Kesko's interim report for the period of 1 Jan. to 31 Mar. 2014: Operating profit excl. non-recurring items improved and was 19.1 million
KESKO CORPORATION INTERIM REPORT 24.04.2014 AT 09.00 1(28)
Kesko's interim report for the period of 1 Jan. to 31 Mar. 2014: Operating profit excl. non-recurring items improved and was 19.1 million
Financial performance in brief:
*The Group's net sales for January-March 2,129 million, change -1.4%.
*Operating profit excluding non-recurring items increased to 19.1 million (18.6 million) due to the enhancement measures implemented.
*Earnings per share excluding non-recurring items 0.15 (0.11).
*Equity ratio 53.2% (51.7%).
*Kesko Group's net sales and operating profit excluding non-recurring items for the next 12 months are expected to remain at the level of the preceding 12 months, unless the overall consumer demand weakens significantly.
Key performance indicators
| 1-3/2014 | 1-3/2013 | |||
| Net sales, million | 2,129 | 2,159 | ||
| Operating profit excl. non- recurring items, million | 19.1 | 18.6 | ||
| Operating profit, million | -13.0 | 19.2 | ||
| Profit before tax, million | -14.4 | 15.8 | ||
| Capital expenditure, million | 43.4 | 41.5 | ||
| Earnings per share, diluted, | -0.11 | 0.11 | ||
| Earnings per share excl. non-recurring items, basic, | 0.15 | 0.11 | ||
| 31.3.2014 | 31.3.2013 | |||
| Equity ratio, % | 53.2 | 51.7 | ||
| Equity per share, | 22.83 | 22.62 |
FINANCIAL PERFORMANCE
Net sales and profit for January-March 2014
The Group's net sales for January-March 2014 were 2,129 million, which is 1.4% down on the corresponding period of the previous year (2,159 million). Net sales increased in the building and home improvement trade and in the car and machinery trade and declined in the home and speciality goods trade and in the food trade. In Finland, the weakening of the general economic situation and consumer demand contributed to the development. In Finland, net sales decreased by 3.3% and in other countries net sales increased by 9.3%. International operations accounted for 16.3% (14.7%) of the net sales. Net sales in foreign currencies increased clearly in foreign operations, but the weakening of the exchange rates of the Russian rouble, the Norwegian krone and the Swedish krona with respect to the euro had an impact on the development in euros.
| 1-3/2014 | Net sales, million | Change, % | Operating profit excl. non- recurring items, million | Change, million |
| Food trade | 1,007 | -3.7 | 46.5 | -1.7 |
| Home and speciality goods trade | 312 | -9.5 | -22.7 | -4.9 |
| Building and home improvement trade | 581 | +3.5 | -10.4 | +6.2 |
| Car and machinery trade | 272 | +9.2 | 8.2 | +0.5 |
| Common operations and eliminations | -44 | +4.6 | -2.5 | +0.5 |
| Total | 2,129 | -1.4 | 19.1 | +0.5 |
The operating profit excluding non-recurring items for January-March was 19.1 million (18.6 million). Profitability was improved by the increase of sales in the building and home improvement trade and the car and machinery trade as well as the enhancement measures implemented in all operations. Operating expenses excluding non-recurring items decreased by 1.3% despite the expansion of the store site network and cost inflation.
Operating profit was -13.0 million (19.2 million). The operating profit includes -32.2 million (0.6 million) of non-recurring items. The non-recurring items include a restructuring provision of 30.0 million for measures to be taken to improve Anttila's profitability.
The Group's profit before tax for January-March was -14.4 million (15.8 million).
The Group's earnings per share excluding non-recurring items were 0.15 (0.11). The Group's earnings per share were -0.11 (0.11). The Group's equity per share was 22.83 (22.62).
In January-March, the K-Group's (i.e. Kesko's and the chain stores') retail and B2B sales (VAT 0%) were 2,555 million, down 0.7% compared to the previous year. The K-Plussa customer loyalty programme gained 14,874 new households in January-March. At the end of March, there was 2,257,144 K-Plussa households and 3.9 (3.8) million K-Plussa cardholders.
Finance
In January-March, the cash flow from operating activities was -94.8 million (-58.7 million). The cash flow from investing activities was -43.7 million (-41.9 million) including a 1.9 million (2.5 million) amount of proceeds from the sale of fixed assets.
The Group's liquidity remained at an excellent level in January-March. At the end of the period, liquid assets totalled 532 million (411 million). Interest-bearing liabilities were 557 million (644 million) and interest-bearing net debt 25 million (233 million) at the end of March. Equity ratio was 53.2% (51.7%) at the end of the period.
In January-March, the Group's net finance costs were 1.6 million (3.3 million). Net finance costs decreased due to gains on rouble currency hedging.
Taxes
In January-March, the Group's taxes were positive by 2.5 million (-4.8 million) due to deferred tax receivables from non-recurring expenses.
Capital expenditure
In January-March, the Group's capital expenditure totalled 43.4 million (41.5 million), or 2.0% (1.9%) of net sales. Capital expenditure in store sites was 27.8 million (31.6 million), in IT 10.8 million (5.6 million) and other capital expenditure was 4.8 million (4.2 million). Capital expenditure in foreign operations represented 37.2% (36.5%) of total capital expenditure.
Kesko's strategic focus areas and profitability programme
The key focus areas in Kesko's business operations are to strengthen sales growth and the return on capital in all divisions, to exploit business opportunities in e-commerce and in Russia, and to maintain good solvency and dividend payment capacity.
Profitability programme
Because of the further weakened economic situation and consumer demand, Kesko continues to implement the profitability programme with the key objective of improving the Group's cost-effectiveness. Cost savings will be implemented in all divisions and all cost groups. The most significant measures will be targeted at the operations with low profitability.
Improving Anttila's profitability
In order to improve Anttila's profitability, a decision was made during the reporting period to close eight Anttila department stores operating in rented premises. The department stores to be closed have a total of some 210 employees. In addition, 25 full-time employees will be reduced in other Anttila department stores. In addition, employee co-operation negotiations were started in the Kodin1 chain and in the centralised operations of Anttila Oy and K-citymarket Oy during the reporting period. In the Kodin1 department store chain, four Kodin1 department stores are planned to be closed within the next two years. The negotiations will concern a total of some 1,350 persons, and the estimated need for reduction is at most 220 full-time employees. In addition to the profitability driven renewal of Anttila's business, the option of selling Anttila Oy is also being investigated.
Kesko looks into setting up a real estate fund
Kesko is looking into selling some of its store sites to a fund to be set up with Kesko as one of its major investors. Kesko Group would continue its operations in the store sites under long-term leases signed in connection with their sales to the fund.
Kesko's objective is to set up a fund of mainly Kesko-owned store sites and shopping centres in Finland, Sweden and Russia with a maximum fair value of approximately 750 - 950 million.
Launching the real estate investment fund depends, in addition to investor interest, on whether it is possible for Kesko to achieve such terms and conditions in the arrangement that are commercially viable for it, taking the Group's strong financial position into account. Moreover, starting a real estate investment fund is subject to the authorisation of the Financial Supervisory Authority.
The possible fund is expected to be launched in the course of 2014.
Personnel
In January-March, the average number of employees in Kesko Group was 19,616 (19,126) converted into full-time employees. In Finland, the average decrease was 185 people, while outside Finland, there was an increase of 676 people.
At the end of March 2014, the number of employees was 23,425 (22,881), of whom 12,152 (12,298) worked in Finland and 11,273 (10,583) outside Finland. Compared to the end of March 2013, there was a decrease of 146 people in Finland and an increase of 690 people outside Finland.
In January-March, the Group's staff cost was 156.0 million, showing a 1.7% increase compared to the previous year.
