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Financial statements Parent's financial statements Notes to the parent's financial statements
Kesko Corporation's financial statements have been prepared in compliance with the Finnish Accounting Standards (FAS).
Intangible assets are stated in the balance sheet at cost less depreciation according to plan.
Depreciation plan
Other capitalised expenditure 5–14 years
Tangible assets are stated in the balance sheet at cost less depreciation according to plan.
Depreciation plan
Depreciation according to plan is calculated on a straight line basis so as to write off the cost of tangible assets over their estimated useful lives.
The periods adopted for depreciation are as follows:
| Buildings | 15–33 years |
| Fixtures and fittings | 8 years |
| Machinery and equipment | 8 years |
| or machinery and equipment | purchased since 1999 25% reducing balance method |
| Transportation fleet | 5 years |
| Information technology equipment | 3–5 years |
| Other tangible assets | 5–14 years |
Land has not been depreciated. The total of depreciation according to plan and the change in depreciation reserve comply with the Finnish tax legislation. The change in depreciation reserve has been treated as appropriations in the parent company.
Marketable securities have been valued at lower of cost or net realisable value.
Items denominated in foreign currencies have been translated into Finnish currency at the average exchange rate of the European Central Bank at the balance sheet date. If a receivable or a debt is tied to a fixed rate of exchange, it has been used for translation. Exchange rate differences have been recognised in profit or loss.
Interest rate derivatives are used to modify loan durations. The target duration is three years and it is allowed to vary between one and a half and four years. Cash flows arising from interest rate derivative contracts are recognised during the financial year as interest income or expenses, according to the maturity date. In the financial statements, open forward agreements, futures, options and swaps are stated at market values. Unrealised revaluation is not stated as income. Any valuation losses are included in interest expenses.
Currency derivative instruments are used for hedging against translation and transaction risks. Forward exchange contracts are valued at the exchange rate of the balance sheet date. The rate differences arising from open derivative contracts are reported in financial items. If a derivative instrument has been used to hedge a foreign-currency-denominated asset, the value change has been recognised against that of the asset item. The premiums of option contracts are included in the balance sheet accruals until they expire, or if a value change at the balance sheet date so requires, recognition in profit or loss.
Kestra Kiinteistöpalvelut Oy, a Kesko Corporation subsidiary, uses electricity derivatives to balance the energy costs of the Group and its retailers. Kesko's subsidiaries engaged in the agricultural trade use grain derivatives to hedge against the grain price risk. Kesko Corporation is an external counterparty in electricity and grain derivative contracts made with the bank, and internally hedges the corresponding price with the subsidiary. At no stage does Kesko Corporation have derivative positions, and thus there are no effects on profit or loss. The electricity price risk is reviewed on a 3-year time span. With respect to derivative contracts hedging the price of electricity supplied during the financial year, changes in value are recognised in Kesko under interest income and expenses. The unrealised gains and losses of contracts hedging future purchases are not recognised through profit or loss. With respect to grain derivative contracts, the open contracts in the income statement are recognised at market prices. Valuation differences related to open contracts are recognised in Kesko under financial items.
The pension insurances of Kesko Corporation's personnel are arranged through the Kesko Pension Fund. The Fund's A department, which provides supplementary pension benefits, was closed on 9 May 1998. The job-based retirement age agreed for some of the personnel is 60 or 62 years. Pensions are expensed in the income statement.
Provisions stated in the balance sheet include items bound to by agreements or otherwise, but remain unrealised. Changes in provisions are included in the income statement. Rent liabilities for vacant rented premises no longer used for the Group business operations, as well as the losses resulting from renting the premises to outsiders, are included in provisions.
