Download - Kesko 020615
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KESKO’S NEW
STRATEGY
CFO JUKKA ERLUND
2 June 2015
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KESKO
TODAY
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KEY FIGURES 2014
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Net sales
Operating profit*
Equity ratio
Liquid assets
Return on capital employed*
Book value of real estate
Personnel (FTE)
Shareholders
* excl. non-recurring items
€9,071m
€233m
54.5%
€598m
9.9%
€1.4bn
19,976
39,869
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NET SALES
BY LINE OF BUSINESS
2014
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Machinery trade 3%
Car trade 9%
Agricultural trade 4%
Sports trade 2%
Furniture trade 2%
Building and home improvement trade 25%
Kespro 9%Grocery trade
Russia 1%
Grocery trade
Finland 44%
Grocery trade €4,754m
Home improvement and speciality goods trade €3,000m
Car and machinery trade €1,011m
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NET SALES BY
COUNTRY 2014
Russia 4%
Lithuania 4%
Latvia 1%
Finland 82%
Belarus 1%
Estonia 1%
Sweden 2%
Norway 5%
Over 80% of net sales
comes from Finland
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0
2000
4000
6000
8000
10000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Finland Other countries
NET SALES
6
+5.8%
+11.1%+9.3%
+3.3%
-11.9%+3.9%
+7.8% +2.4%-3.8%
€m
-2.6%
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-100
0
100
200
300
400
500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Operating profit excl. non-recurring items Non-recurring items
OPERATING PROFIT
7
€m
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YEAR-ON-YEAR CHANGE IN FIXED COSTSEXCLUDING NON-RECURRING ITEMS
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10.3%
7.5% 8.0%
1.2%
-4.0% -4.5% -4.0%
-2.0% -1.3%-1.0% -1.6%
-1.9%
-4.4%-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
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RETURN ON CAPITAL EMPLOYEDMOVING 12 MO, EXCL. NON-RECURRING ITEMS
Jukka Erlund
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Group totalHome improvement
and speciality
goods trade
Grocery trade Car and
machinery
trade
%
€1,013m €869m €161m €2,344m
Capital
employed:
21.0
2.3
17.7
10.2
0
5
10
15
20
25
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STRONG FINANCIAL POSITION
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Liquid assets €506m €532m
Interest bearing net debt €41m €25m
Equity ratio 51.5% 53.2%
Gearing 1.9% 1.1%
Q1/2015 Q1/2014
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EARNINGS / SHARE AND DIVIDEND
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2009 2010 2011 2012 2013 2014
2.0
1.5
1.0
0.5
0.0
1.501.65
1.40
1.68
1.20
1.47
1.20
1.84
1.30
1.78
0.90
0.71
Dividend
Earnings / share excl. non-recurring items % Effective dividend yield
3.9% 3.7% 4.6% 4.8% 5.2% 5.0%€
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FINANCIAL TARGETS AND
CAPITAL EXPENDITURE
• Return on capital employed 14%
• Return on equity 12%
• Interest bearing net liabilities / EBITDA < 2.5
• Capital expenditure in 2015–2017 approximately €1 billion
• Excluding possible acquisitions
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Dividend policy: Kesko Corporation distributes at least 50% of its earnings
per share excluding non-recurring items as dividends, taking however the
company's financial position and operating strategy into account.
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OPERATING
ENVIRONMENT
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RETAIL TRADE TRENDS IN OPERATING
COUNTRIES
5/2015 Jukka Erlund
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Source: Eurostat, excl. motor vehicles and fuels
-2
0
2
4
6
8
10
1/2
013
2/2
013
3/2
013
4/2
013
5/2
013
6/2
013
7/2
013
8/2
013
9/2
013
10/2
013
11/2
013
12/2
013
1/2
014
2/2
014
3/2
014
4/2
014
5/2
014
6/2
014
7/2
014
8/2
014
9/2
014
10/2
014
11/2
014
12/2
014
1/2
015
2/2
015
% (
movin
g 1
2 m
o)
Estonia
Lithuania
Norway
Sweden
Latvia
Finland
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FINLAND TURNS SLOWLY
• Weakening of the euro, low energy price and low interest rate level support
economic development
• Political tension in Europe maintains uncertainty and has a negative impact on
the Finnish economy
• Savings in public finances reduce purchasing power – tax reductions may
improve the situation
Decline of purchasing power will level off, but is not expected to improve significantly in
the next few years
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OPPORTUNITIES AND RISKS IN RUSSIA
• Russia is the world’s richest country in terms of
raw material reserves
• Around 150 million consumers whose purchasing
power will improve also in the future
• Russia has 13 metropolitan cities
• As yet, political and financial risks are greater
than normal
• The Russian economy has potential for strong
growth as soon as the political situation is
normalised and the prices of energy and raw
materials rise
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PORTFOLIO STRATEGY
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Grocery trade
• Finland
• Russia
• Kespro, horeca business
Building and home improvement trade
• Europe
Car trade
• Finland
• The Baltic countries, primarily Estonia
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KESKO’S STRATEGIC GROWTH AREAS
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Sports trade
• Finland and Russia
Shoe trade
• Finland
ALL LINES OF BUSINESS WILL BE DEVELOPED
AIMING AT BUSINESS SUCCESS
Furniture trade
• Finland and Estonia
Agricultural trade
• Finland
Machinery trade
• Finland and the Baltic countries
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KEY STRATEGIC OBJECTIVES
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• Turning the market share in the Finnish grocery trade around
• Increasing the building and home improvement trade in Europe
• Strengthening the market leadership in the Finnish passenger car and van trade
• We will operate the retailer business model or Kesko’s own stores when it provides
competitive advantage
• The best customer experience in the trading sector
• One unified Kesko
• Strong brand and identity
• Efficiency
• Managing customer relationships across divisional borders
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GROCERY TRADE
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GROCERY TRADE
2014
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Kespro 17%
Grocery trade
Finland 81%
Grocery trade
Russia 2%Net sales €4,754m
Operating profit €223m
Operating margin 4.7%
ROCE 22.2%
Personnel (FTE) 6,176
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STRATEGIC OBJECTIVES
OF THE GROCERY TRADE IN FINLAND
• Capital expenditure in the K-supermarket and K-market chains will be increased significantly
• The whole neighbourhood store network will be renewed
• Target is 130 new stores and a completely new store concept will be tested on the market
• The whole K-citymarket concept will be renewed
• We will increasingly improve our price competitiveness and price image
• We will increasingly emphasize digitisation at K-food stores
• We will revise the retailer business model
• We will improve the quality and service level
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STRATEGY FOR RUSSIA
• Increasing operations and improving profitability
in the St. Petersburg area
• We will operate actively in the acquisition of plots and store sites
• Our aim is that K-ruoka is the best food store in the St.
