Good morning everyone, let me welcome you to Axfood's financial report for the first quarter. My name is Klas Balkow, I am the CEO of Axfood, and with me on this presentation, I also have Mr. Anders Lexmon, the CFO. Our agenda for today, we will cover the key ratios for the first quarter, Mr. Lexmon will go through the financial position in the company. I will come back and provide an update on our outlook as well as give an update on our strategic agenda that we have going forward. I would like to welcome Mr. Gustav Sandström from SEB, who will lead and moderate the Q&A session. Let me start by making a quick comment about Axfood and reminding you all about Axfood.
We have a clear house of brand strategy where we have distinct concepts that is meeting various consumer needs with a common logistic and common sourcing through Dagab. We are now getting closer and closer to SEK 50 billion sales as of the turnover, and we are meeting over 4 million customers every week throughout our various brands. Before walking through the key ratios, I would like to bring up three areas that I think are the highlights of this report. First of all, we are in this report showing an exceptionally strong growth. This is the first time we are releasing our online numbers, and I think it states, when you see the numbers, that we are also well-positioned also in this segment.
We have exciting plans that we have reported about earlier in terms of going into the future, particularly then developing a completely new, highly automated logistic center. Let's now move into the numbers for the first quarter, starting with sales. In the first quarter, we are reporting a group net sales growth of over 4.2% to SEK 11.9 billion. Overall, it is a strong growth across all the segment. As I should remind you of that we have a negative calendar effect in this quarter due to the Easter was in March last year and now is in April this year. We calculate that the calendar effect for us is approximately 1.5%. Evidently, the growth that we are reporting becomes even stronger when we look at the store sales growth and comparing that to the market.
Our growth, total growth in our stores, including e-com, is up 4.1%. If I compare that to the market, that is up 0.9%. We are clearly gaining market share, and in this quarter, we are outperforming the market. We are also growing faster on the online as we are reporting a 35% growth in our online for Axfood to B2C compared to the market of 19%. As of 2019, we are reporting according to IFRS 16. That is a new standard that will have an impact on our ratios. We are transparent on this on group level but also by segment. Looking into our operating profit, we are reporting SEK 485 million as an operating profit. Excluding the IFRS, we are reporting SEK 442 million. An improvement, excluding IFRS, and it is still an improvement versus last year.
Actually, it is a record profit for a first quarter for Axfood. The level that we are achieving is coming from obviously a positive like-for-like sales, but it's also somewhat hampered by some of the actions and the investments we are doing. We are investing at the moment in a ramp-up of our dark store, of our common dark store in Stockholm, as well as if you remember, we introduced a new ERP system with the fruit and vegetables, and we are not still in fully efficiency in that area yet, so that's hampered a bit. Hemköp continued to invest in our customer meeting. That is also short-term hampering our margin. I will now go through segment by segment and starting with Willys, who is really making a strong quarter again, as we are pleased to see that Willys really attracts more and more customers.
We have a like-for-like in Willys of 4.8%. That is then despite the negative calendar effect due to the Eastern period or the Eastern effect. We also have a very positive online development within Willys, both in terms of the cities we are in today, but we're also rolling out online to more and more cities. That is also giving a positive effect. Our operating profit has improved to SEK 279 million, excluding the IFRS effect. In total, we are reporting SEK 295 million, including the IR or IFRS 16 effect. That's going to be a complicated one today. Moving on to Hemköp. I must say that in this quarter, I'm happy to see that also Hemköp grows more than the market. The group-owned stores are impacted by some changes in our store network.
Totally on the group-owned stores also growing more than the market on the like-for-like as it reports 1%. The franchise part of Hemköp is really showing positive sales. Combined, we are showing a total growth of 1.7%. As shared earlier, when it relates to Hemköp, we are in an investment phase regarding Hemköp, where we are investing really in our customer meeting in terms of that we are investing in our store concepts. We are also investing in marketing and also investing in our employees to continue to strengthen Hemköp over time. This has some impact on our margins short term. In addition to Hemköp, as we are strengthening the concept, I am happy that we could announce earlier on, a few weeks ago, that we have been able to attract the strong retailer Östenssons into Hemköp franchise concept.
