KESKO CORPORATION STOCK EXCHANGE RELEASE 22.04.2008 AT 09.00 1(24)
Interim financial report for the period 1 January-31 March 2008:
Kesko's growth continued
The Group's net sales from continuing operations in January-March
2008 were €2,279 million, up 6.9% on the corresponding period of
the previous year (€2,131 million). In January-March, the
operating profit excluding non-recurring items was €36.6 million
(€57.8 million). The pre-tax profit was €148.6 million (€98.2
million). The earnings per share from continuing operations were
€1.11 (€0.75). The Group's profit for the reporting period was
€120.0 million (€104.0 million). The Group's earnings per share
were €1.22 (€1.06).
Net sales and profit, continuing operations
Net sales and profit in January-March
The Group's net sales in January-March 2008 were €2,279 million,
which is 6.9% up on the corresponding period of the previous year
(€2,131 million). The Group's net sales increased by 5.7% in
Finland and by 12.1% abroad. Excluding business acquisitions and
disposals, the Group's net sales increase was 6.3%. Exports and
foreign operations accounted for 20.1% (19.2%) of net sales.
In January-March, the K-Group's (i.e. Kesko's and the chain
stores') retail sales were €2,604 million, an increase of 7.1% on
the corresponding period of the previous year.
The Group's profit before tax for January-March was €148.6 million
(€98.2 million). The operating profit was €150.1 million (€60.4
million). It was increased by a total of €113.6 million (€2.6
million) in non-recurring gains from the disposal of fixed assets
and businesses. The non-recurring items include a €10.4 million
gain on the disposal of K-Rahoitus Oy shares, and a €103.2 million
non-recurring gain from the property lease and sale arrangements
between Kesko and Nordisk Renting Oy. The financial items of the
comparable period included €37.1 million in non-recurring gains on
the sale of SATO Corporation shares.
The operating profit excluding non-recurring items was €36.6
million (€57.8 million). It represented 1.6% of net sales (2.7%).
The fact that the operating profit excluding non-recurring items
remained smaller than in the previous year was due to smaller
gross margin compared with the previous year and the expansion and
renovation of the store site network. Especially the operating
profits excluding non-recurring items of Kesko Food, Rautakesko
and Indoor decreased from the previous year.
The Group's earnings per share from continuing operations were
€1.11 (€0.75). Equity per share was €19.13 (€17.52).
Discontinued operations
On 28 February 2008, Kesko signed a contract of sale by which it
sells the share capital of Kauko-Telko Ltd to Aspo Oyj. The
completion of the transaction is subject to the approval of
competition authorities. The transaction is expected to be
completed during the second quarter of this year. Kauko-Telko is
presented as a discontinuing operation in compliance with IFRS 5.
On 31 March 2008, Kesko Corporation sold the share capital of
Tähti Optikko Group Oy to the Specsavers optical chain. Tähti-
Optikko is presented as a discontinued operation in compliance
with IFRS 5. The debt-free selling price was about €15 million.
The disposal contributed a non-recurring gain of €8.5 million
included in discontinued operations.
In the comparable period, discontinued operations also include a
€28.2 million gain on the disposal of food store properties leased
to Rimi Baltic AB.
Investments
The Group's investments in January-March totalled €60.3 million
(€50.3 million), which is 2.6% (2.4%) of net sales. Investments in
store sites were €50.0 million (€41.2 million). The Group's other
investments were €10.3 million. Investments in foreign operations
represented 28.0% of total investments.
Finance
In January-March, the cash flow from operating activities was €-
35.5 million (€-19.6 million) and the cash flow from investing
activities was €52.6 million (€54.8 million). The cash flow from
investing activities included €117.2 million (€112.2 million) of
proceeds received from the disposal of fixed assets.
At the end of the period, liquid funds totalled €568 million (€383
million). The amount was increased by the disposal of K-Rahoitus
Oy, which contributed about €240 million to liquid funds from
finance receivables paid to Kesko, and by the real estate and
lease arrangement between Kesko and Nordisk Renting Oy, which
contributed €82 million to the cash flow. At the end of the
reporting period, the interest-bearing net debt was €-35 million
(€171 million). Equity ratio was 46.3% (44.6%) and gearing -1.8%
(9.8%) at the end of the period.
In January-March, the Group's net financial expenses were €1.4
million (net financial income was €37.6 million in the previous
year). The income for the comparable period included €37.1 million
in non-recurring gains on the sale of SATO shares. As a result of
the arrangement with Nordisk Renting, finance lease liabilities
decreased by €81 million.
Taxes
In January-March, the Group's taxes were €37.5 million (€21.7
million). The effective tax rate was 24.7% (21.5%).
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.
Personnel, continuing operations
In January-March, the average number of personnel in the Kesko
Group was 21,150 (19,250) converted into full-time employees.
There was an increase of 1,900 employees compared with the
corresponding period of the previous year. In Finland, the average
increase was 194 employees, while outside Finland it was 1,706.
At the end of March 2008, the total number of personnel was 24,836
(22,522), of whom 13,254 (13,015) worked in Finland and 11,582
(9,507) outside Finland. Compared with the end of March 2007,
there was an increase of 239 employees in Finland and 2,075
outside Finland.
Market review
It has been forecast that the growth rate of the Finnish economy
will decelerate in 2008 compared with 2007, mainly as a result of
weakening export demand. The worsened outlook for the US economy
will affect the growth of the whole euro zone economy. In Finland,
private consumption is forecast to grow at a rate of 3.1% and
investments at a rate of about 3.5%. The increase in consumer
prices is forecast to reach 3.4%. Housing production is expected
to shrink during this year (Nordea, Economic Outlook, 21 April
2008).
