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2007-04-20 10:00:00 CEST 2007-04-20 10:00:00 CEST REGULATED INFORMATION Kesko Oyj - Quarterly reportInterim financial report for the period 1 January-31 March 2007: Kesko Group's strong growth continuesKESKO CORPORATION STOCK EXCHANGE RELEASE 20.04.2007 AT 11.00 1(22) Interim financial report for the period 1 January-31 March 2007: Kesko Group's strong growth continues The Group's net sales in January-March 2007 were €2,193 million, up 11.3% on the corresponding period of the previous year (€1,971 million). The operating profit excluding non-recurring items was €59.8 million (€36.6 million). The operating profit was €62.4 million (€150.8 million). The Group's pre-tax profit excluding non- recurring items was €61.1 million (€36.1 million). The pre-tax profit was €100.9 million (€150.3 million). The consolidated net profit in January-March was €107.4 million (€111.4 million). The consolidated earnings per share were €1.06 (€1.13). Net sales and profit, continuing operations The Group's net sales in January-March 2007 were €2,193 million, which is 11.3% up on the corresponding period of the previous year (€1,971 million). The Group's net sales increased by 8.0% in Finland and by 27.0% abroad. Excluding acquisitions and business disposals, the Group's net sales increase was 11.6%. Exports and foreign operations accounted for 19.8% (17.3%) of net sales. The K-Group's (i.e. Kesko's and the chain stores') retail sales were €2,446 million, an increase of 13.1% on the corresponding period of the previous year. The Group's profit before taxes for January-March was €100.9 million (€150.3 million). The operating profit excluding non- recurring items was €59.8 million (€36.6 million), up €23.2 million on the previous year, due especially to Kesko Food's and Rautakesko's good profit performances. The operating profit excluding non-recurring items represented 2.7% (1.9%) of net sales. The Group's operating profit was €62.4 million (€150.8 million). The operating profit included a net total of €2.7 million (€114.2 million) in non-recurring gains and losses from disposal of fixed assets and operations, and impairment charges. In 2006, the gains from disposal of fixed assets included €99.3 million received by Kesko for selling its retail store properties to Niam Retail Holding Finland AB. The consolidated earnings per share from continuing operations were €0.77 (€1.14). Equity per share was €17.52 (€15.43). Investments The Group's investments for the period under review totalled €51.6 million (€56.6 million), which is 2.4% (2.9%) of net sales. Investments in retail store sites amounted to €39.8 million (€37.5 million). Investments in acquisitions represented €0.7 million (€6.2 million) of total investments. The Group's other investments were €11.0 million. Investments in foreign business operations represented 21.1% of total investments. Finance In January-March, the cash flow from operating activities was €-20 million (€-28 million) and the total cash flow from investing activities was €55 million (€161 million). The latter was increased by €50 million received for selling retail store properties in the Baltic countries, and by €46 million for selling SATO Corporation shares. The comparable cash flow from operating activities was increased by the over €200 million price received in March for selling real estate. At the end of the period, liquid funds totalled €383 million (€186 million). The amount was affected by the €190 million price received in December 2006 for selling Rimi Baltic AB shares. Interest-bearing net debt was €171 million (€512 million). At the end of the period, equity ratio was 44.6% (41.2%) and gearing 9.8% (33.6%). The Group's net financial income were €37.9 million (€-1.5 million), positively affected by the €37.1 million non-recurring gain on SATO shares and interest income from liquid funds. Taxes The Group's income taxes for the first quarter were €21.7 million (€37.1 million). The amount has been calculated based on the anticipated effective tax rate of 21.5% for the whole year. Discontinued operations The sale to Rimi Baltic AB of food store properties that had been leased to it was concluded in January. The gain on the disposal was €28.2 million. Seasonal nature of operations The Group's operating activities are affected by seasonal fluctuations. The net sales and operating profits of its business segments are not earned evenly throughout the year. Instead they vary by quarter depending on the characteristics of each business segment. The first quarter typically has the least significance with respect to its contribution to the Group's net sales and profit. Personnel During the review period, the average number of personnel in the Kesko Group, including joint ventures, was 19,919 (22,614) converted into full-time employees. There was a decrease of 2,695 employees compared with the corresponding period of the previous year. In Finland, the average decrease was 320 employees, while outside Finland it was 2,375. The number of personnel decreased as a result of Kesko's disposal of its ownership interest in Rimi Baltic AB in December 2006. At the end of March 2007, the total number of personnel was 23,087 (26,049), of whom 13,362 (13,736) worked in Finland and 9,725 (12,313) in other countries. Compared with the end of March 2006, there was a decrease of 374 employees in Finland, and 2,588 in other countries. Market review According to the preliminary data of Statistics Finland, the Finnish economy grew by 5.5% in 2006, accelerated by a brisk growth in exports, private consumption and investments. In 2007, the growth rate of the Finnish economy is expected to decelerate compared