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NOTE 2

Segment information

The Group’s reportable segments are composed of the Group’s business divisions, namely the food trade, the home and speciality goods trade, the building and home improvement trade, and the car and machinery trade.

Segment information is reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, responsible for allocating resources to the operating segments, has been identified as the Corporate Management Board. The net sales of the reportable operating segments are derived from the food trade, the home and speciality goods trade, the building and home improvement trade, and the car and machinery trade. Sales between segments are charged at prevailing market rates.

The Corporate Management Board assesses the performance of the segments based on operating profit, operating profit adjusted for non-recurring items, and return on capital employed. Incidental transactions outside ordinary course of business are treated as non-recurring items and allocated to segments. The Group identifies gains and losses on disposals of real estate, shares and operations, impairments and costs of discontinuing significant operations as non-recurring items. Gains on disposal are presented within ‘other income’ in the income statement, and losses on disposal within ‘other operating costs’. In other respects, the Management Board’s performance monitoring is in full compliance with IFRS reporting. Finance income and costs are not allocated to segments, as the Group’s cash and cash equivalents are managed by the Group Treasury. Changes in the fair value of forward foreign exchange contracts entered into inside the Group are reported as part of other operating income and expenses to the extent that they hedge the segments’ operational foreign currency risk.

The assets and liabilities of a segment’s capital employed consist of items used by the segment in its operating activities which can be justifiably allocated to segments. The assets of capital employed comprise property, plant and equipment and intangible fixed assets, interests in associates, pension assets, inventories, trade receivables and other non-interest-bearing receivables, external interest-bearing receivables and available-for-sale assets. The liabilities of capital employed consist of trade payables, other non-interest-bearing liabilities and provisions. The Group’s real estate assets and the revenue and costs derived from them have been allocated to the segments.

Capital employed does not include deferred tax assets and liabilities, financial assets at fair value through profit or loss, except for changes in the fair values of forward foreign exchange contracts, available-for-sale financial assets, cash and cash equivalents, or interest-bearing liabilities.

THE FOOD TRADE comprises the food business based on Kesko Food’s K-retailer business model and Kespro’s grocery wholesaling. Kesko Food is active in the grocery trade in Finland. The operations of the more than 1,000 K-food stores are based on the K-retailer business model. These stores form Kesko Food’s K-citymarket, K-supermarket, K-market and K-extra chains. Kesko Food manages the operations of the chains made up by the stores. Chain operations ensure higher competitiveness. Through chain operations, Kesko Food ensures a strong operational base for K-retailers in terms of sourcing and purchasing, formation of selections, marketing and price competition. Kesko Food’s subsidiary Kespro Ltd engages in wholesaling in the Finnish HoReCa business.

THE HOME AND SPECIALITY GOODS TRADE comprises Anttila, K-citymarket’s home and speciality goods trade, and the other home and speciality goods companies, namely Intersport Finland, Indoor, Musta Pörssi and Kenkäkesko. Anttila retails home and speciality goods. Anttila serves its customers at Anttila department stores, Kodin Ykkönen department stores for home goods and interior decoration, and through NetAnttila focusing on distance sales. K-citymarket’s home and speciality goods trade is responsible for the home and speciality goods and the household goods trade of the K-citymarket chain’s department stores. Intersport Finland is active in the sports equipment trade in Finland and its retail store chains in Finland are Intersport, Budget Sport and Kesport. Indoor is a furniture and interior decoration retailer operating in Finland and the Baltic countries. Its store chains are Asko and Sotka. Musta Pörssi offers home technology products and services through the Musta Pörssi store chain and the Konebox.fi online store. Kenkäkesko is active in the shoe trade and its retail store chains are K-kenkä and Andiamo.

THE BUILDING AND HOME IMPROVEMENT TRADE comprises Rautakesko’s building and home improvement trade in Finland, Sweden, Norway, the Baltic countries, Russia and Belarus. Rautakesko’s operations are based on strong chain concepts, efficient sourcing, and best practices duplicated internationally. Rautakesko is responsible for the chains’ concepts, marketing, and sourcing and logistics services, store site network and retailer resources in Finland. Rautakesko is a retail operator in Sweden, Norway, the Baltic countries, Russia and Belarus. The retail store chains are K-rauta, Rautia, K-Maatalous, Byggmakker (Norway), Senukai (Lithuania) and OMA (Belarus). Rautakesko’s building and home improvement stores serve both consumer and professional customers.

