INTERIM REPORT for the period January 1 June 30, 2006

Transcription

1 ICA AB, corporate identity number INTERIM REPORT for the period January 1 June 30, 2006 Strong development for ICA Group during first half year Stockholm, August 15, 2006 Net sales during the first half year amounted to SEK 32,530 million (31,637), an increase of 2.8 percent. Operating income for the first half year rose to SEK 1,245 million (661), an increase of 88.4 percent, while income after tax rose to SEK 989 million (583). Adjusted for capital gains from real estate sales and impairments, operating income rose to SEK 1,048 million (624), an increase of 67.9 percent. For the second quarter, net sales amounted to SEK 16,999 million (16,409), an increase of 3.6 percent. Operating income for the second quarter amounted to SEK 684 million (373), an increase of 83.4 percent. Adjusted for capital gains from real estate sales and impairments, operating income rose to SEK 585 million (340), an increase of 72.1 percent. ICA Meny is reported as a discontinued operation on a separate line in the income statement, due to which the figures above refer to continuing operations. Key financial ratios April - June January - June Full-year SEK million Net sales 1) 16,999 16,409 32,530 31,637 65,885 Operating income 1) , ,947 Income after tax 1) ,525 Total assets 32,682 31,651 32,731 Cash flow from operating activities 1, , ,339 Operating margin, % 1) Equity/assets ratio, % Return on equity, % 2) Return on capital employed, % 3) ) According to IFRS 5, ICA Meny is reported as a discontinued operation on a separate line in the income statement. These key financial ratios refer to continuing operations. Comparative figures are restated. Other key ratios apply to total operations, including ICA Meny, since the balance sheet for the comparative periods, in accordance with IFRS 5, is not restated. 2) Return on equity = Income after tax as a percentage of average equity. The operations of ICA Banken are excluded from both the income statement and balance sheet in the calculation of return on equity. 3) Return on capital employed = Income after financial income as a percentage of average capital employed. The operations of ICA Banken are excluded from both the income statement and balance sheet in the calculation of return on capital employed. 1

2 Comment by the CEO ICA has reported a strong result for the first half of Adjusted for capital gains from real estate sales, operating income for the first half year rose to SEK 1,048 million, an improvement of 68 percent compared with the same period of The strong upward trend shows that we have focused our energies on the right areas and that we have succeeded in what we set out to do. The income improvement is also due to the fact that the operating income in the year-earlier period was charged with expenses for marketing and preparations for the price-cutting campaign. At the beginning of 2006 we emphasized a number of key areas for ICA price, product assortment, new store openings, Nordic cooperation and competence where we saw good opportunities for continued development. Having now passed the midway point of 2006 it is gratifying to note that our conscientious efforts have resulted in success in all these areas. The rate of new store openings remains high, our organization has become stronger, and our offering is more attractive. Customers are more satisfied, proof that we have again succeeded in strengthening our services and product assortment at the same time that we have kept prices in check. Customers positive opinions of ICA were confirmed by a survey by AC Nielsen in the spring, where ICA ranked the highest among 195 retailers in Europe. This is something we are extremely proud of, and it spurs us to pursue the path we are on. Looking ahead to the rest of 2006, I would like to focus on a number of areas where we have laid a foundation for ICA s further development. One example is the high rate of new store openings. With five new so far this year, in addition to a number of important rebrandings, we will be able to continue to improve our market position. Another area that will produce positive results is the modernization and conversion of our in Norway. During the first half of 2006 the ICA Maxi and ICA Supermarked formats show positive sales trends. This shows that we are headed in the right direction in Norway, even if much remains to be done before we achieve satisfactory profitability. We have also completed the successful sale of our subsidiary ICA Meny. The sale to Nordic Capital is good for all the parties involved. ICA Meny has obtained a new, professional owner. ICA reported a capital gain of approximately SEK 360 million, which is reported during the second half year. And last but not least, ICA can devote even more of its energies to its core retail business. If we can continue to deliver in accordance with our strategy as well as we have so far this year, I am sure ICA will remain the winner in the Nordic food retail market. The market continues to change at a rapid rate, and it is important for ICA to keep the initiative. We will continue our longterm efforts to offer consistently low prices on everyday items. For example, we will now continue our price-cutting campaign, and this autumn we will implement further price cuts in some selected product categories. The first will be frozen foods, where we are already beginning the week of August 21. Important events during the first half year - ICA AB announced in February that the subsidiary ICA Meny was for sale. On June 16 ICA AB signed an agreement with Nordic Capital to sell ICA Meny. The sale generates a capital gain for ICA AB of approximately SEK 360 million. The parties are awaiting the EU Commission s approval before the sale is finalized. The capital gain will be reported in the second half of On May 2 ICA Fastigheter Sverige AB sold a portfolio of 25 store properties in western and southern Sweden to ING Real Estate. The purchase price was SEK 870 million. The sale finally increased ICA AB s operating income by SEK 89 million in the second quarter of On May 22 ICA Fastigheter Sverige AB sold a distribution property in Helsingborg to Kundvagnen Holding AB for SEK 946 million. At the same time ICA signed a long-term lease with the buyer, which will take over the property on October 1. The sale generated a capital gain of around SEK 300 million, which affects ICA AB s result for the fourth quarter of During the first half year four Maxi ICA hypermarket (of which three rebranded ), one ICA Supermarket (rebranded) and six ICA Nära (four rebranded) were opened in Sweden. In Norway, five ICA Supermarked (four rebranded), four ICA Nær (all rebranded) and one Rimi store were opened during the first half year. 2