Östensson is a family-owned inspiring retailer from Östergötland with nine stores, with a total turnover of approximately SEK 600 million. The plan now is to transform Östensson into Axfood by September 1st. We also continue to have a positive momentum in Snabbgross with a strong net sales of 8.3% and a like-for-like above 9%. We clearly continue to gain market share also in Snabbgross. That is our way of meeting the increased demand for cafe and restaurants. The strong sales has also helped to improve our margin and strengthening our profit in this quarter. Finally, Dagab reports a growth of 4.6% that is supported by approximately 0.7% from Urban Deli. We've increased our ownership in Urban Deli, so the sales is now in our books.
We're also reporting a stable profitability behind then strong sales from our various food concepts, but also as shared, it's somewhat hampered from the investment that we are doing with the dark stores. We have initial cost for that. The fruit and vegetables, as I mentioned, but also that we are investing now in new areas like Apohem and Urban Deli that has an impact for this quarter, but overall, a stable profitability. With that, I've gone through the ratios for the first quarter and hand over to Anders Lexmon who will cover the financial position for Axfood. Anders.
Thank you, Klas. Let me first then go through the cash flow for the first quarter. As you see here, we have a strong operating cash flow this quarter, and that is mainly explained by the new lease standard, IFRS 16. Now we recognize lease payments as amortization of debt that you see further down in the statement here. If we exclude that, we have an operating cash flow in line or a little bit higher than last year. We also had a negative effect on the working capital in the quarter, and that is mainly explained by we had a positive calendar effect in Q4, and now that is reversed in the first quarter. We also have some higher inventories in the end of March as Easter was in April.
We also had net investing activities in line with last year, but this quarter that includes a positive payment from a sell of asset hold for sale with approximately SEK 90 million. If we exclude that, we have higher investments this quarter compared to last year. I will come back to the investments on the next page. We also increased the net debt according to the dividend in the first quarter like we did last year as well. The dividend was in line with last year. Coming back to the investments, here are the investments excluding the lease investments. This is the underlying investments according to the old GAAP. The investments in the first quarter summed up to SEK 245 million, which is SEK 56 million more than last quarter. We see that we mainly increase our investments in our retail operation.
We both have a refurbishment and new establishment, which is a little bit higher this year compared to last year. We also had a little bit higher investment in our wholesale operation, that is mainly due to our new automated warehouse in Jönköping. IT and others is in line with last year. Coming back to the change in working capital. We also this quarter see a decrease in the working capital as a percentage of sales. Also here we have effect of the new lease standard because now we are not recognize prepaid leases in the working capital. Here we have a little bit positive effect on that. If we exclude that, we are in line with December last year, -2.6% on net sales.
If we look into our net debt, you can see that we have a big effect on the new lease standard. We have a net debt of approximately SEK 6 billion. If we exclude the new lease standard, we are in line or a little bit lower than last year, SEK 116 million at the end of March. You can also see that we have a big impact on the equity ratio, which goes down from 30.6% to 18% this quarter. The equity ratio, due to the old GAAP, is in line with last year. We see the same effect on capital employed, a big increase here. If we exclude the new standard, we are in line with last year, and we also have a decrease in the return on capital employed, as you can see in the picture.
Also just to summarize the effects in the balance sheet, as you have noticed when we reported Q4, we have an effect on the assets with SEK 5.6 billion, and we increased our lease liabilities with approximately SEK 6 billion, and we have a negative effect on our equity of approximately SEK 0.4 billion. Finally, to summarize the effects on the key ratios according to IFRS 16. As I mentioned, we have decreased the equity ratio, and we have increased net debt. We have also increased EBITDA with SEK 387 million this quarter compared to last year, and we have also increased EBIT with SEK 43 million, like Klas said earlier. ROIC, due to the old GAAP, was 50.7% compared to 30.6% now. We also have, as I mentioned, effect in the cash flow.
