Kesko's financial statements release 2018: All-time-best comparable operating profit

FINANCIAL PERFORMANCE IN BRIEF, CONTINUING OPERATIONS:

  • The Group's net sales in January-December totalled €10,383 million (€10,492 million), an increase of 3.5% in comparable terms 
  • Comparable operating profit was €332.2 million (€296.2 million) 
  • Operating profit was €307.9 million (€338.6 million) 
  • Cash flow from operating activities was €437.1 million (€291.9 million) 
  • Comparable return on capital employed was 14.0% (13.3%)  
  • Comparable profit before tax was €327.5 million (€300.3 million) 
  • Comparable earnings per share were €2.47 (€2.29) 
  • In line with Kesko’s updated dividend policy, the Board of Directors proposes a dividend of €2.34 per share, to be paid in two equal instalments in April and October
  • In comparable terms, the net sales for continuing operations for the next 12 months are expected to exceed the level of the previous 12 months. The comparable operating profit for continuing operations for the next 12-month period is expected to exceed the level of the preceding 12 months. However, investments in information systems and digital services will burden profitability during the period. In the car trade, profitability is burdened by the shift to WLTP emissions testing, which postpones car delivery times. In the building and technical trade, the share of own retailing has risen following the acquisitions carried out, which increases profit-related seasonal fluctuations. 

KEY PERFORMANCE INDICATORS

  1-12/2018  1-12/2017  10-12/2018  10-12/2017 
Continuing operations         
Net sales, € million  10,383 10,492 2,655 2,575
Operating profit, comparable, € million  332.2 296.2 90.5 80.4
Operating margin, comparable  3.2 2.8 3.4 3.1
Operating profit, € million  307.9 338.6 79.8 70.8
Profit before tax, comparable, € million  327.5 300.3 89.8 81.6
Profit before tax, € million  296.8 342.4 72.6 71.7
Cash flow from operating activities, € million  437.1 291.9 127.4 110.6
Capital expenditure, € million  417.6 333.5 67.7 117.1
Return on capital employed, comparable, %, rolling 12 months  14.0 13.3 14.0 13.3
Group         
Return on equity, comparable, %, rolling 12 months  11.7 10.9 11.7 10.9
         
Earnings per share, €, basic and diluted         
Continuing operations  2.18 2.75 0.54 0.57
Discontinued operations  -0.56 -0.16 -0.02 -0.14
Group, total  1.61 2.59 0.52 0.43
Earnings per share, comparable, €, basic         
Continuing operations  2.47 2.29 0.70 0.65
  31.12.2018 31.12.2017  
Group       
Equity ratio, %  51.4 50.4  
Equity per share, €  21.06 21.45  

PRESIDENT AND CEO MIKKO HELANDER:

The cornerstones of Kesko’s strategy are profitable growth, focus on core businesses, and “One unified K”. All our businesses are heavily customer-oriented and use quality to differentiate themselves from the competition in both stores and digital channels. Successful strategy execution enabled us to achieve Kesko’s all-time best result in 2018. We were also able to meet the 14% target level for return on capital employed set in 2015. We continued our strong transformation and improved competitiveness in all divisions, while also carrying out various acquisitions in line with our strategy. In addition to good dividend capacity, our strong financial position enables investments in growth also in upcoming years. In line with Kesko’s updated dividend policy, the Board of Directors proposes to the Annual General Meeting a total dividend payment of €231,702,946.02million, i.e. €2.34 per share, and proposes that the dividend be paid in two equal instalments in April and October.

In the grocery trade division, sales development was good in all chains, and our market share strengthened further. We continued to remodel our stores and implement store-specific business ideas, which resulted in marked growth in customer numbers and customer satisfaction. We have already updated the look and selections of a significant number of our stores, and will continue the redesigns this year. Growth also continued strong online, and more than 150 K-food stores offered online sales of groceries by the end of the year. We strengthened Kespro’s competitiveness in foodservice wholesale by acquiring leading Finnish fresh fish and meat providers Kalatukku E. Eriksson and Reinin Liha. The division’s profitability development was also good, improved by strong sales growth and synergies obtained in the integration of Suomen Lähikauppa.

In the building and technical trade, strategy execution proceeded as planned. We made significant changes to the division’s management model at the start of the year, and our increased country-specific focus resulted in improved competitiveness and profitability. Comparable net sales and operating profit grew for both the building and home improvement trade and Onninen. Sales and profit grew especially in Finland, the Baltics and Poland. Our strategic acquisitions for the Byggmakker chain in Norway create a good basis for further growth in upcoming years. In Sweden, we initiated a comprehensive transformation programme under new management, which resulted in a turnaround in comparable net sales in the fourth quarter.

The year overall was good for the car trade division, although new WLTP emissions testing caused significant disturbances in European car trade in the latter half of the year. Porsche’s performance was particularly strong, with first registrations up by more than 60% in Finland. The market shares of SEAT and Volkswagen also grew. Operating profit for the division improved, thanks to steady sales development in servicing, after-sales and used cars. During the year, we launched various new mobility services, such as leasing products and car sharing services, and introduced electric car charging points to K-stores, thus enabling growth in customer flows across divisions. We expect the market to normalise following the WLTP-related disturbances by the end of the first quarter of 2019. The strategy for the car trade division is based on extensive cooperation with the world’s leading car manufacturer, the Volkswagen Group. In line with the strategy, we will expand our selection this year to include Bentley’s range.

The objective of our corporate responsibility work is to enable a sustainable lifestyle for our current and future generations of customers in the areas of food, mobility and living. We continued to actively implement our sustainability strategy, for example, through increased audits in our purchasing chains and continued investments in renewable energy and improved energy efficiency. We were pleased that Kesko was recently again included on the Global 100 list as the most sustainable trading sector company in the world.

The outlook for 2019 is also good. Our growth strategy is working and we will continue its consistent execution in an effort to become an even stronger and more customer-oriented retail company. We will be increasing sales and efficiency further by operating as one unified K. In the grocery trade, our focus will be on growing sales and further improving customer experience. We will continue to implement store-specific business ideas and strengthen retailer entrepreneurship. We will also seek growth in Kespro’s foodservice wholesale. In the building and technical trade, our focus will be on increasing sales and profitability, especially in Sweden. We will seek growth in Northern Europe also through acquisitions. In the car trade, we will further tighten our partnership with the Volkswagen Group.

 

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