SEGMENT INFORMATION
Seasonal nature of operations
The Group's operating activities are affected by seasonal fluctuations. The net sales and operating profits of the reportable segments are not earned evenly throughout the year. Instead, they vary by quarter depending on the characteristics of each segment.
Food trade
| 1-3/2014 | 1-3/2013 | |||
| Net sales, million | 1,007 | 1,045 | ||
| Operating profit excl. non- recurring items, million | 46.5 | 48.2 | ||
| Operating margin excl. non-recurring items, % | 4.6 | 4.6 | ||
| Capital expenditure, million | 18.0 | 16.5 | ||
| Net sales, million | 1-3/2014 | Change, % | ||
| Sales to K-food stores | 751 | -6.6 | ||
| Kespro | 182 | -3.4 | ||
| K-ruoka, Russia | 25 | (..) | ||
| Others | 50 | +10.4 | ||
| Total | 1,007 | -3.7 |
January-March 2014
In the food trade, the net sales for January-March were 1,007 million (1,045 million), down 3.7%. The net sales development was partly impacted by the fact that Easter fell in April. The grocery sales of K-food stores in Finland decreased by 3.5% (VAT 0%) which is estimated to have been below the total market development. The rise of consumer prices in the grocery trade has slowed. The sales and profitability of the food stores in Russia were realised better than expected for the reporting period despite the weakening of the Russian rouble.
In January-March, the operating profit excluding non-recurring items of the food trade was 46.5 million (48.2 million), or 1.7 million down on the previous year. Profitability was improved by savings achieved from enhanced operations and adjustment of capital expenditure. Operating profit excluding non-recurring items was negatively impacted bya 0.3 million loss (2.3 million gain) on measurement of derivatives used for hedging electricity purchases. Operating profit was 45.4 million (48.2 million). Non-recurring items were 1.1 million (0.0 million).
The capital expenditure of the food trade in January-March was 18.0 million (16.5 million), of which 16.2 million (14.6 million) in stores sites.
In January-March, three new K-supermarkets and one new K-market were opened. The most significant store sites being built are a K-citymarket in the Puuvilla shopping centre in Pori and K-supermarkets in downtown Helsinki, in Jakomäki, Helsinki, and in Hanko, Hollola and Lappeenranta.
The objective of Kesko Food is to open three new food stores in the St Petersburg area in 2014.
| Number of stores at 31 March | 2014 | 2013 |
| K-citymarket | 80 | 80 |
| K-supermarket | 219 | 214 |
| K-market (incl. service station stores) | 441 | 448 |
| K-ruoka, Russia | 4 | 1 |
| Others* | 172 | 190 |
* incl. online food store
Home and speciality goods trade
| 1-3/2014 | 1-3/2013 | |||
| Net sales, million | 312 | 345 | ||
| Operating profit excl. non- recurring items, million | -22.7 | -17.8 | ||
| Operating margin excl. non-recurring items, % | -7.3 | -5.2 | ||
| Capital expenditure, million | 3.8 | 8.0 | ||
| Net sales, million | 1-3/2014 | Change, % | ||
| K-citymarket home and speciality goods | 133 | -4.8 | ||
| Anttila | 76 | -14.1 | ||
| Intersport, Finland | 45 | -10.1 | ||
| Intersport, Russia | 5 | -26.9 | ||
| Indoor | 42 | -4.8 | ||
| Musta Pörssi | 6 | -41.1 | ||
| Kenkäkesko | 6 | -4.8 | ||
| Total | 312 | -9.5 |
January-March 2014
In the home and speciality goods trade, the net sales for January-March were 312 million (345 million), down 9.5%. Consumer demand in the home and speciality goods trade has continued to weaken, and the change in customer behaviour has strengthened during the reporting period. Sales declined especially in the department store trade. The sales of clothing and sports goods decreased because of the weak winter season. Net sales performance was also impacted by the network changes in Musta Pörssi and Intersport Russia.
In January-March, the operating profit excluding non-recurring items of the home and speciality goods trade was -22.7 million (-17.8 million), down 4.9 million compared to the previous year. The development was impacted by the growing losses caused by the decline in Anttila's sales. The profitability of K-citymarket home and speciality goods was better than the year before. Intersport's profitability in Finland remained at a good level despite weaker sales in winter sports equipment compared to previous year. Operating profit was -54.5 million (-17.7 million). The most significant non-recurring item was a restructuring provision of 30.0 million for measures to be taken to improve the profitability of Anttila.
The capital expenditure of the home and speciality goods trade in January-March was 3.8 million (8.0 million).
The most significant new store openings in January-March 2014 were Asko and Sotka in Pirkkala.
| Number of stores at 31 March | 2014 | 2013 |
| K-citymarket, home and speciality goods* | 81 | 81 |
| Anttila department stores* | 31 | 31 |
| Kodin1 department stores for interior decoration and home goods* | 13 | 13 |
| Intersport, Finland | 63 | 62 |
| Budget Sport* | 11 | 11 |
| Asko and Sotka | 87 | 84 |
| Musta Pörssi* | 6 | 25 |
| Kookenkä* | 46 | 48 |
| Anttila, Baltics* | 3 | 3 |
| Intersport, Russia | 20 | 21 |
| Asko and Sotka, Baltics* | 10 | 10 |
* incl. online stores
Building and home improvement trade
| 1-3/2014 | 1-3/2013 | |||
| Net sales, million | 581 | 562 | ||
| Operating profit excl. non- recurring items, million | -10.4 | -16.6 | ||
| Operating margin excl. non-recurring items, % | -1.8 | -3.0 | ||
| Capital expenditure, million | 12.0 | 12.5 | ||
| Net sales, million | 1-3/2014 | Change, % | ||
| Rautakesko, Finland | 289 | +2.9 | ||
| K-rauta, Sweden | 38 | +0.5 | ||
| Byggmakker, Norway | 100 | -1.5 | ||
| K-rauta, Estonia | 14 | +16.5 | ||
| K-rauta, Latvia | 10 | +4.5 | ||
| Senukai, Lithuania | 58 | +21.3 | ||
| K-rauta, Russia | 49 | -4.0 | ||
| OMA, Belarus | 24 | +14.0 | ||
| Total | 581 | +3.5 |
January-March 2014
In the building and home improvement trade, the net sales for January-March were 581 million (562 million), up 3.5%. The net sales growth in the building and home improvement trade was 8.7% in terms of local currencies. The net sales increased in all operating countries in terms of local currencies. The good sales performance was impacted especially by successful sales of building materials and B2B sales as well as the fact that Easter fell in April.
In Finland, the net sales for January-March were 289 million (281 million), an increase of 2.9%. The building and home improvement products contributed 197 million to the net sales in Finland, an increase of 3.2%. The agricultural supplies trade contributed 92 million to the net sales, up 2.1%.
The retail sales of the K-rauta and Rautia chains in Finland grew by 5.2% to 179 million (VAT 0%). The sales of Rautakesko B2B Service increased by 7.3%. The K-Group's sales of building and home improvement products in Finland increased by a total of 5.6% and the total market (VAT 0%) is estimated to have grown 1-2% in January-March (Kesko's own estimate). The retail sales of the K-maatalous chain were 91 million (VAT 0%), down 1.3%.
In January-March, the net sales from foreign operations of the building and home improvement trade were 292 million (281 million), an increase of 4.2%. In terms of local currencies, the net sales from foreign operations increased by 14.5%. In Sweden, net sales in terms of kronas were up by 4.7% and in Norway net sales were up by 10.7% in terms of krones. In the Baltic countries, net sales increased by 18.1%. In Russia, net sales in terms of roubles increased by 14.9%. Foreign operations contributed 50.3% (50.0%) to the net sales of the building and home improvement trade.
In January-March, the operating profit excluding non-recurring items of the building and home improvement trade was -10.4 million (-16.6 million), up 6.2 million compared to the previous year. Due to increase in sales and enhancement measures, profit performance was clearly positive. Operating profit was -9.7 million (-16.1 million).
