Annual report Sligro Food Group...Sligro Food Group’s dividend policy is to distribute...

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FOOD GROUP N.V.

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02

The company is established in Veghel

and entered in the commercial register

of the Chamber of Commerce and Industry

for East Brabant in Eindhoven

under number 160.45.002.

Corridor 11

P.O. Box 47

5460 AA Veghel

Netherlands

Telephone +31 413 34 35 00

Fax +31 413 36 30 10

E-mail [email protected]

Internet site www.sligro.nl

Layout and coordination Sligro B.V.

W.C.A.A. Jansen

A.M.A.P. van der Valk

E.E.C.M. Hoogers

Printing

Bek Grafische Producties, Veghel

Translation

Mac Bay Consultants, Amsterdam

The 2002 annual report of Sligro Food Group N.V. is

available in Dutch and English.

Should different interpretations arise, the Dutch

language version prevails.

Copies of the annual report in Dutch and English are

available on request from

Public Relations Department,

Sligro Food Group N.V.,

Veghel, The Netherlands.

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FOOD GROUP N.V.

2

Sligro Food Group N.V. annual report 2002

Diary

Final 2002 turnover 2 January 2003

Final 2002 figures 23 January 2003

Press conference 23 January 2003

Analysts’ meeting 23 January 2003

Publication of annual report 4 February 2003

Annual General Meeting 19 March 2003,

at the company’s offices,

Corridor 11, Veghel, 11.00 a.m.

Announcement of stock-dividend exchange ratio 2 April 2003

Dividend available for payment 16 April 2003

2003 half-year prospects 17 April 2003

2003 half-year figures 17 July 2003

Press conference 17 July 2003,

Le Meridien Apollo, Amsterdam, 11.00 a.m.

Analysts’ meeting 17 July 2003,

Le Meridien Apollo, Amsterdam, 1.30 p.m.

Final 2003 turnover 2 January 2004

Final 2003 figures 22 January 2004

Press conference 22 January 2004,

Le Meridien Apollo, Amsterdam, 11.00 a.m.

Analysts’ meeting 22 January 2004,

Le Meridien Apollo, Amsterdam, 1.30 p.m.

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Important dates 2

Foreword 5

Sligro Food Group shares 6

Profile 8

Key figures 9

Locations 10

Directors and management 11

Formats 12

Report of the Executive Board

Commercial developments 16

Organisation and employees 24

Risks and risk management 28

Capital expenditure 29

Results 30

Finance 34

Prospects 37

Report of the Supervisory Board 38

Annual accounts for 2002

Consolidated profit and loss account for 2002 42

Consolidated cash flow statement for 2002 43

Consolidated balance sheet as at 28 December 2002 44

Consolidated statement of movements in shareholders’ equity for 2002 45

Accounting policies 46

Notes to the consolidated profit and loss account 50

Notes to the consolidated cash flow statement 55

Notes to the consolidated balance sheet 56

Company profit and loss account for 2002 64

Company balance sheet as at 28 December 2002 65

Notes to the company profit and loss account 66

Notes to the company balance sheet 68

Other information 71

Ten-year review 74

Works Council and key personnel 76


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A good year

Following the acquisition of Prisma Food Retail

in 2001, we rounded off another excellent

takeover in 2002. With the acquisition of

EM-TÉ Supermarkten, we are now active in all

segments of the food market in which we have

identified long-term growth opportunities.

In the food retail market, we have concentrated

our operations for franchised independent

retailers in Prisma and through EM-TÉ we have

taken the first step with our own supermarkets.

In the food service market, Van Hoeckel serves

the institutional segment and Sligro the

restaurant, catering and company canteen

segment. To distinguish the group activities

more clearly from those of the main operating

company, Sligro, we changed the listed parent

company’s name to Sligro Food Group N.V..

These measures are intended to bring

our group strategy to the attention of a large

group of interested parties both at home

and abroad.

In 2002, turnover increased by 10.8% to

e 1,299.0 million and net profit by 46.5% to

e 37.0 million. Earnings per share after

amortisation of goodwill improved by 42.4% to

e 3.83. Organic turnover was 4.4%, in

comparison with a 7.7% increase in 2001.

All activities contributed to

the improvement in results.

EM-TÉ Supermarkten turned

out to be more profitable

than anticipated at the time

of acquisition. This company

proves that you do not

necessarily have to be big to

operate supermarkets

successfully. With the right market focus and

strict cost control in combination with the strong

buying position offered by Superunie, we can

compete with large international organisations.

EM-TÉ, incidentally, is not an exception in the

Dutch food market. The same success factors

are important in the food service market, too,

where our companies also compete

successfully against their peers.

Owing to the economic slowdown, market

conditions weakened slightly in the course of

2002 and competition is expected to intensify in

2003. Nevertheless, we confidently expect a

further improvement in our results and another

increase in earnings per share in 2003. We are

equally confident that we can rely on the total

commitment of our staff, just as we have in

recent years, for which we are extremely

grateful.

We are pleased that the Supervisory Board has

proposed that Mr K.M. Slippens, currently food

service director, be appointed to the Executive

Board of Sligro Food Group N.V..

Veghel, 23 January 2003

Executive Board, Sligro Food Group N.V.

A.J.L. Slippens, chairman


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From left to rightJ.G.M. GeerdinkK.M.SlippensA.J.L. SlippensH.L. van Rozendaal

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Shares in Sligro Food Group are traded on Euronext Amsterdam N.V.. The market in Sligro Food Group shares was

maintained in 2002 by three liquidity providers: Dexia, Rabo Securities and ING Barings. Having been admitted to

the NextPrime segment of the market, Sligro Food Group has to satisfy a number of additional requirements,

including requirements relating to the frequency and quality of its reports. Sligro will publish quarterly figures as from

1 January 2004 at the latest and will change its accounting policies to International Accounting Standards (officially

the International Financial Reporting Standards) in 2004 or 2005.

Sligro Food Group is included in Euronext’s Next 150 Index. This index is classified by market capitalisation. As at

the 2002 year-end Sligro Food Group was in 82nd place. As at the same date it was 182nd by market capitalisation

on the joint stock exchanges of Amsterdam, Brussels, Lisbon and Paris.

Movement in shares (x 1,000)

2002 2001 2000 1999 1998

Issued capital, opening balance 9,503 9,229 9,030 8,888 8,721

Stock dividend 1) 232 239 182 139 158

Exercise of options 1) 19 35 17 3 9

Issued capital, closing balance 9,754 9,503 9,229 9,030 8,888

Average issued capital 9,672 9,406 9,165 8,984 8,832

1) Included in the average number of shares in issue as from the date concerned

The number of shares in issue as at the 2002 year-end was 9,754,076, an increase of 250,718 on the 2001 year-end

owing to the payment of stock dividends (231,718) and the exercise of share options (19,000). Earnings and cash

flow per share are calculated on the average number of shares in issue, which increased by 266,382, or 2.8%, to

9,672,399.

At year-end 2002, 173,425 share options had been granted to senior management, equal to 1.8% of the total

number of shares in issue. These options may not be exercised within three years of being granted. Up to 1999, five-

year at-the-money options were granted. Since 1999, four-year 16% out-of-the-money options have been granted.

Sligro Food Group’s dividend policy is to distribute approximately 40% of profit after tax excluding extraordinary

items. The proposed payout ratio for 2002 is 39.2% based on a cash dividend. The stock dividend will be 3% to 5%

more favourable to shareholders.

Shareholders

Notification of major shareholders pursuant to the

Disclosure of Major Holdings in Listed Companies Act 1)

% year-end 2002

Stichting Administratiekantoor Slippens 46.85 (38.43)

Boron Investments N.V. 5.19 (6.05)

Darlin N.V. 5.00 (6.55)

Internationale Nederlanden Groep N.V. 5.06

Orange Deelnemingen Fund N.V. 5.11 (5.44)

Vinke Amsterdam I B.V. 5.02 (5.10)

1) Adjusted for double counting


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1010

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30

40

50Share price

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40

30

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0 0,00,51,01,52,02,53,03,54,0

Per share retained earnings - dividend

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Pursuant to the Disclosure of Major Holdings in Listed Companies Act, disclosures must be made when a

shareholding passes above or below certain percentages. They therefore need not provide a true insight into the

free float of the shares. Corrections are accordingly made for double counting. To provide the greatest possible

insight into the actual holdings, moreover, the percentage held as at balance sheet date is shown between brackets

where the shareholder in question has volunteered the information.

The information currently available indicates that the employees of Sligro Food Group N.V. hold 584,000

(2001: 567,000) shares, of which 370,000 (2001: 369,000) are held by members of the Executive Board.

Key figures per share (x e 1)

2002 2001 2000 1999 1998

Highest quotation 44.25 35.20 32.50 38.95 42.46

Lowest quotation 28.70 24.75 22.00 27.75 23.05

Year-end quotation 40.00 35.00 26.10 30.10 34.03

Earnings per share 3.83 2.69 2.02 1.95 1.55

Dividend 1.50 1.05 0.80 0.80 0.61

Year-end market capitalisation

(e million) 390 333 241 272 302

In contrast to the general performance of the Dutch equity market, turnover of Sligro Food Group shares doubled in

2002 (source: Euronext).

2002 2001

Total share turnover (e 1,000) 98,110 49,458

Number of shares traded (x 1,000) 2,568 1,674

Numberof transactions (single counting) 5,434 2,339

The highest number of shares traded in one month in 2002 was 548,353 in November. The lowest number was

50,151 in September.

Share distribution statements have been requested from the major financial institutions in the Netherlands. At the

beginning of 2003, these institutions had 94% of the issued capital under management. On the basis of these

statements, the classification of share capital in percentage terms can be analysed as follows:

Private Institutional Banks Other Total

Netherlands 46 22 0 12 80

UK 0 0 8 0 8

USA 0 0 3 0 3

Other 0 0 2 1 3

46 22 13 13 94

We endeavour to keep over 50,000 lines – dry goods,

perishables and food-related non-food items – in

stock at all times, assuring our customers of prompt

service. We also provide commercial and business

management support, ranging from complete

franchise packages to insurance and training

services.

Intensive efforts are made among the Sligro Food

Group companies to share know-how and to utilise

the substantial economies of scale. Joint purchase

and the joint use of exclusive brands, combined with

a direct and detailed management of margins is

yielding higher gross margins. Operating expenses

are kept in check by ongoing tight cost control and

a joint logistics and distribution strategy.

Group synergy is further enhanced by the expansion

of joint IT systems, joint property management and

group management development. Staff have the

opportunity to make the most of their talents and

develop their full potential. Innovation, training and

personal development are the key concepts in this

context.

Sligro Food Group aims to be a consistent, quality

company, achieving controlled growth in all its

activities and for all its stakeholders.

Turnover in 2002 was e 1,299 million and net profit

was e 37 million. The average number of employees

on a full-time-equivalent basis was 2,561.

Sligro Food Group N.V. encompasses food service

and food retail companies selling directly and

indirectly to the entire Dutch market for food and

beverages. The group adopts a multichannel strategy

covering various forms of sales and distribution (self-

service and delivery) using different distribution

channels.

Food retail

• Prisma Food Retail B.V. supplies some three

hundred and fifty independent food retailers

employing five different retail formats with different

store sizes and market approaches (Golff,

MeerMarkt, Attent, Zomermarkt/Rekra and Milo).

This multiformat principle means that outlets can be

accurately matched to local market needs.

• EM-TÉ Supermarkten B.V. operates 11 large

supermarket/off-licence stores, with the aim of

achieving market leadership at regional level.

Food service

• Sligro B.V. supplies the catering trade, volume

users, company restaurants and smaller retail

businesses on the basis of both self-service and

delivery from 34 large outlets.

• Van Hoeckel Grootverbruik B.V. addresses the

institutional market nationally, supplying non-profit

establishments like hospitals, nursing and care

homes, residential homes for the elderly and the

Dutch Army.

• Rosenberg Import B.V. supplies the top segment of

the sweets market via a number of sole agencies.

Fresh food

• Sligro Fresh Partners, together with partners and

participating interests (Smits Vis 100%, Smeding

AGF 49%) in the fresh produce business, focuses

on the most efficient logistics commensurate with

food safety for supplying fresh produce to all Sligro

Food Group operations, based on five Regional

Fresh Centres.

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(amounts x e 1,000)

2002 2001

- Result

Turnover 1,299,028 1,171,940

Operating profit before depreciation and amortisation

of goodwill (Ebitda) 87,680 63,455

Operating profit before amortisation (Ebita) 69,095 46,310

Operating profit 65,482 45,144

Profit after tax 37,024 25,270

Cash flow from operating activities 74,219 50,640

Proposed dividend 14,631 9,979

- Financial position

Shareholders’ equity 132,182 96,168

Interest-bearing debt 112,711 107,359

Balance sheet total 367,715 288,423

- Employees

Average for the year (full-time equivalents) 2,561 2,177

Staff costs 84,080 72,229

- Ratios

Increase in turnover on previous year (%) 10.8 49.9

Gross margin as a percentage of turnover 17.8 15.7

Operating profit before amortisation of goodwill as

a percentage of turnover 5.3 4.0

Operating profit as a percentage of turnover 5.0 3.9

Profit after tax as a percentage of turnover 2.9 2.2

Return on average equity (%) 32.4 30.1

Operating profit as a percentage of average

net capital employed 3) 27.4 20.0

Shareholders’ equity as a percentage of balance sheet total 35.9 33.3

- Figures per e 0.24 share

Number of shares in issue (year-end, x 1,000) 9,754 9,503

(Amounts x e 1) e e

Shareholders’ equity 13.55 10.12

Profit after tax 1) 3.83 2.69

Cash flow 1) 2) 6.12 4.63

Proposed dividend 1.50 1.05

Year-end share price 40.00 35.00

1) Calculated on the average number of shares in issue2) Profit after tax plus amortisation/depreciation3) Calculated on the weighted average

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Drachten

Groningen

Emmen

Zwolle

Almelo

ApeldoornAmersfoort

NijkerkPutten

Rosenberg

Arnhem

TielNijmegen

Van Hoeckel

Gorinchem

The Hague

Leiden

Gouda

Alkmaar

The Hague

Rotterdam Zuid

Rotterdam Spaanse Polder

Den Bosch

Helmond

Venlo

Weert

Sittard

HeerlenMaastricht

Elsloo

Veghel(head office)

Eindhoven

Tilburg

Breda

Goirle

Bergen op Zoom

Kapelle

Terneuzen

Vlissingen

Goes

Roosendaal

Riel

Nieuwegein Doetinchem

EM-TÉ

Prisma

EM-TÉ Head office

Van Hoeckel

Sligro Fresh Partners

Rosenberg

Restaurant and CateringDelivery Service

Sligro

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Supervisory Board

H.J. Hielkema (59), president

G.J. Beijer (57)

T.J.M. van Hedel (61)

J.H. Menkveld (56)

Executive Board

A.J.L. Slippens, chairman (51)

J.G.M. Geerdink (53)

H.L. van Rozendaal (47)

K.M. Slippens (35) 1)

Senior Management

J.G.M. de Bree (45)

A.P. Dijkstra (56)

G.L.M. Poels (52)

C. de Rooij (49)

Group company management

Sligro B.V.