According to the preliminary data of Statistics Finland, in
January-February 2008, the volume of Finnish retail trade
increased by 10.9% compared with the corresponding period of the
previous year. The increase in the wholesale trade volume was
14.1% in the same period.
According to Statistics Finland's consumer survey of March 2008,
consumers' confidence in the economy strengthened slightly in
March but continued to stand below the long-term average.
Consumers' views concerning their own financial situation and
saving possibilities were bright, which reflected their slightly
higher expectations concerning unemployment. Instead, the outlook
for the Finnish economy remains gloomy and inflation expectations
high among consumers.
In 2008, the Estonian economy is forecast to grow by 4.0%, the
Latvian economy by 5.6% and the Lithuanian economy by 7.4%.
Private consumption is estimated to grow by about 6.0% in Estonia,
by 7.0% in Latvia and by 14.0% in Lithuania. Consumer prices are
forecast to rise by 7.9% in Estonia, by 12.0% in Latvia and by
7.0% in Lithuania (Nordea, Economic Outlook, 21 January 2008).
The Swedish economy is forecast to grow by 2.1% and private
consumption by 2.0% in 2008. Consumer prices are expected to
increase at a rate of 3.1%. The increase in investments is
forecast to slow down and that of housing construction to level
off (Nordea, Economic Outlook, 21 April 2008).
The Norwegian economy is estimated to grow by 3.0% and private
consumption by 3.3% in 2008. Consumer prices are expected to
increase by about 2.9% (Nordea, Economic Outlook, 21 April 2008).
The Russian economy is forecast to grow by 7.0% in 2008. Private
consumption is forecast to increase by 10% and investments by 21%.
Consumer prices are expected to increase by 12% (Nordea, Economic
Outlook, 21 January 2008).
The market and outlook for each of Kesko's business divisions are
discussed in the division reviews of this interim financial
report.
Divisions
Kesko Food
In January-March, Kesko Food's net sales totalled €937 million, up
6.1%.
In January-March, Kesko Food's operating profit excluding non-
recurring items was €20.7 million (2.2% of net sales), i.e. €8.4
million, or 1.1 percentage points, less than in the previous year.
The operating profit excluding non-recurring items for the first
months of the year was negatively affected by a decrease in gross
margin and the extensions and renovations carried out in the store
site network. Kesko Food's operating profit was €123.9 million
(€29.2 million). The operating profit was increased by a €103.2
million non-recurring gain on real estate and lease arrangements.
In January-March, Kesko Food's investments totalled €30.4 million
(€24.4 million), of which investments in store sites were €27.9
million (€20.6 million).
In January-March, the retail sales of the K-food stores increased
by 8.1%, totalling €1,226 million (incl. VAT). At the end of
March, there were a total of 1,053 K-food stores (mobile stores
excluded).
Kesko Food continued the intensive development of the K-food store
network. In January-March, a K-supermarket was opened in
Hämeenkyrö and K-markets were opened in Olari, Espoo, in Etu-
Lyöty, Oulu, in Huittinen and in Puumala. Other renovations and
extensions were also implemented.
In April, K-supermarkets were opened in Metropoli, Joensuu and in
Kuninkoja, Raisio.
The most important retail stores being built are K-citymarkets in
Päiväranta, Kuopio, in Pori, Tornio, Jämsä, Klaukkala, Ylöjärvi,
in the Skanssi shopping centre in Turku, and in Ylivieska, as well
as the extension of a K-supermarket into a K-citymarket in Rusko,
Oulu, and the K-supermarkets being built in Hämeenlinna,
Mustasaari, Alavus, Haukipudas, Viitasaari, Rauma, in Konala,
Helsinki, and in Liminka.
The growth rate of the total grocery trade market in Finland for
January-March is estimated at about 7-8% up on the previous year.
In January-February, prices increased at an average monthly rate
of about +5.8% compared with the previous year (Statistics
Finland).
Kesko Food's net sales are expected to grow in 2008. Owing to
major investments in store sites and information systems, Kesko
Food's operating profit excluding non-recurring items in 2008 is
expected to remain at a lower level compared with the previous
year.
Rautakesko
In January-March, Rautakesko's net sales amounted to €591 million,
an increase of 10.6%. The contribution of acquisitions excluded,
the net sales growth was 8.2%. Net sales in Finland were €232
million, an increase of 7.9%. The net sales of foreign
subsidiaries were €358 million, up 12.5%. Foreign subsidiaries
contributed 60.6% to Rautakesko's net sales.
In Sweden, the net sales of K-rauta AB increased by 13.8% to €38
million in January-March. In Estonia, Rautakesko's net sales were
up by 1.1% to €18 million. In Lithuania, the net sales of UAB
Senuku Prekybos Centras (Senukai), in which Rautakesko has a
majority interest, increased by 24.6% to €111 million, of which
the contribution of the Belorussian OOO OMA, acquired by Senukai
in July 2007, was €13 million. In Latvia, Rautakesko's net sales
increased by 3.8% to €18 million. In Russia, Stroymaster's net
sales grew by 40.2% to €40 million. In Norway, Byggmakker's net
sales decreased by 0.1% and were €130 million.
In January-March, Rautakesko's operating profit excluding non-
recurring items was €7.0 million (1.2% of net sales), i.e. €9.3
million, or 1.9 percentage points less than in the previous year.
The profit performance was affected by the expansion of the store
site network and the weakening of demand in the construction
market especially in the Baltics. Rautakesko's operating profit
for January-March was €7.0 million (€18.6 million). During the
reporting period, new K-rauta stores were opened in Lahti and
Raisio.
In January-March, Rautakesko's investments totalled €22.3 million
(€19.9 million), of which 74.7% (41.2%) was abroad.
