Hello, everybody. My name is Hugh Carroll, CFO of KESSCO Corporation. I warmly welcome you to this Kesco Capital Markets Day 2016. Very nice to see all of you here. As you know, we renewed our strategy 2015 last year end and and have been executing that strategy during the last couple of years, in in create, in many areas.
And today, I'm very happy to to have our group management board here to present, a bit more of our strategy, to show show all the things that, are on the strategy agenda and what we are executing at the moment. I hope that we will have a very informative and very, interactive day with you today. I'll start with the agenda. And and presenting our, group management board for you. So first, I would like to, present, our president and CEO.
Mikko Hellender. Then I would like to introduce our, president and and for our grocery trade, your morale holler. President for the building and technical trade, Derho Galiocoskip, And, and then director, Vikramukra, from VBR Out of Cartrade, spekalati, will join us later in in the evening evening today, but he couldn't, his at the mo moment approach, so couldn't attend this session. And I would also like to mention that Johan Freeman will start as a, president of our car trade beginning of next year. Then I would like to present, Laura Paltola, Executive Vice President of our marketing and communications.
On Ronkonen, Kesco, chief digital officer. And then I would like to present, on the left Palanilson as well. Our group, General Counsel, and then Matti Metala, Executive Vice President Human Resources. And also Rrika Togonen head of financial communications. Okay.
So here's a program of the day. We'll start with Micah's presentation, creating the new KESSCO, and and that will be followed by my presentation regarding enhancing cash flow generation and the financials. Then after, after a short break, Jarmarajala will present, his presentation regarding the grocery trade, strong and renewing grocery trade, followed by Terrokalia Koskis, presentation, in building a technical trade, journey of improving profitability and growth, And then after coffee break, Mick Kamukla will present, our car division reengineering the car industry. Followed by Anir Ron Kainen and Lara Peltola's presentation boosting business through marketing and digitalization. And after the presentations, I hope that, we could do so that each of these presentations will be presented first then there would be a sort of Q and A type of, session after each of the presentation.
And, of course, at the end of the day, there's plenty of time for discussion as well. I also hope that, as many of you as possible could, attend the, dinner with us at at the restaurant editor. Later on, this evening, we have a transportation from here and, and we will continue continue the discussion, during the evening as well. But once again, you are warmly welcome to this, case of Capital Markets Day 2019, and we will start with Micho Hellandeste presentation. Creating the new Cascor.
Please make up.
Thank you. Thank you, Yukon. And Once again, thank you for coming. You call myself. We did a big effort to organize this wonderful winter day.
Just only for you. At the same time, when you enjoy our presentations, please enjoy also this beautiful interview. And as you said, I will I will communicate, creating the new I will share our latest development and, definitely most interesting and more important part is how we will further develop and how we will further continue this very exciting journey to create a new guest call. Important to remind that, that the gay group is a 3rd largest retailing company in Northern Europe, together with retailing entrepreneurs, we have pro form a sales €13,400,000,000. We operate in 9 countries.
And together with entrepreneurs, we have in this K group more or less 45,000 employees, very, very big company And once again, I repeat 3rd largest retailing company in Northern Part of Europe. KESCO rolling 12 months figures. You can see here, net sales, €9,600,000,000 operating profit almost €270,000,000. Personnel, we have in case cost payroll in Finland and a probe about 22,000 employees and shareholders, 40,000. And more and more also foreign shareholders of course, we are very happy that the Finnish shareholders finish investors, but at the same time, especially in Westos in Western Europe, UK, USA have increased very much ownership in Tesco.
Our market capitalization end of October was 1,000,000,000. We operate in 3, divisions. As you know, the pickers is grocery trade. We are number 2, in Finnish retailing market as well as we are number 1 in Finnish food service business, very strong market, position in both two main segments. And we have in Finland about 1500 stores, building a technical trade little bit smaller, but very important to recognize that, building a technical trade, fast growing And, this difference between a grocery trade, building, and technical trade is not anymore very big.
And, this is very good position that we have 2 very massive, very strong, divisions as we have in grocery and building and technical business. We are clear, number 1, in Northern Europe, in building a technical, trade, and we have about 7 hundred stores in 9 European Countries. Card rate, we are also market leader in Finnish car business and we have more or less percent market share. My understanding is that this is, quite abnormal situation that in Europe, in one country, one, one player has so dominant market position as we have in Finnish car freight. 20% market share, and we are sole importer of Volkswagen Audi Saad and man trucks.
I apologize that man trucks are missing. Rickavi foregot mono trucks. Midcommucker, please don't tell Pekka and, your colleagues that we did this stupid mistake. But man trucks and man trucks, very, very good product and also a very good progress in sales of heavy man trucks in Finland. As well as, we have also good progress and good development in sales of all other Volkswagen group branch.
Again, I underlined that make our trains very strongly lead, CASKOS development, K Group's development. Those most important megatrends from our point of view, 1st, consumers, very strong position, to make nowadays analytical decisions. This is a big change compared to situation, what we had in retailing business, let's say, 5, 10 years ago. As well as in Finland everywhere in Europe, aging population is big megatrend without any doubts, as well as urbanization, everywhere in Western part of the world as well as in Asia. And the fast growing amount of single households, also big macad rent, especially in Western Europe, in Northern Europe.
Corporation corporate responsibilities are more and more important, not just in our company, but all business, to be in good position to succeed, you must take full responsibility for all your business activities, and you have to be good corporation, citizen, in all societies, in all countries where you operate. Importance of strong brands, bigger and bigger This is also, definitely clear McArthurnd. Everybody knows that in retailing business, traditional local players are more and more challenged by new, very focused international retailing companies. That is in a grocery trade. That is in, in in a DIY business that is in sport trade.
This is very common trend everywhere, especially in Western Word. And digital services digital revolution, we can call that real revolution. But, definitely in in case we recognize that as positive revolution, as Amir Ronkanen will explain later today that this great opportunity for Kescot and K Group. Our position also is very strong because our main markets in in Scandinavia, Finland, Baltic Countries. And, we can say that our markets and countries where we operate, without any doubts, most stable from economical and political point of view.
And, that is wonderful position because, compared to many other markets, compared to many other business, business territories, our situation from economical and political point of USI stated is a very stable, very positive. In Finland, we had some concerns But now it seems that the Finnish economy is getting better. Norway's freedom despite the challenges in which economy, very strong. I'm big fan of Baltic Countries, wonderful development in last 10, 15 years, it seems that, in Baltic Countries, development continues very strong And we can see still wonderful opportunities in, in, in that part of Europe. Russia is more challenging.
Russia definitely very promising, market. But due to, especially due to political challenges, Russia is more complicated. But once again, Cascos main markets are countries where we can see very stable political economical situation. And of course, that is always good news for business. We have growth strategy in Tesco.
Big retailing company has to grow. Without growth sooner or later, we would face serious problems and difficulties. We are growing. We follow very systematically, we implement, very professionally our growth strategy, meaning that the Cascoys growing in grocery trade particular particularly in a Finnish market. We have strong growth in building and technical trade in Finland, in Northern Europe, in Baltic Countries, and we are seeking different options also to accelerate crowd in car rate, especially in a Finnish market.
But at the same time, again, I would like to remind that, we have also other businesses. Very strong businesses, furniture trade, agricultural trade, machinery trade, sports trade, soul trade, those so called small businesses, as we call those businesses, have total revenue, almost €1,000,000,000. All those businesses have strong market shares and return on capital employed. And all those businesses have succeeded also 2016 further improve on operational and financial performance. Again, I repeat that we are also maximizing value creation of our other businesses.
Of course, strong focus further develop increased value creation of our core businesses, but at the same time, we further develop other businesses and we will do, our utmost, to safeguard, success of those businesses in longer term as part of Tesco or as part of some other companies. We have good progress in the implementation work of our new strategy. We started implementation 1 a half years ago. Successful divestment of heavy loss making until a department store chain was first step. We succeeded reduce risk positions in properties when we, completed very extensive real estatement arrangement 2015.
Kess Kosenoukai could arrangement be merged all Baltic Belarusian operations, we established 1 unified strong, clear market leader in Pulpix and Belarus in DIY business, revenue, 1,000,000 and already midterm target to exceed €1,000,000,000 revenue, very profitable, very strong company. Acquisition of was very important action and, and, I have stated and I have said that that was definitely once in life chance, and we fully utilize that opportunity. Yurma Rahula related today report our wonderful progress in this acquisition. After Lahi Capa, owning an acquisition, Thero, myself, we we we stated that a perfect match we can confirm also today. In Terje's presentation that this is a real perfect match.
And latest, divestment of loss making, Coruaka, Russian operations till should be completed, and closed end of, this month. And one unified K Starting from day 1 in new strategy, it has been it it has been very important to create 1 strong unified Tesco k group. And I can confirm that also on that side, we have wonderful progress. We have established search services, HR, legal affairs, and so on. That way, we are in position to utilize better synergies we have also succeeded to motivate our entrepreneurs to participate this development and we can see that we are already today in much better position, utilize synergies in internal operations as well as in customer interface.
And we expect that, when we will continue this development, we will gain a lot of a lot of, benefits and and savings as well as a commercial success, from this 1 unified k approach. Then few words about the direction and directions in a different business areas. First, the grocery trade, we are and we must become even more customer driven and most customer driven and inspirational food retailer. Today, after Swamalaikaupa acquisition, we have any more such as 2 main players in Finnish grocery trade and then, newcomer from Germany. And definitely, our aim is to be even more positively different retailing company in Finland compared to 2 other players.
And we are on the right track without any doubts. Yurma will present more detail this latest development. Another important part of, direction in grocery trade to renew our concepts, plans as well as to have more modern, more efficient approach in marketing. As well as provide best digital services, I believe that already today, we are in position to offer best digital services in grocery trade, but our aim is to become even more digital, driven player to be in position, to be at front line in those services even in European scale. Also, we are today very profitable grocery trade company.
And we have strong will to be among the best profitable retailing companies in Europe also in future. Plus maintain profitable growth as I said, to succeed to be and to become even better company means that we must grow. And that is definitely our aim also in grocery trade. In building and technical trade, based on our strategy, we will create more unified building and technical, trade company. And that way we will harvest synergies It is not just question of on linen.
It is also a question of all our DIY and building and technical trade businesses in Scandinavia, Finland, Baltic Countries, Belarus, Russia, we have a lot of synergy potential, but we have to establish more unified business approach and that we are doing, definitely. Also in building a technical trade, we have to provide, and we have to offer best digital services for business customers, for consumer customers, we have good services, but not at all, not yet. We are at the level where as the leading company, we should be.
Profitability
we have succeeded 14 quarters to improve profitability in building and technical trade. Create development but at the same time, I would like to remind that we are not yet not at all on the level where we must be in the future. Our profitability is quite far away from the best players profitability in Europe and we are targeting in mid and longer term, high profitability same level what the best European companies are reporting. We are prioritizing profitability as well as organic growth, acquisitions We are well prepared to make acquisitions also in future, but I repeat priority number 1 is better profitability priority number 2 is organic growth, but we have to be well prepared, to make also acquisitions when timing is good. Most natural growth areas for our building and technical trade are Nordic and Baltic Countries, and of course also Finland.
I repeat most natural natural road areas are Nordic and Countries. Direction are in car freight. Meadow of the fact is that the car industry is in the middle of big changes. Volkswagen Group, but also all other leading companies in car industry, they are changing they are developing new strategies. And, I'm convinced that in the coming years, we will see very extensive re engineering in all meanings in car industry, Worldwide.
It means also that, that, we are re engineering, in many manners, our car, trade division. But at the same time, we are maintaining our high market share we are seeking all different options, to grow also in car business as well as, I'm convinced that we can maintain also good profitability. Important part of our strategy in card rate is that, we will do our utmost to have even deep cooperation with Volkswagen Ace. Volkswagen Ace is the biggest, company in car industry. In in the word.
