Kesko’s year year Kesko’s www.kesko.fi 2007 Business ID 0109862-8 Business Kesko’s year 2007 WorldReginfo - 144ca99f-46a2-45b6-8eb4-4794b080e4d3 Design and layout: Incognito Photos: Kirsi Salovaara Milla Photos of Board Members: Rami Salle liked Kodin Ykkönen Printed by: Libris Oy because of Plussa offers sensible prices moving to study interior decoration trends WorldReginfo - 144ca99f-46a2-45b6-8eb4-4794b080e4d3 Year 2007 Divisions The Group Financial statements Further information 1 Contents Financial Further Year 2007 Divisions The Group statements information 2 Kesko in brief 10 Kesko Food 38 Vision, values and goals 70 Contents 143 Shares and share- 4 Year 2007 in brief 16 Rautakesko 40 Strategic emphases 71 Report by the Board of holders 6 Review by the President 21 VV-Auto 44 Individual customer Directors 150 Information for and CEO 24 Anttila approach -K-Plussa 81 Consolidated financial shareholders 8 Operating environment 27 Kesko Agro 46 Real estate operations statements (IFRS) 151 Information about 31 Other operating 48 Kesko is a good work- 85 Notes to the consolidat- Kesko for investors activities place ed financial statements 152 Contact information Konekesko 51 Competitive advantage 134 Parent’s financial 154 Glossary Intersport Finland from chain operations statements (FAS) Indoor Group and K-retailer Musta Pörssi entrepreneurship Kenkäkesko 52 Corporate responsibility Tähti Optikko in Kesko Kauko-Telko 57 Corporate Governance Statement 66 Board of Directors 68 Corporate Management Board WorldReginfo - 144ca99f-46a2-45b6-8eb4-4794b080e4d3 2 Kesko's year 2007 Kesko in brief Divisions Kesko Agro | Page 27 Kesko Agro operates the K-maatalous and Kesko Food | Page 10 Kesko Agro chains. The company purchases Kesko Food’s retail chains in Finland are and sells animal feed, chemicals and machin- K-citymarket, K-supermarket, K-market and ery to agricultural entrepreneurs and trades K-extra. Kesko Food manages K-food store in grain. Kesko Agro is active in Finland and chains and combines their purchasing power, in all the Baltic countries. Kesko is the leading provider of trading arranges efficient logistics, acquires store sector services and a highly valued sites and guarantees strong marketing and Other operating activities | Page 31 listed company. Through its stores, development support for K-food stores. K-food Konekesko is a service company specialised Kesko offers quality to the daily lives retailers are responsible for delivering the in the import and sale of earthwork and envi- customer promise in their K-stores. All K-food ronmental machinery, trucks and buses, and of consumers. Kesko has about 2,000 stores in Finland are run by K-retailer entre- recreational machinery. Konekesko also sells stores engaged in chain operations in preneurs. Kesko Food’s subsidiary Kespro Ltd forest machinery in the Baltic countries, the Nordic and Baltic countries, Russia offers delivery sales and wholesale services arranges the manufacture of and sells and Belarus. to HoReCa customers. Yamarin boats manufactured in Finland and exports them to other European countries, Rautakesko | Page 16 including Russia. Rautakesko is engaged in the building and home improvement trade through the Sports trade The K-Group’s sports store K-rauta, Rautia, Byggmakker and Senukai chains are Intersport, Budget Sport and Our core competence areas retail chains. Rautakesko operates in Finland, Kesport. ●● Development and management of store Sweden, Norway, the Baltic countries, Russia concepts and brands and Belarus. It manages and develops its Furniture and interior decoration trade ●● Development of store site network retail chains and B-to-B Service sales in its Indoor Group is a retailer of home furniture ●● International retail expertise operating area. Rautakesko is responsible and interior decoration items, which operates ●● Generating sourcing, logistics and sup- for the chains’ concepts, marketing, sourcing in Finland and its neighbouring countries. Its port services for cooperation partners and logistics services, store network and retail chains are Asko and Sotka. ●● Combining retailer entrepreneurship retailer resources. Working in cooperation and chain operations efficiently with its customers, Rautakesko enhances liv- Home technology trade The Musta Pörssi ●● Leveraging centralised resources and ing and aims to be the leading service pro- chain offers home technology products and economies of scale vider in the building and home improvement services. trade in its operating area. Shoe trade The K-Group’s specialist shoe VV-Auto | Page 21 stores are K-kenkä and Andiamo. VV-Auto imports Volkswagen, Audi and Seat passenger cars and Volkswagen commercial Tähti Optikko is a chain of optical stores in vehicles. VV-Auto is also engaged in car retail- Finland. ing and provides after-sales services. Kauko-Telko specialises in international Anttila | Page 24 technical trading in the Nordic countries, the Anttila is the leading home and speciality Baltic countries, Poland, China and Russia. goods