Stellarton, NS-based Sobeys, Canada’s second largest retail grocer and food distributor, has reported record operating earnings of C$141.7m for the year ended 4 May 2002, a 55% increase over the previous year’s C$91.2m.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Included in FY 2002 operating earnings are earnings from discontinued SERCA Foodservice operations for the 11 months ended 30 March 2002, of US$14m, compared with US$16.2m for FY 2001.
FY 2002 financial highlights (year-over-year):
– Sales of C$9.73bn, up C$570m, an increase of 6.2%.
– Same-store sales, excluding stores that expanded during the year, increased 3.5%.
– Same-store sales, including stores that expanded during the year, increased 4.9%.
– Operating earnings of C$141.7m, an increase of C$50.5m, or 55%.
– Operating earnings per share of C$2.15, up from C$1.50, a 43% increase.
– Net earnings of C$210.6m or C$3.20 per share, up from C$42m the previous year.
– Funded debt to total capital ratio of 29%, compared to 43.3% in fiscal 2001.
“We have made considerable progress this past year,” said Bill McEwan, president and CEO: “We surpassed our sales, earnings, and operational improvement targets, and with a strong Q4 finish in FY 2002, our momentum continues to build.”
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataSobeys also reported record Q4 operating earnings of C$37.2m, up from C$25.4m year on year. Included in 2002 Q4 are earnings from discontinued SERCA Foodservice operations of C$2.8m, compared with C$6m in the Q4 2001.
Q4 financial highlights (versus Q4 in 2001):
– Sales of C$2.42bn, an increase of C$131.2m or 5.7%.
– Same-store sales, excluding expanded stores, increased 1.9%.
– Same-store sales, including expanded stores, increased 3.7%.
– Operating earnings of C$37.2m, up 46% on C$25.4m in the previous year.
– After-tax gain on sale of discontinued operations of C$80.7m, from the sale of SERCA
Foodservice operations for proceeds of C$411m.
– Net capital loss & other items of C$11.8m.
– Net earnings of C$106.1m, versus C$25.4m in fiscal 2001.
“We have taken decisive action to significantly improve our National and Regional merchandising effectiveness, reduce distribution costs, streamline operating and administrative expenses, and execute an aggressive capital spending programme,” said McEwan: “What we said we would do, we have done and will continue to do.”
Financial overview
The financial highlights below reflect the performance of Sobeys’ retail food distribution business, exclusive of SERCA, which is reported as discontinued operations as a result of the sale of the net assets of SERCA on 30 March 2002.
FY sales were C$9.73bn, 6.2% up on FY 2001. For the Q4, sales were C$2.42bn compared to C$2.29bn the previous year, a 5.7% increase. All regions experienced sales growth for the year and in the Q4. Same-store sales, excluding stores that expanded in the year, increased 3.5% in FY 2002. Same-store sales, including stores that expanded in the year, increased 4.9% over FY 2001. For the Q4, same-store sales, excluding stores that expanded in the year, increased 1.9%. Same- store sales for the quarter, including stores that expanded in the year, increased 3.7%.
EBITDA totalled C$103.8m in the quarter, an increase of 21.8% over the C$85.2m recorded in the Q4 2001. Trading margin (EBITDA divided by sales) improved to 4.28% in the Q4, compared to 3.72% the previous year. For the full year, EBITDA increased C$75.6m or 23.5%, to C$397.6m. A trading margin of 4.09% as compared to 3.51% in 2001. The improvement is attributed to sustained progress on margin development and cost management initiatives.
Investment in property and equipment was C$424.2m for FY 2002 and C$197.8m during the Q4. This reflects the company’s ongoing commitment to reinvest cash flow to grow its core retail food distribution business. A total of 55 new corporate and franchised stores opened during FY 2002 (15 in the Q4). Total capital spending for the year included the purchase of the Whitby and Milton, Ontario distribution centres for a total of C$93m in the Q4.
The financial condition of Sobeys strengthened. The ratio of funded debt to total capital at the end of the year was 29%, compared to 43.3% on 5 May, 2001. The company’s funded debt-to-EBITDA ratio was 1.3x at the end of 2002, compared with 2.1x at the close of the previous year. Operating cash flow in the Q4 totalled C$116m, up C$66m from the C$50m reported in the Q4 2001. For the year, operating cash flow of C$336.8m increased 51% compared with C$222.4m in 2001. At 4 May 2002, the company’s managed working capital position improved by C$79.8m, compared with FY 2001. The improvement in managed working capital resulted from sustainable improvements in inventory management, accounts receivable collection processes, and accounts payable administration.
Dividend declaration
McEwan announced a 50% increase in the annual common dividend per share, from 24 cents to 36 cents. The board of directors also declared a quarterly dividend of 9 cents per share on Sobeys common shares, an increase of 3 cents per share. The dividend will be payable on 31 July 2002, to shareholders of record on 15 July 2002.
Outlook
Sobeys expects continued growth in sales and earnings from positive same-store sales, sustainable operating cost savings, margin enhancement initiatives, and continued modernisation and expansion of the store network. The operating results are expected to enhance its financial position and ability to continue its capital spending and modernisation programme as well as the necessary investments in its sales, marketing, and merchandising initiatives.
Sobeys has established the following financial performance and condition targets for 2003:
– Sales growth: between 6 and 8%
– Earnings growth: double the rate of growth in sales
– Debt to total capital ratio: below 35%
– Debt to EBITDA ratio: below 1.5 times
– Company-wide capital expenditures: approximately C$600m