3 ICA Group financial results First half year Consolidated net sales for the ICA Group during the first half of 2006 amounted to SEK 32,530 million (31,637), an increase of 2.8 percent. ICA Sverige s sales rose by 2.6 percent. Sales for ICA Norge gained 0.6 percent; in local currency sales decreased by 4.1 percent. ICA Banken s sales rose by 127 percent, while business volume climbed 18 percent. Operating income for the first half of 2006 rose by SEK 584 million or 88 percent to SEK 1,245 million (661). The income improvement for ICA Sverige is due to stronger market positions and the fact that operating income in the year-earlier period was charged with expenses for marketing and preparations for the price-cutting campaign launched in March Capital gains on real estate sales in Sweden increased by SEK 97 million to SEK 106 million (9). Higher private label sales also positively contributed to financial results. ICA Norge s income improvement is mainly due to capital gains on real estate sales. After deducting write-downs, capital gains amounted to SEK 91 million (4). The large part is attributable to the sale of a Norwegian shopping center in February. Higher business volumes substantially improved ICA Banken s operating result, and it is now closing in on positive operating income. The ICA Group Functions segment (previously named ICA AB) is reporting lower results due to changes in the principles for distributing expenses within the Group, which is an element in the efforts to create a joint Nordic organization. Net sales for Rimi Baltic during the first half of 2006 amounted to SEK 4,216 million, an increase of 20.2 percent. ICA s share of Rimi Baltic s loss amounted to SEK 29 million. The comparable result for the first half of 2005 was SEK 20 million. The increased loss is largely due to expenses for the high rate of new store openings. Net sales for Netto Marknad during the first half year amounted to SEK 1,175 million, an increase of 19.4 percent. ICA s share of Netto Marknad s loss for the first half year improved slightly to SEK -36 million (-38). Net sales for ICA Meny during the first half year amounted to SEK 3,291 million, an increase of 19.3 percent. The sales increase, together with good cost controls, led to an improvement in net income for ICA Meny for the period to SEK 8 million (-7). Second quarter Consolidated net sales for the ICA Group during the second quarter of 2006 amounted to SEK 16,999 million (16,409), an increase of 3.6 percent. ICA Sverige s sales rose by 3.7 percent. Sales for ICA Norge gained 0.7 percent; in local currency sales decreased 3.2 percent. ICA Banken s sales rose by 116 percent. Operating income for the second quarter of 2006 rose by SEK 311 million or 83 percent to SEK 684 million (373). The improvement year-to-year by ICA Sverige is due to stronger market positions and the fact that operating income during the second quarter of 2005 was charged with expenses for marketing and price cuts. During the second quarter capital gains on real estate sales in Sweden increased by SEK 93 million to SEK 99 million (6). Operating income was also positively affected by higher private label sales. Lower sales volume and expenses to modernize are the main reasons for the declining results for ICA Norge during the period. ICA Banken s business volume continued to rise, which contributed to substantially higher operating income. ICA Banken is now close to reporting positive operating income. The ICA Group Functions segment (previously named ICA AB) is reporting lower results due to changes in the principles for distributing expenses within the Group, which is an element the efforts to create a joint Nordic organization. Net sales for Rimi Baltic during the second quarter of 2006 amounted to SEK 2,222 million, an increase of 20.0 percent. ICA s share of Rimi Baltic s loss amounted to SEK 16 million. The comparable result for the second quarter of 2005 was SEK 12 million. The increased loss is largely due to expenses for the high rate of new store openings. Net sales for Netto Marknad during the second quarter amounted to SEK 625 million, an increase of 23.1 percent. ICA s share of Netto Marknad s loss for the second quarter improved slightly to SEK - 16 million (-18). Net sales for ICA Meny during the second quarter amounted to SEK 1,731 million, an increase of 20.4 percent. The sales increase, together with good cost controls, led to an improvement in net income for ICA Meny for the period to SEK 12 million (3). 3

