Improved result for S Group through cost reductions - S-ryhmä
Improved result for S Group through cost reductions

Improved result for S Group through cost reductions

Cost reductions implemented within the S Group resulted in an improved January–June result compared to the previous year. Retail sales contributed close to €5.5 billion, which is the same as for the corresponding period last year.

12.8.2014

In January–June 2014, S Group's total profit before extraordinary items and taxes was €122 million, whereas the profit for the corresponding period in 2013 was €61 million.

Through streamlining operations, there was a significant improvement in the result before taxes. In addition to cost reductions, the improved result can be attributed to the merger between S-Bank and LocalTapiola Bank. SOK Corporation's result from continuous operations before taxes was €35.4 million, compared to €13.8 to the negative in 2013.

S Group's operational result was €62.4 million, whereas in the corresponding period in 2013 it was €32.2 million. SOK Corporation's operative result was €1.0 million, compared to €22.1 million to the negative in the previous year.

S Group's result for the whole year is expected to improve somewhat from last year. The result depends, however, on the overall development of the economy.

The Finnish retail trade is currently facing difficulties, which shows as decreased sales. According to forecasts, the negative trend will continue over the next few months.

"Consumers' purchasing power has diminished and will continue to weaken, mainly because of the five-billion euro tax increases implemented during the current government's term in office. Consequently, the trade sector is hoping for the Government to support employment through the domestic market by easing the tax payers' burden", says SOK CEO Taavi Heikkilä.

In January–June 2014, S Group's retail sales (excluding VAT) totalled €5,468 million. Despite the 1.1 per cent decrease of sales, comparable sales reached last year's level with just a slight decrease of 0.1 per cent.

The retail sales of the regional cooperative enterprises also decreased by 0.1 per cent compared to January–June 2013 and totalled €5,071 million. The cooperative enterprises' proportion in S Group's sales was 92.7% and in SOK Corporation's sales, 7.3%.

During the first half of the year, S Group invested €239 million. In the corresponding period 2013, the investments amounted to €351 million.

"For the whole of 2014, the investments will probably be about €100 million euro below last year's figures. Currently, we are focusing the investments on our smaller outlets and on renovating old ones", says Mr Heikkilä.

At the end of June, there were a total of 1,641 outlets. This was seven outlets less than in 2013.

Summary:

S Group's sales and economic development in January–June 2014

The S Group as a whole

  • S Group tax-exclusive retail sales in January–June 2014 were €5,468 million (€5,528 million in 2013).

  • Comparable retail sales decreased by 0.1%.

  • S Group's result (cooperatives + SOK Corporation) before extraordinary items was €122 million (€61 million in 2013).

  • S Group's operational result was €62.4 million, whereas in 2013 it was €32.2 million.

  • Investments totalled €239 million (€351 million in 2013).

  • At the end of June, the number of personnel was 45,943 (46,458 in 2013; the figure includes approximately 5,000 summer employees, but not the trainees in the "Tutustu työelämään ja tienaa" programme)

  • The total number of business locations on 31 June 2014 was 1,646 (1,648 in 2013)

SOK Corporation (SOK + subsidiaries)

  • The revenue of continuous operations was €3,573 million, a decrease of 0.5% compared to 2013.

  • SOK Corporation's result of continues operations before taxes was €35.4 million (€13.8 million to the negative in 2013).

  • SOK Corporation's operational result was 1.0 million, whereas in 2013 it was €22.1 million to the negative.

  • Investments totalled €42.9 million (€69.4 million in 2013).

  • The number of SOK Corporation personnel decreased by 327 people from the corresponding period last year, totalling 9,705 at the end of June.

S Group's retail sales by business area, January–June 2014 (VAT 0%)

1 Jan – 30 June 2014

1 Apr – 30 June 2014

€ million

Change, %

€ million

Change, %

Supermarket trade*

3,820.80

1.2

2,019.1

1.2

Service station store and fuel sales

878.34

-0.8

478.8

1.6

Department store and speciality store trade

151.41

-0.9

74.1

-3.2

Travel industry and hospitality business*

380.96

-1.5

195.5

-3.1

Automotive trade and accessories**

155.79

-34.0

76.0

-34.8

Agricultural trade

75.35

-13.1

46.2

-8.7

Other

5.81

4.2

3.2

3.4

Total

5,468.46

-1.1

2,892.8

-0.8

* Includes the retail sales for neighbouring areas (the Baltic countries and St. Petersburg)

The 34.0 decrease in retail sales is due to the sale and discontinuation of SOK Autokauppa Oy's operations in 2013. Comparable sales increased by 3.7 per cent.

