FINANCIAL
REVIEW
KESKO ANNUAL REPORT
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
FINANCIAL
REVIEW
CONSOLIDATED
FINANCIAL STATEMENTS (IFRS)
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
. ACCOUNTING POLICIES FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
. Basic information about the Company
. Basis of preparation
. Critical accounting estimates and assumptions
. Critical judgements in applying
accounting policies
. Consolidation principles
. Discontinued operations and non-current assets
classified as held for sale and related liabilities
. New IFRS standards and IFRIC interpretations
and the impact of new and updated standards
. Change in accounting policy
REPORT BY THE BOARD OF DIRECTORS
Operating environment
Outlook and guidance for
Important events
Financial performance
Segments
Changes in Group composition
Main objectives and results achieved in sustainability
Key events during the financial year
Events after the financial year
Resolutions of the Annual General Meeting
and decisions of the Board's organisational meeting
Information contained in the notes to the financial
statements
Risk management
Significant risks and uncertainties
Proposal for profit distribution
Annual General Meeting
Shares and securities markets
Analysis of shareholding
Board authorisations
Group's key performance indicators
Calculation of performance indicators
FINANCIAL STATEMENTS
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
. FINANCIAL RESULTS
. Revenue recognition
. Segment information
. Material and services
. Other operating income
. Operating expenses
. Foreign exchange differences recognised in
operating profit
. Income tax
. Earnings per share
. Notes related to the statement of cash flows
. Components of other comprehensive income
. CAPITAL EMPLOYED
.. Business acquisitions, disposals of assets,
and non-current assets classified as held for sale
and related liabilities
. Property, plant and equipment
. Intangible assets
. Leases
. Inventories
. Trade and other current receivables
. Pension assets
. Shares in associates and joint ventures
. Provisions
. CAPITAL STRUCTURE AND FINANCIAL RISKS
. Capital management
. Shareholders' equity
. Financial risks
. Finance income and costs
. Financial assets and liabilities by category
. Contingent liabilities
. OTHER
. Group composition
. Subsidiaries, associates, joint ventures
and proportionately consolidated mutual
real estate companies
. Related party transactions
. Share-based compensation
. Legal disputes and possible legal proceedings
. Events after the balance sheet date
PARENT COMPANY'S FINANCIAL
STATEMENTS (FAS)
Parent company's income statement
Parent company's balance sheet
Parent company's cash flow statement
Notes to the parent company's financial statements
Note . Principles used for preparing
the financial statements
Note . Net sales by division
Note . Material and services
Note . Other operating income
Note . Employee benefit expenses
Note . Depreciation, amortisation and impairment
Note . Other operating expenses
Note . Finance income and costs
Note . Appropriations
Note . Income taxes
Note . Deferred taxes
Note . Intangible assets
Note . Property, plant and equipment
Note . Investments
Note . Receivables
Note . Shareholders' equity
Note . Provisions
Note . Non-current liabilities
Note . Current liabilities
Note . Non-interest-bearing liabilities
Note . Guarantees, liability engagements
and other liabilities
Note . Cash and cash equivalents within
the statement of cash flows
Note . Related parties
SIGNATURES
AUDITOR’S REPORT
AUDITOR’S ESEF ASSURANCE REPORT
THE REPORT BY
THE BOARD OF
DIRECTORS
KESKO ANNUAL REPORT
Kesko has operations in Finland, Sweden, Norway, Estonia, Latvia, Lithuania and Poland, with
some , stores engaged in chain operations.
Kesko’s principal business model in the Finnish market is the chain business model, in which
independent K-retailers run retail stores in Kesko's chains. Retailer operations accounted for
approximately % of Kesko’s net sales in . At the end of , Kesko had some ,
independent K-retailer entrepreneurs as partners. Kesko also engages in its own retailing,
which accounted for some % of net sales. BB trade is a significant and growing part of
Kesko’s business operations, and it accounted for some % of Kesko’s net sales.
Outside Finland, Kesko mainly engages in its own retailing and BB trade. Net sales for
international operations totalled €, million, and accounted for .% of Kesko’s total
net sales.
Together, Kesko and K-retailers form K Group, whose retail sales (preliminary) totalled some
€ billion (% VAT) in .