Petersburg area in terms of quality and customer experience
• Identifying new growth possibilities in the Moscow area
and possibly in other metropolitan cities in Russia
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WE WILL INCREASE THE
HORECA BUSINESS
• We will seek organic growth through strong international
cooperation, differentiating the selection especially with the help
of private label products
• We will improve service counter efficiency and diversification of
offering by increasing cooperation with K-food stores
• We will examine expansion alternatives in Finland and the
neighbouring areas
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BUILDING AND HOME
IMPROVEMENT TRADE
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HOME IMPROVEMENT AND
SPECIALITY GOODS TRADE
2014
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Sports trade
€186m 6%
Shoe trade
€20m 1%
Furniture trade
€176m 6%
Agricultural trade
€372m 12%
Others
€20m 1%
Building and home improvement trade
Belarus €125m 4%
Building and home improvement trade
Russia €250m 8%
Building and home
improvement trade
Finland
€785m 26%
Building and home
improvement trade
Scandinavia €625m 21%
Building and home improvement trade
Baltics €443m 15%
Net sales €3,000m
Operating profit €63m
Operating margin 2.1%
ROCE 7.9%
Personnel 10,600
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STRATEGIC OBJECTIVES OF
THE BUILDING AND HOME IMPROVEMENT TRADE• In Finland, market position will be strengthened further and profitability will be
improved
• In Scandinavia, improvement of profitability will continue in Sweden and Norway and
then profitable growth will be sought
• In Russia, profitable growth will continue in the St. Petersburg and Moscow areas in
moderation
• Possibilities to increase operations in Russia on a wider scale through both
partnerships and acquisitions will be examined
• In the Baltic countries, Belarus and Eastern Central Europe, the aim is to grow faster
alone or with partners
• Possibilities to expand also elsewhere in Europe will be examined
• In the future, we will aim to offer increasingly extensive services to business and
project customers, in addition to consumer customers
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NEW K-RAUTA EXPRESS CONCEPT
• A concept for locations with large flows of
customers to offer fast and easy shopping
• Satellite store in a shopping centre, city centre
or in connection with a K-citymarket
• Customers will find inspiration, tools and
services for renovation and home improvement
• All tools, small accessories and renovation
projects on the same visit
• Will operate as K-rauta branches
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CAR TRADE
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CAR AND MACHINERY
TRADE 2014
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Konekesko
Baltics €96m 9%
VV-Auto
€756m 75%
Konekesko
Finland €161m 16%Net sales €1,011m
Operating profit €30m
Operating margin 2.9%
ROCE 18.3%
Personnel 1,244
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STRATEGIC OBJECTIVES
OF THE CAR TRADE
• Aiming at an even closer and more extensive cooperation with Volkswagen
Group
• Aiming at even stronger market leadership in the Finnish car trade
• Expanding operations in Estonia and possibly into other Baltic countries as
far as it supports the cooperation with Volkswagen Group and our
operations in Finland
• Digital services based on customer needs
• Konekesko’s business operations will be organised as part of the home
improvement and speciality goods trade
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BEST CUSTOMER
EXPERIENCE
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STRATEGIC OBJECTIVES
FOR IMPROVED CUSTOMER EXPERIENCE
• Corporate identity of Kesko and the K-Group will be revised to be more customer oriented
• Customer loyalty system will be revised to make it even more attractive
• Customers’ shopping, transactions and interaction with the K-Group will bemade easier by offering the best digital services in the sector
• Improving quality in everything we do
• Quality targets will be announced publicly
• Simple customer feedback system will be created
• Received feedback will guide the development of both stores’ and Kesko’soperations
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STRATEGIC OBJECTIVES
FOR MORE EFFICIENT OPERATIONS
• We will operate even more than before as a unified Group across
divisional and organisational borders
• We will create shared processes and functions that support operations:
finance and risk management, HR, communications, legal services,
ICT, customer loyalty system and indirect sourcing
• Improving the competitiveness of business operations through even
more cooperation: logistics, direct sourcing, marketing, store sites and
business development and digital services
• In order to ensure competitiveness and improve profitability the
objective is to achieve cost savings of at least €50 million in fixed costs
by the end of 2016
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FOR SHOPPING TO BE FUN
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