Interim Report, Axfood AB (publ.) for the period 1 January-30 June 2002

Interim Report, Axfood AB (publ.) for the period 1 January - 30 June 2002 · Consolidated sales amounted to SEK 16,197 m (15,738), an increase of 2.9%. · Operating profit increased by slightly more than 30% compared with the same period a year ago, to SEK 450 m (338). The Willys chain, Dagab and Axfood Närlivs made the strongest earnings contributions. · Profit after net financial items increased by SEK 122 m, to SEK 395 m (273). · Profit for the period includes a net capital gain of SEK 25 m on sales of real estate. · The new Willys Hemma discount concept opened 36 units during the period. Key figures Jan.-June April-June Jan.-Dec. Mkr 2002 2001 2002 2001 2001 Net sales 16,197 15,738 8,207 8,143 32,428 Operating profit before 709 575 345 313 1,171 depreciation Operating profit1 450 338 216 193 653 Operating margin, % 2.8% 2.1% 2.6% 2.3% 2.0% Profit after financial 395 273 190 162 527 items Profit after tax 260 177 130 106 328 Earnings per share, m SEK 4.88 3.33 2.44 1.99 6.16 Equity ratio, % 19.2% 16.2% - - 17.0% Return on capital 21.2% 11.8% - - 17.3% employed, % Return on shareholders' 34.6% 18.1% - - 31.8% equity after tax,% Net asset value per share 24.86 19.73 - - 22.70 1. Operating profit for the year includes a net capital gain of SEK 25 m on sales of real estate. CEO's comments The Axfood Group's operations during the first half of 2002 were characterised by a strong earnings trend. Willys, Dagab, Axfood Närlivs and Spar Finland are showing the best development. The Willys chain is increasing its market share, and the intensive debate during the spring on lower food prices in Sweden has led to greater awareness of the chain and contributed to its favourable development. We see that consumers are increasingly turning to discount alternatives. Accordingly, Axfood has complemented its discount offering through the launch of Willys Hemma. This concept, which is entirely new for the Swedish market, consists of small stores in residential areas. Willys Hemma has established 36 stores in a short period of time. Our wholly owned stores are steadily increasing the portion of their purchasing from Dagab, giving us opportunities for continued streamlining of the product assortment. This can lead to further improvements in Dagab's efficiency. Spar Finland improved its category management and purchasing during the first half of the year, resulting in a considerable earnings improvement. Hemköp's work on reversing its volume and earnings trend continues. A new pricing strategy and new business hours in the chain's test regions are showing improved sales and earnings. The forecast for the Group's earnings in 2002, entailing an improvement compared with 2001, remains. Mats Jansson President and CEO Important events during the first half of the year · The new Willys Hemma chain opened 36 stores. · Axfood's sales of private label products increased, accounting for 6.3% of total sales at the half-year mark. The increase can be attributed to the successful introduction of the Willys brand. · The changeover of Dagab's distribution has been completed in large part, leading to efficiency improvements. The changeover will be fully completed by the fourth quarter. Market trend Volume growth for Sweden's retail food sector during the first half of 2002 is estimated at 2.1%. Retail food prices in Sweden rose 4.4%. In Finland, volume growth was 2.1% for the period January-May. Sales and earnings of the Axfood Group Consolidated wholesale and retail sales for the Axfood Group for the period 1 January - 30 June amounted to SEK 16,197 m (15,738), an increase of 2.9%. Sales for retail operations owned by Axfood in Sweden increased by 10.4%. The Axfood Group's sales in Sweden during the first half (in own and collaborating stores), including VAT, amounted to SEK 17,126 m (17,107), an increase of 0.1%. Operating profit for the period amounted to SEK 450 m (338). The operating margin was 2.8% (2.1%). Operating profit included a net capital gain of SEK 25 m on sales of real estate. Net financial items amounted to SEK -55 m (-65). Profit after financial items was SEK 395 m (273). The margin after financial items was 2.4% (1.7%). Store operations The Axfood Group's store operations are conducted via the wholly owned retail chains Hemköp, Willys and Willys Hemma. The Group collaborates with independent grocers via the Spar and Tempo franchise concepts. Vivo Stockholm is run via a separate economic association. The grocers in this chain are customers of Axfood's wholesaling operation. The Vivo brand is owned by Axfood. Hemköp Hemköp's work on improving the efficiency of its store operations and enhancing its customer offering continues. Development work is in progress at Hemköp on improving the chain's large stores. The first pilot store will be opening during the third quarter. Hemköp streamlined its work processes during the first half of the year, resulting in approximately 300 fewer full-time employees. Sales during the first half amounted to SEK 3,132 m (3,210). Same-store sales decreased by 2.6%. Operating profit (EBIT) was SEK 62 m (73). The operating margin for the period was 2.0% (2.3%). During the period, five stores were converted to other concepts in the Group, five were closed, and one was acquired. Hemköp now has 97 stores. Willys Willys is Axfood's chain of large discount stores. The chain comprises 65 stores, of which 27 are still working under the Exet/Matex brand. Conversion of