A.J.L. Slippens (51)

K.M. Slippens (35)

G.L.M. Poels (52)

Prisma Food Retail B.V.

J.G.M. Geerdink (53)

P. Tent (43)

EM-TÉ Supermarkten B.V.

J.J.C. van Eijk (49)

W. van Gennip (42)

J.M. Maijers (43)

A.C.A.M. Trommelen (53)

J.W.M.M. Trommelen (55)

W.N.A.S. Trommelen (56)

Van Hoeckel Grootverbruik B.V.

G.J.M. Hafkamp (50)

Sligro Fresh Partners

P.G.A.M. Dirven (43)

G.L.M. Poels (52)

Rosenberg Import B.V.

E.M. Buurman (58)

J. Smit Vishandel B.V.

P.T.A.J. Smit (43)

Participating interest management

Assurantie Advies Nederland (49%)

C.H.P.M. van der Pol (35)

O. Smeding & Zn. B.V. (49%)

R. Smeding (45)

S.J. Smeding (43)

1) Proposed for appointment at the Annual General Meting to

be held on 19 March 2003

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Retail

Restaurants and catering


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Number Average retail area Consumer turnover

m2 x e 1,000

11 1,150 192 (week)

61 750 85 (week)

80 400 31 (week)

54 200 16 (week)

84 250 515 (year)

68 100 14 (week)

150 80 170 (year)

23 100 275 (year)

13 150 300 (year)

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2002 h ighl ights

l Net profit increases by 46.5% to e 37.0 million

l Earnings per share up by 42.4% to e 3.83

l Proposed dividend 42.9% higher at e 1.50

l Operating margin (Ebita) advances 1.3% to 5.3%

l Turnover increases by e 127 million, or 10.8%, to e 1,299 million

l Organic growth for 2002 of 4.4% in weakening market conditions

l Costs under control

l Acquisition of EM-TÉ Supermarkten: first step with our own supermarkets

l Sligro Breda exceeds expectations after opening

l Completion of a new 28,000 m2 distribution centre

l Successful Night-of-the-Proms promotion for Sligro business- to-business and Prisma business-to-consumer contacts

l Sligro Beheer N.V. becomes Sligro Food Group N.V.

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Commercia l developments

Goals

l To increase turnover by an average of 10% each year

l To realise strong growth in the turnover of fresh produce by establishinga national network of regional fresh produce centres under the name Sligro Fresh Partners

l To continuously renew the commercial formats in the food retail and food service markets

l To reposition Van Hoeckel, partner in foodcare

l To expand the network and upgrade and enlarge existing outlets

l To capitalise on acquisition opportunities that satisfy our criteria

l To strengthen the image and increase the name recognition of the Sligro Food Group companies and formats

l To increase the proportion of cash-and-carry turnover in Sligro turnover

l To increase customer focus and value added through training and induction programmes for employees

l To maximise the internal synergy potential and the exchange of know-how between the group activities

l To realise competitive and permanent margin management

Our activity e billion %

Food retail

Supermarkets (Prisma, EM-TÉ) 22.9 45.6

Other retail (Prisma) 12.5 24.9

35.4 70.5

Food service

Restaurants (Sligro) 11.3 22.5

Catering 3) (Sligro) 1.8 3.6

Institutional (Van Hoeckel) 0.6 1.2

Ancillary outlets 4) (Sligro) 1.1 2.2

14.8 29.5

Total market 50.2 100

The food market

Sligro Food Group is engaged in virtually all

segments of the Dutch food market. Turnover in the

food retail channel is accurately measured but far

less information is available on the food service

market. Until recently, there was not even a definition

of the food service market. There is much discussion,

though, of which figures should be compared with

each other. The CBL 1) assumes that price levels in

the food retail market and the food service market are

the same, ignoring the extra value added provided

by, for example, restaurants. In the past year, three

organisations 2) developed the food service monitor,

which analyses the food service market by the

amount of expenditure, i.e. including value added.

In our opinion, analysis of actual consumer or

business expenditure provides a better insight into

the total size of the market. On this assumption, the

Dutch food market in 2001 can be broken down as

follows:

The share of food service in the total food market has

increased by nearly 1% per annum in recent years. At

the time of writing, only supermarket turnover figures

were available for 2002 as a whole, which, according

to GFK Panel Services, were 5.5% higher at e 24.2

billion. In view of the less favourable conditions in the

Dutch restaurant and catering sector in 2002, partly

because of the introduction of the euro, we therefore

do not think the recent growth in food service will

have continued in 2002.


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1) Centraal Bureau Levensmiddel (Central Food Agency)2) CBG (Central Large-Scale Catering Agency), University of Wageningen and GFK Panel Services3) Contract and company-managed catering4) Petrol and railway station outlets

Sligro Food Group has restructured is operations to

bring them largely into line with the above market

segmentation, as shown in the chart below.

The chart shows that we draw a distinction in food

retail between franchised independent retailers and

our own outlets. Working with independent retailers

requires a different approach and organisational

structure from working with a branch organisation,

although there are many similarities from a marketing

angle. Having separate organisations does not mean

there is no synergy potential between the two, but

forced synergy in all areas might lead to sub-

optimisation. That is why we are allowing both

organisations to keep their own identities.

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small to large-scale

franchised retail stores

distribution centres in

Putten and Kapelle

own outlets

large-scale retail

distribution centre in

Kaatsheuvel

restaurants, company

canteens, leisure

organisations, catering,

large-scale caterers

national network of 34

combined cash-and-

carry/delivery-service

wholesale outlets

health care, defence,

other non-profit

distribution centre in

’s-Hertogenbosch

Sligro Fresh Partnersnational network of – currently – five fresh produce distribution centres (building up to seven)

Central distribution centre and head office in Veghel

FOOD RETAIL FOOD SERVICE

Prisma EM-TÉ Sligro Van Hoeckel

Number x 1,000 m2 retail area x e millionconsumer turnover 5)

2002 2001 2002 2001 2002 2001

EM-TÉ 11 11 13 13 110 102

Golff 61 61 47 46 270 245

Meermarkt 80 81 31 30 129 116

Attent 54 56 11 11 45 41

Zomermarkt/Rekra 84 81 20 17 43 39

Supermarket formats 290 290 122 117 597 543

Milo convenience

stores 68 60 7 6 50 48

Total 358 350 129 123 647 591

5) Including VAT


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The Sligro Food Group formats performed well in

comparison with the market. The total market

increased by 5.5% whereas our formats grew by

nearly 10%. Our share of the supermarket market is

about 2.5%. The following table shows the

developments:

Food retail

The food retail market saw many changes in 2002

and Sligro Food Group actively played its part by

acquiring EM-TÉ Supermarkten in May. Laurus, one

of our competitors, teetered on the brink of financial

ruin and was only saved by a concerted effort by the

Casino group of France and the banks. Laurus lost

market share owing to internal problems and the sale

of various activities, chiefly to the Sperwer group.

Schuitema, a member of the Ahold group, completed

the conversion of its 2000 acquisition, A&P, to the

C-1000 format during the year. The German

discounters Aldi and Lidl grew faster than the market

thanks to the weakening economy and the

acquisition of outlets from Laurus. Together, they

command about 10% of the market. Most

supermarket chains that meet their retail buying

needs through the Superunie buying organisation, as

we do, reported stronger organic growth than the

market as a whole. The Superunie members’

estimated market share in 2002 was 24% (2001:

approximately 21%).

(x e million)

2002 2001

Turnover 433.8 1) 329.8

Operating profit 19.5 9.8

Net capital employed 77.9 48.21) Including Milo (e 20 million)

EM-TÉ is preparing to open a new location in

’s-Gravenmoer in May 2003. In Gilze, a completely

new, considerably bigger outlet will be opened at the

end of 2003. Measured in terms of turnover per

square metre, the EM-TÉ format ranks amongst the

best in the Netherlands.

After several years’ success at Sligro, the Night-of-

the-Proms promotion was extended to the Prisma

supermarket formats in the past year. Both the

10,000 business contacts from Sligro and the 10,000

consumers from the Prisma formats enjoyed two

evenings of hospitality and a fantastic concert. This

loyalty programme, in which customers saved for

tickets, was a great success.

At EM-TÉ, the difference between consumer turnover

and the turnover we recognise represents VAT only.

At the other formats supplied by the Prisma

wholesale organisation, the difference consists of

VAT plus retail margins. Prisma’s total wholesale

turnover to supermarkets rose from e 330 million to

e 344 million, an increase of 4.2%. This is less than

the increase in consumer turnover, chiefly because

sales to a former associated company of Prisma were

ended as planned in the course of 2001. The relevant

wholesale turnover during that year was e 14 million.

Management of the Milo convenience stores was

transferred from Sligro to Prisma in 2002 and the

format is now included in Prisma’s figures.

Comparative figures for 2001 have not been restated.

This format realised wholesale turnover of e 20 million

in 2002, raising Prisma’s total wholesale turnover

to e 364 million.

The upgrading programme for the Golff and

Meermarkt formats was vigorously and successfully

continued in 2002, with 56 outlets being upgraded.

A further 48 upgrades are planned for 2003 by the

end of which the programme will be largely

completed.

The Meermarkt supermarket managed by

F. Fluitman in Bakhuizen was voted ‘Local

Supermarket of the Year’. Prisma is seeking to

strengthen its market position through both organic

growth and the acquisition of retail outlets. With

regard to retail acquisitions, we are interested

principally in locations/outlets that achieve consumer

turnover of between e 30,000 and e 200,000 per

week, whereas other organisations are more

interested in very large outlets.

To make our Golff, Meermarkt, Attent,

Zomermarkt/Rekra and Milo consumer formats more

effective and aggressive in the market, we will

strengthen and sharpen up their commercial

organisations in a number of areas.

20


Food service

2002 was a quiet year for acquisitions in the food

service market, both at Sligro and at our competitors.

Sligro Food Group is active in four segments of the

food service market. The institutional segment is

served by Van Hoeckel, the others by Sligro. The

total institutional market is showing modest but

steady growth. The principal customer categories are

health care institutions, senior care institutions,

penitentiaries and the Ministry of Defence. The table

on page 17 shows that this segment is worth e 0.6

billion. This relates to the value of the goods

supplied, which is roughly the same as our turnover

plus VAT. A special approach is needed for this

segment. Very reliable deliveries and close

cooperation with customers are essential. The market

is witnessing an increase in the number of clusters of

care institutions that work together and pool their

buying operations. Van Hoeckel specialises

exclusively in the institutional market, receiving fresh

produce support from Sligro Fresh Partners. It again

won several substantial contracts in 2002, including a

three-year agreement with 46 care institutions in the

province of Friesland involving an annual turnover of

e 5 million.

Van Hoeckel has been operating successfully in the

institutional market for many years. Building on the

13.7% increase in its turnover in 2001, it saw its

turnover increase by a further 15.2% to e 74.4 million

in 2002. Thanks in part to the new contract, double-

digit growth will again be reported in 2003.

Van Hoeckel has one national competitor, Deli XL, a

member of the Ahold group, and several medium-

sized regional and fresh-produce competitors.

Van Hoeckel Grootverbruik B.V. will introduce a new

corporate identity in 2003 that complements its

position in the institutional market. The introduction

will be accompanied by a change of name to ‘Van

Hoeckel, partner in foodcare’.

Sligro remains the main business unit and was good

for more than 60% of group turnover in 2002. Sligro

serves restaurants, large-scale caterers, party

caterers, company canteens and petrol and railway

station shops. Restaurant and catering customers

form the largest group. Priority is given to the middle

of the market, which accounts for about 85% of the

total restaurant and catering market. The total

restaurant and catering market amounts to

e 11.3 billion at consumer prices. The cost of the

food and drink sold is about 30% of this amount.

Restaurant and catering turnover came under

pressure in 2002. Quarterly figures from the

Restaurant and Catering Product Board indicate

there was a steady deterioration. Up to the end of the

third quarter, volume declined by 2.2%. Owing to an

average price rise of 6.2%, however, total turnover

increased by 3.9%. Reports on restaurant turnover in

the important month of December suggest that the

market declined further in the fourth quarter. Although

Sligro is not unaffected by this trend, its sales volume


21

(x e million)

2002 2001

Turnover 865.21) 842.1

Operating profit 43.8 33.3

Net capital employed 152.8 152.81) Excluding Milo (e 20 million)

multiples. This is now beginning to bear fruit. In 2002,

for example, a long-term national delivery agreement

was signed with Holland Casino’s.

Sligro is the leader in the meals segment, with an

estimated share somewhere in the region of 15%.

