Sligro Food N : Press release 2023 half-year figures

Press release

2023 half-year figures

Metro integration progressing well, operating EBIT improving

Group revenue for the first half of 2023 totalled €1,403 million, an increase of 24.2% compared to the same period in 2022. In 2022, we posted a large one-off book profit on the sale of our stake in Smeding. Adjusted for book profits, EBITDA was up €5 million to €54 million. Net profit for the first half of 2023 totalled €1 million.

Koen Slippens, CEO

"It is rather tricky to interpret the revenue development in the first half of 2023 due to the major differences compared to the 2022 basis for comparison. A COVID-19 lockdown was still in place in the first weeks of 2022, and this was followed by a spring with good weather. 2023, on the other hand, had a relatively cold and rainy spring. When May this year brought better weather, we saw a clear positive shift in the revenue and result development. Inflation had a major impact on revenue, gross profit and costs.

Our analysis of the market in the Netherlands and Belgium over the past few months shows that consumers are still going out and spending on hospitality. Spending remains strong and the market is growing. This is driven largely by price, as market volumes are under pressure. At Sligro Food Group, we are seeing volumes increase as we grow our customer base and sell more to existing customers, partly through our partnership with Heineken, while volumes are growing in Belgium on the back of our acquisition of former Metro sites. We are continuing to gain market share in both countries.

Key figures

for the first half-year

x € million

2023

2022

Revenue	1,403	1,129
Organic revenue growth (%)	17.6	43.3
Gross operating result (EBITDA)	55	65
Gross operating result (EBITDA) excluding book profits	54	49
Operating result before amortisation (EBITA)	23	36
Operating result (EBIT)	4	25
Net profit	1	23
Free cash flow1)	19	(7)
Earnings per share (x €1)	0.01	0.53
Interim dividend per share (x €1)	0.30	0.30
		30 June 31 December
x € million		2023		2022
Net invested capital		854		802
Net interest-bearing debts	428	365

1. The free cash flow has been adjusted for the impact of lease liabilities paid under IFRS 16.

Sligro-M

2 Sligro Food Group Press release on the 2023 half-year figures

The start-up and development of the Sligro-M sites in Belgium is progressing smoothly. Revenue from the former Metro sites is developing better than expected and the start-up costs and losses are much lower than anticipated.

Our delivery operation in Antwerp suffered some disruptions in the first half of the year due to the switch to SAP, which not only saw us incur repair and recovery costs, but more importantly had an impact on customer trust. While we saw our performance improve gradually in the second quarter, it still has not reached the required level of stability. A thorough evaluation has meanwhile been conducted, from which we concluded that, while the newly developed processes and technology are adequate, changes will have to be made in some areas before we can launch the roll-out to other sites. We are therefore taking our foot off the gas to first focus on restoring operational calm, providing our delivery customers in Antwerp with a good service and cutting costs.

Our results for this first half of the year are, like the results for the same period last year, affected by several non- recurring one-off income and expense items. If we take these out of the equation, we see a fine improvement in our operating result. Free cash flow is also recovering, coming in at €19 million for the first half of the year. We have decided to, like in the previous year, pay an interim dividend of €0.30 per share this year.

The focus in the second half of the year will continue to be on the consequences of inflation. Before the summer started, we already initiated a large number of plans that are aimed at growing our gross profit margin on the one hand and reducing costs on the other, so as to ultimately further increase returns.

Over the past few years, a lot has happened both in the market and at our company that has blurred the view of the underlying result drivers. In order to provide a clearer view, we will explain our plans and ambitions for the coming years in greater detail at a Capital Markets Day on

19 October 2023."

Revenue from the outlets acquired from Metro totalled €74 million in the first half of the year (Q2: €43 million), putting us firmly ahead of the schedule from our business case. As previously stated, the Middelkerke outlet is currently still operating as a temporary pop-up site. The other eight sites are generating revenues that are currently at more than 50% of the original level.

