation of the transfer of value along the European food supply chain between suppliers and retailers, this survey was initiated to collect data using the grocery retailers statutory reports across several countries: The survey focuses on the elements which allow a measure of the interface between retailers and suppliers, of operations profitability as well as the elements of finance which may affect retail profitability over a 2 year period (27-28) The differences in national financial standards and legislation, not to mention companies ownership, may at times affect the availability of some data or of some players on the market considered. It also explains time lag to produce report (28 detailed reports have to be filled to national authorities by December 29 at the latest) A trade off between variables and players had to be organized while remaining focus on operations. It was not always possible to have a complete group or country overview derived from the international study, yet each country can benefit from some benchmark over main players, format or business model (eg cooperatives) The work does not include any audit activity on the financials: all data have been assumed on an AS-IS basis as they are presented in retailers public reports (except ordinary reclassification activities being necessary to determine performance indicators) PriceWaterhouseCoopers Advisory srl has collected the retailers public reports and ensure the standardisation of the financial data as described in the methodology section and in appendix, while providing the results in this illustrative format. Slide 2

3 A sample of selected countries and retailers France Carrefour (hypermarket) Auchan (2 companies) Groupe Casino (2 companies) Germany Edeka (8 companies) Rewe ermarkt Metro Group Spain Eroski Mercadona Carrefour (2 companies) Auchan (2 companies) Lidl-Schwarz Switzerland Coop Group Migros Group Italy Esselunga Carrefour (2 companies) Auchan (2 companies) Conad (8 cooperatives) Coop (9 cooperatives) United Kingdom Asda Tesco WM Morrison ermarkets J. Sainsbury Notes: -While some companies only provide a group consolidated overview, some provide only financial reports by each legal entities. When possible, PwC reclassified companies annual reports to get a company full overview. - Some companies reports for their 28 operations were not yet available by February 21, despite legal obligations in most countries. Major European retailers Metro Group Rewe Group Auchan Group Carrefour Group Notes: not all players are presented in the international comparison but their performance can be seen in country reports Slide 3

4 Introduction Methodology (1/2) Financial statements are a useful source of information, particularly when combining values into key performance indicators and comparing them over a significant set of players. The report encompasses several performance indicators, divided into three categories, reflecting those activities that may affect negotiation and partnership between producers and retailers: operating performance, investments and development, financing activity. Net sales Net sales growth Sales density Sales per employee Commercial margin as a % of net sales Gross margin as a % of operating revenues Operating expenses as a % of operating revenues Operating expenses per sqm EBITDA EBIT EBITDA as a % of operating revenues EBIT as a % of operating revenues EBIT per square meter Sales Sales and and profitability profitability Negotiation & partnership Days Payable Outstanding Days Inventory Outstanding Days sales outstanding Current ratio Debt ratio Investments Investments and and development development Differences in accounting standards and companies transparency/ openess can explain some analysis or comparison limitation. Cash flows Statement Interest coverage ratio Average interest rate Financing Slide 4

5 Introduction Methodology (2/2) The financial statements of the selected retailers were reclassified by means of the following schemes, as to operate comparisons over different accounting principles and countries while determining the ratios. Profit and loss Balance sheet + Net sales + Trade discounts (where applicable or available) Cost of sales (cost of goods sold) Commercial margin (contribution margin) + Recurring operating income Operating expenses EBITDA Depreciations, amortisations and provisions EBIT +/ Other financial income and expenses +/ Other non recurring income and expenses Net income before tax ASSETS + Cash and cash equivalents + Trade receivables + Prepaid exp. and stocks + Current financial investments + Other current assets Working capital + Goodwill + Intangible fixed assets + Tangible fixed assets + Financial fixed assets Non current assets LIABILITIES + Trade payables + Current financial liabilities + Accruals and deferred income + Other current liabilities Current liabilities + Long term debts + Other non current liabilities Non current liabilities + Share capital + Reserves + Retained earnings Equity = Total revenues Slide 5

6 Appendix - Summary tables - Notes and limitations ITALY REPORT Slide 6

7 Reports by country: Italy Sales and profitability Net sales Full year net sales 12, 38 Million Euro 1, 8, 6, 4, 2, 2, ,66 SMA Auchan 2, ,7 SSC C.four Hyp 2, ,989 3, ,522 4, Auchan Hyp GS C.four Conad Esselunga Coop 5,98 5, ,783 1,244 1, Increase (Million)... Decrease (Million) Slide 7

