Q2 report 2015 Press- and analyst presentation 19 August 2015 Per Strömberg, CEO Sven Lindskog, CFO
Q2 Highlights: Solid second quarter 2015 Stable financial development Improved net sales +15% +4.3% excl effects from acquisitions Improved EBIT MSEK 33 of which Apotek Hjärtat acquisition contributed with MSEK 61 net EBIT excl acquisition effect slightly below last year due to start-up costs, new stores and business mix Events Divestment of Care and nursing business to ApoEx Early redemption of preference shares in July - Redemption at 110% of the subscription price; SEK 3.3 billion General market Continued food price inflation in Sweden Food inflation in the Baltics below zero Pharmacy market +6% in Q2 18/08/2015 2 MSEK Q2 2015 Q2 2014 Change % Net sales 25,542 22,223 14.9 EBIT* 1,018 985 3.4 EBIT Margin* 4.0% 4.4% -0.4 pp Net sales and EBIT margin R12* MSEK % 30 000 25 000 20 000 15 000 10 000 5 000 0 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Net Sales EBIT margin (R12) * Before non-recurring items 6,0 5,0 4,0 3,0 2,0 1,0 0,0
Market development Sales in ICA stores outperform food retail market % 6,0 5,0 4,0 3,0 2,0 1,0 0,0-1,0 Food retail market increased by 1.7% in Q2 ICA s store sales +2.9% in Q2, comparable sales +2.0% Food price inflation continues price effect of +2.7% in Q2 vs close to zero one year ago HUI s forecast for the Swedish food retail market in total 2015 is +3% Food Retail Market ICA ICA, Comparables Inflation 18/08/2015 3
Market development Rimi stores outperform food market % 10,0 8,0 6,0 4,0 2,0 0,0-2,0 Food Market (EE adj) Rimi comparable retail sales Rimi retail sales Market Inflation Rimi Baltic Food market +1.7% in Q2 Estonia +2.2% Latvia +0.2% Lithuania +2.5% Rimi retail sales +5.6% in Q2 - comparable sales +1.2% Strong competition in all countries Hard to employ among the highest salary increases in EU Food inflation below zero 18/08/2015 4
Market development Apotek Hjärtat faster growth than market % 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% Sales growth higher than market growth primarily driven by new pharmacies Apotek Hjärtat +8.9% vs Market growth of 6% in Q2 Total market growth 2015 driven by low margin Hepatit C prescription medicine (limited EBIT impact) 2,0% 0,0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 Pharmacy Market Apotek Hjärtat 18/08/2015 5
Segmental highlights ICA SWEDEN Continued robust sales development and increased market shares Stable EBIT margin Logistics restructuring proceeding as planned, at an intense stage Now 48 stores Online pace to increase post summer RIMI BALTIC 6 new stores in the Baltics in Q2 and increased market shares in the region Strong EBIT development in Q2 APOTEK HJÄRTAT Increased market shares Integration according to plan, all Cura pharmacies to be rebranded during 2015 Care and nursing divested, pending approval from authorities ICA BANK Positive business volume development Number of bank customers now ~665,000 Lower repo rate of -0.35% gives adverse impact on net interest and EBIT ICA REAL ESTATE High activity on Swedish real estate market Divestment of Norwegian real estate initiated in Q3 18/08/2015 6
ICA Online - initial findings Spend 18 weeks like for like Average customer spend/household SEK Online customers > 5 purchases 2.31x Customers with more than 5 purchases Online after their store launched Online offer: Show to be more loyal with 2.31x increased spending All ICA card customers Off-line purchases 43% 7,842 Online Have increased their total ICA spending with 10.5% vs same period LY 7,877 57% 10,395 In-store In-store only In-store + online grocery 18/08/2015 7
Rebranding of Cura Pharmacy to Apotek Hjärtat
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Financials
Financial summary MSEK Q2 2015 Q2 2014 Change Jan-Jun Jan-Jun Change % 2015 2014 % Net Sales 25,542 22,223 14.9 49,215 41,978 17.2 EBIT before non-recurring items 1,018 985 3.4 1,793 1,684 6.5 EBIT margin* % 4.0% 4.4% -0.4 pp 3.6% 4.0% -0.4 pp Cash flow** 1,902 1,916-0.7 1,927 1,839 4.8 Earnings per share (SEK) 9.63 4.65 107.1 12.19 6.15 98.2 * Before non-recurring-items ** Cash flow from operating activities excl. ICA Bank Strong sales Logistics restructuring / start-up costs in Q2 MSEK 40 Acquisition and integration cost of Apotek Hjärtat in Q2 MSEK 27 EPS 2015 includes capital gain from divestment of ICA Norway SEK 1.2 billion and EPS 2014 includes MSEK 440 from Kjell & Company divestment 18/08/2015 12
