2012 Annual Report Executive summary
06 01 DIA at a glance Page 03 02 Letters Page 09 03 Our values Page 15 04 Business model Page 19 05 Corporate governance DIA in 2012 Page 37 Page 43 This document is an executive summary of the 2012 Annual Report, the full version of which is available at www.diacorporate.com
01
2012 Annual Report 04 DIA, S.A. 2012 2011 (1) Gross under-banner sales 11,679 11,062.3 Financial indicators Millions of euros the Beijing business as a discontinued operation in both years. (2) Adjusted for non-recurring items. Revenue (net sales) Adjusted EBITDA (2) Capital expenditure Net debt Underlying EPS Dividend paid 10,124.3 609.5 331.7 629.3 190.1 0.287 0.11 9,728.5 561.1 350 576 159.3 0.236 Sustainability indicators EMPLOYEES Headcount (average headcount) Training hours ( 000) HEALTH AND SAFETY Workplace accidents with leave Absentee rate (%) COMMUNITY WORK Number of shares ENVIRONMENTAL DISCLOSURES Investment in environmental upgrades ( m) Carbon emissions (millions of kg of carbon dioxide equivalent) Water consumption (millions of m3) Total electricity consumption (millions of kwh) 47,763 638 2,876 7.83% 56 13.59 171.89 1.30 1,101 47,575 490 3,496 8% 36 2.58 179.57 1.26 1,117
DIA at a glance 01 05 6,914 stores 4,024 proprietary stores 2,890 franchises Over 7,500 47,700 DIA products employees (average headcount) Over More than 45 million customers worldwide 17,000 45 jobs generated at franchises warehouses
DIA, S.A. 2012 Annual Report 2012 2011 (1) Global footprint the Beijing business as a discontinued operation in both years. SPAIN PORTUGAL BRAZIL ARGENTINA TURKEY CHINA FRANCE Stores Employees Revenue (average headcount) (, millions) /// 2,925 /// 19,392 /// 4,919.6 2,827 19,500 4,665.8 572 3,765 /// /// /// 553 3,897 561 /// /// /// 480 5,874 559 1,093 /// /// /// 1,115 3,936 316 888 6,184 3,894 /// /// /// 495 3,421 3,737 3,182 /// /// /// 284 3,133 7,609 /// /// /// 916 7,814 949.2 934.2 1,529.2 1,341.6 1,189 868 468.9 461.9 177.7 146 2,445.1 2,644.8
01 DIA at a glance Spain Inauguration of DIA Fresh. Acquisition of Schlecker. Against-the-tide Spain. in 2012 Portugal Start-up of new neighbourhood shopping store formats: Mais Perto and MiniFresh. Over 3.5 million loyalty card holders. Brazil 500 th store opening. DIA the best-selling private label brand. Argentina DIA s 15 th anniversary in Argentina. Supermarket chain with most outlets in the country. DIA the best-selling private label brand. Turkey DIA private label perceived price/quality ranked #2 by Nielsen. China Launch of Club DIA card. Inauguration of franchise # 200. France Completion of store transformation. Over 4 million Club DIA loyalty card holders.
02
DIA, S.A. 2012 Annual Report Dear shareholder: 2.1 Chairwoman s statement This strength is evident in the almost 7,000 stores in operation at year-end. But it is clearer still in the trust placed in us by nearly 45 million shoppers, our and the gain in our share price last We thought long and hard about our ensure clear and transparent decision-making and so that all our that they are doing the right thing by consistently championing the has set up a business ethics committee implementing the code, ensuring that and upheld. policy. This policy is designed to strike
02 Chairwoman s statement set up a corporate risk management plan to continue to set up local risk committees in our various operating markets. compelling investment opportunities creation. This transaction brings us a retail line that complements our placing their trust in us and our that they are up to the task, demanding circumstances achievements can be tangibly shareholder value creation and, in trust in us continues to rise. thanks to them, our customers, and Ana María Llopis Chairwoman
DIA, S.A. 2012 Annual Report Dear friends: 2.2 CEO statement authentic specialists in neighbourhood consumer needs prompted us to commitment to perishables. health and beauty products segment. and the contribution to the local in a management model that is more central than ever to our business development strategy.
