Interim Report, January June 2006

Transcription

1 Page 1/25 Interim Report, January June 2006 January 1 June 30, 2006 Group revenues amounted to SEK 314 M (309). An increase of 1.6 percent compared with the yearearlier period. Operating profit for the Group, including share of ICA AB s earnings, improved to SEK 353 M (225). An increase of 57 percent. Profit for the period amounted to SEK 388 M (455). Earnings per share amounted to SEK 2.41 (2.82). The ICA Group s revenues increased by 2.8 percent. Profit for the period improved to SEK 997 M (576). Forma s revenues rose to SEK 314 M (297). Result for the period was SEK -1 M (14). April 1 June 30, 2006 Group revenues amounted to SEK 160 M (161). Operating profit for the Group improved to SEK 190 M (128). Profit for the period amounted to SEK 148 M (245). Earnings per share amounted to SEK 0.92 (1.52). The ICA Group s revenues increased by 3.6 percent. Profit for the period improved to SEK 532 M (325). Forma s revenues rose to SEK 160 M (155). The profit for the period was SEK 1 M (14). Key figures April - June January - June Full-year SEK M Group Revenues Operating profit Profit for the period Earnings per common share, SEK Earnings per C share, SEK Equity/assets ratio, % Return on capital employed, % Return on shareholders equity, % Parent Company Profit for the period Hakon Invest, which is listed on the Stockholm Stock Exchange (Stockholmsbörsen) O-list, conducts active and longterm investment operations in retail-oriented companies in the Nordic region. Hakon Invest owns 40% of ICA AB, the Nordic region s leading retail company with focus on food. In addition, Hakon Invest owns 100% of the shares in Forma Publishing Group, which is one of Sweden s largest publishers. Further information about Hakon Invest is available at Hakon Invest AB (publ) Svetsarvägen 16 P.O Box 1508 SE Solna Phone Fax Corp. Id no

2 President s comments It is pleasing to note that our portfolio companies are performing favorably. The ICA Group reports a sharp improvement in earnings compared with a year earlier, when ICA invested in price campaigns from which we can now harvest the benefits when profitability is back to normal levels. This is clearly reflected in the improvement in Hakon Invest s operating profit in the first six months. Return on our financial management is somewhat below the goal, but should be viewed in relation to our priority to be prepared to assume ownership responsibility for continued growth in our portfolio companies, ICA, Forma and Kjell & Company, while at the same time evaluating new investment. ICA AB started the year strongly. The conscious focus on price and product range has resulted in more satisfied customers, while at the same time a high pace of establishment and increased expertise in the organization further strengthened ICA s market position. We can conclude that the divestment of ICA Meny was successful and, as a result, all energy can now be centered on further strengthening ICA AB s core business, retailing. Combined, these factors form the foundation for a continued strong development in the ICA Group. In Sweden, sales in the ICA stores exceeded expectations and it is additionally pleasing to note that all four profiles report favorable rates of increase. We are now seeing positive signals in Norway, where both the ICA Maxi and ICA Supermarket formats are developing positively. Renewal and conversion of the Norwegian stores has begun to yield effect, although much work remains before ICA Norge achieves satisfactory profitability. In the Baltic States, Rimi Baltic continues to stride forward through strong growth in existing stores as well as a continued high pace of establishment. Our wholly owned subsidiary Forma Publishing Group has had a stable sales trend in a tougher market for consumer magazines. Investing in new magazines and structural costs for the acquisition of B. Wahlströms Bokförlag has produced a lower profit. B. Wahlström s represents a very fine complement to Forma s book publishing operations and which now broadens its offering and gains access to new attractive customer groups. The acquisition is also well in line with the expansion plans we have for Forma in terms of both organic and acquisition-driven growth. Acquisition of 50 percent of Kjell & Company was performed in the spring. The company fits very well into our investment strategy and we foresee great possibilities to contribute with our retail know-how and large network in the retail sector when Kjell & Company now accelerates its pace of establishment in Sweden. Within five years, the plan is that the current total of 16 stores will be increased to some 40 growth that will occur with sustained favorable profitability. Our strong balance sheet provides security and flexibility for our portfolio companies and means that we can act quickly when we see attractive investment opportunities. Our focus is on investment in new companies as well as possibilities for supplemental investment in our existing portfolio companies, ICA, Forma and Kjell & Company. Claes-Göran Sylvén President and CEO Interim Report, January June