Drinks, however, form an important part of this

market, and this segment is dominated by the

breweries. Our share of the total restaurant and

catering market is just over 10%. Our main

competitors are the Ahold subsidiary Deli XL, the

German Metro group and its Makro subsidiary,

various medium-sized family companies and the

breweries.

rose by more than 2% in 2002. It even realised a

modest increase in December. Our turnover is far

less sensitive to inflation than that of restaurants and

caterers, whose prices are forced up principally by

higher costs for staff, premises and safety measures.

Sligro therefore won market share. The growth was

due on the one hand to the strength of the format

and on the other to expansion investments, such as

the new outlets opened in Groningen in October 2001

and in Breda in February 2002. Furthermore, several

outlets were expanded and restyled. Sligro has

traditionally been strong among independent

restaurateurs and caterers, but in recent years it has

also trained its sights on larger alliances and

22


Wine is one of the spearheads of the Sligro range. We have invested in a completely new wine concept

based on product knowledge and buying power. The result is an exclusive and affordable range of wines that

has had an immediate effect on sales results, with turnover trebling since 1995. Most of the growth has been

organic. In 2002, Sligro increased its turnover of wine in the food service channel by more than 13% to e 27.7

million. Consumption of French wines in the Netherlands increased by 2% and total wine consumption rose

by 3% in 2002. Thanks to the specialised concept, Sligro’s wine range is comfortably outstripping the market

trend.

As part of the new concept, Sligro cuts out the middleman by importing the wine itself. Apart from France

(60%), Sligro also buys wine directly in such new wine countries as South Africa, Australia, New Zealand and

Chile. Selling wine requires expertise. Investments have therefore been made in personnel and professional

training courses. The qualified personnel in Sligro’s outlets thus combine the skills of sales staff with the

expertise of advisers.

In the restaurant and catering segment, we acquired

OKC de Jong, Gouda, as of 1 January 2002 (annual

turnover: e 7 million) and the wholesaler Loek den

Elzen, Leiden, as of 1 October 2002 (annual turnover:

e 7 million).

Sligro Fresh Partners was strengthened through the

conversion of its minority interest in J. Smit Vishandel

into a 100% interest as of 1 July 2002, after many

years’ successful cooperation between the two

companies. Sligro thus became the leader in fish

products in the Dutch food service market.

Growth in the company canteen (catering) market is

greater than the average. A shift is taking place in this

segment as more companies contract out their

catering instead of managing it themselves. Contract

catering now accounts for about 65% of the total

market. The market leaders in the Netherlands are the

international groups Sodexho and Compass. The

total market volume of e 1.8 billion comprises the

turnover realised by contract caterers (including the

value they add) and an estimated value for

companies that still manage their own catering.

Sligro has traditionally been strong in the company-

managed segment, particularly among smaller

companies, which it serves through its cash-and-

carry wholesale channel. Delivery services are usually

provided to large companies. In recent years, we

have paid more attention to larger locations and to

contract catering as well as company-managed

catering. Last year, this led to double-digit turnover

growth in this sector. The introduction of state of the

art logistics and communication software developed

in-house will help generate further growth in this

segment in the years ahead. We are second behind

Deli XL in this part of the market. Two medium-sized

family companies are also important players in this

segment.

Ancillary outlets include petrol station shops, which

realise a turnover of approximately e 1 billion. About

65% of their turnover, though, consists of tobacco

products, which have narrow margins and high

security costs. This segment is expanding strongly,

but increased tobacco duties mean the growth in

monetary terms is higher than the growth in volume

terms. Oil companies have tried many experiments

with shop/catering formats in this segment, both in

collaboration with retailers and on their own, but have

met with mixed success.

From a commercial point of view, the combination of

catering and retail is attractive because we are active

in both markets. Sligro Food Group has grown

strongly in this segment in recent years but the tide

turned in 2002. Despite our successful sales

performance to the end of 2001, we have earned very

little in this segment. We shall therefore channel the

enthusiasm for our market approach to segments

that need suppliers who are familiar with and

understand the food market. Sligro will further scale

down its position as a supplier of only tobacco

products that have no value added. Our market share

in this segment is about 10%. The market leader is

the German Lekkerland organisation.


23

24


Organisat ion and employees

Goals

l To strengthen Sligro Food Group’s position in the labour market

l To strengthen middle and senior management in order to sustain growth

l To encourage further professionalism from the bottom to the top by means of a targeted training programme

l To increase productivity, while offering customers greater valueadded

l To foster permanent cost consciousness in all our staff

l To raise the top 150 managers’ focus on goals by rewarding their performance

l To maintain the high level of staff commitment in a growing organisation

The further decline in economic growth led to some

relaxation of the labour market in 2002 but there is

still no cause for optimism, especially not for

positions requiring relatively low-level qualifications.

Physical work is simply not popular and our

investments to limit physical exertion and our training

programmes cannot make up for this. We have fewer

problems in management positions. The slump in the

IT sector has enabled us to staff our IT department

almost entirely with highly qualified specialists again.

Throughout 2002 a large team of IT experts and

managers from Prisma and Sligro worked on the

design and construction of a new management

information system for Prisma that will be linked to

the Sligro computer systems and the Prisma retail

systems. We hope to implement this system in the

course of 2003 after exhaustive testing.

In 2002 we plucked the first fruits of our strategy of

having the Personnel & Organisation department

work both centrally and regionally for all group

businesses after raising it to the right quality and

quantity in the past few years. With all Prisma staff

included in the central personnel information system

since 1 January 2002, moreover, we are now in a far

better position to produce clear management reports

and tools. Having regional P&O staff work for all parts

of Sligro Food Group makes the P&O policy more

transparent, creates synergy and broadens the

opportunities for personal development.

The information supply from P&O to the staff took

a professional stride forward in 2002 with the

introduction of the personnel information file, the

more accessible staff annual report in the form of

a newspaper and a weekly information bulletin.

A group-wide staff satisfaction survey was again held

in 2002.

Our training programmes have been strengthened.

Training courses are an integral part of our

organisation and effective tools to realise our

business objectives. Training is a continuous process.

Enthusiasm and loyalty, cost leadership, quality

improvement, structure and commitment are

essential for the vitality, competitiveness and

flexibility of Sligro Food Group and are therefore

spearheads in the training policy.

One issue that demands a great deal of attention is

the reduction of sickness absenteeism and new

incapacity benefit claimants. Absenteeism rose

gradually in recent years to 5.8% but fell in 2002 to

5.4%. Although our absenteeism rate is slightly lower

than the industry average, we still think it is far too

high. Our medium-term goal is to reduce it to less

than 4%, the same as in 1996. This absenteeism rate

does not include EM-TÉ Supermarkten. The rate of

absenteeism at EM-TÉ was 4.5% in 2002, in

comparison with 4.7% in 2001, a very respectable

figure, especially in view of the industry average.


25

26


Sligro B.V. has decided to opt out of the state

incapacity benefit scheme and finance the risks itself.

It must therefore pay benefits during the first five

years of an employee’s incapacity for work. By

accepting this risk, the company is immediately faced

with all the consequences of incapacity for work,

from the possible causes of incapacity in working

conditions to the financial and personal effects.

Furthermore, it must deal directly with the

consequences of the agencies that test incapacity

occasionally not doing their job properly. Every

potential and actual benefit claimant has our full

attention because incapacity may have far-reaching

effects on personal and working conditions. It may

also lead to additional costs, which can quickly run

up to an average of e 100,000 per claimant. This

increased attention bore fruit in 2002, chiefly through

finding suitable alternative work for benefit claimants.

As a result, we realised a considerable saving and at

the same time fleshed out our human resources

policy.

A new group Works Council was elected in 2002. The

separate works councils of Sligro and Prisma have

been abolished. All outlets and group activities are

represented according to their size. Since EM-TÉ was

acquired shortly after the election and is subject to a

separate collective labour agreement (CAO), it is

represented by two observers. The Works Council

plays an important role in communicating and

consulting with the staff. If only because of the size of

our organisation, employee participation is essential.

We have always found the consultation to be open

and constructive and look upon the Works Council as

an important partner in the implementation and

evaluation of the business strategy.

Staff numbers were as follows:

Average number of FTE’s

2002 2001

Food retail

Prisma 338 362

EM-TÉ 352 0

Food service

Sligro 1,791 1,738

Van Hoeckel 80 77

Total 2,561 2,177

Outlets 1) 1,314 986

Distribution centres2) 853 818

Head offices 394 373

Total 2,561 2,177

1) Both cash-and-carry wholesalers and group-owned supermarkets

2) The central distribution centre and Prisma’s and EM-TÉ’s

distribution centres and Sligro’s individual delivery locations

EM-TÉ’s figures relate to the 36 weeks in which it

was included in the consolidation. On an annual

basis, EM-TÉ employed 509 staff (full-time

equivalents). Other acquisitions that added to staff

numbers were the cash-and-carry wholesaler OKC de

Jong (1 January: 8), J. Smit Vishandel (1 July: 80) and

Horecagroothandel Loek den Elzen (1 October: 15).

Numbers were reduced by the further outsourcing of

transport at Prisma and Sligro.

Organic staff numbers will show little change in 2003.

Since the acquisitions made in 2002 will count in full

in 2003, the average number of employees will be

higher.

Sligro Food Group set up its own pension fund in

2001 and in the past year we worked hard on

harmonising Prisma’s and Sligro’s pension schemes.

The basic schemes were harmonised on 1 January

2002 and the supplementary schemes on 1 January

2003. A great deal of attention was paid to the

schemes’ conditions and the changes so that they

could be communicated clearly and understandably

to the staff, because these important benefits are

often found to be very complicated. Fortunately, the

pension fund is in reasonably good financial health.

Detailed information on the fund is provided in the

annual accounts.

A new collective labour agreement (CAO) for the food

wholesale industry was concluded in 2002 for the

period from 1 June 2002 to 1 July 2004. It provides

for a salary increase of 2.5% as of 1 July 2002, of 1%

as of 1 January 2003, of 1.75% as of 1 July 2003 and

of 1.5% as of 1 January 2004. In addition, pension

contributions will in general be considerably higher,

but this is of only limited relevance to Sligro Food

Group since we have our own scheme. The CAO’s

salary provisions are applicable to about 80% of our

employees. The remuneration policy for the other,

higher positions is more performance-related with

regard to both the fixed and the variable salary

components.

We thank our staff for the excellent profit growth they

achieved through their hard work in 2002. That

growth translates into an increase of approximately

25% in the free shares they will receive under our

profit-sharing scheme. We encourage their long-term

financial involvement in the company and our

employee share ownership plan takes advantage of

the tax concessions which are currently available to

save-as-you-earn schemes. We trust that the new

government will recognise the benefits of these

schemes, so that we in the Netherlands are not out of

step with developments in other European countries.


27

28


Although our main competitors in both the food retail

and the food service markets are members of large

international groups, we are not at a competitive

disadvantage. Some of Sligro Food Group’s growth is

achieved through acquisition; on average we acquire

four small to large businesses every year. We have a

wealth of experience with acquisitions and

understand the financial and other risks associated

with them. We limit financial risks by following

thorough due diligence procedures. Risk is also

reduced by familiarity with the market and

agreements with key personnel. Our policy is to

integrate newly acquired wholesalers into the Sligro

Food Group information system and thus bring them

under our central management and control as quickly

as possible. Structural improvement in Sligro Food

Group’s profitability in the medium term is partly

dependent on acquisitions.

Sligro Food Group is adequately insured against the

customary risks. Since 1 January 2002, however, we

have no longer been insured against the

consequences of acts of war. External

circumstances, such as movements in interest and

exchange rates, have a very limited effect on Sligro

Food Group’s results, but general trends in costs do

have an impact owing to the labour-intensive nature

of the group activities.

To summarise, we believe operating risks are

manageable. Compared with some other sectors of

the Dutch economy, cyclical movements have little

impact on Sligro Food Group’s performance.

Directly or indirectly, we serve the end consumer.

While food sales are not cyclical, economic

developments may prompt shifts from the food retail

market to the food service market and vice versa.

The food service market’s share of the total Dutch

food market is steadily rising, partly due to the

growing affluence of the Dutch consumer.

Favourable economic conditions accelerate this

trend, whereas a flat economy has little net effect on

the shift between the markets. There is also a

process of consolidation under way in the food

service market, with many smaller wholesalers being

taken over, but in some segments the market is still

highly fragmented. Consolidation is also in evidence

in the food retail market, which is now far less

fragmented.

Sligro Food Group operates in highly competitive

markets. In the industry and in the wholesale and

retailing sectors, cost increases can only partly be

passed on in higher selling prices and have to be

absorbed largely by efficiency gains. We spread

turnover among our customers in order to reduce

risk. Our largest customer currently accounts for only

about 2% of our total turnover.

In the food retail market, competition on price may

sometimes escalate into a price war, often lasting for

several months. Price wars also affect price levels in

the food service market. The growth in results may

come under pressure when price wars break out, but

we have not yet suffered any long-term

consequences.

Risks and r isk management

Net capital expenditure for the year amounted to

e 28.3 million, slightly above the goal of 2% of

turnover. By way of comparison, the figure for 2001

had been relatively low at e 7.8 million. The main item

of expenditure related to the expansion of the central

distribution centre in Veghel. To ensure we have

sufficient growth opportunities, we purchased a

6 hectare site in 2002 that will be increased by

a further 2 hectare in due course. We have realised

a new non-food distribution centre on the site with a

total area of 28,000 m2. It is the first stage in a project

that can be enlarged to 55,000 m2 depending on the

growth in our activities in the years ahead. Expenditure

on this project in 2002 amounted to e 14.6 million.

Other major projects were the expansion of the Sligro

outlet in Maastricht and the realisation of a completely

new Sligro outlet in Breda in leased premises.

