Interim report Q1 2019

keep up pace in change process – Reallocation of freed-up resources to our extensive development agenda e.g. e-commerce, personalization, meal solutio...

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Interim report Q1 2019 Press and analyst presentation 3 May 2019 Per Strömberg, CEO Sven Lindskog, CFO

In brief

Solid sales growth in store and online

Good progress on EBIT margin

High activity level across the Group

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Good start to the year – improved profitability • Growth in local currency +2.8%

MSEK

• Easter calendar effect -1.2%

Net sales EBIT EBIT Margin

• EBIT and EBIT margin improvements

Q1 2019 28,098 1,125 4.0%

Q1 2018 Change % 27,181 1,005 3.7%

3.4 11.9 0.3 pp

Events • Organizational changes in ICA Sweden

Net sales and EBIT margin R12

• Announcement of e-commerce warehouse establishment in Gothenburg end of 2020

MSEK 32,000 30,000 28,000 26,000 24,000 22,000 20,000 18,000

AGM • AGM decided on dividend of SEK 11.50/share • New board members, Lennart Evrell and Bo Sandström, elected

%

Q1

Q2

Q3 2018

Net Sales

EBIT margin (R12)

EBIT equals ”EBIT excluding items affecting comparability” on all slides in this presentation. 3

As of January 1, 2019, ICA Gruppen reports in accordance with IFRS 16. 2018 numbers have been recalculated.

4.2

4.2

Q4

Q1 2019 Excl. IFRS 16

ICA SWEDEN

Store sales growth in line with market Store sales and market in Q1

Sales development for ICA stores in Sweden (incl. VAT)

ICA store sales growth of +1.0%, comparable stores +0.7%

%

• Increased number of customers and higher average buy

8.0 6.0

Price and calendar effect +0.8% (price effect +2.6%, calendar effect -1.8%).

4.0

Market growth according to DVI* +0.9% ICA Online sales growth +34% (food online +41%, menu baskets +3%). Market** growth +19%

2.0 0.0 Q1

Q2

Establishments Q1: 1 new store

Q4

2018 Food Retail Market

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Q3 ICA

Q1 2019

ICA, comparables

*DVI=Dagligvarubutiksindex/Food Retail Index which includes grocery sales in stores and online, except Lidl and Netto **DVI online sales

Inflation

RIMI BALTIC

Price driven sales growth, continued store conversions negative impact on market share Store sales and market in Q1

Sales development for Rimi Baltic stores

Rimi store sales +1.5%, comparable sales +3.3%

%

• Estonia comparable +0.5%

8.0

• Latvia comparable +5.1% • Lithuania comparable +2.5% Food inflation +2.2% • Estonia +2.3% • Latvia +3.0% • Lithuania +1.7% Market growth +3.5% •

Estonia +4.6%



Latvia +4.3%



Lithuania +2.4%

Establishments Q1: 1 new store 5

6.0 4.0 2.0 0.0 Q1

Q2

Q3

Q4

2018 Food Retail Market

Rimi

Q1 2019

Rimi, comparables

Inflation

APOTEK HJÄRTAT

Sales development in line with market growth Store sales and market in Q1

Sales development for Apotek Hjärtat pharmacies

Apotek Hjärtat sales growth +5.2%, adjusted growth +3.1% (constant prices prescription drugs)

% 12.0

• Prescription +5.1%

10.0

• OTC +2.2%

8.0

• Traded goods +8.0%

6.0

Market growth of +5.9%. Adjusted +3.0%

4.0

• Prescription +5.5%

2.0

• OTC +2.4%

0.0

• Traded goods +9.8%

Q1

Q2

Q3

Q4

2018 Strong online growth, Apotek Hjärtat +56%, market growth +34% No new pharmacy establishments in Q1

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Pharmacy Market

Q1 2019

Apotek Hjärtat

Highlights

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E-commerce – continued outperformance ICA SWEDEN

APOTEK HJÄRTAT

+34%

+56%

• ICA online sales growth significantly above market •

Sales Q1: 570 MSEK, +34% growth vs market +19%



Online share of sales in active stores >3%



In total ~280 stores selling food online (“Lösplock”)



~60 stores are using the e-commerce warehouse in Stockholm by end of March (~530 for menu baskets)

• +41% Food Online • +3% Menu Baskets

HEMTEX

+34%

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Online sales growth Q1 2019 vs Q1 2018

• Apotek Hjärtat online sales continues to outpace market growth •

+56% vs market +34%



Click & Collect share of sales increasing



Click & Express tested in pilot stores

New sustainability target to reduce food waste by half in 2025 Socially audited suppliers of corporate brands in high-risk countries

Decrease in emissions compared with 2006

-60%

95% Vs. goal of 100% Quality certified suppliers of Notebrands 1. corporate

Rollin 2017)