3 Significant events during January June Hakon Invest signed an agreement on May 24, 2006 covering acquisition of 50 percent of the shares in Kjell & Company Elektronik AB (Kjell & Company), that is a leading retailer of home electronic accessories that owns and manages 16 stores in Sweden. The newest store was opened in Farsta on June 16 and is the company s fourth in the Stockholm region. During fiscal year 2006, Kjell & Company projects sales of about SEK 260 M, with favorable profitability. Hakon Invest s investment totals SEK 100 M. On June 16, ICA AB announced an agreement with Nordic Capital on the sale of the ICA Meny subsidiary. The sale results in a capital gain for ICA AB of about SEK 360 M. For Hakon Invest, this resulted in a participation in earnings of 40% reduced by reported surplus value of SEK 26 M. The parties are awaiting the EU Commission s approval before the transaction can be completed and the gain booked. During the period, ICA AB divested a portfolio of store properties in southern and western Sweden to ING Real Estate for SEK 870 M. The sale ultimately increases the ICA Group s operating profit by SEK 89 M during the second quarter. An agreement was made during the period to sell a property in Helsingborg for SEK 945 M to Kundvagnen Holding. The sale creates a capital gain of approximately SEK 300 M that affects the ICA Group s operating profit for the fourth quarter. During the second quarter, Hakon Invest s subsidiary Forma acquired 100 percent of B. Wahlströms Bokförlag, which publishes books in the areas of fiction, facts and youth literature. B. Wahlströms has annual sales of slightly more than SEK 100 M. The takeover was on June 1, Naomi Seid was elected a new Board member in Forma Publishing Group, whereby the Board was increased by one member. Naomi Seid has years of experience in the media industry, including various positions within MTG and Bonnier Veckotidningar (weekly magazines). Currently, she is president of Titeldata AB. Group Revenues and profit January 1 June 30, 2006 Consolidated revenues amounted to SEK 314 M (309). Forma s share of the revenues amounted to SEK 314 M (297). The preceding year s comparative figure includes revenue from member service activities which was transferred from the Parent Company to the fellow company ICA-handlarnas Medlemsservice AB. Operating profit in the Group amounted to SEK 353 M (225), an improvement of SEK 128 M compared with the year-earlier period. Of the improvement SEK 143 M relates to Hakon Invest s share in the earnings of ICA AB. Net financial items amounted to SEK 36 M (239). Considering the risk profile and the profitability target the portfolio development has been acceptable. Interest-bearing investments and cash, which amounts to almost half of the financial investments, have given a low return less than 1 percent. Of the total financial investments 35 percent is Interim Report, January June

4 in the stock market and 21 percent in hedge funds. They have produced a return of about 2 percent. The very weak development of the stock markets, in Sweden and internationally, has implied a lower yield compared with January June 2005 when the Royal Ahold-shares showed a large increase in value. Tax expense was SEK -1 M (-9). Profit for the period amounted to SEK 388 M (455). Earnings per share totaled SEK 2.41 (2.82). April 1 June 30, 2006 Consolidated revenues amounted to SEK 160 M (161). Forma accounted for SEK 160 M (155) of revenue. The preceding year s comparative figure includes revenue from member service activities which was transferred from the Parent Company to the fellow company ICA-handlarnas Medlemsservice AB. B. Wahlströms is consolidated starting June 1, 2006 and SEK 8 M is included in Forma s revenue for the period. Operating profit in the Group amounted to SEK 190 M (128), an improvement of SEK 62 M compared with the year-earlier period. Of the improvement SEK 76 M relates to Hakon Invest s share in the earnings of ICA AB. Net financial items amounted to SEK -64 M (126). The general decline in the stock markets during the second quarter has negatively affected the return of the financial portfolio. Income tax was positive SEK 22 M (-9). Profit for the period amounted to SEK 148 M (245). Earnings per share totaled SEK 0.92 (1.52). Interim Report, January June