The distribution centre that Prisma acquired in Nijkerk

in 2001 to improve its logistics operations for fresh

produce came on stream as a regional fresh produce

centre. Planned expenditure on the distribution centre

in Putten was delayed, partly because the necessary

permits were not granted on time. Refurbishment of

the Putten distribution centre in 2003 will also allow

Prisma’s head office to return from Nijkerk to Putten.

The distribution centre in Kapelle will be moved to a

new, 25,000 m2 leased distribution centre in 2003 in

the direct vicinity. The current premises will be put up

for sale in 2003.

The investment programme to upgrade the

supermarkets affiliated to Prisma was also given high

priority. Since they are paid for by the operators,

these investments are not included in our capital

expenditure.

In the year ahead, capital expenditure will remain

within the goal of 2% of turnover. In addition to the

Prisma projects, various Sligro outlets will be

upgraded or expanded. The 35th Sligro outlet will be

opened in Gouda. The Sligro outlets in Nieuwegein

and The Hague will be moved to new locations. EM-TÉ

will open its 12th supermarket, in ’s-Gravenmoer, and

new premises will be completed for the supermarket

in Gilze.

Finally, the replacement of the computer equipment

at all locations will require an investment of several

millions.


29

Capita l expenditure

Goals

l To maintain average net capital expenditure at about 2% of turnover

l To increase the number of Sligro outlets by one a year and the number of large supermarket outlets by two a year, excluding acquisitions

l To achieve continuous efficiency gains in order to retain our position as cost leader

The profit and loss account can be summarised

as follows:

x e million as a percentage of turnover

2002 2001 % increase 2002 2001

Net turnover 1,299.0 1,171.9 10.8 100.0 100.0

Cost of sales (1,068.1) (987.9) 8.1 (82.2) (84.3)

Gross margin 230.9 184.0 25.5 17.8 15.7

Expenses (166.5) (140.3) 18.7 (12.8) (12.0)

Other operating income 4.7 2.6 80.8 0.3 0.3

(161.8) (137.7) 17.5 (12.5) (11.7)

Operating margin 1) 69.1 46.3 49.2 5.3 4.0

Amortisation of goodwill (3.6) (1.2) 200.0 (0.3) (0.1)

Operating profit 65.5 45.1 45.2 5.0 3.9

Financial income and charges (7.9) (6.2) 27.4 (0.6) (0.6)

Profit before tax 57.6 38.9 48.1 4.4 3.3

Taxation (20.6) (13.6) 51.5 (1.6) (1.1)

Profit after tax 37.0 25.3 46.5 2.8 2.2

1) Operating profit before amortisation of goodwill (ebita)

30


Results

Goals

l To increase turnover by an average of 10% a year, with at least a comparable increase in net profit

l To distribute about 40% of net profit in the form of dividend -in cash and/or stock, at the shareholder’s option

Total turnover increased by 10.8% to e 1,299 million

in 2002. Organic turnover growth amounted to 4.4%.

Acquisitions, notably EM-TÉ Supermarkten, which

has been consolidated for 36 weeks, were

responsible for a 6.4% increase. The rate of organic

growth was lower than in 2001, when the 7.7%

growth rate was boosted by higher price inflation, a

good summer and record end-of-year turnover, partly

in anticipation of the euro. Organic growth in the first

half of 2002 was 5% but weakened in the second half

to 4%. Lower price inflation also had an impact on

2002. Furthermore, the growth in the second half of

2002 is compared against the very strong growth

recorded in second-half 2001. It would be helpful if

the regulatory authorities issued a precise definition

of the term organic growth because we come across

many different calculation methods in practice, some

of which are very flattering to the figure. Sligro Food

Group defines organic turnover growth as total

turnover growth, including newly built, converted and

closed outlets, and new and lost customers, but less

all growth due to acquisitions.

We are reasonably satisfied that our organic growth

forecasts for 2002 proved correct, despite the lack of

economic growth in the Netherlands. As explained in

the section on commercial developments, we felt little

of the negative developments in restaurant and

catering volumes.

The composition of results has been significantly

changed by the consolidation of EM-TÉ Supermarkten

and J. Smit Vishandel. Both companies have a higher

gross margin than the group average. The same is

true of their costs. As a supermarket chain with all

fresh produce groups under its own management,

EM-TÉ generates relatively high value added. This is

also the case at Smit Vis, which concentrates

principally on fresh and semi-fresh products. EM-TÉ’s

operating profit as a percentage of turnover is greater

than that of all the other activities.

The gross margin increased by 25.5% to e 230.9

million. As a percentage of turnover it was 2.1%

higher at 17.8%. Apart from the consolidation effect

described above, this improvement was the outcome

of margin management. Margin management

comprises the system of measures in place to

improve gross margin without raising selling prices.

Examples include improved buying conditions and

range mix, a higher proportion of exclusive brands

and the optimisation of promotions.

Directly and indirectly, our costs are influenced

chiefly by movements in salaries. The direct increase

in CAO salaries was 2.5%, while secondary salary

expenses caused a further increase. Social security

contributions were also higher, but compensation

was found in the favourable development of

incapacity costs, as explained on page 26. If salary

costs move upwards sharply, even greater priority is

given to labour productivity. To increase our control

over this process, Sligro introduced SAM 2), a

planning and productivity model, on 1 January 2003.

SAM is supported by software developed in-house

using the expertise EM-TÉ has gained and applied

with remarkable success in this area.

Total costs increased by e 26.2 million, or 18.7%. As

a percentage of turnover, this represents an increase

from 12.0% to 12.8%. Apart from acquisitions, costs

were increased by a non-recurring non-cash e 6.4

million addition to the provision for pre-pensions, as

explained on page 47. In 2001, there had been a non-

recurring expense of e 2.1 million due to the change

in accounting policies for provisions. Adjusted for

these items, total costs increased by 15.8%, or from

11.8% to 12.3% of turnover.


312) Sligro Arbeidsproductiviteits Model (Sligro Labour Productivity Model)

On balance these developments widened the

operating margin by e 22.8 million, or 49.2%, to

e 69.1 million. As a percentage of turnover this is an

improvement from 4.0% in 2001 to 5.3% in 2002, the

highest level in our history. The increase in goodwill

amortisation was caused by to the acquisition of

EM-TÉ (e 0.8 million) and to the change in the

amortisation term (e 1.2 million), as explained on

page 48.

Operating profit can be analysed as follows:

(x e million)

32


The Milo convenience store format, with wholesale

turnover for the year of e 20 million, was transferred

from food service to food retail in 2002. Comparative

figures have not been restated.

Food service Food retail Retail property Total

2002 2001 2002 2001 2002 2001 2002 2001

Net turnover 865.2 842.1 433.8 329.8 – – 1,299.0 1,171.9

Operating profit 43.8 33.3 19.5 9.8 2.2 2.0 65.5 45.1

Weighted average net

capital employed 152.8 152.8 77.9 48.2 24.2 24.7 254.9 225.7

Operating profit as a

percentage of turnover 5.1 4.0 4.5 3.0 – – 5.0 3.9


percentage of net capital

employed 28.7 21.8 25.0 20.3 9.1 8.1 25.7 20.0

The table shows that food service achieved a

considerable organic improvement in its results. Food

retail includes EM-TÉ’s figures for 36 weeks. Since

this company achieves the highest margins in our

group, food retail’s overall margin on an annual basis

has risen to a comparable level to that of food

service. Food retail also realised an organic

improvement in its results. As a percentage of net

annualised capital employed, too, the differences

between the activities are now small. The return on

retail property letting should be considered from the

position of a property investor.

Even though the acquisition of EM-TÉ was financed

entirely by means of bank borrowing and many

investments were made in tangible fixed assets,

interest expense did not increase because the high

cash flow was applied to reduce debt. Financial

charges increased by e 2.2 million owing to the

valuation of interest rate swaps at fair value, as

explained on page 47.

Net profit increased by 46.5% to e 37.0 million.

Earnings per share calculated on the average number

of shares in issue increased by 42.4% from e 2.69 in

2001 to e 3.83 in 2002. On a fully diluted basis,

earnings per share amounted to e 3.76, up from

e 2.65 in 2001. It is proposed that a dividend be


33

0

200

400

600

800

1000

1200

1400Net turnover x e million

1,400

1,200

1,000

800

600

400

200

0 0

0000

0000

0000

0000

0000

0000

0000Operating profit x e million as a percentage of turnover

3

4

560

70

50

40

30

20

10

0

5.0

4.0

3.0

05000

10000150002000025000300003500040000

1,50

2,25

3,00Net profit x e million as a percentage of turnover

40

35

30

25

20

15

10

5

0

3.00

2.25

1.50 0,00,51,01,52,02,53,03,54,0

Per share retained earnings - dividend

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

distributed for 2002 of e 1.50 per share, an increase

of 42.9% on 2001. This represents a payout ratio of

39.2%. At the shareholder’s option, the dividend may

be taken in cash or in shares. The stock dividend will

be 3% to 5% more favourable to shareholders.

Finally, Sligro Food Group will replace all its

accounting policies with International Accounting

Standards in 2004 or 2005. We have already changed

some policies in 2001 and 2002 but adoption of the

others will have to await further clarification. Significant

changes have been proposed to some standards. In

particular, regulations for first time application and

the treatment of goodwill may have a significant

influence on the level and presentation of the result.

34


Sligro Food Group seeks to maintain a healthy

financial position. We have never made a policy of

leveraging interest-bearing debts and have accepted

that this has had some influence on the growth of

earnings per share. Thanks to this conservative policy

we could comfortably finance the acquisitions of

Prisma and EM-TÉ entirely by means of bank

borrowings. With the capital market being as good as

closed, we would have missed out on these excellent

acquisitions if we had not pursued this policy. In the

past two years our net expenditure on acquisitions

has exceeded e 120 million, yet our interest-bearing

debt was no more than e 112.7 million at the end of

2002. This is markedly lower than our shareholders’

equity of e 132.2 million. It should also be borne in

mind that we own property with a book value of

e 150.3 million and an even higher market value.

In this respect we stand out from other listed

companies in the Dutch food market. We will remain

alert to new acquisition opportunities, provided they

satisfy our strict selection criteria. Apart from

satisfying financial criteria, acquisitions should

complement our existing activities and create synergy

opportunities. One factor determining an acquisition’s

success that should not be underestimated is that the

corporate cultures must not conflict.

We believe cash flow statements do not receive the

attention they deserve. They provide a better insight

into a company’s financing opportunities and also

reveal whether cash is coming in, because the profit

figure is not what pays the bills.

A summary of the cash flow statement is provided

below:

(x e million)

2002 2001

Cash flow from

operating activities 74.3 50.6

Cash flow

investing activities (78.6) (78.5)

Cash flow from

financing activities 4.5 28.0

Movement in cash and

cash equivalents 0.2 0.1

Financing

Goals

l To provide adequate finance by using credit facilities, subject to the company comfortably meeting the ratios stipulated

l To issue shares, apart from for stock dividends, only for major acquisitions that make a direct contribution to earnings per share

The summary shows that cash flow from operating

activities increased by e 23.7 million to e 74.3 million,

mainly due to the higher operating profit (e 20.3

million), the movement in working capital and

provisions (e 10.6 million) as explained on page 55,

less e 5.5 million in higher corporation tax. The 2002

financial year closed on 28 December. As a

consequence, e 4.7 million of tax payable at the end

of December in respect of November was deferred to

the following financial year. This had a non-recurring

positive influence on the cash flow for 2002.

In total, there was a net cash outflow from investing

activities of e 78.6 million. The largest item was the

acquisition of EM-TÉ for a debt-free purchase price

of e 47.1 million. Net expenditure on tangible fixed

assets amounted to e 27.8 million, with the new

distribution centre in Veghel accounting for the lion’s

share (e 14.6 million). The financing shortfall was

funded by bank borrowings. EM-TÉ’s purchase price

was financed by a new 10-year e 28.5 million loan.

The rate of interest on this loan has been fixed at

4.98% for its entire term by means of an interest rate

swap. The remainder of the consideration was settled

using short-term loans.


35

36



37

The attention paid to cost control will not be relaxed;

we are very attached to our position as the industry’s

cost leader. Under the current CAO, the increase in

salary costs will be slightly lower than in 2002. In

addition, a further easing of the labour market will

improve the quality of the inflow of new personnel.

The organic number of staff will remain virtually

unchanged in 2003.

A non-recurring pension expense of e 6.4 million was

taken in 2002. We do not foresee any material non-

recurring items in 2003. Interest expense will be lower

thanks to the cash flow and the fact that non-recurring

expenses will be lower if not zero. Capital

expenditure will remain within the limit of 2% of

turnover. Expenditure will be financed with internally

generated funds. On the whole, we therefore expect

further growth in earnings per share in 2003.

As is customary, we shall make a more concrete

forecast for the first half of 2003 after the end of

the first quarter. We shall issue a press release on

17 April 2003.

Prospects

We noted a slowdown in the spending growth on

food in 2002 and expect the trend to continue in

2003. It is due in part to a further decline in price

inflation, which will prompt greater competition.

We expect organic turnover growth in the first half of

2003 to be 3% to 4%. Acquisitions made in 2002 will

have a positive effect on the turnover for the year of

approximately e 35 million. In the second half of

2003, the projected sharp fall in sales of Christmas

hampers owing to changes in tax legislation will have

a one-off effect on organic turnover growth. It is

unfortunate that government measures will have such

a serious impact on this market. Employers will in

future be able to show their appreciation for the

employees’ hard work only if they incur additional

administrative costs and higher salary expenses.

Many employees will therefore miss out on this sign

of appreciation. Many underprivileged employees and

employees in sheltered workplaces will lose their

packing jobs at the end of the year and production

and trade jobs will also be lost. The measures will

also harm the government itself because the

anticipated revenue will not be forthcoming: since

many companies will not provide compensation in

the form of higher salaries, there will be a loss of VAT

and income tax.

