Dear shareholders, ladies and gentlemen!
The fast-deepening global recession that followed the long economic boom came as a surprise to both private consumers and financial experts. The financial operating environment of the trading sector also deteriorated quickly during last year.
About half of the Finnish GDP comes from private consumption. It can, however, be stated that the recession has hardly affected those Finns who have a steady job and the same amount of money at their disposal as before. However, the recession causes uncertainty and so consumers often consider carefully any major acquisitions. Consequently, housing sales and construction have come to a near standstill.
The recession also affects Kesko. The impacts of the reduced consumer demand are felt, above all, in our building and home improvement as well as the car and machinery trade.
In times like this, Kesko's strengths include the Group's high solvency and the steady development of Kesko Food, our largest division. Nearly half of Kesko's net sales and 60% of the profit come from the food trade.
It can also be stated that Kesko's liquidity is excellent and solvency is high. We will continue well-thought store site investments in Finland and other countries where we operate, particularly in Russia.
Kesko's Board of Directors revised Kesko's dividend policy in February 2009. In addition to the financial position and the operating strategy, the new policy takes account of the nature of non-recurring items. According to the revised policy, Kesko Corporation distributes at least 50% of its earnings per share excluding non-recurring items as dividends, taking however the company's financial position and operating strategy into account.
Kesko's financial objectives were also revised. Now, the objective for return on equity is 12%, the objective for return on capital employed is 14%, and the objective range of equity ratio is 40-50%.
In a moment, President and CEO Matti Halmesmäki will give a review of the Group's financial highlights for last year.
There are news about cooperation negotiations, layoffs and notices in Finnish companies nearly every day. In Kesko, too, different divisions had to implement cooperation negotiations aimed at cutting the number of employees.
Nearly 70% of Finnish jobs are in the service sector. Retailing and wholesaling remains a major employer during the recession, too. The jobs provided are nearly always local and can't be moved to other countries.
Recent employer profile surveys have shown that the popularity of the trading sector has increased among young people. In Universum, the survey directed to young professionals, Kesko's ranking as an ideal employer rose from 16th to 13th.
Students of social sciences and economics ranked Kesko 6th in the survey conducted among them. In the recent survey by Talentum Media, young people selected three trading sector companies - Kesko, the S Group and Stockmann - among the most attractive employers.
Most of the K-Group's business is run by retailers. This business model has proved competitive and flexible even in difficult market situations.
Our competitive advantage is the combination of chain operations and K-retailer entrepreneurship, cooperation. As entrepreneurs, K-retailers have good opportunities to make creative and independent solutions in order to maintain their competitiveness.
Retailers are building local wellbeing. Last year, Kesko and the K-Group retailers paid a total of €738 million in wages and taxes. Local products find their way to the K-store shelves more easily than in chains with completely centralised management. K-retailers' direct purchases from regional producers totalled €569 million last year.
Kesko and the K-Group stores have approximately 50,000 employees in eight countries. Our most international division is Rautakesko, where 96% of the over 10,000 employees work outside Finland.
In 2008, the Kesko Group recruited approximately 12,000 new employees. In order to succeed in competition in our sector, we have to maintain our employees' competence and constantly develop their skills.
An important provider of retail training is K-instituutti, the K-Group's own competence development centre, which had some 25,000 students attending its training programmes in 2008.
The trading sector will need new employees with basic education in business also in the future. Recent years have shown that nearly half of retail companies have difficulties in recruiting competent sales staff for different duties. Employee turnover is also high, particularly in stores located in the Greater Helsinki area.
The aim of the K-trainee programme, implemented by Kesko twice already, is to train young professionals for the K-Group's managerial and specialist positions.
I consider it important that vocational education institutions and polytechnics increase business education that provides knowledge and skills for retailing duties.
From experience, I know that they open significant career paths in retailing for young people.
Much of retail companies' recruitment needs focus on business college graduates. The intake of students for secondary education and the number of business college graduates specialised in retailing should be increased.
Working life orientation in business polytechnics should also be enhanced. BBA studies with focus on retailing are currently provided by two polytechnics only.
The new study line was started in four polytechnics in autumn 2008, which enables students to acquire training needed to become K-retailer entrepreneurs as part of their bachelor studies in business administration and hospitality management.
The year 2009 will bring major changes in the trading sector. The food VAT rate will decrease from 17% to 12% at the beginning of October. The joint vision of the trading sector is that this decrease will be transferred into prices in full so that food prices will drop.
We have also received a promise that the question about store opening hours which has been continuing for years will be solved during this year and that the purpose is to liberalise the legislation. In the current system, opening hours are difficult to remember and floor area limitations distort and prevent competition.
The trading sector is in favour of free opening hours. They increase competition and eliminate distortions of competition. They raise productivity and level goods flows. Year-round Sunday opening would also improve the efficiency in the use of real estate.
Customers are also expecting expanded opening hours. According to the 'Suomi syö 2007' survey, 55% of customers consider Sunday opening useful and 43% would shop for groceries on Sundays throughout the year. Families with children and city dwellers, in particular, would prefer more liberal opening hours.
An amendment to the Opening Hours Act in currently being prepared by the Finnish Government. One of the most important duties of decision-makers is to ensure that the current system will not become even more complicated.
Legislation concerning store-related town planning and construction should also be liberalised.
Rapporteur Matti Purasjoki presented the report on the subject to the Ministry of the Environment last February. The trading sector supports Purasjoki's proposals on the liberalisation of store planning and promoting competition. The report is based on the notion that the planning process has to be liberalised, made more transparent, and equal opportunities have to be guaranteed to various operators.
Brisk and smooth town planning is important for the trading sector. In the current practice, processes often very slow. Complaints on planning and construction projects may unreasonably delay and complicate them.
Dear shareholders, dear audience!
On behalf of Kesko's Board of Directors, I would like to thank all our shareholders, the management and other employees of the Kesko Group, K-retailers and all our business partners for profitable cooperation.
I would like to ask President and CEO Matti Halmesmäki to extend the Board's respectful thanks to the entire personnel of the Group in all of Kesko's operating countries.
The agenda of this meeting includes the selection of Kesko's Board members for the next term of three years. I also take this opportunity to thank the current Board for your excellent and most cooperation-oriented work for the K-Group.
In the framework of the agenda, the purpose of the Annual General Meeting is also to provide a forum for active discussion between shareholders and the company's Board of Directors. The meeting is a very good and natural place for such an exchange of ideas.
I wish you all welcome to the Annual General Meeting of Kesko Corporation.