5 Development in holdings ICA AB During the first six months ICA Group-revenues rose by 2.8 percent to SEK 32,530 M compared with the yearearlier period. The sales trend in Sweden continued to be favorable, while sales in Norway did not fully live up to expectations. ICA Meny 1 and ICA Banken increased their revenues. The ICA Group s operating profit for the first six months amounted to SEK 1,245 M (661), an increase of 88 percent. Excluding capital gains and impairments, operating profit increased by 68 percent to SEK 1,048 M. ICA Sverige increased operating profit with SEK 599 M and ICA Norge with SEK 51 M. The first six month s profit for the period for the ICA Group amounted to SEK 997 M (576). During the second quarter the ICA Group s revenues rose by 3.6 percent to SEK 16,999 M compared with the year-earlier period. In Sweden the rate of store establishment continues to be high and ICA s improved market position has created higher revenues for the Group. In Norway some positive indicators can be seen, as a favorable development of the ICA Maxi and ICA Supermarket formats, although sales still develops less favorable than expected. ICA Meny 1 and ICA Banken recorded highly favorable sales during the quarter. The ICA Group s operating profit was SEK 684 M (373), an increase of 83 percent. ICA Sverige rose by SEK 432 M. The second quarter profit for the period for the ICA Group amounted to SEK 532 M (325). Forma Publishing Group AB Forma s revenues increased to SEK 314 M (297) during the first six months. During the period the business unit Publishing has shown a positive development and established consumer magazines have had a stable development. The introduction of new consumer magazines has implied an increased competition in the market. This has particularly affected newly launched magazines that have not found their customer base. That has given Forma a lower sale of single copies than expected for some issues. Operating result was SEK -1 M (17). The decline is attributable to the planned investments in new products, as the magazine Market, and the cost for integration of B. Wahlströms. Net financial items amounted to SEK 0 M (3). Tax expenses during the period were SEK 0 M (-5). The first six month s result for the period for Forma amounted to SEK -1 M (14). 1 ICA Meny s revenue is not included in ICA AB s revenue as the company is reported as discontinued operations. Interim Report, January June

6 During the second quarter Forma s revenues increased to SEK 160 M (155). Forma s business areas Contract Publishing and Books have increased revenues, while Consumer Magazines and Professional Magazines show lower revenues. During the quarter B. Wahlströms has been added and is included with SEK 8 M. Operating profit was SEK 1 M (18). Start-up costs for new magazines and integration cost relating to the acquisition of B. Wahlströms are affecting the lower operating profit for the quarter. Net financial items amounted to SEK 0 M (2). Tax expenses during the period was SEK 0 M (-5). The second quarter profit for the period for Forma amounted to SEK 1 M (14). Holdings January - June Revenues, SEK M Operating profit, SEK M Operating margin, % Ownership % ICA ,530 31,637 1, Forma Total 32,844 31,934 1, Note. Hakon Invest and Ahold have joint determining influence in ICA AB through an agreement requiring unanimity for all decisions made by the Annual General Meeting and the Board of Directors. For further information about ICA AB, see the section under Holdings in the Appendix. Financial position The Hakon Invest Group has no long-term financial liabilities, SEK 0 M (0). The equity/assets ratio at the end of the period was 95.4% (95.4). The current value of the Group s cash and cash equivalents and investments at June 30, 2006 amounted to SEK 2,801 M, compared with SEK 2,938 M at June 30, 2005 and SEK 3,046 M at year-end At June 30, 2006, financial investments under external management amounted to SEK 2,289 M and investments under internal management to SEK 512 M. At the close of the period, investments were distributed as follows: shares, 35 percent; interest-bearing securities, 24 percent; hedge funds, 21 percent, and cash and cash equivalents, 15 percent. Cash flow Cash flow from operating activities amounted to SEK 123 M (490) during the first six months of 2006.The decrease is attributable to a lower profit and an increased portion of non cash-generating items. The dividend received from ICA AB amounted to SEK 244 M. Cash flow from investing activities amounted to SEK 90 M (63) and is primarily attributable to changes in short-term investments and the acquisition of B Wahlströms. Interim Report, January June