Our buying position remains as strong as ever, both

through Superunie and through our own food service

buying activities. The priority given to margin

management will remain just as high. A further

modest improvement in gross margin should be

possible, thanks in part to consolidation effects.

Our meetings considered the interim figures,

comparisons of Sligro Food Group with its

competitors, the internal controls in place to

guarantee the reliability of the figures and the

accounting policies.

Even though profit had increased by 36.6% in 2001,

the increase in 2002 was actually higher: 46.5%. All

core activities made a significant contribution to the

improvement and also laid the foundations for further

growth in net profit in 2003. The very high growth

rates of 2001 and 2002, however, will not be

matched.

One meeting each year, not attended by the

Executive Board, is devoted to the performance of

the Executive Board and the Supervisory Board and

the relationship between them. This meeting also

considers the remuneration of the Executive Board.

Our conclusion once again was that the Supervisory

Board and the Executive Board had a good working

relationship.

Members of the Supervisory Board attended one of

the Works Council’s consultation meetings last year

and again found the consultation to be rigorous, open

and constructive.

Owing to the increased importance of the retail

activities, Mr J.G.M. Geerdink, managing director of

Prisma, was appointed to the Executive Board of

Sligro Food Group N.V. at the Annual General

Meeting held on 14 March 2002.

We propose that Mr K.M. Slippens, who has been in

service since July 1998, most recently as food

service director, also be appointed to Sligro Food

Group N.V.’s Executive Board. Mr Slippens has been

To the shareholders

Strategic developments

As in the previous year, the Dutch food market lost

none of its dynamism in 2002 and Sligro Food Group

played its part. Following the acquisition of Prisma in

2001, in May 2002 EM-TÉ became the second major

acquisition in the food retail market. Both acquisitions

are generating wider margins than originally

anticipated. Although these acquisitions are in the

food retail sector, Sligro Food Group is still actively

seeking opportunities to strengthen its position in the

food service market.

Result and dividend

Net profit was again boosted by acquisitions, the

sharper market focus, margin management and cost

saving measures. The 2002 accounts presenting

these results were prepared by the Executive Board

and adopted by our Board. We endorse the

Executive Board’s proposal to increase the dividend

for 2002 by 42.9% to e 1.50 per e 0.24 share.

Supervision

Current and future strategy and Sligro Food Group’s

growth opportunities were high on the agenda of our

Board’s five meetings last year, which also gave

special consideration to several larger acquisition

opportunities. As always, the implementation of the

business strategy and its consequences for the

results and financial position were key items on the

agenda. Particular attention was paid to the

consequences of the acquisition of Prima and EM-TÉ

on the organisation and the quantitative and

qualitative development of the workforce. The

organisation has been restructured to the changed

composition of the group and the greater diversity in

the food activities. A clearer distinction has been

made between corporate services and operational

activities. The variable remuneration policy was

brought into line with the new structure. These

changes were one of the reasons to change the

company’s name from Sligro Beheer N.V. to Sligro

Food Group N.V..38


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39

Further information on the Supervisory Board

H.J. Hielkema (59)

Supervisory Director, Dutch nationality.

Director of Fortis Amev.

Appointed in 2001 until 2005 and eligible for

reappointment.

Supervisory Director of Van Wijnen Holding B.V. and

IsoTis N.V.

G.J. Beijer (57)


Chairman of the Executive Board of Macintosh Retail

Group N.V.

Reappointed in 2000 until 2004 and no longer eligible

for reappointment.

Supervisory Director of, inter alia, Vebego Holding B.V.

and The Greenery B.V.

T.J.M. van Hedel (61)


Deputy Chairman of A.S. Watson (Health & Beauty

Europe, formerly Kruidvat)


reappointment.

Supervisory Director of Koninklijke Buisman B.V.,

Febeco Holding/Fetim B.V. and Zeeman Groep B.V.

J.H. Menkveld (56)



reappointment.

Supervisory Director of, inter alia, Bloemenveiling Flora

Holland, Accell Group N.V., Ad van Geloven B.V. and

Refresco B.V.

All Supervisory Directors are independent within the

meaning of section 7 of the NextPrime Segment

Inclusion Agreement of Euronext Amsterdam N.V..

a driving force behind the growth of the food service

activities. Following his appointment, the Executive

Board will be made up of:

A.J.L. Slippens, managing director and chairman;

J.G.M. Geerdink, food retail director;

H.L. van Rozendaal, finance director;

K.M. Slippens, food service director.

Mr J.H.J Cuypers retired from the Supervisory Board

after the Annual General Meeting on 14 March 2002,

having served the maximum of two four-year terms,

pursuant to the Articles of Association, as a

supervisory director of Sligro Food Group. He was

succeeded by Mr J.H. Menkveld. The Executive

Board and the Supervisory Board are extremely

grateful to Mr Cuypers for his contribution to our

Board.

Annual accounts

The Executive Board has prepared the accounts for

2002. The annual accounts were discussed at a

meeting attended by the auditors, who provided

further information on them, the accounting

organisation and internal controls. The annual

accounts have been audited by KPMG Accountants

N.V., whose unqualified audit report can be found on

page 71 in ‘Other information’.

We have adopted the annual accounts as presented

and propose that you:

- approve the accounts for 2002;

- confirm the profit distribution in accordance with

the proposal made by Stichting Prioriteit;

- endorse the Executive Board’s conduct of the

company’s affairs;

- endorse the supervision exercised by our Board.

Thanks to the efforts of the Executive Board and all

the staff, the group again posted an excellent result

in 2002. We owe them a great debt of gratitude.


Supervisory Board

From left to rightJ.H. MenkveldG.J. BeijerT.J.M. van HedelH.J. Hielkema

40



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42


Co n s o l i d a t e d p r o f i t a n d l o s s a c co u n t f o r 2 0 0 2

(x e 1,000)

2002 2001

Turnover

Net turnover 1,299,028 1,171,940

Cost of sales (1,068,081) (987,963)

Gross margin 230,947 183,977

Selling expenses (138,008) (125,496)

General administrative expenses (28,550) (14,809)

Other operating income 4,706 2,638

Operating profit before amortisation of goodwill 69,095 46,310

Amortisation of goodwill (3,613) (1,166)

Operating profit after amortisation of goodwill 65,482 45,144

Financial income and charges (7,875) (6,187)

Profit before tax 57,607 38,957

Taxation (20,583) (13,687)


Figures per share

e e

Earnings 3.83 2.69

Proposed dividend 1.50 1.05

(x e 1,000)

2002 2001

Receipts from customers 1,412,335 1,273,100

Other operating income 4,266 2,824

1,416,601 1,275,924

Payments to suppliers (1,202,949) (1,103,425)

Payments to employees (48,856) (40,711)

Payments to the government (66,669) (63,234)

(1,318,474) (1,207,370)

Cash flow from trading activities 98,127 68,554

Interest received 698 847

Dividend received from participating interests 328 226

Interest paid (6,260) (6,177)

Corporation tax paid (18,674) (12,810)

Cash flow from operating activities 74,219 50,640

Acquisitions (54,407) (70,868)

Sale of participating interests 3,597 0

Capital expenditure on fixed assets (32,500) (16,782)

Sales of fixed assets 4,747 9,030

Reduction of capital in participating interests 0 73

Cash flow from investing activities (78,563) (78,547)

Proceeds from share issues 456 708

Repayments by participating interests 171 1,335

New long-term debt 30,627 34,867

Repayment of long-term debt (9,116) (8,718)

Repayment of / new short-term bank borrowings (16,159) 1,260

Dividend paid (1,466) (1,456)

Cash flow from financing activities 4,513 27,996

Movement in cash and cash equivalents 169 89


43

Co n s o l i d a t e d c a s h f l o w s t a t e m e n t f o r 2 0 0 2

(x e 1,000)

Assets 28 December 2002 29 December 2001

Fixed assets

Intangible fixed assets 44,461 23,181

Tangible fixed assets 172,774 130,948

Financial fixed assets 5,511 7,504

222,746 161,633

Current assets

Stocks 100,679 81,998

Debtors, prepayments and accrued income 42,581 43,252

Cash 1,709 1,540

144,969 126,790

367,715 288,423

Equity and liabilities 28 December 2002 29 December 2001

Shareholders’ equity 132,182 96,168

Provisions

Deferred taxation 13,616 12,566

Other 11,671 5,712

25,287 18,278

Long-term liabilities 65,984 49,401

Current liabilities

Repayment commitments 21,269 16,341

Amounts owed to credit institutions 25,458 41,617

Creditors 53,613 36,944

Tax and social security contributions 23,068 12,132

Other liabilities, accruals and deferred income 20,854 17,542

144,262 124,576

367,715 288,423

44


Co n s o l i d a t e d b a l a n ce s h e e t a s a t 2 8 D e ce m b e r 2 0 0 2 b e f o r e p r o f i t a p p r o p r i a t i o n


45

(x e 1,000)

Paid-up Share Other Total

and called premium reserves

capital

Balance as at 30 December 2000 2,215 21,787 47,644 71,646

Exercise of share options 9 699 708

Stock dividend 57 (57) 0




Exercise of share options 4 452 456

Stock dividend 56 (56) 0




Co n s o l i d a t e d s t a t e m e n t o f m ove m e n t s i n s h a r e h o l d e r s’ e q u i t yf o r 2 0 0 2 b e f o r e p r o f i t a p p r o p r i a t i o n

The acquisitions contributed the following assets and

liabilities:

(x e 1,000)

2002 2001

Tangible fixed assets 32,145 46,213

Financial fixed assets (65) 4,974

Stocks 6,088 10,618

Debtors 2,644 14,348

Deferred taxation (3,858) (5,310)

Creditors (5,745) (17,685)

Other liabilities (3,636) (3,294)

Net asset value 27,574 49,864

Capitalised goodwill 26,833 21,004

Debt-free purchase price 54,407 70,868

Consolidation policies

The consolidated annual accounts include the

financial information of Sligro Food Group N.V. and

the wholly-owned participating interests Sligro B.V.

and Sligro Retail Holding B.V., Veghel.

Sligro B.V. is the holding company of the following

wholly-owned participating interests:

- Van Hoeckel Grootverbruik B.V., ’s-Hertogenbosch

- Rosenberg Import B.V., Amsterdam

- J. Smit Vishandel B.V., Veghel

- Retail Service Groep B.V., Hoogeveen

- Stap In Overhead B.V., Maastricht

- Vastfin C.V., Amsterdam

- Hardas C.V., Amsterdam

Sligro Retail Holding B.V. is the holding company of

the following wholly-owned participating interests:

- Prisma Food Retail B.V., Putten

- Prisma Vastgoed B.V., Putten

- Wipa B.V., Putten

- Prisma Lease B.V., Nijkerk

- Golff Supermarkten B.V., Putten

- EM-TÉ Supermarkten B.V., Kaatsheuvel

- EM-TÉ Vastgoed B.V., Kaatsheuvel

46


Ac co u n t i n g p o l i c i e s

General

Pursuant to the Articles of Association, the financial

year coincides with the calendar year. The year is

actually closed on the last Saturday of the calendar

year in accordance with the international system of

week numbering and thus on 28 December 2002 in

the year under review.

Acquisitions

The activities of the cash-and-carry wholesaler OKC

de Jong, Gouda, were acquired in January. EM-TÉ

Supermarkten B.V. and EM-TÉ Vastgoed B.V.,

Kaatsheuvel, were acquired in May. The minority

interest in J. Smit Vishandel B.V., Veghel, was

converted into a 100% interest in July and the

activities of Horecagroothandel Loek den Elzen were

acquired in October. The acquired turnover and

employees for the last financial year for wich figures

are available, were:

Turnover Employees

(x e million) (FTE’s)

OKC de Jong 7 8

EM-TÉ Supermarkten 94 509

J. Smit Vishandel 27 80

Horecagroothandel

Loek den Elzen 7 15

135 612

Since OKC de Jong was an established customer for

the complete range of goods and J. Smit Vishandel

was both a customer and a concessionaire, these

two acquisitions had little influence on consolidated

turnover.

The financial information of participating interests

acquired during the year is included in the

consolidation as from the date on which the results of

those undertakings were for the account and risk of

Sligro Food Group N.V..

Changes in accounting policies

Two changes were made in accounting policies in 2002.

A provision was formed to cover future liabilities

relating to the pre-pension scheme linked to the

group pension scheme, which was introduced on

1 January 2001. The pre-pension scheme has been

transferred to Stichting Pensioenfonds Sligro Groep.

The conditions of the scheme and the calculation of

the provision are explained in detail in the note to

provisions on page 59. In the previous year this item

had been disclosed under commitments not shown in

the balance sheet.

In contrast to previous years, a liability is recognised

in respect of the fair value of interest rate swaps

concluded. It has been decided not to use hedge

accounting.

The effects of these changes on the 2002 result are

as follows:

(x e 1,000)

Expense due to the formation of the

pre-pension provision 6,400

Expense due to the recognition of

interest rate swaps at fair value 2,237

8,637

Tax effect on the changes 2,980

Effect on profit after tax (negative) 5,657

Since the changes in accounting policies are non-

recurring, comparative figures for 2001 have not been

restated.

Both changes have been made in anticipation of the

application in these annual accounts of International

Accounting Standards in 2004 or 2005.

Policies for the determination of the result

Exchange rates

All Sligro Food Group’s participating interests are

located in the Netherlands. Exchange differences on

trading activities are taken to the profit and loss

account. Debtors and creditors are translated at rates

ruling as at balance sheet date.

Net turnover

This item represents the proceeds of sales of goods

and services, excluding value added tax, to third

parties. Purchase discounts granted are deducted

from turnover. Turnover also includes sales realised in

cooperation with concessionaires.

Cost of sales

This item includes the cost of goods and services

sold and the value of trading stamps issued. Bonuses

and payment discounts received are deducted from

the cost of sales.