And, I repeat, we have wonderful long lasting cooperation with Volkswagen, and our aim is, to have even deeper and even wider cooperation with the Volkswagen group. Digital services. Very important. We are very pleased that, today, Volkswagen, stated many times that probably Tesco and Tesco's card rate is, the leading player in digitalization in whole Volkswagen group society. We have launched completely new online car store car in May.
Wonderful startup, Mick Kamukra, later today, will present this this new platform and, open more detailed our plans, how we will further develop online services in our card rate. Few words about the capital allocation. Our annual CapEx level will remain below €200,000,000 after 2017. Meaning that we don't need to make such a big investments in the coming years, but earlier was estimated. Reasons are very simple, 1st successful acquisition of Soumelahi Kaup means that we will have very competitive neighborhood store network in Finland.
We will be in leading position Our market share in neighborhood market will be very close 60%, 55%, 60% and we don't need to make such a big investments as earlier was planned, thanks to acquisition of Soumelaica. Also, we will complete very extensive renewal of our successful hypermarket chain this, work will be completed by 2018. This is second reason why such a big investments are not any more needed. As well as we will complete very, very thick shopping center investment in Eastern Part of Helsinki. 1st phase, will be in operation in 2017.
And of course, successful divestment of a Russian food, operations will also heavily reduce need for investments in the coming years. But once again, I repeat, investments will remain below 1,000,000. After 2017, YOKA will open more detailed how whole company will be even more cash flow driven player in the future. Last but not least, I remind, Cresco is the most, the world's most sustainable retailing operator. Not bad.
We will continue on that track on that track. We see that we have still a lot of homeworks to do to become even more sustainable company, but not bad. We are the most sustainable retailing company, and that is definitely also highly appreciated by our customers, consumers, and I believe also investors. Ladies and gentlemen. Thank you very much, and, and questions.
Who is first? You guys, not first.
Good afternoon, Nicholas. This is on. Yes?
Yes. Hi.
It's
been afternoon, Nickolas Catani from OP Financial Group. Well, I could start then, you mentioned that you were you were talking about the, capital allocation, but, there was no no mentioned about dividends. Do you can you elaborate a little bit on that, perhaps?
Yes. I can. I can. We are working very hard to be in position to pay a good dividend also in future. As you remember, last year, it was nice dividend.
As well as dividend has been very nice already many years. And, and our aim is to pay good dividend not just, next year, but also in the coming years. Don't ask how much, but,
calling out of Pinendeskabank. Question about the profitability and building on technical trade talking about benchmarking towards best European performers. Can you break that down a little bit? You have different business models in your building a technical. You have the, wholesale business with a retailer model.
You have the own retail business, and you have B2B online and business. What what kind of differences to see in this going forward and and where are the best improvement potentials.
Yeah. When we take, our current, and now I mean, case cost profitability, for example, in DIY, And then we add EBIT, what the entrepreneurs, for example, in Finland report. That is still quite far away from the profitability, what the best European DIY companies report. Just book King's free set of Ariel, and and that is a clear message for us that, we have still lot of potential. And we have, to improve further our financial and operational performance.
Also, Acel. Acel reports much better profitability compared to owning and also Rexel dial. We have also on that side, a big potential, further improve our financial and operational performance. And, we were aware when we acquired on in an and, many actions in process. But again, I underline the importance of more unified unified business approach.
I under underline importance, fully utilize synergies in internal operations as well as in customer interface.
Thank you
Okay. Then Yuka continues.
Okay. Thank you, Mick. So let's look at the financials after So enhancing cash flow generation, I will start with the financial figures, our sort of KPI figures. Happy to say that currently, during the last last two years, we have been able to, progress in pretty much all area of areas of our, financial KPIs. We are finally on, on the positive track in our, top line growth.
Plus 9.1 1% also organically, also on positive figures, and that's one of our major goals, with a growth strategy, obviously. Also, the operating profit, €269,000,000 and operating margin 2.8% has been increasing. There's still way to do and potential to increase it further, and that's that's for sure. But at least we are on a right track there. Net debt to EBITDA level is is is very decent, I would say there's room to to, have some higher figures as well, but not necessarily to, upper level of 2.5, but we have clearly room there to, to still, you know, work on the balance sheet as well.
Also, the return on capital employed and return on equity figures have been, progressing well during the last 2 years and and and especially on the return on equity, we are finally on double digit figures. Again, somewhat below the target still, but, but, clearly progressing towards them. Like Mico said, the GDP development in, in the countries where we operate, in, in the majority of the countries, in the Nordic countries and both the countries, the situation seems to be, very stable, and, and we have positive growth on those areas. Also, Russian environment seems to, be on positive figures most likely during next year as well. So therefore, the overall market situation seems to be, quite good, after especially in Finland as we had, several years of negative growth in GDP in Finland.
So the overall situation is getting better and and especially in Finland, the positive thing is that we have positive development after after some years now. Mikko went through the, acquisitions and divestments that we have done during the last last couple of years and and and we are naturally very happy that we have been able to sharpen our strategy quite a bit during the last year and a half. In addition to these, acquisitions and divestments, also the operations of Muza Percea, home electronics business was discontinued last year. So in that sense, there has been a lot of work done in our capital allocation and in our portfolio work as as as the goal is to to really focus the company and operating those 3 strategic growth areas grocery, building a technical trade and and and car trade. Then if you wish about our capital allocation, like I said, we have done a lot of work in this this sense during the last 2 years, studied our strategy work last year, and and that the whole big picture is that that we have looked very carefully on the megatrends and then the retail trends, what what is really happening on the consumer side there, overall, look at the macro environment, in, in great detail during the last 2 years and and following that constantly.
And and taking into those, things into consideration, renewed our portfolio strategy, which, of course, you know, is driven by then by the investment strategy where we are now able to to go further in our strategy to with below €200,000,000,000 annual CapEx. And then we are, clearly see the situation as soon as so that, with these three growth areas that we have in the portal are now We are very well competitive in those businesses. We have good scale and good capabilities in those areas and then good growth potential and return on capital employed, potentially in those areas. Also, the risks are well balanced in our current, macro environment position and, and in the business where we are. So it has been a lot of work in this area, and, and, and we are very satisfied how the portfolio of our business is is developing.
Then looking at the financial financials in more detail. Like I said, we have had 3 years of negative top line development, mostly due to the Finnish retail environment. And and and, like I said, we are happy now that our top line is also growing. Plus 9% during the last 12 months and and with the acquisitions we've made during the last quarter, with, plus 27% growth rate, so it is, of course, very important that we have a profitable growth, healthy growth in our operations so that we get more scale into our operations. And by that way, we are able to improve our profitability on a long term perspective.
Also, the organic growth has been positive as well during the during the last quarter and 1st 9 months of this year. Then looking at the operating margin, Like I said, we are targeting for further growth. We have been improving our operating, margin during the last couple of years, and and there's still room to improve there. And that's definitely our target as well. Hopefully, the environment will be also, slightly better, going further, and that seems to be the case at this moment.
If we look at our different divisions, I could say that we have potential to improve in all of these 3 divisions. But of course, the billing and technical trade is the one where we see the most potential here with 2.4%, operating margin during the last 12 months, But like I said, also, we seek for further improvement in our grocery trade as well as in, in the car trade. And crossroads trade, of course, like you know, we had a loss making, Russian operations in the crossroad business and that is one one, thing which will also improve our profitability as when the deal has been, closed. A few words about our cost efficiency. Last year, we launched an €50,000,000 efficiency program.
We are very satisfied how that program has been going further. We have been, able to, maintain good, cost efficiency even though there's a lot of strategic initiatives taking place in the group in our store sites. There's a lot lot has been done in order to offer a customer customers, better customer experience in the stores, refurbishments, and, and, and a lot of new marketing, that kind of things, a lot has been done in the digital side in order to improve our digital channels and digital marketing as well. So a lot has been done at the same time. We have been able to finance those, those development areas by reducing our cost base in these, areas like personal efficiency, ICT, marketing and, and, store side costs.
The maturity of these actions, are completed and they will have a full impact, during next year, but it also already impacts our profitability currently, and, and, and that has been seen our profitability. During this year. There's still, of course, a lot of things that we can still further improve, and and that is, of course, very clear for us, and then we will do that and and continue our efficiency programs and cost cutting in those areas where there's more potential, and then at the same time, invest also in those areas like digital capabilities where we still have to further develop our capabilities. Cash flow generation is one of the, key parts of our strategy to improve that one. We definitely want to have a better cash flow from our operating activities.
I will come to that one. In the next slide, to open up a little bit about this topic. We are scaling down some of our CapEx like Nick introduced, in his presentation. So we are coming below that €200,000,000 of the 2017. And then we also see that we can work out, downwards our networking capital, which has been somewhat lifted up by by their own in an acquisition.
So those are, some of the areas. So we want to improve our cash flow from the operating activities and then scale down our cash flow from the investing activities. So enhancing the cash flow generations, the main target, of course, is to to further get growth in the strategic growth areas where we operate. And and and to increase the operating margin in these businesses. So continue, that area.
In all of the businesses, like I said, especially in the billing and technical trade. Then we have the synergy benefits from the acquisitions that we had done during this year. So in Soumela, the progress has been better than expected. And we expect, full annual impact of above 1,000,000 from 2018. The integration, which shows a very fast integration, of the Saumilahi Capa, acquisition into our operations, and that has gone very well.
Jorma will open up that one a little bit later. And, and, therefore, we all associate that we can, we can, get these synergies above 30,000,000, from from 2018. Also, the ONN integration is progressing as expected. There, the full annual impact of 30,000,000, is expected to take place at 2020. But, of course, there as well, we are getting, of course, and trying to realize all the synergies as soon as possible, already, hitting the 2020.
Then like I said, we have the 50,000,000 cost savings program, which is progressing well, and the full impact will be next year, of in in that area. The annual CapEx level will be below 200,000,000 after 2017. Unlike Nikko said, in the cross route trade, we lee we need less CapEx after 2017 as as we have then integrated the, Sonmelaicopa operation into our operations and and and as we are closing the deal of the exceeding the Russian grocery trade, and we have also opened up quite a few, supermarket size stores in our operations during last year and this year and the following year. So they will impact the grocery trade, CapEx needs, after 2017. And also in the billing and technical trade, we see that we can be more efficient with our store side CapEx needs as the growth is mostly coming from the B2B side of the operations.
So that is also reducing that side. We also have a target to reduce our networking capital by €50,000,000. Like I said, it was somewhat uplifted, by on and during this year and also in some of the some of the other operations, so now we have a very clear, view that that we have to further improve our, net working capital during the next next year. And of course, potential further business and real estate divestments are also can have a possible, positive cash flow affecting our operations as well. Overall, the real estate, joint venture with Ilmarin and AMF has gone really well and and we are happy with how that that, took place and and and in that sense, we have potential for both business and real estate divestments in the future.
Then looking at the return on capital employed, this is the most important profitability KPI for us, for all of our businesses. And and we have seen good progress On that side, during the last 5 years, as we started, at 9% in 2012, currently, we are at 12.5%. So that has been driven by the improving profitability in our operations, especially in the, building a technical trade, aside Also, the real estate transaction made last year had a positive impact also on the, and, return on capital employed side. Until and in the spot, Russia divestments have also improved our our profitability. And, and further improvement will also come from, Keeskabur Prussia divestment.
