Financial statements release 2020: Record result in 2020

FINANCIAL PERFORMANCE IN BRIEF, CONTINUING OPERATIONS:                                          

10-12/2020

  • Group net sales for continuing operations in October-December totalled €2,662.3 million (€2,734.2 million), an increase of 4.5% in comparable terms, reported net sales decreased by 2.6%
  • Comparable operating profit totalled €165.6 million (€129.7 million), up by €44.6 million when Kesko Senukai is treated as a joint venture also for the comparison period (illustrative comparison figures)
  • Operating profit totalled €155.6 million (€127.8 million)
  • Comparable earnings per share were €0.31 (€0.23)
  • Reported earnings per share for continuing operations were €0.29 (€0.22)

1-12/2020

  • Group net sales for continuing operations in January-December totalled €10,669.2 million (€10,720.3 million), an increase of 3.6% in comparable terms, reported net sales decreased by 0.5%
  • Comparable operating profit totalled €567.8 million (€461.6 million), up by €118.9 million when Kesko Senukai is treated as a joint venture also for the comparison period (illustrative comparison figures)
  • Operating profit totalled €600.2 million (€447.8 million)
  • Comparable earnings per share were €0.97 (€0.74)
  • Reported earnings per share for continuing operations were €1.09 (€0.83)
  • The Board proposes a dividend of €0.75 per share, proposed to be paid in two instalments

KEY PERFORMANCE INDICATORS

  10-12/2020 10-12/2019 1-12/2020 1-12/2019
Continuing operations        
Net sales, € million 2,662.3 2,734.2 10,669.2 10,720.3
Operating profit, comparable, € million 165.6 129.7 567.8 461.6
Operating margin, comparable, % 6.2 4.7 5.3 4.3
Operating profit, € million 155.6 127.8 600.2 447.8
Profit before tax, comparable, € million 150.4 107.7 481.9 370.7
Profit before tax, € million 138.4 105.7 527.6 403.3
Cash flow from operating activities, € million 308.4 273.2 1,152.4 893.1
Capital expenditure, € million 55.5 83.3 398.4 686.1
         
Earnings per share, €, basic and diluted        
Continuing operations 0.29 0.22 1.09 0.83
Discontinued operations - 0.01 - 0.03
Group, total 0.29 0.23 1.09 0.86
Earnings per share, comparable, €, basic        
Continuing operations 0.31 0.23 0.97 0.74
  1-12/2020 1-12/2019
Continuing operations    
Return on capital employed, comparable, % 12.0 9.6
Group    
Return on equity, comparable, % 17.8 15.1

 

Kesko is reporting Kesko Senukai Group, which is part of Kesko’s building and technical trade segment and operates in the Baltic countries and Belarus, as a joint venture as of 1 July 2020. Kesko Senukai Group was reported as a subsidiary until 30 June 2020. In order to enable the comparison of financial performance indicators between reporting periods, Kesko reports illustrative Group performance indicators to be used alongside indicators based on IFRS consolidated financial statements. In segment data, Kesko Senukai is reported consolidated as a joint venture also for the comparison periods, as this method is used in management reporting.

Illustrative Group performance indicators

10-12/2020* 10-12/2019 1-12/2020 1-12/2019
Continuing operations        
Net sales, € million 2,662.3 2,509.8 10,242.6 9,862.0
Operating profit, comparable, € million 165.6 121.1 553.6 434.7
Operating margin, comparable, % 6.2 4.8 5.4 4.4
Operating profit, € million 157.2 119.1 540.0 421.0

*Reported 10-12/2020

In this financial statements release, the comparable change (%) in net sales has been calculated in local currencies and excluding the impact of Kesko Senukai and the acquisitions and divestments completed in 2019 and 2020. The comparable operating profit has been calculated by deducting items affecting comparability from the reported operating profit. The illustrative performance indicators have been calculated for the reporting period 1-12/2020 and the comparison periods as if Kesko Senukai had been consolidated as a joint venture.

OUTLOOK AND GUIDANCE FOR 2021

Kesko Group’s outlook is given for the year 2021, in comparison with the year 2020. 