CEO statement 02 business has once again demonstrated its resilience in a challenging environment. We have stepped up our commitment to helping our customers to continue to make their money go enabled us to get closer to our all our markets endorses this strategy. best-selling retail brand in countries unbeatable prices. commitment to becoming increasingly implying steady leverage year-on-year. store openings. Ricardo Currás
03
2012 Annual Report 16 DIA, S.A. Our values Customer satisfaction is our number one goal. Customers DIA s business, as an international retailer, corporate values. These values are embedded throughout the group and have been entwined with the company s every action since it was created more than three decades ago. We work as a coordinated team towards a common goal. We encourage a positive environment in order to tap our people s talent. This leads to optimal results. We honour our commitments. We foster a climate of trust and welcome opinion. This creates es a work environment marked by security, credibility and personal respect. Teamwork Respect
Our values 03 17 Our work is thorough. We train our teams to take decisions informed by professional criteria. We seek returns for our shareholders. quality products and services at unbeatable prices. E ciency Initiative We monitor our operating markets for changes, proactively devising creative and innovative solutions.
04
DIA, S.A. 2012 Annual Report The cornerstones of our success The DIA business model is articulated around six strategic cornerstones that have made the group a benchmark in the global discount sector. Proximity Proximity to our customers, both physically and in terms of meeting their everyday needs, is evident in DIA s three store models Market, Maxi and Fresh, its loyalty card and the strategic commitment to perishables. Franchises The franchise model allows the group to leverage each franchisee s know-how with respect to its local environment, while also expressing the group s commitment to entrepreneurs and job creation. Quality DIA s private label and brand product quality unbeatable price/value. Private label label brand in several markets. The DIA brand is key to providing shoppers with an meets their needs. Logistics Continual evolution and development of the end-to-end supply process maximises the Sustainability DIA has made sustainability an intrinsic part of its business strategy and calling as a company at the service of its customers and broader society.
Business model 04 PROXIMITY 21 DIA has two distinct business formats forms of buying behaviour. 4.1 which brings in shoppers within a radius of 8 minutes by foot and in turn implies frequent low/medium-sized shops. The second is a larger-format store, which brings in customers within a much wider radius; these shoppers come by car, they shop less frequently but buy more. Proximity Both formats have evolved in recent years, taking on a more modern, competitive and customer-focused decisively on perishables, the key driver of shopping frequency. The inauguration of the DIA Fresh model and the acquisition of the Schlecker stores in 2012 reinforce DIA s strategic commitment to the neighbourhood segment. 2,744 neighbourhood stores DIA Market and DIA Fresh, 1,280 DIA Maxi stores and Schlecker acquisition: more than 45,000,000 customers worldwide
2012 Annual Report 22 DIA, S.A. DIA MARKET Floor area of 400 700m 2. Located in urban areas. Key characteristics of DIA Market Ability to adapt supply to local demand. Over 2,800 SKUs Expanding range of perishables
Business model 04 PROXIMITY 23 DIA FRESH Three bedrocks of the DIA Fresh store SPECIALISTS: The undisputed specialists in perishables in terms of selection and management within the store s area of Key characteristics of DIA Fresh: Long opening hours: 9.30am 9.30pm. Floor area of 125 200m 2. Over 1,000 SKUs. Located in city/town centres. Broad range of fresh products. IMAGE: A new store concept with a new image, inside and out. The image is fresh : modern and of a regular DIA store, albeit without losing the latter s essence. PRICE: Aggressive pricing strategy in perishables to complement the specialist image.
DIA, S.A. 2012 Annual Report Schlecker acquisition Schlecker characteristics DIA s strategy is to lead the neighbourhood segment and in 2012 it took another step to round Schlecker chain in Spain and Portugal. area of 150m 2. Located in urban areas. Leader in household, health and beauty products in Spain. weight of private label in drugstore products. Key characteristics of DIA Maxi: DIA MAXI Floor area of 700 1,000m 2. Over 3,500 SKUs. Customer parking. Located in the suburbs. Extensive product range, including household and textile goods. Improvements to the DIA Maxi format Fruit & veg: change in location and layout to emulate that of DIA Market. Key products: baby food, pet food, pastries and wines. New product families: and charcuterie products. Product selection tailored for and exclusive to the large format: bigger sizes and promotional packs. campaigns for DIA Maxi stores.
