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
2
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
4
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
6
Pharmacy Market
Q1 2019
Apotek Hjärtat
Highlights
7
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%
8
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)
9
• 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
10
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
11
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
12
Financials
13
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
14
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
15
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
21
−
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
24
Outlook and Summary
25
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
26
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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