The gross profit margin is developing positively compared to the assumptions in our business case, while operating expenses are under control and one-off expenses so far are lower than anticipated. In the first half of the year, we posted a negative EBITDA of €4 million and a negative EBIT of €8 million, both considerably better than expected. In operating terms, the sites are expected to start contributing to the results in Belgium over the course of

the second half of the year onwards. We do, however, expect to incur several millions of euros in one-off expenses in the second half of the year.

Results

Group revenue grew organically by 17.6% compared to last year. In the Netherlands, organic growth was 15.7% and in Belgium we posted 36.8% organic growth. Inflation pushed up prices by approximately 8% in the first half of the year, and there was also a significant increase in volume, mainly on the back of the acquisition of new customers, but certainly also as we sold more to existing customers, partly through our partnership with Heineken.

The gross profit percentage of revenue (not including Sligro-M) was down 0.4% to 26.5%. The scope available to pass on price increases in the supply chain is diminishing and putting pressure on our gross profit margins. After a slow start to the year, we launched additional promotional activities to support revenue growth, which also weighed down on the gross profit margin.

Finally, we took parts of the Antwerp site's receivables from customers relating to the period immediately after the go-live through to the end of the first quarter of 2023 to the gross profit. This concerns a total amount of approximately €2 million.

Operating costs as a percentage of revenue (not including Sligro-M) were down 0.5% to 22.2%. Prices for wages, logistics and other costs again increased significantly as of the start of this year. Measures taken to cut costs and increase efficiency helped cushion these price increases. The supply chain regained some of its composure this year. Where driver and vehicle shortages led to considerable additional expenses for hotel stays for foreign drivers, co-drivers and couriers last year, these expenses dropped to zero this year. General and administrative expenses increased and included one-off costs of €4 million for amendments to stabilise our ERP landscape in Antwerp.

Depreciation and amortisation (not including Sligro-M) rose by €7 million, of which €6 million related to the start of depreciation of the new ERP landscape in December 2022.

Other operating income was down €15 million to €2 million. Last year, we had €16 million in one-off income from the sale of our stake in Smeding, while this year we posted a small book profit of €1 million on the sale of a vacant property.

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Sligro Food Group Press release on the 2023 half-year figures

Operating result (EBIT)

for the first	half-year
				Netherlands				Belgium				Group
x € million			2023		2022		2023	2022		2023	2022

EBIT reported	19
-/- Book profits on asset sales	1
-/- Metro start-up costs and losses	0
-/-One-off recovery costs and write-downs in
Antwerp	(4)
EBIT from operations	22

When removing one-off impacts in 2023 and 2022 from the reported EBIT figures, the picture that emerges shows that we have improved operating performance by €8 million.

Our interest expenses were up €3 million on last year, due to an increased debt position following the acquisition of the Metro sites in Belgium and rising variable interest rates. Our share in the result of associates in the first half of the year is down €1 million on last year.

Free cash flow was up €26 million on last year, coming in at €19 million, primarily thanks to improvements in our working capital position. This cash flow was used to pay the final dividend for 2022 and to reduce the debt position. Our net interest-bearing debts/EBITDA ratio (adjusted for IFRS 16 Leases) stood at 1.97 at the halfway point of the year.

Dividend

Based on the 2023 half-year results, our strong financial position and our expectations for the rest of 2023, it was decided to pay an interim dividend, in accordance with our dividend policy. The interim dividend amounts to €0.30 per share and will be payable on Monday 2 October 2023. The ex-dividend date is Wednesday 20 September 2023 and the record date is Thursday 21 September 2023.

ERP implementation

Since we went live with our new ERP solution in Antwerp in November 2022, we have been experiencing problems mainly in the delivery operation. This is causing unsatisfactory performance towards our customers both when it comes to actual deliveries and administrative processing. During the first half of the year, we launched an improvement effort that is seeing us troubleshoot issues and stabilise processes and systems. While this effort is increasingly showing results, the situation is still insufficiently stable for us to be able to start rolling out the ERP to other sites as well. We have, therefore, opted not to.

