Search

Choose note

2.1 Kesko's divisions
Accounting policies
The Group's reportable segments are composed of the Group's divisions, namely the grocery trade, the building and technical trade, and the car trade.
Division information is reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, responsible for allocating resources to the divisions, has been identified as the Group Management Board. The reportable operating segments derive their net sales from the grocery trade, the building and technical trade, and the car trade. Sales between divisions are charged at prevailing market rates.
The Group Management Board assesses the divisions' performances based on operating profit, comparable operating profit, and comparable return on capital employed. Exceptional transactions outside the ordinary course of business are treated as items affecting comparability and are allocated to the divisions. The Group identifies gains and losses on the disposal of real estate, shares and business operations, impairments and significant restructurings as items affecting comparability. Gains on disposals are presented in the income statement within other operating income, and losses on disposals within other operating expenses. In other respects, the Management Board’s performance monitoring is in full compliance with IFRS reporting. Finance income and costs are not allocated to the divisions as the Group’s cash and cash equivalents and financial liabilities are managed by the Group Treasury. Changes in the fair values of intra-Group foreign exchange forward contracts entered into and realised gains and losses are reported as part of other operating income and expenses to the extent that they hedge the divisions’ foreign exchange risk.
The assets and liabilities of a division's capital employed consist of operating items that can be justifiably allocated to the divisions. The assets of capital employed comprise property, plant and equipment and intangible assets, interests in associates and joint ventures and other investments, pension assets, inventories, trade receivables and other non-interest-bearing receivables, interest-bearing receivables and assets held for sale. The liabilities of capital employed consist of trade payables, the share of other non-interest-bearing liabilities and provisions. The Group’s real estate assets and the revenue and costs generated from them have been allocated to the divisions.
Capital employed does not include deferred tax assets and liabilities, financial assets at fair value through profit or loss except for fair value measurements of foreign exchange forward contracts recognised in the balance sheet, available-for-sale financial assets, cash and cash equivalents, or interest-bearing liabilities.
Revenue recognition policies
Net sales comprise the sale of goods, services and energy. The contribution of the sales of services and energy to total net sales is not significant.
For net sales, sales revenue is adjusted for indirect taxes, sales adjustment items and the exchange differences of foreign-currency-denominated sales. Sales adjustment items include loyalty award credits relating to the K-Plussa customer loyalty programme, which are recognised at fair values as part of sales transactions. Loyalty award credits affect the net sales of those segments which grant K-Plussa customer loyalty credits and are engaged in retailing.
The Group sells products to retailers and other retail dealers in addition to engaging in own retailing. Income from sales of goods is recognised when significant risks, benefits and control relating to the ownership of the goods have been transferred to the buyer, and it is probable that the economic benefits associated with the transaction will flow to the Group. As a rule, income from sales of goods can be recognised at the time of transfer. Sales to retailers and other retail dealers are based on invoicing. Retail sales are mainly in cash or by credit card.
Income from services is recognised after the service has been performed and when a flow of economic benefits associated with the service is probable.
Interest income is recognised on a time apportionment basis using the effective interest method. Dividend income is recognised when the right to receive payment is established.
Grocery trade
The grocery trade comprises the wholesale and B2B trade of groceries in Finland. Kesko's grocery trade operates under the K-retailer business model. There are approximately 1,100 K-food stores operating under the K-retailer business model in Finland. These stores form the K-Citymarket, K-Supermarket and K-Market grocery retail chains. Kesko manages the operations of the chains made up of the stores. Chain operations ensure higher competitiveness and a strong operational basis for K-retailers in terms of purchasing goods, building selections, marketing and price competition. Following the acquisition of Suomen Lähikauppa Oy (K-Market Oy as of 2016), Kesko itself has acted as a retailer in Finland. The conversion of Siwa and Valintatalo stores into K-food stores began in May 2016 and by the end of May 2017, all 409 continuing stores had been converted into K-stores. By the end of 2017, 243 of the converted stores had been transferred to retailers. The transfer of the stores to retailers will be completed by the end of H1 2018. Kespro provides Foodservice (previously HoReCa) and wholesale services in Finland. K-Citymarket's home and speciality goods trade is a retailer of home and speciality goods in Finland. The Russian grocery trade business was disposed of on 30 November 2016.
