Ladies and gentlemen, welcome to Keeskoy's Full Year 2020 Release Call. I'm Keeskoy's CEO, Mikko Hellandar. Together with me, I have our CFO, Jukka Ehrlund and Vice President, Investor Relations, Hanna Jakkola. Keesco had a very strong year 2020. We were able to increase significantly our sales and profits.
I will first give an overview of our business performance in 2020 Q4. Thereafter, we will be happy to take questions both by phone and via chat. Main facts for 2020. We were able to increase significantly our profit, in comparable terms by nearly EUR 120,000,000 The record result proves that we are able to successfully execute our growth strategy also during these exceptional times. The year 2020 is, of course, the year of COVID-nineteen pandemic, and it affected our businesses in different ways.
The pandemic had a positive impact on the company's profit, but Less than half of the profit growth was related to the pandemic. In 2020, Keesco sales grew and profitability improved. The performance of all key food store sales was excellent. In Building and Technical Trade, the performance was good in all countries. On the other hand, Food Service Business and Card Rate were hit by the corona pandemic.
Keesco's financial position is strong and cash flow improved clearly. In 2020, new financial targets as well as Sustainability objectives were set. The net sales in 2020 totaled €10,243,000,000 it was up comparably by 3.6%, thanks to our strong strategy execution. Net sales increased in grocery trade and billing and technical trade. These numbers are excluding Keesko Senukai.
Comparable operating profit for 2020 was record high €554,000,000 and it increased by almost €120,000,000 It increased due to good sales development in grocery trade and Building and Technical Trade. These numbers include Keesko Senukai as a joint venture instead of a subsidiary for the whole year 2020. Keesko Senukai had an impact of €25,000,000 on the Group's comparable operating profit. Return on capital employed, one of our strategic targets, improved and was at the level of 12%. It improved in the grocery trade and in Building and Technical Trade.
Keesco's financial position is very strong. Cash flow from operating activities continued to strengthen, and it was almost €1,200,000,000 and our liquid assets were over €300,000,000 Net debt to EBITDA, excluding IFRS 16 impact was 0.4%, clearly below the target level. We continued the investments in sales growth and better operational efficiency, even during the pandemic. We continued to execute our growth strategy during the year and both Cars and Fridge Building and Home Improvement Rate seen in Norway and the Miap and TUK and Interior Businesses in Sweden. We have been growing our sales and profitability for a long time, which is a strong indication that our growth strategy is working and being successfully executed.
As I said already earlier, the strategy is in the key role in our success also in 2020. Less than half of our profit improvement in 2020 was due to the positive impacts of the pandemic. Going forward, our strategy provides a good foundation to continue on the same path, to increase sales and improve profit even further. One of our important strategy focus areas is sustainability. Our Systematic Sustainability work were noticed widely internationally.
Once again, for the 7th time, K Group has been ranked as the most sustainable grocery trade company in the world in the Global 100 list. By sourcing K Group, customers are sourcing a more sustainable way of eating, building and driving. All time best Q4. First, some Q4 key figures. Net sales and operating profit continued to strengthen, resulting in operating margin of 6.2%.
Earnings per share was €0.31 Net sales the net sales in Q4 2020 totaled €2,662,000,000 It was up comparably by 4.5%. These numbers are, again, excluding Keesko Senukai. Comparable operating profit for Q4 was record high €165,600,000 and it increased by nearly €45,000,000 It increased due to good sales development in grocery trade and building and technical trade. For the whole year, the comparable operating profit increased by €119,000,000 to €554,000,000 These numbers include Keesko Senukai as a joint venture, and it had an impact of €1,500,000 on the group's comparable operating profit in Q4. And now to grocery trade, where sales and profit growth continued strong.
Net sales totaled €1,517,000,000 and grew comparably by 4.2%. Net sales grew in all food store chains, but declined in Keespro. Comparable operating profit for Q4 was record high €123,000,000 and increased by €25,000,000 Profitability was 8.1%, and it increased due to good sales development in all food store chains and improved Operational Efficiency. During the quarter, retail sales market grew by 9.4%, while K Food Stores were up by 10.1%. Sales grew in all K Food Store chains.
We saw excellent Christmas sales. Market share strengthened clearly also in December. Online growth rates has continued to grow. The corona pandemic has caused household consumption to focus especially on domestic retail. This is the 5th year in a row that our k Food stores have gained market share.