with 2006. The Finnish economy is expected to grow by 2.7% in 2007. It is forecast that private consumption will increase by 2.4% and investments by 3%. The increase in consumer prices is forecast to reach 1.8%. Housing construction investments are estimated to grow by about 2% (ETLA, The Research Institute of the Finnish Economy). According to the preliminary data of Statistics Finland, in January-February 2007, the volume of Finnish retail trade increased by 6.7% compared with the corresponding period of the previous year. The increase in the wholesale trade volume was 5.4% in the same period. The volumes of Finnish retail and wholesale trade are expected to continue to grow also in 2007. The growth is expected to decelerate somewhat compared with previous years, as the growth of households' buying power slows down. According to Statistics Finland's consumer survey of March, consumers continued to be very confident about their own finances and the growth of Finland's economy. They also had higher expectations of a decrease in unemployment than in previous months. The Estonian economy is forecast to grow by 8.9%, the Latvian economy by 9.5% and the Lithuanian economy by 7.4% this year. Private consumption is estimated to grow by about 13% in Estonia and by 8-9% in Latvia and Lithuania. Consumer prices are forecast to rise by 4.7% in Estonia, by 6.2% in Latvia and by 4% in Lithuania (Nordea). The retail trade will continue growing briskly in all Baltic countries. This year the Swedish economy and private consumption are forecast to grow by 3.5%. The increase in consumer prices is anticipated to be 1.4% (Nordea). Due to brisk housing construction, total building investments are forecast to continue increasing at a rate of some 4% in 2007 (Sveriges Byggindustrier). The Norwegian economy is forecast to grow by 3.4% and private consumption by 3.2% in 2007. Consumer price inflation is anticipated to be approximately 1% (Nordea). The Russian economy is forecast to grow by 6.5%. Private consumption and investments are estimated to continue increasing at the brisk pace of 15% in 2007 (Nordea). The strong growth in private consumption will be reflected positively in the growth of retail trade. As income levels rise, households will have more money to spend on the maintenance of homes, gardens and countryside houses. The retail trade is growing rapidly and the competitive situation is tightening as new local and foreign operators enter the market. The market and outlook for each of Kesko's business divisions are discussed in the business division reviews of this interim financial report. Divisions Kesko Food In January-March, Kesko Food's net sales totalled €883 million, up by 8.4%. In January-March, Kesko Food's operating profit excluding non- recurring items was €29.0 million (3.3% of net sales), i.e. €8.6 million, or 0.8 percentage points, more than in the previous year. The operating profit increased as a result of improved cost efficiency and good retail sales growth. Kesko Food's operating profit was €29.2 million (€64.8 million). The comparable operating profit was increased by non-recurring gains from property disposals. Kesko Food's investments totalled €24.4 million (€15.9 million), of which investments in retail store sites were €19.0 million (€12.5 million). In January-March, the retail sales of the K-food stores increased by 8.1%, totalling €1,135 million (including VAT). In March, the sales increase was 9.1%. At the end of March, there were a total of 1,073 K-food stores. Kesko Food continued investing in the development of the K-food store network. During the first months of the year, K-supermarkets were opened in Siilinjärvi and Naantali, and a K-market in Nilsiä. In addition, other renovations and extensions were implemented. The total grocery trade market in Finland has continued to grow steadily. The growth rate for January-March is estimated at about 4.5% up on the previous year. Prices rose at an average monthly rate of 2.0% (Statistics Finland) compared with the comparable period of the previous year. Kesko Food's net sales and operating profit excluding non- recurring items are expected to increase in 2007. Rautakesko In January-March, Rautakesko's net sales amounted to €534.1 million, an increase of 24.7%. Net sales in Finland were €215.4 million, an increase of 15.2%. Net sales of foreign subsidiaries were €318.3 million, up 32.1%. Foreign subsidiaries contributed 59.6% to Rautakesko's net sales. In Sweden, the net sales of K-rauta AB increased by 23.3% to €33.7 million. In Estonia, Rautakesko's net sales were up by 36.7% to €17.3 million. In Lithuania, the net sales of UAB Senuku Prekybos Centras (Senukai), in which Rautakesko has a majority interest, increased by 36.9% to €89.2 million. In Latvia, Rautakesko's net sales increased by 77.1% to €17.3 million. In Russia, Stroymaster's net sales grew by 59.0% to €28.7 million. In Norway, Byggmakker's net sales grew by 21.7% and were €130 million. In January-March, Rautakesko's operating profit excluding non- recurring items was €16.3 million (3.0% of net sales), i.e. €7.4 million, or 0.9 percentage points, more than in the corresponding period of the previous year. The increase is particularly attributable to the good sales performance, and was recorded regardless of the fact that three new stores opened during the period under review. Rautakesko's operating profit for January- March was €18.6 million (€56.5 million). During the review and comparable periods, the operating profit was increased by non- recurring gains on real estate disposals. Rautakesko's investments totalled €19.9 million (€12.9 million), of which 41.2% (34.7%) was abroad. At the end of March, the K-rauta