these stores to Willys and the establishment of a homogenous Willys chain is proceeding according to plan. Sales during the period for wholly owned stores amounted to SEK 3,963 m (3,184). The increase for same stores was 8.7%. Profit (EBIT) totalled SEK 142 m (115). The operating margin was 3.6% (3.6%). During the first half three stores were converted from other concepts within the Group, three were closed, two were acquired, and one new store was established. Willys Hemma Willys Hemma is Axfood's discount chain in the neighbourhood store segment. Willys Hemma was launched in February and had 36 stores at the end of the first half. The chain's launch is proceeding according to plan. During the start-up period, earnings have been charged with conversion costs of slightly more than SEK 10 m. Sales for Willys Hemma amounted to SEK 512 m (494) during the period, an increase of 3.6%. A loss (EBIT) of SEK -12 m (+10) was reported for the period. The operating margin was negative (+2.0%). During the first half 29 stores were converted from the HP chain, two were converted from other concepts within the Group, and five were acquired. Axfood Franchise Axfood's collaboration with independent grocers is coordinated in Axfood Franchise and the two store concepts Spar and Tempo. The Spar chain comprised 126 stores at the end of the second quarter. Axfood Franchise is reported under joint-Group items. Profit (EBIT) for the period was SEK 12 m (13). Change of store structure - Group-owned stores in Sweden, second quarter 2002 Sales/ Conversions Dec. '01 Acquisitions closures to/from June '02 Hemköp 106 1 -5 -5 97 Willys 62 3 -3 3 65 Willys Hemma 29 5 - 2 36 Spar Finland 77 4 -3 - 78 Spar 1 - - - 1 275 277 Axfood Partihandel (wholesaling) Axfood's wholesaling operations (Dagab and Axfood Närlivs) posted sales of SEK 9,925 m (8,877) during the first half. Dagab's sales during the period amounted to SEK 8,598 m (7,057). The sales increase is partly due to higher invoicing of directly distributed products during the first half, to SEK 1,801 m (918), and partly to a higher portion of purchasing from Dagab by Axfood's wholly owned stores. Dagab's profit (EBIT) amounted to SEK 131 m (107). The operating margin was 1.5% (1.5%). The changeover of distribution initiated during the first quarter has now been completed in essential respects and is expected to yield annual savings of SEK 20 m starting in 2003. From having been previously chain- steered, distribution is now geographically-steered. Axfood Närlivs, with customers in the convenience store segment, grew its sales by 4.1% during the first half of the year, to SEK 2,301 m (2,210). Profit (EBIT) was SEK 42 m (32). The operating margin was 1.8% (1.4%). Spar Finland Spar Finland Abp consists of 78 wholly owned stores and 227 collaborating stores. The Spar Group has an approximate 9% share of the Finnish retail food market. Spar Finland's work on systematising purchasing and the product range in its stores has led to significant earnings improvements. The chain has also focused on reducing shrinkage in the stores. A price increase effected during the first quarter has also contributed to the earnings improvement. Sales during the first half amounted to SEK 2,748 m (2,760), and profit (EBIT) was SEK 20 m (0). The operating margin for the period was 0.7% (0.0%). Capital expenditures Capital expenditures during the first half amounted to SEK 224 m. Of these, investments in fixed assets in the wholesaling operations and in the store network in Sweden accounted for SEK 190 m, and investments in fixed assets by Spar Finland for SEK 34 m. In addition, shares in subsidiaries were acquired for SEK 14 m. During the period, Axfood sold real estate, which made net contribution of SEK 25 m to earnings. At the end of the period, Axfood Fastigheter's real estate portfolio had a book value of SEK 484 m. Financial position Cash flow from continuing operations amounted to SEK 594 m (500) during the first half. Lending by Handelskredit decreased by SEK 79 m and amounted to SEK 270 m (445) at the end of the period. The Group's liquid assets totalled SEK 392 m (282). Interest-bearing assets amounted to SEK 636 m (694) at the end of the period. Interest-bearing net debt decreased by SEK 531 m, to SEK 1,412 m (1,943) at the end of the period. The debt-equity ratio, net, was 1 (1.6) at the end of the period. The equity ratio was 19.2% (16.2%). Employees The Axfood Group had 8,082 (8,625) full-time employees at the end of the second quarter. The number of employees in the Hemköp chain has decreased by approximately 300 full-time positions. Of the Group's total workforce, slightly more than 5,000 employees worked in stores. Parent Company Other operating revenue for the Parent Company amounted to SEK 15 m (13) during the period. After administrative expenses of SEK 42 m and net financial items of SEK -13 m, profit after financial items was SEK -40 m (-36). Capital expenditures totalled SEK 1 m (-). Accounting principles The Group applies the accounting recommendations that took effect on 1 January 2002. In other respects, the same accounting principles and calculation methods used in the 2001 Annual Report have been applied. The next reporting date will be 23 October 2002. Stockholm, 1 August 2002 Axfood AB (publ.) The Board of Directors 34 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/08/01/20020801BIT00260/wkr0001.doc The full report http://www.waymaker.net/bitonline/2002/08/01/20020801BIT00260/wkr0002.pdf The full report