Operating environment
Identified megatrends impacting K Group’s operations include changes related to utilising
digital solutions and new technologies, the growing importance of sustainability and climate
change, globalisation, and population change. Customer and consumer trends emphasise
the growth in online sales, growing customer knowledge and power, change in consumer
trends, and individual customer behaviour. Key opportunities and risks in the operating
environment are related to the development of the economic operating environment,
competition, digital services and cyber threats, demographic changes and the availability of
skilled personnel, climate change, and sustainable purchasing and human rights. Risks have
been described in more detail in the Significant risks and uncertainties section of this Board
of Directors’Report.
Outlook and guidance for 2022
Kesko Group’s outlook is given for the year , in comparison with the year .
Kesko estimates that its comparable operating profit in will be in the range of €-
million. In , Kesko’s comparable operating profit totalled €. million.
Overall, the outlook for Kesko's business in is positive.
Net sales for the grocery trade division are expected to remain at a good level also in .
As the pandemic eases, food sales are expected to partly shift from BC trade to foodservice
wholesale. Food price inflation is estimated to support sales growth.
Outlook for the building and technical trade division is also positive. We expect sales to stay
at a good level in BB trade, which now accounts for % of the division’s sales. Demand
in BC trade is expected to normalise. Price inflation is expected to support growth, but
prolonged price inflation would lead to lower construction volumes.
In the car trade division, predictions regarding new car sales are made more difficult by
uncertainties related to component supply chains. Delivery issues related to the availability of
semiconductors will continue to hinder the car trade division’s business also in .
The progress of the pandemic will continue to have an impact on the overall economy,
consumer behaviour, and trading sector demand in Kesko’s operating countries. During the
REPORT BY THE BOARD OF DIRECTORS
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
pandemic, household consumption has focused on domestic purchases, which is expected to
have a positive impact on some of Kesko’s businesses also in . In addition to the Covid-
pandemic, assessments for outlook and predictions for demand are made more difficult
by uncertainties related to overall economic development, inflation, geopolitics, and the
availability of goods.
Important events
Positive profit warning on October
Kesko raised its profit guidance for on October . Kesko estimated that its
comparable operating profit in would be in the range of €- million. Before, the
company estimated that the comparable operating profit would be in the range of €-
million. The guidance upgrade was based on better-than-anticipated sales growth and
profit development especially in the building and technical trade division, and the division’s
more positive outlook for the remainder of the year. In , Kesko’s illustrative comparable
operating profit totalled € million. (Stock exchange release ..)
Positive profit warning on June
Kesko issued a positive profit warning based in particular on stronger-than-anticipated
development in building and technical trade, and raised its profit guidance for . Kesko
estimated that its comparable operating profit in would be in the range of €-
million. Before, the company estimated that its comparable operating profit would be in the
range of €- million. (Stock exchange release ..)
Updated strategy and new financial targets
The Board of Directors of Kesko Corporation confirmed an updated version of the company’s
strategy and new medium-term financial targets for the company. Kesko’s growth strategy
centres on profitable growth in three selected business divisions: grocery trade, building
and technical trade, and car trade. The new medium-term financial targets for profitability
are a comparable operating margin of over .% (previously .%) and a comparable return
on capital employed of over .% (previously .%). As for financial position, the Group
continues to target a maximum interest-bearing net debt/EBITDA of ., excluding the
impact of IFRS . (Stock exchange release ..)
Positive profit warning on April
Kesko raised its guidance for its comparable operating profit in , estimating that its
comparable operating profit in would be in the range of €- million. Before, the
company estimated that the comparable operating profit would be in the range of €-
million. The guidance upgrade was based on better-than-anticipated sales development
in all divisions and a more positive outlook for the remainder of the year. The illustrative
comparable operating profit in was € million. (Stock exchange release ..)
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Group net sales increased by .% in comparable terms. Net sales grew in comparable
terms by .% in Finland and by .% in other operating countries. The comparable change
% has been calculated in local currencies and excluding the impact of Kesko Senukai and
acquisitions and divestments completed. The Group’s reported net sales grew by .%.
In the grocery trade division, sales to K Group’s grocery store chains grew, as did the net
sales of K-Citymarket’s home and speciality goods (non-food) trade and Kespro.