We have a positive effect in the operating cash flow and a negative in the financing activities, and the sum of that is zero. That summed up my end.
Thank you.
part of the presentation. Klas.
Thank you, Anders. I hope that sorted out the IFRS 16 changes. I'm sure we also will come back to that a bit later on. Let me now go through the strategic agenda that we have for Axfood, and I hope that for you who follow us, that you are start to be familiar with our business plan structure, where we have six clear strategic areas, with also sustainability as a red thread throughout and integrated across all our areas that we are covering. I will not go through all the strategic areas at this time, but I will cover a few in my update, and I'll start with the customer offer, where we have four clear priorities. First priority is to strengthening the assortment of good and sustainable food.
In this area, we have now, in this time, we've added a new measure to have a new target of 25% sustainability certified goods out of our sales. The base in 2018 was 20%, and in this quarter, we're now up at 20.5%, so we are on the right track also already in this quarter. It is an important measure for us to drive more and more sustainability in our range, in our assortment to track this and to influence our customers to make more sustainable choices. Another key area in our customer offer and another prioritized area for us is meal solutions. It is a clear trend where customer want to have more ready-made meal solutions, and we have worked for some time to develop our way of solving this for the consumers.
In this period, we have launched a wide range of new items, new articles to the consumers that they can easily select and pick and combine and make their own meal in an easy, quick way. We're also reviewing and adding with the range, new format, and particularly in Hemköp. Actually today, we open up the refurbished store in Mall of Scandinavia. That will clearly have an impact on meal solutions where we have our own kitchen with our own chefs and so forth. We are really excited about this new step that we're taking within Hemköp. Moving into our customer meeting, also with three clear priorities where we're going to develop our customer program. As I mentioned, we have over 4 million customers that we are meeting every week.
We of course want to develop the customer program as well to meet them even better. We are continuing as well to update our stores where we are developing our stores. We also are refurbishing our stores, and we have a clear program for that. We are strengthening our digital customer meeting. If I like to make a few comments regarding online, as you are probably familiar with, that online as a share of sales overall for the market is fairly small, around approximately 2%. It is growing, and as I reported earlier, it grows. This quarter reports a growth of 19%. We for us want to be well-positioned as well in this channel as we are in the physical stores.
Even if we started somewhat late, I think we are now with this number report that we are also in a good position as well on the online channel. We are actually at this stage growing somewhat faster than the market, and we are reporting SEK 334 million to the consumer on the online. We also have B2B, but this is only the B2C part of our online. For us, it's clear that we have and we are taking a broad approach when it comes to online, where we have various brands. We are working with four brands to the online. We also have various business models, where we have various delivery options as well as different fee options. Obviously for us, it is important now to learn and to see what works best for us and what the customers really want to have.
As you know, this is a complex part, where some consumers prefer to have a click and collect solution, some prefer to have it home delivered. It's interesting for us to see also where we are developing the fee structure. As you know, it is a fairly costly model, where Willys, with the fee structure they have, is really showing a very positive growth. That's also somewhat proof that fees is also working even on online for food. Finally, when it comes to the supply chain regarding our priorities, we also have three clear priorities. We have started now, which is linked into the online part, to roll out our first common dark store in Stockholm, where we are serving both Hemköp, Willys, and Mat.se's customers through one dark store.
We said we're going to roll it out this spring, and we started and we also started to make our first deliveries to Willys customers in this period. If I look at the supply part and the large part and the large steps we are taking is a clear step into the future via building a completely new logistic center. It is a fully automated logistic center that is, and I want to be clear about that supports both the stores and the online. This is not only for online, but it's also for both. That will give us the flexibility pending on in terms of how large the share of sales will be on online. Since we last time had this meeting, we have selected Witron as the supplier for the automation, and we also selected that we will locate the facility in Bålsta outside Stockholm.
I want to reiterate that the investments for the coming 4 years is approximately SEK 600 million for the automation per year. It is a large investment, but it's also a very positive business case as when we look at it, the share of logistic cost that we will have in 2023 is in line with what we have with current levels. With this new facility, we are also increasing our capacity, which we need to do when we're looking at our growth moving forward. With an increased capacity and then with increased volumes, we calculate with further efficiencies regarding to our logistic cost as a share of sales. The outlook for 2019, it is just coming back to the same outlook that we presented when we met in February.