Income tax includes the income tax payments for the period based on the profit for the period, and taxes payable for prior periods, or tax refunds. Deferred taxes are not included in the parent's income statement and balance sheet.
| € million | 2009 | 2008 |
| 1. Other operating income | ||
| Profits on sales of real estate and shares | 95.7 | 128.1 |
| Rent income | 164.4 | 169.8 |
| Merger profit | 0.0 | 0.8 |
| Others | 0.9 | 0.3 |
| Total | 261.0 | 299.0 |
| 2. Average number of personnel | ||
| Kesko Corporation | 147 | 160 |
| Total | 147 | 160 |
| 3. Personnel expenses | ||
| Salaries and fees | 9.1 | 10.0 |
| Social security expenses | ||
| Pension expenses | 0.5 | 2.1 |
| Other social security expenses | 0.7 | 0.9 |
| Total | 10.3 | 13.0 |
| Salaries and fees to the management | ||
| Managing Director and his deputy | 0.8 | 0.8 |
| Board of Directors' members | 0.3 | 0.3 |
| Total | 1.1 | 1.1 |
An analysis of the management's salaries and fees is included in the notes to the consolidated financial statements.
| 4. Depreciation and reduction in value | ||
| Depreciation according to plan | 22.5 | 22.5 |
| Reduction in value, non-current assets | 9.1 | 15.0 |
| Total | 31.6 | 37.5 |
| 5. Other operating expenses | ||
| Rent expenses | 90.0 | 87.6 |
| Marketing expenses | 1.0 | 2.2 |
| Maintenance of real estate and store sites | 11.7 | 15.6 |
| Data communications expenses | 12.2 | 12.2 |
| Losses on sales of real estate and shares | 0.7 | 1.0 |
| Merger losses | 0.0 | 2.7 |
| Other operating expenses | 7.0 | 8.6 |
| Total | 122.6 | 129.9 |
| PricewaterhouseCoopers, Authorised Public Accountants |
||
| Auditor's fees | 0.1 | 0.1 |
| Tax consultation | 0.0 | 0.1 |
| Other fees | 0.1 | 0.1 |
| Total | 0.2 | 0.3 |
| 6. Financial income and expenses | ||
| Dividend income | ||
| From Group companies | 0.0 | 6.2 |
| Dividend income, total | 0.0 | 6.2 |
| Other interest and financial income | ||
| From Group companies | 37.0 | 50.7 |
| From others | 12.8 | 67.2 |
| Interest income, total | 49.8 | 117.9 |
| Interest and other financial expenses | ||
| To Group companies | -5.5 | -27.8 |
| To others | -33.1 | -58.8 |
| Interest expenses, total | -38.6 | -86.6 |
| Total | 11.2 | 37.6 |
| 7. Items included in extraordinary income and expenses | ||
| Contributions from Group companies | 49.7 | 153.7 |
| Contributions to Group companies | -28.1 | -53.9 |
| Total | 21.6 | 99.8 |
| 8. Appropriations | ||
| Difference between depreciation according to plan | ||
| and depreciation in taxation | 39.6 | 26.5 |
| Total | 39.6 | 26.5 |
| 9. Changes in provisions | ||
| Future rent expenses for vacant business premises | 0.5 | -2.0 |
| Other changes | -1.0 | 3.1 |
| Total | -0.5 | 1.1 |
| 10. Income taxes | ||
| Income taxes on extraordinary items | -5.6 | -26.0 |
| Income taxes on operating activities | -44.1 | -38.6 |
| Total | -49.7 | -64.7 |
Deferred tax liabilities and assets have not been included in the balance sheet. The amounts are not significant.