chain in Finland comprised 40 stores and the Rautia chain 105 stores. The sales of the K-Group hardware and builders' supplies stores in Finland increased by 15.5% to €203.7 million (including VAT). The sales of the Rautakesko B-to-B Service increased by 23.9%. Rautakesko operates 15 K-rauta stores in Sweden. The sixteenth K- rauta in Sweden opened in Umeå. A new K-rauta will be opened in Gävle in summer 2007 to replace the outlet destroyed in a fire in August 2006. In Estonia, Rautakesko has five stores now that the fifth K-rauta opened in Tallinn in March. In Latvia, Rautakesko now has five stores of its own and one partner store. In Lithuania, UAB Senuku Prekybos Centras (Senukai) operates 14 Senukai stores and 76 Partnershops. In Norway, Rautakesko owns 99.9% of Byggmakker Norge AS (former Norgros AS), a company managing the Byggmakker chain of hardware and building materials stores. The chain comprises 119 stores, 21 of which are owned by Byggmakker. The other stores of the chain are owned by retailer- entrepreneurs who have signed a chain agreement with Byggmakker. Byggmakker Norge AS opened a new Byggmakker store in Oslo in March. In Russia, Rautakesko has 7 K-rautas in St. Petersburg, two of which are new and operate in conformity with the K-rauta concept. The hardware and builders' supplies market is anticipated to grow in all countries in which Rautakesko operates. In 2007, 3-5% growth is forecast for the Nordic countries and 10% for the Baltic countries. About 10-15% growth is forecast for the St. Petersburg area. In 2007, Rautakesko will increase its investments in new store sites, employee competence and a uniform information system. It is expected that Rautakesko's net sales and its operating profit excluding non-recurring items will grow in 2007. VV-Auto VV-Auto's net sales totalled €247.9 million, up by 7.6 %. The new Volkswagen and Audi retail businesses acquired by VV-Auto at the beginning of March 2006 contributed 2.1% to the growth of VV- Auto's net sales. In January-March, the operating profit was €11.7 million (4.7% of net sales), up €0.6 million, or down 0.1 percentage points, compared with the corresponding period of the previous year. Investments totalled €1.6 million. In January-March, first registrations of new passenger cars totalled 40,204 in Finland, down by 8.2% on the previous year. Compared with the previous year, first registrations of vans were up by 11.7% to 4,887. The sale of new cars in Finland has been constrained by a rise in interest rates and uncertainty about future tax decisions. In addition, the prices of used cars have come down, which increases the customer's cash payment in exchange. In January-March, VV-Auto's retail sales volume increased significantly compared with the corresponding period of the previous year. In addition to the business acquisition concluded a year ago, the growth is attributable to investments in the outlets of Turku and Herttoniemi. In January-March, registrations of Volkswagen passenger cars totalled 3,747 and their market share was 9.3%, compared with 11.5% in the previous year. The number of Volkswagen vans registered was 902, while the market share was 18.5% (17.5%). In January-March, first registrations of Audis were 1,540, and the market share was 3.8%, compared with 3.5% in the previous year. The registrations of new Seat passenger cars totalled 492 in Finland, 216 in Estonia and 50 in Latvia. The market share in Finland was 1.2%, compared with 0.4% in the previous year. It is estimated that Finland's total market for passenger cars will drop slightly in 2007 from the level of the previous year to approximately 135,000. The total market for vans is expected to be slightly bigger than in 2006. VV-Auto's net sales are anticipated to grow in 2007. The operating profit excluding non-recurring items is expected to equal the level of the previous year. Anttila In January-March, Anttila's net sales totalled €119.7 million, representing the level of the corresponding period of the previous year. Sales were affected by the closing down of the City department store in Helsinki due to the expiry of the lease in January, and changes in the competitive situation due to the opening of new shopping centres. The sales of the Anttila department stores were €81.6 million (incl. VAT), down 1.3%. The sales of the Kodin Ykkönen department stores for home goods and interior decoration were €36.2 million (incl. VAT), up 1.8%. Distance sales in Finland were €22.0 million, representing the level of the corresponding period of the previous year. The sales trend was affected by a reduction in the number of illustrated catalogues. The sales of NetAnttila, engaging in distance sales, increased by 28.7%. Sales trends varied significantly by product line, with the best performance being recorded by fashion product lines. In January-March, Anttila's operating loss excluding non-recurring items was €0.9 million (-0.8% of net sales), an improvement by €0.6 million, or 0.5 percentage points, on the corresponding period of the previous year. Anttila's operating loss was €0.9 million (€10.8 million). Non-recurring items in the corresponding period of the previous year included €12.3 million in gains on the disposal of real estate. The growth of the home goods market varies considerably by product line. The growth is forecast to average 3-5%. Anttila's net sales are expected to increase in 2007, while its operating profit excluding non-recurring items is expected to represent the level of the previous year. Kesko Agro In January-March, Kesko Agro's net sales were €168 million, an increase of 3.6%. The net sales of foreign subsidiaries were €48 million, accounting for 28.6% of net sales. Kesko