Varie
Kesko's interim report for the period 1 Jan. to 30 Jun. 2013
KESKO CORPORATION STOCK EXCHANGE RELEASE 24.07.2013 AT 09.00 1(31)
Financial performance in brief:
*The Group's net sales for January-June decreased by 4.2%.
*The retail and B2B sales (VAT 0%) of the K-Group (i.e. Kesko and chain stores) for January-June decreased by 4.6%.
*The operating profit excluding non-recurring items was EUR88.4 million (EUR81.7 million).
*The Kesko Group's net sales and operating profit excluding non-recurring items for the next twelve months are expected to remain at the level of the preceding twelve months.
Key performance indicators
FINANCIAL PERFORMANCE
Net sales and profit for January-June 2013
The Group's net sales in January-June 2013 were EUR4,580 million, which is 4.2% down on the corresponding period of the previous year (EUR4,778 million). Net sales performance was affected by weaker consumer demand especially in the building and home improvement trade and department store trade in Finland. In Finland, net sales decreased by 3.6% and in the other countries by 6.6%. Net sales performance in the other countries was materially impacted by the sales decline in the building and home improvement trade in Norway resulting from the retailer changes that took place in the Byggmakker chain in the previous year. International operations accounted for 17.1% (17.6%) of net sales. Net sales grew in the food trade and declined in the other divisions.
The operating profit excluding non-recurring items for January-June was EUR88.4 million (EUR81.7 million). The enhancement measures of the profitability programme had a significant positive impact on the Group's profit performance. Operating expenses decreased by EUR40 million compared to the previous year.
Operating profit was EUR96.3 million (EUR82.8 million). The operating profit includes EUR7.9 million (EUR1.1 million) of non-recurring items. The non-recurring items include gains on the disposals of properties in the amount of EUR9.0 million. The Group's profit before tax for January-June was EUR93.0 million (EUR82.3 million).
The Group's earnings per share were EUR0.62 (EUR0.53). The Group's equity per share was EUR21.79 (EUR21.72).
In January-June, the K-Group's (i.e. Kesko's and the chain stores') retail and B2B sales (VAT 0%) were EUR5,615 million, down 4.6% compared to the previous year. The K-Plussa customer loyalty programme gained 33,787 new households in January-June. At the end of June, there was 2,229,370 K-Plussa households and 3.8 million K-Plussa cardholders.
Net sales and profit for April-June 2013
The Group's net sales in April-June 2013 were EUR2,420 million, which is 1.6% down on the corresponding period of the previous year (EUR2,460 million). Net sales decline was mainly attributable to the fall in the department store trade in Finland and in the sales of the building and home improvement trade in Norway. In Finland, net sales decreased by 1.2% and in the other countries by 3.3%. International operations accounted for 19.3% (19.6%) of net sales.
The operating profit excluding non-recurring items for April-June was EUR69.8 million (EUR59.4 million). It represented 2.9% (2.4%) of net sales. Profitability was improved through major cost adjustments in all divisions.
Operating profit was EUR77.0 million (EUR57.7 million). The operating profit includes EUR7.3 million (EUR-1.7 million) of non-recurring items. The non-recurring items include gains on the disposals of properties in the amount of EUR8.4 million. The Group's profit before tax for April-June was EUR77.2 million (EUR57.3 million).
The Group's earnings per share were EUR0.50 (EUR0.37).
In April-June, the K-Group's (i.e. Kesko's and the chain stores') retail and B2B sales (VAT 0%) were EUR3,042 million, down 2.0% compared to the previous year.
Finance
In January-June, the cash flow from operating activities was EUR185.7 million (EUR55.9 million). The cash flow from investing activities was EUR-80.0 million (EUR-171.2 million) including a EUR14.0 million (EUR21.1 million) amount of proceeds from the sales of fixed assets.
The Group's liquidity remained at an excellent level in January-June. At the end of the period, liquid assets totalled EUR474 million (EUR253 million). Interest-bearing liabilities were EUR587 million (EUR563 million) and interest-bearing net debt EUR113 million (EUR310 million) at the end of June. Equity ratio was 50.5% (51.2%) at the end of the period.
In January-June, the Group's net finance costs were EUR2.9 million (EUR0.4 million). Interest expense was increased by the EUR250 million bond taken out in September 2012.
