Thank you. It's 9:00 A.M., and I would like to welcome you to the Presentation of Axfood's Year-End Report 2019. My name is Klas Balkow. I'm the CEO of Axfood, and I will guide you through this presentation. With me today, I also have our CFO, Mr. Anders Lexmon, who will present the financials, as well as be part of the Q&A session. The agenda that we will cover today, we will go through, obviously, the key ratios for the fourth quarter, and we will sum up the fiscal year 2019 and go through our financials. I would also like to give you an update on our strategic agenda, as well as guide you in terms of our outlook for 2020 and comment as well on the proposal regarding our dividend. We will end up this session with the Q&A.
Before we go into the key ratios for the quarter, just a quick reminder of our house of brands strategy. We have, as you know, several strong brands that is well-positioned in each individual segment with a common logistics and sourcing. We have now, in this fiscal year, reached another milestone of over SEK 50 billion in our sales. Let's now go into the numbers and go through our fourth quarter and the key ratios. We'll start with sales. I'm obviously pleased to report that we once again report a solid growth, which is across all segments. Willys continues to outperform the market, we also see a more positive trend in this quarter in Hemköp. All in all, our net sales increased by 5.4 percentage points to over SEK 13 billion for the quarter. We look into our sales that we see in our stores.
We conclude that we continue to gain market shares. We have grown with 6.2% in the quarter, and if we compare that to the overall market growth, we once again significantly outperform the market, both, I would say, for the quarter as well as for the full fiscal year. Now, looking as well into the online part of our business we noted a 31% growth for Axfood, which we can compare then to the overall market growth of 17%. Also here we have a faster growth than the overall market. Moving then from sales into our operating profit, and including the new IFRS standard we are clearly improving our operating profit. However, also excluding the IFRS effect, we report a higher profit and stable margin.
This is driven by strong like-for-like but also somewhat offset by the investments for our future growth, such as common dark stores and investments in Apohem, Mat.se, and Urban Deli. All in all, profit came in at SEK 487 million, or SEK 442 million excluding the IFRS effect, which is a clear improvement versus last year. Moving further and looking into how we see it by segment, starting with our largest segment, Willys, which also includes Willys Hemma as well as Eurocash. Clearly another strong quarter with very strong like-for-like sales with + 5.1%. Versus last year, we now have five more stores and 22 more stores now offering e-commerce. The strong like-for-like and the good cost control led to SEK 285 million in terms of profit and excluding the IFRS effect, which is + 8% versus last year.
Outside the numbers, if I go into Willys and continue with Willys, I would like just to highlight that not only the larger Willys units are doing or having a good progress, but we also see a very good and healthy progress in Willys Hemma as well as Eurocash. Also in our online, our progress with the transparent fee system that we offer in Willys goes really well. I would like to highlight that we not only had positive Christmas sales, but we also increased our donations for Christmas food to relief organizations in this quarter. Moving then on to Hemköp, and a general comment is a step in the right direction. Total sales for Hemköp increased by 5.7%. Also that clearly above the market growth, but it's also supported by the new nine stores from Östenssons in our franchise system.
Our group-owned stores like-for-like has improved versus previous quarters to 1.7%. Our operating profit came in at SEK 65 million, or SEK 52 million if I exclude the IFRS standard. Even if we're then facing some softer comparable numbers, it is a positive move, clearly, as I said in the beginning, in the right direction. Looking at Hemköp's highlight, we continue with high activities to strengthening Hemköp. Highlights for this quarter has been that we now have, since February 1st, a new Managing Director in place in Simone Margulies. We have started also the expansion of e-commerce, then in click and collect, to our franchise stores. We start to see positive signs from our new marketing and communication platform. Moving to Axfood Snabbgross. We are also, and I would say on the other hand, compared to Hemköp, we're also meeting high comps in Axfood Snabbgross.
Hence, then pleased to see that we also, again in this quarter, reporting strong sales with very positive like-for-like at +6 .2%. A solid operation and good growth resulted in improved operating margin and improved profit to SEK 34 million for the quarter. Finally, Dagab, who also report a solid net sales growth of 5.3%. Our operating profit at SEK 152 million versus last year, SEK 170 million. Even if last year was a strong quarter, I want to point out that our underlying operation with purchase and logistics shows a very robust performance in the year and also as well in the quarter. The reason for the margin drop are due to our investments for the future. We are implementing, as you all know, a common dark store in Stockholm that continue to drive some cost for us.