Agro's net sales in Finland were €118 million, up by 4.6%, which is mainly attributable to the trend in grain and tractor sales. In January-March, the sales of the agricultural and machinery trade in the Baltic countries decreased by 3.6%, due to a decline in grain sales. In January-March, Kesko Agro's operating loss excluding non- recurring items was €0.6 million (-0.4% of net sales), i.e. €0.9 million, or 0.6 percentage points, smaller than in the corresponding period of the previous year. The decrease of operating loss, non-recurring items excluded, was attributable to the good sales trend in Finland and cost savings. In January- March, Kesko Agro's operating loss was €0.6 million (€-0.1 million). Kesko Agro's comparable operating loss included non- recurring gains on the disposal of fixed assets. In January-March, investments totalled €2.2 million, 81% of which were in projects abroad. At the end of the period under review, the K-maatalous chain comprised 99 agricultural stores in Finland. The sales of the K- maatalous chain increased by 18.2% to €134 million (including VAT). Kesko Agro has six stores in Estonia, four in Latvia and three in Lithuania. It is estimated that Finland's total agricultural trade market will remain at the level of the previous year. The total Baltic market is anticipated to grow by about 5-10%. Regardless of the structural changes taking place in the sector, Kesko Agro's net sales and operating profit excluding non- recurring items are expected to remain at the same level in 2007 as in 2006. Other operating activities Other operating activities comprise the reporting for Konekesko, Intersport Finland, Indoor Group, Musta Pörssi, WellStep, Tähti Optikko Group and Kauko-Telko. In January-March, the aggregate net sales from other operating activities were €248 million, up 9.0%. Net sales from foreign operations were €51 million, contributing 20.7% to the net sales. In January-March, the operating profit from other operating activities, non-recurring items excluded, was €10.6 million (4.3% of net sales), which was up by €5.2 million, or 1.9 percentage points, on the corresponding period of the previous year. This is mainly attributable to the good profit performance of Indoor Group and Musta Pörssi. The operating profit was €10.7 million (€9.1 million). The operating profit was improved by the €0.1 million non-recurring gain on the disposal of fixed assets. The operating profit of the review period was improved by the €3.7 million non- recurring gain on the disposal of operating activities and fixed assets. In January-March, investments totalled €2,7 million. In January-March, the net sales of Konekesko were €62 million (€49 million), an increase of 26.7% from the previous year. In Finland, sales were €49.6 million, up by 22.6%. Konekesko's export sales totalled €13.8 million, an increase of 50.4%. In January-March, the net sales of Intersport Finland were €38 million, up by 11.5%. In January-March, Indoor Group's net sales were €46 million, up by 12.0%. The aggregate net sales of the furniture trade in the Baltic countries and Sweden were €9.9 million, an increase of 65.4%. In January-March, the net sales of Musta Pörssi Oy were €32 million, up by 14.3%. In January-March, WellStep Oy's net sales decreased by 17.2% to €6 million. In January-March, the net sales of the Tähti Optikko Group were €6 million, up 7.5%. In January-March, Kauko-Telko's net sales were €58 million (€62 million), down by 7.4% from the previous year. Foreign operations contributed €27.4 million, or 47.3%, to the net sales. It is expected that in 2007, the net sales of other operating activities will remain at the level of the previous year and the operating profit excluding non-recurring items will increase slightly. Changes in Group structure No significant changes took place in the Group structure during the period under review. Decisions of the Annual General Meeting Kesko Corporation's Annual General Meeting held on 26 March 2007 adopted the financial statements for 2006 and discharged the members of the Board of Directors and the Managing Director from liability. The Annual General Meeting also decided to distribute a dividend of €1.50 per share, as proposed by the Board of Directors, or total dividends of €146,314,669.50. The record date for dividend distribution was 29 March 2007 and the payment date was 5 April 2007. The Annual General Meeting decided to leave the number of Board members unchanged at seven. The members of the Board of Directors elected by the Annual General Meeting of 27 March 2006 are Pentti Kalliala, Ilpo Kokkila, Maarit Näkyvä, Seppo Paatelainen, Keijo Suila, Jukka Säilä and Heikki Takamäki. The term of office of each Board member, in accordance with the Articles of Association, is three years, with the term starting at the close of the General Meeting electing the member and expiring at the close of the third Annual General Meeting after the election (in 2009). The Annual General Meeting decided to leave the Board members' fees unchanged. The Annual General Meeting decided that the monthly fees will be as follows: Board Chairman €5,000, Deputy Chairman €3,500 and Board member €2,500. The Annual General Meeting also decided that a fee of €500 will be paid for each Board of Directors' meeting and for each meeting of its committees. However, the fee of the Chairman of a Committee meeting will be €1,000, unless he/she also acts as Chairman or Deputy Chairman of the Board of Directors. The Annual General Meeting elected PricewaterhouseCoopers Oy, Authorised Public Accountants, as the company's single auditor, with Pekka Nikula, B.Sc. (Econ.), APA, as the auditor with principal responsibility. The Annual General