THE CAR AND MACHINERY TRADE comprises the business operations of VV-Auto and Konekesko. VV-Auto imports and markets Volkswagen, Audi and Seat passenger cars and Volkswagen commercial vehicles in Finland. VV-Auto is also engaged in car retailing and provides after-sales services at its own retail outlets. Konekesko is a service company specialising in the import and sales of construction, environmental and agricultural machinery, trucks and buses, and recreational machinery. Konekesko operates in Finland, the Baltic countries and Russia.

COMMON OPERATIONS comprise Group support functions.

Segment information 2010

Income statement
€ million	Food trade	Home and speciality goods trade	Building and home improvement trade	Car and machinery trade	Common operations	Eliminations	Total
Segment net sales	3,896.3	1,568.5	2,519.4	954.8	136.5		9,075.6
of which inter-segment sales	-161.7	-23.4	-0.5	-0.3	-112.9		-298.8
Net sales from external customers	3,734.7	1,545.1	2,519.0	954.5	23.6		8,776.8
Other segment income	544.3	116.4	101.5	2.3	16.6		781.1
of which inter-segment income	-73.7	-6.2	-1.4	-0.1	-0.8		-82.3
Other operating income from external customers	470.6	110.1	100.1	2.2	15.8	0.0	698.8
Depreciation and amortisation	-42.6	-22.9	-40.7	-8.2	-2.3	0.3	-116.3
Impairments	-4.6				0.0		-4.6
Operating profit	158.4	103.4	23.9	33.9	-12.9	0.1	306.7
Non-recurring items	-1.7	37.4	-0.1	0.8	2.3	0.0	38.6
Operating profit excl. non-recurring items	160.1	66.0	24.0	33.1	-15.2	0.1	268.1
Finance income and costs							6.0
Share of profit/loss from associates							-0.3
Profit before tax							312.4
Assets and liabilities
Tangible and intangible assets	528.3	248.6	495.6	73.8	78.8	25.3	1,450.4
Interests in associates and other capital expenditure	1.3	0.1	0.2	0.0	60.1	-0.6	61.1
Pension assets	73.5	66.8	16.5	10.9	18.0		185.8
Inventories	107.6	230.7	254.4	165.0		-0.9	756.9
Trade receivables	265.0	132.6	188.3	52.3	14.1	-32.6	619.7
Other non-interest-bearing receivables	56.1	27.5	56.0	5.3	44.1	-18.7	170.3
Interest-bearing receivables from external customers	78.7	1.9	1.0	0.4	2.0	-2.8	81.1
Assets held for sale			0.4		0.9		1.3
Assets included in capital employed	1,110.5	708.1	1,012.4	307.8	218.0	-30.3	3,326.6
Unallocated items
Deferred tax assets							2.7
Financial assets at fair value through profit or loss							242.1
Available-for-sale financial assets							549.0
Cash and cash equivalents							56.1
Total assets	1,110.5	708.1	1,012.4	307.8	218.0	-30.3	4,176.5
Trade payables	393.5	152.2	264.0	51.6	4.2	-31.8	833.5
Other non-interest-bearing liabilities	163.6	138.9	101.2	78.1	55.9	-19.3	518.4
Provisions	12.5	9.1	2.0	14.5	2.7		40.9
Liabilities included in capital employed	569.6	300.2	367.2	144.2	62.8	-51.1	1,392.9
Unallocated items
Interest-bearing liabilities							476.8
Deferred tax liabilities							96.9
Total liabilities	569.6	300.2	367.2	144.2	62.8	-51.1	1,966.6
Total capital employed at 31 Dec.	540.9	407.9	645.2	163.6	155.2	20.8	1,933.7
Average capital employed	592.5	431.3	634.1	168.6	80.5	20.6	1,927.6
Return on capital employed excl. non-recurring items, %	27.0	15.3	3.8	19.6			13.9
Capital expenditure	117.2	45.3	78.2	17.8	67.0	-0.2	325.3
Number of personnel at 31 Dec.	3,106	7,887	9,493	1,205	433		22,124
Average number of personnel	2,881	5,418	8,379	1,138	399		18,215
Segment information 2009
Income statement
€ million	Food trade	Home and speciality goods trade	Building and home improvement trade	Car and machinery trade	Common operations	Eliminations	Total
Segment net sales	3,797.6	1,558.0	2,311.8	947.5	133.7		8,748.6
of which inter-segment sales	-161.5	-26.1	-1.6	-0.5	-112.2		-301.8
Net sales from external customers	3,636.1	1,532.0	2,310.2	947.0	21.5		8,446.8
Other segment income	546.3	118.7	104.2	6.8	15.6		791.5
of which inter-segment income	-71.2	-5.4	-2.7	-0.4	-1.4		-81.1
Other operating income from external customers	475.1	113.2	101.4	6.3	14.3		710.4
Depreciation and amortisation	-42.8	-27.0	-36.6	-8.1	-2.7	0.3	-116.9
Impairments	-8.0	-1.1	-0.6	-4.6			-14.4
Operating profit	170.6	66.5	19.6	-5.1	-19.3	0.0	232.3
Non-recurring items	37.5	37.0	7.7	-5.4	0.7	-0.5	77.0
Operating profit excl. non-recurring items	133.1	29.5	11.9	0.3	-20.0	0.5	155.4
Finance income and costs							-16.0
Share of profit/loss from associates							0.2
Profit before tax							216.6
Assets and liabilities
Tangible and intangible assets	480.8	252.0	450.4	67.5	19.7	25.1	1,295.4
Interests in associates and other capital expenditure	1.1	0.2	0.2	0.0	35.2	-0.6	36.0
Pension assets	150.5	52.1	43.3	28.5	40.8		315.2
Inventories	90.4	223.0	195.8	157.2		-0.8	665.5
Trade receivables	255.9	149.5	154.8	51.3	11.8	-29.7	593.7
Other non-interest-bearing receivables	35.4	24.2	54.0	13.0	9.2	-15.5	120.3
Interest-bearing receivables from external customers	79.7	0.6	13.3	2.9	3.4	-3.0	96.9
Assets held for sale					0.9		0.9
Assets included in capital employed	1,093.8	701.5	911.8	320.3	121.1	-24.5	3,123.9
Unallocated items
Deferred tax assets							3.2
Financial assets at fair value through profit or loss							213.1
Available-for-sale financial assets							427.7
Cash and cash equivalents							73.9
Total assets	1,093.8	701.5	911.8	320.3	121.1	-24.5	3,841.8
Trade payables	348.7	138.3	198.9	31.4	3.1	-21.7	698.7
Other non-interest-bearing liabilities	140.6	121.3	85.4	51.9	70.4	-23.3	446.2
Provisions	8.4	8.2	3.8	14.7	8.7		43.7
Liabilities included in capital employed	497.7	267.8	288.1	97.9	82.2	-45.0	1,188.6
Unallocated items
Interest-bearing liabilities							456.2
Deferred tax liabilities							127.7
Total liabilities	497.7	267.8	288.1	97.9	82.2	-45.0	1,772.5
Total capital employed at 31 Dec.	596.1	433.8	623.7	222.4	38.8	20.5	1,935.3
Average capital employed	635.7	509.6	644.9	244.2	58.3	21.8	2,114.5
Return on capital employed excl. non-recurring items,%	20.9	5.8	1.8	0.1	0.0		7.3
Investments	69.4	29.6	84.7	13.4	2.5	-1.7	198.0
Number of personnel at 31 Dec.	3,288	8,073	9,226	1,196	424		22,207
Average number of personnel	3,035	5,666	8,804	1,291	403		19,200

