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Note 2. Segment information
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.
Segment 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 operating segments, has been identified as the Group Management Board. The reportable operating segments derive their net sales from the food trade, the building and technical trade, and the car trade. Sales between segments are charged at prevailing market rates.
The Group Management Board assesses the segments' performances based on operating profit, comparable operating profit, and return on capital employed. Exceptional transactions outside the ordinary course of business are treated as items affecting comparability and allocated to the segments. The Group identifies gains and losses on the disposal of real estate, shares and operating activities, impairments and significant costs of discontinuing operations and restructurings as non-recurring items. 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 segments, as the Group’s cash and cash equivalents are managed by the Group Treasury. Changes in the fair values of intra-Group foreign exchange forward contracts entered into are reported as part of other operating income and expenses to the extent that they hedge the segments’ foreign exchange risk.
The assets and liabilities of a segment’s capital employed consist of operating items that can be justifiably allocated to the segments. The assets of capital employed comprise property, plant and equipment and intangible assets, investments accounted for using the equity method 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 segments.
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.
Grocery trade
The grocery trade comprises the wholesale and B2B trade of groceries in Finland. In Finland, Kesko Food operates under the K-retailer business model. The Russian grocery trade business was disposed of on 30 November 2016. Following the acquisition of Suomen Lähikauppa Oy, Kesko Food itself acts as a retailer in Finland. The conversion of Siwas and Valintatalos into K-Markets was begun in May 2016 and by the end of the year, 223 stores had been converted. Suomen Lähikauppa Oy was renamed K-Market Oy in autumn 2016. There are around 900 K-food stores operating under the K-retailer business model. These stores form the K-Citymarket, K-Supermarket and K-Market grocery retail chains. Kesko Food 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. Kesko Food’s subsidiary Kespro Ltd engages in grocery wholesaling in the Finnish hotel, restaurant and catering (HoReCa) business. K-citymarket, home and speciality goods, is a retailer of home and speciality goods in Finland.
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. The Group itself acts as a retail operator in Sweden, the Baltic countries, Russia and Belarus. The retail store chains are K-Rauta, Rautia, Byggmakker (Norway), K-Senukai (the Baltic countries) and OMA (Belarus). The building and home improvement stores serve both consumer and professional customers. On 1 June 2016, Kesko Corporation acquired Onninen Oy which specialises in the B2B trade. Onninen is one of the leading suppliers of HEPAC and electrical products and related service providers. The group specialises in the B2B trade and has around 150 places of business in Finland, Sweden, Norway, Poland, the Baltic countries and Russia. Kesko's business operations in the HEPAC and electrical product groups will expand and it will be able to provide better service to contractor customers in particular.
This reportable segment also includes the agricultural and machinery trade in Finland, the machinery trade in the Baltic countries, the leisure trade in Finland and the furniture trade. The furniture trade chains in Finland and the Baltic countries are Asko and Sotka. Intersport, Budget Sport and Kookenkä are the leisure chains. Intersport engages in the sports equipment trade in Finland. The agricultural and machinery trade comprises the operations of K-maatalous and Konekesko. The machinery trade is a service company specialising in the import and trade of construction, environmental, agricultural and recreational machinery.
Car trade
The car trade comprises the business operations of VV-Auto. VV-Auto imports and markets Volkswagen, Audi and Seat 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 VV-Auto.
Common functions
Common functions comprise Group support functions.