Meeting approved the Board of Directors' proposal to amend the Articles of Association. Most of the amendments were due to the new Companies Act. The major amendments were the removal of rules on minimum and maximum capital, and that the company has one auditor which should be a firm of auditors authorised by the Central Chamber of Commerce. The Annual General Meeting also approved the Board of Directors' proposal to authorise the Board of Directors to issue shares. By virtue of the authorisation, the Board can decide on the issuance of a maximum of 20,000,000 new B shares. New shares can be issued either against payment to company shareholders in proportion to their existing shareholdings regardless of whether they consist of A or B shares, or, in deviation from shareholders' pre-emptive subscription rights, to be used as consideration in possible company acquisitions, other company business rearrangements, or to finance investments. The company must have a weighty financial reason to deviate from the pre-emptive subscription rights. The authorisation includes an authorisation to decide on the share subscription price, to issue shares against non-cash consideration, and to decide on other matters relating to share issues. The authorisation is valid for two years after the decision of the Annual General Meeting. In addition, the Annual General Meeting approved the Board's proposal to grant stock options for no consideration to the Kesko Group management, other key Kesko personnel, and to Sincera Oy, a subsidiary wholly owned by Kesko Corporation. The company has a weighty financial reason for granting stock options because they are part of Kesko's share-based incentive plan. The options are intended to motivate the management and other key persons to work on a long-term basis in order to increase shareholder value, and to align their interests with those of their employer. The aggregate number of options is 3,000,000 at the maximum. The options give the right to subscribe for an aggregate maximum of 3,000,000 new B shares of the company. The share subscription price of a stock option is based on the trade volume weighted average price of a Kesko Corporation B share on the Helsinki Stock Exchange in April 2007, 2008 and 2009. The exercise period for 2007A options will be from 1 April 2010 to 30 April 2012, for 2007B options from 1 April 2011 to 30 April 2013, and for 2007C options from 1 April 2012 to 30 April 2014. The decisions of the Annual General Meeting were published in more detail in a stock exchange release on 26 March 2007. Corporate governance Kesko Food Ltd and Rautakesko Ltd, major subsidiaries fully owned by Kesko Corporation, elected the members of their Boards of Directors at their Annual General Meetings held on 23 March 2007. The compositions of the Boards were announced in a stock exchange release on 23 March 2007. The organising meeting of Kesko Corporation's Board of Directors held after the Annual General Meeting on 26 March 2007 decided to leave the compositions of its committees unchanged. The Board elected Maarit Näkyvä as the Chairman of its Audit Committee, and Seppo Paatelainen and Keijo Suila as its members. The Board elected Heikki Takamäki as the Chairman of its Compensation Committee, and Pentti Kalliala and Keijo Suila as its members. The committees' terms of office always expire at the Annual General Meeting. On the basis of the evaluation of independence carried out by the Board of Directors, all members of the Audit Committee are independent of the company and its significant shareholders. The decisions of the organising meeting of the Board of Directors were published in a stock exchange release on the day of the meeting. Shares and the securities market An increase in the share capital (€46,376) corresponding to the share subscriptions (23,188) made with the options of Kesko Corporation's year 2003 stock option scheme was entered in the Trade Register on 12 February 2007. The new shares were included in the main list of the Helsinki Stock Exchange with old B shares for public trading on 13 February 2007. In consequence of the increase, Kesko Corporation's share capital increased to a total of €195,086,226. Of all shares, 31,737,007, i.e. 32.5%, are A shares and 65,806,106, i.e. 67.5%, are B shares. The price of a Kesko A share was €38.43 at the end of 2006 and €38.90 at the end of the review period in March 2007, representing an increase of 1.2%. The price of a B share was €40.02 at the end of 2006 and €39.93 at the end of March 2007, a decrease of 0.2%. From the beginning of 2007 until the end of March 2007, the Helsinki Stock Exchange All Share index (OMX Helsinki) rose by 7.1%, the weighted OMX Helsinki CAP index by 6.1%, and the Consumer Staples Index by 2.5%. At the end of the review period, the market value of A shares was €1,234.6 million, while that of B shares was €2,627.6 million. Their combined market capitalisation was €3,862.2 million, an increase of €10 million from the beginning of the year. During the first months of 2007, approximately 1 million A shares were traded on the Helsinki Stock Exchange at a total value of €39.1 million, while 33.3 million B shares were traded at a total value of €1,334.4 million. The 2003D stock options of the year 2003 option scheme were included on the main list of the Helsinki Stock Exchange on 1 April 2005. The number of 2003D options traded during the review period was 42,788 at a total value of €1.6 million. The 2003E stock options were included on the main list of the Helsinki Stock Exchange on 3 April 2006. The number of 2003E options traded during the review period was 77,445 at a total value of €2.2 million. The 2003F stock options were included