Secondly, we also continue to invest in our new brands, as I mentioned earlier, in Urban Deli, Apohem, and Mat.se. Looking at the highlights for Dagab in this quarter, I'm then coming back to the dark store, as I would say that we are now making good progress with our dark store, and we are gaining a lot of learnings for the operation, how we can increase our productivity in that area. Learnings that we now are taking as we are now planning to move in to do a common dark store as well in Gothenburg later on in the coming months. We're also making good progress regarding our sustainability, as now 50% of our truck fleet is now ready for fossil free, which also is part of driving a more sustainable general operation.
Finally, within Dagab, as shared with many of you at our Capital Market Day in December, we now have all our key components in place for our new automated logistic center to be open up in 2023. With this, I've covered the ratios for the quarter, and I would like to hand over to our CFO, Mr. Anders Lexmon, to go through our financial position.
Thank you, Klas. Let me first sum up the full- year. The net sales increased with 5.5% to SEK 50.7 billion for the full- year. The Swedish market at the same time grow with 3.1%. We clearly gained market share, even for the full- year. It's mainly Willys that contributed to the good growth, but also the other segments have had good growth, Hemköp and Snabbgross, and consequently, even Dagab, of course, had good growth. The operating profit for the full- year summed up to SEK 2,288 million, an increase with 13%, and that include an IFRS 16 effect with SEK 174 million. Excluding IFRS 16, the operating profit increased with 4.4% to SEK 2,114 million.
We had a good growth in like-for-like, which boosted both profit in SEK and margin. We also saw improved gross margins in our concepts. On the other hand, we had, as Klas mentioned, higher cost to implementation of the common dark store and even investments in Apohem, Urban Deli, and Mat.se that hampered Dagab's profit for the year. The operating margin increased with 0.3% to 4.5%. Excluding IFRS 16, we have an unchanged operating margin of 4.2%. Looking at our cash flow for the year. As I mentioned earlier quarters, we have a huge effect of IFRS 16 at the row of amortization of debt of SEK 1.4 billion is fully an IFRS 16 effect. We see the opposite positive effect in the operating cash flow. That's a zero effect on the total cash flow.
We have a higher investing activity this year, that's mainly explained by the investment in the automation facility in Bålsta. A payment we did in the fourth quarter of SEK 510 million, that's affected the net investing activities. We also see a negative effect in the working capital, as I mentioned earlier quarters as well. Last year we have a positive calendar effect, this year we have a reverse effect that which is mainly explained the change in working capital. I will come back to the working capital. Otherwise, we have small changes in the cash flow. Share repurchases and dividend payout is approximately the same this year compared to last year. If we then look at our capital expenditures, we sum up to SEK 1,481 million, that's also including this automation investment of SEK 510 million.
Excluding that, the investments are up to SEK 971 million this year compared to SEK 905 million last year, if we exclude acquisitions. We have a little bit higher underlying capital expenditure this year. We increased our investments in our retail operation, which is the dark blue color here in the figure, with approximately SEK 100 million more. That's due to more store openings and also higher pace in our refurbishment programs in our stores. We also see a little bit higher investments in IT for the full- year. Back to the development of our working capital. We still see that we managed to decrease our working capital even in the fourth quarter. For the full- year, we now reach - 3.0% of net sales. It's mainly accounts payable that we made improvements in, but also in the inventory.
Inventory turnover ratio is decreasing as well. If we look at the development of net debt, we even this year had a net receivable position at year-end of SEK 377,000,000 , and that's also, of course, impacted of the payment we did to [2023] in the fourth quarter of SEK 510,000,000 . The equity ratio was just above 25%, which is well above our long-term goal of 25%. Finally, the development of our capital employed and return on capital employed. We see that we have a huge effect of IFRS 16 of approximately SEK 5.5 billion at year-end. If we exclude that, we are in line with previous years, and also the return on capital deployed is above 40% if we exclude the IFRS 16 effect. To sum up, we still have a strong financial position, and we are well-equipped for further investments.
With that, Klas, I hand over to you again.
Thank you, Anders. Now, I must say we have now ended 2019, and with energy moving into a new decade and a new year. We have outlined a solid business plan for the year ahead, and I would now like to give you or provide you with a quick update regarding the key elements and our priorities the year ahead to come, which is included in our plan. Now, first, let me remind you of that our mission or purpose for our business is also very clear, that we want to enable a better day for everyone to enjoy affordable and good and sustainable food. I think food and sustainability has never been more relevant, and I'm sure the relevance will continue even further to increase as we move along. Now, as most of you know, we have divided our business plan into six strategic focus areas.
