report 11 November Per Strömberg, CEO Sven Lindskog, CFO
Good quarter across the Group Stable financial development Improved net sales +5% on a comparable basis Improved EBIT MSEK 149 of which Apotek Hjärtat acquisition contributed with MSEK 58 net Improved EBIT before non-recurring items on a comparable basis +8%, mainly sales driven Events Cash offer to Hemtex shareholders closed ICA Insurance launched per October 1 st General market Food price inflation in Sweden considerably higher than LY, +2.8% in Food inflation in the Baltics below zero, below LY Competitor price initiatives MSEK Change % Net sales 25,517 22,016 15.9 EBIT* 1,321 1,172 12.7 EBIT Margin* 5.2% 5.3% -0.1 pp MSEK 30 000 25 000 20 000 15 000 10 000 5 000 0 2013 Net sales and EBIT margin R12* % 6,0 5,0 4,0 3,0 2,0 1,0 0,0 Net Sales EBIT margin (R12)* 10/11/ 2 * Before non-recurring items
Good retail environment in Sweden GDP development GDP +3.8% (YoY) Swedish households more positive view of own economy than average EU Unemployment Consumer sentiment Market growth Household consumption supported by Historically low interest rate Low inflation (but food inflation close to 3% in ) Higher income Inflation Swedish households less price focused than European peers -11-10 3
Market development ICA stores continue to gain market shares % 6,0 5,0 4,0 3,0 2,0 1,0 0,0 Food retail market increased by 2.9% in ICA s store sales +3.6% in, comparable sales +2.9% Food price inflation continues price effect of +2.8% in vs close to zero one year ago HUI s forecast for the Swedish food retail market in total is +3% -1,0 Food Retail Market ICA ICA, Comparables Inflation 10/11/ 4
Competitive retail market in the Baltics GDP development Unemployment Consumer sentiment GDP (YoY)* Estonia +2.0% Latvia +2.7% Lithuania +1.4% Market drivers Very low inflation, even deflation on food Price an important factor but also local produce Market growth Inflation Share of income* spent on food higher than EU norm Estonia ~21% Latvia ~23% Lithuania ~24% -11-10 5 *Source Eurostat
Market development Higher market share in the Baltics % 10,0 8,0 6,0 4,0 2,0 0,0-2,0 Rimi Baltic Food market +3.2% in Estonia +4.0% Latvia +1.9% Lithuania +3.7% Rimi retail sales +5.8% in - comparable sales +0.3% Strong competition in all countries Food inflation below zero Food Market (EE adj) Rimi comparable retail sales Rimi retail sales Market Inflation 10/11/ 6
Market development Apotek Hjärtat sales growth higher than market % 14,0% 12,0% 10,0% 8,0% Sales growth higher than market growth primarily driven by new pharmacies Apotek Hjärtat +8.6% vs Market growth of 6.0% in 6,0% 4,0% 2,0% 0,0% 2013 Pharmacy Market Apotek Hjärtat 10/11/ 7
Apotek Hjärtat synergies & Apolosophy now at ICA 10/11/ 8
Segmental highlights ICA SWEDEN Continued robust sales development and increased market shares Increased average purchase inflation main driver Stable EBIT margin Now over 100 stores Online RIMI BALTIC Continued good sales development Strong EBIT development 3 new stores in the quarter one per country APOTEK HJÄRTAT Increased market shares Integration continues as planned Synergies in line with target ICA REAL ESTATE ICA Real Estate community initiatives 11 properties in divestment process in Norway Core Norwegian portfolio to be sold in 2016-2017 Divestment of some Swedish properties in ICA BANK Positive business volume development Positive underlying EBIT development despite challenging market conditions ICA Insurance launched PORTFOLIO COMPANIES Hemtex acquisition completed Comparable EBIT improved 10/11/ 9
10 Financials
Strong sales and EBIT MSEK Change % Net Sales 25,517 22,016 15.9 EBIT before non-recurring items 1,321 1,172 12.7 EBIT margin* % 5.2% 5.3% -0.1 pp Cash flow** 624 454 37.4 Earnings per share (SEK)*** 4.83 3.19 51.4 * Before non-recurring-items ** Cash flow from operating activities excl. ICA Bank *** EPS continuing operations Logistics restructuring / start-up costs in MSEK 65 Acquisition and integration cost of Apotek Hjärtat in MSEK 52 EPS included an impairment charge of MSEK 322 in inkclub 10/11/ 11