retailer in Finland. Anttila serves its customers with two department store con- cepts – the Anttila department stores and the Kodin Ykkönen department stores for interior decoration and home goods – and with the NetAnttila concept focused on distance sales. NetAnttila provides products and services in Finland, Estonia and Latvia. Anttila’s custom- ers value, above all, diversified, up-to-date and low-priced selections, and good service. WorldReginfo - 144ca99f-46a2-45b6-8eb4-4794b080e4d3 Year 2007 Divisions The Group Financial statements Further information 3 having been to K-citymarket the Aaltonen’s recipe for choice was the best offers the broadest selection all under the same roof competitive prices WorldReginfo - 144ca99f-46a2-45b6-8eb4-4794b080e4d3 4 Kesko's year 2007 Year 2007 in brief Sales and profit increased Pirkka magazine revamped considerably The content and appearance of Pirkka, the Kesko’s sales and profit continued to increase K-Group’s customer loyalty magazine, were considerably in 2007. The strong development changed. The first new-look Pirkka magazine of operating profit excluding non-recurring was published in February and was well items continued for the sixth successive year. received by readers. According to the survey Kesko Food and Rautakesko increased their published by the National Media Research profit most. Particularly encouraging was the KMT in September, Pirkka has increased its growth in the sales of K-food stores. Rauta- readership by 60,000 to over 2.5 million read- kesko continued its successful expansion and ers and is the most widely read magazine in achieved strong growth particularly in inter- Finland. Kesko continued its strong national operations. performance in 2007 Investments in new store sites and the ●● Retail sales of the K-Group increased renovation of existing ones were are at a high Recognition for responsible by 9.7% to €11,575.6 million (incl. VAT). level in Finland. 27 new K-food stores were operating practices ●● The Kesko Group’s net sales increased opened, and several stores were refurbished Kesko continues to be one of the top compa- by 9.0% to €9,534 million. or expanded. Investments in the building and nies in the world judged by sustainability ●● Net sales in Finland increased by 6.0% home improvement sector mainly focused on indicators and was again included among to €7,357 million. the development of the international network, ’The Global 100 Most Sustainable Corpora- ●● Net sales outside Finland grew by 20.4% but stores were opened and improved in Fin- tions’ list published by the World Economic to €2,177 million, accounting for 22.8% land, too. Out of the 16 new building and Forum. Furthermore, Kesko was listed for the of the total net sales. home improvement stores opened during the fifth time in the Dow Jones sustainability ●● Operating profit excluding non-recurring year, eleven were outside Finland. The eighth index. In the review for 2007, Kesko’s environ- items increased by €45.3 million to €325.1 K-rauta outlet in St. Petersburg was opened in mental performance was evaluated to be the million. December. Major investments in store sites best in the retailing sector. ●● Kesko Food’s sales grew by 7.7%. will continue over the next few years. ●● Rautakesko’s strong internationalisation continued. Actions promoting a healthier ●● Earnings per share were €2.61 (€2.45). Corporate strategy was specified way of life ●● The market capitalisation of the company In spring, the Board of Directors revised the Kesko started a campaign to promote chil- was €3,692 million (€3,852 million) at the company’s financial targets and specified the dren’s and adolescents’ physical activity in end of the year. strategy. Due to the expanding international cooperation with the Young Finland Associa- ●● A dividend of €1.50 per share was distrib- operations and outlook for business develop- tion. Kesko promised to donate 0.25 cents to uted for the year 2006. The Board of Direc- ment, objectives for return on equity and support children’s and adolescents’ healthy tors proposes to the Annual General Meet- invested capital were raised. The company is way of life every time a customer uses a ing that €1.60 per share be distributed as preparing for sizable store site investments in K-Plussa card in a K-Group store. The total a dividend for 2007. the next few years in all the countries where it sum raised was about €500,000. operates. Strategic emphases include healthy, focused growth, the focus on sales and serv- ices to consumer-customers, and responsible Market capitalisation and cost-efficient operations. The company’s market capitalisation was €3.7 billion, showing a decrease of about €150 mil- lion compared with the end of 2006. The pro- K-Plussa is undergoing a reform portion of foreign owners of the B shares was Kesko and the K-retailers started a thorough about 50% at end of the year. reform of the K-Plussa customer loyalty pro- gramme. The choice of cards became more diversified and the benefits for loyal custom- ers increased.