INTERIM REPORT for the period January 1 March 31, 2006

Transcription

1 ICA AB, corporate identity number INTERIM REPORT for the period January 1 March 31, 2006 Strong start to the year for the ICA Group Stockholm, May 8, 2006 Net sales during the first quarter amounted to SEK 17,091 million (16,549) an increase of 3.3 percent. Operating income for the first quarter rose to SEK 560 million (281). Income after tax rose to SEK 465 million (251). Key financial ratios SEK million January -March Full-year Net sales 17,091 16,549 71,663 Operating income ,958 Income after tax ,523 Total assets 32,071 30,816 32,731 Cash flow from operating activities 990 1,012 2,339 Operating margin, % Equity/assets ratio, % Return on equity, % 1) Return on capital employed, % 2) ) Return on equity excl. ICA Banken = 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. 2) 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 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 stores 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 stores. ICA also offers financial services to Swedish customers through ICA Banken. ICA owns half of the companies Rimi Baltic, with just over 170 stores in the Baltic countries, and Netto Market, with just over 70 stores 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 1

2 Comment by the CEO To date, 2006 has been a very good year for ICA. The positive development that distinguished 2005 has continued during the first three months of the year. Sales are pointing to good growth for comparable stores and thanks to the new stores we have opened during 2005 and We are maintaining a fast pace of expansion right now, and we will remain aggressive during the year with regard to new stores. Sales in our Swedish stores rose by 4.9 percent during the period despite that Easter fell in April this year and in March last year. Compared with the situation a year ago, the positive development is even more apparent. Last year ICA s sales fell in the first quarter, while this year they rose. A number of factors are working together to produce strong financial results. For one thing, we have taken structural measures, including the reorganization we began last year. Also, we have made a number of key strategic choices, such as the price-cutting campaign we initiated just over a year ago. But perhaps the most important reason why ICA is growing and strengthening profitability right now is that we have become even better at the most important thing of all taking care of our customers. ICA s success comes from being able to combine the entrepreneurship of individual retailers with a strong shared organization. The unique way we work has carried us to where we are today. In the last year we have further capitalized on the dynamic energy in our business model. Today our organization is stronger and more efficient than before. For example, the purchasing organization through various measures and increased European purchasing cooperation has achieved significant cost savings, which has strengthened ICA all the way to the customer. With increased Nordic cooperation now being implemented in purchasing and logistics, we are also making it possible for individual retailers to offer exactly what their customers want. Many of the measures taken during the last year have one aim in mind to further encourage retailers to act as entrepreneurs by giving them the right tools. The proof that we are headed in the right direction is that more people are choosing to shop in our stores. Another area where we devoted great energy during the first quarter was the modernization of our Norwegian stores and change in our store structure in Norway. Although parts of the operations in Norway are reporting growth, sales and income as a whole are not in line with our expectations. We have established a fast pace of change and see that our measures are beginning to have an effect. Eventually we expect that the dynamic energy that distinguishes our operations in Sweden will also characterize Norway. During the remainder of 2006 we will continue to work to bolster our model, which gives us a unique position of strength in the Nordic market. In the short term we are focusing on, among other things, new store openings, further strengthening the purchasing organization and cutting prices. ICA stands strong today, and I believe we can strengthen our position even further this year. Important events during the first quarter - Mats Holgerson was appointed the new COO of ICA Meny on February 1. - ICA AB s Board of Directors decided on February 21 that ICA Meny will be sold. - During the period one Maxi ICA Stormarknad (rebranded store), one ICA Supermarket (rebranded store) and three ICA Nära stores (of which two rebranded stores) were opened in Sweden. In Norway, two ICA Nær and one ICA Supermarked (all rebranded stores) were opened. Important events after conclusion of the period - On May 2, ICA Fastigheter AB sold a portfolio of 25 store properties in the west and south of Sweden to ING Real Estate. The purchase price of the portfolio amounts to SEK 870 million. ICA s operating income in 2006 will increase by SEK 80 million. 2