85% Vs. goal of 90%

Q2 2018 – Q1 2019 (R12)

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• New target within ICA Gruppen to reduce food waste within our operations by half until 2025 • My Climate Goal (“Mitt Klimatmål”) has won an award from Sustainable Brand Index • ICA has been selected by consumers to be the most environmentally friendly brand, “Sveriges grönaste varumärke”, in strategy consultancy firm Differ’s annual survey

ICA Sweden’s new organization to be implemented • Why: – Implement new ways of working, free up resources and recruit new competence to keep up pace in change process – Reallocation of freed-up resources to our extensive development agenda e.g. ecommerce, personalization, meal solutions and AI

• What: – Around 200 existing positions incl. vacancies in ICA Sweden will be removed, and approx. SEK 180 million annual savings will be freed up and re-allocated annually starting H2 2019

• Current status and process: – New organizational structure will be implemented before the summer

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Minutkliniken converted to Min Doktor, rapid expansion pace ahead • Apotek Hjärtat is now taking the next step with Min Doktor • All former Minutkliniken now converted to Min Doktor Kliniken • 13 new Min Doktor Kliniken will be established during 2019, of which 12 next to an ICA Maxi store • ~25,000 visits/month • High customer satisfaction in survey • Strong focus on creating a digiphysical medical customer journey

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ICAx develops new digital service with fast delivery of meal solutions delivered from the local ICA store • New digital service, developed by ICAx, combining fast delivery of meal solutions with ecommerce from the local ICA store • The assortment is decided by the retailer, e.g. pizza, sandwiches, salads, hamburgers or other ready-made meals • Home delivery or pick-up in store • Being tested now in pilot stores

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Financials

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Sales growth held back by Easter – good EBIT progress

Net sales +2.8% in local currency Easter calendar impact -1.2% EBIT improving across most segments partly due to one-offs Cash flow somewhat lower than LY - calendar effects and some slowdown in supply chain financing inflow EPS higher – also improved financial net and slightly lower tax

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MSEK Net Sales EBIT ¹ EBIT margin % Cash flow ² Earnings per share (SEK)

Q1 2019

Q1 2018 Change %

28,098 1,125 4.0% 1,609 4.02

¹ EBIT Q1 2018 includes costs related to the previously planned integration of IKI of 9 MSEK ² Cash flow from operating activities excl. ICA Bank

27,181 1,005 3.7% 1,889 3.28

3.4 11.9 0.3 pp -14.8 22.6

EBIT variance analysis Q1 (estimate)

MSEK EBIT Q1 2018 Sales Volume Margin Store costs Other costs Revised useful lives of fixed assets Acquisition related effects EBIT Q1 2019

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1,005 2 266 -70 -94 14 2 1,125

ICA SWEDEN

Restoring margins, costs up though

Net sales growth +2.2%

MSEK

• Price and wholesale volume

Net sales EBIT EBIT Margin

• Higher buying percentage • Calendar (Easter) impact -1.7% EBIT improvement

16

+

Product mix

+

Price and currency

+

Store divestments (MSEK +20)



Calendar (Easter) impact (MSEK -35)



Logistic costs



Ramp-up of e-commerce warehouse



Project costs – digitalization, IT and reorganization

Q1 2019 19,793 825 4.2%

Q1 2018 Change % 19,358 758 3.9%

2.2 8.9 0.3 pp

RIMI BALTIC

Good EBIT progress, but high cost inflation

Net sales growth in local currency +1.8%, mainly price • Negative Easter calendar impact, -0.7% • Store conversions in Latvia, temporary negative effect Positive EBIT development and margin

17

+

Price/mix effects

+

Improved PL margin and campaign efficiency

+

Last year IKI integration costs



Salary inflation and logistic costs



Conversion of stores in Latvia

MSEK Net sales EBIT ¹ EBIT Margin

Q1 2019

Q1 2018 Change %

3,774 145 3.8%

¹ EBIT Q1 2018 includes costs related to the previously planned integration of IKI MSEK 8

3,548 118 3.3%

6.4 22.9 0.5 pp

APOTEK HJÄRTAT

Sustained EBIT level, high investments in digitalisation

Sales growth +5.9%, higher average buy and increased number of customers • Adjusted sales growth (constant prices prescription drugs) +3.8% • Positive price/mix and higher average price on traded goods • Good volume progress online as well as in comparable pharmacies EBIT margin in line with last year

18

+

Sales growth

+

Price/mix (category)



Investments in e-commerce, digitalization and new pharmacies



Min Doktor EBIT effect MSEK -7

MSEK Net sales EBIT EBIT Margin EBIT margin constant prices prescription drugs, 2.7%