In April-June, the cash flow from operating activities stood at an excellent EUR244.3 million (EUR61.4 million). The cash flow from investing activities was EUR-38.1 million (EUR-79.3 million) including an EUR11.5 million (EUR1.5 million) amount of proceeds from the sales of fixed assets.
In April-June, the Group's net finance income was EUR0.4 million (net finance costs EUR0.3 million. It includes a EUR4.0 million amount of interest in cooperative capital from Suomen Luotto-osuuskunta.
Taxes
The Group's taxes for January-June were EUR28.3 million (EUR25.2 million). The effective tax rate was 30.5% (30.7%), affected by loss-making foreign operations.
The Group's taxes for April-June were EUR23.6 million (EUR17.9 million). The effective tax rate was 30.5% (31.3%).
Capital expenditure
In January-June, the Group's capital expenditure totalled EUR89.5 million (EUR171.9 million), or 2.0% (3.6%) of net sales. Capital expenditure in store sites was EUR66.8 million (EUR147.1 million), in IT EUR12.1 million (EUR13.4 million) and other capital expenditure was EUR10.6 million (EUR11.4 million). Capital expenditure in foreign operations represented 42.2% (13.8%) of total capital expenditure.
In April-June, the Group's capital expenditure totalled EUR48.1 million (EUR67.8 million), or 2.0% (2.8%) of net sales. Capital expenditure in store sites was EUR35.1 million (EUR56.8 million), in IT EUR6.5 million (EUR6.0 million) and other capital expenditure was EUR6.5 million (EUR5.0 million). Capital expenditure in foreign operations represented 47.0% (22.2%) 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.
As a result of a weakened general economic situation, tightened competition and an increase in the level of costs, Kesko is implementing the profitability programme announced previously, which aims to ensure price competitiveness and to improve profitability. The profitability programme includes significant measures aimed to increase sales, to enhance purchasing operations and to adjust costs, working capital and capital expenditure.
The Group level cost saving target is a total of around EUR100 million. Cost savings are implemented in all divisions and in all operating countries. Most of the cost savings are expected to be achieved in 2013. Kesko's operating expenses for the first half of 2013 were EUR885 million, down EUR40 million (-4.3%) on the previous year regardless of store site network expansion and cost inflation.
The measures for staff cost enhancement were implemented as announced previously. In addition to terminations, the reductions included reduced working hours and retirement arrangements. Other significant savings are implemented by adjusting especially marketing and store site expenses and by centralising ICT purchases. In addition, special enhancement measures are targeted at operations with low profitability.
In the next few years, capital expenditure will be aligned with funds generated from operations to some EUR200-300 million per year.
Personnel
In January-June, the average number of employees in the Kesko Group was 19,373 (19,574) converted into full-time employees. In Finland, the average decrease was 331 people, while outside Finland, there was an increase of 130 people.
At the end of June 2013, the number of employees was 24,026 (24,462), of whom 13,252 (13,762) worked in Finland and 10,774 (10,700) outside Finland. Compared to the end of June 2012, there was a decrease of 510 people in Finland and an increase of 74 people outside Finland.
In January-June, the Group's staff cost was EUR310 million, unchanged compared to the previous year. In April-June, the staff cost decreased by 0.7% compared to the previous year and was EUR157 million.
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
January-June 2013
In the food trade, the net sales for January-June were EUR2,144 million (EUR2,101 million), up 2.0%. During the same period, the grocery sales of K-food stores increased by 0.2% (VAT 0%). In the grocery market, retail prices are estimated to have changed by some +5% compared to the previous year (VAT 0%, Kesko's own estimate based on the Consumer Price Index of Statistics Finland), and the total market (VAT 0%) is estimated to have grown by some 3% in January-June compared to the previous year (Kesko's own estimate).
In January-June, the operating profit excluding non-recurring items of the food trade was EUR99.0 million (EUR73.3 million), or EUR25.7 million up on the previous year. Profitability was improved by significant savings achieved from enhanced operations and by the adjustment of capital expenditure. Operating profit was EUR103.3 million (EUR76.0 million). Non-recurring income included EUR4.3 million (EUR2.7 million) of gains on the disposals of properties.
The capital expenditure of the food trade in January-June was EUR43.9 million (EUR95.9 million), of which EUR38.9 million (EUR88.1 million) in stores sites.
April-June 2013
In the food trade, the net sales for April-June were EUR1,099 million (EUR1,091 million), up 0.7%.
