Building better businesses - Permira

Investment
overview
DinoSol Supermercados (‘DinoSol’) is a leading
Spanish food retailer, operating two brands: HiperDino
and SuperSol. The company currently has around
450 stores with a total selling space of c.400,000 square
metres. While the supermarket format represents over
60% of total group sales, the company also operates
convenience stores (formerly under the Netto brand in
the Canary Islands, recently rebranded as HiperDino
and HiperDino Express), cash & carry (under the
CashDiplo brand) and hypermarket formats.
DinoSol enjoys strong market positions in the
south of Spain: it is the market leader in the
Canary Islands and a key player in Andalucía,
with a particular strength in the Costa del Sol.
More than 85% of the company’s sales are
concentrated in regions where DinoSol has
a strong market share.
As a result of the 2009 recession, consumer
spending was negatively affected in a number
of areas. In food retail, consumers reduced
spending overall, traded down to cheaper
categories and, within each category,
focused on private labels. This reduction
in consumer spending led to a significant
increase in price competition. In this context,
DinoSol’s sales have severely deteriorated
across all formats. Netto and CashDiplo
formats were particularly affected given their
exposure to tourism, while the performance
of supermarket formats was somewhat better.
In response to this more difficult environment,
DinoSol has reduced costs by more than
€30 million, while focusing on protecting
cash. Furthermore, the management team
was strengthened in 2009 with the hiring of
Javier Perez de Leza as chief executive and
Luis Gil took over as chairman.
A series of initiatives has been put in place
to strengthen sales in the group, including
commercial pilots in the supermarkets, the
rebranding of the Netto stores as HiperDino
supermarkets and the targeting of the
hospitality segment by the cash & carry
business. These initiatives are yielding
positive results and are the basis of a
business plan that the management team will
be rolling out between 2010 and 2012. In Q4
2009, the sales underperformance when
compared to Q4 2008 was less acute than
in the previous nine months, which was
driven by specific management initiatives.
In 2010, DinoSol will roll out the pilots on
commercial offerings that were successfully
tested in 2009 to recover customer volumes
and sales, as well as maintaining a disciplined
review of its cost base and cash position
through centralisation of warehouses,
reduction of rents and energy costs, and
simplification of administration.
At the beginning of 2010, DinoSol reached
an agreement with its financing banks and
adjusted its capital structure to provide the
company with new covenant and liquidity
headroom to give more flexibility in terms
of the business plan over the next few years.
Permira Annual Review 2009 Our Portfolio 49