Report on 1998 Operations

Report on 1998 Operations Operations during January 1 - December 31, 1998 ______________________________________________________________________ change compared with preceding year % - Net sales SEK 4,958 m (4,724) 5.0 % - Operating income SEK 160.6 m (178.8) -10.2 % - Income after financial SEK 162.2 m (181.8) -10.8 % items - Operating margin 3.2 % (3.8) - Earnings per share after SEK 4.66 (5.24) full tax - Dividend per share SEK 2.60 (2.60) (proposed) - Highest level of investment in company's history - burden on 1998 income - Foundation laid for continued expansion ______________________________________________________________________ Sales and earnings Hemköp continues to capture new market shares in the Swedish food retail market. Volume growth for the industry as a whole was weak and, according to preliminary industry statistics, amounted to 0.3% for the year. A slight recovery took place during the autumn following a negative trend during the summer. However, Christmas sales were weak for the second year in a row, with a 0.3% drop in volume in December. Hemköp had strong Christmas sales and increased its December volume by 6.3%. Hemköp's net sales rose 5.0 (5.8)% in 1998, to SEK 4,958 (4,724) m, entailing growth in volume of 3.1%. Although the sales increase is mainly attributable to new stores, existing stores also showed a positive development. Operating income totaled SEK 160.6 (178.8) m. The operating margin was 3.2 (3.8) %. Earnings were adversely affected by startup costs for new stores established primarily during the fourth quarter, a major refurbishment program for existing stores and higher payroll costs. Net financial items totaled SEK 1.6 m, compared with SEK 3.0 m a year earlier after which income after financial items totaled SEK 162.2 (181.8) m. The profit margin was 3.3 (3.8) %. Capital expenditures and expansion Capital expenditures rose to SEK 123.5 (65.9) m, the highest in the company's history. Six new stores and a new bakery were established during the year. In addition, ten stores were refurbished, four of which were expanded and thereby gained additional retail space. As a result of the extensive level of investment in existing stores during the year, the Hemköp chain is well- equipped for 1999. New bakeries were established during the year in Halmstad and Eskilstuna, the latter involving the replacement of an existing bakery and a subsequent rise in production capacity. In addition, the bakery in Gothenburg underwent extensive expansion. At year-end 67 (52) of Hemköp's stores could supply bread from Hemköp bakeries. New, computerized checkout systems were installed in 48 stores. These investments amounted to SEK 19 m and will lead to more streamlined and cost effective handling and more efficient purchasing routines. The remaining stores will be furnished with new checkout systems in 1999 and the first half of 2000. The two-year cooperation agreement on store establishment reached with D- gruppen at mid-year ensures the establishment of at least ten new stores with combined annual gross sales of at least SEK 600 m. Three new stores were opened during the autumn within D-gruppen cooperation. An additional two establishments have so far been decided on for 1999. In March a new store will be opened in Västerås, and in Valbo, Hemköp's largest store with approximately 5,500 m2 of retail space and a new large-store profile, will be opened during the spring. The Valbo store will also house a bakery, which will supply about ten of Hemköp's stores with bread. Financial position The Group's liquid assets as per December 31 totaled SEK 215.5 (243.4) m. Net interest-bearing assets amounted to SEK 199.0 (197.4) m. The equity ratio was 34.6 (31.5) %. The debt-equity ratio (interest-bearing liabilities divided by shareholders' equity) was 0.0 (0.2). Number of employees The average number of full-year employees was 2,526 (2,405). The increase is mainly attributable to staff at new stores. Proposed dividend and Annual General Meeting The Board of Directors has decided to propose a dividend of SEK 2.60 (2.60) per share for 1998 to the Annual General Meeting. The Annual General Meeting will be held on May 11, 1999 in Falun. Distribution of the Annual Report is scheduled to take place in mid-April. Falun, February 12, 1999 Hemköpskedjan AB (publ) The Board of Directors ______________________________________________________________________ [REMOVED GRAPHICS] [REMOVED GRAPHICS] [REMOVED GRAPHICS] The charts above show the quarterly trend in sales and operating income for 1998 compared with 1997 and 1996, as well as from 1994-1998. ______________________________________________________________________ [REMOVED GRAPHICS] ______________________________________________________________________________ ______ [REMOVED GRAPHICS] 1) Of which, SEK 16.5 (46.0) m in interest-free liabilities and SEK 579.2 (529.3) m in noninterest-bearing liabilities. ______________________________________________________________________________ ______ [REMOVED GRAPHICS] ______________________________________________________________________ ______________________________________________________________________ [REMOVED GRAPHICS]_____________________________________________________________________ Financial calendar for Hemköpskedjan Interim Report (3 months) April 27, 1999 Annual General Meeting 1999 May 11, 1999 Interim Report (6 months) July 27, 1999 Interim Report (9 months) October 27, 1999 ______________________________________________________________________ ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/12/19990212BIT00940/bit0001.doc http://www.bit.se/bitonline/1999/02/12/19990212BIT00940/bit0002.pdf