We are now at the level of 37.6%. Our retail sales have grown by €1,800,000,000 since 2015. Online grocery sales have grown this year by some 400%, and at the end of the year, 4 70 ks food stores offered online services. Our market share in online grocery is over 50%. NPS is high.
In December, It reached the level of 83%. Online sales reached 3.5% of the total grocery sales in Q4. It was 2.2% in Q3 last year. NPS is also high in our physical stores. We have been measuring our customer satisfaction systematically for years.
NPS is now at the level of 65.1. It has increased 12 units in 5 years, thanks to clear strategic focus on improving customer experience. The amount of important customer feedback has also increased dramatically and is now over 2,000,000 cases. Feedback is very valuable, and we use it widely to improve the customer to improve customer experience. Here is the reason why we focus on improving customer experience.
There is A strong correlation between sales growth and customer experience. The stores where NPS is over 61 are performing clearly better than the market. The delta between stores with NPS higher than 61% and lower than 61% is 5 percentage points. Stores underperforming at the market need to focus on improving customer satisfaction. There is still a lot of potential to grow both sales and profitability simply by focusing on customer experience.
I want to highlight that there is still plenty of potential in continuing to implement store specific business ideas based on customer data. Some 50% of K Food stores are currently visibly implementing store specific Business Ideas Widely. We are a forerunner in store digitalization, and it also improves customer experience, both online and offline, and makes operations more efficient. Also, I want to underline that we have a good retailer business model, and also it makes us unique in Finnish grocery business. Our B2P business, Keespro, has been suffering during the corona pandemic, but it did well in a difficult market.
Net sales was €784,000,000 Keesco's market share continued to grow, and we were able to keep the profitability at a good level under the difficult circumstances. To summarize the strong basis for continued growth in the grocery trade, there is further potential to improve customer Experience, Digital Solutions and Efficiency. Also, our market position is strong in food service, which is very important going forward as the pandemic passes. We will continue investing in growth and transformation. And now to Building and Technical Trade Division, where good development continued in all areas.
Net sales excluding KeeskoyeSenukai grew comparably by 6.3% to €918,000,000 Net sales for the Building and Technical Trade Division grew in comparable terms in Finland, Sweden, Norway and Poland. Net sales grew in both B2C and B2B Trade. Comparable operating profit, including Keesko Senukai as a joint venture, increased by EUR 22,000,000 to €44,000,000 The profitability improved and was high, 4.8%. In the Building and Technical Trade, comparable operating profit grew in the building and home improvement rate in Finland, Sweden and Norway. Onenine's comparable operating profit grew in Finland, Norway and Poland.
The acquisitions carried out in Norway and Sweden in last 2 years accounted for €10,000,000 for the comparable operating profit in Q4. Construction activity has stayed at a good level in Northern Europe and P2C trade has remained active. In the market, in general, growth in P2P trade flattened in both building and home improvement rate and technical whole For K Group, in Q4, net sales and profit grew. P2P trade continued to grow in both building and home improvement stores and also owning a sales crew. Completed acquisitions improved profitability.
Billing and Technical Trade is growing and performing well in Finland. The division's comparable operating profit in Finland, meaning both K Raute and Oninen, was nearly €130,000,000 B2P trade share Of sales was 74%. Coronavirus pandemic has not supported the P2P market development. In Sweden, the year 2020 was the year of a significant turnaround. Comparable operating profit was over €15,000,000 Also in Sweden, majority of sales come from P2P, namely 64 Persson.
In Norway, development was good in both Dykmaeker and Oninen. Comparable operating profit was €30,000,000 Also in Norway, P2P's share is high, namely 77%. Onin has developed well as a part of Keesco. Net sales was over 1,600,000,000 and it has grown comparably by 20% since 2015. Onenen's comparable operating profit was over €70,000,000 It has grown by €40,000,000 compared to the year 20 fifteen's level.
In building a technical trade, strong country specific strategies help us grow also going forward. We will continue putting basics in order and improving efficiency. Customer experience is the key to success also in this division. Digital sales channels need to be further developed even if the strategic focus is more on P2P side. Our customers need to be served well also going forward.
We will continue the sector Consolidation in Northern Europe. Profitable growth is at the core of strategy whose execution and we are on the right track what comes to the performance and operating margin development. Increased countries' focus in our strategy execution is working. Sales and profits are up. We are on our way to join the best operators in Europe.
And to cut rate where new models support sales growth. Net sales for the Q4 totaled €234,000,000 and grew comparably by 2.3%. Comparable operating profit for Q4 in card rate was €6,200,000 and it decreased by €2,800,000 Profitability was 2.6%. In the market, the first registrations of passenger cars and vans in Finland were down by 10%. Market for used cars was growing.
