A strong first year for ICA Gruppen
The creation of ICA Gruppen was a major event in 2013. Now, as we lay the foundation for something new, we do it with the vision of making our customers’ lives a little easier. Our starting point is a culture based on simplicity, entrepreneurship and commitment. While maintaining a sharp focus on the customer and the customer experience, our goal is to continue to grow and develop profitably.
In addition to creating ICA Gruppen in 2013, we also put a lot of energy into implementing the Group-wide strategy we decided upon earlier. This process went well and clearly demonstrated that we are doing things right; customers appreciate what we do, sales are increasing and we are continuing to reinforce our already strong position in most of our markets. Our total net sales increased to SEK 99,456 million in 2013. After adjustment for the divested ICA Maxi stores in Norway and currency changes, this represented an increase of 2.3% on the previous year. Operating income excluding non-recurring items, pro forma amounted to SEK 3,004 million, an income improvement of 10.6% compared with 2012.
Satisfied customers, increased sales and a new portfolio strategy
One of the factors driving our improved results is the positive growth for ICA Sweden, which continued to outperform the market. Strong sales growth, a good expansion rate, positive sales development for private label products, a new and more inspiring store concept for non-food items and more efficient logistics all contributed to higher net sales and improved earnings. Rimi Baltic also continued to enjoy good sales and profit development. ICA Bank was named Bank of the Year in 2013, which is clear proof that our customers are satisfied. ICA Real Estate also demonstrated stable growth. An evaluation of our portfolio companies was conducted in 2013. This resulted in the decision to divest Forma, Kjell & Company and Cervera. Hemtex and inkClub are believed to have the potential to support the core business and will therefore continue to have the same ownership structure.
Our one big disappointment was ICA Norway, which continued to experience negative sales and profit development in 2013. Turning the trend around for ICA Norway and laying the foundation for long-term profitability will be our biggest challenge by far. Some major restructuring has already taken place; we have divested the Norwegian ICA Maxi stores, introduced an extensive cost-cutting programme, defined roles and the division of responsibilities, and drawn up new strategies for private label and pricing. But the biggest challenges are reducing our sourcing costs and improving distribution efficiency. The Norwegian Competition Authority has recently notified an advance ruling that it will not approve our cooperation with Norgesgruppen. At the time of writing we are looking into the ruling and the consequences it may have for our operations in Norway.
We now have a sharp focus on continuing to grow while maintaining good profitability.
Priorities that keep us focused
2013 was our first year as ICA Gruppen. Our core business is grocery retail and surrounding this are other operations that support and strengthen the whole organisation, but also contribute to ICA Gruppen’s profitability.
The goal going forward is to ensure that we have good growth in all of the Group’s operations. We want to be even better at combining knowledge of local markets and proximity to the customers with the strength of common processes and structures. By focusing even more on taking advantage of our size and the synergies that exist between our businesses, we will strengthen both the Group as a whole and the individual companies.
The guiding principles here are our strategic priorities. They help us stay focused and on track, and in most areas we have made considerable progress. In Sweden we opened new stores in 2013 in all store formats, including Cura pharmacies, and decided to continue investing in ICA To Go, our small store format that offers ready meal solutions. In the Baltic region we established new stores and converted a number of low-cost stores into Rimi, our most important brand in the region. The grocery market in the Baltic region is growing, our position is strong and we have a sound plan for expansion in the future. We have also increased the percentage of sales of private label products, which is important in terms of both profitability and customer loyalty.
To better support and exploit the sourcing synergies that exist within the Group, we have also created a Group-wide sourcing function.
In logistics and goods transportation, we have put a lot of energy in recent years into modernising and improving efficiency in our product flows. One of the most important events in 2013 was the acquisition of ICA Sweden’s warehouse property in Helsingborg.
Strategic priorities implemented in 2013
- Increase the percentage of private label sales and profitability
- Ensure that our prices are competitive and improve customer price perception
- Develop the portfolio strategy
- Increase growth in the stores in Sweden and the Baltic region
- Cooperate to realise synergies between the subsidiaries
- Ensure operational efficiency, with an emphasis on the logistics chain
- Develop common values
Simplicity, entrepreneurship and commitment
Another important priority for 2013 was to start working on our Group-wide values. Having common attitudes and a common approach to our basic values provides clarity for our customers about who we are, helps us make the right decisions and makes us the nimble organisation we want to be.
FinancingThe change in our ownership structure when ICA Gruppen was formed also changed our financing and capital structure.
Several actions were taken to replace the bridge financing that funded the acquisition of ICA. In May a new issue of shares was fully subscribed and raised a total of around SEK 5 billion for the company. During the summer, bonds were issued within the framework of ICA Gruppen’s MTN programme. This raised an additional SEK 5 billion. At the end of the year unlisted preference shares were issued in the subsidiary ICA Fastigheter Sverige AB for a total of SEK 3 billion. It gives me great pleasure to be able to conclude that the level of interest and confidence in ICA Gruppen has been high in the capital market.
New goals, new priorities
At the end of 2013 the Board of ICA Gruppen established new, long-term financial goals. Our focus is now clearly on continued growth and good profitability. A strong cash flow and sound capital structure will allow us to continue to invest and pay dividends in the future.Our priorities for 2014 support these goals. Among other things, we will continue to focus on strengthening our position in and around large Swedish cities and in the Baltic countries. We will open more stores, more Cura pharmacies and more ICA To Go stores. We will also continue developing our private label products. Our priorities include an even greater emphasis on developing the customer loyalty programme within the Group. In Sweden we are well ahead in knowledge and experience, but we need to take the next step to be better at using and sharing our knowledge and skills across all countries and in all channels. This also applies to the new digital sales channels which, starting with the gradual rollout in autumn 2014, will enable our Swedish customers to shop online.
One of ICA Gruppen’s business linchpins is that good profitability goes hand in hand with responsibility. By acting responsibly today, we are safeguarding our ability to do good business tomorrow. The seven position statements in ICA’s Good Business guidelines establish how we are to work – from factory to store. Through these we also cover the ten principles in the UN Global Compact initiative, which ICA has adopted. ICA has also signed the Global Compact Caring for Climate initiative and we are working in partnership with a number of non-profit organisations such as Childhood, the Red Cross and the WWF. In line with our new strategy we will also be a leader in responsible business practices. This is an important position that we have taken. Over the past few years we have, among other things, worked successfully on ensuring sustainability in the value chain. Now we want to help our customers make sustainable choices when they shop. With better labelling and information, we can make those choices a little easier.
Behind us is an eventful first year for ICA Gruppen. In conclusion, I would like to thank all of ICA Gruppen’s employees, independent retailers and other partners for great collaboration and well-executed efforts in 2013. Now let’s continue full steam ahead. We are entering an intense and exciting period.
Stockholm, February 2014