So in that sense, we are well on track towards our target level of 14%. And then I would like to finalize my presentation with the dividend. So as you know, and we know, of course, that, dividend is very important for many of our shareholders, and and we definitely want to, have a good level of dividends also in the future. Of course, the dividend paid out this year was driven, by the, real estate transaction effect, and and during this year, the dividend payout ratio was clearly above 100%, but also during the last years, we have been quite close to 90 80, 80, 80, 80, 90%, close to 100% there in the dividend payout ratio as well. So we have been definitely at a higher level than our dividend policy.
And and during the last 12 months, our comparable earnings per share development has been good. At €2..1, and and which just shows that, it is not just our operating profit, which has been on a good track but also our financial net has been progressing well, as well as our, effective tax rate as well, which has come down to 20%. So so in that sense, the earnings per share development has been has been good, and and and that, of course, also enables a good dividend as well in the in the coming years as well. Thank you. This was my presentation.
I'm happy to answer any of your questions. You may have.
Thank you, on Skiviniemi SEB. I have two questions. First of all, your return on capital employed, target is 14%. That's the key KPI on that side. On Slide 12, you highlight a bunch of the drivers in the history.
Could you a little bit open up the future drivers of improving ROCE in your businesses? And my second question relates to the first question The second question is that, given the bunch of a huge, kind of transforming deals, that has really changed your business structure. Is the 14% still a relative, a good target or as a matter of fact, should the target be higher?
Yeah. Good question. Going further, yeah, we are still below that 14% now. So in that sense, we first want to sort of, reach that target, I don't want to too much speculate on the, you know, possible future targets, but, of course, we see that we are well on track to that 14%. Going further, we see a potential improvement, like I said, especially in the, in the building and technical trade side.
So improving that division's profitability is one of the key drivers here to improve also the return on capital employed, going further. I think we are in a fairly good level already if we look at the grocery trade and, and the, the car trade We are well above 20% return on capital employed in those 2 businesses. Like I said, we have a target to improve the operating margin there as well. We definitely don't have any plans to, you know, increase the capital employed in those areas. So in that sense, there's also potential in those 2 other businesses, but the most potential lies in the billing and technical trade.
So that's that's pretty much my answer to your to your question on that sense. At this point, like I said, we first want to reset 14% and let's see the future targets after that one. But, of course, you know, this is something that, you know, going further possible, increases, of course, depend on how well, we reached at 40% first.
It's Ted Roberts from Nordea. This real estate divestment seems to be a thing that kind of all of this comes up and by looking at the very strong balance sheet today and by understanding that the kind of buyers in the real estate market are probably more eager to buy to them than they were yesterday and so forth. Could you a little bit open up about kind of the thought process about the whole divestments and think that in the past, you have kind of had strategic real estate and less strategic investments, kind of just to think about this whole.
Yep. Yep. Good question. About 1 third of our real estates that we currently own is so called non strategic. So in that sense, the book value is a bit more than 1,000,000,000, about 1,100,000,000 currently and we see that that book value is below the market value of those real estates.
So about 1 third of that one is currently so called strategic. And, and in that sense, there's room to make this real estate transactions and divestments in the future it can be done by sale and leaseback. So it can be done by, for example, using this kind of so adventures that we currently have. So so we have the tools to make some divestments also from the real estate side. The divestment we did last year was substantially bigger, of course, than we did previously.
So in that sense, We have not sort of rushed to any new kind of, divestments, but we are all the time following our real estate portfolio and, and, in that sense, likes it, in the presentation as well. Of course, we look at potential business and real estate divestments. And, and one part of that is the 1 third of those real estates with Sanon Strategically.
You're way for someone to knock on your door, or are they kind of doing something acting in your We
have continuous discussions with, potential buyers of these kinds of real estate investors. So so in that sense, you know, is one of the things that we we have on our sort of agenda as well.
Yeah. All meetings.
Yeah. Well, this is kind of a ever evolving thing that is always the 350 something is non strategic. I'm just by looking at the market today.
Yep.
Maybe it's even better tomorrow, but who knows? Like, it it should be a market where you should be able to get
it. Yep. True. Yep.
Alright. Thank you.
2 further questions on the real estate issue. First one, the the stores in Russia, are they in the non strategic part of it or in the strategic part of the portfolio?
Yeah, of course, regarding the grocery side, of course, that transaction will take place, and that's mostly, of course, the assets which will be sold out mostly, of course, real estate. So that's, clear. In the DIY operations in the building and technical side operations, it has been very clear for us that, the strategy has been earlier being that we want to own those, like, locations due to the very high yields on on the rental side there. And also, we have wanted to, own those, locations because, It is, it's a scarce resource, I would say, in Russia. We don't have any changes on that side that I could open up at this point.
There is always possibilities, and and in the grocery side, we have had some rented premises as well, but but at this point, no big changes in our strategy there. So they are currently our.
Doors, as you are now selling, are they in that 1 third of book value, which was non strategic?
Yeah, they are they are there. Yes.
Okay. So that will be substantially reduced after those are sold.
Yeah. There are some locations sold. Saw in the strategic part, but but the bigger ones. Yep.
Another question on the real estate is is that, there's this IFRS change where you have to recognize lease liabilities in the balance sheet in the future. Does that affect your thinking on the on the decision whether to own or lease And how do you think about that?
Yeah. It has some effect, of course, that, you know, it comes even more, crucial that, that really what you sort of, as there will be more effects in the balance sheet. Of course, you know, in that sense, you have to very carefully see that what are you sort of, leasing with a very long lease terms and so on because the balance sheet impact is so big with those ones. So yes, it does have an effect on our side. And in some cases, it's, it's good for us to have it in our, you know, current way of accounting balance sheet.
Yep.
Thank you.
Subject, I think, last year, you you said that you are not aiming to do any larger deals on the real estate divestment side. So it would be kind of a single asset based if you do do something. And, and also that on on totally your real estate exposure into balance sheet should remain roughly at the current levels. So are those thinking still valid or has there been some change in those?
Yeah. Compared to last year, transaction, we had we don't have currently on the table that kind of size of of, real estate, divestments. So there will be smaller than going on to the future. So so in that sense, that still holds that, that, strategy. But, of course, we want to be more active when we go further than we have been during this year, of course, because we have not done too much divestments, but what would be more active, but currently we would not have that big deal is on the table that we did last year.
And and on the on the longer term, do you still want to clearly keep a big real estate portfolio in your balance sheet. So it would be kind of you invest somewhere and then divest something, but the the they're will be a big big chunk of real estate in your balance sheet also in the longer term?
Well, we want to own and keeping our own balance sheet, those so called strategic prop is. So it means that, you know, those are the big ones, big, hypermarket stores and big, k raild stores, for example, which have more, economical life of more than 10 years, and there has to be at least 100,000 inhabitants in those cats, mint areas. So so they are, you know, big cities with growing population, good locations, long term view, and, and, and, and that's the sort of so called strategic property. And those those are the ones we want to rather keep in our own balance sheet.
Okay. Good. And then then another thing related to the dividends you mentioned that the last year's dividend was, supported by this larger real estate transaction. So should we expect some kind of support from the Russian divestment also to the the next dividend or?
Well, I can't, frankly speaking too much open it's then up to the board, about about the dividend, how we distribute it. But like Mikko said, you know, We fully, of course, acknowledged that we want to be a good dividend payer. Last year's dividend was, of course, driven by the fact that we had over, you know, capitalized balance sheet and huge cash reserve. Of course, our cat position after the closing of the deal of the Russian grocery operations will be at a very good level as well. So in that sense, it's a combination of looking at the earnings per share development, looking at the yield, looking at our balance sheet structure.
Of course, like I said earlier, last spring 2015, I say that we want to be more efficient on the balance sheet side, though, so that holds still. So so in that sense, we look at the total package and and then then sort of the board decides the dividend. Okay. Very good. I think we have a time for short break now, and then we'll continue with Jorma's presentation accounting grocery.
Yes.
Good afternoon, and welcome also on my behalf. Today, I will tell how we are renewing our operations and building even stronger grocery trade business. I will focus on the following themes in my presentation. We will first take a quick look at our position at the general situation in the Finnish grocery market. We will also look at the grocery trade trends and the consumers' will.
Lastly, I will highlight our strategic choices and the implementation of our strategy in the chosen area areas. You can see here the key figures of the grocery trade. We see profitable growth. Our operating profit in quarter 3 exceeded the previous year's level. The net sales for the last 12 months were over 1,000,000,000 and operating profit stood at a good level of 3.5%.
Kesco's grocery trade business has consisted of grocery trade in Finland and in Russia. Castro's food service business, and the acquired business of Swamin LagerPA. In the next slide, I will open our business scope and figures in more detail. We are number 2 in Finnish grocery trade. We have 80 KCT market hypermarkets with 1,000,000,000 sales.
We have some 230 K Supermarkets and sales 1,700,000,000. In addition, we have some 1000 enabled store after the acquisition of Suwam and Lager. And to say is today approximately 1,000,000,000. Casper is a clear number 1 in the Finnish food service wholesale market, and the sales is today €800,000,000. We have 11 Kroga stores in Saint Saint Petersburg area, in Rasa, and that's announced in October, we have signed the divestment agreement with Linda.
In the future, we will focus on further strengthening our position in the Finnish grocery trade market. The total grocery trade market has turned to slight growth in Finland. After the last year's market decrease, the total market has grown about 1% this year. The most sick significant change into market is the liberalization of store opening hours. Which has increased the total market and changed the structure so that supermarket supermarket size stores have significantly increased day sales, whereas more, less than 4 100 square meter stores have lost sales.
Retailer operators whose network mainly consists of supermarket size stores and who have significantly invested in opening hours. Even at the expense of profitability, have gained some market share. The laborization of opening hours had a big impact on to market 2016, but we expect that the difference in sales between different store size categories will be much smaller next year. The tough price competition of the previous year has continued without any significant change. The intense price competition is expected to continue due to low level of consumer purchasing power.
However, the importance of price has not increased in consumers buying decision since 2014. For example, Tallos Tukkimos Swami Siewer 2016 survey. Results show that price is not higher. 10 to 7th most important criteria in shopping for groceries for the weekend. Instead, consumers increasingly appreciate the quality of the food, finish auction, healthiness, and taste of food to name a few.
We have a strong position, position in the Finnish grocery market. Casper is the leading company in the Finnish food service wholesale market. One topic consumer trend is spending on dining dining out. Also a different kind of takeaway services are growing. GiftPro's strong position and performance in the food service wholesale market support our position in the Finnish grocery market.
The acquisition of Suomi Lajicorp has significantly increased net sales. A strengthened market share, which is expected, which is expected to settle down to range 37% to 38%. We had good profitability due to strong market position, enhancement actions taken and to synergies resulting from to acquisition of Soma La Hiccup. We have achieved significant savings in real estate and personal costs through the whole organization. And for example, in logistics, our efficiency is at the best level ever.
I'm glad that we were able to divest our Russian operations since it would have needed see significant new investments, worth 100 of 1,000,000. In an uncertain economic environment. The divestment will improve our profitability and cash flow. Then moving to our strategic choices. There are certain megatrends that are affecting grocery trade.
Our choice is to be the quality leader of the Finnish grocery market. Topical consumer trends such as aging population, urbanization, inability, and responsibility under being our choices. Every k food store is different, tailored to local customer demand. Store specific business idea enable us to ensure that the consumers will and wishes are made true. Our retailer business model is our key competitive effect.
Our retailers know their customers and can interpret consumer's behavior also with the help of unique Plusa data. This enables rapid response to consumers' needs. As Micho Hellandar mentioned in his presentation, we have a clear direction. We want to be the most customer driven and inspirational food retailer. We will renew our store concepts, brand, and marketing.
We offer to our customer to best digital services in closer trade. K Group's target is to stay as one of the most profitable retailers in Europe and maintain profitable growth also in the future. The customer and quality guide everything we do. For us, there is no average customer. And, therefore, Every K is different and unique in its own way.