Across all areas, go below and goes across everything, is our culture and our core values. Also across, we have sustainability that is clearly an integrated part in all our strategic areas, and should for us and for all of us seen as what we call it a green thread across all parts of our business. If I just look at, as we are focusing a lot on this, a few recent highlights in this area as an example in the fourth quarter, launched at Mat.se where we ended up with a carbon footprint labeling in more than 3,000 SKUs to help and support to guide the consumers to make more conscious choices when they select their food and when they are shopping.
We also made positive progress in reducing plastic, as well, we continue to make good progress in the important area of reducing food waste. If I move into our strategic areas like to point out the key priorities for the coming year, I'll start with our customer offer. For us, it's clear that we will continue to secure and strengthening our price position. This is critical for us and important for the future in a very competitive market. Further, we will drive our sustainable range to track this and to add this to the consumers in a more way as we've done. Also to add more ready-made meal solutions as part of the trend for what we see in the consumer market today. Looking at the customer meeting, we will continue to strengthening the digital customer offer that we have today.
We will optimize our store network and continue also to refurbish our stores that you have seen in the last year in Willys and Hemköp, and continue that program. Also take further steps to even be even more relevant when it comes to our loyalty program, and how we will invest in that with a lot of data and how we can address that to consumers in an even further better way. Looking then at expansion, we plan to expand our store network with 5-10 new stores the coming year or this 2020. We also will roll out our online offer to further cities and to further stores as well in Willys, but also as I pointed out earlier, as we've now started also this with Hemköp franchise operation.
We see a potential to also put even further emphasis of expanding our Willys Hemma store network in the market. For supply chain, as I'm sure you expect, we will continue to focus on building our new logistical center in Bålsta, even if this would be ready by 2023. Obviously it will be a part of key priorities the coming years, also included in 2020. Also focus to improve the efficiencies in our manual common dark stores. I mentioned, we have really good learnings, and we also see large potentials to improve our productivity as well as identify new business models for the last mile. In this area, there is a fast development and there is a lot of innovation going on at the moment.
Regarding work approach, the key topic for us is to capitalize on the large amount of data to secure we become even more relevant to our consumers and are more data-driven in our analysis and decisions, as well as use that to improve our efficiencies internally. Finally, we will continue to invest in our most important asset, our people, in several key areas regarding investing in competence and leadership development, et cetera. That was a quick introduction to the key priorities. If I now end up the presentation or part of the presentation with some comments regarding our outlook and our dividend proposal. Starting with the outlook. For 2020, we plan to invest SEK 900 - SEK 1 billion in our CapEx.
As I also shared in the presentation earlier, we're also guiding that we plan to open up 5- 10 more stores in our store network the coming year. Now moving on, the board of directors will propose to the AGM now in March to increase our dividend to SEK 7.25 per share. The dividend will be split into two payments, March and September, in line with the revised dividend policy. The proposal corresponds to 92% of profit after tax, which is well in line with our dividend policy. Let me sum up. We are closing a successful 2019 with a strong fourth quarter. We have strong growth. We have clearly increased our market shares in this period. We've also improved our profit, and we also report a stable margin, even excluding the IFRS effect.
As Mr. Lexmon pointed out, we have a strong financial position, and I would say that we also have strong plans for investing and moving further with our plans for the future. With that, Alexander, would you like to join me here and guide us through or help us guide us through the Q&A session?
Thank you, Klas. We will now start the Q&A session of the presentation today. We would just like to start with the telephone conference. Operator, please, do we have any questions?
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. Our first question comes from the line of Daniel Schmidt from Danske Bank. Please go ahead.
Yes, good morning, Klas and Anders and Alexander. Just a couple of questions from me and maybe starting with an odd one. I saw that you're writing in the report that you're closing the warehouse when it comes to Mat.se in Malmö, south of Sweden, due to low volumes, and you're offering consumers to shop online through Willys and Hemköp instead, which is pick in store solutions. Could you expand on that? Is there any change in terms of competition or what is happening in south of Sweden, basically when it comes to your offering?