Business model 04 PROXIMITY 25 Loyalty card DIA Club Card Highlights Use of DIA Club Card by country Year launched Cardholding households (million) Percentage of sales VARIETY: Over 250 products with exclusive low prices. RENEWAL: Promotional products renewed every fortnight. Spain Portugal Argentina France Turkey China* Total 1998 2000 2006 2010 2011 Dec. 2012 15.12 3.52 3.89 4.23 3.25 0.02 30.0 71.0% 75.7% 82.9% 61.7% 60.2% 72.9% 71% * New stores. Mass rollout and take-up in March 2013. PERSONALISED SAVINGS: DIA prints more than 1,500 million coupons every year with discounts of up to 50% that are adapted to individual customers shopping
DIA, S.A. 2012 Annual Report 4.2 Franchises The franchise is an essential part of DIA s strategy for delivering growth and creating value in all its operating markets. In 2012 its franchise stores accounted for 41.8% of its establishments, generating over 17,000 jobs and making a noteworthy contribution to the local business landscape. 2012 2011* Franchise-driven job creation as of 31 December 2012. Spain Portugal Brazil Argentina Turkey China France TOTAL No. of franchises by country 5,220 1,983 4,878 718 1,792 1,343 1,445 17,379 Spain Portugal Brazil Argentina Turkey China France TOTAL 1,310 239 312 156 479 139 255 2,890 1,187 208 231 119 412 97 245 2,499 business as a discontinued operation in both years.
04 Business model FRANCHISES foremost enterprising men and women looking to go into business on their own. Their backgrounds are increasingly professional and specialised. They exhibit independence and initiative in managing their stores and employees. Often times the group gives store employees the chance to pursue this entrepreneurial spirit by becoming franchisees. After all, they know their stores, and above all their customers, better than anyone. And they get the chance to partner with the solid and solvent leader in the management of this model. End-to-end support for franchisees Franchisee investment requirements vary by country. What does not vary, however, is DIA s unwavering commitment to lending support in the form of special measures designed to help them get their business up and support mechanisms, either directly or upfront investment. external franchisee satisfaction survey. The survey was conducted by AC Nielsen, an independent external consultant, in order to pinpoint strengths and weaknesses with a view to further enhancing relations between the company and its franchisees. In general terms, 48% of franchisees surveyed felt that their initial business expectations had been met, 52% would recommend the experience, while as many as 39% envisaged opening new franchise stores in the near future.
DIA, S.A. 2012 Annual Report 4.3 The company s commitment to private label and brand product quality and safety is guaranteed by the group s ongoing end-to-end quality management programme. Private label quality control Entire quality control team Lab personnel No. of in-house labs No. of in-house analyses No. of external analyses COVERAGE OF INCOMING PRODUCTS* * Average percentage of analysis in relation to the total number of incoming products 251 135 45 592,668 27,829 36.8% Perishables quality control No. of fruit & veg analyses No. of meat & chicken analyses Total perishables 60 100,388 4,829 105,217
Business model 04 QUALITY 29 The company conducts a series of hygiene-food safety audits in its warehouses and stores across its seven operating markets. This initiative is linked with the store remodelling process underway across the group s store network in recent years and is, above all, yet another example of the company s obsession with maximising quality standards. These audits measure aspects ranging from tidiness and cleanliness to maintenance of the refrigeration cabinets and turnover of perishables. In light of the challenge presented by the new European regulations regarding food labelling and nutrition information, DIA has already begun work on a text validation system that will guarantee that its labels comply. enhance the quality of its products and boost customer satisfaction, in 2012 the company worked to develop allergy-friendly food products. As a 100 SKUs of allergy-friendly products in the Spanish market and is planning to roll the initiative out in the rest of the group s markets. The upcoming markets for rollout of the allergy-friendly range are France and Portugal; these products are already at the initial development phase in these countries. Last year DIA s products were also added to the book compiled annually by FACE, Spain s Confederation of Celiac Associations. This book consists of a list of foods deemed suitable for Celiacs; it itemises the brands and products reported by manufacturers to be gluten-free thereby facilitating food shopping for people with this condition.