8 Reports by country: Italy Sales and profitability Net sales growth (Current FY net sales previous FY net sales) / previous FY net sales 1% 8% 6% 4% 2% % -2% -4% -2.%.3-1.7% GS C.four... Increase (pp) % % SMA Auchan Decrease (pp) % 3.7% 2.4% 4.4% 3.% % % 7.4% 9.1% 7.8% Coop SSC C.four Hyp Auchan Hyp Conad Esselunga 7 Average (3.4%) 8 Average (4.5%) 7 vs 6 8 vs 7 Slide 8

9 Reports by country: Italy Sales and profitability Sales per sqm (Current FY net sales / total square meters) Sales density (Euro per sqm) 18, 16, 14, 12, 1, 8, 6, 4, 2, 2, ,74 4,211 Conad 1,69 5, ,877 SMA Auchan 5, ,321 5,663 5, Auchan Hyp 2.7 SSC C.four Hyp 6, , , ,863 7, ,452 16, GS C.four Coop Esselunga 2,5 2, 1,5 1, 5 - Number of stores... % Increase... % Decrease 7 Average (6,597) 8 Average (6,58) n. stores 7 n. stores Source for net sales: PwC s reclassification of companies annual reports, as received from Cerved database. Source for square meters: Nielsen. Source for number of stores: companies annual reports, as received from Cerved database, except for Coop and Conad (Planet Retail). Slide 9

10 Reports by country: Italy Sales and profitability Sales per employee (Current FY net sales / employees*) 1,4 8.4 Thousand Euro / employee 1,2 1, Coop Auchan Hyp SMA Auchan SSC C.four Hyp ,58 1,147 Esselunga GS C.four Conad... % Increase % Decrease... 7 Average (288) 8 Average (299) (*) Based upon availability on the annual report, employees may refer to the following metrics: average number of employees (SMA Auchan, SSC C.four, GS C.four, Esselunga, Coop Nordest, Novacoop, Coop Lombardia, Coop Adriatica, Coop Liguria, Nordiconad, Conad del Tirreno, Conad Pac 2); number of employees as at year-end (Coop Estense, Coop Firenze, Coop Centro Italia, Coop Tirreno, Conad Adriatico, Conad Centro Nord, Sicilconad, Conad Commercianti Indipendenti); number of full time equivalents at the year-end (Auchan Hyp). Slide 1

11 Reports by country: Italy Sales and profitability Commercial margin as a % of net sales (Net sales + trade discounts cost of goods sold) / net sales Commercial margin as a % of net sales indicates the retailer s ability in maintaining its margin on goods sold to consumers. 35% 3% 25% 2% 25.6%. 25.6% % 26.1% 27.1% 27.2% 27.7%.3 28.% 28.4% % 29.5% % 15%.6 1% 5% 1.8% 1.2% %... Increase (pp) Conad GS C.four Auchan Hyp Coop SSC C.four Hyp Esselunga SMA Auchan... Decrease (pp) 7 Average (25.1) 8 Average (25.3) Slide 11

12 Reports by country: Italy Sales and profitability Gross margin as a % of operating revenues [ 27 ] 1% 8% 3 Average cost of goods as a % of operating revenues (75.8) [ Sample: legend ] Total op. revenues = 1% Other income Trade discounts Net sales Gross margin Commercial margin First margin 6% Cost of goods 4% Conad Auchan Hyp SSC GS C.four Esselunga C.four Hyp SMA Auchan Coop Other incomes refer to ordinary revenues from intra group recharges, operating lease rentals, etc. Slide 12

13 Reports by country: Italy Sales and profitability Gross margin as a % of operating revenues [ 28 ] 1% 8% 4 Average cost of goods as a % of operating revenues (75.7) [ Sample: legend ] Total op. revenues = 1% Other income Trade discounts Net sales Gross margin Commercial margin First margin 6% Cost of goods 4% Conad Auchan Hyp SSC EsselungaGS C.four C.four Hyp SMA Auchan Coop Other incomes refer to ordinary revenues from intra group recharges, operating lease rentals, etc. Source: PwC s reclassification of companies annual reports. as received from Cerved database. Slide 13