4 ICA and Rimi store sales during the first half year The following tables refer to store sales to consumers. In Sweden, this includes sales in Swedish retailer-owned ICA. In Norway, franchise store sales are included. Sales for retailer-owned and franchised are not consolidated in the Group. Information is based on accepted practices in each country. This means that the Swedish sales figures include VAT, while the Norwegian sales figures do not. ICA store sales in Sweden Store sales incl. April June 2006 January - June 2006 VAT SEK M Change, all Change, SEK M Change, all Change, comparable comparable Maxi ICA 5, % 8.2% 9, % 5.5% Hypermarket ICA Kvantum 5, % 8.5% 11, % 6.4% ICA Supermarket 7, % 6.3% 14, % 4.6% ICA Nära 3, % 6.4% 6, % 4.7% TOTAL 21, % 7.3% 41, % 5.3% During the first half year ICA store sales in Sweden rose year-to-year. As a whole, sales climbed 7.1 percent. During the second quarter sales increased 9.1 percent. During the first half year private label sales rose from 14 percent till 17 percent of total sales in Sweden, compared to the same period last year. ICA and Rimi store sales in Norway Store sales excl. April June 2006 January - June 2006 VAT NOK M Change, all NOK M Change, all Change, comparable Change, comparable ICA Maxi % 2.3% 1, % 1.1% ICA Supermarked 1, % -0.1% 2, % 2.5% ICA Nær 1, % 1.0% 2, % 0.4% Rimi 2, % -0.5% 4, % -2.3% TOTAL 4, % 0.2% 9, % -0.3% During the first half year store sales in Norway decreased by 1.6 percent. During the last quarter of 2005 store sales fell by 11.3 percent. The major conversion and modernization work that began in late 2004 is beginning to show results. During the period ICA Maxi rose by 14.8 percent and ICA Supermarked by 6.9 percent. Efforts to modernize the store structure and clarify the format strategies for ICA and Rimi are continuing in During the first half year private label sales rose from 6 percent till 9 percent of total sales in Norway, compared to the same period last year. 4

5 Number of ICA in Sweden, including retailer-owned Store profile Dec 2005 New Converted Closed June 2006 Maxi ICA Hypermarket ICA Kvantum ICA Supermarket ICA Nära TOTAL ICA and Rimi in Norway, including franchised Store profile Dec 2005 New Converted Closed June 2006 ICA Maxi ICA Supermarked ICA Nær Rimi TOTAL Financial position Cash flow from operating activities amounted to SEK 2,059 million (764) during the first half year Capital gains from real estate sales are included in cash flow from investing activities. Cash flow from investing activities amounted to SEK -446 million (-931). Cash flow from financing activities amounted to SEK -1,362 million (158). The Group s liquid assets totaled SEK 3,190 million (3,235). The equity/assets ratio was 26.9% (23.4%). The Group's net debt excluding ICA Banken was SEK 4,636 million (6,883). Investments Investments during the first half of 2006 amounted to SEK 1,306 million (1,246) and were distributed as follows: Investments April - June January - June Full-year Retail locations ,515 Under construction Investment properties Distribution Intangibles Other TOTAL ,306 1,246 2,547 Personnel The Group had an average of 11,744 employees (11,550) during the first half year. Parent Company The Parent Company's net sales amounted to SEK 406 million (96) with income after net financial items of SEK 898 million (890). Investments during the period amounted to SEK 80 million (37). Cash, cash equivalents and short-term investments amounted to SEK million 5 (0). Accounting principles This interim report is prepared according to IAS 34. The same accounting principles and calculation methods are applied as in the most recent annual report. The introduction of IAS 39 for reporting of financial guarantees at fair value in the balance sheet affects the Group s shareholders equity as of January 1, 2006 by SEK 13 million. Other new and revised IFRS standards that entered into 5