In the building and technical trade division, net sales grew in comparable terms in all
operating countries. Net sales grew in comparable terms in building and home improvement
trade, Onninen’s technical trade, and speciality goods trade. Reported net sales for the
building and technical trade division increased by .%. Reported net sales were negatively
impacted by the change in the consolidation method of Kesko Senukai, and positively
impacted by the acquisitions carried out in and and the strengthening of the
Swedish krona and the Norwegian krone against the euro.
In the car trade division, net sales were positively impacted by an increase in the demand for
brands imported by Kesko and growth in market share.
The Group's comparable operating profit totalled €. million, an increase of €.
million. In addition to net sales growth, profitability improved thanks to better sales margin
development and improved cost efficiency. In the grocery trade division, profitability
improved for the grocery store chains, Kespro, and K-Citymarket’s home and speciality
goods (non-food) trade, impacted by sales growth and improved cost ratio. In the building
and technical trade division, there was marked growth in both net sales and comparable
operating profit. Comparable operating profit grew in both building and home improvement
trade and Onninen’s technical trade in all operating countries. Kesko Senukai had a €.
million impact on the Group’s comparable operating profit (€. million, consolidated
as a subsidiary in -/ and as a joint venture in -/). Kesko Senukai has
been consolidated as a joint venture from July onwards. In the car trade division,
comparable operating profit grew thanks to growth in sales and sales margin and cost
adjustment measures.
Financial performance
Net sales and profit
–/
Net sales,
€ million
Change
%
Change, comparable,
%
Operating profit,
comparable
€ million
Change,
€ million
Change, illustrative
comparison figures,
€ million*
Grocery trade ,. +. +. . +. +.
Building and technical trade excl. speciality goods trade ,. +. +. . +. +.
Speciality goods trade . +. +. . +. +.
Kesko Senukai - - - . -. +.
Building and technical trade total ,. +. +. . +. +.
Car trade ,. +. +. . +. +.
Common functions and eliminations -. +. +. -. -. -.
Total ,. +. +. . +. +.
* Change to illustrative Group comparison figures is presented alongside the reported performance indicators based on the consolidated financial statements, to depict the change in comparable operating profit as if Kesko Senukai had been
consolidated in the consolidated financial statements as a joint venture also in the comparison period.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Items affecting comparability, € million –/ –/
Comparable operating profit . .
Items affecting comparability
+gains on disposal +. +.
-losses on disposal -. -.
-impairment charges -. -
+/-structural arrangements +. +.
Total items affecting comparability -. +.
Operating profit . .
The most significant items affecting comparability were the €. million sales gains from
grocery trade properties, the €. million sales gain on real estate in the building and
technical trade division, included in the share of result of joint ventures, and the €. million
costs and impairment charges related to the restructuring of the car trade division. The most
significant items affecting comparability in the comparison period were the positive profit
impact of €. million resulting from the change in the consolidation method of Kesko
Senukai; the €. million negative profit impact of changes in the store site network in
Sweden; the €. million sales gain from the divestment of machinery trade operations in the
Baltics, completed on March – all in the building and technical trade division – as
well as the €. million costs related to corporate restructuring in common functions, and
the €. million costs related to the discontinuation of The Athlete’s Foot and the Kookenkä
chains in leisure trade.
Kesko is reporting Kesko Senukai Group, which is part of Kesko’s building and technical
trade segment and operates in the Baltic countries and Belarus, as a joint venture as of July
. Kesko Senukai Group was reported as a subsidiary until June . In order to
enable the comparison of financial performance indicators between reporting periods, Kesko
reports illustrative Group performance indicators to be used alongside indicators based on
IFRS consolidated financial statements. In segment information, Kesko Senukai is reported
consolidated as a joint venture also for the comparison periods, as this method is used in
management reporting.
Illustrative Group performance indicators –/ –/
Net sales, € million ,. .
Operating profit, comparable, € million . .
Operating margin, comparable, % . .
Operating profit, € million . .
K Group's (Kesko and the chain stores) retail and BB sales (% VAT) amounted to
€,. million, up by .% compared to the previous year. During the -month period
that ended in December, the number of Finnish households belonging to the K-Plussa loyalty
scheme and using the Plussa network totalled . million, with . million customers using
their K-Plussa card.
Net finance costs, income tax and earnings per share
Net finance costs, income tax and earnings per share –/ –/
Net finance costs, € million -. -.
Interests on lease liabilities, € million -. -.
Profit before tax, comparable, € million . .