In January-March, the capital expenditure of the building and home improvement trade was 12.0 million (12.5 million), of which 76.2% (49.2%) abroad. Capital expenditure in store sites represented 75.4% of total capital expenditure.
| Number of stores at 31 March | 2014 | 2013 |
| K-rauta* | 42 | 42 |
| Rautia* | 98 | 99 |
| K-maatalous* | 83 | 83 |
| K-rauta, Sweden | 20 | 21 |
| Byggmakker, Norway | 86 | 89 |
| K-rauta, Estonia | 8 | 8 |
| K-rauta, Latvia | 8 | 8 |
| Senukai, Lithuania | 18 | 17 |
| K-rauta, Russia | 13 | 14 |
| OMA, Belarus | 10 | 9 |
* In 2014, 47 Rautia stores also operated as K-maatalous stores.
In 2013, 1 K-rauta store and 48 Rautia stores also operated as K-maatalous stores.
Car and machinery trade
| 1-3/2014 | 1-3/2013 | |||
| Net sales, million | 272 | 249 | ||
| Operating profit excl. non- recurring items, million | 8.2 | 7.8 | ||
| Operating margin excl. non-recurring items, % | 3.0 | 3.1 | ||
| Capital expenditure, million | 2.9 | 3.9 | ||
| Net sales, million | 1-3/2014 | Change, % | ||
| VV-Auto | 214 | +11.2 | ||
| Konekesko | 58 | +2.0 | ||
| Total | 272 | +9.2 |
January-March 2014
In January-March, the net sales of the car and machinery trade were 272 million (249 million), up 9.2%.
VV-Auto's net sales for January-March were 214 million (193 million), an increase of 11.2%. In January-March, the combined market performance of first time registered passenger cars and vans was +10.0%.
In January-March, the combined market share of passenger cars and vans imported by VV-Auto was 20.9% (19.9%). Volkswagen was the market leader in both passenger cars and vans.
Konekesko's net sales for January-March were 58 million (57 million), up 2.0% compared to the previous year. Net sales in Finland were 36 million, down 6.7%. The net sales from Konekesko's foreign operations were 22 million, up 20.9%.
In January-March, the operating profit excluding non-recurring items of the car and machinery trade was 8.2 million (7.8 million), up 0.5 million compared to the previous year. Due to increase in sales and enhancement measures, profitability in the car trade remained at a good level.
The operating profit for January-March was 8.2 million (7.8 million).
The capital expenditure of the car and machinery trade in January-March was 2.9 million (3.9 million).
| Number of stores at 31 March | 2014 | 2013 |
| VV-Auto, retail trade | 10 | 10 |
| Konekesko | 1 | 1 |
Changes in the Group composition
No significant changes took place in the Group composition during the reporting period.
Shares, securities market and Board authorisations
At the end of March 2014, the total number of Kesko Corporation shares was 99,917,760, of which 31,737,007, or 31.8%, were A shares and 68,180,753, or 68.2%, were B shares. At 31 March 2014, Kesko Corporation held 1,000,075 own B shares as treasury shares. These treasury shares accounted for 1.47% of the number of B shares and 1.00% of the total number of shares, and 0.26% of votes carried by all shares of the company. The total number of votes carried by all shares was 385,550,823. Each A share carries ten (10) votes and each B share one (1) vote. The company cannot vote with own shares held as treasury shares and no dividend is paid on them. At the end of March 2014, Kesko Corporation's share capital was 197,282,584. During the reporting period, the number of B shares was increased once to account for the shares subscribed for with the options based on the 2007 option scheme. The increase was made on 10 February 2014 (85,067 B shares) and announced in a stock exchange notification on the same day. The shares subscribed for were listed for public trading on NASDAQ OMX Helsinki (Helsinki Stock Exchange) with the old B shares on 11 February 2014. The subscription price of 1,041,220.08 received by the company was recorded in the reserve of invested non-restricted equity.
The price of a Kesko A share quoted on NASDAQ OMX Helsinki was 26.80 at the end of 2013, and 31.22 at the end of March 2014, representing an increase of 16.5%. Correspondingly, the price of a B share was 26.80 at the end of 2013, and 31.67 at the end of March 2014, representing an increase of 18.2%. In January-March, the highest A share price was 32.31 and the lowest was 26.39. For B share, they were 33.33 and 26.15 respectively. In January-March, the Helsinki stock exchange (OMX Helsinki) All-Share index was up 0.2% and the weighted OMX Helsinki CAP index 0.4%. Correspondingly, the Retail Index was up 12.8%.
At the end of March 2014, the market capitalisation of A shares was 991 million, while that of B shares was 2,128 million, excluding the shares held by the parent company. The combined market capitalisation of A and B shares was 3,118 million, an increase of 458 million from the end of 2013. In January-March 2014, a total of 0.6 (0.3) million A shares were traded on the Helsinki stock exchange, up 107.3%. The exchange value of A shares was 17 million. The total number of B shares traded was 14.6 (10.1) million, up 44.4%. The exchange value of B shares was 441 million. In terms of volumes, the Helsinki stock exchange accounted for 66% of Kesko A and B share trading in January- March 2014. Kesko shares were also traded on multilateral trading facilities, the most significant of which were BATS Chi-X with 25% and Turquoise with 9% of the trades (source: Fidessa).
The company operates the 2007 option scheme for management and other key personnel, under which the share subscription period of 2007C share options runs from 1 April 2012 to 30 April 2014. The share options have been included on the official list of the Helsinki stock exchange since the beginning of the share subscription periods. A total of 82,958 2007C share options were traded during the reporting period at a total value of 1,453,866. The share subscription period of 2007A share options under the option scheme expired and their trading on the official list ended in 2012. The share subscription period of 2007B share options under the option scheme expired and their trading on the official list ended in 2013.
The Board has the authority, granted by the Annual General Meeting of 16 April 2012 and valid until 30 June 2015, to issue a total maximum of 20,000,000 new B shares. The shares can be issued against payment for subscription by shareholders in a directed issue in proportion to their existing shareholdings regardless of whether they consist of A or B shares, or, deviating from the shareholder's pre-emptive right, in a directed issue, if there is a weighty financial reason for the company, such as using the shares to develop the company's capital structure, and financing possible acquisitions, investments or other arrangements within the scope of the company's business operations. The amount paid for the shares is recognised in the reserve of invested non-restricted equity. The authorisation also includes the Board's authority to decide on the share subscription price, the right to issue shares against non-cash consideration and the right to make decisions on other matters concerning share issuances.
In addition, the Board has the authority, granted by the Annual General Meeting of 8 April 2013 and valid until 30 September 2014, to decide on the acquisition of a maximum of 500,000 own B shares. Kesko's Board of Directors made the decision in February 2014 to start acquiring own B shares. The decision to start acquisition was announced in a stock exchange release on 4 February 2014 and acquisition was started on 18 February 2014. The maximum amount of own B shares the Board was authorised to acquire, 500,000, was acquired by 31 March 2014, and the authorisation is thus fully used. Each acquired batch was announced in a stock exchange release at the end of the day when the acquisition was made. At 31 March 2014, Kesko Corporation held 1,000,075 own B shares as treasury shares. In addition, the Board has the authority, valid until 30 June 2017, to decide on the issuance of the maximum of 1,000,000 own B shares held as treasury shares by the company.
On 4 February 2014, the Board decided to grant own B shares held by the company as treasury shares to persons included in the target group of the 2013 vesting period, based on the authority to issue own shares granted by the Annual General Meeting held on 8 April 2013, and the fulfilment of the vesting criteria of the 2013 vesting period of Kesko's three-year share-based compensation plan. The issuance of a total of 50,520 own B shares, referred to above, was announced in a stock exchange release on 24 March 2014 and on 25 March 2014. During the reporting period, a total of 1,611 shares granted based on the fulfilment of the vesting criteria of the 2011 and 2012 vesting periods were returned to the company in accordance with the terms and conditions of the share-based compensation plan. The shares returned during the reporting period were announced in a stock exchange notification on 7 February 2014. Further information on the Board's authorisations is available at www.kesko.fi.
