The year 2014 can be regarded as a transitional year. Based on the Transformation Strategy 2017 launched by the Board of Directors and Group Management in 2014, a number of key investments were made in areas such as new formats, omnichannel retailing, automation and logistics. Various cost-saving measures were implemented as well.
The purpose of the strategy is to start generating profitable growth again within three years and to become a leading sustainable provider of omnichannel retail services through our formats in the Benelux region. The strategies for France and Germany are designed to further successfully expand our retail and online activities. Our Transformation Strategy 2017 is detailed on the page ‘Accelerated Transformation’ (there is a link to this page on the left).
During the transitional year 2014, Blokker Holding found itself faced with falling revenues and increased costs. Together with the additional expenses for improving customer service, web care and our marketing activities, this has resulted in substantially lower profits. After the deduction of restructuring costs and the loss from the sale of Tuincentrum Overvecht (TCO), net group earnings totalled EUR -20 million. Fortunately, the group can rely on an extremely solid financial basis and receives virtually no financing from external sources.
Blokker Holding follows a non-calendar financial year, running from the fifth week in January up to the fifth week in January of the following year. The 2014/2015 financial year ran from 26 January 2014 to 24 January 2015 (inclusive). The financial year is also referred to below as ‘the year under review’ or ‘the year 2014’. The composition of the group changed during the year under review. TCO was sold effective 30 June 2014, while Casa – following the transfer of management control over all of Casa’s operations – was deconsolidated with effect from the year under review and is currently classified under ‘Associates’.
In the Report of the Board of Directors, the key figures for 2013 and 2014 have been adjusted to reflect the deconsolidation of Casa and TCO; this is done for the purpose of comparison. Note that the figures contained in the annual report have not been adjusted.
Net group revenue (exclusive of VAT) during 2014 reached EUR 2,098 million, representing a 1% decline from 2013, when the group generated total net revenue of EUR 2,122 million.
This net revenue is shown below, divided among the three strategic retail sectors which make up our group and our wholesalers.
The amounts listed exclude Casa / TCO
While this was a difficult year for the Household retailers, the formats in the Toys and Living sectors performed well. Revenue growth in our four key markets shows a different picture from last year: the Netherlands -1.9%, Belgium -1.2%, France -1.4% and Germany +6.1%.
The revenue in retail sales value (i.e. retail sales including VAT) generated at both our company-owned stores and the franchise stores plus the revenues of our wholesalers at invoiced value exclusive of VAT totalled EUR 2,613 million versus EUR 2,646 million in 2013, representing a 1% decline. By year-end 2014 the group operated a total of 2,365 stores, broken down into 2,044 company-owned stores (including 11 webshops), 321 franchise stores and 2 wholesalers.
We saw another sharp rise in revenue from our webshops in 2014. Customer sales (including VAT) from sales in our webshops increased by nearly 25% to approximately EUR 100 million. Following the closure of the Marskramer webshop in spring 2015 and the launch of the xenos.nl and blokker.be webshops, the number of webshops currently stands at 12.
Operational EBITDA* excluding Casa and TCO reached EUR 65.3 million in 2014 (2013: EUR 139.5 million). The main reason for this sharp drop in profit was the lower revenue in the Household sector. In line with the group strategy to strengthen the core activities in this sector, a number of measures were implemented to increase revenue and reduce costs over the long term. Revenue and profit in the Toy and Living sectors are in line with last year.
After deduction of the restructuring costs and recognition of the EUR 7.5 million loss from the sale of Tuincentrum Overvecht, the consolidated net group earnings for 2014 totalled EUR -20 million (2013: EUR 61 million).
* Operating profit before interest, depreciation, taxes, amortisation and provisions for the purpose of restructuring.
ROLLOUT OF NEW FORMATS
Operational cash flow before working-capital changes reached EUR 55.5 million (2013: EUR 131.6 million). The main cause of the drop is the sharp fall in earnings. The total amount invested in tangible and intangible fixed assets was significantly larger in 2014 than in 2013. A total of EUR 66.5 million was invested in 2014 (2013: EUR 56.3 million). A number of targeted investments were made in 2014 as part of the group strategy. The bulk of these investments went towards the organisation and establishment of Nextail, the online organisation responsible for managing all e-commerce activities of the operating companies. We also continued to invest substantially in IT and logistics and, at various operating companies, in the development and rollout of pilot stores, fully in line with the Transformation Strategy 2017. These investments were financed internally within the group.
Net cash flow from operating activities totalled EUR 1.9 million (2013: EUR 148.7 million), mainly as a result of the lower profit and a sharp increase in stocks.