7 A dividend of SEK 4.50 per common share was paid to the shareholders in May 2006, which affected cash flow from financing activities by an amount of SEK -355 M (-325). Cash and cash equivalents declined to SEK 413 M (463) at June 30, Parent Company Revenues and profit January 1 June 30, 2006 Parent Company revenues totaled SEK 0 M (12) during the January June 2006 period. During the corresponding period of 2005, the company had revenues from service operations that were transferred to the fellow company ICA-handlarnas Medlemsservice AB at mid-year Operating profit amounted to SEK 214 M (207). The financial result was SEK 36 M (236). Profit for the period was SEK 249 M (440). April 1 June 30, 2006 Parent Company revenues totaled SEK 0 M (6) during the second quarter Operating profit amounted to SEK 228 M (221) due to the dividend received from ICA AB. The financial result was deteriorated to SEK -64 M (123) due to the development on the stock market. Profit for the period was SEK 187 M (342). Financial position The Parent Company of the Hakon Invest Group has no long-term financial liabilities, SEK 0 M (0). The equity/assets ratio at the close of the period was 97.9% (97.9). The current value of the Parent Company s cash and cash equivalents and investments at June 30, 2006 amounted to SEK 2,724 M, compared with SEK 2,790 M at June 30, 2005 and SEK 2,924 M at year-end Interim Report, January June

8 The company s share Hakon Invest s earnings per share is calculated based on profit after tax and the average number of shares: 160,917,436. Common shares and C shares contribute equally to earnings per share. The total number of C shares is 82,067,892, and the total number of common shares is 78,849,544. C shares can be converted to common shares, but not until 2016 at the earliest. The share capital in Hakon Invest amounts to SEK 402,293,590, divided among 160,917,436 shares, each with a par value of SEK Significant events after the close of the period On July 3, 2006, Hakon Invest s acquisition of Kjell & Company was completed after all conditions for the transaction were fulfilled. Other information At Hakon Invest s 2006 Annual General Meeting, held on May 10 in Solna, Thomas Strindeborn was elected as a new member of the Hakon Invest Board of Directors after Stig Lundström declined re-election. At the same time, Board members Lars Otterbeck, Cecilia Daun Wennborg, Anders Fredriksson, Jan-Olle Folkesson, Olle Nyberg and Jan Olofsson were re-elected. Lars Otterbeck was re-elected Board Chairman. The Meeting approved the proposed dividend of SEK 4.50 per common share. In addition, the Meeting approved the Board s proposal for the principles of remuneration for senior executives as well as the proposal about an incentive program for 2006 directed to company management and certain key personnel. In line with the proposal, the required buy-back and transfer of own shares (treasury stock) was approved to cover allotments of options. Interim Report, January June

9 Key figures for Hakon Invest April - June January - June Full-year SEK M Gross margin, % Operating margin, % Net margin, % Return on shareholders' equity, % Return on capital employed, % Equity/assets ratio, % Share Earnings per common share, SEK Earnings per C share, SEK Share price at the end of the period, SEK Dividend per share, SEK 4.50 Dividend, MSEK 355 Dividend ratio, % 80 Return on shareholders' equity, % Cash flow per share, SEK Number of common shares 78,849,544 78,849,544 78,849,544 Number of C shares 82,067,892 82,067,892 82,067,892 Number of shares at the end of the period 160,917, ,917, ,917,436 Definitions Capital employed Balance sheet total less non-interest-bearing liabilities and provisions. Cash flow per share Cash flow for the period divided by the total number of shares. Dividend payout ratio Dividend as a percentage of the Parent Company s profit for the period. Earnings per common share Profit for the period divided by the total number of shares. Earnings per C share Same definition as in the case of earnings per common share, since common shares and C shares provide entitlement to equal participation in earnings and shareholders equity. The C share does not give entitlement to a cash dividend, as opposed to the common share. Equity/assets ratio Shareholders equity as a percentage of the balance sheet total. Gross margin Gross profit as a percentage of revenues. Net margin Profit for the period as a percentage of revenues. Operating margin Operating profit as a percentage of revenues. Return on capital employed Profit after financial items plus financial expenses, calculated on a rolling 12-month period as a percentage of average capital employed during the same period. Return on shareholders equity Profit for the period, calculated on the basis of a rolling 12-month period as a percentage of average shareholders equity during the same period. Shareholders equity per share Shareholders equity divided by the average number of shares. Interim Report, January June

10 Financial statements Condensed consolidated income statement April June January - June Full-year SEK M Revenues Cost of goods sold Gross profit Other operating income Selling expenses Administrative expenses Share in earnings of companies reporting in accordance with the equity method Operating profit Net financial items Profit after net financial items Income tax Profit for the period Profit attributable to equity holders in the parent company Earnings per share, before and after dilution (SEK) Common share C share Interim Report, January June

