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Full Year Report 2007Claes-Göran Sylvén, CEO Hakon Invest
The positive development for the retail sector continued during 2007
• Continued strong development in the Nordic and Baltic markets
• Swedish retail sector increased +6.5% during 2007- Food retail +5.2% - Consumer durables +7.4%
• Slightly weaker ending of the year
• Price pressure within home electronics
• Price increase within a wide range of groceries
• Online shopping continues to take market shares from the traditional retail
Hakon Invest 1 Jan – Dec 31, 2007• A successful year 2007• ICA favourable profitability and growth• ICA Sweden and Rimi Baltic sales increase and satisfactory results• ICA Norway action program show positive signs but long to go until satisfactory results• ICA Banken good progress with increasing customers and the bank of the year• Intensive work with the portfolio companies provides for long term growth and profitability• Acquisition of inkClub in July• Turbulent financial markets
Summary of the Earnings trendJanuary – December 2007
Q4 2007
Q42006
Jan-Dec2007
Jan-Dec2006
Revenues 341 190 1075 660
Operating profit 231 184 768 885
Profit for the period 313 247 1 326 1 054
Earnings/share 1.98 1.53 8.30 6.55
Operations
Hakon Invest
Portfolio companies
Forma Publishing Group, 100%
Kjell & Company, 50%
Hemma, 60%
Cervera, 45%
ICA AB, 40%*
inkClub 50%
*Remaining 60% is owned by the Dutch company Royal Ahold. According to a shareholder agreement both owners have joint control of ICA AB, through an agreed requirement for unanimity at Annual General Meetings and in the Board of Directors.
ICA AB
• Continued strong sales trend• New logistics structure in Sweden
starts to pay off• Intense work with the action program
in Norway • Good sales and profitability trend in
the Baltic countries• ICA Banken growing with profitability• Faulty handling concerning expiry date
setting of meat– Actions to strengthen quality
supervision
ICA Group Jan 1 – Dec 31, 2007
• Net sales SEK 82,326 M (+22.2 %)
• Operating margin 3.2% (3.4%)
• Operating profit SEK 2,602 M (2,297) – of which capital gains and
property impairments SEK 596 M (588)
• Profit for the period SEK 2,166 M (2,034)for continuing operations
Rimi Baltic, with food retail stores in Estonia, Latvia and Lithuania, is consolidated in the ICA Group with effect from January 1 2007. In 2006 Rimi Baltic was a joint venture of which ICA owned 50%.
ICA Group’s operating profit by segment
SEK M Q42007
Q42006
802 716
-214
16
6
-166
358
-98
63
24
-29
762
Jan – Dec 2007
Jan – Dec 2006
ICA Sverige 2,372 2,557
ICA Norge 144 114
Rimi Baltic 92 -12
ICA Banken 83 11ICA GroupFunctions
Totalt
-89
2,602
-373
2,297
Rimi Baltic, with food retail stores in Estonia, Latvia and Lithuania, is consolidated in the ICA Group with effect from January 1 2007. In 2006 Rimi Baltic was a joint venture of which ICA owned 50%.
ICA Group operating margin %2005-2007 quarterly trend
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Qua
rter
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
5
Rol
ling
4 qu
arte
rs
Quarter Rolling 4 quarters
Forma Jan 1 – Dec 31 One of Sweden’s largest media companies
• Revenues SEK 795 M (660)
• Operating profit SEK 30 M (37)
• Acquisition of Damm Förlag and OTW have raised revenues
• Acquisition and integration costs
• Increased competition for consumer magazines
• Stable development for trade magazines
• Relaunch of Icakuriren
• Revenue increased to SEK 345 M (254)
• Operating loss SEK -4 M (+11)
• Investments in continued expansion – 12 new stores in 2007 totals 29 stores
at year end– Move to new warehouse and HQ in
2007– 2 new stores so far during 2008
• New CEO during spring 2008
Kjell & Company Jan 1 – Dec 31A leading home electronics parts retailer
Hemma Jan 1 – Dec 31Sweden’s largest white goods retailer
• Hakon Invest increases ownership from 49% to 60%
• Revenues amounted to SEK 368 M
• Operating loss SEK 30 M
• Restructuring costs and stock impairments charged to operating profit
• New CEO and organisation in place
Cervera Jan 1 – Dec 31 Nationwide glass and porcelain chain
• Revenues amounted to SEK 377 M
• Operating loss SEK 1 M
• Focus on development of concept and assortment during 2007
• Acquisition of Anders Petter in the beginning of the year
• New CEO and management function strengthened
• 20-anniversary celebrated during autumn
Bild inkClub
inkClub Jan 1 – Dec 31 Leader in online sales of ink cartridges
• Hakon Invest completed acquisition of 50% of inkClub in July