6 force on January 1, 2006 have no effect on the ICA Group s income statement, balance sheet, statement of cash flows and shareholders equity. On June 16 ICA AB signed an agreement to sell all the shares in ICA Meny AB. ICA Meny is reported as a discontinued operation in accordance with IFRS 5. ICA Meny s net income from the beginning of the year is reported on a separate line in the income statement, Net income from discontinued operations. Comparative figures in the income statement are restated. The amortization and depreciation of intangible and tangible fixed assets attributable to ICA Meny ceased as of June 1. The assets in question are valued at the lower of reported value and fair value less selling expenses. No write-down has been necessary. In the balance sheet, assets and liabilities attributable to ICA Meny are reported separately as of June 1, Balance sheets for comparative periods are not affected since these operations were not classified as discontinued until This interim report has not been reviewed by the company s auditors. Next reporting date The interim report for the third quarter of 2006 will be presented on November 6, Stockholm, August 15, 2006 Kenneth Bengtsson President and CEO, ICA AB The ICA Group (ICA AB) is one of the Nordic region s leading retail companies, with around 2,200 of its own and retailer-owned in Sweden and Norway. The Group includes the sales companies ICA Sverige, ICA Norge and Etos. ICA Meny specializes in distribution to restaurants, the foodservice sector and convenience. ICA also offers financial services to Swedish customers through ICA Banken. ICA owns half of the companies Rimi Baltic, with nearly 190 in the Baltic countries, and Netto Market, with nearly 80 in Sweden. ICA AB is a joint venture 40% owned by Hakon Invest AB and 60% by Royal Ahold N.V. of the Netherlands. Due to a shareholder agreement, neither party has control of the company and the two share equal voting power. Through Royal Ahold, ICA AB is part of an international retail network. For more information, please visit 6

7 Condensed income statement April - June January - June Full-year SEK million Net sales 16,999 16,409 32,530 31,637 65,885 Cost of sales -14,464-14,177-27,684-27,510-56,933 Gross profit 2,535 2,232 4,846 4,127 8,952 Selling and administrative expenses -2,024-1,870-3,972-3,509-7,439 Other operating revenue Share of associated companies net profit Operating income , ,947 Financial income Financial expenses Income after net financial items , ,674 Tax Net income for the period from ,525 continuing operations Net income for the period from discontinued operations 1) Net income for the period ,523 Of which attributable to Parent Company's ,536 shareholders Of which attributable to minority Net sales by segment SEK million April - June January - June Full-year ICA Sverige 12,237 11,795 23,176 22,595 46,753 ICA Norge 4,675 4,644 9,166 9,107 19,039 ICA Baltic ICA Danmark ICA Banken ICA Group Functions 1) Intra-Group sales Net sales from continuing 16,999 16,409 32,530 31,637 65,885 operations Net sales from 1,731 1,438 3,291 2,759 5,778 discontinued operations 2) Net sales, total 18,730 17,847 35,821 34,396 71,663 Operating income by segment SEK million April - June January - June Full-year ICA Sverige , ,607 ICA Norge ICA Baltic ICA Danmark ICA Banken ICA Group Functions 1) Operating income from , ,947 continuing operations Operating income from discontinued operations 2) Operating income, total , ,958 1) Previously named ICA AB. The segment includes the Parent Company and other joint group functions. 2) Refers to sales and income from ICA Meny. 7