| € million | 2009 | 2008 |
| 11. Intangible assets | ||
| Other capitalised long-term expenditure | ||
| Acquisition cost at 1 January | 39.1 | 38.3 |
| Increases | 1.5 | 0.7 |
| Decreases | -1.1 | -0.9 |
| Transfers between items | 0.7 | 1.0 |
| Acquisition cost at 31 December | 40.2 | 39.1 |
| Accumulated depreciation at 1 January | 32.6 | 30.6 |
| Accumulated depreciation on decreases and transfers | -0.4 | -0.4 |
| Depreciation for the financial year | 1.8 | 2.4 |
| Accumulated depreciation at 31 December | 34.0 | 32.6 |
| Book value at 31 December | 6.2 | 6.5 |
| Advance payments | ||
| Acquisition cost at 1 January | 1.7 | 2.5 |
| Increases | 0.8 | 0.6 |
| Decreases | -0.6 | -0.4 |
| Transfers between items | -0.4 | -1.0 |
| Acquisition cost at 31 December | 1.5 | 1.7 |
| Book value at 31 December | 1.5 | 1.7 |
| 12. Tangible assets | ||
| Land and waters | ||
| Acquisition cost at 1 January | 111.4 | 112.2 |
| Increases | 1.8 | 8.3 |
| Decreases | -16.0 | -9.1 |
| Acquisition cost at 31 December | 97.2 | 111.4 |
| Book value at 31 December | 97.2 | 111.4 |
| Buildings | ||
| Acquisition cost at 1 January | 514.9 | 513.2 |
| Increases | 9.6 | 24.2 |
| Decreases | -99.6 | -26.9 |
| Transfers between items | 3.1 | 4.4 |
| Acquisition cost at 31 December | 428.0 | 514.9 |
| Accumulated depreciation at 1 January | 205.5 | 181.8 |
| Accumulated depreciation on decreases and transfers | -35.4 | -8.6 |
| Value adjustment | 9.1 | 15.0 |
| Depreciation for the financial year | 15.6 | 17.3 |
| Accumulated depreciation at 31 December | 194.8 | 205.5 |
| Book value at 31 December | 233.2 | 309.4 |
| Machinery and equipment | ||
| Acquisition cost at 1 January | 24.7 | 25.5 |
| Increases | 0.8 | 1.0 |
| Decreases | -3.6 | -1.9 |
| Transfers between items | 0.2 | 0.1 |
| Acquisition cost at 31 December | 22.1 | 24.7 |
| Accumulated depreciation at 1 January | 19.7 | 19.6 |
| Accumulated depreciation on decreases and transfers | -2.8 | -1.3 |
| Depreciation for the financial year | 1.3 | 1.5 |
| Accumulated depreciation at 31 December | 18.2 | 19.7 |
| Book value at 31 December | 3.9 | 5.0 |
| Other tangible assets | ||
| Acquisition cost at 1 January | 15.2 | 13.7 |
| Increases | 1.1 | 2.8 |
| Decreases | -2.6 | -1.4 |
| Transfers between items | 0.0 | 0.1 |
| Acquisition cost at 31 December | 13.7 | 15.2 |
| Accumulated depreciation at 1 January | 7.0 | 6.5 |
| Accumulated depreciation on decreases and transfers | -1.3 | -0.7 |
| Depreciation for the financial year | 1.4 | 1.2 |
| Accumulated depreciation at 31 December | 7.1 | 7.0 |
| Book value at 31 December | 6.6 | 8.2 |
| Advance payments and construction in progress | ||
| Acquisition cost at 1 January | 7.1 | 5.4 |
| Increases | 9.2 | 6.3 |
| Transfers between items | -11.7 | -4.6 |
| Acquisition cost at 31 December | 4.6 | 7.1 |
| Book value at 31 December | 4.6 | 7.1 |
Revaluation of non-current assets
At the end of the financial year, Kesko Corporation's balance sheet did not contain revaluations.
| € million | 2009 | 2008 |
| 13. Investments | ||
| Holdings in Group companies | ||
| Acquisition cost at 1 January | 273.6 | 404.0 |
| Increases | 28.5 | 3.2 |
| Decreases | -38.0 | -133.6 |
| Acquisition cost at 31 December | 264.1 | 273.6 |
| Accumulated depreciation at 1 January | 0.0 | 1.7 |
| Value adjustments | 0.0 | -1.7 |
| Accumulated depreciation at 31 December | 0.0 | 0.0 |
| Book value at 31 December | 264.1 | 273.6 |
| Participating interests | ||
| Acquisition cost at 1 January | 18.7 | 19.8 |
| Increases | 0.0 | 0.1 |
| Decreases | -0.9 | -1.2 |
| Acquisition cost at 31 December | 17.8 | 18.7 |
| Book value at 31 December | 17.8 | 18.7 |
| Other shares and similar rights of ownership | ||
| Acquisition cost at 1 January | 7.3 | 7.3 |
| Acquisition cost at 31 December | 7.3 | 7.3 |
| Book value at 31 December | 7.3 | 7.3 |
Kesko Corporation's ownership interests in other companies as at 31 December 2009 are presented in the notes to the consolidated financial statements.