At the end of March, the K-rauta chain in Finland comprised of 41
stores and the Rautia chain 103 stores. In January-March, the
sales of the K-Group's building and home improvement stores in
Finland increased by 6.6% to €217.2 million (incl. VAT). The sales
of the Rautakesko B-to-B Service decreased by 1.9%.
Rautakesko operates 17 K-rauta stores in Sweden, one of which is
owned by the retailer. In Estonia, Rautakesko has five stores. In
Latvia, Rautakesko has seven stores of its own and two partner
stores.
In Norway, Rautakesko owns Byggmakker Norge AS, a company managing
the Byggmakker chain of building and home improvement stores. The
chain comprises 118 stores, 22 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. There are eight
K-rauta stores in St. Petersburg, Russia, three of which are new
and operate in conformity with the K-rauta concept. The latest K-
rauta in St. Petersburg opened in December 2007.
The building and home improvement trade market is expected to grow
in all countries in which Rautakesko operates. In 2008, a growth
rate of 3-5% is forecast for the Nordic countries and 5-7% for the
Baltic countries. The corresponding growth expectation for the St.
Petersburg area is about 10%. Market development reflects
uncertainties especially in the Baltic countries, with the
construction market expected to slow down especially in Estonia
and Latvia as a result of an increasing economic uncertainty (Own
estimate).
In 2008, Rautakesko will continue to invest in new store sites,
employee competencies and a uniform information system. It is
expected that Rautakesko's net sales will grow in 2008. Its
operating profit excluding non-recurring items in 2008 is expected
to remain at a lower level compared with the previous year.
VV-Auto
In January-March, VV-Auto's net sales totalled €261 million, up by
5.1%. The car tax change postponed sales from 2007 to the
beginning of 2008. The net sales growth was decreased by the
average car prices, fallen as a result of the tax change, and by
the extended delivery times of some car models. The aggregate
registrations of passenger cars and vans imported by VV-Auto
increased by 24.9% during the first months of the year.
In January-March, the operating profit excluding non-recurring
items was €13.9 million (5.3% of net sales), up €2.2 million, or
0.6 percentage points, compared with the corresponding period of
the previous year.
Investments totalled €1.6 million (€1.6 million) in January-March.
In January-March, first registrations of new passenger cars
totalled 46,112 in Finland, up by 14.7% on the previous year.
Compared with the year before, first registrations of vans were
down by 4.2% to 4,681. In consequence of the change by which the
tax on a passenger car is determined based on its CO2 rating, some
demand has shifted to diesel models.
In January-March, VV-Auto's retail sales increased by 10.6%
In January-March, the registrations of Volkswagen passenger cars
totalled 5,380 and their market share was 11.7%, compared with
9.3% in the previous year. The number of Volkswagen vans
registered was 680, while the market share was 14.5% (18.5%). In
January-March, the first registrations of Audis were 1,579, and
the market share was 3.4% (3.8%). The registrations of new Seat
passenger cars totalled 683 in Finland, 126 in Estonia and 45 in
Latvia. The market share in Finland was 1.5%, compared with 1.2%
the year before.
It is estimated that Finland's total passenger car market will
grow markedly compared with the previous year. The total market
for vans is expected to be at a slightly lower level than in the
previous year (Road Transport Forecasting Group).
In 2008, VV-Auto's net sales are expected to grow compared to the
previous year. The operating profit excluding non-recurring items
is expected to increase compared to the year before.
Anttila
In January-March, Anttila's net sales totalled €128 million, up
6.6%.
In January-March, Anttila's operating loss excluding non-recurring
items was €1.3 million (-1.1% of net sales). In January-March the
year before, the operating loss was €0.9 million (-0.8% of net
sales). Anttila's operating loss was €1.4 million (€-0.9 million).
Due to the nature of the department store trade, the majority of
profits are made towards the end of the year.
In January-March, the retail sales of the Anttila department
stores were €84 million, up 2.8%. The retail sales of the Kodin
Ykkönen department stores for home goods and interior decoration
were €43 million, up 17.8%. Distance retail sales in Finland were
€24 million, up 6.6%. The biggest growth was recorded in the sales
of home electronics, information technology and interior
decoration products.
Trends in the home and speciality goods sales vary by product
line. The growth is forecast to average 3-5% in 2008 (own
estimate).
In 2008, Anttila's net sales are expected to grow, and its
operating profit excluding non-recurring items is expected to
match the level of 2007.
Kesko Agro
In January-March, Kesko Agro's net sales were €180 million, an
increase of 6.8%. The net sales from foreign operations were €62
million, accounting for 34.7% of net sales.
In January-March, Kesko Agro's net sales in Finland were €117
million, down 0.6%, due to the animal feed and chemicals trade.
The net sales from foreign operations increased by 24.2% in
January-March, which is attributable to an increase in the grain
and agricultural machinery trade.
In January-March, Kesko Agro's operating loss excluding non-
recurring items was €0.4 million (-0.2% of net sales), which was
€0.2 million, or 0.1 percentage points smaller than in the
corresponding period of the previous year.
In January-March, investments totalled €0.5 million.
At the end of the reporting period, the K-maatalous chain
comprised 92 agricultural stores in Finland. The sales of the K-
maatalous chain decreased by 1.8% in January-March to €132 million
(incl. VAT). Kesko Agro has six stores in Estonia, four in Latvia
and three in Lithuania.
It is estimated that in 2008, the total Finnish and Baltic
agricultural trade market will increase by 5-10% on the previous
year (own estimate).
Regardless of the structural changes taking place in the sector,
it is expected that in 2008, Kesko Agro's net sales will grow and
its operating profit excluding non-recurring items will match the
level of 2007.