Kesko estimates that its comparable operating profit in 2021 will be in the range of €520-620 million. The illustrative comparable operating profit in 2020 was €553.6 million.

The range for Kesko Group’s 2021 profit guidance is wide due to the uncertainties related to the Covid-19 pandemic. The pandemic situation and progress with vaccinations have a significant impact on the overall economy, consumer behaviour and trading sector demand in Kesko’s operating countries. During the pandemic, household consumption has focused on domestic purchases, which is expected to have a positive impact on some of Kesko’s businesses also in 2021.

Overall, the outlook for Kesko's business in 2021 is positive. We anticipate moderate growth in Finnish grocery trade. Recovery in the foodservice business largely depends on the pandemic situation. Renovation building is expected to grow in the Northern European construction market. In housing construction, new construction volumes are expected to decrease overall, but to remain stable in the construction of small housing and vacation homes. The Finnish car trade market is expected to grow in 2021.

PRESIDENT AND CEO MIKKO HELANDER:

Kesko had a very strong year in 2020. We were able to significantly increase our profit – in comparable terms, by nearly €120 million. We have been growing our sales and profitability for a long time, which acts as strong indication that our growth strategy is working and being successfully executed. Less than half of our profit improvement in 2020 was attributable to the positive impacts of the Covid-19 pandemic. Our ability to ensure the safety of our customers and personnel during these exceptional times also contributed to our good performance.

In 2020, our net sales grew by 3.6% in comparable terms, totalling €10,669 million. Our comparable operating profit rose to a record €568 million, representing an increase of €118.9 million when accounting for the change in the consolidation method of Kesko Senukai. Our good ability to produce a profit and strong financial position enable investments in growth and good dividend capacity. Kesko’s Board proposes to the Annual General Meeting a dividend of €0.75/share, totalling nearly €300 million, proposed to be paid in two instalments.

In the grocery trade division, good progress continued also in 2020. Our K-food stores gained market share for the fifth consecutive year. The division’s net sales grew by 3.6%, and its comparable operating profit rose to €375 million. Our strategic objective is to constantly improve customer experience in both physical stores and digital channels, utilising, for example, store-specific business ideas. In the online sales of groceries, we were agile in our response to the growth in demand, and our online customers are also active visitors to our physical stores. The operating environment for Kespro’s foodservice business was made challenging by Covid-19 related restrictions.  Nonetheless, Kespro managed an excellent increase in market share and secured good profitability.

Sales grew and profit improved also in the building and technical trade division, indicating a functional strategy and its good execution. The division’s net sales grew by 5.7% in comparable terms, and its comparable operating profit rose to a new level at €188 million. Profit grew clearly in Finland, Sweden and Norway. Consumer sales grew particularly strongly in 2020, but development was also good on the B2B side in both building and home improvement trade and Onninen’s technical wholesale. Growth in consumer sales was also underpinned by stronger market demand. In addition to organic growth, we continued to execute our growth strategy with the acquisitions of the Carlsen Fritzøe building and home improvement trade chain in Norway and the MIAB and Bygg & Interiör businesses in Sweden.

In the car trade division, the market weakened considerably in the first half of the year due to the decline in consumer demand caused by the Covid-19 pandemic and delays in car deliveries. However, the situation improved in the latter half of the year, and the net sales for Kesko’s car trade rose to nearly €900 million, with an operating profit of €23 million.

Kesko celebrated its 80th anniversary in 2020 with focus on work. Trust towards K Group has improved significantly in Finland in recent years, and we have become one of the top companies in terms of reputation. K Group has also once again been ranked as the most sustainable grocery trade company in the world.

Overall, the outlook for Kesko's business in 2021 is positive. Kesko estimates that the comparable operating profit for its continuing operations will be in the range of €520-620 million in 2021. The range for 2021 profit guidance is wide due to the uncertainties related to the Covid-19 pandemic.

I want to thank everyone at K Group for their valuable contribution in this record-breaking year. Big thanks also to all our customers, shareholders and partners. 

 

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