Annual Report 2017
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Annual report 2017 ANNUAL REPORT 2017 CONTENTS Key figures for the Helsinki Cooperative Society Elanto Group 4 CEO’s review 5 Report by the Board of Directors 6 Financial Statements 31 December 2017 13 Notes to the Financial Statements 17 Disposal of retained earnings 36 Auditor’s Report 37 Statement of the Supervisory Board 39 Governance 40 Governing bodies 41 3 KEY FIGURES FOR THE HELSINKI COOPERATIVE ELANTO GROUP 2013–2017 2013 2014 2015 2016 2017 Net sales, EUR million 1 916.4 1 893.9 1 871.4 1 953.8 2 004.4 Operating profit - EUR million 21.7 41.6 90.3 56.2 43.7 - % of net sales 1.1 2.2 4.8 2.9 2.2 Pre-tax profit - EUR million 22.0 35.4 84.9 58.2 50.5 - % of net sales 1.1 1.9 4.5 3.0 2.5 Return on shareholders’ equity % 3.7 5.0 12.2 7.9 6.3 Return on investment capital % 4.2 6.5 15.9 9.9 8.2 Equity ratio, % 61.6 72.6 78.9 76.0 74.6 Gross investments in fixed assets - EUR million 99.0 43.6 34.7 35.5 68.0 - % of net sales 5.2 2.3 1.9 1.8 3.4 Average number of personnel during financial year 6 300 6 058 5 805 5 554 5 537 *) Wages, salaries and remunerations EUR mill. 159.6 159.1 155.5 157.8 161.0 CALCULATION OF KEY FIGURES Return on shareholders’ equity- % = profit after financial items – taxes × 100 equity + minority shareholding, average Return on investment capital- % = pre-tax profit + interest and other finance costs × 100 balance sheet total – loans excl. interest – obligatory provisions, average Equity ratio, % = capital and reserves + minority interest × 100 balance sheet total – prepayments received Gross investment in fixed assets = sum paid for fixed assets The average personnel numbers during the financial period are calculated as the mean value. *) The average personnel numbers exclude the staff of Stockmann Herkku stores (478 persons). In an asset deal on 31 December 2017, HOK-Elanto acquired the business of the Stockmann Herkku stores, and the personnel were transferred to the employment of HOK-Elanto Liiketoiminta Oy as permanent employees. 4 CEO’S REVIEW The cooperative business model continues to attract customers. HOK-Elanto already has more than 617,000 members, with 23,273 joining in 2017. A cooperative is a rewarding company model for its members. The Bonus and payment method benefit it pays bring plain cash direct into their account. In March 2018, we reviewed our Bonus structure in favour of the members: as an example, they are entitled to the full five per cent Bonus by spending EUR 900 a month instead of the former EUR 1,500. HOK-Elanto continued on the growth track in 2017. The Group turnover exceeded two billion euros, growing by 2.6 per cent on the previous year. Obviously, this is based on the general economic growth, but our own actions also play a significant role. We have made long-term investments in developing job satisfaction. The results of the work community survey have improved year by year, and the latest survey shows overall satisfaction at an excellent level. We strongly believe that this is evidenced in the customer experience. Our food price cutting policy has provided our customers with the opportunity of buying high-quality Finnish products at affordable prices. This has brought more customers and sales. Our market share of the grocery business increased by 0.2 per cent to 42.3 per cent in comparable terms. The turnover of the two Sokos department stores and 10 Emotion cosmetics stores grew by 9.1 per cent. Fuels and car washes sold well, and the restaurant business improved its profits. A total of 15 Prisma stores, S Markets and Alepa stores serve customers around the clock. In November and December, the 24/7 chain was bolstered by three more Prisma stores. Our network of stores and restaurants, opening hours, online grocery store and other electronic services are under constant development, paying close attention to customers' wishes. One example is the Korttelitoive chatbot launched in March 2018, where the customer chats in Messenger with the cartoon character Siponen, familiar from Alepa advertising. The largest operation towards the year end and the turn of the year at HOK-Elanto was the acquisition of four Stockmann Herkku outlets and integration of their business as part of the Cooperative Society. We gained about 500 new professionals as colleagues, as well as Greater Helsinki residents as customers who are accustomed to excellent quality and service. I would like to extend my warmest thanks to all HOK-Elanto employees and staff representatives for their excellent work, as well as the whole S Group for good cooperation. We will continue our long-term efforts