Other operating activities
Other operating activities comprise the reporting for Konekesko,
Intersport Finland, Indoor, Musta Pörssi and Kenkäkesko.
In January-March, the aggregate net sales from other operating
activities were €189 million, up 2.6%. Net sales from foreign
operations were €22 million, contributing 11.8% to the net sales.
In January-March, the aggregate operating profit from other
operating activities, non-recurring items excluded, was €2.2
million (1.2% of net sales), which was down by €6.4 million, or
3.5 percentage points, on the corresponding period of the previous
year. The decline in profitability was mainly attributable to the
weakened profit performance of the furniture trade compared with
the previous year. The operating profit from other operating
activities was €2.2 million (€8.6 million).
In January-March, investments were €3.7 million.
Konekesko's net sales in January-March were €67.5 million (€62.1
million), an increase of 8.8% on the previous year. In Finland,
sales were €55.0 million, up by 10.9% in January-March.
Konekesko's export sales totalled €14.3 million, an increase of
3.8%.
Intersport Finland's net sales in January-March were €36.9 million
(€37.6 million), down 1.8%. During the reporting period, Budget
Sport stores were opened in Espoo and Raisio.
Indoor's net sales in January-March were €44.7 million, down 3.2%.
In January-March, the aggregate net sales of the furniture trade
in the Baltic countries and Sweden were €10.0 million, a decrease
of 22.9%. Indoor's operating activities in Sweden were
discontinued in March 2008.
Musta Pörssi Ltd's net sales in January-March were €32.3 million
(€32.2 million), up 0.4%.
Kenkäkesko Ltd's net sales in January-March were €7.6 million
(€6.1 million), an increase of 23.4%.
The net sales of other operating activities are expected to
increase in 2008. The operating profit excluding non-recurring
items is expected to match the level of 2007.
Changes in the Group structure
K-Rahoitus Oy and its subsidiaries were sold and the disposal was
completed on 31 January 2008. Tähti Optikko Group was sold and the
disposal was completed on 31 March 2008.
Decisions of the Annual General Meeting
Kesko Corporation's Annual General Meeting held on 31 March 2008
adopted the financial statements for 2007 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 €1.60 per share, as proposed by the Board of
Directors, or total dividends of €156,428,592. The record date for
dividend distribution was 3 April 2008 and the dividend payment
date 10 April 2008.
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 Board Chairman is
Heikki Takamäki and the Deputy Chairman is Keijo Suila. 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 also decided to leave the Board
members' fees unchanged. The Annual General Meeting decided that
the monthly fees paid to the Board Chairman, the Deputy Chairman
and a Board member are €5,000, €3,500 and €2,500 respectively. In
addition, the Annual General Meeting decided that a meeting fee of
€500 is paid for the meetings of the Board of Directors and those
of its Committees. However, the fee of a Committee Chairman paid
for a Committee meeting, is €1,000 unless he/she also acts as the
Chairman or the Deputy Chairman of the Board of Directors
The Annual General Meeting elected PricewaterhouseCoopers Oy,
Authorised Public Accountants, as the company's auditor. The
auditor with principal authority is Johan Kronberg, APA.
The decisions of the Annual General Meeting were published in more
detail in a stock exchange release on 31 March 2008.
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 28 March 2008.
The compositions of the Boards were announced in a stock exchange
release on 28 March 2008.
The organising meeting of Kesko Corporation's Board of Directors
held after the Annual General Meeting on 31 March 2008 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, securities market and Board authorisations
At the end of the reporting period, Kesko Corporation's share
capital totalled €195,535,740. Of all shares 31,737,007 or 32.5%
are A shares and 66,030,863 or 67.5% B shares. The aggregate
number of shares was 97,767,870. Each A share entitles to ten (10)
votes and each B share to one (1) vote. During the reporting
period, the share capital was increased once by share
subscriptions with the stock options of the year 2003 option
scheme. The increase was made on 11 February 2008 (€210) and
announced in a stock exchange notification on the same day. The
subscribed shares were included on the main list of the Helsinki
Stock Exchange for public trading with the old B shares on 12
February 2008.
The price of a Kesko A share was €37.85 at the end of 2007 and
€34.10 in March 2008, at the end of the reporting period,
representing a decrease of 9.9%. The price of a B share was €37.72
at the end of 2007, and €32.75 at the end of the reporting period,
representing a decrease of 13.2%. During the reporting period, the
highest A share quotation was €38.20 and the lowest was €30.00.
For B shares, they were €38.12 and €28.68 respectively. During the
first months of 2008, the Helsinki Stock Exchange All Share index
(OMX Helsinki) dropped by 15.9%, the weighted OMX Helsinki CAP
index by 10.6%, while the Consumer Staples Index dropped by 12.6%
during the same period.
At the end of the reporting period, the market capitalisation of A
shares was €1,082 million, while that of B shares was €2,163
million. Their combined market capitalisation was €3,245 million,
a decrease of €447 million from the end of 2007. During the first
months of 2008, about 485,000 A shares were traded on the Helsinki
Stock Exchange at a total value of €16.2 million, while 31.2
million B shares were traded at a total value of €998 million.
The total number of the 2003D, 2003E and 2003F stock options of
the year 2003 option scheme included on the main list of the
Helsinki Stock Exchange traded during the first months of 2008 was
about 24,000 at a total value of €526,000.
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 against payment. The authorisation also includes a right to
deviate, for a weighty financial reason, from the shareholders'
pre-emptive right with a rights issue so that the issued shares
can be used as consideration in possible company acquisitions,
other arrangements concerning the company's operations, or to
finance investments. The authorisation is valid for two years from
the decision of the Annual General Meeting.
Flagging notifications
Kesko Corporation did not receive any flagging notifications
during the reporting period.