During the financial year, Kesko Corporation sold some of its real estate companies.
During the 2008 financial year, Kesko Corporation sold its wholly-owned subsidiaries Kauko-Telko Ltd, Tähti Optikko Group Oy and K-Rahoitus Oy. In addition, the company founded a new subsidiary, K-talouspalvelukeskus Oy. Among subsidiaries directly owned by Kesko Corporation, other changes took place in real estate companies only.
| € million | 2009 | 2008 |
| 14. Debtors | ||
| Amounts owed by Group companies | ||
| Long-term | ||
| Loan receivables | 360.7 | 389.4 |
| Subordinated loans | 50.0 | 10.0 |
| Long-term receivables, total | 410.7 | 399.4 |
| Short-term | ||
| Trade debtors | 1.1 | 1.0 |
| Loan receivables | 294.2 | 541.2 |
| Prepayments and accrued income | 1.5 | 4.4 |
| Short-term receivables, total | 296.8 | 546.6 |
| Total | 707.5 | 946.0 |
| Amounts owed by participating interests | ||
| Long-term | ||
| Loan receivables | 1.5 | 1.5 |
| Short-term | ||
| Loan receivables | 2.1 | 3.1 |
| Short-term receivables, total | 2.1 | 3.1 |
| Total | 3.6 | 4.6 |
| Prepayments and accrued income | ||
| Taxes | 0.0 | 7.3 |
| Others | 3.5 | 18.1 |
| Total | 3.5 | 25.4 |
Kesko Corporation has issued capital loans of €30 million, €10 million and €10 million respectively to its subsidiaries Konekesko Ltd, Indoor Group Ltd and Kiinteistö Mesta Oy.
The loan issued to Konekesko Ltd will mature on 31.12.2024. The capital will be repaid in fifteen equally large instalments of €2 million payable each year on 31.12., provided that the provisions of chapter 12, section 1, paragraph 1 of the Limited Liability Companies Act are fulfilled. Interest will be payable only if the amount of the company's unrestricted equity plus all capital loans at the time of repayment exceeds the amount of loss shown in the balance sheet of the financial statements to be adopted for the company's last concluded financial year or of any more recent financial statements. The annual interest payable on the loan will comprise the reference rate and a margin to be added to it. The reference rate will be the 3-month Euribor and the margin will be 0.5% p.a. The interest will be paid in arrears on 31.12. Any unpaid interest will be treated as the borrower's debt and a sum of interest will be payable annually on it, whose rate will be the same as for the interest to be paid on the capital of the loan.
The loan issued to Indoor Group Ltd will mature on 31.3.2014. The capital will be repaid in five equally large instalments with the first one due on 31.3.2010. The capital will be repaid only if the provisions of chapter 12, section 1, paragraph 1 of the Limited Liability Companies Act are fulfilled. Interest will be payable only if the amount of the company's unrestricted equity plus all capital loans at the time of repayment exceeds the amount of loss shown in the balance sheet of the financial statements to be adopted for the company's last concluded financial year or of any more recent financial statements. If the repayment criteria are met, 10% interest will be paid on the loan.