in developing our network, range, opening times, services and benefits to fulfil our members' changing needs. Helsinki, 27 March 2018 Veli-Matti Liimatainen CEO 5 HELSINKI COOPERATIVE SOCIETY ELANTO ANNUAL REPORT 2017 Helsinki Cooperative Society Elanto, operating in the Greater standards. The acquisition required the approval of the Finnish Helsinki area, is the largest regional cooperative society in Competition and Consumer Authority, which was obtained in S Group. With its members numbering in excess of 600,000, mid-December 2017, and the transaction took place on 31 HOK-Elanto is the company with the largest owner base in December 2017. All the Herkku staff in Finland transferred Finland. The main divisions of the Cooperative Society are the to the employment of HOK-Elanto and S Group as so-called supermarket business, department stores, restaurants, and fuel existing employees, and the Herkku stores continue to operate and car wash business. in all the Stockmann department stores. HOK-Elanto's turnover broke the EUR 2 billion limit. The S Group has initiated collaboration with Nokas CMS Oy strongest growth was in the department store business. HOK- to implement automated cash dispensing (ATM) services in Elanto is the largest private employer in its area, its personnel Finland. The plan is based on the new Financial Supervisory exceeding 6,000 in 2018. Its influence as provider of indirect Authority guidelines issued to banks regarding cash withdrawal employment is also significant. transactions. The new guidelines have opened the automated cash dispenser markets to new operators from the start of OPERATING ENVIRONMENT 2017. They stipulate that the bank must set up a price structure The trend in private consumption plays a crucial role in covering the entire EU for customer cash withdrawals. The the development of S Group's sales. The strong consumer cost to the customer is independent of where or at which ATM confidence in the economy and the positive economic trend the customer withdraws the cash. ¬Cash continues to be an have sustained household consumption and brought about 2.3 important means of payment for the customers, as more than per cent in growth from the year before. As part of general one customer in three still pays in cash at the S Group grocery economic growth, retail sales also grew by 2.2 per cent on the stores. The 74 Nosto ATMs located in HOK-Elanto outlets were previous year. mostly installed in the early autumn. According to the Finnish Grocery Trade Association PTY, the KEY TRENDS IN S GROUP 2017 grocery trade grew by 1.7 per cent (1.0%) whereas the net sales S Group consists of the Cooperative Societies and the SOK of the department stores fell by 0.5 per cent (+1.8%). Consumer Corporation with their subsidiaries. At the close of 2017 there prices increased by 0.5 per cent on the year before (+1.0%). Food were 20 regional Cooperative Societies. prices fell by 0.1 per cent (-1.3%). S Group's retail sales exclusive of tax amounted to EUR The sales value of the licensed restaurants grew in January- 11,273 million in 2017, growing by 2.3 per cent on the previous September by 1.7 per cent (3.9%). The growth arose from food year. At the end of December, S Group had 1,631 outlets (1,633). sales, while alcoholic drinks sales continued to contract. During 2017, 109,584 new members joined the Cooperative The consumption of motor gasoline fell in volume during Societies operating the Bonus system. The total number of the year by 1.9 per cent (-1.1%) while that of diesel oil rose by customer-owner members at the close of the year was 2,355,963. 2.0 per cent (3.5%). The members were paid a total of EUR 334 million in Bonuses. Household confidence in the improving economic situation S Group’s investments totalled EUR 492 million (EUR 510 has increased. The 2017 unemployment rate for the whole coun- mill.). try was 8.6 per cent (8.8%). In Southern Finland, the average unemployment rate rose to 7.7 per cent (7.4%). The total unconsolidated result of S Group before appropri- ations and taxes was a profit of EUR 296 million (EUR 292 mill.). ECONOMIC TRENDS IN GREATER HELSINKI The S Group personnel totalled 36,694 (37,758). The person- Population growth in the Greater Helsinki area continued to nel number of the Cooperative Societies was 30,599 (31,036) be brisk. Preliminary figures put the growth at 19,537 persons and that of the SOK Corporation 6,095 (6,722). (17,634) or 1.4 per cent (1.3%). At the turn of the year, the popu- lation of our trading area was 1,373,729 persons (1,354,192), EVENTS AT HOK-ELANTO IN 2017 or 24.9 per cent (24.6%) of the total population of Finland.