2012 Annual Report 30 DIA, S.A. in Spain almost 30 years ago. Since then the group has successfully exported the concept to the markets it has successively entered. Today, its private label brand is a lynchpin of the group s business strategy 4.4 WEIGHT OF PRIVATE LABEL IN MASS-MARKET SALES Overall PL share DIA PL share (FMCG: fast-moving consumer goods) 31.3 34.8 38.7 35.9 61.6 42.3 54.9 43.7 38.2 16.5 % of sales value. Source: Nielsen. 4.7 10.8 1.5 8 Turkey Brazil China Argentina France Spain Portugal Emerging economies Advanced economies
04 Business model DIA PRIVATE LABEL More DIA, more success DIA s commitment to its brand is intrinsic to its raison d être. To this end DIA painstakingly minds the development and distribution of the products bearing its brand in order to ensure that they translate into a valuable product proposition. In 2012, 57% of the product range in DIA stores worldwide come from the group s more than 7,500 private-label SKUs. At over 5 billion, sales of DIA brand products accounted for over 40% of total revenue last year. products that provide optimal value for money, DIA has gone to lengths to its customers.
DIA, S.A. 2012 Annual Report Innovative proprietary technology as the means DIA has 45 logistics platforms that take up a surface area stretching over 900,000m 2. They are equipped with the most cutting-edge technology. Processes are continually under review. The group is unwavering in its commitment to innovation as the means to that starts with the supplier, with whom DIA maintains transparent business relations, and ends with the customer, the be-all and end-all of the business. 4.5 Logistics Average distance between warehouses and stores in big cities São Paulo 200 stores / 40 Kms. Buenos Aires 160 stores / 30 Kms.
Business model 04 LOGISTICS 33 Cold air evaporator Red Combi system Merchandise layout in a DIA truck designed to enable the transportation of to multiple stores. Tailored insulated cabinets Madrid 280 stores / 40 Kms. Paris 247 stores / 30 Kms. Istanbul 446 stores / 50 Kms. Lisbon 240 stores / 45 Kms. Shanghai 321 stores / 30 Kms.
DIA, S.A. 2012 Annual Report 4.6 DIA is keenly aware of the need to respond to the major challenges facing society today sustainable development working under two principles: Respect for the environment Commitment to society Proper waste management. management. Lower consumption of plastic bags. Innovative product packaging. Cornerstones of DIA s - Minimisation of the environmental footprint of all logistics activities.
04 Business model SUSTAINABILITY Engaged in community and environmental protection work The company is making steady progress on developing and executing projects designed to ensure process safety and the sustainability of its activities as a whole, without ever losing sight of quality as its core customer pledge. In addition to fostering social and economic development in its operating markets, DIA believes it is crucial to shape policies and strategies that protect the surroundings within establishing lines of initiative, the company factors in prerequisite considerations such as logistics optimisation and environmental commitment means fostering environmental conservation by developing and managing a sustainable business based on the constant search for new ways to control and diminish the business s environmental footprint. DIA works tirelessly and in continuous contact with associations, NGOs and other entities that work to help society to jointly pursue initiatives related to food and the community. The company seeks out projects that privileged, prioritising those related to food and food safety; children and their nutrition and health also hold a special place in DIA s heart. For more information on DIA s see the company s Sustainable Development Report and the corresponding tab on the corporate website.
05
DIA, S.A. 2012 Annual Report was included in Spain s benchmark blue chip index, the IBEX 35. It was also a year marked by earnings momentum. Despite the challenging economic environment, marked by widespread contraction in consumption and the retail sector, DIA s gross under-banner sales extended the growth of prior years to reach 11.68 billion. 5.1 Operating summary DIA extends its solid topline growth In 2012 DIA generated gross This buoyant business performance under-banner sales of 11.68 billion, drove EPS growth of 21.6% to 0.287. constant-currency growth of 6.7% Management guidance calls for year-on-year. continued double-digit EPS growth in GROSS UNDER-BANNER SALES millions 11,679 Revenue and earnings momentum was underpinned by strong business performances in Spain and, above all, fast-growing markets such as Brazil 2012-2015. 11,062 and Argentina, where adjusted EBITDA rose by 26.3% in 2012. DIA s adjusted EBITDA rose by 9.4% year-on-year in +6.7% constant-currency terms to 609.5 2011 2012 190.1 million, growth of 19.3%.