The loan issued to Kiinteistö Mesta Oy will be repaid only if, after repayment of the loan, the restricted equity shown in the balance sheet to be adopted for the borrower's last concluded financial year and all other non-distributable items are fully funded.
| € million | 2009 | 2008 |
| 15. Capital and reserves | ||
| Share capital at 1 January | 195.6 | 195.5 |
| Subscriptions with options | 1.0 | 0.1 |
| Share capital at 31 December | 196.6 | 195.6 |
| Share issue, exercise of options at 1 January | 0.1 | - |
| Increase | 4.6 | 0.4 |
| Transfer to share capital | -1.0 | -0.1 |
| Transfer to share premium account | -3.6 | -0.2 |
| Share issue, exercise of options at 31 December | 0.0 | 0.1 |
| Share premium account at 1 January | 190.3 | 190.1 |
| Subscriptions with options | 3.6 | 0.2 |
| Share premium account at 31 December | 193.9 | 190.3 |
| Other reserves at 1 January | 243.4 | 243.4 |
| Other reserves at 31 December | 243.4 | 243.4 |
| Retained earnings at 1 January | 767.8 | 687.8 |
| Distribution of dividends | -97.8 | -156.4 |
| Transfer to donations | -0.3 | -0.3 |
| Retained earnings at 31 December | 669.7 | 531.1 |
| Profit for the financial year | 138.8 | 236.7 |
| Capital and reserves, total | 1,442.4 | 1,397.2 |
During the reporting period, the share capital was increased four times corresponding to share subscriptions with the stock options of the 2003 option scheme. The increases were made on 11 February 2009 (€52,392), 5 May 2009 (€51,250), 5 June 2009 (€673,146) and 17 December 2009 (€216,562), and announced in stock exchange notifications on the same days. 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 2009, 6 May 2009, 8 June 2009 and 18 December 2009.
| Distributable reserves | ||
| Other reserves | 243.4 | 243.4 |
| Retained earnings | 669.7 | 531.1 |
| Profit for the financial year | 138.8 | 236.7 |
| Total | 1,051.9 | 1,011.2 |
| Breakdown of the parent company's share capital | |||
| pcs | counter value, € |
€ million | |
| A shares | 31,737,007 | 2 | 63.5 |
| B shares | 66,584,522 | 2 | 133.2 |
| Total | 98,321,529 | 196.6 | |
| Voting rights carried by shares | number of votes |
||
| A share | 10 | ||
| B share | 1 | ||
On 31 March 2003, the Annual General Meeting resolved to gratuitously issue a total of 1,800,000 share options to the management of the Kesko Group as well as to a wholly-owned subsidiary of Kesko Corporation. A deviation was made from the shareholders' pre-emptive right to subscription since the options form a part of the incentive and commitment programme for the management. Each option entitles the holder to subscribe for one new Kesko Corporation B share. The options are marked with symbols 2003D (KESBVEW103), 2003E (KESBVEW203) and 2003F (KESBVEW303) in units of 600,000 options each.
The Annual General Meeting of 26 March 2007 decided to grant a total of 3,000,000 stock options for no consideration to the Kesko Group management and the management of the other Group companies, to the rest of the key Kesko personnel, and to Sincera Oy, a subsidiary wholly owned by Kesko Corporation. A deviation was made from the shareholders' pre-emptive right to subscription since the options form a part of the incentive and commitment programme for the management. Each stock option entitles its holder to subscribe for one new Kesko Corporation B share. The stock options shall be marked with symbols 2007A, 2007B and 2007C in units of 1,000,000 options each.
If shares were subscribed for with all exercisable options, the shares subscribed for with all the 2003 and 2007 plan options would account for 4.67% of shares and 1.23% of all votes. The subscriptions made with stock options could raise the number of the company's shares to 101,688,793. As a result of the subscriptions, the voting rights carried by all shares could increase to 387,321,856 votes.
The company has not granted other options or special rights entitling to shares.
Kesko's Annual General Meeting of 30 March 2009 authorised the Board to decide about the issuance of new B shares.
B shares can be issued against payment to the company's existing shareholders in proportion to their existing shareholdings regardless of whether they consist of A or B shares, or, deviating from shareholders' pre-emptive rights in order for the issued shares to be used as consideration in possible company acquisitions, other company business arrangements, or to finance investments. The maximum number of new shares issued is 20,000,000.