Thanks, Daniel. No, it's a good question. No, there's no drama at all in this. Malmö was the area that Mat.se entered the last in, and we had seen not the volume that we want to have to cover up or to handle a common dark store. We then taken the decision at this stage that we will now only go from our stores in that region as for now with the volume development that we see. That doesn't mean that we will not come back, but at this stage, we find that more efficient in that area.
Okay. You might be setting up some sort of centralized facility in the future. Do you see any change or is there any difference in the growth? You have around 20% growth in online groceries in Sweden for the nation. Is there a slower growth in the south of Sweden or is there any specifics that you've been surprised by, given that you're changing or you're making this change?
No, I don't think that you should. As I said, we've seen a very strong growth across the nation in particular Willys, which is nationwide. When we have the pure player, Mathem has seen a very positive growth in Stockholm as well as in Gothenburg, particularly also with the launch now, as I mentioned, of the new carbon footprint labeling. It's a positive effect. When we looked at the area and we looked at the volume that we have in the Malmö region for handling a Common Dark Store, we find it not as efficient that we would like to see, so we've taken these decisions. As you point out, the market growth in total, for us, we are growing more than 30%. We are still coming from low volumes, the market is so much lower than that at this stage.
I think we follow this very closely as it could change fast.
Okay. Maybe a follow-up on that one then relating to Dagab and sort of the extra cost that you've incurred during the latter half of 2019 when it comes to the centralization in Stockholm. You also said that you've learned a lot of things and that you will apply those learnings when it comes to the Gothenburg centralization, which I assume is going to happen now in Q1. Would you say that the learnings that you've gathered when it comes to the Stockholm centralization will mean that you won't incur nowhere near as much in terms of extra costs when you're opening up in Gothenburg? How should we model that?
I can't guide you in the exact modeling, obviously, I think the statement that we are doing, that we are confident that we now reach so much learning so we can move on to open up the next common dark store in Gothenburg. We admit, as we have said earlier in the earlier quarters, it's been a longer journey than we expected to get all the systems in place, because for us, obviously, we are combining three brands into the same area. That has put some challenge in terms of how we are picking and how we're handling the picking to become efficient in that picking part. I still think we have area for improvement in the Stockholm part, but now we have so much learnings and we now start to work on that and see some progress already.
We are confident that we will not have the same learning or it will not be the same time journey in Gothenburg. We will come faster up to it, so to speak.
All right. Okay, good. Then a final. It's been quite clear when it comes to ICA as of late or gradually through 2019 became more aggressive when it came to price initiatives and looking into 2020. Do you concur with that? First of all, have you seen that? Secondly, looking into 2020 and given there was a slight slowing of food price inflation in Q4 versus Q3, what do you expect in terms of food price inflation for 2020?
Well, regarding the last question, we have no other forecast than the forecast that is out there in the market from a whole view around 2.5%. 2.5% . No other expectations from that part. When it comes to the overall market, I think we have a very competitive market. One of our, as you all know, key ratios that we are clearly tracking and following that is our price position towards the competitors, and we are keeping that and we are monitoring that on a day-to-day basis. It is a competitive market, and we will continue to have a strong price-value proposition in the market.
Thank you.
The next question comes from the line of Fredrik Ivarsson from ABG. Please go ahead.
Thank you. Hi, guys. A few questions from me as well. Firstly, on the improved campaign efficiency in Hemköp, margin was up close to 1 percentage point. Curious to hear, did you do any big changes in Q4 versus Q3? Is this more a result of things you've been working on for some time now? Also maybe if you expect further tailwinds from a better campaign margin going forward in Hemköp.
Hi. We have, as I shared, we worked intensively with Hemköp. These could change from month- to- month and so forth. I can conclude that in the fourth quarter, we've seen improved efficiencies in our campaign activities. We've been better to making the proper activities and to make the better campaigns in this quarter. Obviously, part of that is learnings that we've gathered during the year in terms of what works and what does not work as well, as good. You're pointing it out, of course, that's part of the learning and how we are driving our Hemköp forward. How we would look the coming quarters, I think we'll follow, but I'm clear that we are continuing to investing in Hemköp. We are continuing to drive operations, to improve the efficiencies as well, and to invest as well in our stores.
It's a journey that we're on, and I'm pleased to see that we've seen a step in the right direction in the fourth quarter.
Thanks. The second one on Dagab, to follow- up there. Profitability was burdened by the dark store obviously, but also as well as the investments in the new brands. Curious to hear which one of those two factors that you mentioned weighed the most. Are they equally heavy, or is one of them significantly higher than the other?