Segment information for 2016
Profit
€ million Grocery trade Building and technical trade Car trade Common functions Total
Segment 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
Other segment 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
Assets and liabilities
€ million Grocery trade Building and technical trade Car trade Common operations Elimi-
nations
Total
Tangible and intangible assets 791.5 661.6 95.9 28.9 2.9 1,580.9
Equity accounted investments 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
Assets 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
Return on capital employed, comparable, % 21.3 9.8 23.8 -9.0 11.9
Capital expenditure 238.1 451.7 41.4 14.9 -3.0 743.1
Number of personnel as at 31 December 10,338 15,630 817 871 27,656
Average number of personnel 8,200 12,744 780 752 22,476
Segment information for 2015
Profit
€ million Grocery trade Building and technical trade Car trade Common operations Total
Segment net sales 4,672.9 3,249.8 747.9 129.4 8,799.9
of which intersegment sales -15.4 -0.6 -0.4 -104.6 -121.0
Net sales from external customers 4,657.5 3,249.1 747.5 24.8 8,678.9
Other segment income 607.9 187.6 4.3 14.7 814.5
of which intersegment income -6.1 -10.0 0.0 2.0 -14.1
Other operating income from external customers 601.9 177.6 4.3 16.7 800.4
Depreciation and amortisation -69.1 -44.6 -8.0 -5.8 -127.6
Impairment -0.0 -9.2 -9.2
Operating profit 249.4 -57.2 26.1 -23.7 194.6
Items affecting comparability 71.9 -120.8 -1.0 -49.9
Comparable operating profit 177.5 63.6 26.1 -22.7 244.5
Finance income and costs -7.1
Investments accounted for using the equity method 0.6
Profit before tax 188.0
Assets and liabilities
€ million Grocery trade Building and technical trade Car trade Common operations Elimi-
nations
Total
Tangible and intangible assets 788.3 523.7 75.7 60.0 2.9 1,450.5
Equity accounted investments and other investments 4.7 0.2 0.0 110.2 -0.6 114.5
Pension assets 40.6 16.3 119.5 176.4
Inventories 211.9 382.3 140.9 -0.0 735.0
Trade receivables 284.5 256.6 43.4 11.3 -14.1 581.7
Other non-interest-bearing receivables 50.5 60.7 4.1 24.2 -21.0 118.5
Interest-bearing receivables 3.8 3.8 0.3 63.1 71.0
Assets held for sale 0.5 0.5
Assets included in capital employed 1,384.3 1,243.5 264.4 388.8 -32.8 3,248.1
Unallocated items
Deferred tax assets 3.9
Financial assets at fair value through profit or loss 374.2
Available-for-sale financial assets 371.7
Cash and cash equivalents 141.2
Total assets 1,384.3 1,243.5 264.4 388.8 -32.8 4,139.3
Trade payables 424.4 355.3 17.4 7.7 -9.8 795.1
Other non-interest-bearing liabilities 233.5 131.3 69.2 88.8 -15.7 507.2
Provisions 4.0 16.6 31.9 0.9 53.4
Liabilities included in capital employed 661.9 503.3 118.6 97.5 -25.4 1,355.7
Unallocated items
Interest-bearing liabilities 439.1
Other non-interest-bearing liabilities 31.2
Deferred tax liabilities 71.4
Total liabilities 661.9 503.3 118.6 97.5 -25.4 1,897.3
Total capital employed as at 31 December 722.4 740.3 145.8 291.3 -7.4 1,892.4
Average capital employed 871.4 823.0 103.7 292.2 -7.1 2,083.2
Return on capital employed, comparable, % 20.4 7.7 25.2 11.7
Capital expenditure 128.9 55.3 16.0 18.5 -0.2 218.5
Number of personnel as at 31 December 8,364 12,270 783 518 21,935
Average number of personnel 6,420 11,269 780 487 18,955
Group-wide 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.
2016
€ million
Finland Other
Nordic countries
Baltic countries Others Eliminations Total
Net sales 8,133.6 899.6 661.8 502.7 -17.4 10,180.4
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 10,714 1,327 4,597 5,838 22,476
2015
€ million
Finland Other
Nordic countries
Baltic countries Others Eliminations Total
Net sales 7,056.8 627.2 584.1 426.8 -16.0 8,678.9
Assets 2,357.1 182.3 216.3 492.5 3,248.1
Capital expenditure 130.6 4.2 4.1 79.6 218.5
Average number of personnel 8,300 988 4,508 5,160 18,955
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.