8 Condensed balance sheet June 30 June 30 June 30 SEK million Intangible fixed assets 1,882 1,975 1,914 Tangible fixed assets 12,138 12,224 12,441 Financial fixed assets 4,864 4,525 4,914 Deferred tax assets Total fixed assets 18,928 18,804 19,318 Inventory 2,952 3,085 3,228 Accounts receivable 5,373 5,646 6,591 Liquid assets 3,190 3,235 2,920 Non-current assets held for sale 2, Total current assets 13,754 12,847 13,413 TOTAL ASSETS 32,682 31,651 32,731 Shareholders equity 8,786 7,418 8,386 Long-term liabilities 7,435 7,239 8,905 Current liabilities 15,633 16,994 15,440 Liabilities related to non-current assets held for sale TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 32,682 31,651 32,731 Pledged assets Contingent liabilities Condensed statement of cash flows January - June January - June Full-year SEK million Cash flow from operating activities before change in working capital 1, ,696 Change in working capital Cash flow from operating activities 2, ,339 Cash flow from investing activities ,076 Cash flow from financing activities -1, ,410 Cash flow for the period Liquid assets at beginning of period 2,920 3,198 3,198 Exchange rate differences in liquid assets Liquid assets at end of period 3,190 3,235 2,920 Of which cash flow from discontinued operations 1) - Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period from discontinued operations ) Refers to cash flows from ICA Meny. 8

9 Change in shareholders equity June 30, 2006, SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,386 Change in accounting principle IAS Opening shareholders equity after introduction of new accounting principles 8, ,373 Paid to minority owners -9-9 Currency translation difference Dividend Net income for the period Closing balance June 30, , ,786 Change in shareholders equity June 30, 2005, SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,094 Paid to minority owners -1-1 Currency translation difference Dividend Net income for the period Closing balance June 30, , ,418 Change in shareholders equity Dec. 31, 2005, SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,094 Paid to minority owners -1-1 Dividend Currency translation difference Net income for the period 1, ,523 Closing balance Dec. 31, , ,386 Note 1 Joint venture Rimi Baltic AB ICA AB and Kesko Livs Ab each own 50 percent of Rimi Baltic AB, which is active in food retail operations in the Baltic countries. Both companies have contributed a share of its capital. Operations are otherwise financed in part through the owners and in part externally, with equal guarantees from both owners. ICA s investment in Rimi Baltic AB is reported as a share of its net profit and is included in the Group's operating income. As of June 30 ICA AB s guarantees for Rimi Baltic AB amount to SEK 535 million. Rimi Baltic s condensed balance sheet as of June 30, 2006 is shown below. Rimi Baltic SEK million SEK million Fixed assets 2,046 Shareholders equity 1,224 Other current assets 698 Long-term liabilities 812 Liquid assets 335 Current liabilities 1,043 Assets 3,079 Shareholders equity and liabilities 3,079 Total Total Total Number of - Rimi Baltic Store profile December New Converted Closed June Supermarket Hypermarket Discount TOTAL

10 Netto Marknad AB ICA AB and Dansk Supermarket each own 50 percent of Netto Marknad AB, which manages the Netto discount concept in Sweden. Both companies have contributed a share of its capital. Moreover, the owners finance operations through loans. ICA AB has not provided any guarantees for the company. Netto Marknad AB s condensed balance sheet as of December 31, 2005 is shown below. Netto Marknad SEK million SEK million Fixed assets 665 Shareholders equity 28 Other current assets 170 Long-term liabilities 591 Liquid assets 5 Current liabilities 221 Assets 840 Shareholders equity and liabilities 840 Number of Netto During the first half of 2006 four new Netto were opened in Sweden. In total, there are 78 Netto in Sweden. Note 2 Discontinued operations On June 16 ICA AB signed an agreement to sell all the shares in ICA Meny AB. ICA Meny is reported as a discontinued operation in accordance with IFRS 5. ICA Meny s net income from the beginning of the year is reported on a separate line in the income statement, Net income from discontinued operations. Comparative figures in the income statement are restated. The amortization and depreciation of intangible and tangible fixed assets attributable to ICA Meny ceased as of June 1. The assets in question are valued at the lower of their reported value and fair value less sales expenses. No write-down has been necessary. In the balance sheet, assets and liabilities attributable to ICA Meny are reported separately as of June 1, Balance sheets for comparative periods are not affected since these operations were not classified as discontinued until The book value of assets and liabilities attributable to ICA Meny as of June 30 were as follows (SEK million): Intangible fixed assets 57 Tangible fixed assets 140 Financial fixed assets 1 Deferred tax assets - Inventory 355 Accounts receivable 779 Liquid assets 1 Total assets 1,333 Long-term liabilities 103 Current liabilities 697 Total liabilities