The operating profit excluding non-recurring items of the food trade in April-June was EUR50.8 million (EUR38.6 million), or EUR12.1 million up on the previous year. Operating profit was EUR55.1 million (EUR38.6 million). Non-recurring income included EUR4.3 million (EUR0.0 million) of gains on the disposals of properties.
The capital expenditure of the food trade in April-June was EUR27.4 million (EUR35.7 million).
In April-June 2013, one new K-citymarket was opened in Kokkola and a K-ruoka store in St. Petersburg. Renovations were carried out in a total of four stores.
The most significant store sites being built are a K-citymarket in the Puuvilla shopping centre in Pori and a K-supermarket in Tapiola, Espoo, in Pohjois-Haaga, Helsinki, in Jyväskylä, Säkylä and Ikaalinen. The objective in Russia is to open, in addition to the existing two stores, two new food stores during the latter part of 2013.
Home and speciality goods trade
January-June 2013
In the home and speciality goods trade, the net sales for January-June were EUR667 million (EUR721 million), down 7.6%. Consumer demand in the home and speciality goods trade has weakened and the change in customer behaviour has strengthened during the first months of the year. Sales declined especially in the department store trade. Net sales performance was also impacted by the change in Musta Pörssi's business model and the adjustment of the Intersport store site network in Russia. The sales and profitability of Intersport and Budget Sport, as well as Asko and Sotka stood at a good level.
The operating profit excluding non-recurring items of the home and speciality goods trade for January-June was EUR-27.8 million (EUR-13.6 million), down EUR14.2 million compared to the previous year. Profitability was negatively impacted by the weak profit performances of Anttila and Intersport Russia. During the reporting period, significant cost savings were implemented. Operating profit was EUR-23.3 million (EUR-13.6 million).
The capital expenditure of the home and speciality goods trade was EUR13.8 million (EUR29.3 million) in January-June.
April-June 2013
In the home and speciality goods trade, the net sales for April-June were EUR322 million (EUR352 million), down 8.7%. Net sales decline was driven by the decrease in the sales of the department store trade in particular and the significant adjustment of the store site network of Musta Pörssi and the Intersport store site network in Russia.
The operating profit excluding non-recurring items of the home and speciality goods trade for April-June was EUR-10.0 million (EUR-0.7 million), down EUR9.3 million compared to the previous year. Operating profit was EUR-5.6 million (EUR-0.7 million).
The capital expenditure of the home and speciality goods trade was EUR5.8 million (EUR10.8 million).
In April-June, eight Must Pörssi stores were closed. In addition, 11 Musta Pörssi retailers continued as Musta Pörssi partners from the beginning of June. Intersport Russia completed the store network adjustment in May, as it closed the Ekaterinburg store. In May, the extended Anttila department store was opened in Citycenter, Helsinki and a new Kodin1 department store in Raisio, and the Kodin1 department store in Länsikeskus, Turku was closed.
* incl. online stores
Building and home improvement trade
January-June 2013
In the building and home improvement trade, the net sales for January-June were EUR1,302 million (EUR1,411 million), down 7.7%. Excluding the impact of retailer changes in Norway, the decrease in net sales was 2.0%. The trend in construction activity remained weak in Rautakesko's operating area. Sales decrease was most significant in basic building materials.
In Finland, the net sales for January-June were EUR615 million (EUR648 million), a decrease of 5.0%. The building and home improvement products contributed EUR417 million to the net sales in Finland, a decrease of 9.3%. The agricultural supplies trade contributed EUR198 million to net sales, up 5.7%.
The retail sales of the K-rauta and Rautia chains in Finland decreased by 5.8% to EUR481 million (VAT 0%). The sales of Rautakesko B2B Service were down 15.9%. The retail sales of the K-maatalous chain were EUR236 million (VAT 0%), up 6.9%.
In January-June, the net sales from the foreign operations of the building and home improvement trade were EUR686 million (EUR763 million), a decrease of 10.1%. Excluding the impact of retailer changes in Norway, net sales increased by 0.7%. In Sweden, net sales were down 7.8% in terms of kronas. In Norway, net sales decreased by 26.4% in terms of krones, which was attributable to the changes that took place in the Byggmakker chain last year. A decision has been made to introduce new chain agreements in Norway starting from 1 January 2014 and to simplify the existing company structure. In Russia, net sales increased by 2.3% in terms of roubles. Foreign operations contributed 52.7% (54.1%) to the net sales of the building and home improvement trade.