Building and technical trade
The building and technical trade operates in the wholesale, retail and B2B trade in Finland, Sweden, Norway, the Baltic countries, Poland, Russia and Belarus. In the building and home improvement trade, Kesko is responsible for the chains’ concepts, marketing, purchasing and logistics services and the store site network in all operating countries and for retailer resources in Finland. Kesko itself acts as a retail operator in Sweden, the Baltic countries, Russia and Belarus. The retail store chains are K-Rauta, Byggmakker (Norway), K-Senukai (the Baltic countries) and OMA (Belarus). The building and home improvement stores serve both consumers and business customers. On 1 June 2016, Kesko Corporation acquired Onninen Oy, which specialises in the technical wholesale trade. Onninen is one of the leading suppliers of HEPAC and electrical products and related service providers in the Baltic Sea region and Scandinavia. The group specialises in the B2B trade and has around 150 places of business in Finland, Sweden, Norway, Poland and the Baltic countries.
The speciality goods trade included in the building and technical trade division comprises machinery trade in Finland and the Baltic countries and leisure goods trade in Finland. The leisure goods trade comprises Intersport, Budget Sport and Kookenkä. Of the speciality goods trade businesses, the K-maatalous agricultural business was divested on 1 June 2017, and the Asko and Sotka furniture business and Yamarin boat business and Yamaha representation were divested on 30 June 2017.
Car trade
The car trade comprises the business operations of VV-Auto and AutoCarrera. VV-Auto imports and markets Volkswagen, Audi, Seat and Porsche passenger cars and Volkswagen and MAN commercial vehicles in Finland. VV-Auto also engages in car retailing and provides after-sales services at its own retail outlets. In December 2016, VV-Auto Group acquired Oy Autocarrera Ab and as a result, the import and retailing of Porsche transferred to Kesko's car trade.
Common functions
Common functions comprise Group support functions.
Kesko's divisions 2017
Profit
€ million Grocery trade Building and technical trade Car trade Common functions Total
Division net sales 5,282.0 4,486.0 909.4 32.9 10,710.3
of which intersegment sales -6.7 -2.6 -0.6 -24.5 -34.4
Net sales from external customers 5,275.2 4,483.4 908.8 8.4 10,675.9
Change in net sales in local currency excluding acquisitions and disposals, % 2.4 1.1 1.0 -3.4 1.8
Change in net sales, % 0.9 9.4 7.1 -68.5 4.9
Other division income 546.0 235.7 4.2 10.5 796.4
of which intersegment income -4.2 -1.9 0.0 0.5 -5.6
Other operating income from external customers 541.7 233.8 4.2 11.1 790.9
Depreciation and amortisation -62.7 -49.3 -9.4 -17.7 -139.2
Impairment -0.0 -14.5 -14.5
Operating profit 181.3 154.7 33.1 -44.5 324.6
Items affecting comparability -22.1 58.9 -8.9 27.9
Comparable operating profit 203.4 95.8 33.1 -35.6 296.7
Finance income and costs 1.5
Investments accounted for using the equity method 1.6
Profit before tax 327.6
Assets and liabilities
€ million Grocery trade Building and technical trade Car trade Common operations Elimi-
nations
Total
Property, plant, equipment and intangible assets 903.8 602.3 93.4 71.5 -1.6 1,669.3
Interests in associates and joint ventures and other investments 7.7 10.4 0.0 123.0 -0.6 140.5
Pension assets 40.6 16.2 150.6 207.5
Inventories 219.6 552.7 166.4 938.6
Trade receivables 344.3 447.0 44.7 7.7 -7.6 836.0
Other non-interest-bearing receivables 79.4 105.7 8.7 26.4 -10.1 210.2
Interest-bearing receivables 0.6 0.6 63.0 64.2
Non-current assets classified as held for sale 1.3 0.5 1.8
Assets included in capital employed 1,595.9 1,736.3 313.1 442.8 -20.0 4,068.1
Unallocated items
Deferred tax assets 5.6
Financial assets at fair value through profit or loss 171.0
Available-for-sale financial assets 94.2
Cash and cash equivalents 132.7
Total assets 1,595.9 1,736.3 313.1 442.8 -20.0 4,471.6
Trade payables 509.5 483.5 22.0 13.8 -5.2 1,023.7
Other non-interest-bearing liabilities 242.0 188.5 70.2 54.1 -11.6 543.2
Provisions 11.6 4.7 39.4 1.1 56.7
Liabilities related to assets held for sale 0.1 0.1
Liabilities included in capital employed 763.1 676.8 131.6 69.0 -16.8 1,623.7
Unallocated items
Interest-bearing liabilities 533.9
Other non-interest-bearing liabilities 29.9
Deferred tax liabilities 52.0
Total liabilities 763.1 676.8 131.6 69.0 -16.8 2,239.5
Total capital employed as at 31 December 832.8 1,059.4 181.5 373.8 -3.1 2,444.4
Average capital employed 791.3 1,129.3 154.1 353.7 -1.2 2,427.2
Number of personnel as at 31 December 8,584 14,717 818 864 24,983
Average number of personnel 6,733 13,662 809 872 22,077