The Board of Directors was also authorised to decide about the subscription price of the shares, to issue shares against non-cash consideration, and to make decisions concerning any other matters relating to share issues.
The authorisation is valid until 30 March 2012.
The Board of Directors has no other authorisation concerning an issue of rights, convertible bonds or options valid at the moment.
| € million | 2009 | 2008 |
| 16. Appropriations | ||
| Depreciation reserve | 91.6 | 131.2 |
| Total | 91.6 | 131.2 |
| 17. Provisions | ||
| Future rent expenses for vacant business premises | 5.7 | 5.2 |
| Other provisions | 2.1 | 3.1 |
| Total | 7.8 | 8.3 |
| 18. Non-current creditors | ||
| Debt falling due later than within five years | ||
| Private placement bonds | 100.4 | 100.4 |
| Loans from credit institutions | 38.2 | 20.5 |
| Total | 138.6 | 120.9 |
On 10 June 2004, Kesko Corporation issued a private placement of USD 120 million in the US. The arrangement consists of three bullet loans: a 10-year loan (USD 60 million), a 12-year loan (USD 36 million) and a 15-year loan (USD 24 million). Kesko has hedged the loan by using currency and interest rate swaps, as a result of which the loan capital totals €100.4 million and the fixed capital-weighted average interest rate is 5.4%.
| € million | 2009 | 2008 |
| 19. Current creditors | ||
| Debt to Group companies | ||
| Trade creditors | 0.1 | 0.6 |
| Other creditors | 237.1 | 349.8 |
| Accruals and deferred income | 1.8 | 1.7 |
| Total | 239.0 | 352.1 |
| Amounts owed to participating interests | ||
| Other creditors | 38.4 | 37.2 |
| Total | 38.4 | 37.2 |
| Accruals and deferred income | ||
| Staff expenses | 2.5 | 2.6 |
| Taxes | 12.1 | 0.0 |
| Others | 11.3 | 12.1 |
| Total | 25.9 | 14.7 |
| 20. Interest-free debt | ||
| Current creditors | 32.0 | 21.3 |
| Total | 32.0 | 21.3 |
| € million | 2009 | 2008 |
| 21. Guarantees and contingent liabilities | ||
| Real estate mortgages | ||
| For own debt | 7 | 6 |
| For Group companies | 10 | 10 |
| Pledged shares | 39 | 14 |
| Guarantees | ||
| For own debt | 3 | 1 |
| For Group companies | 36 | 58 |
| For others | 0 | 1 |
| Other contingent liabilities | ||
| For own debt | 15 | 10 |
| Rent liabilities on machinery and fixtures | ||
| Falling due within a year | 0 | 1 |
| Falling due later | 0 | 0 |
| Rent liabilities on real estate | ||
| Falling due within a year | 81 | 82 |
| Falling due later | 463 | 422 |
| € million | 2009 | Fair value | 2008 | Fair value |
| Liabilities arising from derivative instruments | ||||
| Value of underlying instruments at 31 Dec. | ||||
| Interest rate derivatives | ||||
| Forward and future contracts | 12 | -0.1 | - | |
| Interest rate swaps | 201 | 0.7 | 201 | 9.9 |
| Currency derivatives | ||||
| Forward and future contracts | ||||
| Outside the Group | 437 | -6.6 | 333 | 6.6 |
| Inside the Group | 9 | 0.1 | 20 | 1 |
| Option agreements | ||||
| Bought | - | - | - | - |
| Written | 5 | 0 | 5 | -0.1 |
| Currency swaps | 100 | -17.2 | 100 | -14.2 |
| Commodity derivatives | ||||
| Electricity derivatives | ||||
| Outside the Group | 40 | -5.0 | 46 | -10.8 |
| Inside the Group | 40 | 5.0 | 46 | 10.8 |
| Grain derivatives | 0 | 0.0 | 1 | 0.0 |
