Beleaguered Dutch retail giant Ahold has announced details of its new financing plan and strategy to rebuild the value of the company over the next three years.
Ahold said its “Road to Recovery” programme is focused on delivering results in four key areas: Re-engineering food retail, recovering the value of US Foodservice, reinforcing accountability, controls and corporate governance, and restoring Ahold’s financial health.
“Ahold has been through the most challenging nine months in its history. In spite of this, our core operating companies have shown resilience and have retained their leading market positions. I have been extremely encouraged by how our employees have responded to the situation,” said CEO Anders Moberg.
“With the financing plan that we are proposing, I am pleased to say that we finally draw a line under this difficult year. We can now focus wholeheartedly on strengthening the competitiveness of our business. At the same time, we are in the process of setting the highest possible standards for accountability, controls and corporate governance, to keep Ahold’s investors, customers, employees and partners secure in the knowledge that this company is being run in their best interests,” he added.
Recovering the value of US Foodservice
Moberg said the group’s US Foodservice had the potential to improve its financial performance, but its integration process was never properly executed. Larry Benjamin, the new CEO of US Foodservice, is to implement a three-step plan to recover the value of the unit.
The first step, which is already underway, is to put in place a rigorous control environment and a strong financial organisation. The second step, also underway, is focus on the restoration of profitability and cashflow. As the foundations for improved financial performance are laid, the third step in the company’s recovery will include changes in the mix of customers, products and brands to support sustainable profitable growth, Ahold said.
Re-engineering food retail
Ahold, which is trying to recover from a damaging accounting scandal, said it aimed to raise at least €2.5bn (US$2.9bn) in proceeds from disposals by 2005.
For its food retail business after disposals, Ahold has targeted a minimum of 5% net sales growth per annum, 5% EBITA margin and 14% return on net operating assets from 2005 onwards.
Ahold said it planned to increase its focus by optimising its retail portfolio with an active disposals program and changes to the organisational structure. It will continue to invest in companies that can achieve a sustainable number one or two position in their markets within three to five years, while also meeting defined profitability and return criteria over time. This goes for joint ventures as well. Companies not capable of meeting these objectives will be divested, Ahold said.