The operating profit excluding non-recurring items of the building and home improvement trade for January-June was EUR2.9million (EUR6.2 million), down EUR3.3 million compared to the previous year. The fall is due to weak sales performance. Due to enhancement measures, operating expenses were lower than in the previous year regardless of store site network expansion. Operating profit was EUR2.0 million (EUR4.5million).
In January-June, the capital expenditure of the building and home improvement trade totalled EUR21.6 million (EUR25.8 million), of which 47.3% (54.6%) abroad. Capital expenditure in store sites represented 96.6% of total capital expenditure.
April-June 2013
In the building and home improvement trade, the net sales for April-June were EUR740 million (EUR782 million), down 5.4%. Excluding the impact of retailer changes in Norway, net sales increased by 0.1%.
In Finland, the net sales were EUR334 million (EUR348 million), a decrease of 3.8%. The building and home improvement products contributed EUR227 million to the net sales in Finland, a decrease of 8.5%. The agricultural supplies trade contributed EUR108 million to net sales, up 7.9%.
The retail sales of the K-rauta and Rautia chains in Finland decreased by 4.0% to EUR311 million (VAT 0%) in April-June. The sales of Rautakesko B2B Service were down 11.7%. The retail sales of the K-maatalous chain were EUR143 million (VAT 0%), up 8.6%.
The net sales from the foreign operations of the building and home improvement trade were EUR406 million (EUR434 million), a decrease of 6.6%. Excluding the impact of retailer changes in Norway, net sales increased by 3.6%. In terms of local currencies, the net sales from foreign operations decreased by 5.5%. In Sweden, net sales were down 1.2% in terms of kronas. In Norway, net sales decreased by 22.1% in terms of krones, which was attributable to the changes that took place in the Byggmakker chain last year. In Russia, net sales increased by 5.5% and in Belarus by 44.2% in terms of roubles. Foreign operations contributed 54.8% (55.6%) to the net sales of the building and home improvement trade.
The operating profit excluding non-recurring items of the building and home improvement trade for April-June was EUR19.5 million (EUR15.2 million), up EUR4.2 million compared to the previous year. Due to enhancement measures, operating expenses were lower than in the previous year regardless of store site network expansion. In the previous year, profit was negatively impacted by obsolete inventories and trade receivables written off. Operating profit was EUR18.0 million (EUR13.5 million).
The capital expenditure of the building and home improvement trade totalled EUR9.1 million (EUR14.1 million), of which 44.7% (45.1%) abroad.
In April, Moscow's third K-rauta store was opened in Mytishi, Russia.
*In 2013, 1 K-rauta store and 47 Rautia stores also operated as K-maatalous stores,
in 2012, 1 K-rauta store and 50 Rautia stores also operated as K-maatalous stores.
Car and machinery trade
January-June 2013
In January-June, the net sales of the car and machinery trade were EUR551 million (EUR627 million), down 12.2%.
VV-Auto's net sales for January-June were EUR397 million (EUR454 million), a decrease of 12.7%. In January-June, the combined market performance of first time registered passenger cars and vans was -15.9%.
In January-June, the combined market share of passenger cars and vans imported by VV-Auto was 21.1% (20.4%). Volkswagen was the market leader in passenger cars and vans.
Konekesko's net sales for January-June were EUR154 million (EUR174 million), down 11.2% compared to the previous year. Net sales in Finland were EUR96 million, down 19.8%. The fall is attributable to the weak market performance of machinery trade in Finland. The net sales from Konekesko's foreign operations were EUR59 million, up 6.8%.
In January-June, the operating profit excluding non-recurring items of the car and machinery trade was EUR20.8 million (EUR25.8 million), down EUR5.0 million compared to the previous year. Regardless of the weakened market situation, the profitability of the car trade remained at a good level.
The operating profit for January-June was EUR20.8 million (EUR25.8 million).
The capital expenditure of the car and machinery trade for January-June was EUR8.7 million (EUR18.7 million).
April-June 2013
The net sales of the car and machinery trade for April-June were EUR301 million (EUR274 million), up 9.8%.
VV-Auto's net sales for April-June were EUR204 million (EUR165 million), an increase of 23.3%. In the previous year, sales were decreased by the car tax change effective 1 April 2012. In April-June, the combined market share of passenger cars and vans imported by VV-Auto was 22.1% (21.8%).
