INTERIM REPORT for the period January 1 March 31, 2007

Transcription

1 Interim report for ICA AB January 1 - March 31, 2007

2 INTERIM REPORT for the period January 1 March 31, 2007 Stockholm, May 15, 2007 Strong sales growth but lower operating income during first quarter Net sales during the first quarter amounted to SEK 18,791 million (15,595), an increase of 20.5 percent. Rimi Baltic s net sales of SEK 2,390 million are consolidated beginning this year. Excluding Rimi Baltic, the Group s net sales were SEK 16,401 million, an increase of 5.2 percent. Operating income for the first quarter decreased to SEK 346 million (561), or by 38.3 percent. Operating income includes capital gains on real estate sales and impairment losses on fixed assets of SEK 117 million (96). Excluding these items, operating income decreased by 50.8 percent. Income after tax from continuing operations decreased to SEK 341 million (469). Net income for the first quarter amounted to SEK 341 million (465), a decrease of 26.7 percent, and includes the impact from the sale of ICA Meny of SEK 0 million ( 4). Key financial ratios January - March Full-year SEK million Net sales 1) 18,791 15,595 67,395 Operating income 1) ,297 Operating income excluding capital gains from real estate sales and impairment losses on fixed assets 1) ,709 Income after tax 1) ,034 Total assets 36,381 32,071 35,506 Cash flow from operating activities ,044 Operating margin, % 1) Operating margin excluding capital gains from real estate sales and impairment losses on fixed assets 1) Equity/assets ratio, % Return on equity, % 2) Return on capital employed, % 3) ) The sale of ICA Meny was finalized on September 19, 2006, and ICA Meny s operations are reported according to IFRS 5 as a discontinued operation on a separate line in the income statement. These key financial ratios refer to continuing operations, and comparative figures are therefore 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. 2

3 Comment by the CEO At the start of 2007 the ICA Group was a completely different company than it was a year earlier. Last year we streamlined operations through a number of structural deals, and as of January 2007 we are consolidating Rimi Baltic in its entirety. This year we have also decided to simplify our organizational structure. Four Group functions have been consolidated into three, the subsidiaries now have clearer responsibility for local customer offerings, and coordination in certain areas has been improved at Group level. As a result of the organizational changes, we will reduce the Swedish organization by approximately 100 posts and increase the Norwegian organization by approximately 80 posts. First-quarter sales amounted to SEK 18,791 million, an increase of slightly over 5 percent excluding Rimi Baltic, which is not included in the Group s sales last year. Sales have increased for ICA Sverige, ICA Norge and Rimi Baltic. However, the increase for ICA Norge is mainly because we have more branch, which are consolidated in the Group s sales. Despite higher net sales, the Group s operating income decreased year-to-year. We did, however, in the first quarter last year, benefit from the price-cutting campaign started in 2005, As a result, the comparable period s income was unusually strong. In ICA Sverige s case, lower operating income was also due to higher logistics expenses in connection with our new distribution network and our new warehouse in Helsingborg. This is an investment for the future and part of our distribution network, however, which we expect will improve the costefficiency in our supply chain. ICA Norge s operating income has also declined compared with the same quarter last year, mainly due to increased administration and transport expenses and due to the fact that we have taken over a number of unprofitable franchise and converted them to branch. In Norway, we launched a program at the beginning of the year called Take-off 2007 to focus on creating more profitable by accelerating customer traffic and offering a more attractive product range. Activities are being carried out in several principal areas in Norway. Our work with Take-off 2007 is proceeding at a high speed and we are expecting to see some effects from it later this year. Store sales in Sweden remained strong during the first quarter, with an increase for comparable of 4.4 percent. Comparable in Norway are also reporting fine gains in all formats. Also Rimi Baltic s comparable posted strong sales increase that amounted to 10.7 percent. During the first quarter we initiated our work with a savings program. In a first step we are concentrating on increasing our cost consciousness in the company with a focus to decrease some of the Group s administrative expenses. The savings program will continue in two more steps. In these steps we will concentrate on a few areas and projects where we can identify further savings in order to lower the Group s cost level on a long-term basis. Important events during the first quarter In February 2007 ICA decided to simplify the Group s organizational structure. Four Group functions were consolidated into three. The subsidiaries now have clearer responsibility for local customer offerings whilst coordination in certain areas was strengthened at the Group level. The changes will be carried through also in order to enable upcoming cost savings. In connection with the new organizational structure, the composition of ICA s Group Management was changed as well. In January ICA Eiendom AS sold a real estate portfolio mainly comprised of retail properties to ERIV. The sales price amounted to NOK 516 million with a capital gain of approximately NOK 100 million that affected ICA s operating income in the first quarter of Trond Kongrød was appointed the new President and COO of ICA Norge in January. In January ICA Norge launched Take off 2007, a program designed to boost business in a number of areas and create Norway s best. ICA Norge will strengthen its store network by opening new and modernizing existing. ICA Eiendom AS sold a property in Norway to Klaveness Eiendom AS in February. The purchase price was NOK 330 million with a capital gain of approximately NOK 90 million that affects ICA s operating income later in ICA s ownership changes in Netto were approved by the Swedish Competition Authority on February 5, The deal was finalized on February 15, after which ICA owns 5 percent of Netto. Structural costs in connection to the deal were accrued for in the fourth quarter