DIA in 2012 05 39 5.2 Business segments 5.2.1 /////// The Spanish and Portuguese operations once again posted sales under-banner sales of 4.8%. Spain outperformed Portugal despite the sharp deterioration in the former country s economic environment, with revenue of 4.92 billion, growth of 5.4%. beauty products while shoring up its shoppers top value for their money, helping to boost their purchasing power. Gross under-banner sales (, millions) Number of stores Headcount 2012 2011 5,868.9 (+4.8%) 3,497 (+3.5%) 23,397(+2.9%) 5,600 3,380 22,746 The Schlecker acquisition, a key transaction DIA announced the acquisition of household, health and beauty products chain Schlecker at the end of September. The transaction was closed at 69.3 million (free of debt). The deal was approved by Spain s anti-trust authority in December 2012. With this step DIA has broadened its Minipreço, Although Portugal remains immersed in a complex economic environment, the sales performance of Minipreço, the banner under which DIA operates in Portugal, was satisfactory. Gross under-banner sales inched 1.6% higher year-on-year to 949.2 million, demonstrating the worth of a business strategy that combines the neighbourhood approach with undisputed price/quality leadership in Portuguese consumers eyes.
2012 Annual Report 40 DIA, S.A. Brazil, a growth story 15 years in Argentina Prioritisation of the Shanghai business Competing with everyday low prices in Turkey Gross under-banner sales (, millions) Number of stores Headcount 5.2.2 /////// Emerging markets 2012 2011 (1) 3,364.9 (+24%) 2,817.6 2,529 (+6.5%) 2,374 17,471 (+6.8%) 16,364 Emerging market sales staged a stellar performance. Brazil was the biggest contributor with gross banner sales of 1.53 billion, growth of +23.1%, while Argentina was the fastest-growing market, posting topline growth of 39.8% to 1.19 billion. Sales in China rose 9.6% to 177.7 million, while Turkey posted sales of 468.9 million, growth of 1.2% in constant currency. Argentina as markets that are average. They also underscore the sales momentum in China, particularly in Shanghai. Gross under-banner sales (, millions) Number of stores Headcount 5.2.3 /////// Sales in France declined by 7.5% to 2012 2,445.1 (-7.5%) 888 (-3.1%) 2011 2,644,8 916 2.45 billion. Despite the topline contraction, adjusted EBITDA rose by 5.7%. The franchise regime accounted for 29% of the overall store network at year-end. The Club DIA card has built its membership to over four million in two years. 7,172 (-8.2%) 7,814
DIA in 2012 05 5.3 On 13 June 2012, the company s shareholders approved the payment of an interim dividend from per share. DIA cements its position in the IBEX-35 year, DIA emerged as one of the best-performing stocks in the market, gaining over 39%. RELATIVE SHARE PRICE PERFORMANCE 150 % DIA IBEX 35 Bloomberg Food Retail Index (Between 1 January 2012 and 31 December 2012) 130 Key 110 Dividend paid in 2012 Underlying EPS 90 0.11 0.287 70 50 J F M A M J J A S O N D
06
DIA, S.A. 2012 Annual Report front. Having thought long and hard about DIA s values and target business ethics, the Board of Directors approved the company s Code of Ethics on 9 May 2012. DIA has set up a corporate ethics committee to facilitate its dissemination and ethics-related enquiries. Solid and committed leadership Another important milestone was the Board s approval of DIA s risk management strategy, which is designed to the associated risks. In parallel, the company set up a corporate risk management committee last year, which will be complemented by local country risk committees to be created in the course of 2013. Lastly, DIA has begun work on protocol for countering crime and corruption which implies the development of oversight policies and measures to ensure that it conducts its business in keeping with the law.