14 Reports by country: Italy Sales and profitability Operating expenses as a % of operating revenues Breakdown of the operating expenses by nature with respect to revenues. [ 27 ] [ 28 ] % 5% 1% 15% 2% 25% 3% % 5% 1% 15% 2% 25% 3% Conad 2.5% 3.9% 8.9% Conad 2.4% 4.1% 9.% Esselunga 1.4% 3.2% 18.1% Esselunga 1.1% 3.1% 17.4% Auchan Hyp 1.8% 4.6% 2.1% Auchan Hyp 1.9% 4.7% 2.2% GS C.four 9.% 3.8% 22.% GS C.four 8.5% 6.1% 21.8% Coop 12.5% 9.2% 24.5% Coop 12.3% 8.8% 24.3% SSC C.four Hyp 11.3% 3.3% 24.2% SSC C.four Hyp 1.8% 5.2% 24.3% SMA Auchan 1.% 7.4% 23.5% SMA Auchan 1.4% 8.1% 25.1% Marketing Administrative expenses Lease Cost of employees Utilities Maintenance Other operating costs... Sum of operating expenses vs. op. revenues % Slide 14

15 Reports by country: Italy Sales and profitability Operating expenses per sqm Operating expenses / total square meters 4, 1.5 3,5 3, 3,557 3,611 Euro per sqm 2,5 2, 1,5 1, , ,272 1,288 1,32 1,479 1,58 Conad Auchan Hyp Coop SMA Auchan 2. 1, ,526 SSC C.four Hyp 7.5 1,69 1,564 GS C.four Esselunga... Decrease (%)... Increase (%) 7 Average (1,5) 8 Average (1,495) Source for square meters: Nielsen. Slide 15

16 Reports by country: Italy Sales and profitability EBITDA Operating revenues minus operating expenses and costs of sales before interest, taxes, depreciation and amortisation EBITDA enables a comparison of the operating performances among competitors, as the ratio does not include the burden of financing activities (interests) or investments (amortisation) Million Euro SSC C.four Hyp SMA Auchan Auchan Hyp GS C.four Conad Coop Esselunga... Increase (Million)... Decrease (Million) Slide 16

17 Reports by country: Italy Sales and profitability EBITDA as a % of operating revenues EBITDA / total revenues This ratio indicates to what extent the retailer succeeds in managing overheads and earning a margin by means of its operations. 1% 9% 8% 7% 6% 5% 4% 3%. 2% 1% % SSC C.four Hyp... Increase (pp) 1.% 1.% 3.% 2.5% SMA Auchan....5 Decrease (pp) 3.9%.7 3.2% 3.9%.4 3.5% 3.4% Auchan Hyp Conad Coop GS C.four Esselunga 7 Average (4.%).6 4.% 4.4%.1 8 Average (3.9%) 4.3% 8.3%.8 9.1% Slide 17

18 Reports by country: Italy Sales and profitability EBIT EBITDA after depreciation and amortisation Earnings from operations minus the amortisation and depreciation exercise through various accounting decisions Million Euro SSC C.four Hyp Coop -1 SMA Auchan Auchan Hyp GS C.four Conad Esselunga... Increase (Million)... Decrease (Million) Slide 18

19 Reports by country: Italy Sales and profitability EBIT as a % of operating revenues EBIT / total revenues The operating margin after deduction of amortisation and depreciation following various accounting decisions. 8% 6% 4% 2%.1% 1.1%.8.3% 1.4%.3 1.1% 1.9%.1 1.8% 5.3%.3 5.6% % -2% -3.7% -3.4% -.4% -.9% -.3% -4%.5.6-6%.3 SSC C.four Hyp SMA Auchan Coop Auchan Hyp GS C.four Conad Esselunga... Increase (pp)... Decrease (pp) 7 Average (.8%) 8 Average (.7%) Slide 19

20 Reports by country: Italy Sales and profitability EBIT per sqm EBIT / square meters 1, , Euro per sqm SSC C.four Hyp Coop SMA Auchan Auchan Hyp GS C.four Conad Esselunga... Increase (%)... Decrease (%) 7 Average (66) 8 Average (73) Source for square meters: Nielsen. Slide 2

