EANS-Adhoc: Valora Holding AG / Valora Group reports 2010 operating profit up 19%, stage set for further expansion

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25.03.2011

Valora Group reports 2010 operating profit up 19%, stage set for further
expansion

- External sales stable, EBIT margin improves to 2.8%
- "Valora 4 Success" strategy largely completed
- "Valora 4 Growth" identifies expansion opportunities
- Board recommendations to 2011 General Meeting
* 15% dividend increase to CHF 11.50 per share
* Flexibilisation of company´s capital structure

External sales stable, EBIT margin improves to 2.8%

In 2010, the Valora Group increased its external sales (including sales by
franchisees) by +0.3%, to CHF 2 947 million. As the volume of sales by
franchisees within the Valora Group increases, this new external sales metric
will become an increasingly important yardstick. The Group´s 2010 net revenues
were CHF 2 878 million (-0.7% down on 2009). This figure includes adverse
exchange rate effects totalling CHF 81.2 million and sales of football World Cup
collectible picture cards amounting to CHF 39.5 million. Stripping out these
factors and the impact of acquisitions, the Valora Group´s net revenues for 2010
came in roughly flat on the year, at CHF 2 885 million (-0.2% on 2009 levels).
Valora raised its operating profit (EBIT) by 19.3%, to CHF 81.3 million, despite
adverse exchange rate effects shaving CHF 4.0 million from this result. The
Group achieved an operating profit margin of 2.8% in 2010, a substantial 40
basis point improvement on the result achieved in 2009. Further efficiency gains
and cost-savings in 2010 contributed CHF 12.9 million to this pleasing outcome.
From its launch in 2008 until 2010, the "Valora 4 Success" strategy programme
has cut annual costs by some CHF 27 million in total. The improved results the
Group achieved in 2010 were essentially attributable to the positive performance
of its Retail and Services divisions. In the face of challenging market
conditions, Valora Trade had the task of making up for the sales shortfall
resulting from the previously announced expiration of a number of distribution
contracts, as well as experiencing adverse foreign exchange effects.

Divisions

Valora Retail - This division increased its 2010 net revenues by 0.9%
year-on-year, to CHF 1 606.5 million. After adjusting for currency fluctuations,
World Cup picture card sales and acquisitions, Valora Retail´s 2010 sales were
2.3% higher than a year earlier. This advance was largely due to the avec.
format, whose network was expanded to some 100 units. The kiosk business in
Switzerland also did well, with the ok.- private label product range adding more
than CHF 30 million to net revenues. The new "@ k kiosk" modules, which have now
been rolled out to about 300 sites, began to deliver initial growth impetus, and
the extension of the P&B format to 10 locations also contributed to the increase
in sales volumes. Caffè Spettacolo was the division´s only business area with
lower sales, experiencing a marginal decline in turnover as a result of outlet
closures. Valora Retail Germany continued to perform very well. The 184 outlets
operated by tabacon, which Valora acquired in the final quarter of 2010, added
some CHF 40 million to external sales. Net revenues at the Luxembourg operation
remained stable. Operating profit at Valora Retail rose significiantly in 2010,
with EBIT increasing to CHF 39.8 million and the EBIT margin improving to 2.5%,
versus 1.8% a year earlier. The Retail division is thus getting closer to its
objective of generating EBIT margins of 3 - 4% by 2012.

Valora Services - The Group´s Services division increased its 2010 net revenues
by 0.8% year-on-year, to CHF 718.4 million. After adjusting for World Cup
picture card sales and adverse exchange rate effects, the division´s 2010 net
revenues came in at CHF 708.5 million, -0.6% lower than in 2009. Given the
decline of some 2.5% experienced by the overall press market in Switzerland,
this represents a considerable achievement. The division´s operating profit for
2010 rose to CHF 30.3 million, thus raising its operating profit margin to 4.2%
(2.3% in 2009), which is within its target range of 4 - 5%. This strong
performance is the result of the division´s new media strategy and the
efficiency gains it has achieved in its logistics processes. Despite a decline
of the overall Austrian press market, Valora Services Austria managed to
maintain its net revenues at 2009 levels. Restructuring initiatives in
Luxembourg have enabled this unit to streamline its processes, and the division
as a whole is now well equipped to face the future.

Valora Trade - The Trade division generated net revenues of CHF 721.8 million in
2010, a 7.2% decline on 2009. After stripping out the effects of currency
movements and the expiration of distribution contracts with former Own Brands
companies, net revenues fell 1.1% in 2010, which is modest given the demanding
market conditions. Norway and Germany were the markets where Valora Trade had
the most pressing challenges to face. The acquisition of the cosmetics
distributor EMH in the autumn of 2010 marks a major step forward in the
Norwegian market, and is expected to contribute significantly to future net
revenues and profitability. Valora Trade´s operating profit for 2010 was CHF
17.7 million, which puts its operating profit margin at 2.5% (2.9% in 2009).
This metric thus remains within the division´s target range of 2 - 3%.

