Quarterly Report, Axfood AB (publ.)

Quarterly Report, Axfood AB (publ.) For the period January 1 - March 31, 2001 · Consolidated sales totaled SEK 7,595 m (7,081), an increase of 7 percent. · Operating income amounted to SEK 145 m (11). Income adjusted for items affecting comparability totaled SEK 145 m (45). · Income after financial items amounted to SEK 111 m (-14). Adjusted for items affecting comparability, income after financial items totaled SEK 111 m (20). · The wholly owned store chains Hemköp and Axfood Lågpris showed a significant improvement during the first quarter compared with the fourth quarter. The Hemköp chain is showing a positive trend in volume and income. During the period Axfood Lågpris had good volume growth, leading to an improvement in operating income. · The wholesale operations are showing stronger earnings, as Dagab's and Axfood Närlivs' efficiency improvement measures are now beginning to generate results. · Spar Finland showed an earnings improvement during the first quarter. An ambitious cost-cutting program, the start of restructuring of the store structure and higher volumes are generating better earnings. · An agreement was reached with some 170 private merchants concerning franchising contracts for the Spar brand. The agreement pertains to Vivo merchants outside Stockholm. · SEK m 1st quarter pro forma 1) 2001 2000 Sales 7,595 7,081 Operating income before depreciation 262 113 Operating income 145 11 Operating margin, percent 1.9% 0.2% Operating income before items affecting 145 45 comparability Income after financial items 111 -14 Income after financial items, before items affecting comparability 111 20 Income after tax 71 -19 Earnings per share, SEK 1.05 - Equity ratio, percent 15.3% - Return on capital employed, percent 7.4% - Return on shareholders' equity, percent 14.8% - CEO's comments "The first quarter results indicate a recovery in Axfood's core businesses. Although much of the work on change that was begun in autumn 2000 with respect to coordination within the store chains is still being carried out, we can see that the structural program started during the autumn has had an effect on costs within the Group. Although the coordination gains within the Axfood Group have not yet been realized, the trend is headed in the right direction. "The trend for our wholly owned store chains is favorable. The Hemköp chain is showing a slight growth in volume and improved earnings. Volume growth at Axfood Lågpris was strong during the period, and we are continuing our work on coordinating our store concepts to form a nationwide store chain. The conclusion of negotiations with Vivo merchants outside the greater Stockholm area represents significant progress in our brand strategy. "The trend for our wholesale operation is also very pleasing. Disciplined cost controls, efficiency improvement within the organization, and - most of all - an improved level of service have contributed to higher volumes and better profitability." Mats Jansson Market development The trend for the retail sector remained positive during the first quarter of 2001, according to data released by the Swedish Research Institute of Trade (HUI). Volume growth was 2 percent, with strong volume growth of 4 percent during the month of March. Sales and earnings of the Axfood Group Consolidated sales of the Axfood Group, including Spar Finland Abp, amounted to SEK 7,595 m (7,081) during the period. The Axfood Group's sales in Sweden (in own and collaborating stores) amounted to SEK 7,893 m, including VAT, an increase of 1.8 percent in volume, or 2.5 percent in current prices, compared with the preceding year. During the first quarter, sales via own stores totaled SEK 3.7 bn, including VAT, an increase of 13.6 percent in volume and 14.5 percent in current prices, compared with the corresponding period a year ago. Operating income for the period amounted to SEK 145 m (11). The operating margin was 1.9 percent (0.2). The operating margin before items affecting comparability and goodwill amounted to 2.3 percent (1.0). Net financial items amounted to SEK -34 m (-25). Income after financial items thus totaled SEK 111 m (-14). The margin after financial items was 1.5 percent (neg.). Store operations The store operations are today conducted through wholly owned chain concepts (Hemköp, Axfood Lågpris and Axfood Direkt) and via franchising, in which collaboration is extended to private merchants in established store concepts (Vivo, Spar and Tempo). Hemköp is the Group's most well-known brand, with 107 stores nationwide. The concept emphasizes the environment, health and quality, and is based on breadth and depth in the product assortment, especially of fresh products. Hemköp, which experienced a slight drop in profitability in 2000, showed a recovery during the first quarter of the year. An enhanced store and marketing program was a contributing factor to the improvement. Sales during the period totaled SEK 1,596 m (1,602). Operating income before goodwill (EBITG) amounted to SEK 40 m (43), and the operating margin for the period was 2.5 percent (2.7). Growth and chain operations are Hemköp's chief success factors in 2001. A thorough review has been conducted of all stores in the chain, leading to clearer control of category and product range matters, among other things. During the period, one store was added to the Hemköp chain and two stores were converted to Axfood Lågpris units. Axfood Lågpris is the market leader in Sweden's discount segment. Business is conducted under three brands targeted at consumers: Willys, Matex/Exet and HP Billigt & Nära, with a total of approximately 86 stores that will be coordinated under a single brand. In 2000 Axfood Lågpris experienced strong growth through a number of