11 Condensed consolidated balance sheet June 30, Dec 31, SEK M ASSETS Fixed assets Goodwill Share in earnings of companies reported in accordance with the equity method 5,148 4,640 4,997 Other fixed assets Total fixed assets 5,360 4,830 5,148 Current assets Miscellaneous current assets Short-term investments 2,388 2,475 2,490 Cash and cash equivalents Total current assets 2,995 3,052 3,197 TOTAL ASSETS 8,355 7,882 8,345 EQUITY AND LIABILITIES Shareholders' equity 7,972 7,516 7,931 Long-term liabilities Current liabilities TOTAL EQUITY AND LIABILITIES 8,355 7,882 8,345 Interim Report, January June

12 Changes in condensed consolidated equity January - June Full-year SEK M Opening equity *) 7,926 7,244 7,244 Translation differences Items booked directly under equity from companies reported in accordance with equity method Total revenues and expenses reported directly against equity Profit for the period Total revenues and expenses ,009 Shareholder contribution 0-3 Dividend Closing equity 7,972 7,516 7,931 *) Less SEK 5 M in an adjustment for changed accounting principle due to financial guarantees according to IAS 39. Condensed consolidated cash-flow statement January - June Full-year SEK M Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period Cash and cash equivalents at January Exchange difference in cash and cash equivalents Cash and cash equivalents at the end of the period Interim Report, January June

13 Segment reporting January - June Publishing operations Serviceoperations Other, incl. Eliminations Total SEK M External revenues Operating profit/loss Profit/loss after financial items Profit/loss for the period Assets ,930 7,492 8,355 7,882 Liabilities Investments Depreciation Accounting principles As of 2005, Hakon Invest prepares the consolidated accounts in accordance with the International Financial Reporting Standards (IFRS), approved by the EU. This interim report was prepared in accordance with IAS 34 Interim Financial Reporting, which is in agreement with the Swedish Financial Accounting Standards Council s recommendation RR 31, Interim Reporting for Corporate Groups. The same accounting principles and calculation methods are applied as in the most recent annual report, except for the change due to the introduction of IAS 39. This means that financial guarantees are reported at fair value in the balance sheet, which reduces the Group s shareholders equity as of January 1, 2006 with a negative amount of SEK 5 M. Other new and revised IFRS standards that became effective on January 1, 2006 have no effect on the Group s income statement, balance sheet, statement of cash flows or shareholders equity. Compared with the year-earlier period for the second quarter 2005 the consolidated numbers are corrected according to the changes made in the third period quarterly report for the year This interim report has not been reviewed by the company s auditors. Interim Report, January June

14 Acquisitions On May 8, 2006 Hakon Invest s subsidiary Forma announced that it is strengthening its position in the book market through the acquisition of B. Wahlströms Bokförlag. B. Wahlströms has a broad register, particularly in youth titles, and is a fine complement to Forma s current publishing operations. On June 1, 2006 Forma acquired 100 percent of the shares in the company for SEK 69 M including acquisition costs. The goodwill item in connection with the acquisition of B. Wahlströms, pertain to the value of cost synergies. The above acquisition affected Group revenues by SEK 8 M and the consolidated income statement with a loss of SEK 7 M during the month of June. An amount of SEK 6 M of this is due to restructuring costs related to the acquisition. If B. Wahlströms had been acquired at January 1, 2006, the Group s revenues would have amounted to SEK 342 M and the profit for the period to SEK 384 M. The assets and liabilities included in the acquired company are the following: SEKM Accounting value at the time of acquisition *) Value according to acquisition value Brands - 23 Customer relations - 1 Shares in associated companies 1 2 Inventory Short-term liabilities Cash and cash equivalents 1 1 Deferred tax liability 0-7 Long-term liabilities Short-term liabilities Net acquired assets Goodwill 39 Purchase price for shares in subsidiary 66 Acquisition costs 3 Total acquisition cost 69 Total acquisition cost 69 Cash and cash equivalents in acquired subsidiary -1 Payment of loan in subsidiary 13 Change in Group cash and cash equivalents at acquisition 81 *) Accounted for in Wahlströms with applications of Hakon Invest s principles. Interim Report, January June