Even if we are not splitting it up, obviously, as you're seeing, I also want to mention, last year, we are meeting high comps in Dagab, so the effect is around SEK 18 million on the full- quarter of SEK 150 million-SEK 170 million. It's not that large, if I say, when you start to split it up. We are clear about it that obviously we are now also in an investment phase with some of our new brands. As you know, we now have Urban Deli fully in our books, and fourth quarter and first quarter in that part of the business is so much lower than the summer period. That is a bit more burden than we see on the overall year. Of course, now we have the full effect in our books.
Fair enough. Thanks.
Just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. Our next question comes from the line of Niklas Ekman from Carnegie. Please go ahead.
Thank you. I want to follow- up a bit on Willys here. We've seen a couple of quarters here with exceptionally strong like-for-like growth. This obviously narrowed quite a bit relative to the market in Q4. I just want to hear your take on this. Anything particularly except tough comparisons, obviously, also a little bit how you see this going forward, if you think we should expect this outperformance of previous quarters. Do you think that this could return, or if the comparisons basically make this more or less impossible? Just your general view here.
Hi, Niklas. Well, I think when you're looking at Willys now, we can compare it in many other ways, but obviously with a like-for-like of over 5%, as you know, in the food retail, and it's on a year, this effect. We are not really meeting any easy comps in Willys. We are really meeting high comps. It's very impressive, I think, to see that their performance continued to be on this high level. I think that's enough as a comment on that part.
Yep, fair enough, agree. A very impressive performance. Turning to the store rollout, you talk about 5 - 10 net, is that a net number in store rollout? Can you talk a bit about by format here as well? You mentioned Willys Hemma, that was a priority. Can you give us some more flavor here?
The guidance is on new stores, but we don't have any closures in pipeline, so at this stage it looks like net. Obviously that could change, but we are guiding on new stores. We will look at a broad range in terms of and see opportunities. We have some stores in pipeline, both for Hemköp and Willys while the majority there is in Willys, and I'm pointing out when in terms of priorities that we see opportunities to further accelerate Willys Hemma. That could not only be part of in this year, it could also be years to come in terms of how we are looking at that part of our business.
Okay. Thank you. Also, I just wanted to ask about the dividend as well, the reason behind the dividend hike, given that you're facing now a couple of years here with significantly elevated investment. I'm just curious if you could elaborate a bit more on here how the Board has been reasoning and why they decided to raise the dividend.
I think it's as you look at the plans ahead and you look at your financial position in total, and the Board has made the decision and the view of that we have the opportunity to increase the dividend by 3%-4%. I think it's a common view in terms of how we have a very strong financial position. As you know, in terms of our investment in our logistical center moving the year ahead, we also have secured financials for that. I think we are in a good place.
Excellent. Finally, a question on sustainability. I'm curious here, we have a lot of initiatives ongoing, and I'm curious if you take the net effect of this in terms of profitability. Obviously, a lot of initiatives here that will imply higher costs, but at the same time, you're doing a lot to reduce plastic, reduce food waste, et cetera, which should be, I guess, positive from a profitability perspective. If you look at it from that perspective, have you done a calculation what this actually does to your profitability?
I think there is no choice in this in terms of to gain the consumer's trust, we need to make sure we have a really sustainable operation. I'm also confident that this goes hand- in- hand, both with growth and profitability over time. I think, obviously, the efforts we are making are needed, and the critical part, as I pointed out, we also need to attract and to make sure that we get the consumers with us on this journey to make more sustainable choices. Within our operations, there are areas that, of course, some of it will cost, but also several of the sustainability initiatives we are doing is also good for reducing cost in our own system as well. I think there is no conflict in this.
Okay. At net-net, you don't see any dramatic impact to profitability?
No.
Excellent. Okay, thank you very much.
As there are no further questions, I'll hand it back to the speakers.
Thank you. We'll now just turn to the audience here who are present at the store. Do we have any questions from the audience? No. If we have no further questions, I will now turn the floor over to you, Klas, for final remarks.
Thank you. Let me then close this session by thanking you for listening and also hope you've seen, if you move a step ahead there, or aside, Alexander, that as I said, we are now moving with energy into a new year. Actually, the year Axfood turns 20 years. It's going to be an interesting and fun year for the whole Axfood family. Thanks a lot for listening.