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Sok-Corporation SOK-CORPORATION Interim Report 1 January – 30 June 2019 Development of the operating Financial development environment SOK’s operations The overall development of the Finnish national economy and that SOK is the parent company of SOK Corporation. In accordance of private consumption, in particular, has a considerable effect on with its statutes, SOK serves as the central organisation of the result of SOK Corporation and the entire S Group. Consumer S Group, promoting and developing the operations of the coop- confidence in personal finances has decreased due to the trade war, erative enterprises and other organisations belonging to S Group, Brexit and weaker economic growth. Employment has remained and managing and supervising the Group’s overall resources for at a good level, even though its growth rate seems to have peaked. maximum efficiency while also monitoring operations and seeing A good employment rate would facilitate private consumption if to the interests of S Group and its segments. consumers regained confidence. A resolution of the trade war and SOK is responsible for S Group’s overall strategic management. measures implemented by central banks play a decisive role in Its tasks are to provide S Group companies with chain manage- resum-ing economic growth. ment, co-op membership and marketing services, as well as other Finland’s GDP grew by 1.7% in 2018, which was less than group and corporate services and development activities related expected. The forecast for 2019 is 1.5%, and slightly higher for to these services and other activities of S Group. Services central 2020. Global economic growth has peaked, which is reflected in to S Group’s operations also include procurement and assortment a decrease in investments in the Finnish economy. services. Through its subsidiaries, SOK offers a wide spectrum of services S Group’s performance 1 January – 30 June 2019 to its co-op members in S Group. Furthermore, through its S Group comprises the cooperatives and SOK with its subsidi- subsidiaries, SOK engages in the supermarket trade and travel aries. S Group’s retail sales excluding taxes in January–June were industry and hospitality business in Estonia and St Petersburg. EUR 5,665 million, showing an increase of 1.0% year-on-year. SOK Corporation’s financial development 1 January +/- % – 30 June 2019 S Group’s retail sales excluding taxes EUR previous SOK Corporation’s net sales in January–June 2019 were EUR by business area million year 3,644.7 million, showing an increase of 1.7% year-on-year. Supermarket trade total* 3,991 +0.8 SOK Corporation’s operating profit was EUR 44.0 million (EUR Hardware trade 71 +0.9 16.7 million). The improvement is mainly due to the good performance of SOK Corporation’s companies and more efficient Service station store and fuel sales 833 +1.3 operations. Foreign operations accounted for EUR 4.3% (4.8%) of Department stores and speciality stores 134 -3.5 net sales, or EUR 157 million. Travel industry and hospitality business* 398 +3.0 The following key indicators describe SOK Corporation’s Automotive trade and accessories 220 +1.8 financial position and result. Agricultural trade 9 -23.7 SOK Corporation 30 June 30 June 30 June Others 9 +31.5 2019 2018 2017 S Group total* 5,665 +1.0 Net sales, EUR million 3,644.7 3,581 3,449 *Including retail sales in neighbouring areas (Estonia and Operating profit/loss, EUR 44.0 16.7 -5.2 St Petersburg) million Operating profit, % 1.2 0.5 -0.2 At the end of June, S Group had 1,841 outlets (1,836 on 30 June 2018). Return on equity, % 4.4 2.4 -0.7 On 30 June 2019, there were 20 regional cooperatives and six Equity ratio, % 21.6 37.9 36.9 local cooper-atives. In January–June, a total of 34,782 new members joined the cooperatives participating in the Bonus system. The total number of co-op members was 2,407,987 at the end of June. Co-op members were paid EUR 164 million in Bonus rewards. 2 SOK Corporation Interim Report 1 January – 30 June 2019 SOK Corporation’s operating result Funding The operating result is used to monitor the result of the operative The adoption of IFRS 16 on 1 January 2019 increased the Group’s business after financial items excluding non-recurring items and interestbearing liabilities considerably. Changes were therefore IFRS items. The improvement in the operating result is mainly made to the calculation formulas for the financial covenants for due to more efficient supermarket trade, the stronger result of the SOK Corporation’s financing agreements during the first half of travel industry and hospitality business, and overall operational the year. The equity ratio without lease liabilities and