on the main list of the Helsinki Stock Exchange on 2 April 2007. The Board of Directors was authorised by the Annual General Meeting of 26 March 2007 to issue a maximum of 20,000,000 new B shares. The Board has no other valid authorisation concerning an issue of shares, options or other special rights entitling to shares. The Annual General Meeting of 26 March 2007 decided to grant stock options for no consideration to the Kesko Group management, other key Kesko personnel, and to Sincera Oy, a subsidiary wholly owned by Kesko Corporation. The stock options shall be marked with the symbols 2007A, 2007B and 2007C, and their total number shall be 3,000,000 at the maximum. Each option entitles its holder to subscribe for one B share, so that a maximum of 3,000,000 new B shares can be subscribed for with the options in compliance with the terms and conditions of the stock option plan. The Board's share issue authorisation and the year 2007 stock option scheme were disclosed in more detail in a stock exchange release on 26 March 2007. Flagging notifications Kesko Corporation did not receive any flagging notifications during the review period Main events Fiesta Real Estate AS, an Estonian subsidiary of Kesko Corporation, sold the food trade properties leased by Rimi Baltic AB in Estonia to Rimi Baltic for €50 million. Kesko was expected to gain approximately €25 million on the property transaction. The €28.2 million gain on the disposal was recognised in discontinued operations for the first quarter of 2007 (stock exchange release on 4 January 2007). On 16 February 2007, Kesko Corporation and Varma Mutual Pension Insurance Company completed a deal in which Kesko sold its SATO Corporation shares to Varma. Kesko's ownership interest in SATO was approximately 16.5%. The price of the shares was about €46 million and the gain on the disposal (€37.1 million) was recognised for the first quarter of 2007 (stock exchange releases on 7 and 16 February 2007). Events after the end of the review period No significant events took place after the end of the review period. Future outlook In 2007, the Kesko Group divisions are expected to perform as described in the above division reviews. The Group's sales growth will continue during the next six months, although it is expected that the peak of the economic cycle has been reached and that this will slow the sales growth rate. Due to the expansion of the retail store network and the more rapid market growth in the Baltic countries and Russia than in Finland, sales will continue to grow more strongly in other countries than Finland. It is expected that the Kesko Group's operating profit for the next six months, non-recurring items excluded, will remain at a good level despite the costs resulting from the major expansion of the retail store network. Helsinki, 20 April 2007 Kesko Corporation Board of Directors The figures of the interim financial report are unaudited. Further information is available from Arja Talma, Senior Vice President, CFO, telephone +358 1053 22113, and Juhani Järvi, Corporate Executive Vice President, Deputy to the President and CEO, telephone +358 1053 22209. An English-language web conference on the interim financial report will be held today at 14.30 (Finnish time). The web conference login is available at www.kesko.fi. KESKO CORPORATION Paavo Moilanen Senior Vice President, Corporate Communications ATTACHMENTS Consolidated income statement Consolidated balance sheet Consolidated statement of changes in equity Consolidated cash flow statement Group indicators Group contingent liabilities Net sales by division Operating profit by division Operating profit by division excluding non-recurring items Investments by division Group indicators by quarter Divisions' net sales by quarter Divisions' operating profits by quarter Divisions' operating profits, excluding non-recurring items, by quarter Personnel, average number and number at 31 March The K-Group retail sales Kesko Corporation's interim financial report for the first six months of 2007 will be published on 18 July 2007 and the interim financial report for the first nine months of 2007 on 17 October 2007. In addition, the Kesko Group sales figures will be published each month. News releases and other company information are available at www.kesko.fi. DISTRIBUTION Helsinki Stock Exchange Main news media ******** ATTACHMENTS: This interim financial report has been prepared in accordance with the IAS 34 standard. The interim financial report has been prepared in accordance with the same principles as the annual financial statements for 2006. Consolidated income statement (€ million) 1-3/2007 1-3/2006 Change, 1- % 12/2006 Net sales 2,193 1,971 11.3 8,749 Cost of sales -1,880 -1,695 10.9 -7,474 Gross profit 313 276 13.6 1,275 Other operating income 130 234 -44.4 661 Staff cost -131 -126 4.0 -544 Depreciation and impairment -29 -30 -3.9 -160 charges Operating expenses -221 -203 8.9 -869 Operating profit 62 151 -58.6 363 Financial income* 50 7 (..) 38 Financial expenses -12 -9 30.0 -44 Income from associates 1 1 -43.5 1 Profit before taxes 101 150 -32.9 358 Income tax -22 -37 -41.8 -107 Net profit from continuing 79 113 -29.9 251 operations Net profit from discontinued 28 -2 (..) 128 operations* Net profit 107 111 -3.6 379 Attributable to: Equity holders of the 104 110 -5.6 369 parent company Minority interest* 3 1 (..) 