15 On July 3, 2006 Hakon Invest finalized the acquisition of 50 percent of the shares in home electronics chain Kjell & Company in accordance with the agreement signed and made public on May 24, The work with the acquisition analysis for Kjell & Company has started and will be presented in Hakon Invest s interim report for the third quarter of Stockholm, August 14, 2006 Board of Directors For further information, contact President Claes-Göran Sylvén Financial information report dates Interim report for January September 2006 will be released on Monday, November 6, CFO Göran Hesseborn SVP Corporate Communications Anders Hallgren Head of IR Pernilla Linger Interim Report, January June

16 Appendix Holdings ICA AB ICA Group revenues during the first six months 2006 amounted to SEK 32,530 M (31,637) an increase of 2.8 percent. Operating profit amounted to SEK 1,245 M (661), an increase of 88.4 percent compared with the yearearlier period. Operating profit for the period January June 2006 amounted to SEK 997 M (576). ICA Group revenues for the second quarter 2006 amounted to SEK 16,999 M (16,409) an increase of 3.6 percent. Operating profit amounted to SEK 684 M (373), an increase of 83.4 percent compared with the yearearlier period. Operating profit for the second quarter of 2006 amounted to SEK 532 M (325). Ownership interest ICA AB is a joint venture owned 40 percent by Hakon Invest and 60 percent by the Dutch company Royal Ahold. Through the shareholder agreement between Hakon Invest and Ahold, the owners have a joint determining influence in ICA AB, which requires unanimity for all decisions made by the Annual General Meeting and the Board of Directors. Operations The ICA Group is one of the Nordic Region s largest retail companies, with a focus on food and convenience products, and has about 2,200 own and retailer-owned stores in Sweden and Norway. Through Ahold, ICA AB is part of an international retailing network. For more information, visit Market The Nordic retail market for consumer goods has been characterized by increasingly fierce competition in recent years, both in the form of new players and through intensified marketing price reductions from established players. The positive trend that characterized 2005, since ICA AB implemented the first price reductions in March 2005, has continued during Sales show favorable growth in Sweden, both in comparable stores and as a result of new establishments. Sales in the Swedish ICA stores increased by 9.1 percent during the second quarter and 7.1 percent during the first six months. The large increase during the second quarter is due partly to the fact that Easter fell in April this year and March last year. However even taking this into account, the increase is better than the total market. Interim Report, January June

17 % Jan Feb 2005 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 2006 Industry ICA Mar Apr May Jun Figure 1. Sales trend for convenience stores in Sweden during Source: ICA-nyheter ICA store sales 2 The price offensive launched last year has strengthened the performance of the Swedish ICA-stores, which continues to increase their sale at a pace faster than the market. Particularly the smaller stores in the Supermarket and Nära profiles, have gained more customers and increased sales volumes Jan Feb 2005 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 2006 Mar Apr May Jun Maxi Kvant um Supermarket Nära ICA Figure 2. Sales trend for ICA s Swedish profiles, Source: ICA News 2 Reporting relates to the stores sales to consumers (in-store sales). For Sweden, this means that the Swedish retailer-owned stores are included. For Norway, the franchised stores sales are included. Sales in the retailer-owned and franchised stores are not consolidated in the Group. The information given is based on the practice in each country. This means that the Swedish sales figures include VAT, while the Norwegian figures are exclusive of VAT. Interim Report, January June

18 Store sales, Sweden SEK M April - June 2006 January - June 2006 Change, all stores, % Change, comparable stores, % SEK M Change, all stores, % Change, comparable stores, % Maxi ICA Stormarknad 5, , ICA Kvantum 5, , ICA Supermarket 7, , ICA Nära 3, , Total 21, , Table 1: Store sales in Sweden, including VAT Development and sales of private label products (PLP) are important for increasing competitiveness and profitability. The share of PLPs sold by stores in Sweden rose from 14 percent for the first six months 2005 to 17 percent for the corresponding period in In Norway, modernization of ICA s store structure is in progress and is beginning to have an effect. Overall store sales declined by 1.0 percent during the second quarter compared with the corresponding period the preceding year. That implies a lower rate of decrease in the Norwegian stores than during the first quarter this year when the decrease was 2.1 percent and the forth quarter 2005 with a decrease of as much as 11.3 percent. During the second quarter this year some formats started showing a growth, for example ICA Maxi and ICA Supermarked. Efforts to modernize the store structure and clarify the format strategies for ICA and Rimi stores in Norway are continuing in Store sales, Norway April - June 2006 January - June 2006 Change, comparable stores % Change, comparable stores % NOK M Change, all stores % NOK M Change, all stores % ICA Maxi , ICA Supermarked 1, , ICA Nær 1, , Rimi 2, , Total 4, , Table 2: Store sales in Norway, excluding VAT The share of PLP sales in Norway rose from 6 percent for the first six months 2005 to 9 percent for the corresponding period Interim Report, January June