Sales Good net sales development Net sales increased by 15% Excluding acquisition effects +4.3% Higher sales driven by Apotek Hjärtat, ICA Sweden and Rimi Baltic Price development Food inflation in Sweden drives sales Food inflation in the Baltic countries below zero Easter effect of -0.4 in Q2 MSEK 30 000 25 000 20 000 15 000 10 000 Net sales 5 000 0 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 18/08/2015 13
EBIT Robust earnings Group EBIT before non-recurring items increased by 3.4%, incl Apotek Hjärtat acquisition Apotek Hjärtat acquisition contributed with MSEK 61 net of integration costs of MSEK 27 Some pressure on gross margin in ICA Bank and Portfolio companies EBIT margin lower mainly due to logistics restructuring and new stores and business mix MSEK 1 400 1 200 1 000 800 600 400 200 0 EBIT before non-recurring items and EBIT margin R12 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 % 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 EBIT* EBIT margin (R12) 18/08/2015 14
EBIT variance analysis Q2 (estimate) MSEK EBIT before non-recurring items Q2 2014 985 Sales Volume 168 Margin 21 Logistics restructuring Sweden -40 Store costs -135 Other costs -33 LY profits from divested portfolio companies -8 Acquired EBIT (Apotek Hjärtat) 88 Acquisition and integration related costs -27 EBIT before non-recurring items Q2 2015 1,018 18/08/2015 15
ICA Sweden Outperforming market Store sales growth +2.9%; +1pp vs market Particularly good sales in Fruit & Veg, Fresh and Dry grocery Good momentum in large formats Improved EBIT +3.8% Gross profit growing, driven by increased sales Reinvested in New stores Logistics restructuring IT outsourcing 18/08/2015 16 MSEK Q2 2015 Q2 2014 Change % Net sales 18,340 17,811 3.0 EBIT* 864 833 3.8 EBIT Margin* 4.7% 4.7% 0.0 pp 19 000 18 500 18 000 17 500 17 000 16 500 16 000 15 500 15 000 14 500 14 000 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Net Sales *Before non-recurring items Net sales and EBIT margin R12* MSEK % EBIT margin (R12) 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0
Rimi Baltic - Strong EBIT improvement Increased net sales by 8.6%, in local currencies +5.6% Store sales up by 5.6%, in comparable stores +1.2% MSEK Q2 2015 Q2 2014 Change % Net sales 3,136 2,888 8.6 EBIT* 99 86 15.1 EBIT Margin* 3.2% 3.0% 0.2 pp Improved EBIT +15.1% In local currencies +12% Positive impact from higher sales volumes, lower purchasing prices, higher PL share Increased store costs Properties sold in Estonia, capital gain MSEK 64 Net sales and EBIT margin R12* MSEK % 3 500 3 000 2 500 2 000 1 500 1 000 500 0 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 18/08/2015 17 *Before non-recurring items Net Sales EBIT margin (R12)
Apotek Hjärtat Integration and ramp up Apotek Hjärtat consolidated from 15 January Increased market share Q2 +0.7pp to 31.5% Net sales MSEK 3,212 whereof MSEK 2,363 from acquisition effect EBIT impacted by acquisition and integration costs MSEK 27 Estimated net synergies remain; 70 MSEK from 2016 and 80 MSEK from 2019 MSEK Q2 2015 Q2 2014 Change % Net sales 3,212 535 - EBIT* 79 7 - EBIT Margin* 2.5% 1.3% 1.2 pp *Before non-recurring items 18/08/2015 18
ICA Real Estate High activity in property markets Higher rental income from owned properties due to new stores Stable EBIT despite higher operating costs from investments and maintenance costs Divestment of Norwegian properties initiated in Q3 MSEK Q2 2015 Q2 2014 Change % Net sales 594 560 6.0 EBIT* 106 108-2.4 EBIT Margin* 17.8% 19.3% -1.5 pp MSEK Net investments 736 Net sales and EBIT margin R12* MSEK % 600 25,0 198 580 20,0 560 15,0-192 -231-331 -329-287 540 10,0 520 5,0-1 074 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 500 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Net Sales EBIT margin (R12) 0,0 18/08/2015 19 *Before non-recurring items
ICA Bank Increasing business volumes Now ~665,000 customers Adverse EBIT impact from low net interest Investing in IT and marketing ICA Insurance start up cost impacts EBIT by MSEK 7 in Q2 MSEK Q2 2015 Q2 2014 Change % Net sales 214 218-2.0 EBIT* 24 47-48.0 EBIT Margin* 11.4% 21.4% -10.1 pp MSEK 250 230 210 190 170 Net sales and EBIT margin R12* % 25,0 20,0 15,0 10,0 5,0 18/08/2015 20 150 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Net Sales EBIT margin (R12) *Before non-recurring items 0,0
