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Besides acquisitions, Ahold made significant investments in the existing companies as
well. The number of outlets was increased and a large number of stores was enlarged or
remodeled.
Investments in intangible and tangible fixed assets amounted to Dfl 503 million. Of
this amount, Dfl 191 million was invested in The Netherlands. Investments in the United
States amounted to Dfl 145 million.
Ahold's cash flow totaled Dfl 478 million, compared to Dfl 408 million in 1988.
Investments could thus be financed almost entirely from cash flow.
Further growth in operating earnings in
The Netherlands and the United States
Sales in The Netherlands rose by 8.9% to Dfl 9.1 billion and operating results increased
from Dfl 127 million to Dfl 167 million. By far the largest contribution towards these
increases was made by the Albert Heijn chain.
In the United States, sales rose by 15.5% to $4.1 billion. Operating results increased
from $56 million to $69 million. All three US chains - First National Supermarkets,
BI-LO and Giant Food Stores - contributed to the improvement. The improved 1989
operating results were achieved despite relatively high non-recurring costs.
Ahold's sales growth is largely attributable to a broader product range, growth in
sales area and acquisitions. Generally speaking, once stores have been open for more
than two years, their volume growth stabilizes and increases only slowly. This partly
reflects the fact that sales per square foot in the existing stores are already by then fairly
high.
Both in The Netherlands and the United States, salaries, wages and social charges
increased, amounting to 12.1% of sales in The Netherlands (1988: 12.0%) and to 13.3%
in the United States (1988: 12.8%). On a consolidated basis, total salaries, wages and
social charges in guilder terms amounted to 12.6% of sales (1988: 12.4%). Average
employment in 1989 rose by 5.4% to 83,140.
Income from unconsolidated subsidiaries and affiliates rose from Dfl 24.3 million to
Dfl 31.0 million. The main sources of this rise lay in Ahold's increased share in the
Schuitema results and in higher dividends received. Interest expense rose from Dfl 71.8
million to Dfl 96.9 million, reflecting the cost of financing the high capital investment
level in 1988 and new leases signed in the United States.
The interest coverage ratio improved from 2.99 to 3.20.
In 1989 a provision for income taxes of Dfl 51.6 million was required, as compared to
Dfl 44.2 million in 1988. Partly as a result of higher income from unconsolidated
subsidiaries and affiliates and a lower tax rate in The Netherlands, the tax burden
decreased in 1989.
Consolidated net earnings totaled Dfl 194.6 million as compared to Dfl 145.7 million
in 1988. As a percentage of sales, net earnings were 1.10% as against 0.95% in the
previous year. This rise is chiefly attributable to improved results in The Netherlands.
The number of common shares outstanding increased from 20,641,572 to 23,493,266
in the year under review. Contributing to this growth was payment in shares for the
increased interest in Schuitema and the issue of shares in connection with the cross-
participations with Argyll and Casino. In addition, the number of shares outstanding
grew through the exercise of optional stock dividends and the exercise of stock options
granted to employees.
Earnings per common share rose from Dfl 6.97 (adjusted for optional stock divi
dends) to Dfl 8.43. Earnings per common share are based on the number of common
shares outstanding, weighted to reflect their dividend rights for the current year.
Stronger financial position
In 1989 the debt/equity ratio improved considerably. As in previous years, we find the
Group's financial position satisfactory.
Ahold stockholders' equity at December 31, 1989 amounted to Dfl 1,442 million, as
against Dfl 1,025 million at January 1, 1989. Several factors contributed to this improve
ment, including Dfl 326 million in proceeds from the issuance of common shares. Of
this, a total of Dfl 232 million was placed with Argyll and Casino, while Dfl 94 million
derives from optional stock dividends and the exercise of employee stock options. The
13
.Operating as%
[fsults of sale
Net earnings
2.25
2.00
1.75
1.50
1.25
Exchange rate fluctuation
Dfl per
Stockholders' m Return on
equity average
stockholders'
equity
xDfl 1,000.000
1400
18
1200
17
1000
16
800
15
600
14
400
13
200
12
85
86
87 I