The Valora Group´s net income rose CHF 8.7 million in 2010, to reach CHF 63.6
million, a year-on-year increase of 15.9%. Equity cover increased by 2.3
percentage points, with shareholders´ equity accounting for 43.6% of total
assets at year-end 2010. Despite spending CHF 32 million on acquisitions and
raising its dividend pay-out in 2010, Valora´s year-end net debt of CHF 14.1
million demonstrates that the Group remains soundly financed and very well
placed for the future.

"Valora 4 Success" strategy programme largely completed

2010 was the decisive year for the "Valora 4 Success" fundamental strategy
programme, which the Group initiated in 2008 for scheduled completion in 2012. A
number of major milestones were reached and some 80 percent of the objectives
the programme set out to achieve have now been accomplished. As part of its
"competence" initiatives, Valora has improved its distribution management
processes, introduced new product ranges, sharpened the profile of its outlet
formats and tested new outlet business models. The "growth" initiatives have
expanded the avec. and P&B outlet networks. The "efficiency" initiatives have
seen substantial process streamlining following the relocation of Valora´s
logistics operations, as well as revamping the IT infrastructure and slimming
down administrative overheads, all of which have helped to achieve major cost
savings. Valora today projects professionalism, dynamism and success. The
"people" initiatives have played a crucial part in this. In 2008, the Group
centralised its various headquarters sites in Switzerland in one central
location, thus facilitating and improving the management of the company. A new
general contract of employment was introduced for sales staff in Switzerland.
Customer focus is also now well established within the company. Valora will
continue to build on these achievements, focusing its strategic attention on
incremental growth.

"Valora 4 Growth" identifies expansion opportunities

The Group´s "Valora 4 Growth" strategy was unveiled in November 2010. It is
based on organic margin and revenue growth in all areas and on acquisition-led
expansion at Retail/Services and Trade. The strategy´s objective is to raise
Group external sales by 10% per annum and Group operating profit by 15% per
annum. By 2015, Valora intends to increase its external sales to some CHF 4.8
billion and to double its operating profit to CHF 160 - 180 million.

Organic margin and revenue growth

During 2010, Valora Retail successfully tested the agency model, which it will
now rapidly implement over the next few years. By the end of 2011, the division
intends to have some 100 k kiosk units operating as agent managed units. To
achieve this, current regional group managers and individual outlet managers in
the present kiosk sales structure will be given the opportunity of operating
selected outlets with growth potential on an agency basis. Over the next few
years, Valora Retail expects to have some 300 units operating on this basis.
Additional growth initiatives are planned, relating to the extension of product
ranges and the services on offer at outlets and the introduction of new
promotions. The Services division will further enhance its offering by adding
new logistics and distribution packages in order to make good the shortfall
arising from the continuing erosion of press sales. Consistent adaptation of the
division´s cost structure will be a further decisive factor here, especially as
far as keeping up with market developments and maintaining profitability is
concerned. Centralisation and outsourcing of administrative functions offer the
main opportunities for further efficiency gains, and this may result in lower
staff numbers. The relevant processes have been set in motion.

Acquisition-led growth

In autumn 2010, Valora Retail acquired the tabacon franchise company and Valora
Trade acquired the cosmetics distributor EMH. Both companies have since been
integrated into Valora´s organisational structure as planned and are performing
well. The professional franchise system operated by tabacon also provides an
appropriate platform for the further expansion of small-outlet retail formats in
Germany. The current 2011 financial year has already seen Valora complete its
acquisition of Salty Snacks, a German trading company. Salty Snacks is a
traditional distributor, with the majority of its activities focused on savoury
snacks and specialised novelty food products. This acquisition provides Valora
Trade Germany with an ideal means of expanding its product portfolio and of
strengthening its position in the German market. In 2010, Salty Snacks generated
revenues of some CHF 12 million and an above-average EBIT margins.

Board recommendations to the 2011 General Meeting

The Board of Directors will recommend that the General Meeting of shareholders
to be held on April 15, 2011 approve a 15% increase in the dividend, to CHF
11.50 per share. The General Meeting will also vote on proposals to authorise
the Board to carry out a share buy back programme covering a maximum of 280,000
shares and to increase Valora´s share capital by up to 840,000 new shares. The
authorisation the Board is seeking to carry out a share buy back is designed to
give it the necessary scope, should this prove necessary, to return excess funds
to shareholders in the event of surplus cash being accumulated which is not
required for operational purposes. The authorised capital increase proposal
seeks to ensure that the company´s financial flexibility is maintained. The 2011
General Meeting will again provide shareholders with an opportunity of
participating in a consultative vote on the annual remuneration report.

