Rallye 2014 first-half results

Regulatory News:

Rallye (Paris:RAL):

• Rallye’s first-half results are fueled by Casino’s good performance:
  • Organic¹ growth of sales of +6,5% in Q2 2014, in line with the previous quarter
  • In H1 2014, current operating income of €880m, with very strong organic growth: +13.3%
  • Net underlying profit, Group share totaled €176m, up +5.8% at constant exchange rates
• Rallye’s net underlying profit, Group share rose €6m at constant exchange rates
• Extended average maturity of Rallye’s holding perimeter bond debt

The consolidated financial statements for the 1^st half of 2014, established by the Board of Directors on July 29, 2014, were reviewed by the Statutory Auditors.

H1 2014 KEY P&L DATA

⁽¹⁾ 2013 results adjusted for retrospective application of IFRS 11 and for determination at fair value of assets and liabilities acquired of Monoprix
⁽²⁾ EBITDA = current operating income + current depreciation and amortization expenses
⁽³⁾ Underlying net income corresponds to net profit from continuing operations adjusted for the impact of other operating income and expense, non-recurring financial items and non-recurring income tax expense/benefits (see details in the appendix)
⁽⁴⁾ CER: Constant exchange rates

1. GROUP ACTIVITY

Rallye consolidated net sales amounted to €23.6bn, up 0.5% compared to H1 2013. Current operating income (COI) reached €875m, down 4.4%. Net underlying income, Group share, of Rallye reached -€38m, mainly impacted by the translation into euros of the international subsidiaries’ results. Adjusted for changes in exchange rates, net underlying income, Group share, amounted to -€24m, up €6m compared to H1 2013.

Rallye’s holding perimeter net financial debt remained stable over the first half of 2014 at €2,695m. The average maturity of Rallye’s bond debt was lengthened to 4.2 years as at June 30, 2014, compared to 3.1 years as at end-2013, mainly through the placement in April 2014 of a 7-year bond issue carrying an annual coupon of 4%, simultaneously to the buyback of €110.6m of each of both bonds maturing in 2015 and 2016.

Rallye’s investment portfolio is valued at €165m at the end of June 2014, following €50m of net cash-in² in the first half of 2014.

¹ Excluding petrol and calendar effect - organic growth is based on a comparable scope of consolidation and constant exchange rates
² Net from investments

2. SUBSIDIARIES ACTIVITY

Casino: Total Casino sales stood at €11.9 billion in the second quarter, with organic¹ growth of +6.5% (excluding petrol and calendar effect), in line with the previous quarter. In H1 2014, current operating income of €880 million, with very strong organic growth: +13.3%. Net underlying profit, Group share totaled €176 million, up +5.8% at constant exchange rates, and improvement was ongoing in Casino’s financial structure

In the second quarter of 2014, the Casino Group’s consolidated sales totaled €11.9 billion, with organic growth¹ of +6.5%. In France, organic growth in sales (excluding petrol and calendar) of -0.2% in the second quarter marked an improvement on the first quarter thanks to the business recovery at Géant. Internationally, the Casino Group continued to post very robust organic growth (+10.9% in organic in Q2, +11% in Q1 2014). Lastly, non-food e-commerce business in France and Brazil posted growth in business volumes of +23.9% at Cdiscount and +44.1% at Nova Pontocom in Q2 2014.

In H1 2014, the Casino Group’s EBITDA stood at €1,353 million, up +9.1% on an organic basis, and current operating income grew by +13.3% to €880 million. The EBITDA margin increased by +17bp and the COI margin rose by +26bp. In France, after taking into account the deconsolidation of Mercialys, EBITDA and current operating income were down moderately. At Casino, the operational efficiency plans have offset the investments in pricing. Margins remained solid at Monoprix and Franprix. Profitability at Leader Price declined under the impact of the price cuts implemented since Q4 2013. Internationally, all operations recorded an organic increase in profitability in the first half. Current operating income for the food activities in Latin America increased by +18.4%. Latam electronics business and furniture (Viavarejo) and Asia food retail increased respectively by +34.2% and by +6%. E-commerce generated EBITDA of €7 million in H1 2014 versus €2 million in H1 2013.