At the end of March 2014, the number of shareholders was 41,328, which was 1,481 less than at the end of 2013. At the end of March, foreign ownership of all shares was 26%. At the end of March, foreign ownership of B shares was 38%.
Flagging notifications
Kesko Corporation did not receive flagging notifications during the reporting period.
Key events during the reporting period
Kestra Kiinteistöpalvelut Oy, a subsidiary of Kesko Corporation, announced that it will not participate in the future financing of Fennovoima Ltd's Hanhikivi 1 nuclear power project due to the related financial, contractual and schedule uncertainties. (Stock exchange release on 27 March 2014)
As a result of the employee cooperation negotiations to improve Anttila's profitability, the decision was made to close eight Anttila department stores operating in rented premises. The department stores to be closed have a total of some 210 employees. In addition, 25 full-time employees will be reduced in other Anttila department stores. Employee co-operation negotiations were also started in the Kodin1 chain. In the Kodin1 department store chain, four Kodin1 department stores are planned to be closed within the next two years. In addition, employee cooperation negotiations were started in the centralised operations of Anttila Oy and K-citymarket Oy. The negotiations will concern a total of 1,350 persons, and the estimated need for reduction is at most 220 full-time employees. (Stock exchange release on 31 March 2014)
Resolutions of the 2014 Annual General Meeting and decisions of the Board's organisational meeting
Kesko Corporation's Annual General Meeting, held on 7 April 2014, adopted the financial statements for 2013 and discharged the Board members and the Managing Director from liability. The General Meeting also resolved, as proposed by the Board, to distribute 1.40 per share as dividends, or a total of 138,484,759.00. The dividend pay date was 17 April 2014. The General Meeting resolved that the number of Board members be unchanged at seven and elected PricewaterhouseCoopers Oy as the company's auditor, with APA Johan Kronberg as the auditor with principal responsibility. The General Meeting also approved the Board's proposal that it be authorised to decide on donations in a total maximum of 300,000 for charitable or corresponding purposes until the Annual General Meeting to be held in 2015.
The organisational meeting of the company's Board of Directors, held after the Annual General Meeting, kept the compositions of the Audit Committee and the Remuneration Committee unchanged.
The resolutions of the Annual General Meeting and the decisions of the Board's organisational meeting were announced in more detail in stock exchange releases on 7 April 2014.
Responsibility
In January, Kesko was again included on 'The Global 100 Most Sustainable Corporations in the World' list.
In RobecoSAM's Sustainability Yearbook 2014, published in January, Kesko received the Silver Class distinction in the Food & Staples Retailing Industry category.
In March, Kesko and K-stores took part in the global Earth Hour 2014 event by turning off the illuminated signs in their properties and stores.
In 2013, Kesko and K-stores launched a programme with the objective of employing at least 1,000 young people in the target group of the Youth Guarantee initiative by the end of 2014. By the end of February 2014, 718 young people have been employed in K-stores and Kesko across Finland.
Risk management
Kesko Group has an established and comprehensive risk management process. Risks and their management responses are regularly assessed within the Group and reported to the Group management. Kesko's risk management and risks associated with business operations are described in more detail on Kesko's website in the Corporate Governance section.
The most significant near-future risks in Kesko's business operations are associated with the general development of the economic situation and consumer confidence in Kesko's operating area, as well as their impact on Kesko's sales and profit performance. Because of the crisis in Ukraine, the country risks of Russia have increased. It is estimated that in other respects, no material changes have taken place during the beginning of 2014 in the risks described in the report by the Board of Directors and financial statements for 2013 and the risks described on Kesko's website.
The risks and uncertainties related to profit performance are described in the section future outlook of this release.
Future outlook
Estimates of the future outlook for Kesko Group's net sales and operating profit excluding non-recurring items are given for the 12 months following the reporting period (4/2014-3/2015) in comparison with the 12 months preceding the reporting period (4/2013-3/2014).
Future prospects for the general economic situation and consumer demand continue to be characterised by significant uncertainty in Kesko's operating area. Due to the weakened economic situation and decline in consumers' purchasing power, demand in the trading sector is expected to remain weak in Finland.
Kesko Group's net sales and operating profit excluding non-recurring items for the next 12 months are expected to remain at the level of the preceding 12 months, unless the overall consumer demand weakens significantly.
Helsinki, 23 April 2014
Kesko Corporation
Board of Directors
The information in the interim report release is unaudited.
Further information is available from Jukka Erlund, Senior Vice President, Chief Financial Officer, telephone +358 10 53 22113 and Eva Kaukinen, Vice President, Group Controller, telephone +358 10 53 22338. A Finnish-language webcast from the media and analyst briefing on the interim report can be accessed at www.kesko.fi at 11:00. An English-language web conference on the interim report will be held today at 14:30 (Finnish time). The web conference login is available at www.kesko.fi.
Kesko Corporation's interim report for January-June will be released on 22 July 2014. In addition, Kesko Group's sales figures are published each month. News releases and other company information are available on Kesko's website at www.kesko.fi.
KESKO CORPORATION
Merja Haverinen
Vice President, Group Communications
ATTACHMENTS: TABLES SECTION
Accounting policies
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Group's performance indicators
Net sales by segment
Operating profit by segment
Operating profit excl. non-recurring items by segment
Operating margin excl. non-recurring items by segment
Capital employed by segment
Return on capital employed excl. non-recurring items by segment
Capital expenditure by segment
Segment information by quarter
Change in tangible and intangible assets
Related party transactions
Fair value hierarchy of financial assets and liabilities
Personnel average and at the end of the reporting period
Group's commitments
Calculation of performance indicators
K-Group's retail and B2B sales
DISTRIBUTION
NASDAQ OMX Helsinki
Main news media
www.kesko.fi
ATTACHMENTS:
Accounting policies
This interim report has been prepared in accordance with the IAS 34 standard. The interim report has been prepared in accordance with the same accounting principles as the annual financial statements for 2013, with the exception of the following changes due to the adoption of new and revised IFRS standards and IFRIC interpretations:
-IFRS 10 Consolidated financial statements
-IFRS 11 Joint arrangements
-IFRS 12 Disclosure of interests in other entities
The above amendments to standards and interpretations do not have a material impact on the reported income statement and statement of financial position. The amendment will affect notes to the financial statements.