Main events
On 31 January 2008, K-Rahoitus Oy's share capital was transferred
to OKO Bank plc (Pohjola Bank plc from 1 March 2008). An agreement
to this effect was signed between OKO and Kesko Corporation on 21
December 2007. The preliminary price paid on completion of the
deal was about €30 million (stock exchange releases on 21 December
2007 and 31 January 2008).
Kesko Corporation waived the purchase option included in the lease
agreements made with Nordisk Renting Oy in 2001 and 2002, for
which RBS Nordisk Renting paid Kesko €74.2 million in
compensation. The previous agreements were finance leases and the
non-recurring gain resulting from the cancellation was €26.5
million. The lease arrangement and the property sale contributed a
total of €103 million to Kesko Food's and the Kesko Group's
operating profits for the first quarter, which is reported as a
non-recurring item (stock exchange release on 11 February 2008).
Kesko Corporation and Aspo plc signed an agreement by which Aspo
acquires the share capital of Kauko-Telko Ltd, a subsidiary wholly
owned by Kesko. The debt-free selling price is about €76 million,
based on Kauko-Telko's year-end balance sheet. Upon completion of
the deal, a gain on the disposal of about €31 million will be
recognised in profits from discontinued operations. The selling
price will be specified on the date of the completion of the deal.
The completion of the deal is subject to the approval of
competition authorities. The deal is expected to be completed
during the second quarter of this year (stock exchange releases on
23 May 2007 and 28 February 2008).
On 31 March 2008 Kesko Corporation sold the shares of Tähti
Optikko Group Oy to the Specsavers optical chain (stock exchange
release on 1 April 2008).
Events after the end of the reporting period
No significant events have taken place after the end of the
reporting period.
Risk management
The Kesko Group has adopted an established risk management process
in accordance with which the divisions regularly assess risks and
their management, and report on them to the Group's management.
During the past quarter, risks involved in Kesko's operating
activities have not changed in any material way compared with the
risks disclosed in the 2007 financial statements. The most
significant risks relate to the general economic development in
Kesko's operating area, the expansion and the growth rate of
foreign operations, especially in Russia and the Baltic countries,
the cost-efficiency of operating activities, and the availability
of competent personnel.
During the reporting period, no damages that would have a
significant effect on the Group's result were reported to the
Board of Directors. The Board of Directors is not aware of any
legal risks that would have an effect on the Group's result.
Other risks and uncertainties relating to profit performance are
described in the outlook for the Group and its divisions.
Future outlook
In 2008, the Kesko Group divisions are expected to perform as
described in the above division reviews.
The Group's operating activities are affected by the economic
outlook in its different market areas and especially by the growth
rate of private consumption. Market growth is expected to slow
down in the Nordic and the Baltic countries. In Finland, consumer
demand is expected to remain at a good level. As a result of an
economic uncertainty prevailing throughout the Baltics, the
construction market is expected to slow down especially in Estonia
and Latvia.
The sales from the Group's continuing operations are expected to
grow during the next six months, which is especially attributable
to the expansion of the food store and the building and home
improvement store networks, and the expected increase in car
sales.
During the next six months, the Kesko Group's operating profit,
excluding non-recurring items, from continuing operations is
expected to remain at a good level, although lower than in the
corresponding period of the previous year. In addition to the
slowing market growth, profitability will be impacted by an
intensive expansion and renovation of the store site network.
Helsinki, 22 April 2008
Kesko Corporation
Board of Directors
The figures of this interim financial report are unaudited.
Further information is available from Arja Talma, Senior Vice
President, CFO, telephone +358 1053 22113, and Jukka Erlund, Vice
President, Corporate Controller, telephone +358 1053 22338. A
Finnish-language webcast from the media and analyst briefing on
the interim financial report can be accessed at www.kesko.fi at
11.00. 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 and Responsibility
ATTACHMENTS
Consolidated income statement
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Group indicators
Net sales by division
Operating profit by division, incl. non-recurring items
Operating profit by division, excl. non-recurring items
Divisions' operating profits, excl. non-recurring items, as % of
net sales
Investments by division
Group contingent liabilities
Group indicators by quarter
Calculation of indicators
Divisions' net sales by quarter
Divisions' operating profits by quarter, incl. non-recurring items
Divisions' operating profits by quarter, excl. non-recurring items
Personnel, average number, and number at 31 March
The K-Group's retail sales
Kesko Corporation's interim financial report for January-June will
be published on 22 July 2008. 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 2007.