21 Reports by country: Italy Financing Interest coverage ratio EBIT / Interest paid The ratio determines how easily a company can pay interest on outstanding debt through the profit generated by operations. The lower the ratio, the more companies are burdened by debt expense SSC C.four Hyp SMA Auchan Coop Auchan Hyp GS C.four Conad Esselunga... Increase... Decrease Slide 21

22 Reports by country: Italy Financing Average interest rate Interest paid / financial debt (long term debt + short term loans) An estimate of the average interest rate companies borrows at. The lower %, the less debt on average 18% 16% 14% 12% 1% 13.4% 14.1% 16.2% 8% 6% 4% 2% % 3.8% 5.2% Esselunga 7.4% 5.8% SMA Auchan 7.4% 7.2% 3.7% 7.7% 7.7% 9.1% 7.1% Conad Coop GS C.four Auchan Hyp SSC C.four Hyp Slide 22

23 Reports by country: Italy Investments and development Debt ratio Total debt = liabilities/total assets What proportion of debt the company has relative to its assets. Ratio greater than 1% indicates that a company has more debt than assets 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % 62.1% % 61.6% % 69.2% % Conad GS C.four Esselunga Coop Auchan Hyp SSC C.four Hyp 75.8% % 79.5% % 78.% % 9.6% % SMA Auchan... Decrease (pp)... Increase (pp) Slide 23

24 Reports by country: Italy Investments and development Current ratio Short term assets (cash, inventory, receivables)/short term liabilities (trade payables, debt within a year) Company's ability to meet short-term debt obligations. Ratios lower than 1% imply that short term liabilities (incl.trade payables) are higher than short term assets. Companies are dependent on inventory and receivables to be turned quickly into cash if sales revenues drop. 14% % 1% 8% 6% 4% 2% 56.4% % 63.% % 58.9% % 66.9% % 72.% % 13.2% % 119.9% 126.8% % GS C.four Auchan Hyp Esselunga SMA Auchan SSC C.four Hyp Conad Coop... Increase (pp)... Decrease (pp) Slide 24

25 Reports by country: Italy Investments and development Days payable outstanding and days inventory outstanding (Trade payables / cost of goods sold) x 365 and (inventory / cost of goods sold) x 365 DPO is a measure of the average number of days the company takes to pay its vendors. DIO measures how many days inventory is held on average before it is sold. Measures of cash management/retention, possibly indirect financing/borrowing at no cost. [ DPO, days pay its vendors on average ] [ DIO, days inventory is held on average ] Coop 71 7 Coop 35 Esselunga 82 4 Esselunga 28 2 Conad 84 1 Conad 17 SSC C.four Hyp 14 2 SSC C.four Hyp 38 1 Auchan Hyp Auchan Hyp 4 3 GS C.four GS C.four 3 1 SMA Auchan SMA Auchan Decrease (days)... Increase (days) Decrease (days)... Increase (days) Slide 25

26 Reports by country: Italy Investments and development Days payable outstanding and days sales outstanding (Trade payables / cost of goods sold) x 365 and (trade receivables / net sales) x 365 DPO is a measure of the average number of days the company takes to pay its vendors. DSO is a measure of the average number of days the company takes to be paid by its customers. Measures of cash management/retention, possibly indirect financing/borrowing. [ DPO, days pay its vendors on average ] [ DSO, days retail company is paid by its business customers] Coop 71 7 Coop 19 6 Esselunga 82 4 Esselunga 22 Conad 84 1 Conad 41 1 SSC C.four Hyp 14 2 SSC C.four Hyp 26 2 Auchan Hyp Auchan Hyp GS C.four GS C.four 16 2 SMA Auchan SMA Auchan Decrease (days)... Increase (days) Decrease (days)... Increase (days) Slide 26

