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

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

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/repo
rts/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/presentati
ons/2010/valora_gb2010_en_praesentation.pdf

*********************************************************************
*********** 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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ots Originaltext: Valora Holding AG
Im Internet recherchierbar: http://www.presseportal.de

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

Branche: Retail
ISIN: CH0002088976
WKN: 208897
Börsen: BX Berne eXchange / stock market
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