Demand for aftersales was at a good level. Our car trade sales were up by 2.1%. Used car sales grew by 14% and order book for new cars was up by 36% at year end. Our own leasing fleet is now over 3,200 Cars. In 2020, Volkswagen was the most rated all electric car brand in Finland.
And then, dividend proposal and outlook. Keeskoy's Board of Directors proposes €0.75 dividend to the Annual General Meeting. It is nearly €300,000,000 in total. The proposed dividend corresponds a payout ratio of 77% an effective Peshare dividend yield of 3.5%. Dividend proposed to be paid in 2 installments.
The proposal is in line with Keesko's dividend policy. Outlook. We estimate that comparable operating profit in 2021 will be in the range of €520,000,000 €620,000,000 The illustrative comparable operating profit In 2020, it was €554,000,000 The profit guidance range is wide due to the uncertainties related to the COVID-nineteen pandemic. Overall, the outlook for Keeskoy's Business in 2021 is positive. We continue to celebrate Keesco's 18th anniversary.
The company was founded under exceptional circumstances, and Keesco and K Group have grown into a leading retail operator in Northern Europe. I want to thank our customers, K retailers, All K Group personnel, Keesco shareholders and all other stakeholders for these past 80 years. Thank you. And now we are ready for questions. 1st, We will take questions from the conference call lines.
Thank you. Hellandar. Our first question is from Fredrik Irvason from ABG. Please go ahead.
Thank you. Hi, guys. A few questions from me, if I may. First, I want to talk a little bit The guidance and the outlook for 2021, obviously, a wide range, but you leave, I guess, room for a 5%, six Percent decline year on year versus last year always. Curious, what division do you see the most risk in?
Where Do you leave room for a sort of margin deflation?
First, I would
like to stress that our outlook is positive. And we have behind of us Excellent strategy execution, very strong sales and profit development already Last 5, 6 years, and I repeat, outlook is positive. We expect that this strong Successful implementation of strategy will continue, and that gives us excellent opportunities to beat also records in future, also in 2021. Okay, I repeat that still We suffered due to pandemic globally. Nobody knows yet exactly when the pandemia is over.
And that makes this estimating a little bit challenging. Once again, in all businesses, We feel and we see that outlook is positive. Okay. Some risks related to pandemia, of course, we can see, especially in case that we would be forced in some countries, temporary to close stores in building a technical trade or if construction companies, more big, medium sized construction companies, would be Forced in some countries to stop working on building sites maybe are the biggest Risks. But at the moment, we don't see that kind of problems.
And also our feeling is that in all Countries. We have also learned somehow to live better and to handle better pandemic related matters. But those are reasons that we can see in the middle of positive outlook also some risks. But hopefully and I believe we can very well handle those risks.
Okay. So primarily within the Building and Technical Trade, I agree. Thanks for that, Mikko. And a follow-up on the outlook for 20 21 as well. You mentioned you expect moderate growth within the food retail market in 2021.
What is your assumption here for COVID-nineteen in general maybe? And also if you could Share what you assume in terms of food price inflation when you say that you expect the market to grow moderately?
COVID pandemic, our understanding is that, unfortunately, Pandemic will disturb our life. Definitely first half of twenty twenty one. And at the moment, it looks that it is not yet over even in the second half of twenty twenty one. But hopefully, situation will be better and better under control, latest second half of this year, but nobody can be sure. And our expectation is that The market and our business environment is not yet back to normal this year, hopefully next year.
Cost inflation, it has been very, very, very moderate, especially in Grocery Trade. We might see some increase in cost inflation on that side. But we expect a bigger price increases, cost inflation in Building and Technical Trade. And It seems to be also more global issue. But I see that we are also very well prepared to handle and manage this matter.
Okay. Thank you. And then If you could help us out a little bit with the margin bridge in both the grocery trade and B and T. I mean, both these Divisions are at historical all time high levels. And if you could just help us with how much of the margin expansion We've seen over the full year has been due to volume and how much is price mix of that?
It is especially thanks to steadily growing sales market shares And also due to the fact that already many years we have succeeded to manage Higher volumes through existing logistic IT systems, and that has dramatically improved our cost efficiency everywhere. And we should remember that we have growth strategy. We are doing our utmost to maintain Growth also this year and also in the future. And that will give us excellent opportunities, further improve our margins and cost Competitiveness.