| Consolidated income statement ( million), condensed | |||||||
| 1-3/ 2014 | 1-3/ 2013 | Change, % | 1-12/ 2013 | ||||
| Net sales | 2,129 | 2,159 | -1.4 | 9,315 | |||
| Cost of goods sold | -1,850 | -1,875 | -1.4 | -8,034 | |||
| Gross profit | 279 | 284 | -1.7 | 1,281 | |||
| Other operating income | 165 | 173 | -4.8 | 734 | |||
| Staff cost | -156 | -153 | 1.7 | -611 | |||
| Depreciation and impairment charges | -39 | -37 | 5.4 | -153 | |||
| Other operating expenses | -262 | -248 | 5.8 | -1,003 | |||
| Operating profit | -13 | 19 | (..) | 248 | |||
| Interest income and other finance income | 2 | 3 | -39.3 | 20 | |||
| Interest expense and other finance costs | -4 | -5 | -18.2 | -20 | |||
| Exchange differences | 1 | -2 | (..) | -6 | |||
| Income from associates | 0 | 0 | (..) | 0 | |||
| Profit before tax | -14 | 16 | (..) | 242 | |||
| Income tax | 3 | -5 | (..) | -58 | |||
| Net profit for the period | -12 | 11 | (..) | 185 | |||
| Attributable to | |||||||
| Owners of the parent | -11 | 11 | (..) | 173 | |||
| Non-controlling interests | -1 | 0 | (..) | 12 | |||
| Earnings per share () for profit attributable to equity holders of the parent | |||||||
| Basic | -0.11 | 0.11 | (..) | 1.75 | |||
| Diluted | -0.11 | 0.11 | (..) | 1.75 | |||
| Consolidated statement of comprehensive income ( million) | |||||||
| 1-3/ 2014 | 1-3/ 2013 | Change, % | 1-12/ 2013 | ||||
| Net profit for the period | -12 | 11 | (..) | 185 | |||
| Items that will not be reclassified subsequently to profit or loss | |||||||
| Actuarial gains/losses | 8 | - | (..) | 12 | |||
| Items that may be reclassified subsequently to profit or loss | |||||||
| Exchange differences on translating foreign operations | -6 | 3 | (..) | -14 | |||
| Adjustment for hyperinflation | 2 | 2 | -9.5 | 3 | |||
| Cash flow hedge revaluation | -2 | 0 | (..) | -4 | |||
| Revaluation of available-for-sale financial assets | 1 | 0 | (..) | -5 | |||
| Other items | - | - | - | 0 | |||
| Total other comprehensive income for the period, net of tax | 3 | 4 | -41.8 | -8 | |||
| Total comprehensive income for the period | -9 | 15 | (..) | 177 | |||
| Attributable to | |||||||
| Owners of the parent | -9 | 14 | (..) | 166 | |||
| Non-controlling interests | -1 | 1 | (..) | 11 |
(..) Change over 100%
| Consolidated statement of financial position ( million), condensed | ||||
| 31.3.2014 | 31.3.2013 | Change, % | 31.12.2013 | |
| ASSETS | ||||
| Non-current assets | ||||
| Tangible assets | 1,645 | 1,685 | -2.4 | 1,651 |
| Intangible assets | 194 | 190 | 2.2 | 189 |
| Investments in associates and other financial assets | 105 | 106 | -0.6 | 104 |
| Loans and receivables | 16 | 90 | -82.6 | 15 |
| Pension assets | 181 | 154 | 17.4 | 170 |
| Total | 2,141 | 2,225 | -3.8 | 2,131 |
| Current assets | ||||
| Inventories | 840 | 859 | -2.2 | 797 |
| Trade receivables | 720 | 805 | -10.5 | 617 |
| Other receivables | 195 | 198 | -1.5 | 136 |
| Financial assets at fair value through profit or loss | 183 | 98 | 86.5 | 171 |
| Available-for-sale financial assets | 263 | 218 | 20.9 | 398 |
| Cash and cash equivalents | 86 | 95 | -9.8 | 112 |
| Total | 2,287 | 2,273 | 0.6 | 2,231 |
| Non-current assets held for sale | 1 | 2 | -74.3 | 1 |
| Total assets | 4,429 | 4,500 | -1.6 | 4,362 |
| 31.3.2014 | 31.3.2013 | Change, % | 31.12.2013 | |
| EQUITY AND LIABILITIES | ||||
| Equity | 2,259 | 2,221 | 1.7 | 2,279 |
| Non-controlling interests | 72 | 68 | 6.7 | 73 |
| Total equity | 2,331 | 2,289 | 1.8 | 2,352 |
| Non-current liabilities | ||||
| Interest-bearing liabilities | 351 | 438 | -19.8 | 355 |
| Non-interest-bearing liabilities | 10 | 10 | -5.2 | 10 |
| Deferred tax liabilities | 68 | 78 | -12.5 | 68 |
| Pension obligations | 2 | 2 | 10.0 | 2 |
| Provisions | 28 | 20 | 42.7 | 17 |
| Total | 459 | 547 | -16.1 | 452 |
| Current liabilities | ||||
| Interest-bearing liabilities | 206 | 206 | -0.1 | 199 |
| Trade payables | 940 | 951 | -1.1 | 825 |
| Other non-interest-bearing liabilities | 446 | 467 | -4.3 | 494 |
| Provisions | 46 | 41 | 13.8 | 38 |
| Total | 1,639 | 1,664 | -1.5 | 1,557 |
| Total equity and liabilities | 4,429 | 4,500 | -1.6 | 4,362 |
Consolidated statement of changes in equity ( million)
| Share capi- tal | Res-erves | Cur- rency trans-lation differ-ences | Re- valu- ation reser-ve | Trea-sury sha-res | Re- tained earn- ings | Non- cont- rol-ling inte-rests | Total | |
| Balance at 1.1.2013 | 197 | 442 | -2 | 10 | -19 | 1,578 | 67 | 2,272 |
| Shares subscribed with options | 1 | 1 | ||||||
| Treasury shares | ||||||||
| Share-based payments | 0 | 0 | 0 | |||||
| Other changes | 0 | 0 | ||||||
| Net profit for the period | 11 | 0 | 11 | |||||
| Other comprehen- sive income | ||||||||
| Items that will not be reclassified subsequently to profit or loss | ||||||||
| Actuarial gains/losses | ||||||||
| Items that may be reclassified subsequently to profit or loss | ||||||||
| Exchange differences on translating foreign operations | 0 | 3 | 0 | 3 | ||||
| Adjustment for hyperinflation | 0 | 2 | 2 | |||||
| Cash flow hedge revaluation | 0 | 0 | ||||||
| Revaluation of available- for-sale financial assets | 0 | 0 | ||||||
| Tax relating to other comprehen-sive income | 0 | 0 | ||||||
| Total other comprehen-sive income | 0 | 3 | 0 | 0 | 2 | 4 | ||
| Balance at 31.3.2013 | 197 | 443 | 1 | 10 | -19 | 1,590 | 68 | 2,289 |
| Balance at 1.1.2014 | 197 | 461 | -13 | 1 | -18 | 1,651 | 73 | 2,352 |
| Shares subscribed with options | 1 | 1 | ||||||
| Treasury shares | -15 | -15 | ||||||
| Share- based payments | 2 | 2 | ||||||
| Other changes | 0 | 0 | 0 | 0 | ||||
| Net profit for the period | -11 | -1 | -12 | |||||
| Other comprehen- sive income | ||||||||
| Items that will not be reclassified subsequently to profit or loss | ||||||||
| Actuarial gains/losses | 10 | 10 | ||||||
| Items that may be reclassified subsequently to profit or loss | ||||||||
| Exchange differences on translating foreign operations | 0 | -5 | 0 | -1 | -6 | |||
| Adjustment for hyperinflation | 0 | 1 | 2 | |||||
| Cash flow hedge revaluation | -2 | -2 | ||||||
| Revaluation of available for sale financial assets | 1 | 1 | ||||||
| Tax relating to compre-hensive income | 0 | -2 | -2 | |||||
| Total other compre-hensive income | 0 | -5 | -1 | 8 | 0 | 3 | ||
| Balance at 31.3.2014 | 197 | 462 | -18 | 0 | -31 | 1,648 | 72 | 2,331 |
Consolidated statement of cash flows ( million), condensed
| 1-3/ 2014 | 1-3/ 2013 | Change, % | 1-12/ 2013 | |||
| Cash flows from operating activities | ||||||