4 Important events after conclusion of the quarter ICA Eiendom Norge AS has sold Alta Storsenter (Komsa Eiendom AS) to Amfi Eiendom AS. The underlying property value is NOK 273 million. The buyer took possession of the property on May 2, The agreement will positively affect ICA s operating income by approximately NOK 65 million in the second quarter of this year. ICA Fastigheter Sverige AB has sold two real estate properties in Västerås and in Gävle in May for SEK 237 million to Standard Life Investments European Property Fund (EPGF). The buyer will take over the properties on May 31 this year. The agreement will affect ICA s operating result positively by approximately SEK 140 million by the latest during the third quarter this year. The ICA Group s financial results Financial results during the first quarter Consolidated net sales during the first quarter amounted to SEK 18,791 million (15,595), an increase of 20.5 percent. Rimi Baltic s net sales of SEK 2,390 million are consolidated this year. Excluding Rimi Baltic, consolidated sales were SEK 16,401 million, an increase of 5.2 percent. Excluding sales of SEK 86 million in the recently acquired Netto in Mälardalen, the increase in ICA Sverige amounted to 5.1 percent. ICA Norge s net sales increased by 1.5 percent. The increase of net sales in ICA Norge is mainly due to the fact that ICA has taken over franchised and we therefore have more consolidated into the Group s net sales. In local currency the increase was 5.2 percent. Rimi Baltic s net sales increased by 22 percent in local currency. ICA Banken s sales rose by 15.0 percent. Operating income for the first quarter decreased by SEK 215 million to SEK 346 million (561) and includes capital gains on real estate sales and impairment losses on fixed assets of SEK 117 million (96). Operating income excluding these items decreased by SEK 236 million to SEK 229 million (465). One of the reasons for the difference between periods is due to an unusually strong first quarter of 2006 as a result of the price-cutting campaign in The Group s higher selling and administrative expenses are due to the consolidation of Rimi Baltic. The lower operating margin is due to the major sales campaign last year as well as the fact that Rimi Baltic is in an expansive stage, which is negatively affecting earnings. Operating income for ICA Sverige amounted to SEK 340 million (451) and includes capital gains on real estate sales of SEK 7 million (6), including impairment losses on fixed assets. The decrease compared with the first quarter last year is mainly due to an increase in logistics expenses. These costs have arisen as we during a transition period have redundant expenses for personnel, IT and rent in connection with the opening of the new distribution unit in Helsingborg and closure of the unit in Växjö. Operating income for ICA Norge amounted to SEK 65 million (120). Operating income includes capital gains on real estate sales of SEK 114 million (90), including impairment losses on fixed assets. The decrease compared with the first quarter last year is mainly due to increased administration and transport expenses. Furthermore, the decrease is due to expenses when taking over unprofitable franchise. Rimi Baltic s operating income amounted to SEK 36 million. Comparable operating income for the first quarter 2006 was SEK 24 million. Sales volume and revenue have increased substantially due to the higher number of year-to-year. Operating income includes capital gains on real estate sales, including impairment losses on fixed assets, of SEK 3 million (7). ICA Banken s operating income improved to SEK 15 million ( 4). Business volume increased by 7 percent. The income improvement is due to higher volumes, a lower net interest expense, increased commission income, and lower depreciation. The ICA Group Functions segment reported operating income of SEK 38 million (7). The decrease is due to high expenses in IT, purchasing, and marketing. 4

5 ICA and Rimi store sales The following tables refer to store sales to consumers. In Sweden, this includes Swedish retailer-owned ICA store sales. In Norway, franchise store sales are included. Sales for retailer-owned and franchised are not consolidated in the Group. Beginning this year all sales figures are reported excluding VAT. ICA store sales in Sweden Store sales January - March 2007 excl. VAT SEK M Change, all Change, comparable 4, % 2.5% Maxi ICA Stormarknad ICA Kvantum 4, % 4.1% ICA Supermarket 6, % 5.4% ICA Nära 2, % 5.3% TOTAL 18, % 4.4% During the first quarter private label sales in Sweden rose from 17.5 percent to 18.1 percent year-to-year. ICA and Rimi store sales in Norway Store sales January - March 2007 excl. VAT NOK M Change, all Change, comparable ICA Maxi % 2.2% ICA Supermarked 1, % 1.3% ICA Nær 1, % 1.8% Rimi 1, % 2.9% TOTAL 4, % 2.2% During the first quarter private label sales in Norway rose from 9.0 percent to 11.4 percent year-to-year. Rimi store sales by Rimi Baltic Store sales January - March 2007 excl. VAT EUR M Change, all Change, comparable Supermarket % 11.1% Hypermarket % 12.1% Discount % 8.6% TOTAL % 10.7% During the first quarter private label sales in the Baltics rose from 2.1 percent to 4.6 percent year-to-year. 5