 

Group-wide information

The Group operates in the Nordic countries, the Baltic countries, Russia and Belarus. The food trade and the home and speciality goods trade mainly take place in Finland, the car and machinery trade in Finland and the Baltic countries, and the building and home improvement trade in Finland, Norway, Sweden, the Baltic countries, Russia and Belarus. The item ‘Other countries’ includes Russia and Belarus.

Net sales, assets, capital expenditure and personnel are disclosed by location.

 

2010
€ million	Finland	Other Nordic countries	Baltic countries	Other countries	Eliminations	Total
Net sales	7,323.0	755.1	437.8	277.7	-16.8	8,776.8
Assets	2,660.8	291.2	156.4	171.3	46.9	3,326.6
Capital expenditure	283.0	19.1	3.2	19.9	0.0	325.3
Average number of personnel 1 Jan.–31 Dec.	9,914	1,544	4,015	2,741		18,215
2009
€ million	Finland	Other Nordic countries	Baltic countries	Other countries	Eliminations	Total
Net sales	7,022.9	664.0	556.0	222.7	-18.8	8,446.8
Assets	2,489.7	248.7	197.7	144.2	43.7	3,123.9
Capital expenditure	127.1	18.6	5.8	47.2	-0.6	198.0
Average number of personnel 1 Jan.–31 Dec.	10,284	1,521	4,810	2,586		19,200

 

The net sales nearly completely consist of goods sales. The sales of services are immaterial.

There was no income from transactions with a single customer amounting more than 10% of the Group’s total income.