27 Reports by country: Italy Financing Cash flows Cash flows from operating, investments & financing activities Cash flows refer to the movement of cash into or out of the business generated from operations, investment and financing activities. [ 27 ] [ 28 ] [ 27 ] [ 28 ] 6 6 4, , 3,5 36 Million Euro Conad SMA Auchan SSC C.four Hyp Auchan Hyp GS C.four Esselunga Million Euro Net cash generated from operations Net cash used in investing activities or cash-in from net divestitures Conad SMA Auchan 3, 2,5 2, 1,5 1, 5 Coop Coop 28 Net cash from/(used in) financing activities Resulting either in Net yearly decrease in cash and cash equivalents OR Net yearly increase in cash and cash equivalents 8 6 SSC C.four Hyp Auchan Hyp GS C.four Esselunga Million Euro Source: cash flows reported as disclosed in the annual reports drawn from Cerved; PwC estimates from the reclassification of the annual reports where cash flow statements were not available (Coop). Slide 27

28 The Ownership Pattern It shows how much of an investment each category has on companies total assets: the creditors/note holders on short term liabilities,; the bank/bond holders on the long term liabilities and the stockholders/owners on the equity. [ 28 ] 34,1 27,6 41,9 41,4 22,2 16,7 15,4 18,2 23,1 9,1 2,4 29,3 9,7 13,8 36, ,4 44,8 61,1 61,5 72,7 Esselunga Coop Italia Conad GS Carrefour Auchan Hyper SMA Auchan Carrefour Hyper short term liabilities/total assets long term liabilities/total assets equity/total assets Slide 28

29 Reports by country: Italy Investments and development Balance sheets as at year-end Assets and liabilities [ 27 ] [ 28 ] [ 27 ] Billion Euro Billion Euro [ 28 ] Billion Euro SSC C.four Hyp SMA Auchan Auchan Hyp GS C.four Conad Esselunga SSC C.four Hyp SMA Auchan Auchan Hyp GS C.four Conad Esselunga Coop 27 Coop 28 Long term assets Long term liabilities Short term assets Short term liabilities Shareholders funds Total assets / liabilities Slide 29

30 Appendix - Summary tables - Notes and limitations Slide 3

31 Reports by country: Italy Appendix Summary table Reclassified P&L Slide 31

32 Reports by country: Italy Appendix Summary table Reclassified P&L Slide 32

33 Reports by country: Italy Appendix Summary Selected Financial Statements (1/2) Notes / Limitations Legal Entity Financial Statement availability Italy Auchan: two legal entities have been reported as no consolidated national statutory report Carrefour:two legal entities have been reported as no consolidated national statutory report Conad: Conad is cooperative of entrepreneurs and a single consolidated financial statement does not exist. As an approximation, it was possible to aggregate data from 7 regional cooperatives. A limitation exists since regional cooperatives sell to single entrepreneurs and not to the final consumers. from Cerved database. Auchan S.p.A. (Auchan Hyp) / SMA S.p.A. the SMA s gross sales (including VAT) in 28 were 2,259 million Euro, to be split on these formats: SMA (866), Cityper (58), Simply-Iper Simply (511), wholesale (374). GS S.p.A. - does not include DiperDi srl. Revenues include sales to other group companies for.5 bln euro (managing convenience stores, hypermarkets and other),.3 bln for wholesales under Docks banner and the remaining 2.7 bln Euro are sales through supermarkets / / S.S.C. Societa' Sviluppo Commerciale S.r.l / Commercianti Indipendenti Associati Soc. Coop / Conad Adriatico S.c.r.l / Conad Centro Nord S.c.r.l / Conad del Tirreno S.c.r.l / Nordiconad S.c.r.l / Sicilconad Mercurio Soc. Coop / Pac 2A S.c.r.l / Slide 33

34 Reports by country: Italy Appendix Summary Selected Financial Statements (2/2) Notes / Limitations Legal Entity Financial Statement availability Italy Coop: is a cooperative of consumers that does not prepare a single consolidated financial statement. As an approximation it was possible to aggregate data from nine regional cooperatives. from Cerved database. Coop Adriatica S.c.r.l / Coop Centro Italia S.c.r.l / Coop Estense S.c.r.l / Coop Nord Est S.c.r.l / Coop Liguria S.c.r.l / Coop Lombardia S.c.r.l / Novacoop S.c.r.l / Unicoop Firenze S.c.r.l / Unicoop Tirreno S.c.r.l / Esselunga ermarkets Italiani S.p.A / Slide 34