| Profit before tax | -14 | 16 | (..) | 242 | ||
| Planned depreciation | 39 | 37 | 5.4 | 152 | ||
| Finance income and costs | 2 | 3 | -52.4 | 6 | ||
| Other adjustments | 20 | -1 | (..) | 8 | ||
| Change in working capital | ||||||
| Current non-interest-bearing operating receivables, increase (-)/decrease (+) | -158 | -144 | 9.4 | 89 | ||
| Inventories, increase (-)/decrease (+) | -48 | -43 | 11.1 | 3 | ||
| Current non-interest-bearing liabilities, increase (+)/decrease (-) | 80 | 87 | -7.6 | -1 | ||
| Financial items and tax | -15 | -13 | 14.3 | -85 | ||
| Net cash from operating activities | -95 | -59 | 61.8 | 414 | ||
| Cash flows from investing activities | ||||||
| Investing activities | -45 | -44 | 2.0 | -174 | ||
| Sales of fixed assets | 2 | 2 | -23.2 | 22 | ||
| Increase in non-current receivables | 0 | 0 | (..) | 0 | ||
| Net cash used in investing activities | -44 | -42 | 4.4 | -152 | ||
| Cash flows from financing activities | ||||||
| Interest-bearing liabilities, increase (+)/decrease (-) | 5 | 22 | -79.1 | -47 | ||
| Current interest-bearing receivables, increase (-)/decrease (+) | -3 | 1 | (..) | 78 | ||
| Dividends paid | - | - | - | -122 | ||
| Equity increase | 1 | 1 | 0.9 | 20 | ||
| Acquisition of own shares | -15 | - | (..) | - | ||
| Short-term money market investments, increase (-)/ decrease (+) | -16 | 21 | (..) | -91 | ||
| Other items | 3 | -2 | (..) | 5 | ||
| Net cash used in financing activities | -25 | 43 | (..) | 159 | ||
| Change in cash and cash equivalents | -164 | -58 | (..) | 103 | ||
| Cash and cash equivalents and current portion of available-for-sale financial assets at 1 Jan. | 453 | 352 | 28.7 | 352 | ||
| Currency translation difference adjustment and revaluation | -1 | 0 | (..) | -2 | ||
| Cash and cash equivalents and current portion of available-for-sale financial assets at 31 Mar. | 288 | 294 | -2.1 | 453 |
(..) Change over 100%
| Group's performance indicators | |||||||||||
| 1-3/2014 | 1-3/2013 | Change, pp | 1-12/ 2013 | ||||||||
| Return on capital employed, % | -2.2 | 3.1 | -5.3 | 10.2 | |||||||
| Return on capital employed, %, moving 12 mo | 8.9 | 8.0 | 0.9 | 10.2 | |||||||
| Return on capital employed, excl. non-recurring items, % | 3.2 | 3.0 | 0.3 | 9.8 | |||||||
| Return on capital employed excl. non-recurring items, %, moving 12 mo | 9.9 | 8.8 | 1.1 | 9.8 | |||||||
| Return on equity, % | -2.0 | 1.9 | -4.0 | 8.0 | |||||||
| Return on equity, %, moving 12 mo | 7.0 | 5.7 | 1.3 | 8.0 | |||||||
| Return on equity, excl. non-recurring items, % | 2.3 | 1.8 | 0.5 | 7.7 | |||||||
| Return on equity excl. non-recurring items, %, moving 12 mo | 7.8 | 6.6 | 1.3 | 7.7 | |||||||
| Equity ratio, % | 53.2 | 51.7 | 1.5 | 54.5 | |||||||
| Gearing, % | 1.1 | 10.2 | -9.1 | -5.4 | |||||||
| Change, % | |||||||||||
| Capital expenditure, million | 43.4 | 41.5 | 4.7 | 171.5 | |||||||
| Capital expenditure, % of net sales | 2.0 | 1.9 | 6.2 | 1.8 | |||||||
| Earnings per share, basic, | -0.11 | 0.11 | (..) | 1.75 | |||||||
| Earnings per share, diluted, | -0.11 | 0.11 | (..) | 1.75 | |||||||
| Earnings per share excl. non-recurring items, basic, | 0.15 | 0.11 | 96.1 | 1.68 | |||||||
| Cash flow from operating activities, million | -95 | -59 | 61.8 | 414 | |||||||
| Cash flow from investing activities, million | -44 | -42 | 4.4 | -152 | |||||||
| Equity per share, | 22.83 | 22.62 | 0.9 | 22.96 | |||||||
| Interest-bearing net debt | 25 | 233 | (..) | -126 | |||||||
| Diluted number of shares, average for the reporting period | 99,524 | 98,724 | 0.8 | 99,136 | |||||||
| Personnel, average | 19,616 | 19,126 | 2.6 | 19,489 | |||||||
| (..) Change over 100% | |||||||||||
| Group's performance indicators by quarter | 1-3/ 2013 | 4-6/ 2013 | 7-9/ 2013 | 10-12/ 2013 | 1-3/ 2014 | ||||||
| Net sales, million | 2,159 | 2,420 | 2,374 | 2,362 | 2,129 | ||||||
| Change in net sales, % | -6.9 | -1.6 | -3.1 | -3.9 | -1.4 | ||||||
| Operating profit, million | 19.2 | 77.0 | 84.1 | 68.0 | -13.0 | ||||||
| Operating margin, % | 0.9 | 3.2 | 3.5 | 2.9 | -0.6 | ||||||
| Operating profit excl. non- recurring items, million | 18.6 | 69.8 | 83.6 | 66.8 | 19.1 | ||||||
| Operating margin excl. non-recurring items, % | 0.9 | 2.9 | 3.5 | 2.8 | 0.9 | ||||||
| Finance income/costs, million | -3.3 | 0.4 | -2.6 | -0.4 | -1.6 | ||||||
| Profit before tax, million | 15.8 | 77.2 | 81.5 | 67.9 | -14.4 | ||||||
| Profit before tax, % | 0.7 | 3.2 | 3.4 | 2.9 | -0.7 | ||||||
| Return on capital employed, % | 3.1 | 12.3 | 14.2 | 11.5 | -2.2 | ||||||
| Return on capital employed, excl. non-recurring items, % | 3.0 | 11.1 | 14.1 | 11.3 | 3.2 | ||||||
| Return on equity, % | 1.9 | 9.5 | 10.2 | 10.8 | -2.0 | ||||||
| Return on equity, excl. non-recurring items, % | 1.8 | 8.6 | 10.1 | 10.6 | 2.3 | ||||||
| Equity ratio, % | 51.7 | 50.5 | 52.9 | 54.5 | 53.2 | ||||||
| Capital expenditure, million | 41.5 | 48.1 | 35.4 | 46.6 | 43.4 | ||||||
| Earnings per share, diluted, | 0.11 | 0.50 | 0.53 | 0.60 | -0.11 | ||||||
| Equity per share, | 22.62 | 21.79 | 22.39 | 22.96 | 22.83 | ||||||
Segment information
| Net sales by segment ( million) | 1-3/ 2014 | 1-3/ 2013 | Change, % | 1-12/ 2013 | ||
| Food trade, Finland | 982 | 1,036 | -5.2 | 4,316 | ||
| Food trade, other countries* | 25 | 9 | (..) | 71 | ||
| Food trade total | 1,007 | 1,045 | -3.7 | 4,387 | ||
| - of which intersegment trade | 45 | 43 | 4.9 | 172 | ||
| Home and speciality goods trade, Finland | 304 | 335 | -9.2 | 1,424 | ||
| Home and speciality goods trade, other countries* | 8 | 10 | -19.8 | 33 | ||
| Home and speciality goods trade total | 312 | 345 | -9.5 | 1,457 | ||
| - of which intersegment trade | 3 | 3 | -20.8 | 17 | ||
| Building and home improvement trade, Finland | 289 | 281 | 2.9 | 1,173 | ||
| Building and home improvement trade, other countries* | 292 | 281 | 4.2 | 1,435 | ||
| Building and home improvement trade total | 581 | 562 | 3.5 | 2,607 | ||
| - of which intersegment trade | 0 | 0 | -45.7 | -1 | ||
| Car and machinery trade, Finland | 250 | 231 | 8.3 | 921 | ||
| Car and machinery trade, other countries* | 22 | 19 | 20.7 | 116 | ||
| Car and machinery trade total | 272 | 249 | 9.2 | 1,037 | ||
| - of which intersegment trade | 0 | 0 | 5.8 | 1 | ||
| Common operations and eliminations | -44 | -42 | 4.6 | -173 | ||
| Finland total | 1,781 | 1,841 | -3.3 | 7,661 | ||
| Other countries total* | 347 | 318 | 9.3 | 1,654 | ||
| Group total | 2,129 | 2,159 | -1.4 | 9,315 |
* Net sales in countries other than Finland.