We have a CapEx plan of SEK 1.5 billion-SEK 1.6 billion, which includes then the SEK 600 million investment for the new logistic center. Excluding that, we're more or less in line with the investment that we had 2018. Let me sum up this presentation before we go into the Q&A. We are looking at the first quarter, a positive start to the first quarter, excluding, we have a negative calendar effect due to the Easter. Looking despite that, we are showing a really positive sales growth, where we are clearly outperforming the market. We have slightly improved profit despite the calendar effect, and I would like to say that we have really exciting plans moving on for the future.
With that, if I can welcome up Gustav Sandström from SEB to lead us through or walk us through or however you would like to call it, the Q&A session.
Excellent. Thank you so much for that run-through. If I may start with a few questions, and then perhaps we have a few questions from the audience here or on the web. Starting with the food price inflation, which has obviously been very beneficiary to your entire industry now for quite some years, and if anything, it seems as if it accelerates rather than decelerates now in the start of the year 2019. Are we starting to see any signs of price elasticity in the market or within your assortment, or is the customers largely absorbing this without any effects on volumes?
I think if I look at it, now we are having this Easter effect and so on, it's somewhat difficult to find out the exact numbers for March and so on. We are calculating with approximately 2% inflation rate at this stage. For us, we are showing that we are seeing a positive growth and also volume-related. The inflation is somewhat higher on fruit and vegetables, which is direct cause due to some part is the currency for the Swedish krona, also some of the drought that we had last year that is reducing some of the supply that has an impact or drives then some part of that is inflation-related.
In this stage in the cycle where you have a lot of support from inflation, does it make sense now to perhaps absorb a little bit of that of your own in your Willys brand to further accelerate that market share gain? I'm perhaps referencing it a little bit to one of your competitors that have been quite vocal on lowering prices in a fairly big share of their assortment.
As you probably expect, I will not comment on some of the colleagues out there in the market, what their action and so on. We are obviously very keen on for us to make sure that we have our pricing position out there in the market. For Willys with the lowest price food bag ambition, for us, that is critical. We also clearly to see that the customer is also appreciating if that's what's relating to the Willys range and the Willys pricing. Obviously we are happy to see that.
Another question on volume. Your investment with this new facility sort of requires quite a hefty volume growth. Perhaps especially when looking at volume growth in the overall market, sort of below the population growth at the moment. Where do you see this growth stemming from that you're obviously planning on when going ahead with this investment? Where are the pockets where you see you can-
What I'm stating is that with this facility, we are creating an opportunity of 40% more volume. I'm not saying we're having 40% volume as of 2023, but we're getting the room for that. We think that this facility will live for some time. Obviously looking at the growth rate that we have now, it's also even more important that we are increasing our capacity moving forward. I don't think it's any drama in the growth that we are calculating. We are really seeing a benefit of moving into an automated logistics center. We're also taking the advantage that we need to do on online to automate that, to make sure that we are reducing the handling cost for the unit, which is fairly expensive today.
With this facility as well, with the combining online and physical stores, we are getting the flexibility within the facility as well. To answer your question, I don't think there's any drama in terms of the volume forecast we have with this facility. We're moving from six logistic center warehouses into one. It's actually less square meter but we are with technology clearly increasing our capacity, which we think is needed for the long term and for the future.
The theme of Mr. Lexmon's presentation today, I guess, was IFRS.
One question on my own then. You updated your financial targets in relation to IFRS 16, you did not change your margin target, which stands at 4%, if I recall correctly, which implicitly is a lowering of that margin guidance, given the boost you get from IFRS 16. Could you please elaborate a bit on the internal discussions to go with that?
I think there is no magic behind that. We have a target of minimum 4%. We're getting support from IFRS. It's still minimum 4%. We're not looking at it as we are changing or we are lowering any target. It's just that we're getting a support from IFRS and the target today, margin target is minimum 4%.