Selling expenses

This item represents direct expenses incurred in the

sale of goods and services and promotional and

logistical activities. Amounts charged to third parties

for commercial and logistical services are deducted

from this item. Selling expenses are recognised in the

year to which they relate.


47

company or are integrated in full, is now capitalised

over five years with retroactive effect as from

1 January 2000, when goodwill was first amortised.

As a consequence, only purchased goodwill relating

to Prisma and EM-TÉ will be amortised over 20 years.

Goodwill is written down to its lower realisable value

if there is a lasting impairment in the acquisition’s value.

These changes in accounting estimates led to an

additional write-down in 2002 of approximately e 1.2

million. Up to the end of the 1999 financial year,

goodwill had been charged directly to reserves. In the

ten-year period to year-end 1999, total goodwill of

e 48 million had been charged in this way.

Tangible fixed assets

Tangible fixed assets are carried at historical cost

after deduction of straight-line depreciation based on

the estimated economic lives of the assets. The

maximum depreciation term for improvements to

rental properties is the term of the lease. The

depreciation rates applied are:

Land nil

Buildings/improvements 4 - 12 1/2

Retail premises 2

Plant and equipment 12 1/2 - 33 1/3

Other 20 - 50

Financial fixed assets

Participating interests are carried at net asset value.

Participating interests in buying and marketing

organisations are carried at historical cost, which

approximates to net asset value, since no influence is

exercised on policy. Loans to customers are carried

at face value, less a provision for doubtful debts.

Stocks

Stocks are carried at the lower of cost based on the

FIFO method and market value, less a provision for

slow-moving goods. All stocks are held for trading

purposes.

General administrative expenses

This item includes all other expenses. Administrative

expenses are recognised in the year to which they

relate.

Other operating income

This item includes rental income from property and

profit realised on the sale of tangible fixed assets and

similar income.

Financial income and charges

This item represents interest payments to third

parties and similar charges, less interest received

from customers in respect of loans granted and/or

deferred payments. This item also includes

movements in the fair value of interest rate swaps

contracted and the results of participating interests.

Taxation

Tax is computed on the result for accounting

purposes before taxation, taking due account of tax

facilities and costs that are not or not wholly

deductible.

Valuation policies

Intangible fixed assets

Goodwill is the difference between the acquisition

cost of a business and the value of its assets and

liabilities calculated in accordance with our

accounting policies. The land and buildings of

acquired businesses are carried at market value as at

the date of acquisition. Goodwill is amortised on a

straight-line basis over the estimated economic life

with a maximum of 20 years.

It was decided in 2002 that only goodwill relating to

major, permanently identifiable acquisitions would be

amortised over 20 years. Goodwill relating to other

acquisitions, which cease to exist as an identifiable48


Debtors

Debtors are carried at face value, less a provision for

doubtful debts and net of purchase discounts

granted to customers. Payments made for delivery

contracts to supermarkets are included in prepaid

expenses. These are charged to the profit and loss

account over six years or the contractual term if shorter.

Cash

Cash is carried at face value. Unless stated otherwise,

it is freely available on demand.

Provisions

The provision for deferred taxation, which is based on

valuation differences for tax and accounting

purposes, relates mainly to property. The provision is

calculated at the standard rate of tax.

The provision for pre-pensions comprises the present

value of future pre-pension commitments discounted

at 4%. It has been formed to cover shortfalls between

the benefits accrued from past and future years’

service and the benefits granted by the scheme. The

difference is recognised over the total period of

service. The calculations also take account of mortality

rates and the likelihood of employees remaining in

service. This scheme is administered by Stichting

Pensioenfonds Sligro Groep, which calculates an

average premium. The average premium contains an

element to fund the shortfall in benefits. The calculation

of the provision takes account of this element.

The provision for incapacity for work costs has been

formed to cover all costs of long-term incapacity for

work originating in the period before the balance

sheet date. It relates to the present value of statutory

benefit obligations and additions thereto in

accordance with the collective labour agreement

(CAO) in force in the food wholesaling industry. Other

provisions relate to existing commitments and are

estimated at the probable amounts payable in the

future.

Liabilities

Long-term and current liabilities are carried at face

value. Purchase bonuses receivable from suppliers

are deducted from creditors.

Derivatives

Interest rate swaps are concluded to manage interest

rate risks on long-term liabilities. They are carried in

the balance sheet at fair value. Hedge accounting is

not applied.


49

(unless stated otherwise, all amounts x e 1,000)

Net turnover

This item relates almost entirely to domestic sales of food and food-related non-food articles to consumers and

retail traders (food retail), institutional customers, the restaurant and catering industry, company canteens and other

large-scale caterers (food service).

Turnover can be analysed by activity as follows:

(x e 1,000)

2002 2001

Food retail

Group supermarkets (EM-TÉ) 70,043 0

Franchised supermarkets and convenience stores (Prisma) 363,791 329,787

433,834 329,787

Food service

Institutional customers (Van Hoeckel) 74,402 64,612

Restaurants, caterers, company canteens

and other large-scale caterers (Sligro) 790,792 777,541

865,194 842,153

Total turnover 1,299,028 1,171,940

Management of the Milo convenience store format was transferred from Sligro to Prisma in 2002. The wholesale

turnover concerned for 2002 amounted to e 20.0 million. Deliveries to certain other retail customers were also

transferred to Prisma in the course of 2001 and 2002. Comparative figures for 2001 have not been restated. Sligro’s

turnover includes e 74.0 million (2001: e 69.9 million) of professional non-food turnover.

50


N o t e s t o t h e co n s o l i d a t e d p r o f i t a n d l o s s a c co u n t

Operating profit (after amortisation of goodwill) and net capital employed (including capitalised goodwill) can be

analysed as follows:

(x e million)

Food service Food retail Retail property Total

2002 2001 2002 2001 2002 2001 2002 2001

Net turnover 865.2 842.1 433.8 329.8 – – 1,299.0 1,171.9

Operating profit 43.8 33.3 19.5 9.8 2.2 2.0 65.5 45.1

Allocated assets 216.3 201,3 97,7 65,4 24,2 24,7 339,2 291,4

Allocated liabilities (63.5) (48.5) (19.8) (17.2) (0) (0) (84.3) (65.7)

Net capital employed 152.8 152.8 77.9 48.2 24.2 24.7 254.9 225.7


percentage of turnover 5.1 4.0 4.5 3.0 – – 5.0 3.9

Operating profit as a percentage

of net capital employed 28.7 21.8 25.0 20.3 9.1 8.1 25.7 20.0

Net capital employed is computed on the basis of the weighted average for the year.

Prisma Vastgoed lets nearly all the retail property it owns to customers of Prisma. It also rents property from third

parties for subletting to customers of the entire group. The operating profit on these activities is recognised

separately.

Staff costs

Staff costs are included in the profit and loss account under selling and general administrative expenses and can be


(x e 1,000)

2002 2001

Salaries 71,364 60,268

Social security contributions 7,569 7,484

Pre-pension and pension contributions 5,156 4,477

84,080 72,229

The e 6,400 expense recognised in 2002 for the formation of the provision for pre-pensions referred to on page 47,

and the e 3,585 addition to the provision for incapacity for work costs in 2001, are included in other expenses.


51

Staff costs can be specified by activity as follows:

(x e 1,000)

2002 2001

Food retail 23,038 14,734

Food service 61,042 57,495

84,080 72,229

The average number of full-time equivalent staff employed by the group in 2002 was 2,561 (2001: 2,177).

The analysis is as follows:

(x e 1,000)

2002 2001

Food retail 690 362

Food service 1,871 1,815

2,561 2,177

Outlets 1,314 986

Distribution centres 853 818

Head offices 394 373

2,561 2,177

Some head office staff responsible for corporate services are included in the food service activities.

Owing to the changed composition of the group, temporary and holiday workers are included in staff numbers.

Comparative figures have been restated.

General administrative expenses

In connection with the change in group structure and the clear distinction being introduced between the various

activities, the allocation of general administrative expenses was altered in 2002. Comparative figures have not been

restated.

(x e 1,000)

2002 2001

28,550 14,809

52


Audit fee

The audit fee in respect of the 2002 annual accounts was e 115 (2001: e 124). Other audit work consisted principally

of assistance in due diligence reviews for acquisitions, the fee for which was e 53 (2001: e 198). The audit firm is not

engaged to perform consultancy work unless it is directly related to the presentation of the annual accounts.

(x e 1,000)

2002 2001

Other operating income

Property letting income 2,915 2,589

Profit on sale of tangible fixed assets 533 9

Non-recurring income 1,258 40

4,706 2,638

Depreciation and amortisation

Depreciation of tangible fixed assets 18,585 17,145

Amortisation of goodwill 3,613 1,166

Depreciation is charged to the profit and loss account under selling expenses. Amortisation of goodwill is

recognised separately in the profit and loss account. As noted on page 48, the charge increased by e 1,151 in 2002

owing to the change in the amortisation term. Furthermore, this item includes an exceptional impairment in value for

2002 of e 392 in respect of purchased goodwill in a participating interest.

Financial income and charges

This item can be analysed as follows:

(x e 1,000)

2002 2001

Results of participating interests 376 31

Profit on sale of participating interest (284) 0

Interest expense 6,244 7,003

Movement in fair value of interest rate swaps 2,237 0

Interest income (698) (847)

7,875 6,187

The movement in the fair value of interest rate swaps is explained on page 47.

Interest income relates principally to loans advanced to customers by Prisma.


53

Taxation

Dutch corporation tax is payable on the profit at the standard rate of 34.5% (2001: 35.0%). The difference between

the standard rate and the effective tax burden is accounted for as follows:

(x e 1,000)

2002 2001

Profit before tax 57,607 38,957

Standard tax rate, 34.5% (35.0%) 19,874 13,635

Effect of non-deductible amortisation of goodwill 945 408

Effect of loss relief for companies acquired (190) (190)

Other, including tax facilities (46) (166)

Taxation shown in the profit and loss account 20,583 13,687

Taxation can be analysed as follows:

(x e 1,000)

2002 2001

Current taxation 23,391 12,903

Deferred taxation (2,808) 784

20,583 13,687

With the exception of EM-TÉ and Smit Vis, all companies are members of the Sligro Food Group N.V. tax group.

General

The company availed itself of the exemption available under Section 402, Book 2 of the Netherlands Civil Code,

when preparing its profit and loss account.

54


The cash flow statement has been prepared in accordance with the direct method, showing cash receipts and

payments rather than revenue and expenditure. Acquisitions are included in the cash flow statement at the debt-

free purchase price, consisting of the direct consideration paid and any current-account balances with the sellers,

as well as the acquired interest-bearing commitments net of any cash balances purchased and the necessary

funding of pension provisions. The net asset value and the consideration paid for acquisitions are explained on

page 46.

Receipts from customers comprise turnover including VAT and movements in amounts owed by customers.

Payments to the government include both the remittance of VAT and excise duties and the remittance of payroll

deductions, social security contributions and pension contributions. Corporation tax paid is stated separately.

The difference between cash flow from trading activities and operating profit can be analysed as follows:

(x e 1,000)

2002 2001

Operating profit 65,482 45,144

Depreciation/amortisation 22,198 18,311

87,680 63,455

Decrease / increase in other income (440) 186

87,240 63,641

Movements in working capital and provisions

Stocks (12,593) 3,818

Debtors 2,924 1,183

Current liabilities 14,597 (2,536)

Provisions 5,959 2,448

10,887 4,913

Cash flow from trading activities 98,127 68,554

Dividends include stock options. Only dividends distributed in cash are included in the cash flow statement.

Cash flow from operating activities for 2002 benefited by e 4.7 million from the remittance of tax and social security

contributions for the month of November 2002 shortly after the end of the 52-week financial year on 28 December

2002. In the previous year, this had not been the case owing to the introduction of the euro.


55

N o t e s t o t h e co n s o l i d a t e d c a s h f l o w s t a t e m e n t


Assets


Movements in 2002 were as follows:

(x e 1,000)

Goodwill

2002 2001

Opening balance

Cost 24,416 3,412

Accumulated amortisation (1,235) (69)

23,181 3,343

Movements in book value

Paid on acquisitions 26,833 21,004

Disposals (1,940) 0

Amortisation (3,613) (1,166)

21,280 19,838

Closing balance

Cost 49,134 24,416

Accumulated amortisation (4,673) (1,235)

44,461 23,181

The charge for amortisation is explained on page 48.

56


N o t e s t o t h e co n s o l i d a t e d b a l a n ce s h e e t


57

Tangible fixed assets


(x e 1,000)

Land Plant Other Total

and and fixed

buildings equipment assets

Opening balance

Cost 147,582 20,624 69,950 238,156

Accumulated depreciation (37,905) (15,146) (54,157) (107,208)

109,677 5,478 15,793 130,948


Additions 22,037 1,575 8,867 32,479

Disposals (3,487) (1) (726) (4,214)

Acquisitions 28,858 0 3,288 32,146

Depreciation (6,805) (2,262) (9,518) (18,585)

40,603 (688) 1,911 41,826

Closing balance

Cost 189,747 13,879 62,823 266,449

Accumulated depreciation (39,467) (9,089) (45,119) (93,675)

150,280 4,790 17,704 172,774

Land and buildings can be analysed as follows:

(x e 1,000)

2002 2001

Wholesale outlets and distribution centres

Land 29,236 22,698

Buildings 68,821 53,881

Improvements/extensions to rented premises 8,769 9,256

106,826 85,835

Retail outlets 43,454 23,842

Total 150,280 109,677

The total area of freehold land and buildings can be analysed as follows:

(x 1,000 m2)

2002 2001

Land

Central complex in Veghel 162 152

Other locations 463 447

Buildings

Central complex in Veghel 116 89

Other locations 160 159

Retail outlets (gross retail area)

Let to customers 31 31

Group use 16 0



(x e 1,000)

Participating Amounts owed by Loans Total

interests participating interests to customers

Opening balance 3,149 542 3,813 7,504


Acquisitions 120 0 0 120

Disposals (1,100) (272) 0 (1,372)

Included in consolidation (185) 0 0 (185)

Investments 21 0 0 21

New loans 0 0 2,338 2,338

Redemptions 0 (171) (1,947) (2,118)

Dividend (328) 0 0 (328)

Result (376) (93) 0 (469)

Closing balance 1,301 6 4,204 5,511

The non-consolidated participating interests are:

- O. Smeding & Zn. B.V., Sint Annaparochie (49%), and C.H.P.M. van der Pol Holding B.V., Vught (49%);

- Buying and marketing organisations: Coöperatieve Inkoopvereniging Superunie B.A., Beesd, Coöperatieve

Vereniging voor de Nederlandse Melkhandel S.R.V. U.A., Amsterdam, M.C.M. Marketing Centrum voor de

Melkdetailhandel B.V., Culemborg, Grootverbruik Produktinformatie B.V., Barneveld, Markant Foodmarketing B.V.,

Amersfoort, and Markant Zegelbeheer B.V., Bilthoven.58


Current assets

Debtors, prepayments and accrued income

(x e 1,000)

2002 2001

Trade debtors 39,869 40,104

Other debtors, prepayments and accrued income 2,712 3,148

42,581 43,252

The amount of trade debtors is influenced by end-of-year sales of Christmas hampers, for which payment is

received in part in January. Prepayments and accrued income include payments made for deliveries to

supermarkets representing costs attributable to future years.

