The sales of Kesko Group’s continuing operations in January 2020 totalled €843.5 million, representing an increase of 4.2%. The comparable sales for continuing operations increased by 1.9%. The month had one delivery day less than January last year.
FINANCIAL PERFORMANCE IN BRIEF, CONTINUING OPERATIONS:
KEY PERFORMANCE INDICATORS
|Net sales, € million||10,720.3||10,382.8||2,734.2||2,655.1|
|Operating profit, comparable, € million||461.6||428.5||129.7||114.5|
|Operating margin, comparable, %||4.3||4.1||4.7||4.3|
|Operating profit, € million||447.8||404.3||127.8||103.8|
|Profit before tax, comparable, € million||370.7||325.2||107.7||90.8|
|Profit before tax, € million||403.3||294.5||105.7||73.6|
|Cash flow from operating activities, € million||893.1||748.4||273.2||209.0|
|Capital expenditure, € million||686.1||417.6||83.3||67.7|
|Earnings per share, €, basic and diluted|
|Earnings per share, comparable, €, basic|
|Return on capital employed, comparable, %||9.6||9.8|
|Return on equity, comparable, %||15.1||12.5|
|Equity ratio, %||31.2||31.9|
|Equity per share, €||20.44||19.33|
ADOPTION OF IFRS 16 LEASES
At the start of the financial year, the Group adopted the new standard IFRS 16 Leases, which took effect on 1 January 2019. The Group adopted the standard using a retrospective method, and reporting for the 2018 comparison period has been restated to be comparable. The change increases the comparable operating profit and capital employed, and decreases the return on capital employed. At Group level, the change increases the Group’s net finance costs and interest-bearing liabilities. The change has a significant impact on the presentation of the Group’s cash flow, as cash flow based lease expenditure is partly presented under cash flow from operating activities and partly under cash flow from financing activities. The change does not have an impact on the Group’s cash flow overall.
|1-12/2019, reported||Impact of IFRS 16||1-12/2019 excluding the impact of IFRS 16||1-12/2018, reported comparison period||Impact of IFRS 16||1-12/2018 excluding the impact of IFRS 16|
|EBITDA, comparable, € million||948.9||-419.3||529.6||875.8||-403.4||472.4|
|Operating profit, comparable, € million||461.6||-91.1||370.5||428.5||-96.4||332.2|
|Profit before tax, comparable, € million||370.7||+4.3||375.1||325.2||+2.3||327.5|
|Cash flow from operating activities, € million||893.1||-328.3||564.8||748.4||-311.3||437.1|
|10-12/2019, reported||Impact of IFRS 16||10-12/2019 excluding the impact of IFRS 16||10-12/2018, reported comparison period||Impact of IFRS 16||10-12/2018 excluding the impact of IFRS 16|
|EBITDA, comparable, € million||258.0||-108.8||149.1||232.1||-103.1||129.0|
|Operating profit, comparable, € million||129.7||-23.1||106.6||114.5||-24.0||90.5|
|Profit before tax, comparable, € million||107.7||+0.5||108.1||90.8||-1.0||89.8|
|Cash flow from operating activities, € million||273.2||-85.4||187.7||209.0||-81.5||127.4|
Kesko Corporation has provided information on the adoption of IFRS 16 Leases in a 19 December 2018 release containing comparison figures for January-September 2018, in the 2018 financial statements release published on 6 February 2019, in the 2018 financial statements published on 8 March 2019, and in a 25 March 2019 release which contained comparison figures for the financial year 2018. Detailed information regarding the impacts of IFRS 16 Leases is provided in the Tables section of this release: information on impacts on the consolidated financial statements on page 40, and on operating profit and EBITDA by segment on page 33 and onwards.
PRESIDENT AND CEO MIKKO HELANDER:
“Kesko had a very strong year in 2019. Our net sales continued to grow and totalled €10,720 million, and our comparable operating profit rose to a record €462 million, improving by €33 million on 2018. The final quarter of 2019 was the best ever Q4 for Kesko: our operating profit increased by €15 million and totalled €130 million. The investments in growth made in line with our strategy have significantly improved our profitability. In addition to financial success, we once again also ranked as the most sustainable grocery trade company in the world.
Our great success is based on the strategy established in 2015 and its successful execution. Customer-orientation drives everything we do. The cornerstones of our strategy are profitable growth, business focus, sustainability and combatting climate change, and “One unified K”. The fact that trust towards K Group has significantly improved in recent years is another sign of our success.
In 2019, we continued our strong transformation and improving competitiveness in all our divisions, while also carrying out various acquisitions in line with our growth strategy. Our good ability to produce profit and strong financial position enable not only investments but also good dividend capacity. Kesko’s Board of Directors proposes to the Annual General Meeting a total dividend payment of €249,702,740.28 million, i.e. €2.52 per share, and proposes that the dividend be paid in two instalments.
In the grocery trade, our success is founded on good customer experiences. Our sales and market share have been growing at a good pace for some time, and continued to do so also in 2019. Online sales of groceries also continued to grow strongly. Profitability has improved not only thanks to sales growth, but also due to more extensive utilisation of technology and improved efficiency in logistics. At the core of our strategy are store-specific business ideas built on top of our chain concepts. I have been pleased to see how sales have grown in those K-stores where store-specific business ideas have resulted in even better selections and services for our customers. I still see significant potential to increase sales and profit by supporting and encouraging K-retailers to implement store-specific business ideas throughout our network of 1,200 K-food stores.
In the building and technical trade division, sales grew and profit strengthened. Profitability for the division has been improving for several years now. I am very pleased with the strong performance of K-Rauta in Finland, which translated into a market share of over 42% and an even stronger profit. Onninen has developed well as part of Kesko, and the growing technical wholesale market provides good potential for growth and further profitability improvement in Onninen. In Sweden, we carried out a significant acquisition to focus on professional builders: the acquisition of Fresks and its integration have been successful, and we are now well-positioned to grow our business in Sweden and further improve profitability. We will also continue efforts to improve the profitability of K-rauta in Sweden. In Norway, we have increased the share of our own retailing in the Byggmakker chain in line with our strategy, and will continue the integration of related acquisitions in 2020. Both the Swedish and the Norwegian market offer significant growth potential for Kesko.
In the car trade, the situation improved during the final quarter of the year, with better demand and availability. However, the situation has not fully returned to normal yet. Our collaboration with the world’s biggest car manufacturer, the Volkswagen Group, enables great competitiveness in the changing market. An updated range – all-electric cars, rechargeable hybrids and also new internal combustion engine vehicles with lower emissions – and new mobility services will improve our ability to serve our customers even better in all their car-related needs.
K Group has once again been ranked as the most sustainable grocery trade company in the world. This is thanks to years of effort. As a trading sector company, we have a unique opportunity and the responsibility to enable sustainable lifestyles for our customers. This requires transparently disclosing the origin and carbon footprint of products we purchase, thus offering customers in K-stores the chance to make sustainable choices.
Our outlook for 2020 is good. We expect the comparable net sales for continuing operations for the next 12 months to exceed the level of the previous 12 months, and the comparable operating profit for continuing operations for the next 12-month period to exceed the level of the preceding 12 months.
I want to thank all our customers, shareholders, suppliers and other stakeholders for their trust and collaboration in 2019. I also want to express my sincerest thanks to all the people in K Group for their productive work and commitment to K Group’s transformation.”