This is underpinned by our store specific business idea. Store specific business idea is built on our central centralized and effective sourcing, logistics, IT and marketing operations. So to idea that every k difference is not having any negative impact. On our efficiency. One way to ensure a rise in our quality level is the fact that our best retailers can run more than one stores.
We already have several excellent examples of this. We have created a completely new customer feedback system through which we receive over 1,000,000 customer feedback messages per year. All feedback is collected in one place. I can, for example, follow the feedback received by all our stores, by phone in real time. One example of customer orientation is is also to revision of the Bluschaseem in the future.
In the future, the Bloste chain will be even more personalized. Next, I will focus on, neighborhood market Renewable. Our strategic choice is to increase of the neighborhood store network. We will renew all our current K Market stores. 120 k markets will be renewed by the end of this year, and all of the nearly 400 k markets will be modern modern insights by theendofnextyear.
The first results are promising. For instance, the sales development has been better in the renewed stores compared to old K Markets. Civil and Vallentator stores will be correlated into K Markets I will open the integration in more details in the next slide. We have created a completely new Neste case service station concept. We want to offer a better stop for people on the road.
And the end of 2016, we will have already 25 completely modernized service station. And the figure will rise to 60 by the end of the next year. Our choice is to concentrate, especially on restaurant, and cafeteria services, taking account of the change into regulation of opening hours. Restaurant rate of the renewed service station is growing at a rate of 10%. The integration of Souamilajicopa is processing faster than we plan.
Over 160 Siva and Wallin Datalos stores have already been converted. All will be K Markets by theendofAprilnextyear. Sales and customer visits have increased markedly. Compared to period before conversion, the sales increase has been over 12%. And the customer visits have grown even more.
The store's price level is much more competitive and selection more attractive. The K market conversion has lowered to price level by as much 20%. We have modified the store selection to be more attractive and relevant. 70% of selection has changed. Purchasing and logistical operations will be fully integrated by spring 2017.
We have made an agreement with 2 logistics. As a result of the agreement, we are able to transfer to logistics into our more effective system earlier than we planned. Moreover transferring stores to retailers is progressing. At present, the K Retail carrier is attractive and we have received plenty of applications to our retailer training program. There are 3 different alternatives in transferring Sivas and Valin Tataos to retailers.
1, the so called traditional 1 store per retailer model. 2, tomorrow in which the current retailer is given a second, a so called satellite store. And 3, the cluster of several stores. Due to good progress, we are targeting Annual synergies above 1,000,000 at 2018. Synergies are expected to rise especially from sourcing, logistics, and personal costs.
How is it possible to convert Shiva into K market in only 2 days? The next video will show how the conversion happens in practice.
Much. If they do it, if I feel, we'll have an
I am extremely, proud of our competent and, dedicated people every Thursday. We opened 50 new K markets that have gone through the conversion process shown in the video. Our high performing KCT market chains will be renewed. Each KCT market will be tailored according to its local customer base. By now, 23 stores have been renewed and the renewal of all stores will be completed in 2018.
We will also continue the development of chosen Superior Department These include meat, fish, fruit, and vegetable, beauty, and footwear. An example of a child concept development is the renewal of therapeutic departments. We made the decision to start to concept renewal in May this year. And the outcome has been visible in all KCT markets already by the end of October. This year.
We'll also continue focusing on category optimization and new partnerships that bring more customer flow. We will have 25 post outlets and free Starbucks in connection with Casey to markets by the end of this year. I believe in the future, we will have even more attractive partnerships that will increase KCT market customer flow. Our current hypermarket network is optimal and competitive. According to our view, to era of hypermarkets is definitely not over.
The development of digital services builds our competitiveness now and into future. Food online rate in Finland is still low, accounting for around 0.2% of the whole grocery market. But the share of online trade is growing strongly. Customers who stop online are often also very good customers at physical stores. This is why we want to be actively involved to the development of online trade.
Currently, we have over 80 k food stores that are offering e commerce services mainly through Click and Collect service. We are in the process of adopting a new operating model which will enable us to offer wider store specific selections and more affordable price level. This will be realized early 2017. Okay, Roca, if I service has around 1,000,000 visitors per week. We provide versatile food content and inspiration for online grocery shopping.
We are continuously developing our services. We currently focus on improving periods, and developing to write action from contents to shopping. CareROCA Mobile Services is definitely the best grocery mobile app in the market. Our target for KROG mobile services is to have 400 50,050,000 downloads by the end of 2017. Our present focus is on tailored procedures, of the application, increasing Plusal functionalities, and enabling mobile purchasing.
All in all, we have performed quite well in the demanding economic economical environment. We have a clear strategy, and I'm confident that by implementing our strategy, we are able to perform even better in the future. Thank you for your time. It was a pleasure to be here today, and now I assume it's time for Okay. It seems that there is no, okay.
Hi. Carla from Danske Bank. Again, on on Soma Lykapa, can you give a little bit of a analysis on what do you see as that where swam and leg up as major weaknesses and problem areas why they were able to become profitable over
Our logistic is much, much more efficient. One is that they didn't have, enough purchasing power. One of these that they didn't have any, private label, good private label. Few you mentioned. Okay.
I think it's thermostat now.
Good afternoon. It's my pleasure to present billing and technical trade. Strategy and and issues because as you, heard, and you explain so exactly what I have to make. I have to have make happen and now it's only to implementation. And implementation is so it's so easy.
First, I I I will describe a little bit, what what is, this, new building and technical trade, division? And, last, 4 quarters because you you see it here in in in left side. So let's say we're about €3,700,000,000 and operating profit 91,000,000, euro. And it it was about 2.4% from, sales. And, our return of capital employed, we we finally reached this, 10% level.
I'm saying so because some years ago, it was in in negative side. So we have, been able to improve it. And then, As Mickco, presented, we have those, 4, different business areas inside, this building a tech technical trade division. Of course, the biggest is this, real building a technical trade, and then there is, this agricultural machinery trade. It's it's, it's quite big business.
All together. And, those, I don't know how how to point this, but, this, agriculture, machinery, it's about, 700 €1,000,000 all altogether in in retail side, and this furniture, about 200,000,000 and this, tend to sports rate including is, shoe trade. It's about, about a €200,000,000. So all all to get the in in retail said pro form a figures are about 5,700,000,000. But now now I I will concentrate on this building and tech and technical trade in the issues.
I will not, any more handle those other business areas. So this building and technical strategy is divided to 2 business, segments. So, B2B after owning an acquisition, It's it's bigger, business, area 10, 10, p to c business. Before on the acquisition, we were also big a B2B operator, consist of, wholesale. It it was about 40%.
But now it's It's, 60% and it's increasing. And then, this B to C, about this, 40, person And now now we have uh-uh after this acquisition some some weeks ago, We we we we created new organization structure. So, there are there is different business unit for P2P and different for P2C. Because we see that we have to have a clear idea how to develop those 2 different business, areas. And, 10, sales by country.
This building a technical trade, in from Finland, It is about 40, 5% from total sales and approach. So so it's it's bigger, approach. Outside Finland. So 55%. And and the biggest, business is, I, is in in Norway.
All together about 22% of total sales and then, politics altogether, 12% and then a Sweden, 10 percent. So altogether, we are operating in in in, in 9, countries. And we are number 5. Player in in Europe and, and, number 1 player in in Newton, Europe as as, Mico said. So what what is, B2B, customer?
As I said, it's about about this, 60% from sales, the come come from, P2P operations And, largest, largest customer groups out of construction companies, this, 40, 3% and 10 contractors about, 30, the 8% And what does it, these contractors mean? It's it's, more or less small companies which are focusing mainly on installation or maintenance of heating, heating, plumbing, air conditioning, or household technology or elect electrical issues. Those are quite often small companies. Sometimes we are saying that, FAR to and and a transporter. Bb transporter.
So this is, how how to call call it. And then, we have a industrial customers. And this is also very important, sector for us and and new sector. After this only then acquisition and also this infra sector. It it was also a new sector for us a as a customer point of view and then some retail retailers.
We have also our our customer and building materials and uh-uh he puck So he he it means heating, plumbing, and and air air collision, cools, and then, those, electrical could account for 75% of total sales. And 10 B2C. Customers it's altogether 40% of, total sales. And, those pricked customers. Of course, it's not so, white and black to say who are, prepaid customers because sometimes some customer might feel that, he or she is, create customer if they want to put some, some, very small issue to to to happen, but We are thinking that, those pre customers are renovators who are making, for example, some kitchen renovation, bathroom renovation, or something like that.
And 10 builders who are building, own, own, house or or something like that. And then those consumer, customers, who are visiting our average in our store less than three times per year compared to a a grocery trade, the consumers are visiting three times per every every week. So so there is huge difference, but of course, those preact customers, they are visiting a very often, during day day, project maybe every day, maybe twice per day. It depends on on on situation. What what is in in in their, site.
And if we and when we convert those products, B2P and B2C. Of course, there in B2C side that there are there are more, decorations, decoration coups and and the home furnishing coups, but but, also in this side, this building material is the the the biggest, product line. And, also this yard and garden, it's it's it's, increasing quite quite a lot. And, it's it's very important, for us, as an, a product, sector. And as I, say it, and as you know, we operating in in 9 countries, And I I briefly described the situation in in situations in in those, countries.
I'm very happy to say that in in Finland, we we are clear, number one player, all together, this building a technical trade and also separately so that a K router, of course, together with Routia, today, it's, market leader, market position market share, more than 40% And then, if I call all in a sector in in in Finland, we are clear number one play you also in in this site, especially tearing in, in, heating and and plumbing. Markets there. It's it's more than than the care out or out here together. And in in all sectors there, we we have a good markets here. And, now now we are, under process to to to combine our power So we will create new or we will launch next, next week, new K router sign also in in in in Kyuru.
Attend in in in Norway, we have, 2 different, chains there, bookmarker. It is retail retailer chain. We acquired it, about 10, 10 years ago, 2000, and 5. And 10, the all men is a strong in electric cars. And I'm happy to say that that this only in Norway, they have a very good ecom platform.
And we we are now, converting this, system to other all in an operation, all in an countries, and also to whole B2B, operations. And, as you know, Sweden is is, the biggest market in Nordics And, I I'm saying that, there is still use Botansel, but as you, recognized, from our, third quarter's, presentation that we finally reads positive side in in in k router after many after many after many years. Only 10 years ago, it it was in in about, in 0 level, but now we are, so happy that, again, we are in in positive side there. And then this, We are number 1 player in in in geopolitics and also in in in Belarus. And, as as you know, or the name was previous name, it was it it, has made a positive epic every year, every year after acquisition.
It in in in in Lithuania and they it's strong player chair and and in the DIY sector and also in whole non sector. It's number number 1 player in in non full sector in in in Lithuania. And in in Latvia, we have suffered And, many years, we have made a negative, a bit, but, finally, we have, been able to improve it so that it it has been some years in in positive side. And in Estonia, even quite good level, but I see that when we have this, company, casino guy, now we are able to improve our sales, so croat and also EBIT side. And now we are testing, we will test, the new concept there in in Rika.
Just now, one story is under under renovation, and we will, open it, before before, Christmas. And, I'm quite sure that, it will be, successful, and it will help us to to continue good process that they're in in in Latvia, also. And then we have a good present presence there in in in in Russian, in in Saint Pete and in in Moscow. And, we are in the positive side also there in in in EBIT. And in Poland, we are just now studying what is the market there, what our operations, and and, we are exploring how to utilize this, big potential there in in, Poland.