Konekesko's net sales for April-June were EUR97 million (EUR109 million), down 10.8% compared to the previous year.
In April-June, the operating profit excluding non-recurring items of the car and machinery trade was EUR13.0 million (EUR10.3 million), up EUR2.7 million compared to the previous year. Profitability improved as a result of sales growth and cost savings implemented. The operating profit for April-June was EUR13.0 million (EUR10.3 million).
The capital expenditure of the car and machinery trade for April-June was EUR4.8 million (EUR5.9 million).
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 June 2013, the total number of Kesko Corporation shares was 99,515,420, of which 31,737,007, or 31.9%, were A shares and 67,778,413, or 68.1%, were B shares. At 30 June 2013, Kesko Corporation held 544,854 own B shares as treasury shares. These treasury shares accounted for 0.80% of the number of B shares and 0.55% of the total number of shares, and 0.14% of votes carried by all shares of the company. The total number of votes carried by all shares was 385,148,483. Each A share entitles to ten (10) votes and each B share to one (1) vote. The company cannot vote with treasury shares and no dividend is paid on them. At the end of June 2013, Kesko Corporation's share capital was EUR197,282,584. During the reporting period, the number of B shares was increased three times to account for the shares subscribed for with the options based on the 2007 option scheme. The increases were made on 11 February 2013 (74,600 B shares), 2 May 2013 (135,861 B shares) and 5 June (592,619 B shares) and announced in stock exchange notifications on the same days. The shares subscribed for were listed for public trading on NASDAQ OMX Helsinki (Helsinki Stock Exchange) with the old B shares on 12 February 2013, 3 May 2013 and 6 June 2013. The subscription price of EUR15,671,241.60 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 EUR24.39 at the end of 2012, and EUR22.89 at the end of June 2013, representing a decrease of 6.2%. Correspondingly, the price of a B share was EUR24.77 at the end of 2012, and EUR21.36 at the end of June 2013, representing a decrease of 13.8%. In January-June, the highest A share price was EUR26.85 and the lowest was EUR22.48. For B share, they were EUR25.87 and EUR20.96 respectively. In January-June, the Helsinki stock exchange (OMX Helsinki) All-Share index was up 1.6% and the weighted OMX Helsinki CAP index 1.4%. Correspondingly, the Retail Index was down 13.6%.
At the end of June 2013, the market capitalisation of A shares was EUR726 million, while that of B shares was EUR1,436 million, excluding the shares held by the parent company. The combined market capitalisation of A and B shares was EUR2,163 million, a decrease of EUR255 million from the end of 2012. In January-June 2013, a total of 0.5 (1.0) million A shares were traded on the Helsinki stock exchange, down 47%. The exchange value of A shares was EUR13 million. The total number of B shares traded was 22.2 million, down 48%. The exchange value of B shares was EUR525 million.
The company operates the 2007 option scheme for management and other key personnel, under which the share subscription period of 2007B share options ran from 1 April 2011 to 30 April 2013 (subscription period has expired), and that 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. During the reporting period, a total of 381,332 2007B share options were traded at a total value of EUR923,801, and a total of 187,336 2007C share options were traded at a total value of EUR2,096,239. The share subscription period of 2007A share options under the option scheme expired and their trading on the official list ended in 2012.
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, and the authority, valid until 30 June 2017, to decide on the issuance of a maximum of 1,000,000 own B shares held as treasury shares by the company.
On 4 February 2013, based on the authority to issue own shares valid prior to the Annual General Meeting of 8 April 2013 and the fulfilment of the vesting criteria of the 2012 vesting period of Kesko's three-year share-based compensation plan, the Board decided to grant own B shares held as treasury shares by the company to people included in the target group of the 2012 vesting period. The issuance of 66,331 own B shares, referred to above, was announced in a stock exchange release on 5 February 2013 and on 5 April 2013. The latter release also announced that 866 own B shares had been returned to the company without consideration. During the reporting period, a total of 2,594 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 the stock exchange release referred to above and in stock exchange notifications on 8 May 2013, 20 May 2013 and 18 June 2013. Further information on the Board's authorisations is available at www.kesko.fi.
At the end of June 2013, the number of shareholders was 44,323, which was 231 less than at the end of 2012. At the end of June, foreign ownership of all shares was 20%. At the end of June, foreign ownership of B shares was 29%.