The group concluded 2014 with a balance sheet total of EUR 1,104 million (2013: EUR 1,041 million). Shareholders’ equity fell to EUR 467 million (2013: EUR 486 million). The solvency rate (defined as the ratio between shareholders’ equity and borrowed funds) fell to 42.4% (2013: 46.7%).
Amounts excl. Casa / TCO
In light of the lower earnings, the Board of Directors has proposed that no dividends be paid for the 2014 financial year; this proposal has also been incorporated into the financial statements. The proposal to refrain from paying any dividends also applies to the dividends for employees participating in the existing Oranje Boven Participation Plan. The value of the Oranje Boven certificates is determined based on a fixed valuation rule whereby the average of Blokker Holding’s net earnings for the past two years form the basis. This amount fell again following the substantially lower earnings in 2013 and 2014.
CENTRAL WORKS COUNCIL
The Central Works Council is comprised of members of the works councils of our subsidiaries in the Netherlands (for details on their composition, please refer to page 8 of this annual report). The Central Works Council convened on a total of nine occasions during 2014, including twice in consultation meetings with the CEO. These consultation meetings are generally attended by a member of the Supervisory Board.
In addition to the consultation meetings, the Executive Committee of the Central Works Council also consults regularly with the CEO. The consultation meeting held in July was attended by the newly appointed Supervisory Board member Ms M.J. Poots-Bijl. Topics discussed in this meeting included the 2013/14 financial statements, the updated group strategy and the sale of the business of Tuincentrum Overvecht, the latest developments concerning the Collective Agreement and the results of the Employee Engagement Survey.
Requests for advice were submitted to the Central Works Council in 2014 regarding the establishment of the online organisation for all the e-commerce activities of the operating companies, the introduction of new management positions for these omnichannel activities and for Group Control; the introduction of a performance-based evaluation system; and the relocation of the Blokker Holding head office from Laren to Amsterdam. The Central Works Council made carefully considered favourable recommendations in each of these cases. Furthermore, the Central Works Council was also asked to give its approval for the proposed required amendment of the supplementary pension insurance in connection with the amendments of the Dutch tax regulations effective 1 January 2015.
The second consultation meeting with the CEO was held in November 2014. During this meeting, the members of the Central Works Council were introduced to the CFO of Blokker Holding, Mr J.W. Visser, appointed effective 1 November 2014. The meeting attendees also again discussed the slow progress of the Gebra Collective Agreement negotiations.
The talks with the Central Works Council are always conducted in a positive and open atmosphere, based on mutual respect and trust. The Board of Directors greatly values the constructive attitude of the employee representatives within the group.
PERSONNEL CHANGES IN THE GROUP ORGANISATION
There were several changes in the Board of Directors during the year under review. As reported in the annual report for the previous year under review, Mr A. Blokker retired from the Board of Directors on 1 April 2014, joining the Supervisory Board as of that same date. Meanwhile, Mr A.H.M. van der Horst retired from the Board of Directors on 1 June, while Mr J.W. Visser was appointed as a member of the Board of Directors and CFO effective 1 November.
The overview of the group organisation and the management of the operating companies is included on the page ‘Organisation’ (there is a link to this page on the left).
The first signs of economic recovery should become evident during the 2015 financial year in the European countries in which the group operates. To date, however, we have only seen a tentative recovery of consumer confidence, which is also reflected in the sales at our retail formulas. The sale of garden furniture and garden accessories at our Leen Bakker and Blokker chains and outdoor toys at our toy chains had a late start this spring. Since retail organisations such as Blokker Holding tend to generate the bulk of their profits in the second half of the year, it is too early to make any statements regarding profits during the current financial year.
Investments in the current year will be similar to those in the year under review. A key priority at present is the optimisation of the e-commerce business of the formats operating webshops, along with an expansion of our store base to include new formats at Blokker, Xenos, Big Bazar and Leen Bakker.
The number of employees (based on full-time employment) is expected to remain equal overall as a result of store closures in the Netherlands and new store openings in Germany.
The results of the Employee Engagement Survey conducted in 2014 form the basis for various promotions and monitoring by the management and executive management of the various operating companies.
We would finally like to extend our compliments to approximately 22,000 employees, the majority of whom are employed in the stores. They once again managed to satisfy millions of customers in the year under review. This is no small feat and we thank them for the way they committed themselves to our company during the year under review.
Amsterdam, 13 May 2015
Board of Directors
R.E. Palmer, Chairman
L.M. de Kool, Deputy Chairman
J.W. Visser, CFO