And here, you can see that, in in, in Finland, And in this is all together, this billing and technical trade. So not only DIY, but all altogether, So in Finland, we are in in in in high level, but still we have a roof for improvement also in Finland. I see that it it we can improve our, markets there also here. And then in electronics, it's it is in in quite quite good level. But in in many countries, there is huge potential to improve, that is, our our size, especially, as you see, for example, in in Sweden, I would say that at that, I I'm not satisfied with the situation where we are, we where we are, today.
That's no. This includes everything. It includes, k router, Rautier, and onion operations and comparative toll market. Maybe you remember that in Ketera, the route is that we, more than 40%. Okay.
Then, our mega mega trends which, influence to our our operations and then some strategy points. As we have presented previously also, this mega trends, which drive P2P growth building at renovation increasingly is technical and and also regulate regulation increases. And then, it's very easy to see that, consumers more and more, often, outsourced building, to professionals. And then, we can see that there there is growing, need for renovation in different, buildings, everywhere, I would say. And then also rising a standard of living and aging of population increased the use of services.
So there are many many trends which affect that B2B share will will, increase. But as I said, of course, we will, also concentrate on B2C and improve, this efficiency and and, service for 2 customers. As Miko, presented, our, direction in in our our division, I would say some more words about what what does it mean? This unified building and tech technical trade. What kind of in in what size size, site we we can we see the the synergy potential.
It's from customer side. There it's it is more or less, to to create new kind of services. We see that we have, great potential to share better our existing, customers. I keep better service to them, wider assortment, and, and, I see that it has started to develop. There are many Yes.
Details and and many, issues with which we are which we are concentrating to improve. So, this customer side, it's more or less creating something new and 10 how to call support functions or or or or or or there there we have integration is Of course, we we we we are integrating our operation in HR issues, finance issues, ICT issues, logistic issues in in logistic site. I even, she also, potential to share our customers better. We can combine our our, lots in in on the side and and and in in DIY side. So there are 2 potential which we are concentrating to to to make this, new, unified building and technical trade.
And then this best digital services. We are really, concentrating to improve our, digital services in in B2B site and B2C site. Those are differentiated to those projects because customers need for service is there's big difference between B2B and and B2C. And then, of course, I I see, that's there is huge potter zone to improve our our profitability. Also in in in coming, years.
And we are prioritizing, to profitability and organic growth and, and 10, third is this, acquisition, possibilities which we are also, exploring. And the most, the best areas where we can create this, growth is it is in in Nordic countries and and also in in public countries. So, near near Finland. And then, we have changed our organization structure so that as I mentioned previously, it's very important, to create, or to keep it better service to customers. So, we have, since, meet of last, month, 2 different, business units.
1 for P2P and 1 for P2C and 10, in in country level. We are, implementing those, synergies and taking care of customer service. And, we are combining gecko and on in and strengthens and and and, offering to customers better service and this common global core? What what does it mean? There are also, central units for, purchasing for a logistic issues for marketing, for store site issue, and ICT, and some of those, functions are are also kesco level functions.
So we are utilizing whole kesco power also, sir. And, for example, one issue which I I want to point out in is store site. We are, piloting, we are preparing a pilot where on in an express will be, in same premises as. And so there we can, we see that we can share those B2B customers better in same site. And, and, also show, I I'm quite sure that we can uh-uh have a sales growth and also, better, return on capital invested.
Employed. So there are also 2 different things, how to improve this. And, then Our own brands. We have a worked worked a lot of this but still we are in in in quite low level. Our best, product category tools and and yard and garden via, only a little bit, more than 10% level.
So we see also in this side big potential to improve and give better service to to our our, customers. And one part of this, unified business approach is this, and, that we are integrating k router and throughout here in Finland to new, k router. And, I'm happy, very happy to say that, last Friday, we had very good meeting with, k, retailers, k, route, and route to our retailers in Finland, and they are very into enthusiastic about the situation, and we see that, it will give us, good possibilities to to sure even better our customers in Finland. So this is why I say that I see that we we are able to improve or or make growth also in in in Finland. 10, some words about b to b trade as as I, have said this there is, very good potential to to keep even better, offering to to to our customers by utilizing, all product lines.
And then, I'm, I'm so happy after owning an acquisition we we made our homework very carefully before acquisition and, it has started as as we supposed it it, on and, will start. And, and, I'm very convinced that we will be able to to deliver deliver those synergies as as we, announced after, on in an acquisition, so 30,000,000 to 2020. Of course, target is to to make it, even, earlier. And ten best digital services to B2B customers. It's it's it's not only this ecommerce platform.
It's planning services so that, those contractors and so on. They can use our, our, services so that they can, make also themselves more efficient in their operations so that they are more, connected, to us, and also those mobile cons construction site it is very important that we can, offer them that, to to contractors that they can handle easier day pay paperwork. It is, also very important for us. And this expansion of owning an expert express network. We are we are working on that.
And it's it's good to I understand that, on average, on in an express. It re it requires only about €1,000,000 investments. It's it's so so small investment compared as, as you say, we have also renewed our k router concept that it it it require requires 20% less, capital to the new new k rata sites, but if we compare those, it's it is at least 10 times bigger investment or 10 times less investment. To to own in a express than k router, store. And then b to c side trade.
The the main question is how and how quickly we are able to develop our, e commerce services. And now I'm very convinced that we are next year, we will make or take, big steps for example, last week, I visited in in our pilot, one pilot, the k router 75, says, in in in Vanta. And there is one pilot, in in in a kitchen side. So that, we have a developer, one mobile, application so that we can communicate with a customer easily. And also, the constructor can, communicate easily with with the customer.
And there are also many other actions going on and the most important in Finland is this new k. Release, which we are planning to to announce, at the same time as we are announcing or or or implementing this new care out of chain, in in in Finland. And also, this, also, there is this common global core and, of course, local, adaptation and own brands are very important also in in this side. And we see also big potential. How do you utilize this new on in in Kesco new building and and, and technical trade, operations.
We have been able to improve our our profitability but still there is huge, potential in this site. And and, and we are working on that. As you see, we we have many, many ideas how to improve and I'm very confident that we will continue this good development. As said, we are concentrating on profitability and organic growth. And at the same time, we are exploring, that, there are good what is what is what a good moment and and, to acquisitions.
But of course, now we are concentrating to to take on in an and, and, creating a new building and technical trade, division. So thank you. This was my my presentation, please, questions.
Don't miss. How could it be Seabee Wealth? As you pointed out, you have a target of being among the European top players when it comes to profitability. Mick Cole, so refer to competitors such as wholesale, etcetera, wholesale having, say, 8% margin and even 12% in Sweden. Is it feasible to believe that owning and could reach about the same or even better?
I see in in online side also, or absolutely I see big potential there. There, we are creating this common core. Onin has been very diversified comp company. It hasn't, utilized to power in country level or or all altogether on an operations. So we we see that there is big potential and how to combine and utilize our existing, k route of B2B operations.
We are working to reach, same level. We we know very well what ourselves has achieved. So many questions. Maybe the presentation wasn't so good.
Just Ted Roberts from Nordea. On the on the on the onion, first of all, the strategy of onion outside of Finland, could you explain a little bit about how you think about doing that?
Yes, we are working on that and we have some ideas how to utilize and how how to proceed there. For example, in in in Norway, we we see that we can combine our logistic operations, logistical operations there. And in in in Sweden, we see that as I mentioned, we are piloting, that only in an express will be inside k router premises. And, and, as you know, of course, we have we have reached positive figure in carryout operations, but but it it is still in in very low level. And it can be, many persons higher, and we can improve, our, our, effect new effectiveness and capital allocation to her.
So I I see that we can, enlarge our our store network in this side in in on-site. And, as I say it in in, in in Poland, we are studying to market. And, incoming months or incoming, yes. We will decide if and how we will proceed there. We are now operating there only in on the side.
We are not whole B2B actor. And, of course, they're they're we we like a P to C operation totally there.
And what's the strategy? The the killer application for all say, ourselves seems to have been that they are in many different product categories. Are you the hip hop, the electricals, and then the tools? And you will now have a the tools in your DIY business, Y, the K router. So it's the kind of thinking that you would, take the K route tools into the on and then, business as well in Finland, for example, to kind of improve the profitability via that side.
At least from customer's point of view. To customers, we will offer whole assortment, including tools and and so on. And, this is what what we are working on just now. And, we see that we have big possibilities there also compared to our competitors. And, I'm happy to say that, that we have new, Mega Express there in in in, what's the name?
Kozhika Wanda. And, there, we have piloted to have more tools and even some, working clothes and and so on, and it has affected so that, that that, cross merchants cross merchant has improved quite well. And also customer has, be satisfied also. And, we can make this happen. We we we we haven't planned to have so big stores others.
This is very big stores. This, on in Mega on in Express. But as I said, we can combine our existing sites in in in existing sites. We can make this happen. By not investing so huge amount of money.
And then the then the last question on the on the sourcing is there a lot you can do with the omen and and with the K route of combining them together and have you started to do that already?
And and we see also in in this side, quite big potential.
Alright. Thank you.
Some some information about this, on in the future. Please remember that on in Finland and Norway, as they stated, are performing pretty well. And, Norway and Finland have also caught the progress. The biggest question marks are definitely Poland and Sweden, and we have decided that within coming 6 months, we will decide what kind of measures are needed to turn business back to the black figures in Sweden and and Poland. Paltic Countries are quite small when we discuss it about owning and and we have very strong, company Kozhanu Kai has stated many times, and, definitely, our intention is to combine on an important and Casco Zenupai, but, but, maybe that will do a little bit later on because, much more critical.
Issues we have in Poland and in Sweden.
Yeah, well, you partly answered my question about on this council level profitability, but few other questions, came out to Rautia. You have all this for quite a long time and only now you are combining the brands into 1. So what has changed your thinking in here? And and another question, regarding Sweden, you have 5 ish percent market share or something like that. Is it, is it smart to be in Sweden without acquiring something to be bigger just working organically from 5% market share, maybe to 6 or 7%, can that become a significant contributor without buying something to make it bigger, faster.
This first question was e easier. So that this, Kroute and and Rautia, when we, started to work with our status at the beginning of year 2015, we were we made very carefully our our surveys, and and we analyzed our customer surveys. And they they to answer was that those from customers point of view, those carryout and Saudi are quite similar kind of. It it was also easy to see what what is the difference. And then another issue is that because of this digital services.
It's much more complicated to create, digital services to 2 different things and of and also marketing. 3 drivers was, up behind this, solution. And then what was the second question?
About Sweden is or gradually increasing the market share through organic Is that enough for it to become a meaningful player in your portfolio, or should it become faster, bigger, faster by by buying something?
I I think so that, of course, the speed and it it's very, decentralized, country in in operation compared to to Finland and and and, at the same time, I want to say that we we have also in our our existing, operations, big potential to improve because, as I said, that, EBIT, it's about 0 or or plus 0. So I see that there is also a potential and how how to combine our only then and and the k delta operation operations also there. And maybe there are also we will need some, investments, also in Carroll, but not we are not as as Mickco and Duke has presented any huge investment programs there, but some investments are also needed there.
I stated that the that the Nordic countries, public countries, most natural growth areas. And as Stero said, Sweden is surprisingly fragmented market compared to Norway, Finland, also due to that reason, definitely very interesting for us. But before that, as you know, very well, we have still quite many homeworks to do especially in Sweden. But, I feel that we are on the right track. We are now back to black figures on, and then once again, I repeat that, we have to decide very soon what kind of measures are needed.
And, definitely, if we need heavy measures, on in and Swedish operations. But at the same time, we very carefully evaluate, those acquisition opportunities in nortic countries as well as in Baltic Countries.
Just to get back at that onerous control level profitability, can you give any indication of the size of law is in Sweden and Poland or alternatively the size of profits in Finland and Norway? Pretty much the same question.