06 Corporate governance 45 6.1 Governing bodies BOARD OF DIRECTORS Name Ms. Ana María Llopis Mr. Mariano Martín Mampaso Mr. Ricardo Currás de Don Pablos Mr. Julián Díaz González Mr. Richard Golding Mr. Pierre Cuilleret Ms. Rosalía Portela Mr. Antonio Urcelay Alonso Mr. Nadra Moussalem Mr. Nicolas Brunel Position Chairwoman Vice-Chairman Member (*) Member Member Member Member Member Member Member Director class Other Independent Executive Independent Independent Independent Independent Independent Proprietary Proprietary The general policies and strategies reserved to the Board of Directors of policy, management targets and corporate group structure, corporate governance policy, corporate social responsibility policy and the business plan and strategy.
2012 Annual Report 46 DIA, S.A. APPOINTMENTS AND REMUNERATION COMMITTEE Name Position Director class Mr. Pierre Cuilleret Mr. Mariano Martín Mampaso Mr. Nicolas Brunel Chairman Member Member Independent Independent Proprietary The duties vested by the Board of Directors in the Appointments and Remuneration Committee include senior executive compensation policy, evaluation of these executives performance and executive promotion proposal-making. AUDIT AND COMPLIANCE COMMITTEE Name Position Director class Mr. Julián Díaz Mr. Nadra Moussalem Mr. Richard Golding Chairman Member Member Independent Proprietary Independent The duties vested by the Board of Directors in the Audit and Compliance Committee include risk control and management policy, periodic monitoring of the internal control over dividend and treasury policy, particularly with respect to their limits.
06 Corporate governance EXECUTIVE COMMITTEE Name Mr. Ricardo Currás de Don Pablos Mr. Diego Cavestany de Dalmases Mr. Antonio Coto Gutiérrez Mr. Juan Cubillo Jordán de Urríes Mr. Francisco Javier La Calle Villalón Mr. Bruno Pertriaux Mr. Amando Sánchez Falcón Position Executive Director of Operations, Spain Exec. Dir., Latin America and Partners/Franchises Director of Sales and Merchandise Exec. Director, Portugal, Turkey and China Executive Director, France Executive Director, Corporate Development 6.2 Ethic code Every member of the DIA organisation discharges his or her professional duties in a manner that is coherent behavioural codes listed in the Code of Ethics approved by the company in 2012. In addition, the company has decided to make the ten principles of the United Nations Global Compact, signed in 2012, its own. It is committed to promoting them among all its stakeholders. DIA expects the companies that it works with - franchises, suppliers, contractors, etc. to behave consistently with these principles and reserves the right to collaborate only with those that make their commitment to these principles explicit.
DIA, S.A. 2012 Annual Report Ethic code principles We comply with rules and regulations and respect others Compliance with the bodies of in-house and external rules and regulations and respect for others lie at the heart of DIA professionals business conduct. Our decisions and relationships are guided by ethics: we say no to corruption At DIA we are aware that individual success is rooted in the team, and that a team can only be successful when it is founded on ethical conduct. Dealings with colleagues and third parties must be based on integrity, objectivity and impartiality. We safeguard assets and information DIA employees are thorough, professional and loyal to the company. They endeavour to ensure the best use of DIA s assets and resources at all times aware that they must be used strictly for professional purposes. We are committed to our customers and to society as a whole Individually and as a company, DIA and its professionals play fair, avoiding and thwarting manipulation, fraud or any other form of illicit behaviour that could give the group an unfair advantage. We lead by example Each and every member of DIA is responsible for ensuring that the company abides by the business ethics to which it aspires. DIA s values and codes of conduct are not just words: they must inspire and dictate our everyday actions.
06 Gobierno Corporativo 00 Edit: DIA, S.A. Parque empresarial de las Rozas - Edif. TRIPARK C/ Jacinto Benavente 2 A 28232 Las Rozas. Madrid - España STROCEN.COM New Corporate Design Jesús Umbría / DIA M-9817-2013 Internacional de Alimentación S.A. and each of its subsidiaries are registered in accordance with the accounting regulations in force in each respective home market. This document is an executive summary of the 2012 Annual Report, the full version of which is available at www.diacorporate.com