Sales Improved net sales development in all segments Net sales increased by 16% Comparable sales growth +5% Increased net sales in all segments Higher sales driven primarily by Apotek Hjärtat, Rimi Baltic and ICA Sweden Price development Continued food inflation in Sweden drives sales Food inflation in the Baltic countries below zero MSEK 30 000 25 000 20 000 15 000 10 000 Net sales 5 000 0 2013 10/11/ 12
EBIT Robust earnings Group EBIT before non-recurring items increased by 8%, on a comparable basis Net contribution from Apotek Hjärtat with MSEK 58 EBIT improvement Primarily sales driven Improved gross margins - partly product mix driven Partly off-set by costs related to logistics restructuring and continued store and pharmacy expansion MSEK 1 500 1 200 900 600 300 0 EBIT before non-recurring items and EBIT margin R12 2013 % 5,0 4,0 3,0 2,0 1,0 0,0 EBIT* EBIT margin (R12)* *Before non-recurring items 10/11/ 13
EBIT variance analysis (estimate) MSEK EBIT before non-recurring items 1 172 Sales Volume 190 Margin 103 Logistics restructuring Sweden -65 Store costs -106 Other costs -49 LY profits from divested portfolio companies 17 Acquired EBIT (Apotek Hjärtat) 110 Acquisition and integration related costs -52 EBIT before non-recurring items 1 321 10/11/ 14
ICA Sweden Another solid quarter Store sales growth +3.6%; +0.7pp vs market Particularly good sales in Fruit & Veg, Private Label and Health related products Increased average purchases, mainly inflation driven Good momentum particularly in large formats EBIT improving 3% Gross profit growing, driven by increased sales, but also improved margins if adjusting for logistics restructuring/start-up costs Positive product mix effect Logistics restructuring of MSEK -65 Store network expansion 10/11/ 15 MSEK Change % Net sales 18,356 17,550 4.6 EBIT* 996 970 2.7 EBIT Margin* 5.4% 5.5% -0.1 pp Net sales and EBIT margin R12* MSEK % 19 000 18 000 17 000 16 000 15 000 14 000 2013 *Before non-recurring items Net Sales 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 Increased EBIT despite challenging market Increased net sales by 8.3%, in local currencies +5.7% Store sales up by 5.8%, in comparable stores +0.3% Increased sales across the countries and in most formats EBIT improving 18% In local currencies +14.7% Positive impact from higher sales volume Gross margins improving despite competitor actions putting pressure on prices Store network expansion Salary cost inflation high MSEK Change % Net sales 3,196 2,952 8.3 EBIT* 110 93 18.3 EBIT Margin* 3.4% 3.2% 0.2 pp Net sales and EBIT margin R12* MSEK % 3 500 3 000 2 500 2 000 1 500 1 000 500 0 2013 Net Sales EBIT margin (R12)* 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 10/11/ 16 *Before non-recurring items
Apotek Hjärtat Integration and further expansion Apotek Hjärtat consolidated from 15 January Outperforming market in by 2.6pp reaching a market share of 31.1% Net sales MSEK 3,113 of which MSEK 2,483 acquisition effect Apotek Hjärtat acquisition contributed with MSEK 58, net of integration costs of MSEK 52 (EBIT) Estimated net synergies remain; 70 MSEK from 2016 and 80 MSEK from 2019 Four new pharmacies opened in Divestment of Care and nursing business finalised MSEK Change % Net sales 3,113 524 na EBIT* 85 12 na EBIT Margin* 2.7% 2.3% na *Before non-recurring items 110 85-52 15 12 14 EBIT (Cura) Organic improvement Acquired EBIT Acq. & integration costs 15 EBIT 10/11/ 17
ICA Real Estate Good progress Higher rental income due to Långeberga unit and to new stores Higher EBIT due to rental income, lower operating expenses and higher income from JVs Divestment of Norwegian properties initiated in Divestment of some Swedish properties in MSEK Change % Net sales 600 562 6.8 EBIT* 134 112 19.6 EBIT Margin* 22.3% 19.9% 2.4 pp Net investments Net sales and EBIT margin R12* MSEK 1 100 600 100 172 736 MSEK % 600 25,0 580 20,0 560 15,0-400 - 900-192 -231-331 -329-287 -157 540 520 10,0 5,0-1 400 2013 Net investments 500 2013 Net Sales EBIT margin (R12)* 0,0 10/11/ 18 *Before non-recurring items