6 Number of ICA in Sweden, including retailer-owned Store profile Dec 2006 New Converted Closed March 2007 Maxi ICA Hypermarket ICA Kvantum ICA Supermarket ICA Nära TOTAL 1, ,390 During the first quarter one Maxi ICA hypermarket and five ICA Nära (five rebranded) were opened in Sweden. ICA and Rimi in Norway, including franchised Store profile Dec 2006 New Converted Closed March 2007 ICA Maxi ICA Supermarked ICA Nær Rimi TOTAL In Norway, one new ICA Maxi was opened during the first quarter and two were converted to ICA Naer. Number of - Rimi Baltic Store profile December New Converted Closed March Supermarket Hypermarket Discount TOTAL Financial position The Group s total assets have increased by SEK 875 million to SEK 36,381 million since December 31, The increase is due to investments in tangible fixed assets. Cash flow from operating activities amounted to SEK 301 million (920) during the period. Cash flow from investing activities was SEK 207 million (188). Cash flow from financing activities amounted to SEK 217 million ( 847), which largely relates to amortization of loans. The Group s liquid assets totaled SEK 4,008 million (3,208) as of March 31. The equity/assets ratio was 30.1 percent (27.6). The Group's net debt excluding ICA Banken was SEK 4,469 million (5,419). The Group s finance companies are being audited by the Swedish tax authorities. Correspondence with the tax authorities is ongoing. Investments Investments during the period amounted to SEK 1,032 million (551) and were distributed as follows. The largest single investment is the acquisition of four properties in Estonia of SEK 459 million. Investments January - March Full-year Retail locations ,381 Distribution Investment properties Intangibles Other TOTAL ,423 Personnel The Group had an average of 19,956 employees (11,475) during the quarter. Rimi Baltic, which was consolidated this year, has 8,016 employees. 6

7 Parent Company The Parent Company's net sales amounted to SEK 215 million (200) with income after net financial items of SEK 138 million ( 102). Investments during the period amounted to SEK 22 million (53). Cash, cash equivalents and short-term investments amounted to SEK million 5 (5). 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. As of January 1, 2007 ICA applies IFRS 7 Financial Instruments: Disclosures and the amendment to IAS 1 Presentation of Financial Statements. IFRS 7 and the amendments to IAS 1 as well as IFRIC 7, 8, 9 and 10 are expected to have little effect on the ICA Group s income statement, balance sheet, statement of cash flow and shareholders equity. On June 16, 2006 ICA AB signed an agreement to sell all the shares in ICA Meny AB. The sale was finalized on September 19, ICA Meny is reported as a discontinued operation in accordance with IFRS 5. ICA Meny s operations and net income are recognized on a separate line in the income statement, Net income from discontinued operations. The preparation of the financial reports in accordance with IFRS requires management to make estimates and assumptions that affect the application of the accounting principles and the carrying amounts in the income statement and balance sheet. Estimates and assumptions are based on historical experience and a number of factors that under current circumstances seem reasonable. The result of these estimates and assumptions is then used to determine the carrying amounts of assets and liabilities that otherwise are not clearly indicated by other sources. Actual outcomes may deviate from these estimates and assumptions. Next reporting date The interim report for January June will be presented on August 21. The interim report has not been reviewed by the company s auditors. Stockholm, May 15, 2007 Kenneth Bengtsson President and CEO, ICA AB About ICA The ICA Group (ICA AB) is one of the Nordic region s leading retail companies, with around 2,300 of its own and retailer-owned in Sweden, Norway and the Baltic states. The Group includes the sales companies ICA Sverige, ICA Norge and Rimi Baltic. ICA also offers financial services to Swedish customers through ICA Banken. ICA AB is a joint venture 40% owned by Hakon Invest AB and 60% by Royal Ahold N.V. of the Netherlands. According to a shareholder agreement, Royal Ahold and Hakon Invest jointly share a controlling influence over ICA AB. Through Royal Ahold, ICA AB is part of an international retail network. For more information, please visit 7