(..) Change over 100%
| Operating profit by segment ( million) | 1-3/ 2014 | 1-3/ 2013 | Change | 1-12/ 2013 | ||
| Food trade | 45.4 | 48.2 | -2.8 | 208.0 | ||
| Home and speciality goods trade | -54.5 | -17.7 | -36.8 | -2.1 | ||
| Building and home improvement trade | -9.7 | -16.1 | 6.3 | 24.8 | ||
| Car and machinery trade | 8.2 | 7.8 | 0.5 | 33.9 | ||
| Common operations and eliminations | -2.5 | -3.0 | 0.5 | -16.3 | ||
| Group total | -13.0 | 19.2 | -32.3 | 248.4 |
| Operating profit excl. non-recurring items by segment ( million) | 1-3/ 2014 | 1-3/ 2013 | Change | 1-12/ 2013 | ||
| Food trade | 46.5 | 48.2 | -1.7 | 203.3 | ||
| Home and speciality goods trade | -22.7 | -17.8 | -4.9 | -8.3 | ||
| Building and home improvement trade | -10.4 | -16.6 | 6.2 | 25.7 | ||
| Car and machinery trade | 8.2 | 7.8 | 0.5 | 33.9 | ||
| Common operations and eliminations | -2.5 | -3.0 | 0.5 | -15.8 | ||
| Group total | 19.1 | 18.6 | 0.5 | 238.8 |
| Operating margin excl. non-recurring items by segment , % | 1-3/ 2014 | 1-3/ 2013 | Change, pp | 1-12/ 2013 | Moving 12 mo 3/2014 | |
| Food trade | 4.6 | 4.6 | 0.0 | 4.6 | 4.6 | |
| Home and speciality goods trade | -7.3 | -5.2 | -2.1 | -0.6 | -0.9 | |
| Building and home improvement trade | -1.8 | -3.0 | 1.2 | 1.0 | 1.2 | |
| Car and machinery trade | 3.0 | 3.1 | -0.1 | 3.3 | 3.2 | |
| Group total | 0.9 | 0.9 | 0.0 | 2.6 | 2.6 |
| Capital employed by segment, cumulative average ( million) | 1-3/ 2014 | 1-3/ 2013 | Change | 1-12/ 2013 | Moving 12 mo 3/2014 | ||
| Food trade | 781 | 854 | -72 | 821 | 809 | ||
| Home and speciality goods trade | 399 | 477 | -78 | 445 | 431 | ||
| Building and home improvement trade | 709 | 762 | -53 | 732 | 722 | ||
| Car and machinery trade | 169 | 170 | -1 | 161 | 160 | ||
| Common operations and eliminations | 316 | 258 | 58 | 278 | 293 | ||
| Group total | 2,375 | 2,520 | -146 | 2,438 | 2,416 |
| Return on capital employed excl. non-recurring items by segment, % | 1-3/ 2014 | 1-3/ 2013 | Change, pp | 1-12/ 2013 | Moving 12 mo 3/2014 | |
| Food trade | 23.8 | 22.6 | 1.2 | 24.8 | 24.9 | |
| Home and speciality goods trade | -22.8 | -14.9 | -7.9 | -1.9 | -3.1 | |
| Building and home improvement trade | -5.9 | -8.7 | 2.8 | 3.5 | 4.4 | |
| Car and machinery trade | 19.5 | 18.3 | 1.1 | 21.1 | 21.5 | |
| Group total | 3.2 | 3.0 | 0.3 | 9.8 | 9.9 |
| Capital expenditure by segment ( million) | 1-3/ 2014 | 1-3/ 2013 | Change | 1-12/ 2013 | ||
| Food trade | 18 | 17 | 2 | 92 | ||
| Home and speciality goods trade | 4 | 8 | -4 | 23 | ||
| Building and home improvement trade | 12 | 13 | 0 | 38 | ||
| Car and machinery trade | 3 | 4 | -1 | 15 | ||
| Common operations and eliminations | 7 | 1 | 6 | 4 | ||
| Group total | 43 | 41 | 2 | 171 |
Segment information by quarter
| Net sales by segment ( million) | 1-3/ 2013 | 4-6/ 2013 | 7-9/ 2013 | 10-12/ 2013 | 1-3/ 2014 |
| Food trade | 1,045 | 1,099 | 1,095 | 1,148 | 1,007 |
| Home and speciality goods trade | 345 | 322 | 351 | 439 | 312 |
| Building and home improvement trade | 562 | 740 | 710 | 596 | 581 |
| Car and machinery trade | 249 | 301 | 260 | 226 | 272 |
| Common operations and eliminations | -42 | -41 | -43 | -46 | -44 |
| Group total | 2,159 | 2,420 | 2,374 | 2,362 | 2,129 |
| Operating profit by segment ( million) | 1-3/ 2013 | 4-6/ 2013 | 7-9/ 2013 | 10-12/ 2013 | 1-3/ 2014 |
| Food trade | 48.2 | 55.1 | 56.5 | 48.3 | 45.4 |
| Home and speciality goods trade | -17.7 | -5.6 | -2.1 | 23.3 | -54.5 |
| Building and home improvement trade | -16.1 | 18.0 | 23.9 | -1.0 | -9.7 |
| Car and machinery trade | 7.8 | 13.0 | 9.8 | 3.3 | 8.2 |
| Common operations and eliminations | -3.0 | -3.4 | -4.0 | -5.9 | -2.5 |
| Group total | 19.2 | 77.0 | 84.1 | 68.0 | -13.0 |
| Operating profit excl. non-recurring items by segment ( million) | 1-3/ 2013 | 4-6/ 2013 | 7-9/ 2013 | 10-12/ 2013 | 1-3/ 2014 | |
| Food trade | 48.2 | 50.8 | 56.0 | 48.3 | 46.5 | |
| Home and speciality goods trade | -17.8 | -10.0 | -2.2 | 21.6 | -22.7 | |
| Building and home improvement trade | -16.6 | 19.5 | 23.9 | -1.1 | -10.4 | |
| Car and machinery trade | 7.8 | 13.0 | 9.8 | 3.3 | 8.2 | |
| Common operations and eliminations | -3.0 | -3.4 | -4.0 | -5.4 | -2.5 | |
| Group total | 18.6 | 69.8 | 83.6 | 66.8 | 19.1 |
| Operating margin excl. non-recurring items by segment, % | 1-3/ 2013 | 4-6/ 2013 | 7-9/ 2013 | 10-12/ 2013 | 1-3/ 2014 |
| Food trade | 4.6 | 4.6 | 5.1 | 4.2 | 4.6 |
| Home and speciality goods trade | -5.2 | -3.1 | -0.6 | 4.9 | -7.3 |
| Building and home improvement trade | -3.0 | 2.6 | 3.4 | -0.2 | -1.8 |
| Car and machinery trade | 3.1 | 4.3 | 3.8 | 1.5 | 3.0 |
| Group total | 0.9 | 2.9 | 3.5 | 2.8 | 0.9 |
Change in tangible and intangible assets ( million)
| 31.3.2014 | 31.3.2013 | |
| Opening net carrying amount | 1,840 | 1,870 |
| Depreciation, amortisation and impairment | -39 | -37 |
| Investments in tangible and intangible assets | 45 | 43 |
| Disposals | -3 | -3 |
| Currency translation differences | -5 | 2 |
| Closing net carrying amount | 1,839 | 1,875 |
Related party transactions ( million)
The Group's related parties include its key management (the Board of Directors, the President and CEO and the Group Management Board) and companies controlled by them, subsidiaries, associates and Kesko Pension Fund.