3 ICA Group financial results during the first quarter Consolidated net sales during the first quarter of 2006 amounted to SEK 17,091 million (16,549), an increase of 3.3 percent. ICA Sverige s sales rose by 1.3 percent. Sales for ICA Norge gained 0.6 percent. ICA Meny s sales rose by 18.1 percent, while sales for ICA Banken climbed 139 percent. ICA Banken s business volume rose by 23 percent. Operating income for the first quarter of 2006 rose by SEK 279 million or 99 percent to SEK 560 million (281). The income improvement for ICA Sverige is due to improved market positions and the fact that operating income for the first quarter of the previous year was partly charged with expenses for marketing and preparations for the price-cutting campaign launched in March Higher private label sales have also positively contributed to financial results. Income improvement for ICA Norge is mainly due to capital gains. After deducting write-downs, capital gains amounted to SEK 90 million (-20). The large part is attributable to the sale of a shopping center in Norway. Higher sales for ICA Meny resulted in a major improvement in operating income. Higher business volumes substantially improved ICA Banken s operating result, and it is now closing in on positive operating income. Net sales for Rimi Baltic during the first quarter of 2006 amounted to SEK 1,994 million, an increase of 16.5 percent. ICA s share of Rimi Baltic s profit amounted to SEK 13 million. The comparable result for the first quarter last year was SEK 8 million. The increased loss is largely due to the high rate of new store openings in ICA Baltic. Net sales for Netto Marknad during the first quarter amounted to SEK 550 million, an increase of 15.4 percent. ICA s share of Netto Marknad s profit is unchanged compared with the first quarter of 2005, SEK -20 million. ICA and Rimi store sales during the first quarter The following tables refer to store sales to consumers. In Sweden, this includes sales in Swedish retailer-owned ICA stores. In Norway, franchise store sales are included. Sales for retailer-owned and franchised stores 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. VAT January - March 2006 SEK M Change, all Change, stores comparable stores Maxi ICA Stormarknad 4, % 2.5% ICA Kvantum 5, % 4.3% ICA Supermarket 7, % 2.9% ICA Nära 3, % 2.9% TOTAL 19, % 3.2% During the first quarter ICA store sales in Sweden rose year-to-year. As a whole, sales climbed 4.9 percent. During the first quarter private label sales rose from 14 percent to 18 percent of total sales in Sweden. 3

4 ICA and Rimi store sales in Norway Store sales excl. VAT January - March 2006 NOK M Change, all stores Change, comparable stores ICA Maxi % -0.1% ICA Supermarked % 5.3% ICA Nær 1, % -0.2% Rimi 2, % -4.1% TOTAL 4, % -0.9% During the first quarter store sales in Norway decreased by 2.1 percent. The corresponding figure for the last quarter of 2005 was a decrease of 11.3 percent. The major conversion and modernization work that began in late 2004 is beginning to show results. ICA Supermarked stores are especially performing well, with sales rising by 5.3 percent during the first quarter. This is because a format strategy for ICA Supermarked is now in place and the stores can better meet their customers needs. Efforts to modernize the store structure and clarify the format strategies for ICA and Rimi stores are continuing in During the first quarter private label sales rose from 6 percent till 9 percent of total sales in Norway. Number of stores ICA stores in Sweden, including retailer-owned stores Store profile December 2005 New Converted Closed March 2006 Maxi ICA Stormarknad ICA Kvantum ICA Supermarket ICA Nära TOTAL 1, ,410 ICA and Rimi stores in Norway, including franchised stores Store profile December New Converted Closed March ICA Maxi ICA Supermarked ICA Nær Rimi TOTAL