10 Earnings per share (€) for profit attributable to the equity holders of the parent company Continuing operations Basic 0.78 1.16 -32.8 2.47 Diluted 0.77 1.14 -32.7 2.45 Whole Group Basic 1.07 1.14 -6.4 3.80 Diluted 1.06 1.13 -6.2 3.76 *Change over 100% Income tax has been calculated on the profit for the review period as a proportion of the estimated tax for the whole financial year. Consolidated balance sheet (€ million) 31.3.200 31.3.200 Change, 31.12.20 7 6 % 06 ASSETS Non-current assets Intangible assets 247 306 -19.4 248 Tangible assets 1,126 1,150 -2.1 1,115 Investments 28 41 -31.1 37 Loans and receivables 130 140 -6.9 126 Pension assets 229 214 6.8 220 Total 1,760 1,851 -4.9 1,746 Current assets Inventories 841 822 2.3 789 Trade and other receivables 943 851 10.9 852 Marketable securities* 333 117 (..) 341 Cash on hand and balances 50 69 57 with banks -26.8 Non-current assets held for 1 3 -41.1 22 sale Total 2,168 1,862 16.5 2,061 Total assets 3,928 3,713 5.8 3,807 *Change over 100% Consolidated balance sheet (€ million) 31.3.2007 31.3.2006 Change, % 31.12.20 06 EQUITY AND LIABILITIES Equity 1,709 1,494 14.4 1,750 Minority interest 31 28 11.3 27 Total equity 1,740 1,522 14.4 1,777 Non-current liabilities Pension obligations 4 4 -0.4 4 Interest-bearing 319 400 -20.4 317 Non-interest-bearing 17 20 -16.3 18 Deferred tax liabilities 114 118 -2.9 113 Provisions 17 19 -9.9 17 Total 471 561 -16.1 469 Current Interest-bearing 236 298 -20.9 293 Non-interest-bearing 1,467 1,325 10.7 1,254 Provisions* 14 7 (..) 14 Total 1,717 1,630 5.4 1,561 Total equity and 3,928 3,713 5.8 3,807 liabilities *Change over 100% Consolidated statement of changes in equity (€ million) Share Issue Share Other Curre Reval Re- Minor Tot capit of premi- reser n-cy u- taine ity al al share um ves trans-ation d inter capit latio surpl earni est al n us ngs diffe r- ences Balance at 1 Jan. 193 1 189 246 -4 0 857 27 1,5 2006 08 Shares subscribed 1 1 2 4 for with options Option 1 1 cost Currency translatio n 0 0 0 difference s Fair value changes 4 4 Dividends -106 - 106 Net profit for the 110 1 111 period Balance at 31 Mar. 194 2 191 246 -4 4 861 28 1,5 2006 22 Balance at 1 Jan. 195 0 196 246 -6 0 1,120 27 1,7 2007 77 Shares subscribed 0 0 0 0 for with options Option 0 0 cost Currency translatio 1 1 2 n difference s Minority interest 1 1 Fair value changes -1 -1 Dividend -146 - 146 Net profit for the 104 3 107 period Balance at 31 Mar. 195 0 196 246 -5 -1 1,078 31 1,7 2007 40 Consolidated cash flow statement (€ million) 3/2007 3/2006 Change, 12/2006 % Cash flow from operating activities Profit before tax 129 149 -13.1 487 Planned depreciation 29 33 -12.8 142 Financial income and expenses* -38 2 (..) 7 Other adjustments -39 -121 -67.5 -215 Working capital Current non-interest-bearing -95 -90 6.2 -85 receivables, increase (-)/decrease (+) Inventories -51 -35 46.4 -36 increase (-)/decrease (+) Current non-interest-bearing 72 49 46.9 142 liabilities, increase (+)/decrease (-) Financial items and taxes -26 -15 68.9 -114 Net cash from operating -20 -28 -29.6 328 activities Cash flow from investing activities Investments -57 -53 6.9 -237 Disposals of fixed assets 112 233 -51.9 450 Loans granted 0 -19 -98.7 -10 Net cash used in investing 55 161 -65.9 203 activities Cash flow from financing activities Debt increase* 0 22 (..) 18 Debt decrease -53 -87 -39.4 -159 Dividends paid* 0 0 (..) -113 Equity increase 0 4 -96.4 6 Short-term money market 2 0 (..) -140 investments* Other items* 3 0 (..) -3 Net cash used in financing -48 -61 -21.9 -390 activities Change in cash and cash -12 72 (..) 141 equivalents* Cash and cash equivalents 257 114 (..) 115 at 1 Jan. * Currency translation difference 0 0 -59.9 1 Cash and cash equivalents at 31 244 186 31.1 257 Mar. *Change over 100% Group indicators 3/2007 3/2006 Change, % Return on invested capital, % 23.5 27.8 -15.5 Return on invested capital, %, 22.4 16.2 38.4 moving 12 months Return on equity, % 24.4 29.4 -17.0 Return on equity, moving 12 23.0 16.9 36.2 months Equity ratio, % 44.6 41.2 8.1 Investments, € million* 51.6 56.6 -8.9 Earnings per share, basic, €* 0.78 1.16 -32.8 Earnings per share, diluted, €* 0.77 1.14 -32.7 Earnings per share, basic, €** 1.07 1.14 -6.4 Earnings per share, diluted, 1.06 1.13 -6.2 €** Equity per share, € 17.52 15.43 13.5 Personnel, average 19,919 22,614 -11.9 * Continuing operations ** Whole Group Divisions Net sales by division, continuing operations 1-3/2007 1-3/2006 Change € million € million % Kesko Food, Finland 879 809 8.6 Kesko Food, other 4 5 -17.6 countries* Kesko Food, total 883 814 8.4 Rautakesko, Finland 215 187 15.2 Rautakesko, other 319 241 32.1 countries* Rautakesko, total 534 428 24.7 VV-Auto, Finland 242 227 6.5 VV-Auto, other 6 3 91.5 countries* VV-Auto, total 248 230 7.6 Anttila, Finland 114 114 -0.1 Anttila, other 6 6 -1.9 countries* Anttila, total 120 120 -0.2 Kesko Agro, Finland 118 113 4.6 Kesko Agro, other countries* 50 50 1.3 Kesko Agro, total 168 163 3.6 Other operating activities, Finland 197 189 4.0 Other operating 51 38 33.8 activities, foreign countries* Other operating 248 227 9.0 activities, total Common operations and -8 -11 - eliminations Finland, total 1,759 1,629 8.0 Other countries, total* 434 342 27.0 Group, total 2,193 1,971 11.3 *Exports and net sales in countries other than Finland Operating profit by 1-3/2007 1-3/2006 Change division, incl. non- recurring items € million € million € million Kesko Food 29.2 64.8 -35.6 Rautakesko 18.6 56.5 -37.9 VV-Auto 11.7 11.1 0.6 Anttila -0.9 10.8 -11.7 Kesko Agro -0.6 -0.1 -0.5 Other operating 10.7 9.1 1.7 activities Common operations and -6.3 -5.0 eliminations -1.4 Group's operating profit 62.4 150.8 -88.4 Operating profit by 1-3/2007 1-3/2006 Change division excl. non- recurring items, € million € million € million Kesko Food 29.0 20.5 8.6 Rautakesko 16.3 8.8 7.4 VV-Auto 11.7 11.1 0.6 Anttila -0.9 -1.5 0.6 Kesko Agro -0.6 -1.6 0.9 Other operating 10.6 5.5 5.2 activities Common operations and -6.3 -6.2 -0.2 eliminations Total 59.8 36.6 23.2 Investments