31	(15)	(6)	4	25
16	0		0	1	16
0	(8)		0	(8)	0
0	(2)		0	(6)	0
15		(5)		(6)		17		9

However, based on our evaluation of the programme so far and the quality assessment of the system as it is now, we do still see a way to migrate to a future-proof and scalable SAP-based platform. We have concluded that the complexity of an integral system migration is too great to manage simultaneously with the pre-existing challenges in the Belgian operation. That being said, we are also seeing how successful we are with our SAP Hybris online environment, the value created by our new item master data environment, and the improved functionality of the SAP Finance modules, which are all live already.

Based on lessons learned and experience gained, we are now opting for a course of action that prioritises stabilising our Antwerp site, restoring operational calm and improving overall performance in Belgium. We will disentangle the solution we initially built and split it up into separate delivery and cash-and-carry modules that will subsequently be easier to roll out. In our view, this approach will accelerate the improvement of overall returns in Belgium, while also reducing the costs involved in the further ERP roll-out in Belgium and the Netherlands.

Financing

In April 2023, we completed the implementation of our refinancing plan. We opted to take out a committed facility totalling €260 million with three major Dutch banks. This new facility with the banks is made up of a three-year component of €160 million with two one-year extension options and a second component of €100 million with a term of one year and an option for a one-year extension. Both components have a variable rate of interest.

In April 2023, we repaid €30 million on our USPP loan on schedule, which leaves one final tranche of €40 million, which will be repaid in 2025.

4 Sligro Food Group Press release on the 2023 half-year figures

Staffing changes

At the Extraordinary General Meeting of Shareholders held on 29 June 2023, Mr Dirk J. Anbeek was appointed to the Supervisory Board of Sligro Food Group N.V. for an initial term of four years, on the understanding that his term will expire on the day of the General Meeting of Shareholders in 2027 if this is earlier.

Outlook

When it comes to consumer confidence and jobs, as well as inflation, we expect to see a situation that can more or less be classed as a status quo. We are not seeing any signs of major changes, neither upwards nor downwards.

This means that we will be able to maintain the revenue development from the past few months and can expect some further volume growth on top of inflation. Our aim is to outperform the market again this year, and to reinforce our market position both in the Netherlands and Belgium. Revenue in Belgium over the past twelve months was buoyed by the acquisition and subsequent sharp rise in sales to a very large customer, which are sales recognised as like-for-like sales from the end of the second quarter onwards. Metro will generate additional growth in Belgium as we move towards 70% of original revenue by the end of the year.

The expected drop in tobacco revenue has, thus far, not materialised. Tobacco's share in revenue will, however, still cautiously drop towards 7% or just below that figure.

Our focus for the upcoming period will be on improving returns as we head towards our medium-term goal of 7.5% EBITDA. The initiatives we launched in the first half of the year to boost gross profit and cut costs will be continued with the same energy over the second half of the year. Given the way prices have been developing in the market in 2023 so far, and looking ahead to 2024, more initiatives are likely to follow. The aforementioned choices we have made with respect to our ERP implementation, combined with our focus on restoring returns in Belgium, will also contribute to that.

Even though our investment spending has already normalised to a significant degree over the past months, we will work to keep investment spending below our long-term target figure of 2.5% of revenue. Combined with our focus on working capital control, we will reduce our debt position, and therefore the interest we pay.

As you know, we always refrain from making any firm forecasts as to the results for the second half of the year. In our trading update of 19 October 2023, we will go into developments in the third quarter of 2023 in greater detail.

On that same day, we will hold our Capital Markets Day from 12 p.m. to 4 p.m., which you can attend at our head office in Veghel. The event will also be streamed.

Veghel, 20 July 2023

On behalf of the Executive Board of Sligro Food Group N.V.

Koen Slippens

Rob van der Sluijs

Tel: [phone]

www.sligrofoodgroup.nl

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Sligro Food Group Press release on the 2023 half-year figures

Appendices

Statement of directors' responsibilities	6
Consolidated statement of profit or loss for the first half-year	7
Consolidated statement of comprehensive income for the first half-year	8
Abridged consolidated statement of cash flows for the first half-year	9
Consolidated statement of financial position	10
Consolidated statement of changes in shareholders' equity for the first half-year	11
Notes to the consolidated 2023 half-year financial statements	12
Profile	14