the ratio of development. EBITDA to net interest expense are used as financial covenants in all financial facility agreements. In addition, the maximum 30 June 30 June 30 June amount of lease liabilities is limited. SOK Corporation 2019 2018 2017 SOK Corporation’s financial situation has remained good Operating result, throughout the first half of the year. SOK Corporation’s interest- EUR million 28.8 19.6 10.5 bearing net liabilities amounted to EUR 1,078.7 million at the end of June (EUR 87.4 million), and its gearing was 177.7% (13.9%). SOK Corporation’s equity ratio was 21.6% (37.8%). SOK Corporation’s operating revenue and At the end of June, SOK Corporation’s liquid assets amounted operating result by business area (segment) to EUR 145.7 million (EUR 159.1 million). In addition, the SOK Corporation’s operating revenue and operating result are Group had EUR 100.0 million in unused longterm committed divided into retail and wholesale business areas in accordance with credit facilities (EUR 100.0 million) and EUR 57.0 million in operational monitoring. In addition, the operating result of the unused account limits (EUR 57.0 million). banking operations is under operational monitoring. The operating result differs from the official IFRS operating result, Investments and divestments with the difference being equal to the non-recurring items and SOK Corporation’s non-current asset procurement, or invest- IFRS items. ments in fixed assets, amounted to EUR 29.4 million in the first half of the year (EUR 70.9 million). The most significant invest- Operating ments were related to the acquisition of property companies, the Net sales, Change, result, Change, renovation of stores and the development of IT systems. EUR EUR EUR EUR Sales of non-current assets amounted to EUR 0.7 million in million million million million the review period (EUR 21.6 million). Supermarket trade 134.1 -10 .5 -2.5 +2.6 Travel industry and Personnel hospitality business 132.4 +4.4 +11.9 -0.2 SOK Corporation’s average number of personnel in full-time Procurement and equivalents was 5,625 in January–June 2019 (January–June 2018: service business 3,434.8 +117.4 +9.3 +2.5 5,492). Real estate business 42.5 +0.5 +9.4 -0.3 At the end of June, SOK Corporation’s personnel numbered Result from banking +4.7 +2.4 6,669, of whom 1,643 (25%) were employed by SOK and 5,026 (75%) by its subsidiaries. At the end of the review period, a total Elimination for the retail and wholesale of 2,111 people (32%) of the Corporation’s personnel worked and other items -101.0 -47.7 -5.8 +1.5 abroad. SOK Corporation, total 3,642.8 +63.3 +27.0 +8.6 Compared with the end of the previous year, SOK Corpora- tion’s number of personnel increased by 472 (7.6%). Compared with the corresponding period in the previous year, the number of personnel increased by 83 (1.3%). 3 SOK Corporation Interim Report 1 January – 30 June 2019 Development of business areas Net sales from the procurement and service business totalled EUR 3,433.8 million, increasing slightly from the previous year. The operating result of the procurement and service business was Supermarket trade EUR 8.4 million, which was better than in the previous year. The supermarket trade includes the business operations in Estonia In the first half of 2019, investments by the procurement and and Russia. In Estonia, there are five Prisma stores in Tallinn, two service business totalled EUR 14 million The investments stores in Tartu and one in Narva. In St Petersburg, there are 14 consisted mainly of information sys-tem investments. Prisma stores. The newest opened in July. Net sales from the supermarket trade were EUR 134 million. Real estate business Net sales decreased by 7% year-on-year, mainly due to the discon- Net sales from the real estate business consist of rental and prop- tinuation of units in St Petersburg. The operating result of the erty service income from properties owned by SOK Corporation. supermarket trade was at a considerably better level than in the Net sales from the real estate business were EUR 43 million, previous year. Investments by the supermarket trade totalled EUR representing a decrease of 2% year-on-year. The operating result 1.8 million and were mostly equipment replacement investments. of the real estate business was positive and remained at the previous year’s level. In the first half of 2019, investments by the Travel industry and hospitality business real estate business totalled EUR 6 million. SOK Corporation’s travel industry and hospitality business is conducted by Sokotel Oy in Finland, AS Sokotel in Estonia, and Development of associated companies and joint OOO Sokotel in Russia.
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