by division 1-3/2007 1-3/2006 Change € million € million € million Kesko Food 24 16 8 Rautakesko 20 13 7 VV-Auto 2 15 -13 Anttila 1 2 -1 Kesko Agro 2 2 0 Others 3 9 -6 Group, total 52 57 -5 Group's contingent liabilities 3/2007 3/2006 Change, % (€ million) For own commitments 226 251 -10.1 For associates 0 0 0 For shareholders 1 1 0 For others 11 35 -68.0 Lease liabilities 12 7 66.7 Liabilities arising from derivative financial instruments Fair value Values of underlying 3/2007 3/2006 at 31 instruments Mar. 2007 at 31 Mar. Interest rate derivatives Forward and future contracts 48 - -0.15 Interest rate swap contracts 202 205 -0.69 Currency derivatives Forward and future contracts 369 136 1.69 Currency swap contracts 100 100 -10.31 Commodity derivatives Electricity derivatives 38 26 -0.60 Figures by quarter Group indicators by 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ quarter 2006 2006 2006 2006 2007 Net sales, € million 1,971 2,277 2,196 2,304 2,193 Change in net sales, % 15.6 12.8 6.2 8.2 11.3 Operating profit, € 150.8 91.6 82.6 37.6 62.4 million Operating profit, % 7.7 4.0 3.8 1.6 2.8 Operating profit excl. 36.6 89.4 82.4 71.4 59.8 non-recurring items, € million Operating profit excl. 1.9 3.9 3.7 3.1 2.7 non-recurring items, % Financial -1.5 0.4 1.5 -5.9 37.9 income/expenses, € million Profit before tax, € 150 92 84 31 101 million Profit before tax, % 7.6 4.0 3.8 1.4 4.6 Return on invested 27.8 17.7 16.5 30.4 23.5 capital, % Return on equity, % 29.4 11.3 17.4 36.4 24.4 Equity ratio, % 41.2 41.7 43.8 47.0 44.6 Investments, € million* 56.6 60.1 45.8 88.0 51.6 Earnings/share, €* 1.14 0.42 0.67 0.21 0.77 Equity/share, € 15.43 15.79 16.46 17.94 17.52 * Continuing operations Divisions' net sales by 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ quarter, € million 2006 2006 2006 2006 2007 Kesko Food 814 931 899 971 883 Rautakesko 428 572 588 541 534 VV-Auto 230 221 186 152 248 Anttila 120 111 132 185 120 Kesko Agro 163 212 174 206 168 Other operating 227 239 224 259 248 activities Common operations and -11 -9 -7 -10 -8 eliminations Group's net sales 1,971 2,277 2,196 2,304 2,193 Divisions' operating 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ profits by quarter incl. 2006 2006 2006 2006 2007 non-recurring items, € million Kesko Food 64.8 38.9 32.6 36.9 29.2 Rautakesko 56.5 32.0 34.3 16.5 18.6 VV-Auto 11.1 11.9 5.0 1.4 11.7 Anttila 10.8 -0.6 7.1 21.4 -0.9 Kesko Agro -0.1 8.1 1.0 0.3 -0.6 Other operating 9.1 7.7 6.3 -17.3 10.7 activities Common operations -1.4 -6.4 -3.7 -21.6 -6.3 Group's operating profit 150.8 91.6 82.6 37.6 62.4 Divisions' operating 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ profits, excl. non- 2006 2006 2006 2006 2007 recurring items, by quarter, € million Kesko Food 20.5 38.7 32.5 37.0 29.0 Rautakesko 8.8 31.7 34.2 16.5 16.3 VV-Auto 11.1 11.9 5.0 1.5 11.7 Anttila -1.5 -0.6 7.2 21.4 -0.9 Kesko Agro -1.6 8.1 1.0 0.3 -0.6 Other operating 5.5 7.0 6.2 2.7 10.6 activities Common operations -6.2 -7.4 -3.7 -8.0 -6.3 Group's operating profit 36.6 89.4 82.4 71.4 59.8 Personnel, 1-3/2007 1-3/2006 Change average number Kesko Food 5,647 6,159 -512 Rautakesko 8,271 6,433 1,838 VV-Auto 727 389 338 Anttila 1,935 2,011 -76 Kesko Agro 841 877 -36 Others 2,498 2,417 81 Group companies, total 19,919 18,286 1,633 Kesko Food's joint 0 4,328 -4,328 ventures Kesko Group, total 19,919 22,614 -2,695 Number of personnel 2007 2006 Change at 31 Mar.* Kesko Food 7,335 7,722 -387 Rautakesko 8,970 6,968 2,002 VV-Auto 747 400 347 Anttila 2,583 2,697 -114 Kesko Agro 857 910 -53 Others 2,595 2,673 -78 Group companies, total 23,087 21,370 1,717 Kesko Food's joint 0 4,679 -4,679 ventures Kesko Group, total 23,087 26,049 -2,962 * Total number including part-time employees K-Group's retail sales (incl. VAT) in January-March 2007 (preliminary data): 1.1. - 31.3.2007 K-Group food stores € Change, million % K-citymarket 394.8 8.0 K-supermarket 340.5 6.8 K-market 277.9 12.4 Other K-food stores and 121.5 -2.4 mobile stores Finland, total 1,134.8 8.1 Food stores, total 1,134.8 8.1 K-Group hardware and builders' supplies stores K-rauta 114.2 16.3 Rautia 89.5 14.4 Finland, total 203.7 15.5 K-rauta, Sweden 42.5 23.9 K-rauta, Estonia 20.5 38.3 K-rauta, Latvia 20.4 77.3 Senukai, Lithuania 105.5 36.7 Stroymaster, Russia 33.9 59.0 Byggmakker, Norway 231.6 16.9 Other countries, total 454.4 27.2 Hardware and builders' 658.1 23.3 supplies stores, total Kesko Group car stores Helsingin VV-Auto and Turun 115.6 35.1 VV-Auto Finland, total 115.6 35.1 Anttila Anttila department stores 81.6 -1.3 Kodin Ykkönen department 36.2 1.8 stores for home goods and interior decoration Distance sales (Mail Order 22.0 0.8 and NetAnttila) Finland, total 139.8 -0.2 Anttila Mail Order, Estonia 6.1 -3.2 and Latvia Other countries, total 6.1 -3.2 Anttila, total 145.9 -0.3 K-Group agricultural stores K-maatalous 134.2 18.2 Finland, total 134.2 18.2 Kesko Agro, Estonia 14.5 7.8 Kesko Agro, Latvia 19.4 -1.4 Kesko Agro, Lithuania 17.1 27.8 Other countries, total 51.0 9.7 Agricultural stores, total 185.2 15.7 Other operating activities Kesko Group machinery stores Yahama Center 2.1 -2.3 Finland, total 2.1 -2.3 K-Group home and speciality goods stores Intersport 65.8 8.2 Kesport 7.0 5.4 Asko 22.2 2.9 Sotka 27.0 8.5 Musta Pörssi 44.9 10.8 Andiamo and K-kenkä 9.1 8.4 Kenkäexpertti 2.7 8.7 Tähti Optikko chain 13.3 3.5 Finland, total 194.1 7.6 Furniture sales, Sweden, 12.0 64.0 Estonia and Latvia Other countries, total 12.0 64.0 Home and speciality goods 204.1 7.4 stores, total Other operating activities, 206.2 9.9 total Finland, total 1,922.2 10.1 Other countries, total 523.5 25.5 Retail sales, total 2,445.7 13.1 |
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