Flagging notifications
Kesko Corporation did not receive flagging notifications during the reporting period.
Key events during the reporting period
Changes, effective 5 February 2013, took place in Kesko's Corporate Management Board. Arja Talma, M.Sc. (Econ.), eMBA, 50, was appointed Senior Vice President responsible for the Kesko Group's store sites and investments. Terho Kalliokoski, M.Sc. (Econ.), 51, was appointed Rautakesko Ltd's President. Jorma Rauhala, M.Sc. (Econ.), 47, was appointed Kesko Food Ltd's President. Starting from 5 February 2013, Kesko's Corporate Management Board is composed of Matti Halmesmäki, Chair; Jorma Rauhala, food trade; Minna Kurunsaari, home and speciality goods trade and Kesko's customer information and e-commerce projects; Terho Kalliokoski, building and home improvement trade; Pekka Lahti, car and machinery trade; Arja Talma, store sites and investments; Jukka Erlund, CFO, accounting, finance and IT management; and Matti Mettälä, human resources and stakeholder relations. (Stock exchange release on 5 February 2013)
On 5 April 2013, Kesko transferred a total of 66,331 own B shares (KESBV) held by the company as treasury shares to the about 150 Kesko management employees and other named key persons included in the target group of the 2012 vesting period of Kesko's three-year share-based compensation plan. In the same context, 866 B shares, originally transferred to a person included in the target group of the 2011 vesting period of the share-based compensation plan, were returned to Kesko without consideration. After the transfer and return of shares, Kesko holds 543,126 own B shares as treasury shares. (Stock exchange release on 5 April 2013)
With effect from 1 January 2013, the Kesko Group adopted the revised IAS 19 Employee benefits standard. The amendment had an impact on the Kesko Group's pension costs and profit, as well as the pension assets and equity on the balance sheet. Resulting from the amendment, Kesko's consolidated income statement, consolidated statement of financial position and segment information for 2012 were updated in compliance with the requirements prescribed in the revised standard. (Stock exchange release on 11 April 2013)
Events after the reporting period
A total of 260 B shares (KESBV), initially transferred to a person included in the target group of the share-based compensation plan's 2011 vesting period, have been returned to Kesko without consideration. After the return of the shares, Kesko holds 545,114 own B shares as treasury shares. (Stock exchange notification on 19 July 2013)
Resolutions of the 2013 Annual General Meeting and decisions of the Board's organisational meeting
Kesko Corporation's Annual General Meeting, held on 8 April 2013, adopted the financial statements for 2012 and discharged the Board members and the Managing Director from liability. The General Meeting also resolved, as proposed by the Board, to distribute EUR1.20 per share, or a total of EUR117,892,576.80 as dividends. The dividend pay date was 18 April 2013. The General Meeting resolved that the number of Board members is unchanged at seven, elected PricewaterhouseCoopers Oy as the company's auditor, with APA Johan Kronberg as the auditor with principal responsibility, and approved the Board's proposals for amending Article 9 of the Articles of Association concerning the delivery of the notice of a General Meeting, for authorising the Board to acquire a maximum of 500,000 own B shares and to issue a maximum of 1,000,000 own B shares held as treasury shares by the company. The General Meeting also approved the Board's proposal that it be authorised to decide on the donations in a total maximum of EUR300,000 for charitable or corresponding purposes until the Annual General Meeting to be held in 2014.
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 8 April 2013.
Responsibility
Kesko's 13th Corporate Responsibility Report was published in May. The theme of report is "Let's do good. Together." The 2012 report provides information on the objectives, actions and results of Kesko's responsibility programme and work.
A Kesko Fair Play scholarship was distributed to over 2,800 pupils for promoting school work. The scholarships were rewards to pupils who had promoted peace and tolerance at school, motivation in school work and a positive atmosphere in their schools with their exemplary behaviour. Schools themselves across Finland selected the scholarship recipients from among their grade nine pupils. The total scholarship amount was nearly EUR150,000.
Kodin1 opened the first passive retail store building in Finland and the Nordic countries in Raisio. The department store saves energy with, for example, lighting solutions, need-based air-conditioning, building automation and air-tight structures.