8 Income statement January - March Full-year SEK million Net sales 18,791 15,595 67,395 Cost of sales -16,220-13,220-57,640 Gross profit 2,571 2,375 9,755 Selling and administrative expenses -2,382-1,948-8,179 Other operating revenue Share of associated companies net profit Operating income ,297 Financial income Financial expenses Income after net financial items ,046 Tax Net income for the period from continuing operations ,034 Net income for the period from discontinued operations 1) Net income for the period , 2,401 Of which attributable to Parent Company's ,393 shareholders Of which attributable to minority Net sales by segment SEK million January - March Full-year ICA Sverige 11,585 10,939 48,301 ICA Norge 4,560 4,491 18,361 Rimi Baltic 2) 2, ICA Banken ICA Group Functions ,114 Intra-Group sales Net sales from continuing operations 18,791 15,595 67,395 Net sales from discontinued operations 1) 0 1,560 4,383 Net sales, total 18,791 17,155 71,778 Operating income by segment SEK million January - March Full-year ICA Sverige ,257 ICA Norge Rimi Baltic 2) ICA Banken ICA Group Functions Operating income from continuing operations ,297 Operating income from discontinued operations 1) Operating income, total ,335 1) Refers to sales and income from ICA Meny. 2) In 2006 Rimi Baltic was a 50% joint venture. 8

9 Condensed balance sheet March 31 Dec. 31 SEK million Intangible fixed assets 3,553 3,447 Tangible fixed assets 14,175 13,232 Financial fixed assets 3,534 3,959 Deferred tax assets Total fixed assets 21,449 20,819 Inventory 3,928 3,550 Accounts receivable 6,621 6,242 Liquid assets 4,008 3,749 Non-current assets held for sale 375 1,146 Total current assets 14,932 14,687 TOTAL ASSETS 36,381 35,506 Shareholders equity 10,959 10,216 Long-term liabilities 7,675 7,642 Current liabilities 17,747 17,648 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 36,381 35,506 Pledged assets Contingent liabilities Condensed statement of cash flows January - March January - March SEK million Cash flow from operating activities before change in working capital Change in working capital Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period Liquid assets at beginning of period 3,749 2,920 Exchange rate differences in liquid assets Liquid assets at end of period 4,008 3,208 Of which cash flow from discontinued operations 1) - Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities 0 0 Cash flow for the period from discontinued operations 0 0 1) Refers to cash flows from ICA Meny. 9

10 Change in shareholders equity March 31, 2007 SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,216 Acquisition of minority 1 1 Currency translation difference Net income for the period Closing balance March 31, , ,959 Total Change in shareholders equity March 31, 2006 SEK million Attributable to Parent Company s shareholders Attributable to minority Opening balance Jan. 1, , ,386 Change in accounting principle IAS Change in accounting principle card fees ICA Banken Opening shareholders equity after introduction of new accounting 8, ,358 principles Acquisition of minority -9-9 Currency translation difference Net income for the period Closing balance March 31, , ,852 Note 1 Joint venture Rimi Baltic AB ICA AB and Kesko Livs Ab established a joint venture, Rimi Baltic AB, in early Each owned 50 percent until December 18, 2006, when ICA acquired Kesko Livs Ab s shares and became sole owner. In 2007 the company is reported as a subsidiary, though in 2006 it was reported as a joint venture. Netto Marknad AB In 2002 ICA AB and Dansk Supermarket formed a joint venture, Netto Marknad AB, to manage the Netto discount concept in Sweden. In December 2006 an agreement was signed between the owners whereby ICA reduced its interest to 5 percent. The transaction was approved by competition authorities on February 5, 2007 and finalized on February 15, As part of the agreement, ICA took over 21 and 2 projects in the Mälardal area as of January 1, ICA has to date decided to convert 5 to ICA. The other and an undeveloped property are now being sold through tender proceedings. The operations that have been taken over are consolidated and included in ICA Sverige. In 2006 Netto Marknad AB was reported as a joint venture. Note 2 Discontinued operations On June 16, 2006 ICA AB signed an agreement to sell all the shares in ICA Meny AB. The sale was approved by the EU Commission in September, and the transaction was finalized on September 19, ICA Meny is reported as a discontinued operation in accordance with IFRS 5. ICA Meny s operations and net income from the beginning of the year are recognized on a separate line in the income statement, Net income from discontinued operations. Comparative figures in the income statement are restated. ICA MENY January - March Full-year (SEK million) Net sales - 1,560 4,383 Operating income Income before tax from discontinued operations Tax on income for the year Result for the period from discontinued operations Capital gain from discontinued operations Result from discontinued operations, net after tax Total 10

11 ICA AB Corporate identity number Svetsarvägen 16 SE Solna, Sweden Telephone Fax