Consolidated income
statement (€ million)
1- 1-3/2007 Change, 1-
3/2008 % 12/2007
Net sales 2,279 2,131 6.9 9,287
Cost of sales -1,973 -1,833 7.6 -7,957
Gross profit 306 299 2.5 1,330
Other operating 248 130 90.8 577
income
Staff cost -145 -124 17.0 -547
Depreciation and -29 -28 3.2 -116
impairment charges
Other operating -230 -216 6.4 -922
expenses
Operating profit* 150 60 (..) 322
Financial income 11 50 -77.4 87
Financial expenses -13 -12 4.8 -51
Income from 0 0 (..) 0
associates*
Profit before tax 149 98 51.2 358
Income tax** -37 -21 74.4 -87
Net profit from 112 77 44.9 270
continuing operations
Net profit from 10 30 -65.6 37
discontinued
operations
Net profit 122 107 13.8 307
Attributable to:
Equity holders of 120 104 15.4 285
the
parent company
Minority interest 2 3 -34.1 22
Earnings per share
(€) for profit
attributable to the
equity holders of the
parent company
Continuing operations
Basic 1.12 0.76 48.2 2.54
Diluted 1.11 0.75 48.6 2.52
Whole Group
Basic 1.23 1.07 15.1 2.92
Diluted 1.22 1.06 15.4 2.90
* Change over 100%
** Income tax has been calculated on the profit for the reporting
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
8 7 % 07
ASSETS
Non-current assets
Intangible assets 227 247 -8.2 252
Tangible assets 1,097 1,126 -2.5 1,153
Non-current financial assets 31 28 8.7 31
Loans and receivables 59 130 -54.3 45
Pension assets 265 228 16.1 262
Total 1,680 1,760 -4.6 1,743
Current assets
Inventories 907 841 7.9 922
Trade and other receivables 944 943 0.1 840
Current financial assets 517 332 55.4 261
Cash and cash equivalents 51 50 1.3 90
Total 2,419 2,167 11.6 2,113
Non-current assets held for 98 1 (..) 237
sale*
Total 4,196 3,928 6.8 4,093
* Change over 100%
Consolidated balance sheet
(€ million)
31.3.200 31.3.200 Change, 31.12.20
8 7 % 07
EQUITY AND LIABILITIES
Equity 1,870 1,709 9.4 1,909
Minority interest 57 31 83.1 55
Total equity 1,927 1,740 10.7 1,964
Non-current liabilities
Pension obligations 4 4 14.6 4
Interest-bearing 223 319 -30.0 314
Non-interest-bearing 5 17 -69.9 12
Deferred tax liabilities 130 115 13.5 126
Provisions 18 17 5.2 15
Total 380 471 -19.2 471
Current
Interest-bearing 310 235 31.5 311
Non-interest-bearing 1,526 1,467 4.0 1,320
Provisions 12 14 -13.9 23
Total 1,847 1,717 7.6 1,654
Liabilities for available- 42 - (..) 3
for-sale assets*
Total equity and liabilities 4,196 3,928 6.8 4,093
* Change over 100%
Consolidated statement of changes in equity (€ million)
Share Issue Share Other Curre Reval Re- Minor Total
capit of premi- reser n-cy u- taine ity
al share um ves trans-ation d inter
capit latio surpl earni est
al n us ngs
diffe
r-
ences
Balance at
1.1.2007 195 0 196 246 -6 -1 1,120 27 1,777
Shares
subscribed
for with 1 0 2 3
options
Option 2 2
cost
Currency
translatio
n 2 1 3
difference
s
Minority
interest
acquisitio 15 15
ns
Fair value
changes 10 10
Other
changes 1 1 2
Dividend -146 -9 -156
Net profit
for the 285 22 307
period
Balance at
31.12.2007 195 0 200 247 -3 9 1,260 55 1,964
Balance at
1.1.2008 195 0 200 247 -3 9 1,260 55 1,964
Shares
subscribed
for with 0 0 0 0
options
Option 1 1
cost
Currency -1
translatio
n -2 -3
difference
s
Fair value
changes -2 -2
Other 1
changes -4 4 1
Dividend -156 -156
Net profit
for the 120 2 122
period
Balance at
31.3.2008 195 0 201 243 -5 7 1,228 57 1,927
Consolidated cash flow
statement (€ million)
3/2008 3/2007 Change 12/200
, % 7
Cash flow from operating
activities
Profit before tax 160 129 23.7 398
Planned depreciation 30 29 3.2 119
Financial income and 1 -38 (..) -37
expenses*
Other adjustments* -134 -39 (..) -75
Working capital
Current non-interest- -144 -95 50.9 -37
bearing trade receivables,
increase ( -)/ decrease (+)
Inventories -14 -51 -73.0 -123
increase ( -)/ decrease (+)
Current non-interest- 80 72 10.3 95
bearing liabilities,
increase (+)/ decrease (-)
Financial items and taxes -15 -26 -43.0 -91
Net cash from operating -35 -20 81.5 248
activities
Cash flow from investing
activities
Investments -60 -57 5.8 -237
Disposals of fixed assets 117 112 4.4 146
Increase of long-term -4 0 (..) 0
receivables*
Decrease of long-term 0 0 (..) 6
receivables*
Net cash used in investing 53 55 -4.0 -85
activities
Cash flow from financing
activities
Debt increase* 3 0 (..) 16
Debt decrease -16 -64 -74.3 -20
Increase (-)/decrease (+) 216 11 (..) -52
in short-term interest-
bearing receivables*
Dividends paid* 0 0 (..) -156
Equity increase 0 0 -97.9 3
Short-term money market -91 2 (..) 35
investments*
Other items* 0 3 (..) 1
Net cash used in financing
activities* 111 -48 (..) -173
Change in cash and cash 128 -12 (..) -9
equivalents*
Cash and cash equivalents 245 257 -4.5 257
at 1 Jan.
Currency translation 0 0 53.4 0
difference
Cash and cash equivalents 3 0 (..) 2
relating to available-for-
sale assets*
Cash and cash equivalents 371 244 51.8 245
at 31 Mar.