Kesko arranged a Mother's Day celebration at Kaivopuisto in Helsinki at which mothers and grandmothers were given 10,000 Pirkka Fairtrade roses. In addition, another 10,000 Pirkka Fairtrade roses were distributed to new mothers at hospital maternity wards in Hyvinkää, Turku, Tampere, Lahti, Seinäjoki, Jyväskylä, Kuopio, Oulu, Espoo and Helsinki.
Kesko's Board of Directors granted scholarships to talented young athletes and art students in a total amount of EUR40,000.
Risk management
The Kesko Group has an established and comprehensive risk management process. Risks and their management are assessed in the Group regularly and they are reported to the Group's management. Kesko's risk management and risks associated with business operations are described in more detail on Kesko's website in the section Corporate Governance.
The most significant near-future risks in Kesko's business operations are related to the general economic development, the financial market situation in the euro zone and low consumer confidence and their impact on Kesko's sales and profit performance. During the first months of the year, no material changes are estimated to have taken place in the risks described in the 2012 report by Kesko's Board of Directors and the financial statements, or in the risks described on Kesko's website.
The risks and uncertainties related to financial performance are described in the section future outlook of this release.
Future outlook
Estimates of the future outlook for the Kesko Group's net sales and operating profit excluding non-recurring items are given for the 12 months following the reporting period (7/2013-6/2014) in comparison with the 12 months preceding the reporting period (7/2012-6/2013).
Resulting from the problems of European national economies, the future prospects for the general economic situation and consumer demand continue to be characterised by significant uncertainty. In consequence of weakened employment and consumers' purchasing power, the growth prospects for the trading sector remain weak.
In the Finnish grocery trade, the market is expected to remain stable. As a result of the weakened economic situation, the demand in the home and speciality goods trade, the building and home improvement trade and the car and machinery trade is expected to remain weak.
The Kesko Group's net sales and the operating profit excluding non-recurring items for the next twelve months are expected to remain at the level of the preceding twelve months.
Helsinki, 23 July 2013
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 +358 105 322 113, and Eva Kaukinen, Vice President, Corporate Controller, telephone +358 105 322 338. A Finnish-language webcast from the media and analyst briefing on the interim report can be accessed at www.kesko.fi at 10.00. An English-language web conference on the interim report will be held today at 14.30 (Finnish time). The web conference login is available on Kesko's website at www.kesko.fi.
Kesko Corporation's interim report for January-September will be released on 24 October 2013. In addition, the 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, Corporate 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
TABLES SECTION:
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 2012, with the exception of the following changes due to the adoption of new and revised IFRS standards and IFRIC interpretations:
The amendment to the IAS 19 Employee benefits standard changes the determination of the return on defined benefit pension plan assets. According to the revised standard, the rate used to discount the retirement benefit obligation is used as the return on assets in place of the expected long-term return on the assets used previously. Due to the amendment, the net return on defined benefit pension plans recognised in the consolidated income statement decreases. In addition, the amendment to the IAS 19 Employee benefits standard eliminates the possibility to apply the so-called "corridor approach" to the calculation of retirement benefits classified as defined benefit pension plans, which follows that the changes in the calculation assumptions used for measuring the pension obligation and the covering assets are recognised in pension assets and equity in the balance sheet. The impact of the amendment was announced in a separate stock exchange release on 11 April 2013.
In addition, the Group has adopted the following standards and amendments to standards issued for application:
-IAS 1 Presentation of financial statements (amendment)
-IFRS 13 Fair value measurement
-IFRS 7 Financial instruments: Disclosures (amendment)
(..) Change over 100%
(..) Change over 100%
Consolidated statement of changes in equity (EUR million)
Consolidated statement of cash flows (EUR million), condensed
(..) Change over 100%
Segment information
* net sales in countries other than Finland
(..) Change over 100%
Segment information by quarter
Change in tangible and intangible assets (EUR million)
Related party transactions (EUR million)
The Group's related parties include its key management (the Board of Directors, the President and CEO and the Corporate Management Board), subsidiaries, associates and the Kesko Pension Fund.
The following transactions were carried out with related parties:
Fair value hierarchy of financial assets and liabilities (EUR million)
Fair value hierarchy of financial assets and liabilities (EUR million)
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 at 30 June
* total number incl. part-time employees
Calculation of performance indicators
* Indicators for return on capital have been annualised.
K-Group's retail and B2B sales (VAT 0%) (preliminary data):
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Attachment(s)
http://hugin.info/3055/R/1718283/571534.pdf
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