Equity and liabilities

Provisions

(x e 1,000)

Opening Acquisitions Additions/ With- Closing

balance (release) drawals balance

Deferred taxation 12,566 3,858 0 (2,808) 13,616

Other provisions

Pensions 91 0 65 (31) 125

Pre-pensions 0 0 6,400 0 6,400

Incapacity for work costs 3,585 0 (335) 0 3,250

Trading stamp promotions 1,225 0 115 0 1,340

Franchise risks 495 0 0 (149) 346

Other 316 0 0 (106) 210

5,712 0 6,245 (286) 11,671

Total 18,278 3,858 6,245 (3,094) 25,287

The provision for pensions includes commitments in respect of current pensions based on actuarial calculations. A

pre-pension scheme linked to the company pension scheme, which has been transferred to Stichting Pensioenfonds

Sligro Groep, was introduced on 1 January 2001. The scheme replaces the collective early retirement scheme for

the food wholesaling industry. Under the scheme, members accrue a pre-pension over 37 years as from their 25th

birthdays. The pre-pension is equal to 80% of average salary and is payable from the employees’ 62nd to 65th

birthdays. All those participating in the pre-pension scheme who have been employed by the group on a continuous

basis since 1 January 1997 and who remain so until their pre-pension date are entitled to the above benefit as of


59

that date, regardless of the number of years in service. The provision has been formed to cover the difference

between the pre-pension based on number of years’ service and the pre-pension granted under the scheme’s

regulations for employees who satisfy the above conditions. A provision was formed in 2002 for the resultant liability

partly in accordance with Dutch annual reporting guidelines and partly in anticipation of International Accounting

Standards. In 2001, this item had been included in commitments not shown in the balance sheet. The calculation

method for the provision is explained on page 49 and information on all pension schemes and their funding is

provided on page 63.

The subsidiary company Sligro B.V. bears the financial risk of uninsured incapacity benefits pursuant to the

Incapacity for Work (Benefits) Act (the ‘Pemba’ legislation). The provision for incapacity for work costs has been

formed to cover all costs of long-term incapacity for work originating in the period before the balance sheet date. It

relates to the present value of the estimated future cost of bearing the uninsured risk and additions thereto in

accordance with the Collective Labour Agreement for the food wholesaling industry.

The provision for trading stamp promotions relates to the outstanding commitment in respect of trading stamps

issued to customers.

The provision for franchise risks relates to guarantees given, rental risks and the like in respect of a franchise chain

acquired several years ago. Other provisions relate to legal claims.

All provisions are predominantly long-term in nature.

60


Long-term liabilities

(x e 1,000)

Remaining Repayable 2002 2001

term within

(years) one year

Floating rate loan 2 0 6,807 6,807


Floating rate loan 0 9,075 9,075 9,075

Floating rate loan 3 4,538 14,748 19,286

Floating rate loan 10 2,850 27,788 0

Floating rate loan 19 113 2,099 0


4.55% loan 5 363 1,843 2,206

5.55% loan 8 141 3,325 3,457

4.15% loan 11 169 3,298 3,460

6.0% loan 1 454 680 1,134

5.92% loan 3 454 1,248 1,588

8.875% subordinated loan 0 0 0 320

5.56% subordinated loan 3 1,134 3,120 3,971


Floating rate subordinated loan 4 389 1,555 1,749


21,269 87,253 65,742

Amounts falling due within one year 21,269 16,341

Amounts falling due after more than one year 65,984 49,401

Amounts falling due after more than five years 20,145 5,769

The repayment of subordinated loans is subordinate to payments of amounts owing to all current and future

creditors. The rate of interest payable on the floating rate loans is adjusted periodically in line with movements on

the money market. The interest payable on e 8.9 million and e 14.7 million may be increased by up to 0.4% and

0.25% respectively if the ratio of interest-bearing debt to operating profit plus depreciation and amortisation is

greater than 2.0. Interest rate swaps have been concluded to hedge the interest rate risk on floating rate loans up

to an amount of e 60.5 million. The fair value of these swaps is included under other liabilities.


61

Security

No security has been provided. As at year-end 2002, however, Sligro Food Group had to satisfy the following ratios:

(x e 1,000)

Requirement Actual

Capital base/balance sheet total 20% 37.5%

Operating profit before amortisation of

goodwill/net interest charges 4.0 8.8

Interest-bearing debt/operating profit before

depreciation and amortisation 2.75 1.3

All requirements were therefore comfortably met.

Taxation and social security contributions

(x e 1,000)

2002 2001

Corporation tax 7,788 2,756

VAT and excise duties 11,497 7,167

Payroll deductions 2,596 1,127

Social security contributions 636 319

Pension contributions 551 763

23,068 12,132

Commitments not shown in the balance sheet

Rental commitments

Rental commitments have been contracted for the group’s premises. The annual rental amounts to e 3.8 million

(2001: e 3.2 million). The maximum commitment, being the rent payable for the remainder of the total contracted

term, is e 21.7 million (2001: e 16.6 million), of which e 7.0 million (2001: e 3.7 million) has a term of more than five

years. Rental commitments have also been contracted for the premises of customers, to whom the rental is

recharged in full. The annual amount involved is e 6.8 million (2001: e 5.3 million). There are no other operating-

lease or rental commitments of any significance, nor are there any commitments in respect of off-balance-sheet

agreements.

62


Repurchase commitments and suretyships

Repurchase commitments representing a total liability

of e 21.3 million (2001: e 13.6 million) have been

given to financial institutions in respect of financing

granted to retail customers. These repurchase

commitments are secured against building

improvements, stocks, fixtures and fittings, so that no

material adverse financial consequences can arise. In

addition, guarantees and suretyships have been given

to finance customers to an amount of e 0.3 million

(2001: e 0.4 million). Insofar as necessary, provisions

have been formed for possible losses.

Investment commitments

As at year-end 2002, investment commitments had

been entered into of approximately e 4.3 million.

Pensions

The group operates two pension schemes that are

linked to the two Collective Labour Agreements (In

Dutch: CAO’s) applicable to its activities. The

employees of EM-TÉ Supermarkten are covered by

the CAO for food chain stores. The pension scheme

has been transferred to the industrial pension fund for

the grocery industry. The pension scheme is an

indexed average salary scheme. The industrial

pension fund is in a healthy financial position. The

early retirement scheme currently applicable to the

sector is expected to be gradually converted to a

pre-pension scheme with effect from 1 January 2004.

Other group employees are covered by the CAO for

the food wholesaling industry. The two pension

schemes have been transferred to Stichting Prisma

Pensioenfonds and Stichting Pensioenfonds Sligro

Groep, which also administers the pre-pension

schemes for Prisma’s and Sligro’s employees. The

conditions of these schemes are explained in the

note on provisions on page 59. The pension scheme

administered by the Prisma pension fund is reinsured.


63

The Sligro pension fund is expected to assume these

commitments on 1 January 2004. The pension

schemes for the Prisma and Sligro employees are

indexed average salary schemes funded by an

average premium. The pension funds’ boards are

jointly selected and decide, amongst other things,

upon the level of indexation, taking account of the

constitutions and regulations, the industrial pension

fund’s policy and the supervision exercised by the

Pension and Insurance Supervisory Authority. The

funding agreement between the Sligro pension fund

and the Sligro Food Group companies requires the

companies to bear most of the financial risk of

shortfalls in the pension fund.

According to calculations made by the pension

fund’s actuary, as at 1 October 2002 the fund’s

reserves were equal to approximately 22% of the net

provision for insurance commitments. In accordance

with recent guidelines issued by the Pension and

Insurance Supervisory Authority, the fund’s reserves

should be equal to 15% for it to qualify as prudently

funded. As of that date the fund had placed 90% of

its investments in fixed-income securities and 10% in

equities.

No additional expenses in excess of the average

annual pension premium are expected to be charged

to the profit and loss account in the coming years.

(x e 1,000)

2002 2001

Results of participating interests after tax 38,731 27,432

Other results after tax (1,707) (2,162)


64


Co m p a ny p r o f i t a n d l o s s a c co u n t f o r 2 0 0 2

(x e 1,000)

Assets 28 December 2002 29 December 2001

Fixed assets

Intangible fixed assets 16,936 17,878

Financial fixed assets 132,469 93,738

149,405 111,616

Current assets

Cash 463 0

463 0

149,868 111,616

Equity and liabilities 28 December 2002 29 December 2001

Shareholders’ equity

Paid-up and called capital 2,341 2,281

Share premium 22,827 22,429

Other reserves 107,014 71,458

132,182 96,168

Long-term liabilities 7,217 9,624

Current liabilities

Repayment commitments 3,566 3,886

Group companies 6,903 1,938

10,469 5,824

149,868 111,616


65

Co m p a ny b a l a n ce s h e e t a s a t D e ce m b e r 2 0 0 2B e f o r e p r o f i t a p p r o p r i a t i o n


General

Details of the valuation policies and policies for determination of the result are provided in the notes to the

consolidated accounts.

Remuneration of Executive Directors and Supervisory Directors

The remuneration of the company’s 3 Executive Directors (2001: 2) amounted to e 1,391 (2001: e 874).

This can be analysed as follows:

(x e 1,000)

A.J.L. Slippens J.G.M. Geerdink H.L. van Rozendaal

2002 2001 2002 2002 2001

Fixed salary 227 205 227 227 205

Variable salary 153 177 153 153 177

Pension contribution 135 56 45 71 54

Total 515 438 425 451 436

Option rights granted during the year 10,000 10,000 10,000 10,000 10,000

The variable salary is based on performance in the year in question and is paid in the following year. It is

determined by the extent to which the budgeted profit target is achieved. If less than 90% of the target is reached,

the variable salary is nil. The options have a life of four years and an exercise price 16% higher than the share price

on the date granted. The exercise price is set two days after the Annual General Meeting. The options may not be

exercised within three years of being granted. Each year, options may be granted on shares with a maximum

underlying value of e 500 (2001: e 350) or on a maximum of 12,000 shares per person.

The annual remuneration of the president of the Supervisory Board is e 19 (2001: e 18) and that of the other

members of the Supervisory Board e 14 (2001: e 14). The remuneration is not dependent on the result. The total

remuneration amounted to e 61 (2001: e 59).

66


N o t e s t o t h e co m p a ny p r o f i t a n d l o s s a c co u n t

Movements in option rights can be analysed as follows:

Remaining Price A.J.L. J.G.M. H.L. van

term in in e Slippens Geerdink Rozendaal

months

Opening balance 47,425 0 30,000

Number granted during the year 44.11 10,000 10,000 10,000

Number exercised during the year 21.06 (7,500) 0 0

Closing balance 49,925 10,000 40,000

Balance as at year-end 2002

Year granted: 1997 0 22.87 9,925 0

Year granted: 1999 3 35.50 10,000 10,000

Year granted: 2000 15 36.20 10,000 10,000

Year granted: 2001 27 31.10 10,000 10,000

Year granted: 2002 39 44.11 10,000 10,000 10,000

49,925 10,000 40,000

Movements in share ownership can be


Opening balance 349,374 2,032 20,010

Purchase of shares 2,883

Stock dividend 312 85 568

Exercise of options 7,500

Employee share scheme 43 43 43

Sale of shares (12,429)

Closing balance 344,800 5,043 20,621

Mr H.J. Hielkema holds 1,061 shares in Sligro Food Group N.V..


67

68



Assets


(x e 1,000)

2002 2001

Opening balance 17,878 0


Purchased goodwill 0 18,819

Amortisation (942) (941)

Closing balance 16,936 17,878

Cost 18,819 18,819

Accumulated amortisation (1,883) (941)



The participating interests relate to group companies

only. Movements can be analysed as follows:

(x e 1,000)

2002 2001

Opening balance 93,738 46,017

Acquisitions 0 20,289

Result 38,731 27,432


N o t e s t o t h e co m p a ny b a l a n ce s h e e t

Equity and liabilities

Shareholders’ equity

Paid-up and called capital

As at year-end, the authorised capital amounted to e 10,000,824, divided into 100 priority shares, 20,835,000

preference shares and 20,835,000 ordinary shares all of e 0.24 nominal value each. Issued and paid-up capital as at

28 December 2002 amounted to e 2,340,978, divided into 100 priority shares and 9,753,976 ordinary shares.

Option rights have been granted to a limited number of senior managers (including members of the Executive

Board), whereby the options may not be exercised within the first three years. The total amount which may be

granted each year is limited to 1% of the number of shares in issue. The exercise of options and other share

transactions by the recipients are subject to regulations to prevent insider trading. Furthermore, share and option

transactions may be executed only during the two weeks following the publication of the annual figures, the

publication of the half-year figures and the Annual General Meeting and only insofar as there is no possibility of

inside knowledge during that period .