In in in in in in Poland, it it hasn't been, loss making company. It it has been made a small positive EBIT there. VB launched new SAP to Poland some some months ago and, of course, as you know, sometimes there is some, influence to to figures also, and, Poland market has gone a little bit down. In in building, and, home improvement side.
Piran is, quite painful when we discuss about owning an operation.
Yes. Raleigh from. On acquisitions, you know, on last CMD, you you talked about about the potential to expand to new markets in in in Europe into DIY trade and now you are clearly highlighting the Nordic and Baltic countries the areas to to go. So what what has changed there in your thinking?
Of course, now we are concentrating to to utilize this on on linen, acquisition. And, and as I said, we are we have explored and we are exploring, those countries, what what, Mickko mentioned are the most, interesting countries for for from our point of view.
So it's possible, basically, to kind of come back with the growth strategy to to do also a new market in a few years after you have integrated on NN.
Such as in a building a technical trade in all core businesses. But Once again, important to repeat, most natural growth areas at the moment, those reasons, what we mentioned,
Okay. And and then then in the in the DIY trade in in the market where you have a weaker market share, basically, Sweden, and a lot we have to maybe maybe in particular, are you happy with your kind of concept of of your of your business and and and store. So is, is that kind of working? And you have faith that that's, that's the way going forward, or do you think you would have to kind of totally renew your your concept in one of the weaker countries speaking about DIY.
In Sweden, I think that the that the most important, circus factor has been that we have, improved our B2B operations there in in South K Router. And and this specialties, B2B sales, quote has been significant in in Sweden. And this has been very important from our point of view. And as I said, in in in Latvia, we are piloting also, new concept and we will launch also new new new brand territory in in in Latvia. And we are utilizing this Tesco Senokai, power chair.
Tesco Senokai has been very profitable in in Lithuania, and they they have some, differs to our existing, concept. They are more utilizing the whole non food. And, I think it's very interesting to see how does it work in in riga. In Latvia also, and and we are ready to invest also, new locations there there in in in in, in Latvia. Especially in riga.
Really, very important to remember that Sanukai concept in Latown, he has amazing success story. From commercial point of view, from operational point of view, from profit point of view, and as Terro stated, our aim is, more and more, have same approach especially in Sri Townia, Latvia. And, let's see more and more common approach properly in all Baltic Countries.
Any other questions? Okay. Thank you so much.
Okay, ladies and gentlemen, ready to continue with the presentations. Nice to meet you, everyone. My name is Mickk. From the car trade of Tesco and, and as Yuka described already, I'm not back Calati, even though I also am losing already some hair from my head, but But anyway, Pekka will join us later on in the evening and will be with us at the dinner. So we agreed already with Pekka that there's questions I can't answer, he will take care of it in the evening.
So please be gentle on me. Some words and let's say, say insight on the car industry or car business, we were just discussing here that quite a, let's say, a lot promising headline I have here, but at least we are trying to describe here what we are doing inside our company and in car trade to to take advantage of the changes that you the basic size and the figures of the company, we are clearly a little prouter in the company compared to Therajos and Jormas divisions But on the other hand, it's a good side because everybody always likes the little brother and our business is really interesting and we are happy to represent it. The sales is roughly 1,000,000, operating profit 26, around 3.2%. And return on capital employed 22%, which is, of course, quite nice. Then on the right side of the slide, you see a little bit more than how our business in Salesforce is divided.
There's roughly half of the business coming from the, importing activities, importing business of Volkswagen Audi sales and MAN, and then the other half roughly is coming from our own retail operations we have in the capital area and Turco area. And also, if you take the retailing business in pieces, there's naturally the new car retailing parts on 30% of the of the totality and then used car sales and after sales retailing, including also work. After sales, 9% and used car retailing 14%. And actually quite surprisingly, you car business is currently a growing segmented whole of Europe And Car Industry. And there's many players playing around this thing and boosting new services and new kind of business models in that area, not only Finland, but also European wide growth, is bigger in used car sales currently than in new car sales.
Then if you take the car market a little bit on the and perhaps the finished car market in more detail. For us in car businesses, it's really, really important to maintain this good market share level, Mickko mentioned, some 20%. And this is what it's been already 4 years, but because it's or why it's important to us is the fact that, that to maintain good, level of operations and business in the offices, we need a good car park into traffic. And when we have a good market share to good car park is remained, and of course, then we have good business in off the sales side as well. For example, today, looking at the weather, it's the best marketing campaign we can have because unfortunately, a lot of Volkswagen are in the small traffic accidents, it means new business for us in the body repair site and so on.
This is how the business works. We need even when we have hard situations in the market, it's really, really crucial for us to maintain the, market share levels we have around 20% as a totality. Volkswagen after 10 months is still the market leader in Finland with 11% market share Audi is number 1 in premium segment. So those figures as well as are quite nice with with the market share of 5% roughly and SEAT has, let's say, after some years, a great offensive going on, for example, with new Ateca SEATAKA model reaching 2% this year. And for us, that is, of course, a, a cheerful thing.
Also, MAN trucks we discussed earlier also there, we have, let's say, the growing brands currently, we have our, our MAN and SEAT. Set in passenger cars and then MAN trucks in truck market. We are boosted quite nicely about the market growth as well. As you see here, the market roughly 11% after 10 months. In, commercial vehicles, van business, it's even bigger, it's 16% and in in trucks is around 20%.
So quite nice boost also from the market development currently, or let's put it this way that something nice is happening in Finnish car market. Or, let's say, hopefully also in Finnish Economy in more general scale. Then getting back to the industry or, let's say, re engineering our view on reengineering the industry. As in all businesses, megatrends are behind. And as discussed already today, there are big things going on in car industry.
Urbanization being one of the global megatrends sort of pushes the car industry in the situation where there are more like new services like car sharing, short time leasing, mobility as a service as general. Same happens with digitalization when we have a lot of different digital, good means in the market, it pushes autonomous driving, for example, here, a nice picture in Palo Alto Google sales driving car. The technology exists already in many places and also different kind of easy access services are, pushed heavily by digitalization, meaning that that when people have the need to move from point A to point B, you have the nice services in place in your mobile and you sort of Uber like take the the journey journey into another place. Regulation plays a crucial role naturally. There's, limitations in car usage already existing in many cities.
We see this as a growing trend. More and more big cities will have limitations in in how to use car in, in, city center areas, metropolitan areas. Authorities naturally naturally are highly steering the business all the time with emissions on car taxation. This is also happening in Finland. Whatever happens in the car taxation, it has immediate effect on the car market and what happens there.
Of course, environmental awareness is also one thing pushing electric cars currently and also, as a separate thing, the battery technology to enable the electric cars will be a huge challenge for car industry in the future. Direction or, let's say, our, our view of direction for Cartwright, Mikko showed you this slide already, we want to think in the way that things are happening, we want to take our own advantage of the things happening and finding new business areas in car industry. We want to deepen our cooperation with Volkswagen AG. I will come back to that later on maintaining high market share, as I already discussed, growth and good profitability and also fast expansion of online car service or let's say platform cara.fi. I will also describe a little bit later in more detail.
Let me just give you a couple of words about our manufacturer strategy. Our manufacturer or OEM is also in in in, let's say, biggest change of its its history, basically. Partly, it's it's, caused by the, emission crisis, which pushes them to renew themselves and to push new kind of approach to the business. And on the other hand, it's, as like as us, it's derived from the fact that the market is changing and big things are happening all the time in the market. Volkswagen has stated out that it's about transforming one of the world's best carmakers into leading providers of sustainable mobility and how to do it in Volkswagen's language is to sort of push electrification of vehicles, as, as already mentioned.
Autonomous driving is the second one And the third one, our different mobility services delivered nicely for the consumers. So 3, let's say, building pillars of the new strategy, electrification of vehicles, autonomous driving, which is totally, you know, different approach for the whole car industry, and and also then different mobility services that are easy for customers to approach. A little bit perhaps in more detail about the new strategy and declaration of it that was made this summer, Volkswagen has stated out that there will be 30 totally new pure electric vehicles by 2025. The same same thing other way around much more actually more interesting is that they've they've stated out a 20 to 25 percent of total sales in Volkswagen Group will be electric vehicles by 2025. On the other hand, it means that there's still like 80% to 75% combustion engine markets, but still that is a huge change in Volkswagen, let's say, whole strategy and approach and car manufacturing.
In addition, full autonomous vehicles with Volkswagen's own self driving system will from 2021 also, and that is also stated already in the summer into strategy. Then the new mobility services are basically built on a strategic partnership with Get. I don't know if you know the service, but you can consider it pretty much as a competitor of Uber. Same kind of hailing service, service thing. They have a strategic partnership there, a new kind of, let's say, mobility services, robotics, car sharing, on demand trans we'll be crouped around this service later on now now as we as the following years will come.
This is basically the Volkswagen approach to the subject. And for us, as VVR, naturally, this is all like exploitable for us as well. And when these things go on, we want to be one of the first one to, to utilize them into finished market. Then when we come back to, our own approach in outdoor Tesco in Carche. This is our strategy in a nutshell.
We have 3 basic building blocks in the strategy, deepening cooperation with Volkswagen AG. Now, this means naturally that we are not looking for dealerships for issued to or something brands like this. We are concentrating on Volkswagen corporation brands and count on the fact that they produce enough business for us in that sense. Good examples in there are the growth of sale this year, as I mentioned, and for example, to MAN truck business, we started as a part of VBLTA in the beginning of this year. Then we are also pushing to increase, let's say, services business.
It doesn't mean only the after sales business it means only like new kind of approach to produce mobility as a service for consumers. This kind of new services. And car.fi is a good example of that. It it is a, a, let's say, genuine e commerce channel, which we started in the late May, early June this year, and we are purely selling used cars to consumers in online channel there. No, like, like, brick and mortar outlets are existing It's only the sales guy contacting the customer online, producing rich content of pictures for the customers about the cars online being totally transparent about the cars, being totally trustworthy towards the consumer and making it easy for the consumers to buy those cars.
This kind of approaches and spaces in the market we need to find to find also growth in this kind of services area. Then the 3rd pillar of the strategy is naturally the digitalization. No business can survive after a while if we are not coping with the change, This means also that in the traditional brand business of Volkswagen Audi said, we need to be able to offer customers the services they want in the channel they want. And and in our language, this means that if customers wants to start the buying process online, we need to offer it for him. If the customer wants to, buy his service online, we need to offer it for him.
And all the time in multichannel approach, that it's complementing the existing dealer chain we already have looking at the VVR, this growth strategy or GESCO's card rate growth strategy, I would say that if you look at this year's figures, we are nicely on the path. VVR sales growth this year after 9 months is 10%. And the own retail sales growth is even more plus 13% in that business. Used car sales is 20%, as I already mentioned, it's a growing segment currently, partly boosted by the cara.fi model. And the, let's say, the, e commerce model we have there.
After sales growth is, is in sales 8%. And as I mentioned, Saad and Mann, those figures, we can our sales are quite nice, increase in said registration 35% and increase in one truck registration, some 60%. So in this sense, the growth strategy is proceeding nicely. Then if you look at the omnichannel a little bit more in detail, I pointed out some key figures or KPAs for you just to understand it more precisely what kind of services we already have. And with one kind of omnichannel approach, we already act with the customers.
People often ask me that when can I buy a new car online? Yeah? And this is actually happening already all the time. And and we have a chat model in volkswagen.ify, Audi.ify. The sales guy is taking contacts to customer into online channel and starting the buying process or let's say the customer service process online.
And in this model, we will, we'll have this year or we have had this year some 40% growth in the new cars sold via this chat chat model service. So it clearly shows that this is a model where customer how customers want to operate in the future as well. Then another value is the online booking system or e commerce channel we have in place. It's a service where customer Volkswagen now, the said customer can easily book his his or her next service online. And in that channel, actually, the sales value this year will reach roughly 1,000,000.