Net finance costs for the period amounted to €311 million (vs. €309 million in H1 2013) and the income tax expense was €179 million (vs. €192 million). The share of profits of associates was €30 million (vs a loss of €2 million) and now includes Casino’s share of Mercialys results.

Net underlying profit, Group share, came to €176 million, down -8.9%, due mainly to the impact of translation into euro of the results of foreign subsidiaries. Adjusted for exchange rate fluctuations, net underlying profit, Group share, increased by +5.8%.

Net financial debt stood at €7,836 million at 30 June 2014, down by €1,020 million compared with the end of H1 2013. Given the seasonality in cash flows, debt will continue to decrease in the second half.

Groupe GO Sport: Groupe GO Sport same-store sales near-stable and EBITDA and COI down in the first half of 2014

Groupe GO Sport consolidated net sales amounted to €305.1m in the first half of 2014, near-stable on a same-store basis with constant exchange rates compared to H1 2013 (-0.6%), with an improvement of the sales trend in the second quarter (+5.8% vs -6.1% in Q1). GO Sport France sales increased in the second quarter on a same-store basis, with a positive evolution of both the number of clients and quantities sold. Sales were down -2.6% in the first half of 2014. Courir posted an eighth consecutive semester of sales growth (+5.2% on a same-store basis) and GO Sport Poland sales slightly decreased (-1.0%), within a still highly competitive environment. Groupe GO Sport’s EBITDA and Current Operating Income were down in the first half of 2014.

¹ Excluding petrol and calendar effect

3. CONCLUSION AND PERSPECTIVES

• The Casino Group confirms its targets for 2014:
  • A return to positive organic sales growth in France
  • Continued strong organic sales growth internationally
  • Further current operating income growth in organic terms
  • Continued improvement in the financial structure
• In H2 2014, Groupe GO Sport will continue its action plans aiming at a return to basics, notably by maintaining an intense level of promotional activity. Courir will pursue the action plans in order to develop its market share through the opening of new stores, both franchised and owned, and the launch of its
  e-commerce website in the third quarter.
• The disposal of Rallye’s investment portfolio, which is composed of quality and diversified financial and real estate assets, will carry on.
• Rallye benefits from a very strong liquidity situation, with close to €2.0bn of confirmed, undrawn and immediately available credit lines as at June 30, 2014, with an average maturity of 4.4 years.

For more information, please consult the company’s website: www.rallye.fr

⁽¹⁾ 2013 results adjusted for retrospective application of IFRS 11 and for determination at fair value of assets and liabilities acquired of Monoprix
⁽²⁾ EBITDA = current operating income + current depreciation and amortization expense
⁽³⁾ CER: Constant exchange rates

RECONCILIATION OF REPORTED PROFIT TO UNDERLYING PROFIT

Underlying profit corresponds to net profit from continuing operations adjusted for the impact of other operating income and expense (as defined in the "Significant Accounting Policies” section of the notes to the consolidated financial statements), non-recurring financial items and non-recurring income tax expense/benefits.

Non-recurring financial items include fair value adjustments to certain financial instruments at fair value through profit or loss whose market value may be highly volatile. For example, fair value adjustments to financial instruments that do not qualify for hedge accounting and embedded derivatives indexed to the Casino share price are excluded from underlying profit.

Non-recurring income tax expense/benefits correspond to tax effects related directly to the above adjustments and to direct non-recurring tax effects. In other words, the tax on underlying profit before tax is calculated at the standard average tax rate paid by the Group.

Underlying profit is a measure of the Group’s recurring profitability.

(1) The following are deducted from Other financial income and expenses: the impact of monetary discounting of tax liabilities in Brazil (-€13m in 2013 and -€13m in 2014), as well as fair value changes of the Total Return Swaps on GPA and Big C shares, forwards, call options, as well as financial instruments that do not qualify for hedge accounting (-€12m in 2013 and +€35m in 2014)
(2) The following are deducted from tax charges: tax items corresponding to the items deducted above, as well as non-recurring income and charges
(3) The following are deducted from minority interests: the amounts related to the items subtracted above