Q1 2019 3,634 96 2.6%

Q1 2018 Change % 3,430 94 2.7%

5.9 2.6 -0.1 pp

ICA REAL ESTATE

Strong EBIT progress, affected by revised depreciations

Net sales slightly higher

MSEK

• Increased volume from acquisitions and other investments

Net sales whereof owned properties Net Yield EBIT EBIT Margin

EBIT level above last year + Increased income from joint ventures and new investments + Revised estimates of the useful life of fixed assets. One-off Q1 MSEK 14 (FY effect approx. MSEK 60) − Operating costs up

Q1 2019

Q1 2018 Change %

676 265 6.6% 109 16.2%

642 245 6.5% 90 14.0%

5.2 8.2 0.1 pp 21.2 2.1 pp

Net Investments

200 -132

-201

- 400

-482

-544 -682

-1 000 Q1

Q2

Q3 2018

19

Q4

Q1 2019

ICA BANK

Continued volume-driven EBIT progress

Strong growth in net income

MSEK

• Customer loans

Net income EBIT Business Volume

• ICA Insurance customer growth continues (~150,000 customers) EBIT improvement

20

+

Volume growth, loans and insurances

+

Net interest, higher repo rate

+

Cost ratios in ICA Insurance



Somewhat higher IT and marketing costs



Higher credit losses



Effect of new card agreement last year, MSEK +12, almost offset by MSEK +10 release of claims provision in ICA Insurance this year

Q1 2019 370 39 47,645

Q1 2018 Change % 322 26 42,648

15.0 46.5 11.7

HEMTEX

EBIT sustained, online growth and planned store closures

Sales below last year

MSEK

• Good growth in online sales

Net sales EBIT EBIT Margin

• Fewer customer visits in stores • Nine stores fewer this year (net) EBIT in line with last year

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Sales volume

+

Cost savings and reduced store operating costs

Q1 2019 213 -20 -9.4%

Q1 2018 Change % 223 -20 -9.0%

-4.3 1.7 -0.3 pp

Robust cash-flow, affected by calendar

Operating cash-flow slightly lower than LY: • EBIT up • Financial net improving • Tax lower

Cash flow (excl. ICA Bank)

MSEK 4,000 3,200

• Negative calendar effects • Less supply chain financing program inflow than LY

2,400 1,600 800 0 Q1

Q2

Q3

Q4

2018 Cash flow from operating activities, excl. ICA Bank 22

Q1 2019

Net debt ratio in line with financial targets

Net debt and net debt ratio, high impact from IFRS16 accounting Net debt ratio 2.2x IRFS16 adds SEK 16.6 billion to net debt as per Q1 2019

Net debt

MSEK 25.0 20.0 15.0 10.0 5.0 0.0 Q1

Q2

Q3

Q4

2018 Net Debt excl. leasing

23

Q1 2019

Leasing

Long term financial targets

Targets

R12 (31 Mar 2019), %

Long-term targets, %

Sweden Baltics Pharmacy

All markets

EBIT margin excl. non-recurring items

4.2

4.5

ROCE2

7.8

7.5

2.2x

<3.0x

66

At least 50

Grow faster than market¹

Net debt/EBITDA3 Dividend (% profit of the year 2018)

The changeover to IFRS 16 impacts EBIT margin, ROCE, Net debt/EBITDA and dividend ratio

1 Swedish

and Baltics growth based on latest definitive market data Q4, 2018 ICA Bank 3 Interest-bearing liabilities excluding pensions and ICA Bank minus cash and cash equivalents in relation to EBITDA, operating income before depreciation and impairment 2 Excluding

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Outlook and Summary

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Outlook ICA Sweden • Implementation of new organization • Cost reductions to enable investments in digitalization and business development • Logistic costs remain a challenge • Continued ramp-up of e-commerce warehouse • 8-10 store openings 2019 with focus on large cities ICA Real Estate • Continue to develop urban places with ICA stores and Apotek Hjärtat as a hub • Impact of revised estimates of the useful life of fixed assets

Rimi Baltic • Tough pricing environment and cost inflation continues

• Investment in online and last mile continues

• DC Riga, intensified phase drives costs

• Strong focus on CRM

• One Brand Strategy in Latvia (29 out of 44 completed)

• Expansion of Min Doktor Kliniken (former Minutkliniken), 13 new clinics

• Launch of e-commerce pilot

• 6-8 new pharmacies in 2019

• 8-10 store openings in 2019

ICA Bank • Bank transformation proceeding – Develop new digital services – Focus on customer loans and corporate loans • ICA Insurance growth focus continues

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Apotek Hjärtat (pharmacy)

Hemtex • Focus on improving sales trend • Optimization of store network and rollout of new concept in 16 more stores • Roll-out of brand Hemtex 24H in ICA stores

In brief

Solid sales growth in store and online

Good progress on EBIT margin

High activity level across the Group

27

2019-05-03

Disclaimer

This information is such that ICA Gruppen AB is obligated to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication May 3 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.

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