And in our opinion, that represent some 15% of all the throughputs in our network. And in that, in that perspective, it's actually generated a nice channel growing channel for our customers to take contact and make the business with us. 1,000,000 in my opinion is a nice figure in our our context. Then perhaps a little bit different approach. If you take e commerce as such, we have also a e commerce platform for accessories, and lifestyle products and products like this in the brand business.
It's not about the volume so much. It's like it's quite much Peanuts business. But nice thing there is that the customers who have bought in that e commerce channel, 25% of those customers are totally new to us. They have bought before nothing from our dealers nor us, and and we can sort of reach new customer potential with this new channel channel in in in e Commerce. Then the last, last figure, 300 is the Cara, Cara figure, from the beginning of June, we have sold some 300 cars online with this car.
Identify, e commerce model. And, and, This is just the beginning. Let's put it this way. We are actively working on different kind of, let's say, innovative services under the Cara brand. To, to utilize this service approach in the car business.
For example, we have some 800, 2000 cars in our use cars in our inventory all the time. Why not offering these cars more as a service to customer? If customer don't want to buy the car, he wants to lease it for 6 months, we need to make it possible. And the nice thing is that we have the asset and the cars already there. So this kind of new approach is we need, but it's believe me, when I say it's not easy, it's pushing new sort of new ways of doing things, and we are also our traditional company, so little by little we go forward.
But the whole idea in Kara is to disrupt our own business in a way, and find new services areas in the business. That's my last slide, and now hopefully easy questions for me
Not sure if these are easy, but, starting with this this cara.fi. These 800 2000 cars that you have in the inventory, those would be at your current dealers.
At our own dealership, VVR's own dealership. Yeah.
And how does that model work? Because they have, of course, the model today where in such a way that you would take in the old car and then kinda you give the rebate for the new one and so forth. So it's kind of very, very tough to then sell it at the right price forward.
It is. It is actually working more or less in the same way, but but the the customer interaction is done online. So we have a chat service, and we approach the whole subject totally openly from our side. If there's scratches in the car, we take pictures of it. We show the scratches.
If there's bad winter tires, we take picture of the winter tires showed for the consumer. It seems to be ending in the situation that also the consumer is quite open towards us. And and we always have the possibility that then when you take, we take the car for the consumer, And our car or his car is not what he sort of thought it would be, the deal can be cancelled. But but that actually doesn't happen. Since we are open, the consumer is open, and it seems to be working quite nicely currently.
And then, then a follow-up on on, can I access these these cars also via Neti Alta and this other other online services?
That's a good question as well because some, a little bit from the sleeve, but some 90% perhaps of the used car volume in Finland comes from net debt. So we need to be there. It's, it's, you know, it's simple fact of life.
Yes. And then the last question, there was one company which tried to come to the market this year who gave interesting numbers around this whole business where they were selling a lot of insurance, extra kind of 1 year guarantees, etcetera, where they, in the end of the day, they made all the money for the business in services, which were nothing to do with actually selling in the car. Are you providing those kinds of services for or or top of services for
selling those cars. This is exactly what we are trying to achieve. To find the places in the industry where we go forward with the services inside the industry. So yes, little by little, yes.
Nicholas Katami from OP Financial Group. I'm not sure if you're the right one to comment, but maybe, Mikko or or, someone else will can comment on this. You have had quite a good growth this year, a special, and, but the profitability has come come down, quite significantly. Can you describe what is behind that?
May I? Yeah. This is the one. I I agree. This is the one.
Basically the, the emission crisis Volkswagen had last autumn is behind of that. So in a way, we've we've been in the this year, we've been in a situation where we have to take care of our market share and we have to fight for our market share. And that has naturally costed some money as well. The good thing here is that it, little by little, seems to be over. Brand preference of Volkswagen took a, I would say, an enormous hit last autumn, but it's already coming back to almost the same level.
It it has been in. And in this sense, we can look quite positively into future. But basically, it wouldn't be open if we say that the emission crisis hadn't had an effect on the on the profitability of way we out.
Okay. Thank
you very much.
Alright. Good afternoon, everyone. I'm trying to make a very, really quick recap on the digital projects. In a 15 minutes or so, so you have good time to then enjoy your drinks and dinner. We have also kind of recognized some megatrends within the digitization when we are looking at the outside the window So what is maybe the kind of common denominator for all of the businesses is the change?
And the change is kind of becoming faster and faster. And it has a really, really big impact on our businesses. And the digitization or the digital technology is very often behind the speed and the change. So what has it kind of what kind of implication it has to our business? Probably kind of in the finance and business as well, But I think that the one of the biggest challenges for every retailer is that the consumer really, really is the king today.
So actually he or she has a kind of endless global selection in front of him. And we just are one player within within that group. The other thing is that the importance of data will increase. And this has kind of 2 sides of the join. On the other hand, our consumers are more analytical.
When they come into the store, they know everything about the product. And they're more kind of better decisions all the time. And then on the other hand, the amount of data within the business is increasing a lot. It's a kind of oil to the machine that makes the kind of machine take a little bit faster and better and without kind of less mistakes, I would say. And then the third thing maybe I would point out from this slide is that the importance of a positive customer experience And we believe that the next battlefield will be within the customer experience because on the kind of price and the good products brings you only to the par with a competition where you can excel and make a competitive edge is really the customer experience.
In the mobile, I think we are going the same track that every other businesses Today, we see that more than half of the old traffic coming into the K group's domain come from mobile devices. And it's growing. And then as Micko pointed out in his, presentation, on demand services will grow in Ares. Industry in car business and in other retail sections as well. And this is the world we are facing, and this is the world we used strongly believe in it.
In our strategy work, 2015, we already stated that we want to create best digital services to our customers. So, and why is that Our customers are already leaving this kind of life and we definitely want to be with the same page with them. And how we are doing there. So this is kind of a long journey. And this year and next year, we will still be very strongly in the digital platform and service development.
This means that we have lots to do in the basic still. We have a topic that or issues that we need to solve within, for example, the product information management on or data asset management And these are huge project or programs for the kind of corporate size us. And then going further on 2017, 2018, we definitely will come up with the new services and ecosystem development. And then like in 2019, I think that there will be we are kind of big in a big kind of sitting behind the rear here as well. So really thinking that as a big company, we sort of really set the, set the way where kind of, for example, Air Commerce is done in, in Finland, especially.
As you heard during the day, there are a lot of kind of digital projects ongoing in every challenge. And this is actually only we are having. If we are doing anything without logistics or HR, these are programs that are visible to our consumers. So in each of the other business division, there are so called spearhead projects. You heard about grocery trade about corridor FI, which is actually a very big media in Finland, one of the biggest one having 1,000,000 weekly visitors.
Or coworker mobile application, which is, with a target of 450,000 uploads by the end of this year, currently, we have actually already approximately 400,000 uploads, but we don't kind of include them all in our statistics because we want people to finalize their registration process. And that number is 250,000 at the moment. About the core robot application, that is kind of your kind of friendly daily assistant when you are shopping, and we know that it's working. People who have downloaded the application, the average basket size has grown kind of by €8 approximately. And if you calculate that in the yearly numbers, that's a big number for us.
So it's a real business case for us. It seems to increase loyalty, very much and also customer seems to be very happy. Happy on the product itself. And then about talking about building and technical trade, there are different kind of target groups B2B and B2C, and we have to offer services to all of this needs being e commerce, being kind of old tools, being kind of how you can manage your several sites, if you are structure or what kind of inspiration or design tools we can offer our consumers. And then this great success within the car industry.
But for us, the modern store is a physical store plus all digital services around it. And this really means that we have to integrate this endless and this is a kind of ongoing challenge for, I think, every kind of brick and mortar player at this point of point of time. 1 of the biggest projects we have conducted during the past 18 months is Corplus loyalty program. And we are on the way to build that as the most personalized retail program in the country. And I think that when we start about Buses, it's kind of good to stop here with a kind of volumes and numbers for a while.
So we are having 3,600,000, cardholders holders in Finland they done approximately 8,000,000 kind of digital visits to K Group's domains in a month, they do 250,000,000 physical store visits in our stores and they cover $5,900,000,000 of the revenue. So it's a huge, huge volume, what we are talking about. And that kind of indicates the importance of the whole program for us and for our customers. What we have done during the past year are several things. Technically, we have been, renewed the program and also wise.
This means that Pluso has gone digital more or less. So it's on your mobile. You can access through your Gauranga mobile application. And you can use your kind of loyalty bonuses or plus some money as we call it when you during the checkout project in the counter. And this seems to work very well after the first release of the Plusa money in 2 weeks ago, there were approximately 40,040 transactions a day within the checkout.
And kind of the customer feedback has been really, really well. On the concept level, we are moving more and more towards the personalized content. This means that you should be received offers and recommendations on the products that are suitable for you. If you are kind of vegetarian, you should not receive any kind of promotions on meat or kind of products, which is not in your shopping pass. It in general.
And this everything is obviously based on the data. So that when you register your purchase on the counter, so So, we are able to target the the promotions better and better for you. Then the one more thing I would like to mention about the renewal is that we also launch a program for our kind of best customers. The customers who are bringing more than €6500 a year to the K group are will be kind of receiving as a even even even better, better offers. And this is very important target group for the whole whole K group as a whole.
The journey in this has already started and we are doing a lot of improvements all the day time and we'll be launching new, for example, cooperation with our outside partners later this year and in the beginning of next year. But the aim here is really to become more and more personalized loyalty program. So not for everybody, but it's actually tailored for your needs. Then a few things about dates. Mikko has mentioned, and we also stated in the strategy that we want to churn this company very strongly into the data driven company.
And we really believe that it gives us a kind of head start compared to our competitors. And it's also kind of make us more agile more kind of faster company because when we are able to make decisions on the base on the on the data, we probably are able to move faster and make more decision at the same time. Actually, the number of data or amount of data or collecting data is not a problem as the challenge for every big player is what do you do with the data? For these days, almost, we have looked strongly on the internal data. That means kind of plus the data the customers give us.
And now we are moving towards for combining both internal data to the external data. And why external data? Well, our customers have outs kind of life outside K group as well. And for us, it's super important to understand that what is kind of the attribution model on the web and in our stores as well. Based on this kind of mix, we really believe that we are able to kind of build the winning customer experience with more relevant services, products, tools and so on.
And also kind of really turn the company so that we are not, not anymore looking from the rear rear mirror, but from kind of more looking from the, through the windscreen. One thing what we have been doing during the last year is related to business and the store specific business ideas. This means that every kind of grocery store has the business idea of their own and how they can make it. They can build it based on the data. So currently, every K- supermarket retailer K- city market retailer and K- K market retailer has access to their own data.
This means that they have a good picture about What are their customers like? Where they come from? What do they buy? And also on the other hand, what does the competition look like? What's the potential kind of business potential in the market, what they could have and the customers are currently shopping somewhere else.
This actually doesn't mean that there would have been the data before so This kind of excel sheet have been, sent to the retailers earlier. And to be honest, this sheet continues to column GT. So there's a long way to go. So you can imagine we're having like 100100 of retailers, the data literacy is not always on the top. So, we have moved more and more towards this life.
Direction. So now every retailer has a kind of visual access to usable, usable data and, and the kind of the feedback from the retailers has been very good. That's needless to say that this is also a huge training program, education program for us. And we need to really train all the retailers to standard how what kind of decisions they can do based on that. As one kind of example, how the retailers are using the data is that they are looking that when they should be open.