Thank you. And last question from me. If you could Just give us an update on the conflict with the other owner in Senukai. That would be interesting.
About Keesco Senukai, situation is very well under control. And we are very pleased as the biggest owner of Keeskoye and UK. That also in Baltics, Belarus, we have succeeded to increase sales and we have also improving Keesko Senukai profitability again. And it is strong message that also Keesko Senukai Situation is very well under control. Those different opinions between us and minority owner.
We are negotiating and we have also started arbitration process. And hopefully, negotiations and arbitration will help us to find resolution between parties.
Perfect. Thanks a lot for answering the questions.
And our next question is from Niklas Gugman from Handelsbanken. Please go ahead.
Yes, hello. I have a couple of questions, if I may. The first one is, I mean, looking at Kornen and Finland, it did well in the quarter. But then looking at your Building and Home Improvement Trade in Finland in Q4, it was only up 3.1% sales in comparable terms. And in there, I would assume that you have seen strong B2C demand also in Finland like we've seen Across Europe, that makes me wonder how your how the B2B development was within your building and Home Improvement Trade in Finland in Q4, because I see the comps were pretty easy as well.
Yeah. All in all, Our Building and Technical Trade performance also in Finland is a great success story. And we highly appreciate Jormer Raouf Hallas and his team. Very steady work, thanks to excellent implementation, well functioning strategy, steadily on the net krauta, increasing sales, improving profitability as well as gaining market share. And we feel strongly that this gives excellent platform for to develop and strengthen our building and technical trade, all in all, also in Finland.
P2P segment, especially in the builders merchant Business. We have seen some signals that demand is not anymore growing, but at the same time DIY B2C segment very strong. But also in B2B segment, especially in longer term, we can see very positive outlook. And our expectation is that also 2021 will be again very strong for us in Finland in Building and Technical Trade Business.
Okay. Keesko, I'm trying to sort of join the statements of flattening growth in B2B With just 3% growth for your K router business, knowing that B2C demand has been extremely strong, so it almost looks to me like Sales were must have been down in the quarter to B2B in Finland in Building and Home Improvement trade.
But as I said and I repeat, all in all, development is very strong. And when we take a little bit longer Outlook, we can see clearly that we are also very strongly gaining market share. And sales Profitability Development is very strong. If you take some numbers from Q4, That does not give a full picture. It is better to take full picture and look a little bit longer time period this year development.
And I repeat, also in Building and Technical Trade in the Finnish market, we can see positive we have positive outlook.
Okay. Thank you. Then
Just a question on your CapEx plans for 2021. I don't think I've heard anything communicated yet.
Yes, Jukka, you can open. Yes. So let's start with the
last year first. So As you remember, our CapEx last year was around €400,000,000 And if you took out the acquisitions from there, I think we landed somewhere around euros 240,000,000 that includes also that's actually the cash flow CapEx is even lower than that one Due to the fact that in the CapEx overall is included, for example, the certain car sales and so on, Leasing Businesses and so on and so. So the cash flow CapEx was lower. When it comes to this year, We are pretty much on the same ballpark when it comes to the sort of organic CapEx or CapEx overall without acquisitions. So No big changes on that side.
A little bit different on the mix. Obviously, store side sort of Things are the biggest part of the CapEx, but also it's highly important for us to further invest to the Digital Capabilities, E Commerce, etcetera. So overall, in the same ballpark as last year, Excluding acquisitions.
Exactly, excluding acquisitions, because we are working very hard to find new good targets. And If we will succeed, then we are ready to invest also more money on new acquisitions.
Speaking of acquisitions within B and T, do you is your impression that price tags have gone up on the back of this bumper year for Home Improvement.
1st, We can say that for time being, we have succeeded pretty well in acquisitions, and we have succeeded to integrate also very Well, those acquired companies and businesses, as well as pricing has been, from Keesco's point of view, successful. Also on that side, competition is tough, and good businesses and good companies Never Ship. This is matter of the fact, but we are very confident that We can continue also on that side our success story.
Okay. Very good. My last question is on the profit you or the profit you recognize from Seneca. It looks like they made almost SEK 23,000,000 in EBIT in Q4. But you're only recognized and that would net profit was SEK11.8 billion, but You only recognize SEK1.5 billion in your numbers, how which is like 13% Of the net profit while you own off in a bit.
So how does that work?
I'm very eager to open this.
Yes. Sure. So it relates to the it's actually said also in the report there that there was a fair valuation regarding the Keesko Senokai on 1st July. And that affected the sort of there was a fair value Sort of effect which was taking in the from the inventories during the Q4, the amount of that one was negative by €4,300,000 So that's sort of the reason behind that number. So it's said in the table if you look at the Keesko Senokai financial numbers there.