The following transactions were carried out with related parties:
| 1-3/2014 | 1-3/2013 | |
| Sales of goods and services | 22 | 22 |
| Purchases of goods and services | 7 | 7 |
| Other operating income | 0 | 0 |
| Other operating expenses | 7 | 7 |
| Finance income and costs | 0 | 0 |
| 31.3.2014 | 31.3.2013 | |
| Receivables | 11 | 9 |
| Liabilities | 19 | 28 |
Fair value hierarchy of financial assets and liabilities ( million)
| Level 1 | Level 2 | Level 3 | 31.3.2014 | |
| Financial assets at fair value through profit or loss | 14 | 169 | 183 | |
| Derivative financial instruments at fair value through profit or loss | ||||
| Derivative financial assets | 5 | 5 | ||
| Derivative financial liabilities | 25 | 25 | ||
| Available-for-sale financial assets | 61 | 203 | 17 | 280 |
Fair value hierarchy of financial assets and liabilities ( million)
| Level 1 | Level 2 | Level 3 | 31.3.2013 | |
| Financial assets at fair value through profit or loss | 98 | 98 | ||
| Derivative financial instruments at fair value through profit or loss | ||||
| Derivative financial assets | 3 | 3 | ||
| Derivative financial liabilities | 12 | 12 | ||
| Available-for-sale financial assets | 18 | 199 | 7 | 225 |
Level 1 instruments are traded in active markets and their fair values are directly based on quoted market prices. The fair values of level 2 instruments are derived from market data. The fair values of level 3 instruments are not based on observable market data.
Personnel, average and as at 31 March
| Personnel average by segment | 1-3/2014 | 1-3/2013 | Change |
| Food trade | 3,294 | 2,856 | 438 |
| Home and speciality goods trade | 5,547 | 5,786 | -238 |
| Building and home improvement trade | 9,129 | 8,836 | 293 |
| Car and machinery trade | 1,228 | 1,223 | 5 |
| Common operations | 417 | 425 | -8 |
| Group total | 19,616 | 19,126 | 490 |
| Personnel at 31 March* by segment | 2014 | 2013 | Change |
| Food trade | 3,696 | 3,183 | 513 |
| Home and speciality goods trade | 7,786 | 8,030 | -244 |
| Building and home improvement trade | 10,191 | 9,931 | 260 |
| Car and machinery trade | 1,267 | 1,263 | 4 |
| Common operations | 485 | 474 | 11 |
| Group total | 23,425 | 22,881 | 544 |
* total number incl. part-time employees
| Group's commitments ( million) | |||
| 31.3.2014 | 31.3.2013 | Change, % | |
| Own commitments | 198 | 181 | 9.5 |
| For associates | 65 | 65 | 0.0 |
| For others | 10 | 10 | 1.6 |
| Lease liabilities for machinery and equipment | 25 | 25 | -2.1 |
| Lease liabilities for real estate | 2,312 | 2,274 | 1.7 |
| Liabilities arising from | |||
| derivative instruments | |||
| Fair value | |||
| Values of underlying instruments at 31 March | 31.3.2014 | 31.3.2013 | 31.3.2014 |
| Interest rate derivatives | |||
| Interest rate swaps | 202 | 203 | -0.62 |
| Currency derivatives | |||
| Forward and future contracts | 331 | 234 | 2.31 |
| Option agreements | - | 10 | - |
| Currency swaps | 100 | 100 | -13.39 |
| Commodity derivatives | |||
| Electricity derivatives | 27 | 40 | -8.94 |
Calculation of performance indicators
| Return on capital employed*, % | Operating profit x 100 / (Non-current assets + Inventories + Receivables + Other current assets - Non-interest-bearing liabilities) on average for the reporting period |
| Return on capital employed, %, moving 12 mo | Operating profit for prior 12 months x 100 / (Non-current assets + Inventories + Receivables + Other current assets - Non-interest-bearing liabilities) on average for 12 months |
| Return on capital employed excl. non-recurring items*, % | Operating profit excl. non-recurring items x 100 / (Non-current assets + Inventories + Receivables + Other current assets - Non-interest-bearing liabilities) on average for the reporting period |
| Return on capital employed excl. non- recurring items, %, moving 12 months | Operating profit excl. non-recurring items for prior 12 months x 100 / (Non-current assets + Inventories + Receivables + Other current assets - Non-interest-bearing liabilities) on average for 12 months |
| Return on equity*, % | (Profit/loss before tax - income tax) x 100 / Shareholders' equity |
| Return on equity, %, moving 12 months | (Profit/loss for prior 12 months before tax - income tax for prior 12 months) x100 / Shareholders' equity |
| Return on equity excl. non-recurring items*, % | (Profit/loss adjusted for non-recurring items before tax - income tax adjusted for the tax effect of non-recurring items) x 100 / Shareholders' equity |
| Return on equity excl. non-recurring items, %, moving 12 months | (Profit/loss for prior 12 months adjusted for non-recurring items before tax - income tax for prior 12 months adjusted for the tax effect of non-recurring items) x 100 / Shareholders' equity |
| Equity ratio, % | Shareholders' equity x 100 / (Balance sheet total - prepayments received) |
| Earnings/share, diluted | (Profit/loss - non-controlling interests) / Average diluted number of shares |
| Earnings/share, basic | (Profit/loss - non-controlling interests) / Average number of shares |
| Earnings/share excl. non-recurring items, basic | (Profit/loss adjusted for non-recurring items - non-controlling interests) / Average number of shares |
| Equity/share | Equity attributable to equity holders of the parent / Basic number of shares at the balance sheet date |
| Gearing, % | Interest-bearing net liabilities x 100 / Shareholders' equity |
| Interest-bearing net debt | Interest-bearing liabilities - money market investments - cash and cash equivalents |
* Indicators for return on capital have been annualised.
K-Group's retail and B2B sales, VAT 0% (preliminary data):
| 1.1.-31.3.2014 | ||||
| K-Group's retail and B2B sales | million | Change,% | ||
| K-Group's food trade | ||||
| K-food stores, Finland | 1,089 | -3.8 | ||
| Kespro | 180 | -3.5 | ||
| K-ruoka, Russia | 25 | (..) | ||
| Food trade total | 1,293 | -2.5 | ||
| K-Group's home and speciality goods trade | ||||
| Home and speciality goods stores, Finland | 335 | -8.6 | ||
| Home and speciality goods stores, other countries | 8 | -14.2 | ||
| Home and speciality goods trade total | 343 | -8.7 | ||
| K-Group's building and home improvement trade | ||||
| K-rauta and Rautia | 179 | 5.2 | ||
| Rautakesko B2B Service | 41 | 7.3 | ||
| K-maatalous | 91 | -1.3 | ||
| Finland total | 311 | 3.5 | ||
| Building and home improvement stores, other Nordic countries | 174 | -0.2 | ||
| Building and home improvement stores, Baltic countries | 83 | 18.5 | ||
| Building and home improvement stores, other countries | 73 | 1.2 | ||
| Building and home improvement trade total | 641 | 3.9 | ||
| K-Group's car and machinery trade | ||||
| VV-Autotalot | 100 | 11.9 | ||
| VV-Auto, import | 119 | 11.6 | ||
| Konekesko, Finland | 36 | -7.1 | ||
| Finland total | 255 | 8.7 | ||
| Konekesko, other countries | 23 | 20.7 | ||
| Car and machinery trade total | 279 | 9.6 | ||
| Finland total | 2,170 | -2.3 | ||
| Other countries total | 385 | 9.1 | ||
| Retail and B2B sales total | 2,555 | -0.7 | ||
