BsimEiHHta
Group financial review (continued)
Net financial expenses
Income taxes
Share in income of joint ventures
Results from discontinued operations
Underlying operating income and
underlying operating income margin
Ahold at a glance
Business review
Governance
Net financial expenses in 2015 increased by
€30 million, or 12.8%, to €265 million compared
to €235 million in 2014. This increase is driven by
a €23 million higher interest expense compared
to 2014, attributable to U.S. dollar-denominated
interest expenses, which resulted in a higher euro
value on conversion due to the stronger U.S. dollar.
Excluding the currency impact, interest expense
was down by €7 million, largely resulting from
lower finance lease interest expenses compared
to 2014 at constant exchange rates.
Excluding interest income and expense on defined
benefit pension plans, net interest expense of
€230 million was €24 million higher than in 2014,
falling within our guidance of €215-€235 million.
Net interest expense on defined benefit pension
plans decreased by €2 million in 2015.
Other financial expense of €21 million was higher
by €8 million compared to 2014. This increase
resulted from valuation adjustments related to notes
and derivatives.
In 2015, income tax expense was €224 million,
down by €24 million, compared to €248 million
in 2014. The income tax expense in 2015
was positively impacted by one-time items.
The effective tax rate, calculated as a percentage
of income before income tax, was 21.3%
in 2015 (2014: 24.4%).
Ahold's share in income of joint ventures, which
relates primarily to our 49% shareholding in JMR,
was €20 million in 2015, down by €4 million
compared to last year. For further information about
joint ventures, see Note 14 to the consolidated
financial statements.
Results from discontinued operations in 2015
were €2 million, versus a loss of €197 million in
2014. The 2014 loss from discontinued operations
included a net of tax settlement amount and
associated legal fees for the Waterbury litigation
of €194 million. This litigation was related to Ahold's
U.S. Foodservice operations, which were divested
in 2007
In 2014, we completed the sale of our Slovakian
business to Condorum, an agreement we had
announced in November 2013. Ahold recorded
a net loss of €1 million in 2014 on this divestment,
with negative cash proceeds amounting to
€34 million.
In addition, 2015 and 2014 results from
discontinued operations were impacted by
various adjustments to the results of prior years'
divestments as a consequence of warranties
and indemnifications provided in the relevant
sales agreements.
For further information about discontinued
operations, see Note 5 to the consolidated
financial statements.
Ahold
Annual Report 2015
Underlying operating income was €1,461 million
in 2015, up €194 million or 15.3%, versus
€1,267 million in 2014. Underlying operating
income margin in 2015 was 3.8%, compared
to 3.9% in 2014.
At constant exchange rates, underlying
operating income was up by €51 million,
or 3.6%, compared to 2014. The changes in
underlying operating income are mainly a reflection
of improved margins at Ahold USA. Last year,
Ahold USA's margin was negatively impacted by
accelerated investments in our customer proposition
and price investments where product cost increased
and Ahold chose to only partially pass these
costs on to its customers.
Margins in The Netherlands were impacted by
increased pension costs as a result of lower discount
rates and also by additional investments, as part
of our future growth strategy, in our online businesses.
Our online businesses in the Netherlands operate
at a lower margin and their accelerated growth has
a dilutive impact on the segment's overall margin.
This additional dilutive affect was in line with our
full-year expectations of 25 basis points.
Underlying operating income and underlying operating income margin for 2015 and 2014 were as follows:
Underlying operating income
Underlying operating margin
2015
2014
2015
2014
million
(53 weeks)
(52 weeks)
change
(53 weeks)
(52 weeks)
pt change
Ahold USA
1,043
980
6.4%
4.0%
3.8%
0.2% pt
million
Ahold USA
940
738
27.4%
4.0%
3.8%
0.2% pt
The Netherlands
578
574
0.7%
4.6%
4.9%
(0.3)% pt
Czech Republic
27
19
42.1%
1.5%
1.2%
0.3% pt
Corporate Center
(84)
(64)
(31.3)%
Total
1,461
1,267
15.3%
3.8%
3.9%
(0.1)% pt
Czech Republic's margin improved during 2015.
The SPAR acquisition had a negative impact
of €7 million on underlying operating income.
Last year's underlying operating income was
impacted by €12 million of operating losses
from the acquired SPAR stores.
Tight cost management remains a core part
of our business model. In 2015, we completed
a €350 million cost and efficiency program.
This enabled us to continue to invest in our
competitive position and, at the same time, our
businesses benefited from optimized store processes
and improved sourcing. At Ahold USA, as part of our
Simplicity program, we implemented a reorganization
of our head office support roles to improve efficiency.