Portfolio companies A changing business Numbers adjusted for Forma, Kjell & Company, Beauty Planet and Cervera in all periods Adjusted for divestments of Kjell & Company, Beauty Planet and Cervera, sales increased by 8.1% EBIT on comparable basis decreased by MSEK 24 New acting CEO in inkclub MSEK Q2 2015 Q2 2014 Change % Net sales 357 330 8.2 EBIT* -40-16 148.3 EBIT Margin* -11.1% -4.8% -6.3 pp Net sales and EBIT margin R12* MSEK % 800 700 600 500 400 300 200 100 0 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 * Before non-recurring items Net Sales EBIT margin (R12) 3,0 2,0 1,0 0,0-1,0-2,0-3,0-4,0-5,0 18/08/2015 21
Cash-flow on par with last year Operational cash flow of MSEK 1,902 Improved EBIT Seasonal improvement in working capital vs previous quarter (normal annual pattern) MSEK 2 750 2 250 1 750 1 250 750 250-250 Cashflow (proforma until Q4 2013) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 Cash flow from operating activities, excl. ICA Bank Cash flow R12 MSEK 6 000 5 000 4 000 3 000 2 000 1 000 0 18/08/2015 22
Net debt / EBITDA ratio down Closed ICA Norway divestment in April SEK 2.8 billion Dividend paid in April: SEK 1.1 billion Continously stable underlying cash flow contributing to lower net debt MSEK 16,0 14,0 12,0 10,0 8,0 6,0 4,0 13,9 2,8 Net debt / Proforma EBITDA 9,9 9,2 9,1 8,3 7,1 1,9 2,0 1,7 1,5 1,2 13,6 2,3 10,8 1,9 7,0 6,0 5,0 4,0 3,0 2,0 2,0 1,0 0,0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 Net Debt Net Debt/EBITDA 0,0 18/08/2015 23
Outlook and key take aways
Outcome close to long term targets Target Grow faster than the market Actual R12 (30 June 2015) Sweden Baltics Pharmacy EBIT margin excl. non-recurring items 4.3% 4.5% Return on capital employed* 8.9% 10% Long-term Net debt/ebitda** 1.9x <2.0x All markets Dividend (% profit for the year) 42% At least 50% * Excluding ICA Bank ** Interest-bearing liabilities excluding pensions and ICA Bank minus cash and cash equivalents in relation to EBITDA, operating income before depreciation and impairment. 18/08/2015 25
Outlook ICA SWEDEN Continuously robust sales development High project activity Online rollout, logistics, CRM/digital marketing HUI s forecast for the Swedish food retail market in 2015 is +3% RIMI BALTIC Continued sales growth in tough competition Increased salary levels ICA BANK Repo rate continues to impact earnings in 2015 Insurance company ramp-up increases cost base during 2015, start up in Q4 ICA REAL ESTATE Divestment process of Norwegian properties initiated APOTEK HJÄRTAT GROUP Integration according to plan, pharmacy rebranding in focus Early redemption of preference shares in July - Redemption at 110% of the subscription price; SEK 3.3 billion 18/08/2015 26
Summary Q2 Robust sales and EBIT development in Q2 Pharmacy integration according to plan Store network expansion continues & strategic initiatives are ongoing 18/08/2015 27
2015-08-19 18/08/2015 28
Disclaimer The information is such that ICA Gruppen AB (publ) is obliged to make public pursuant to the Securities Market Act (SFS 2007:528) and/or the Act on Trade with Financial Instruments (SFS 1991:980). The information was distributed to media for publication on August 19, 2015 at 7.00 CET. This report contains forward-looking statements that reflect the Board of Directors and management s current views with respect to certain future events and potential financial performance. Although the Board of Directors and the management believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, (i) changes in economic, market and competitive conditions, (ii) success of business and operating initiatives, (iii) changes in the regulatory environment and other government actions, (iv) fluctuations in exchange rates and (v) business risk management. This report does not imply that the Company has undertaken to revise these forward-looking statements, beyond what is required under the company s registration contract with Nasdaq Stockholm, if and when circumstances arise that will lead to changes compared to the date when these statements were provided. 18/08/2015 29