acquisitions and new store openings. Axfood Lågpris collaborates with a number of private merchants - 29 stores in all - through franchising agreements. During the first quarter, four stores were converted to Axfood Lågpris units and three stores were closed. The trend during the first quarter was positive, with strong growth in volume. The rise in sales is attributable to the opening of new units and to a positive trend for newly converted stores. Sales during the first quarter by wholly owned stores totaled SEK 1,705 m (1,245). Income for the period (EBITG) amounted to SEK 63 m (27), and the operating margin was 3.7 percent (2.2). In 2001 work is being focused on continued development of the Group-wide discount concept, which will be tested in a number of pilot stores. Axfood Direkt conducts the Group's e-commerce business targeted at consumers and is the market leader in online food sales in Sweden. Axfood offers three online shopping sites. The hemkop.nu site, launched on April 25, serves the Stockholm area. Consumers in Gothenburg are served by the willys.nu and billhalls.se online food stores. The launch of hemkop.nu marks the introduction by the Group of a new, joint-Group IT platform which will cover all the Group's e-commerce activities within a few months' time. The platform has been designed to improve operating efficiency and reduce development costs over time. Axfood's e-commerce operation is a market leader in Sweden. Sales during the first quarter totaled SEK 22 m (21). Income (EBITG) amounted to SEK -8 m (-6). Axfood Franchise collaborates with private merchants in Sweden through three concepts: Vivo, Spar and Tempo. The approximately 500 stores in this segment are customers of Axfood's wholesale operation. During the first quarter, an agreement was reached with some 170 Vivo merchants outside the greater Stockholm area concerning a changeover from the Vivo to the Spar concept. The agreement covers purchasing, category and product range control, marketing and operational support. Of the more than 170 stores, about half will be converting in 2001 - with some 20 converting before the summer. The stores have total sales of approximately SEK 6 bn. Axfood Franchise is reported under joint-Group items. Income (EBITG) for the period amounted to SEK 6 m (2). Axfood Partihandel (wholesaling) - Sweden Axfood's wholesaling operation consists of Dagab, which supplies goods to Axfood's wholly owned chains and to collaborating merchants, and Axfood Närlivs, which supplies goods to convenience stores and service stations. Axfood Närlivs also has a cash-and-carry operation in which restaurant and store owners can make purchases themselves and pay in cash. The wholesaling operation showed a positive trend during the first quarter. This is mainly the effect of the restructuring and efficiency- improvement measures carried out during the second half of 2000 at both of the wholesale units. The positive volume trend in the discount chain is contributing to greater volumes for Dagab, leading to an earnings improvement. Despite greater competition, Axfood Närlivs increased its volume through an agreement with the Preem service station chain, among other things. Axfood Närlivs also supplies goods to the OK and Shell service station chains. Axfood's wholesale operation had sales of SEK 4,222 m. (3,930) during the first quarter of the year. Income (EBITG) amounted to SEK 64 m (27), and the operating margin was 1.5 per cent (0.7). Spar Finland Axfood's long-term strategy is to expand in the Nordic region and establish a strong market position in each country. Today the subsidiary Spar Finland Abp, with approximately 9 percent of the market, represents the first step in the implementation of this strategy. Axfood owns 40 percent of the shares and 66 percent of the votes in the company. Spar Finland has a jointly owned wholesale operation and a store network comprising 325 stores, of which 88 are wholly owned. Spar Finland experienced a negative trend in 2000 and posted major losses. During the fourth quarter the company's new management launched an action plan to break the negative trend. A strong focus on cost savings and restructuring of the store structure from five to two concepts - Spar and Eurospar - were the two most important measures taken. The first quarter of 2001 showed a positive trend. Costs have decreased considerably at the same time that a slight growth in volume was noted. Sales during the period amounted to SEK 1,303 m (1,186), and income (EBITG) totaled SEK -2 m (-12). Capital expenditures Capital expenditures during the first quarter of 2001 amounted to SEK 106 m. Of these, investments in fixed assets in the wholesaling and the store network in Sweden accounted for SEK 84 m, and investments in fixed assets by Spar Finland accounted for SEK 22 m. Financial position Cash flow from continuing operations amounted to SEK 141 m. The Group's liquidity amounted to SEK 216 m. Interest-bearing assets amounted to SEK 682 m (756 as per Dec. 31, 2000). Interest-bearing net debt amounted to SEK 2,163 m (2,211 as per Dec. 31, 2000). The equity ratio was 15.3 percent (13.7 as per Dec. 31, 2000), while the debt-equity ratio, net, was 1.9 (2.1 as per Dec. 31, 2000). Employees The Axfood Group had an average of 8,221 full-year employees during the first three months of the year (8,146 as per Dec. 31, 2000). The next reporting date will be Thursday, August 9. Stockholm, Sweden, May 3, 2001 Axfood AB (publ.) The Board of Directors Pro forma figures for Hemköp, D&D Dagligvaror, Spar i Sverige, Spar Inn Snabbgross and Spar Finland. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/03/20010503BIT00710/bit0002.doc The full report http://www.bit.se/bitonline/2001/05/03/20010503BIT00710/bit0002.pdf The full report