19 Number of stores In Sweden there is an increase in the number of the large ICA MAXI Stormarknad and a closing of several small ICA Nära stores. In Norway the change in store structure has been concentrated on smaller stores, but focus will also be on larger stores. Sweden Change Store profile December 2005 New Converted Closed June 2006 Maxi ICA Stormarknad ICA Kvantum ICA Supermarket ICA Nära Total 1, ,408 Norway Change Store profile December 2005 New Rebranded Closed June 2006 ICA Maxi ICA Supermarked ICA Nær Rimi Total Table 3. Stores in Sweden and Norway Interim Report, January June

20 Significant events during the period ICA AB s Board of Directors decided on February 21 to sell ICA Meny. On June 16 an agreement was reached on the sale of ICA Meny to Nordic Capital. The sale results in a capital gain for ICA AB of approximately SEK 360 M. Both parties are awaiting the approval of the European Commission before the deal can be finalized and the capital gain booked. On May 2, ICA Fastigheter sold a portfolio of 25 store properties in western and southern of Sweden to ING Real Estate. The purchase price of the portfolio amounts to SEK 870 M. ICA s operating income in the second quarter ultimately increased by SEK 89 M. On May 22, ICA Fastigheter sold a distribution property in Helsingborg to Kundvagnen Holding AB. The purchase price amounted to SEK 946 M. At the same time ICA signed a long-term lease agreement with the buyer. Possession for the buyer will take place on October 1. The sale will result in a capital gain of approximately SEK 300 M, which will affect ICA AB's results for the fourth quarter in Group Revenues and profit January 1 June 30, 2006 The ICA Group s revenues during the first six months of 2006 amounted to SEK 32,530 M (31,637), an increase of 2.8 percent. ICA Sverige s revenues increased by 2.6 percent and ICA Norge s by 0.6 percent. However the revenues expressed in local currency decreased by 4.1 percent. ICA Banken s business volume rose by 18 percent and revenues by 127 percent. Operating profit for the first six months of 2006 increased by SEK 584 M, or 88 percent, to SEK 1,245 M (661). ICA Sverige s earnings improvement was due to enhanced market positions and the fact that operating profit during the first six months of 2005 was adversely affected by expenses for marketing and preparations for the price campaign that began in March Increased sales of PLPs made a positive contribution to the earnings trend. Capital gains from sales of real estate have increased with SEK 97 M to SEK 106 M. ICA Norge s improved earnings were primarily due to capital gains from property sales, which, after deductions for impairments, amounted to SEK 91 M (4), while diminished sales volume and cost for modernization of stores have negatively affected the period. ICA Banken s operating result improved sharply as a result of increased business volumes, and ICA Banken is now close to a positive operating result. ICA Group Functions (previously named ICA AB) is showing a weaker operating result due to new principles for cost allocations within the Group, as an effect of building a common Nordic organization. Revenues in Rimi Baltic during the first six months of 2006 amounted to SEK 4,216 M, up 20.2 percent. ICA AB s participation in Rimi Baltic s results amounted to SEK -29 M. The comparable result for the year-earlier period was SEK -20 M. The decline in earnings is largely attributable to costs for the high rate of establishment of new stores. Revenues in Netto Marknad during the first six months amounted to SEK 1,175 M, an increase of 19.4 percent. ICA AB s participation in Netto Marknad s results has improved slightly to SEK 36 M (-38) Interim Report, January June