Comparable return on capital employed by segment 2017

Capital expenditure by segment 2017

Kesko's divisions 2016
Profit
€ million Grocery trade Building and technical trade Car trade Common functions Total
Division net sales 5,235.6 4,100.3 849.2 123.4 10,308.5
of which intersegment sales -10.1 -11.2 -0.2 -106.7 -128.1
Net sales from external customers 5,225.5 4,089.2 849.0 16.8 10,180.4
Change in net sales in local currency excluding acquisitions and disposals, % -0.2 2.1 13.0 (..) 1.6
Change in net sales, % 12.0 26.2 13.5 (..) 17.3
Other division income 527.2 169.6 4.4 10.8 712.0
of which intersegment income -5.7 -8.8 1.5 -13.0
Other operating income from external customers 521.5 160.8 4.4 12.2 699.0
Depreciation and amortisation -73.0 -48.5 -9.0 -7.1 -137.6
Impairment -0.4 -17.6 -6.0 -24.0
Operating profit 93.0 60.8 28.9 -36.0 146.8
Items affecting comparability -82.9 -37.2 -0.6 -5.5 -126.2
Comparable operating profit 175.9 97.9 29.5 -30.5 272.9
Finance income and costs -1.0
Investments accounted for using the equity method -0.6
Profit before tax 145.2
(..) Change over 100%
Assets and liabilities
€ million Grocery trade Building and technical trade Car trade Common functions Elimi-
nations
Total
Property, plant, equipment and intangible assets 791.5 661.6 95.9 28.9 2.9 1,580.9
Interests in associates and joint ventures and other investments 4.8 1.5 0.0 117.4 -0.6 123.0
Pension assets 40.6 16.2 107.9 164.7
Inventories 233.3 601.4 144.1 -0.0 978.9
Trade receivables 294.5 486.6 51.1 14.8 -15.9 831.2
Other non-interest-bearing receivables 64.7 106.5 9.2 56.3 -15.0 221.6
Interest-bearing receivables 0.8 2.9 0.0 60.8 64.5
Non-current assets classified as held for sale 2.6 42.7 0.5 45.7
Assets included in capital employed 1,432.9 1,919.5 300.3 386.5 -28.7 4,010.5
Unallocated items
Deferred tax assets 5.8
Financial assets at fair value through profit or loss 93.3
Available-for-sale financial assets 156.8
Cash and cash equivalents 141.3
Total assets 1,432.9 1,919.5 300.3 386.5 -28.7 4,407.7
Trade payables 516.9 539.8 21.3 4.5 -13.4 1,069.2
Other non-interest-bearing liabilities 229.6 212.3 76.3 59.5 -15.5 562.2
Provisions 6.1 10.5 37.9 1.4 55.8
Liabilities related to assets held for sale 0.8 0.8
Liabilities included in capital employed 752.6 763.5 135.4 65.4 -28.8 1,688.1
Unallocated items
Interest-bearing liabilities 514.6
Other non-interest-bearing liabilities 30.6
Deferred tax liabilities 48.1
Total liabilities 752.6 763.5 135.4 65.4 -28.8 2,281.3
Total capital employed as at 31 December 680.3 1,156.1 164.8 321.1 0.2 2,322.4
Average capital employed 827.6 1,000.4 123.9 337.8 -2.2 2,287.5
Number of personnel as at 31 December 10,339 15,616 817 885 27,657
Average number of personnel 8,200 12,743 780 752 22,475

Comparable return on capital employed by segment 2016

Capital expenditure by segment 2016

Geographical information
The Group operates in Finland, Sweden, Norway, Estonia, Latvia, Lithuania, Poland, Russia and Belarus. The grocery trade operates in Finland and, until the end of November 2016, in Russia. The building and technical trade operates in Finland, Sweden, Norway, the Baltic countries, Poland, Russia and Belarus, and the car trade operates in Finland.
Net sales, assets, capital expenditure and personnel are presented by location. Other countries include Russia, Belarus and Poland.

Net sales by country

2017
€ million
Finland Other
Nordic countries
Baltic countries Others Eliminations Total
Net sales 8,391 1,047 717 533 -12 10,676
Assets 3,108.9 297.2 289.6 372.4 4,068.1
Capital expenditure 299.2 3.3 21.5 25.8 349.8
Average number of personnel 10,691 1,460 4,793 5,133 22,077
2016
€ million
Finland Other
Nordic countries
Baltic countries Others Eliminations Total
Net sales 8,134 900 662 503 -17 10,180
Assets 3,035.7 332.5 258.9 383.3 4,010.5
Capital expenditure 630.1 3.1 24.7 85.2 743.1
Average number of personnel 10,713 1,327 4,596 5,839 22,475
Net sales are nearly completely derived from sales of goods. The amount derived from sales of services is minor.
Kesko Group does not have income derived from a single customer amounting to more than 10% of Kesko Group’s total income.