Outlook for 2011

Valora expects to increase its operating profit further in 2011, despite
difficult market conditions. The ongoing decline of the overall press market,
the continuing strength of the Swiss franc against other European currencies and
non-recurrence of one-off events such as last year´s football World Cup are all
weighing on the Group´s businesses. How current geopolitical uncertainties will
affect consumer confidence is difficult to assess at present. Given this
backdrop, Valora´s objectives are ambitious. As Thomas Vollmoeller, Valora´s
CEO, puts it "We are convinced that we will be able to make the most of Valora´s
favourable position and achieve the improvement in operating profit we are
targeting. We maintain our objectives for 2012, assuming that there is no
significant deterioration in the economic climate." Rolando Benedick, Valora´s
Board Chairman, endorses this view, emphasising that "We will pursue our
expansion with the necessary care, the prerequisite for any decisions in this
regard always being that they create added value for our shareholders."

Valora Group key financial data

Income statement

in CHF million                          2010               2009

External sales                       2,946.5            2,937.9
Net revenues                         2,877.7            2,897.0
Adjusted net revenues*               2,884.7            2,891.0
Gross profit                           875.2              867.6
Gross profit margin                    30.4%              29.9%
Operating costs                       -802.6             -815.5
Operating profit (EBIT)                 81.3               68.1
EBIT margin                             2.8%               2.4%
Adjusted operating profit (EBIT)*       77.4               68.6
Adjusted EBIT margin*                   2.7%               2.4%
Group net income                        63.6               54.9

* Adjusted for acquisitions, currency fluctuations and World Cup 2010 picture
cards

Liquidity balance sheet

in CHF million                    31.12.2010         31.12.2009
Cash and cash equivalents           130.5               161.6
Shareholders´ equity                478.1               453.7
Equity cover                        43.6%               41.3%
Net debt / (liquidity)               14.1               -15.8

Valora divisions´ key financial data

Key metrics               Retail          Services             Trade
in CHF million     2010    2009  +/-  2010  2009  +/-    2010  2009   +/-
Net revenues    1`606.5 1`592.1 +0.9% 718.4 712.9 +0.8% 721.8  777.6 -7.2%

Adjusted net revenues*
1´622.2 1´586.1 +2.3% 708.5 712.9 -0.6% 725.8 777.6 -6.7%
Operating profit

39.8    28.3 +40.3%  30.3 16.2 +86.4%  17.7  22.3 -20.5%
Adjusted operating profit (EBIT)*      
                   38.6    28.8 +34.2%  27.6 16.2 +69.7%  17.5  22.3 -21.5%
EBIT margin        2.5%    1.8% +0.7pP  4.2% 2.3% +1.9pP  2.5%  2.9% -0.4pP
Adjusted EBIT margin*    
                   2.4%    1.8% +0.6pP  3.9% 2.3% +1.6pP 2.4%  2.9%  -0.5pP

* Adjusted for acquisitions, currency fluctuations and World Cup 2010 picture
cards

The following documents are available on www.valora.com

Annual Report 2010
http://www.valora.com/media/documents/english/reports/2010/valora_gb2010_en.pdf

Press release
http://www.valora.com/en/newsroom/newsinformation/news_00411.php

2010 results
http://www.valora.com/media/documents/english/presentations/2010/valora_gb2010_en_praesentation.pdf

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Valora Telephone Conference - Analysts´ and Media Conference 2010
Friday, March 25, 2011 | 15:00 CET

Thomas Vollmoeller, CEO of Valora Holding AG, and Lorenzo Trezzini, CFO, will
provide information about the Valora Group´s 2010 results during a telephone
conference. This dial-in conference call will be held in English.

To participate in the conference: please call the following number (please call
10 to 15 minutes before the stated starting time):

+41 (0) 91 610 56 00 (Europe)
+44 (0) 203 059 58 62 (UK)
+1 (1) 866 291 41 66 (USA - toll-free)

The playback will be available one hour after the conference for 24 hours till
March 26th, 2011. To access the digital playback, please dial:

+41 (0) 91 612 43 30 (Europe)
+44 (0) 207 108 62 33 (UK)
+1 (1) 866 416 25 58 (USA)

When prompted, enter the code 12409 followed by the # sign
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This document contains forward-looking statements about Valora which may
incorporate an element of uncertainty and risk. The reader must therefore be
aware that such statements may diverge from actual future events. These
forward-looking statements are projections relating to future possible
developments. All the forward-looking statements contained in this document are
based on data available to Valora at the time this document was prepared. Valora
makes no commitment whatsoever to update forward-looking statements in this
document at a later date, or to adapt them to reflect new information, future
events or the like.

Further inquiry note:
For further information on the above, please contact:

Media Relations:                 Phone: +41 61 467 36 31
Stefania Misteli                 E-mail:        stefania.misteli@valora.com
        
Investor Relations:     Phone:  +41 61 467 36 50
Mladen Tomic             E-mail:        mladen.tomic@valora.com
end of announcement                               euro adhoc

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issuer:      Valora Holding AG
             Hofackerstrasse 40
             CH-4132 Muttenz
phone:       +41 61 467 20 20
FAX:         +41 58 789 12 12
mail:        info@valora.com
WWW:         www.valora.com
sector:      Retail
ISIN:        CH0002088976
indexes:

stockmarkets: stock market: BX Berne eXchange, Main Standard: SIX Swiss Exchange
language: English

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