• inkClub’s revenues increased to SEK 364 M (342)
• Operating profit SEK 45 M (41)
• Focus on continued expansion– Extended club-tips– Evening time packing for faster delivery– Strengthening of organisation
• New development projects initiated within warehouse/logistics and a new web platform
Market forecast
• Our evaluation of the market development is in general positive
• We predict a continued but slightly softened growth
• Consumer choices and allocations can shift
• High inflation is expected to continue during the first half of 2008
• The Baltic growth will reduce to a more sustainable level
Financial informationGöran Hesseborn, CFO
Income statement
SEK MQ4
2007Q4
2006Jan-Dec
2007Jan-Dec
2006Revenues 341 190 1 075 660
Cost of goods sold -223 -94 -664 -338Gross profit 118 96 411 322Other operating income 11 -2 29 1Selling and administrative expenses -138 -87 -504 -348Share of profits of JV 240 177 832 910Operating profit 231 184 768 885Net financial items 69 90 214 219Profit after financial items 300 274 982 1 104Income tax 13 -27 344 -50Profit for the period 313 247 1 326 1 054Earnings per share 1.98 1.53 8.30 6.55
Holdings Jan – Dec 2007
SEK M ICA Forma Kjell & Co Hemma Cervera inkClub
Revenues 82 326 795 345 368 377
-1
-1
364
EBIT 2 602 30 -4 -30 45Share of profits 830 2 -2 -1 4
Share of profits of JV quarterly and rolling trend 4 quarters 2005 – 2007
0
100
200
300
400
500
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Qua
rter
0
200
400
600
800
1000
Rol
ling
4 qu
arte
rs
Quarter Rolling 4 quarters Ex Meny
SEK M SEK M
Condensed consolidated balance sheet
SEK M Dec 31, 2007 Dec 31, 2006
ASSETS
Non-current assets
Goodwill 279 101
Interests in companies accounted for using the equity method 7,016 5,962
Other non-current assets 341 109
Total non-current assets 7,636 6,172
Current assets
Diverse current assets 451 198
Short-term investments 2,011 2,368
Cash and cash equivalents 281 349
Total current assets 2,743 2,915
Total assets 10,379 9,087
EQUITY AND LIABILITIES
Equity 9,796 8,650
Non-current liabilities 210 212
Current liabilities 373 225
Total equity and liabilities 10,379 9,087
• Financial assets totaled SEK 2,292 M (2,717) at December 31, 2007
• Financial investments under external management amounted to SEK 1,776 M and under own management to SEK 516 M
• Non-current financial liabilities SEK 73 M (16)
• Equity/assets ratio: 94.4% (95.2%)
Financial position
Hedge funds 35% (20)
Fixed-income securities 24 %
(34)
Equities 29 % (33)
Cash and cash equivalents 12 %
(13)
Breakdown of financial investments December 31, 2007
Total value at Dec 31: SEK 2,292 M (2,717)
Net financial items quarterly and rolling 4 quarters 2005 – 2007
-100
-50
0
50
100
150
200
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Qua
rter
-200
-100
0
100
200
300
400
Rolli
ng 4
qua
rters
Quarter Rolling 4 quarters
SEK M SEK M
2005 2006 2007
Profit for the period quarterly trend and rolling 4 quarters 2005 – 2007
0
100
200
300
400
500
600
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Qua
rter
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200
400
600
800
1000
1200
1400
1600
Rol
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4 qu
arte
rs
Quarter Rolling 4 quarters
SEK M SEK M
2005 2006 2007
Hakon Invest – profitability %
0
2
4
6
8
10
12
14
16
18
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
%
Return on captial employed Return on equity
2007 2006Return on capital employed. 10.6 13.2Return on equity 14.5 12.7
2006 20072005
Cash flow statementGroup SEK M Jan – Dec 2007 Jan – Dec 2006
Cash flow from operating activities 633 166
Cash flow from investing activities -204 -17
Cash flow from financing activities -498 -355
Cash flow from the period -69 -206
Cash and cash equivalents at January 1 349 556
Exchange differences in cash and cash equivalents
1 -1
Cash and cash equivalents, closing balance
281 349
Dividend 2007
• The Board proposes a dividend of SEK 6,00 per common share (5.50)
• Dividend ratio 50,4 %
Hakon Invest’s Dividend policy:
- dividend shall normally amount to 50%of the Parent Company’s profit after tax
- aim to have an generous dividend level
Events after 2007
• Hemtex– Acquisition of 12.1 per cent of shares in Hemtex AB during
February – Interesting company and business opportunity– Contribute with retail competence
Share price development 2007
- Share price Dec 31, 2007: SEK 132.50- Share price Dec 31, 2006: SEK 157.00- Share price Feb 19, 2008: SEK 118.00
- Price movement 2007 –15.6%- OMX 30 movement 2007 –5.7 %- Dividend 2007 SEK 6.00 (5.50)