21 compared with the first six months ICA Meny increased revenue by 19.3 percent to SEK 3,291 M, but since the company is being sold these numbers are not included in ICA AB s revenues. The increase in revenues resulted in a major improvement (SEK 20 M) in its operating profit. April 1 June 30, 2006 The ICA Group s revenues during the second quarter of 2006 amounted to SEK 16,999 M (16,409), an increase of 3.6 percent. ICA Sverige s revenues increased by 3.7 percent and ICA Norge s by 0.7 percent. In local currency the revenues decreased by 3.2 percent. ICA Banken s revenues were up 116 percent. Operating profit for the second quarter of 2006 increased by SEK 311 M, or 83 percent, to SEK 684 M (373). ICA Sverige s earnings improvement was due to improved market positions and the fact that operating profit during the second quarter of 2005 was adversely affected by expenses for marketing and price cuts. Increased sales of PLPs made a positive contribution to the earnings trend, as did capital gains from the sale of real estate SEK 99 M (6). ICA Norge s diminished profit is attributable to decreased sales and cost for modernization of stores. Increased business volumes sharply improved ICA Banken s operating profit and ICA Banken is now close to a positive operating result. ICA Group Functions is showing a weaker operating result due to new principles for cost allocations within the Group, as an effect of building a common Nordic organization. Revenues in Rimi Baltic during the second quarter of 2006 amounted to SEK 2,222 M, up 20.0 percent. ICA AB s participation in Rimi Baltic s results amounted to SEK -16 M. The comparable result for the year-earlier period was SEK -12 M. The decline in earnings is largely attributable to the high rate of establishment of new stores in the Baltic. Revenues in Netto Marknad during the first second quarter amounted to SEK 625 M, an increase of 23.1 percent. ICA AB s participation in Netto Marknad s results has increased slightly to SEK -16 M (-18). ICA Meny increased revenues by 20.4 percent to SEK 1,731 M. Financial position Cash flow from operating activities during the first six months of 2006 amounted to SEK 2,059 M (764). Cash flow from investing activities, including capital gains from property sales, during the period amounted to SEK -446 M (-931). Cash flow from financing activities amounted to SEK -1,362 M (158). The Group s cash and cash equivalents total SEK 3,190 M (3,235). The equity/assets ratio was 26.9 percent (23.4). The Group s net debt, excluding ICA Banken, was SEK M (6.883). Interim Report, January June

22 Investments ICA Group investments during the first six months of 2006 amounted to SEK 1,306 M (1,246), distributed as shown in the table below: April June January - June Full-year SEK M Retail location ,515 Under construction Investment properties Distribution Intangible fixed assets Other Total ,306 1,246 2,547 Table 4. ICA Group s investments by category Personnel The ICA Group had an average of 11,744 employees (11,550) during the first six months of Interim Report, January June

23 The ICA Group s condensed income statement April - June January - June Full-year SEK M Revenues 16,999 16,409 32,530 31,637 65,885 Cost of goods sold -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 income Share of associated companies' net profit Operating profit , ,947 Net financial items Profit after financial items , ,674 Tax Profit for the period, continued operations ,525 Profit for the period, discontinued operations 1) Profit for the period ,523 Of which, attributable to Parent Company's shareholders ,536 Of which, attributable to minority Revenues by segment April - June January - June Full-year SEK M 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 Intra-Group sales Revenues, continuing operations 16,999 16,409 32,530 31,637 65,885 Revenues, discontinued operations 1) 1,731 1,438 3,291 2,759 5,778 Revenues, incl discontinued operations 18,730 17,847 35,821 34,396 71,663 1) Refers to net sales and operating income from ICA Meny Interim Report, January June

24 Operating profit by segment April - June January - June Full-year SEK M ICA Sverige , ,607 ICA Norge ICA Baltic ICA Danmark ICA Banken ICA Group Functions Operating profit, continuing operations , ,947 Operating profit, discontinued operations 1) Operating profit, incl discontinued operations , ,958 1) Refers to net sales and operating income from ICA Meny The ICA Group s condensed balance sheet June 30, Dec 31, SEK M ASSETS Fixed assets 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 Current assets Inventory 2,952 3,085 3,228 Accounts receivable 5,373 5,646 6,591 Cash and cash equivalents 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 EQUITY AND LIABILITIES 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 tied to assets held for sale TOTAL EQUITY AND LIABILITIES 32,682 31,651 32,731 Interim Report, January June

25 The ICA Group s condensed cash-flow statement January - June Full-year SEK M 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 Cash and cash equivalents at January 1 2,920 3,198 3,198 Exchange differences in cash and cash equivalents Cash and cash equivalents at the end of the 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 flow from ICA Meny Interim Report, January June