* Change over 100%
Group indicators
3/2008 3/2007 Change,
pp
Return on invested capital, % 26.6 23.5 3.1
Return on invested capital, %, 19.4 22.4 -3.1
moving 12 months
Return on equity, % 25.1 24.4 0.7
Return on equity, %, moving 12 17.6 23.0 -5.4
months
Equity ratio, % 46.3 44.6 1.7
Change,
%
Investments, € million* 60.3 50.3 19.9
Earnings per share, basic, €* 1.12 0.76 48.2
Earnings per share, diluted, €* 1.11 0.75 48.6
Earnings per share, basic, €** 1.23 1.07 15.1
Earnings per share, diluted, 1.22 1.06 15.4
€**
Equity per share, € 19.13 17.52 9.2
Personnel, average* 21,150 19,250 9.9
* Continuing operations
** Whole Group
Divisions
Net sales by division, 1-3/2008 1-3/2007 Change,
continuing operations € € %
million million
Kesko Food, Finland 932 879 6.0
Kesko Food, other 4 4 15.1
countries*
Kesko Food, total 937 883 6.1
Rautakesko, Finland 232 215 7.9
Rautakesko, other 358 319 12.4
countries*
Rautakesko, total 591 534 10.6
VV-Auto, Finland 256 242 5.9
VV-Auto, other 4 6 -27.1
countries*
VV-Auto, total 261 248 5.1
Anttila, Finland 121 114 6.7
Anttila, other 6 6 3.4
countries*
Anttila, total 128 120 6.6
Kesko Agro, Finland 117 118 -0.6
Kesko Agro, 62 50 24.2
other countries*
Kesko Agro, total 180 168 6.8
Other operating 167 160 4.0
activities, Finland
Other operating 22 24 -6.4
activities,
foreign countries*
Other operating 189 184 2.6
activities, total
Common operations and -6 -6 -7.5
eliminations
Finland, total 1,821 1,723 5.7
Other countries, 458 409 12.1
total*
Group, total 2,279 2,131 6.9
* Exports and net sales outside Finland
Operating profit by 1- 1- Change,
division incl. non- 3/2008 3/2007 €
recurring items, € € million
continuing million million
operations
Kesko Food 123.9 29.2 94.7
Rautakesko 7.0 18.6 -11.6
VV-Auto 13.9 11.7 2.2
Anttila -1.4 -0.9 -0.5
Kesko Agro -0.4 -0.6 0.2
Other operating 2.2 8.6 -6.4
activities
Common operations 5.0 -6.1 11.1
and eliminations
Group's operating 150.1 60.4 89.7
profit
Operating profit by 1- 1- Change,
division excl. non- 3/2008 3/2007 €
recurring items, € € million
continuing million million
operations
Kesko Food 20.7 29.0 -8.4
Rautakesko 7.0 16.3 -9.3
VV-Auto 13.9 11.7 2.2
Anttila -1.3 -0.9 -0.4
Kesko Agro -0.4 -0.6 0.2
Other operating 2.2 8.6 -6.4
activities
Common operations -5.4 -6.3 0.9
and eliminations
Total 36.6 57.8 -21.2
Operating profit 1-3/2008 1-3/2007 Change,
as % of net sales % of net % of net pp
excl. non- sales sales
recurring items,
continuing
operations
Kesko Food 2.2 3.3 -1.1
Rautakesko 1.2 3.0 -1.9
VV-Auto 5.3 4.7 0.6
Anttila -1.1 -0.8 -0.3
Kesko Agro -0.2 -0.4 0.1
Other operating 1.2 4.7 -3.5
activities
Common operations 97.4 104.4 -7.0
and eliminations
Total 1.6 2.7 -1.1
Investments by 1-3/2008 1-3/2007 Change,
division, € € €
continuing million million million
operations
Kesko Food 30 24 6
Rautakesko 22 20 2
VV-Auto 2 2 0
Anttila 1 1 0
Kesko Agro 1 2 -2
Other operating 4 1 2
activities
Common operations 1 0 1
and eliminations
Group, total 60 50 10
Group's contingent liabilities 3/2008 3/2007 Change, %
(€ million)
For own commitments 231 242 -4.5
For associates
For shareholders 0 1 -95.0
For others 7 11 -40.2
Lease liabilities 15 12 27.5
Liabilities arising from
derivative financial
instruments
Fair
value at
Values of underlying 3/2008 3/2007 31.3.2008
instruments
at 31 Mar.
Interest rate derivatives
Forward and future contracts* 48
Interest rate swap contracts 203 203 5.6
Currency derivatives
Forward and future contracts 329 369 -0.3
Currency swap contracts 100 100 -24.5
Commodity derivatives
Electricity derivatives 42 38 3.8
Grain derivatives 1 0.1
* Change over 100%
Figures by quarter
Group indicators by 1-3/ 4-6/ 7-9/ 10- 1-3/
quarter 2007 2007 2007 12/ 2008
2007
Net sales, € million 2,131 2,401 2,365 2,390 2,279
Change in net sales, % 11.6 8.5 10.8 6.9 6.9
Operating profit, € 60.4 99.6 93.3 68.3 150.1
million
Operating profit, % 2.8 4.1 3.9 2.9 6.6
Operating profit excl. 57.8 93.4 91.9 71.9 36.6
non-recurring items, €
million
Operating profit excl. 2.7 3.9 3.9 3.0 1.6
non-recurring items, %
Financial 37.6 -1.9 2.5 -2.1 -1.4
income/expenses,
€ million
Profit before tax, € 98 97 96 66 149
million
Profit before tax, % 4.6 4.1 4.1 2.8 6.5
Return on invested 23.5 18.6 17.4 12.4 26.6
capital, %
Return on equity, % 24.4 17.3 16.2 9.8 25.1
Equity ratio, % 44.6 46.5 47.4 48.5 46.3
Investments, € 50.3 60.3 48.2 68.9 60.3
million*
Earnings/share, 0.75 0.69 0.69 0.39 1.11
diluted, €*
Equity/share, € 17.52 18.32 19.08 19.53 19.13