Year granted Number of options outstanding Average exercise price (e)

1997 17,425 22.87

1999 33,000 34.82

2000 38,000 35.54

2001 36,000 30.50

2002 49,000 43.49

173,425 35.32

Long-term liabilities

(x e 1,000) Remaining Repayable 2002 2001

term within

(years) one year


5.92% loan 3 454 1,248 1,588


5.56% subordinated loan 3 1,134 3,120 3,971




3,566 10,783 13,510

Amounts falling due within one year 3,566 3,886

Amounts falling due after more than one year 7,217 9,624

Amounts falling due after more than five years 0 0

All loans have been lent-on to subsidiary companies subject to the same conditions.


69

Commitments not shown in the balance sheet

The company is a member of the Sligro Food Group N.V. tax group and is accordingly liable for the taxation

payable by the tax group as a whole.

The company has assumed joint and several liability for debts arising from legal acts of the direct and indirect

majority interests listed on page 46 (Section 403, Book 2, Netherlands Civil Code).


Supervisory Board Executive Board

H.J. Hielkema, president A.J.L. Slippens, chairman

G.J. Beijer J.G.M. Geerdink

T.J.M. van Hedel H.L. van Rozendaal

J.M. Menkveld

70


Profit appropriation

The Executive Board proposes with the approval of

Stichting Prioriteit Sligro Groep (Sligro Group

Priority Foundation) that the profit for 2002 be

appropriated as follows:

(x e 1,000)

Addition to other reserves 22,393

Available for dividend

(e 1.50 per share) 14,631

37,024

It has been proposed by Stichting Prioriteit Sligro

Groep that this dividend may be taken at the

shareholder’s option in cash or in shares at a ratio to

be announced on 2 April 2003. The payment in shares

will be 3-5% higher for the shareholder than payment

in cash.

Article 51 of the Articles of Association stipulates that

the company may make distributions to shareholders

and other parties entitled to the distributable profit only

insofar as shareholders’ equity is greater than the

amount of the paid-up and called-up capital plus

reserves required to be held by law or the Articles of

Association.

Insofar as the profit may be distributed, distribution is

first to be made on an annual basis on the nominal

amount paid up on the preference shares and the

priority shares at the percentage rate stated below. For

preference shares, the percentage shall be equal to the

average interest rate for advances against securities,

weighted by the number of days on which those rates

were applicable during the financial year for which

distribution is being made, plus one and a half. The

interest rate for advances against securities is the

Auditors’ report

Introduction

We have audited the 2002 annual accounts included in

this report of Sligro Food Group N.V., Veghel. The

annual accounts have been prepared under the

responsibility of the company’s management. Our

responsibility is to express an opinion on these

statements based on our audit.

Scope

We have conducted our audit in accordance with

auditing standards generally accepted in the

Netherlands. These standards require that we plan and

perform the audit to obtain reasonable assurance that

the annual accounts are free of material misstatement.

An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the annual

accounts. An audit also includes assessing the

accounting policies applied and significant estimates

made by the management, as well as evaluating the

overall presentation of the annual accounts. We believe

that our audit provides a reasonable basis for our

opinion.

Opinion

In our opinion, the annual accounts give a true and fair

view of the financial position of the company as at

28 December 2002 and of the result for the year then

ended in accordance with accounting policies generally

accepted in the Netherlands and comply with the

financial reporting requirements included in Part 9,

Book 2, of the Netherlands Civil Code.

’s-Hertogenbosch, 23 January 2003

KPMG Accountants N.V.


71

ot

he

r

in

fo

rm

at

io

n

such without prejudice to the provisions concerning

the issue of shares included in these Articles of

Association.

Profit distributions are to be made at a place and

time to be resolved by the general meeting, but no

later than one month after the relevant resolution has

been passed by the general meeting.

Profit distributions shall be announced to

shareholders by letter and also by means of

announcement in a national daily newspaper and, if

the shares are officially listed on the stock exchange,

in the Official List of Euronext Amsterdam N.V.,

Amsterdam.

Profit distributions not claimed within five years of the

date on which they became payable shall revert to

the company.

A loss may be charged to the reserves required to be

held by law only insofar as permitted by law.

Special controlling rights

The object of Stichting Prioriteit Sligro Groep (Sligro

Group Priority Foundation) is to hold and administer

the priority shares in the capital of the company and

to exercise the rights attaching to those shares, more

specifically the voting rights.

The controlling rights of the priority foundation relate

primarily to making proposals on the issue or

repurchase of shares and the priority foundation has

certain powers regarding profit distributions, as noted

above.

The Executive Board may resolve to add the profit in

full or in part to reserves or resolve to make an

interim distribution only with the approval of the

priority foundation.

The general meeting may resolve to charge a

distribution to a distributable reserve or to distribute

interest rate for advances against securities set by

Euronext Amsterdam N.V., Amsterdam, and

published in its Official List. For priority shares, the

percentage shall be equal to the statutory interest

rate as at the end of the financial year for which the

profit is determined. No further distributions shall be

made on the preference and priority shares.

Subject to the approval of the priority foundation, the

Executive Board is entitled to add all or part of the

profit remaining after application of the previous

paragraph to reserves. A majority of two-thirds of the

votes cast in a general meeting at which more than

half the issued capital is represented may, however,

resolve to reverse the addition to reserves.

Any profit remaining after the addition to reserves

referred to in the previous paragraph shall be at the

disposal of the general meeting.

Insofar as the general meeting does not resolve to

distribute profit for any specific year, such profit shall

be added to reserves.

Subject to the approval of the priority foundation, the

Executive Board may make interim distributions

providing the requirement of paragraph 1 of this

Article has been met and is evidenced by an interim

statement of assets and liabilities as referred to in

Section 105, subsection 4, Book 2, of the

Netherlands Civil Code. The company shall deposit

the statement of assets and liabilities at the office of

the commercial register within eight days of the date

on which the resolution to distribute is published.

The second sentence of paragraph 9 of this Article is

equally applicable to interim distributions.

On the proposal of the priority foundation, the general

meeting may resolve to charge a profit distribution to

a distributable reserve.

On the proposal of the priority foundation, the general

meeting may resolve to distribute profit in the form of

shares in the company or depositary receipts thereof,72


the profit in the form of shares in the company only

on the proposal of the priority foundation.

Lastly, the general meeting may resolve to amend the

Articles of Association, enter into a legal merger or

wind up the company only on the proposal of the

priority foundation.

The board of the priority foundation consists of A

members (the incumbent members of the company’s

Executive Board), B members (the incumbent

members of the Supervisory Board) and C members

(Messrs J.J.A. Slippens and A.P. Dijkstra on behalf of

the trust office Stichting Administratiekantoor

Slippens).

On 14 March 2002, Stichting Preferente Aandelen

Sligro Groep (Sligro Group Preference Shares

Foundation) was granted the right for a period of

three years to obtain preference shares in the

company, providing that the total nominal value of

preference shares in issue following such an issue

did not and could not amount to more than half the

capital issued in the form of ordinary shares at any

time before the issue.

The object of this foundation is to serve the interests

of the company, of the legal entities and businesses

related to it and of all parties involved therein and to

do all that which may be incidental or conducive

thereto. Its board consists of Messrs A.I.M. van

Mierlo, A.A.C.C. Rademakers and A.J.L. Slippens.


73

(unless stated otherwise, all amounts x e 1,000) 8)

2002 2001 2000 1999

-Result

Turnover 1,299,028 1,171,940 781,899 733,592

Operating profit 65,482 45,144 30,552 30,031

Profit after tax 37,024 25,270 18,503 17,504

Cash flow from operating activities 74,219 50,640 17,432 19,198

Proposed dividend 14,631 9,979 7,383 7,224

-Financial position

Shareholders’ equity 1) 132,182 96,168 71,646 54,488

Net capital employed 2) 270,180 221,805 154,132 125,834

Balance sheet total 367,715 288,423 201,388 179,137

-Employees

Year average (full-time equivalents) 2,561 2,129 1,769 1,680

Staff costs 84,080 72,229 53,844 49,049

-Capital expenditure

Net capital expenditure 3) 28,265 7,761 19,367 20,332

Depreciation 3) 18,585 17,145 12,355 11,045

-Ratios

Increase in turnover (%) 10.8 49.9 6.6 8.5

Increase in profit after tax (%) 46.5 36.6 5.7 27.9

Gross margin as % of turnover 17.8 15.7 17.1 16.9

Operating profit as % of turnover 5.0 3.9 3.9 4.1

Net profit on ordinary activities

as % of turnover 2.9 2.2 2.4 2.4

Return on average equity 4) 32.4 30.1 29.3 34.2

Operating profit as % of average net

capital employed 5) 27.4 20.0 21.8 25.5

Shareholders’ equity as % of

balance sheet total 35.9 33.3 35.6 30.4

Interest cover 8.3 7.3 8.1 9.4

Turnover per employee (full-time equivalents) 507 550 442 437

Staff costs per employee (full-time equivalents) 32.8 33.9 30.4 29.2

-Figures per e 0.24 share 6)

Number of shares in issue (x 1,000) 9,754 9,503 9,229 9,030

Shareholders’ equity 13.55 10.12 7.76 6.03

Profit after tax 7) 3.83 2.69 2.02 1.95

Cash flow 7) 6.12 4.63 3.38 3.19

Proposed dividend 1.50 1.05 0.80 0.801) Before profit appropriation2) Fixed assets plus working capital less bank borrowings and repayment commitments as at year-end3) On tangible fixed assets4) Calculated on the profit after tax5) Calculated on the weighted average6) Prior-year figures restated for share splits in 1998 and 19957) Calculated on the average number of shares in issue8) Prior-year figures have not been restated for changes in accounting policies74


te

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ye

ar

r

ev

ie

w

1998 1997 1996 1995 1994 1993

657,955 564,863 432,348 392,750 329,392 298,740

24,177 20,242 15,780 13,688 11,347 10,205

13,689 11,355 8,939 7,393 6,534 5,275

15,887 19,519 16,287 10,223 12,086 13,739

5,445 4,432 3,586 2,819 2,393 1,826

47,835 38,098 39,665 27,847 24,702 22,387

109,526 88,965 69,619 60,661 51,598 43,833

166,120 141,647 115,765 93,636 83,071 70,402

1,575 1,320 1,016 940 795 724

45,075 38,254 28,153 25,579 21,218 18,989

18,248 17,683 9,531 7,551 9,489 6,671

10,216 8,914 6,846 6,141 4,622 3,843

19.7 30.7 10.1 19.2 10.3 8.3

20.6 27.0 20.9 13.1 23.9 14.6

16.5 16.5 15.8 15.5 15.2 14.7

3.6 3.6 3.6 3.5 3.4 3.4

2.0 2.0 2.1 1.9 2.0 1.8

31.9 29.2 26.5 28.1 27.8 28.1

24.4 25.5 24.2 24.4 23.8 24.3

28.8 26.9 34.3 29.7 29.7 31.8

7.7 8.0 7.7 6.0 6.2 4.8

429 428 426 418 414 412

28.6 29.0 27.7 27.2 26.7 26.2

8,889 8,721 8,590 7,765 7,530 7,185

5.38 4.37 4.62 3.59 3.28 3.12

1.55 1.31 1.09 0.97 0.89 0.75

2.72 2.35 1.93 1.77 1.52 1.30

0.61 0.51 0.42 0.36 0.32 0.25


75

Works Council

E. den Boer

R. van den Broek

A. van Broekhoven 2)

T. Cissen

S. Dekkers

G. Delisse

K. Doorn

R. Driessen

W. van Gorkom 2)

A. Heida

76


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S. op ‘t Hof

G. Hommerson

W. Jansen

H. Jaspers

P. Kempkes

M. Klaarenbeek

G. Kox

D. Krabbendam

T. Oosthoek

Key personnel 1)

A. Aalders controller

O. Akkerman manager, Sligro Eindhoven

A. Bakens manager, Veghel pilot outlet

R. Barten general commercial manager

A. van Boxtel IT integration specialist

P. Damoiseaux manager, Sligro Maastricht

P. van Dijk operations manager

M. van Dinther national food sales leader

J.J. v.d. Dussen head of commercial information systems

R. van Herpen head food II buyer

F. Hofstra manager, Sligro Drachten

W. Jansen head of corporate communications

H. Jaspers head of IT

P. Lampert manager, Sligro Vlissingen

M. de Man operations manager

W. Paijmans head of accounting

A. de Rooij head fresh produce buyer

G. v.d. Ven head food I buyer

H. Verberk integration coordinator

J. Verhagen head non-food buyer

A. Verlouw head of building matters

1) These persons together with the management of the group companies form the Core Team2) Observers on behalf of EM-TÉ Supermarkten

The company is established in Veghel

and entered in the commercial register

of the Chamber of Commerce and Industry

for East Brabant in Eindhoven

under number 160.45.002.

Corridor 11

P.O. Box 47

5460 AA Veghel

Netherlands

Telephone +31 413 34 35 00

Fax +31 413 36 30 10

E-mail [email protected]

Internet site www.sligro.nl

Layout and coordination Sligro B.V.

W.C.A.A. Jansen

A.M.A.P. van der Valk

E.E.C.M. Hoogers

Printing

Bek Grafische Producties, Veghel

Translation

Mac Bay Consultants, Amsterdam

The 2002 annual report of Sligro Food Group N.V. is

available in Dutch and English.

Should different interpretations arise, the Dutch

language version prevails.

Copies of the annual report in Dutch and English are

available on request from

Public Relations Department,

Sligro Food Group N.V.,

Veghel, The Netherlands.

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Annual report Sligro Food Group...Sligro Food Group’s dividend policy is to distribute...

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