They are compounding kind of the sales data and then opening hours and thinking, okay, that what are the good, good opening hours for them, or then they are thinking when there should be people serving clients in the service desks or the service counters? And that's easily a very good business case for us because personal cost is off, of course, a big cost, for the retailers, especially during the weekends and late hours. We also show data for our customers and the coworker mobile application has you actually accessed the own data. And if you haven't downloaded it, now it's a commercial break. If you haven't downloaded it yet, you can easily do it by going going to, to, App Store or Google Play Store, and it's even available for Windows.
If somebody has Windows for still, and you really can have a, have a kind of look on the data. So Based on the your purchase behavior, we target you offers. And these are usually the products you are usually found in your shopping basket in general. Then we also give you recommendations on recipes, which are based on your shopping basket. So about the product or ingredients you usually buy.
Then they'll say we can populate you a shopping list based on the, on the kind of shopping basket, what you your family has. And this works because 80% of their daily purchases are always the same. And we only were right 20% of our kind of shopping basket. And then you, of course, can see your kind of goods and credentials there. And also see how much percent money you have available if you have any.
And this seems to work very well well at the moment. And this is a direction we want to build our customer communication as well. This, we have a kind of unique tool to be connected with our customers. And we just need to kind of build a, relevant content to our customers. And this makes us really humble because if the content is not good, we all know that what we do as a customer, we quite quickly remove the application from the phone.
So far, we are happy. But the journey has really, really begun. We have lots to do, and we have only scratched the surface. Especially if you are talking about the data. And the way forward is the kind of, I would like to point out three topics.
One is that we really have to focus on the customer experience and really understand the and improve the omnichannel experience as well. And then we have to bring the data to the next level. And really embrace the data driven decision making. Machine learning is a big topic for us. There are still kind of the human power still does a lot of work within the analytics that the machines could already do.
That's what we are thinking at the time. We are also thinking about the real time, not all the data is real time, really have to think that what kind of value add that would bring us if we were able to do it. And then there's also big topics like every business organization today about the big data and privacy, subject as well. And then to the last is that this is this is not a technical exercise. We are really trying to kind of cultivate the experimental culture kind of built lean organization with a kind of more activity in it and really work across the as one Kisco group.
And this data is a very good tool for doing that. And of course, we have to develop the competencies accordingly. I don't know if you, any of you have noticed that today, we'll kind of announce a new kind of digital recruiting campaign. So we are, looking for 20 more digital talent to join K Group mostly within the analytics and marketing platforms. Today.
And in Interos business, we launched in the summer that they are looking for 5th thick digital people to develop their, their existing, existing, services. Actually, that was my last slide. So happy to take any questions, if any.
Hi. Thanks for the. Thanks for the presentation. Rami Beyers Romiel Marinen. Question on the data.
Who owns the data? And and can you sell the data and and form a revenue share model with the company using the data as a a selling lead?
Yeah. So K Group owns the guest owns the data currently, but that's a good question. So what will happen 2 years' time who really owns the data. Does the customer own its own data? Regarding the do we sell the data?
We have some cooperation models, but that's lots kind of we need to think think that more carefully so that what kind of concept we have within the data. So meaning that what kind of data we give for free? What kind of data we give for kind of research purposes? For example, And what is kind of the commercial conceptualization within the data, but definitely, we see a huge potential in that.
Okay. Another question on the mobile ad. Can can you do dietary advice based on customer desires on the on the app?
That's a good question as well. Well, we might good what we want. So, but the thing is that if we are kind of looking for 2 years ahead when the propopoly we all own our own data is that if you can bring the data to your doctor, for example, and ask the doctor to have a look on your kind of shopping data and asks a kind of recommendations from that side. So that's the interesting thing.
Are you referring to PSD2 world on on on banking side where the customers on the data later on and and happens over here as well?
Well, that's a kind of the Anakin comment on that then later, but the EU legislation regarding the par privacy. Really seems to go to that direction and that will enter in force in 2018 so that you you should have a kind of access to your own data and take it wherever you want to take. But nobody knows that for sure yet.
Thank you.
Just regarding the
basic boring e
commerce, k router.fi kinda seems to have been in the making for, quite quite a while in these events every year. It's, I think, 4 or 5 years ago. It was the next year. There will be a new payer out there. That's better than ever before, and now it's there again next year.
So Yeah.
So what What has
been the
story been? Yeah.
Yeah. But what have been the what have been the challenges and and have you kept kind of changing the goal of where you want to go with it or or a little bit on that.
I think that the basic challenge, and terra, please kind of fill in if you wish is that the kind of the purchasing or the customer churning when buying, for example, some kind of tool totally different from buying grocery stuff. And usually, when you buy a kind of tool or hammer ever, you go first to Google and then you search for the certain products. And then you want to see the price and then you shop it. And we were actually asked customers first to decide the shop of physical store and kind of combining this digital life and the physical structures does just doesn't work in this concept. And now we are kind of changing that.
How does that work with your retailer business model that how do you get around the problem that although every retailer is guarding his sales and has really no incentive to tell the customer that go to Kroute without FY and buy this thing.
Do
you want to comment on that?
Yes, we have had very, very good conversations discussed with retailers and they totally agree what we are doing now. Because, we all have realized that we have to listen customers' needs. And make 10 things happen. And then at the same time, we we can utilize our store network in in in certain issues. So we have common understanding about the steps needed in this side.
Has this been a change over the last 3, 4, 5 years?
I I I would say that it has been a journey because first, we started so that we decided that every store have to have click and collect services. And then a customer gave us a feedback that that this is not good enough that they don't want to choose the store before they, have, price or product information. So they want to act at another way. And then we realized that maybe also have to change maybe we could have now some better answer.
I don't know better answer, but, but, Let's let's be very open. We have had very much internal discussions. And old ecommerce platform was developed more from our own internal purposes. And now I don't remember when it was, but it was very clear. This is some made by Tesco and retailing entrepreneurs that, this time we have to develop from customers and consumers point of view.
And I call that a revolution. I call that revolution and, and, due to that reason, I'm very optimistic that, this new k router dot fee when we will launch that, that, next spring is new generation application and definitely much more much more customers and consumers driven e commerce application. Maybe Terjeo has no better answer.
We have to remember that we this is for P2C customers. And there is a totally different card for services to P2P clients.
Yeah. Exactly. Exactly. So and I think it also kind of, you know, it's a kind of good phase to do the change. So there's a kind of enough volume in the e commerce channels as well.
So it's kind of it's a good push to do it at this point of time. And it's good combination with the kind of integrating core out and Raldier brands at the same time.
Thank you.
Thank you.
Yeah. Last but not
always happy to just be the last one to stand between the audience and the the sparkling wine. It's the I I was sure that if I say Sparkling 1 He will say Champagne, a fast recap of the, the Kisco strategy process, 2015, one of the megatrends sort of influenced us to focus on on brands and identity. And sustainability. Furthermore, later on, in addition to digitalization, marketing as a whole was sort of picked have one of the focus areas in the Tesco strategy, of course, among the businesses or, in addition to the businesses. We do this from the consumer and, and customer point of view, but now I'll show you Yuka's favorite slide.
This is something that when I back back investment fund from Mikuan Yukal first show this. It was actually a an old Berkeley University professor David Acre who already in 19 said that or revealed that there is actually a, even though Yooka don't always believe this, but there is a connection between the those companies which really puts some investments in effort to brand identity and really take care of nurture their brand portfolios. They're in a clear, connection between the, long term value growth. And, and therefore, We, sneak off, kindly points out every morning. We don't all only work for the customers, but we also work for the shareholders.
And, yes, Yeah. And I have a Windows phone on me. I'm one of the old guys. So we really started a year ago, a very strong work with a brand of identity. We started to unify the brands within the K group, and we also after a very con considerable amount of, consumer and customer research also made a bit of a revolutionary color change And that's the customer behavior question.
So we're now getting to be a bit orange. And if we look at the, what we're really trying to do now, we will change the content of the marketing that we do. Go from the traditional, price, tactical marketing towards strategic marketing, go to targeted personalized marketing, We started with Kmart. The change already on the spring and the rest of the, grocery chains, Joramaz business is, going to take place, early next year, and terraoske route as well first quarter next year. One of the most important and one of the most interesting things is the return on marketing investment.
I'll come back to that a bit later on. We also sort of appointed 3 major projects, within marketing And we do everything actually through brand preference because that's me got microphone out earlier today. There's a clear, connection between brand preference and profitability and market share. So we really, drive this through, brand preference. And the the old calculation says that when you increase 2.8% of the brand preference, you get 1 present more market share.
That is, of course, an academic calculation and doesn't always go exactly like in stream. But we've succeeded in something at least, during the 1st year, we have, the new K plan that was launched ago, during the 1st year, the value has increased from the little below €500,000,000 to close to €900,000,000. So making a 42% leap in a year is a pretty good result, I would say. And we have some really ambitious goals. As I said, we try to drive market share through brand preference.
Nico is a very, very patient person would like this to be ready next Monday. However, to be a bit more realistic. It takes about 3 to 5 years because we're talking about changing consumer behavior, which is never very easy. We're heavily relying on 3 key attributes, which is inspirational or personal and responsible, and the objective 2019 is no more or no less the master of inspirational customer experience where we do a lot of cooperation also with these y'all say that half of our marketing spend is wasted. We just don't know which half, and I'd like to say that it's busted.
One of the key things that we're doing together with on this team is actually the return on marketing investment. I took a small case here just to go through a bit of a more practical stuff in the end of them so that we don't only talk about brands. When you create a way to calculate return on marketing investment, there are basically three ways to do it. You do strategic metrics and objective, like brand preference, you measure campaigns, which is somewhat exciting, but the the most important thing is that when you try to really improve sales, you need to look into how you get more out of the marketing investment that you're doing. And now while Okay.
I cannot move because there are tapes actually here which sort of put a put a limit to where we can change, and I'm the one who always runs everywhere. But from here, the big, the long, big gray area there is the base footfall, meaning the base, customer traffic that we have. And then the light blue is the customer traffic that we get from marketing. And it is quite funny, and understandable that the small stores actually, I mean, they are there for the location. People go there because of the location.
That's the main, of course, Joramas team has been able to show that you put Pirka products into a, Civa and suddenly you also get some preference. But basically, it's about location. And also the supermarket store, the base food fall, they have a very strong food brand, food image. I mean, supermarkets are the best finished food source. I think we all can agree upon that.
And therefore, because they have such a strong base footfall, such a strong brand, Also, for them, the marketing invest investment is is quite quite small, actually. And then we go to hypermarkets where price is the thing and you suddenly see a big influence from the marketing. And therefore, you need to be extremely careful of how to use the investment, especially in the city market chain. Taking a example, and here's the last slide from the supermarket chain, how you actually start working on the investment. For instance, if you look at television, the investment, and now I'm talking about the marketing investment, which is on top of the base food poll, meaning there's more little thing for K market and gradually a lot bigger for City Margin.
If you take that thing and then you start splitting that marketing investment into pieces, you suddenly realize that in case supermarket, case 22% investment on television seems to pay off 33 percent of the, the, new turnover, you know, you know, the additional, customer traffic. Or at the same time, you start seeing that the old fashioned leaflets, which you see between housing in sediment and here and there, 16% of the investment, only 6% of the customer traffic. The same with so called Monday leaflet offer letter. 19% of the investment, I mean, it's really heavy when you print things and you deliver them to people homes, 19%, however, only bringing 4% of the the additional football. So these are kind of stuff that we work with the re return on marketing investment trying to optimize the stuff that we do trying to get more out of the the, the investment.
And also one of the key things is that we're gradually starting to move the right way Meaning that we're gradually moving from mass media marketing into personalized marketing because as, Andy pointed out, the, the, the future of the marketing and the future of the customer experience is actually mobile, and we need to be there. We need to be present there rather than be present in the housing in Sanamad pages and pay dearly for it. Thank you very much. I actually took the schedule.