With that, maybe some questions from the audience. Daniel?
Thank you. Daniel Schmidt from Danske. Two subjects. Of course Willys is continuing to do well, but I think the opposite is probably true for Hemköp at least when it comes to profitability. You're saying that you are of course continuing to invest to improve the interactiveness of the concept. This has been the case of course for some time. I was just wondering, what's your plans going forward? Where do you see sort of the benefits coming through from these investments? How should we model that?
Well, if I start with that, I think it must be stated in this that we are now also reporting a stronger growth for Hemköp versus the market. I said it for some time that we are in a stage, we're in a phase with Hemköp that we want to invest in several areas. We want to invest in our employees, in the customer meeting. We want to invest in the stores and refurbishing our stores. We're also taking some investments in marketing to position Hemköp and to show the customers the inspiring sustainable offer that we have. Happy to see that we start to see some growth numbers coming through on that. Obviously when it relates to profitability and margin, as we are sharing, we have a slow growth on our group-owned. Partly also we have transformed a couple of stores into Willys.
When we have that slow growth on like-for-like, you are also getting a margin pressure. Moving forward, my expectation, of course, with the investments that we are doing, is that we will get back to stronger growth on a like-for-like basis and I am confident when you get the growth back, you also start to see margin improvement.
Are you seeing anything now, looking into this quarter that we are in, that you are seeing any signs that we will get better profitability soon, or is this more medium term?
No, I think you will clearly see it depends on the like-for-like growth that we are reporting. Now we have 1% like-for-like. Of course, we have an Easter effect as well in this quarter. We need higher like-for-like, as you are well aware of when it comes to retail, that we have our inflation costs in general, we need higher like-for-like to see that you are getting an impact as well on margin.
Would you say that there is a bigger transformational need when it comes to Hemköp and their positioning, versus the transformational need in general for the market? I am maybe referring to the hollowing of the middle income in general. That phenomenon is across Western Europe or the U.S. for that matter. Are you seeing that as a problem, stuck in the middle?
No.
Need to be transformed more thoroughly?
Obviously, the trends are clear in many ways where you also have the low price growth or that channel or that segment is growing, but also the convenience part of to shop where you live, where Hemköp is very well-positioned. Obviously we need to make, as I presented today, we see a larger and larger need for customers to have more ready-made meal solutions, to have quicker solutions for them when they can go and grab something quick where they live. That's why we're also developing this kind of structure also for Hemköp. The convenience part or being located nearby is also a good segment to be in. We also need to meet that demand from a range and from a store perspective, and that's the journey we are into.
Shortly on another subject. Coming back to the online growth, which was quite impressive, and maybe from a little bit of a higher base than I expected. Could you split that out in terms of the concepts? It sounds like you had an even higher growth in Willys, for instance.
Well, as is always, this is the first time we are sharing the numbers. We decided to share it on an Axfood level, we will stick to that. As I reported today, we are seeing good growth in all channels, but particularly good growth in Willys. That's a fair assumption.
Would you share the base for 2018, or will we get that gradually through the quarters?
I'm fully aware of that we have not shared the 2018 or historical data. As I think when you're calculating, if you're looking at the 35% growth that we have, I think it's fair to assume that 2018 is in around SEK 1 billion number. I'm sure you already calculated that.
Thank you.
Are there any more questions in the auditorium? No, I guess we turn to the telephone conference operator.
Thank you. We will now begin the question and answer session. For all you callers, if you have a question to raise, please press 01 on your telephone keypad now.
All right. No questions. With that, I'll-
We'll leave there.
hand it over to you. If there are no more questions in the auditorium, Daniel, a final one, no? I'll leave the floor to you, Klas, for some final remarks.
Thank you, Gustav. Obviously we are fully aware it's a hectic day for you all. Again, thank you for calling in or joining in on the conference. Thanks for participating here in Hemköp and in the Hemköp store. I'll just sum up that we have had a good start of Q1, and now we're looking forward to the remaining part of the year. Thank you.
Thank you.