ICA Bank Comparable EBIT growth Increased income in from loans and mortgages as well as growing commissions, despite adverse impact from repo rate EBIT excluding non-recurring items below LY, due to credit loss provision release in and costs related to the ramp-up of the ICA Insurance company, operational as from October Significant improvement of cost/income ratio if excluding the Insurance company costs MSEK Change % Net sales 221 207 6.8 EBIT* 48 58-17.2 Business volume 28,110 25,850 8.7 Net sales and EBIT margin R12* MSEK % 220 30,0 200 25,0 180 20,0 160 15,0 140 10,0 120 5,0 100 2013 0,0 10/11/ 19 *Before non-recurring items Net Sales EBIT margin (R12)*
Portfolio companies Improving in Adjusted for divestments of Forma, Kjell & Company, Beauty Planet and Cervera, sales increased by 5% EBIT on comparable basis increased by MSEK 14 Improved margins and cost reductions in inkclub In Hemtex, higher sales volumes and higher costs, but also a positive currency hedge revaluation impact of MSEK 5 vs LY Compulsory redemption of remaining shares in Hemtex in process Numbers adjusted for Forma, Kjell & Company, Beauty Planet and Cervera in all periods MSEK Change % Net sales 380 361 5.2 EBIT* 18 4 350.0 EBIT Margin* 4.7% 1.1% 3.6 pp Net sales and EBIT margin R12* MSEK % 600 500 400 300 200 4,0 2,0 0,0-2,0-4,0 100-6,0 0 2013-8,0 Net Sales EBIT margin (R12)* 10/11/ 20 * Before non-recurring items
Cash-flow slightly up vs last year Operational cash flow improved Cashflow (proforma until 2013) EBITDA growing Less working capital outflow compared to LY Normal seasonal pattern MSEK 2 750 2 250 1 750 2,259 1,916 1,772 1,902 MSEK 6 000 5 000 4 000 1 250 3 000 750 454 624 2 000 250-77 25 1 000-250 2013 Cash flow from operating activities, excl. ICA Bank Cash flow R12 0 10/11/ 21
Net debt / EBITDA ratio up vs last year Early redemption of preference shares in, taking the ratio above targeted max level At the start of, the ratio was in line with target despite Apotek Hjärtat acquisition, as ICA Norway divestment was completed in April Divestment of Norwegian real estate is in progress, to be completed at the latest by 2017 MSEK 16,0 14,0 12,0 10,0 8,0 6,0 4,0 Net debt / Proforma EBITDA 13.6 9.9 9.2 9.1 8.3 7.1 2.3 1.9 2.0 1.7 1.5 1.2 10.8 1.9 14.1 2.5 7,0 6,0 5,0 4,0 3,0 2,0 2,0 1,0 0,0 2013 Net Debt Net Debt/EBITDA 0,0 10/11/ 22
Close to reaching long term targets Target Grow faster than the market Actual R12 (30 Sept ) Sweden Baltics Pharmacy EBIT margin excl. non-recurring items 4.3% 4.5% Return on capital employed* 9.6% 10% Long-term Net debt/ebitda** 2.5x <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. 10/11/ 23
Outlook and key take aways
Outlook ICA SWEDEN Continued robust sales development High project activity Digitalisation, logistics restructuring, IT outsourcing HUI s forecast for the Swedish food retail market in is +3% RIMI BALTIC Continued sales growth in a tough competitive environment Store network expansion Challenging labour market ICA REAL ESTATE Community initiatives to secure long term locations Divestment process of Norwegian properties Divestment of some Swedish properties ICA BANK Insurance company start-up phase Changing business due to changing macro environment Objective to increase income per customer APOTEK HJÄRTAT Integration according to plan Pharmacy rebranding in focus all Cura pharmacies rebranded in Pharmacy network expansion continuing 10/11/ 25
Summary Overall strong sales and EBIT development Improved underlying results in all business segments Integration of Apotek Hjärtat running well and estimated synergies will be captured 10/11/ 26
-11-11 10/11/ 27
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 November 11, 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. 10/11/ 28