Supermarket trade

S Group's supermarket sales increased by 1.2 per cent in January–June 2014. This figure includes the grocery and consumer goods sales of the Prisma, S-Market, Sale, Alepa, Kodin Terra and S-Rauta stores, as well as the grocery and consumer goods sales at other supermarket trade units.

When considered separately, value of S Group's grocery sales grew by 4.5 per cent, totalling €3,451 million. The consumer goods trade, on the other hand, decreased by 1.4 per cent, totalling €639 million.

Traditionally, a slump in economy affects the sales of consumer durables and consumer goods in particular. The current decrease in consumption, however, has also marred the Finnish grocery trade which has seen its sales decline for eight consecutive quarters.

From the end 2013, the number of supermarket trade business locations increased by five, and the total number at the end of June 2014 was 940.

Service station store and fuel sales

Service station store and fuel trade sales decreased slightly by just less than 1% during the first half of the year. At the end of 2013, there were 236 outlets (438, including all S Group distribution outlets). S Group's service station store and fuel sales are managed by the ABC service station chain.

Department store and speciality store trade

Retail sales in the department stores and speciality stores decreased somewhat, by 0.9 per cent. At the end of June, there were a total of 21 Sokos stores (including the online store) and 35 Emotion stores.

Travel industry and hospitality business

Retail sales by the travel industry and hospitality business decreased by  1.5 per cent. This can be attributed to the decline in the number of Russian tourists, as well as to dwindling sales of wine, spirits and beer on licensed premises.

At the end of June, there were 64 hotels and 260 restaurant locations. All in all, there were 754 restaurant locations, including units located in connection with other units. The tourism and hospitality business chains include Sokos Hotels, Radisson Blu Hotels and several restaurant chains.

Automotive trade and accessories

The 34.0 decrease in retail sales in the automotive trade and accessories is due to the sale and discontinuation of SOK Autokauppa Oy's operations in 2013. Comparable sales increased by 3.7 per cent.

S Group had 37 automotive and accessories trade outlets at the end of June. A total of 11 regional cooperatives still engage in automotive trade in S Group.

Agricultural trade

Sales in agricultural trade decreased by 13.1 per cent. The chains operating in the agricultural trade segment are Agrimarket and Multasormi. The number of agricultural trade outlets fully owned by the S Group totalled 15 at the end of June. Cooperatives engaged in agricultural trade include Etelä-Pohjanmaan Osuuskauppa, Suur-Seudun Osuuskauppa and Kymen Seudun Osuuskauppa.

Neighbouring areas (the Baltic countries and St. Petersburg)

Retail sales in the business operations in Finland's neighbouring countries totalled €292 million, up 7.4 per cent on the corresponding period in the previous year. Grocery trade sales in Finland's neighbouring countries totalled €270 million, up 9.0 per cent. A new Prisma opened in Lithuania in April 2014.

Banking

The most significant event for S-Bank during the first half of 2014 was the combination merger with LocalTapiola Bank. Through the merger, the operations of the old banks were discontinued and a new S-Bank was established. The new bank began its operations on 1 May 2014. S Group's shareholding of the new bank is 75% and the LocalTapiola Group's is 25%. In SOK Corporation's result, €32 million is attributed to the merger.

At the end of June, S-Bank had approximately 2.7 million customers and almost 1.5 million customers had S-Bank's international payment card. The number of active customers is increasing, and S-Bank is growing from its position as the number two bank of the people to become its customers' primary bank.

At the end of June, S-Bank's funds on deposit totalled €4,139.5 million, comprising deposits by private customers to the amount of €3,454.9 million and by corporate customers to the amount of €684.6 million.

Co-op membership

The co-op members, or the members of the cooperative enterprises, are the sole owners of S Group's cooperative enterprises. Co-op membership is S Group's way of conducting its cooperative form of business and producing services and benefits for its co-op members.

The growth in the number of co-op members continued during the beginning of the year. In January–June, 33,156 new members joined the cooperative enterprises participating in the bonus system. At the end of June, there were a total of 2,117,313 co-op members.

Cooperative member purchases from S Group, that is, the Group's bonus sales, was approximately €4.5 billion.

For more information, please contact:

Taavi Heikkilä, CEO, SOK, tel: +358 10 76 80200

Jari Annala, Senior Vice President, CFO, SOK, tel: +358 0 10 76 82040

SOK Corporation's Interim Report is available in its entirety on 28 August

at www.s-kanava.fi

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