Okay, excellent. Perfect. Thank you very much.
And our next question is from Magnus Raman from Kepler Cheuvreux. Please go ahead.
Hello. Thank you for the presentation. I have three questions. First one is About the possible increase in price value focus in the market post COVID-nineteen, how do you plan to On to such? And do you see any effect on your grocery margins in that case?
As we communicated already Today, in Grocery Business, already many years, of course, inflation has been very low. And we might see some increase on that side, 2021. But let's see, Very, very stable prices already 2, 3, 4 years.
All right.
And then you alluded to previously the uncertainty about the pandemic and the wide range in the guidance for that reason. And you mentioned here on the downside risk, you mentioned risk for closed stores and what have you. But If you were to consider a scenario where lockdowns are released instead in H2, when you see a normalization in consumer behavior with less eating and domestication effects, That has been boosting grocery demand and thereby also then meeting comparisons that include such volume booster. How do you view that risk from that side, so to speak, from that perspective?
Again, I repeat that all in all, our outlook is very positive and, let's say, more or less all Matters which are in our own hands, in our own businesses, we are very confident that we can continue Strong development also in 2021. Uncertainties are coming from pandemia, very clearly from pandemia. But once again, I repeat that at least feeling on our side is that in all operational countries where Keesco operates. Societies are much better prepared to handle and tackle pandemia related matters. But now it is February, we are still starting here 2021.
And due to pandemic, we have plenty of question marks. But Once again, I repeat that all in all, outlook is very positive.
Right. Yes, that's clear. During Q2, we had cost reductions for temporary layoffs. And in Q3, you mentioned that such Cost reductions were minimal and instead the margin lift was driven by cost reductions and then operating or were driven by operating leverage. Was that picture the same here in Q4?
No, we did Plenty of temporary layoffs and heavy measures to handle Situation last year, springtime, when pandemia hit badly, Societies and Businesses. But at the moment, we don't see such a Big hit coming from pandemia. And due to that reason, our expectation is that Probably, we will not we don't have need to implement so heavy measures what we did, especially in the Q2 2020. But let's see. Let's see what this is at least feeling at the moment.
Or Jukka, do you want to add something? Yeah. Maybe it's worth sort of noting that we continuously do measures, Customer related message to drive our top line, but at the same time, we also have initiatives to improve our gross margin And cost efficiency, so it's sort of all areas are covered in our initiatives that we are sort of where we want to progress. And I think that was fruitful also during the 3rd Q4 that it came Top line, but not top line only, also from margin gross margin and cost efficiency as well. So continuing on that path in a way.
Great. That's clear. I just have one final here on online. The online penetration was 3.5% in Q4 and I guess around 3% on average in the full year 2020. Do you deem that these levels are sticky and will be growing further post the pandemic?
Or do you expect a setback, so to speak, here on these comps? And you mentioned previously here on CapEx also that you want to make or improve your online Abilities, can you please elaborate a bit about what these investments entail as well? Thank you.
Yes. About E Com in Grocery Business. Very strong development on our side, and we are so pleased that we are gaining Heavyly Market Share. And we are very confident that we have excellent position further develop our e com services in grocery business, thanks to nationwide store network and already today, well functioning ecom services. This is a winning concept, we believe strongly.
We allocate a lot of resources. We invest a lot of money to accelerate growth in Digital Services and Ecom, in grocery, but also in our other businesses. And We are expecting also in the coming years that strong growth in grocery ecom will continue. About investments, maybe Jukka will continue. Yeah, maybe just shortly.
Obviously, we this is
a long term game in a way, so we've been investing to the Technologies on e commerce and so on for several years, but this is a continuing process in a way. And this year, most likely, We are going a bit up from last year's investments in order to really sort of offer the best possible customer driven e commerce services. Our NPS numbers are really high, really high on the e commerce side. So and we want to stay there in the future as well. So that's why we All the time develop our capabilities and technologies on that side.
All right. Thank you.
And there seem to be no further audio questions. So I will hand the word back to the speakers. Thank you so much for the questions from Sweden. I don't have any questions from chat. So I think we can just thank you and Hope to say that stay safe.
Thank you. Thank you for your participation. And we wish you Pleasant afternoon, evening from pretty cold winter Helsinki. Stay safe. Thanks.
Bye bye. Yep.
Stay safe. Bye.