* Continuing operations
Calculation of indicators
Return on invested Profit before tax + financial expenses
capital = x 100/
Balance sheet total - non-interest-
bearing liabilities
Return on equity = Profit before tax - income tax x 100/
Shareholders' equity
Equity ratio = Equity x 100/
Balance sheet total - advances received
Earnings/share, Profit before tax - income tax -
diluted = minority interest/
Average number of shares adjusted for
dilutive effect of options
Equity/share = Equity/
Number of shares at end of period
Interest-bearing debt - cash and cash
Gearing = equivalents/
Shareholders' equity
Divisions' net 1-3/ 4-6/ 7-9/ 10- 1-3/
sales by quarter, 2007 2007 2007 12/ 2008
€ million 2007
Kesko Food 883 983 959 1 046 937
Rautakesko 534 687 694 622 591
VV-Auto 248 218 195 144 261
Anttila 120 111 143 189 128
Kesko Agro 168 216 196 213 180
Other operating 184 193 185 182 189
activities
Common operations -6 -7 -7 -6 -6
and eliminations
Group's net sales 2,131 2,401 2,365 2,390 2,279
Divisions' 1-3/ 4-6/ 7-9/ 10- 1-3/
operating profits 2007 2007 2007 12/ 2008
by quarter incl. 2007
non-recurring
items, € million
Kesko Food 29.2 40.9 41.2 40.0 123.9
Rautakesko 18.6 37.6 39.5 22.1 7.0
VV-Auto 11.7 8.1 6.8 -0.5 13.9
Anttila -0.9 0.1 6.3 21.6 -1.4
Kesko Agro -0.6 7.9 3.5 2.1 -0.4
Other operating 8.6 6.5 3.3 -8.4 2.2
activities
Common operations -6.1 -1.6 -7.3 -8.6 5.0
Group's operating 60.4 99.6 93.3 68.3 150.1
profit
Divisions' 1-3/ 4-6/ 7-9/ 10- 1-3/
operating profits 2007 2007 2007 12/ 2008
excl. non-recurring 2007
items, by quarter,
€ million
Kesko Food 29.0 41.4 41.1 39.8 20.7
Rautakesko 16.3 38.7 39.0 21.9 7.0
VV-Auto 11.7 8.1 6.8 -0.5 13.9
Anttila -0.9 -1.8 6.3 21.6 -1.3
Kesko Agro -0.6 7.9 3.0 2.1 -0.4
Other operating 8.6 6.5 3.3 -4.5 2.2
activities
Common operations -6.3 -7.5 -7.6 -8.5 -5.4
Group's operating 57.8 93.4 91.9 71.9 36.6
profit
Personnel, 1-3/2008 1-3/2007 Change
average number,
continuing operations
Kesko Food 5,824 5,647 177
Rautakesko 10,068 8,271 1,797
VV-Auto 724 727 -3
Anttila 2,040 1,935 105
Kesko Agro 732 841 -109
Other operating 1,762 1,829 -67
activities and common
operations
Kesko Group, total 21,150 19,250 1,900
Personnel at 31 March, 2008 2007 Change
continuing operations*
Kesko Food 7,556 7,335 221
Rautakesko 11,164 8,970 2,194
VV-Auto 757 747 10
Anttila 2,690 2,583 107
Kesko Agro 752 857 -105
Other operating 1,917 2,030 -113
activities and common
operations
Kesko Group, total 24,836 22,522 2,314
* Total number including part-time employees
The K-Group's retail sales (incl. VAT) (preliminary data):
1.1.-31.3.2008
€ Change,
million %
K-Group food stores
K-citymarket 425.2 7.7
K-supermarket 368.6 8.2
K-market and other K-food 431.8 8.5
stores
Finland, total 1,225.6 8.1
Food stores, total 1,225.6 8.1
K-Group building and home
improvement stores
K-rauta 121.4 6.3
Rautia 95.8 7.1
Finland, total 217.2 6.6
K-rauta, Sweden 48.4 13.7
K-rauta, Estonia 20.7 1.1
K-rauta, Latvia 21.2 3.7
Senukai, Lithuania 116.4 10.3
OMA, Belarus 15.2
Stroymaster, Russia 47.5 40.2
Byggmakker, Norway 227.7 -1.7
Other countries, total 497.0 9.4
714.2 8.5
Building and home
improvement stores, total
Kesko Group car stores
Helsingin VV-Auto and Turun 127.8 10.6
VV-Auto
Finland, total 127.8 10.6
Anttila
Anttila department stores 83.8 2.8
Kodin Ykkönen department 42.7 17.8
stores for home goods and
interior decoration
Distance sales (Mail Order 23.5 6.6
and NetAnttila)
Finland, total 150.0 7.3
Anttila Mail Order, Estonia 6.1 0.5
and Latvia
Other countries, total 6.1 0.5
Anttila, total 156.1 7.0
K-Group agricultural stores
K-maatalous 131.8 -1.8
Finland, total 131.8 -1.8
Kesko Agro, Estonia 18.9 30.5
Kesko Agro, Latvia 24.0 23.8
Kesko Agro, Lithuania 7.0 -58.9
Other countries, total 50.0 -2.1
Agricultural stores, total 181.7 -1.9
Other operating activities
Kesko Group machinery
stores
Yahama Center 1.7 -17.7
Finland, total 1.7 -17.7
K-Group home and speciality
goods stores
Intersport 66.4 0.9
Kesport 7.5 6.0
Asko 21.8 -1.7
Sotka 26.8 -0.9
Musta Pörssi 53.0 18.0
Andiamo and K-kenkä 9.2 0.8
Kenkäexpertti 2.5 -7.4
Finland, total 187.1 4.7
Furniture sales, Sweden, 9.2 -23.8
Estonia and Latvia
Other countries, total 9.2 -23.8
Home and speciality goods 196.3 2.9
stores, total
Other operating activities, 198.1 2.6
total
Finland, total 2,041.2 7.0
Other countries, total 562.2 7.4
Retail sales, total 2,603.5 7.1
Interim financial report for the period 1 January-31 March 2008: Kesko's growth continued
| Source: Kesko Oyj