5 ICA Group sales during the first quarter Net sales by segment SEK million January - March Full-year ICA Sverige 10,939 10,800 46,753 ICA Norge 4,491 4,463 19,039 ICA Baltic ICA Danmark ICA Meny 1,560 1,321 5,778 ICA Banken ICA AB Intra-Group sales TOTAL 17,091 16,549 71,663 Operating income by segment SEK million January - March Full-year ICA Sverige ,607 ICA Norge ICA Baltic ICA Danmark ICA Meny ICA Banken ICA AB TOTAL ,958 Financial position Cash flow from operating activities amounted to SEK 990 million (1,012) during the first quarter of Capital gain from divestment of real estate is included in cash flow from investing activities. The improvement in working capital is lower than last year due to lower increase of deposits in ICA Banken. Cash flow from investing activities amounted to SEK 118 million (-428). Cash flow from financing activities amounted to SEK -847 million (-611). The Group s liquid assets totaled SEK 3,208 million (3,110). The equity/assets ratio was 27.6% (24.2%). The Group's net debt excluding ICA Banken was SEK 5,419 million (7,006). Investments Investments during the first quarter of 2006 amounted to SEK 551 million (491) as showed in the table below: Investments January - March Full-year Retail locations ,515 Under construction Investment properties Distribution Intangibles Other TOTAL ,547 Personnel The Group had an average of 11,475 employees (11,900) during the first quarter. 5

6 Parent Company The Parent Company's net sales amounted to SEK 200 million (47) with income after financial items of SEK -102 million (-74). Investments during the period amounted to SEK 53 million (14). 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 and March 31, 2006 by SEK 13 million. Other new and revised IFRS standards that entered into force on January 1, 2006 have no effect on the ICA Group s income statement, balance sheet, statement of cash flows and shareholders equity. This interim report has not been reviewed by the company s auditors. Next reporting date The interim report for January-June 2006 will be presented on August 15, Stockholm, May 8, 2006 Kenneth Bengtsson President and CEO, ICA AB 6

7 Condensed income statement January March Full-year SEK million Net sales 17,091 16,549 71,663 Cost of sales -14,698-14,589-62,405 Gross profit 2,393 1,960 9,258 Selling and administrative expenses -2,031-1,711-7,734 Other operating revenue Share of associated companies net profit Operating income ,958 Financial income Financial expenses Income after net financial items ,671 Tax 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 January March Full-year ICA Sverige 10,939 10,800 46,753 ICA Norge 4,491 4,463 19,039 ICA Baltic ICA Danmark ICA Meny 1,560 1,321 5,778 ICA Banken ICA AB Intra-Group sales TOTAL 17,091 16,549 71,663 Operating income by segment SEK million January March Full-year ICA Sverige ,607 ICA Norge ICA Baltic ICA Danmark ICA Meny ICA Banken ICA AB TOTAL ,958 7

8 Condensed balance sheet March 31 March 31 Dec. 31 SEK million Intangible fixed assets 1,913 1,869 1,914 Tangible fixed assets 12,479 11,586 12,441 Financial fixed assets 4,853 4,242 4,914 Deferred tax assets Total fixed assets 19,307 17,786 19,318 Inventory 3,008 3,125 3,228 Accounts receivable 6,161 6,014 6,591 Liquid assets 3,208 3,110 2,920 Non-current assets held for sale Total current assets 12,764 13,030 13,413 TOTAL ASSETS 32,071 30,816 32,731 Shareholders equity 8,867 7,452 8,386 Long-term liabilities 7,871 3,139 8,905 Current liabilities 15,333 20,225 15,440 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 32,071 30,816 32,731 Pledged assets Contingent liabilities Condensed statement of cash flows January - March January - March Full-year SEK million Cash flow from operating activities before change in working capital ,696 Change in working capital Cash flow from operating activities 990 1,012 2,339 Cash flow from investing activities ,076 Cash flow from financing activities ,410 Cash flow for the period Liquid assets at beginning of period 2,920 3,198 3,198 Exchange rate differences Liquid assets at end of period 3,208 3,110 2,920 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 Opening shareholders equity after introduction of new accounting principles 8, ,373 Paid to minority owners -9-9 Currency translation difference Net income for the period Closing balance March 31, , ,867 Total 8

9 Change in shareholders equity March 31, 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 Net income for the period Closing balance March 31, , ,452 Total 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 Total 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 March 31 ICA AB s guarantees for Rimi Baltic AB amount to SEK 552 million. Rimi Baltic s condensed balance sheet as of March 31, 2006 is shown below. Rimi Baltic SEK million SEK million Fixed assets 2,045 Shareholders equity 1,272 Other current assets 738 Long-term liabilities 882 Liquid assets 312 Current liabilities 941 Assets 3,095 Shareholders equity and liabilities 3,095 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 Market 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 9