Profit before tax, € million . .
Income tax, € million -. -.
Earnings per share, comparable, € . .
Earnings per share, € . .
Equity per share, € . .
The development of the Group’s net finance costs was impacted by the decrease in interest
expenses for lease liabilities. The decline in lease liabilities was impacted by the change in
Kesko Senukai’s consolidation method as of July . In the comparison period, net
finance costs were increased by foreign exchange differences and a change in the fair value
of interest rate derivatives. Of the foreign exchange differences in the comparison period,
€-. million was due to exchange rate losses on euro-denominated loan financing of
Kesko Senukai’s Belarussian subsidiary OMA, and €-. million due to the weakening of the
Norwegian krone, the Swedish krona and the Polish zloty. The share of result of associates
amounted to €. million (€. million), or €. million (€. million) in comparable terms.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
In the comparison period, the share of result of associates included a €. million profit
related to the dissolution of Valluga-sijoitus Oy, recognised as an item affecting comparability.
The Group’s comparable profit before tax grew thanks to operating profit growth and
reduction in net finance costs compared to the year before. The Group’s effective tax rate
was .% (.%). The Group’s effective tax rate was lowered by the combined share of
result of associates and joint ventures of €. million. In the comparison period, the most
significant items having a decreasing impact on the Group’s effective tax rate were a positive
profit impact of €. million arising from the change in the consolidation method of Kesko
Senukai (recognised as an item affecting comparability) tax-exempt sales gains, and share of
result of associates and joint ventures totalling €. million.
The Group’s earnings per share and comparable earnings per share grew compared to the
year before.
Cash flow and financial position
Cash flow, € million –/ –/
Cash flow from operating activities ,. ,.
Cash flow from investing activities -. -.
Cash flow from financing activities -. -.
Financial position // //
Liquid assets, € million . .
Interest-bearing liabilities, € million ,. ,.
Lease liabilities, € million ,. ,.
Interest-bearing net debt excl. lease liabilities, € million -. .
Interest-bearing net debt/EBITDA, excl. IFRS impact, rolling
months . .
Gearing, % . .
Equity ratio, % . .
The Group’s cash flow from operating activities totalled €,. million (€,. million).
Growth in EBITDA and a €. million return of surplus assets paid by Kesko Pension Fund
had a positive impact on the cash flow, while higher taxes of €. million paid compared
to the year before had a negative impact. In the comparison period, Kesko Senukai had a
positive impact of €. million on cash flow from operating activities.
The Group’s cash flow from investing activities totalled €-. million (€-. million).
Cash flow from investing activities included €. million in investments of Group liquid
assets in money market funds, which are reported under other financial assets in the
consolidated statement of financial position. In the comparison period, the cash flow from
investing activities included €. million in acquisitions, a negative €. million impact of
the change in Kesko Senukai’s consolidation method, and a positive €. million cash flow
impact of the divestment of Baltic machinery trade operations.
Capital expenditure
Capital expenditure, € million –/ –/
Group, total . .
Store sites . .
Acquisitions . .
IT . .
Other investments . .
Capital expenditure in store sites increased by €. million compared to the year before. In
the comparison period, capital expenditure in store sites was increased by the acquisition of
the property of K-Citymarket in Järvenpää.
Acquisitions comprise Byggarnas Partner i Sverige AB in Sweden. In the comparison period,
acquisitions comprised Mark & Infra i Sverige AB (MIAB) and Bygg & Interiör in Sweden and
Carlsen Fritzøe Handel and Flokkmann in Norway.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Segments
Seasonal nature of operations
The Group's operating activities are affected by seasonal fluctuations. The net sales and the
operating profits of the reportable segments are not earned evenly throughout the year.
Instead, they vary by quarter depending on the characteristics of each segment. In terms
of the level of operating profit, the second and third quarter are the strongest, whereas the
impact of the first quarter on the full-year profit is the smallest.
Grocery trade
–/ –/
Net sales, € million ,. ,.
Operating profit, comparable, € million . .
Operating margin, comparable, % . .
Return on capital employed, comparable, % . .
Capital expenditure, € million . .
Personnel, average , ,
Net sales, € million –/ –/ Change, %
Change, %,
comparable
Sales to K-food stores
K-Citymarket, food ,. ,. +. +.
K-Supermarket ,. ,. +. +.
K-Market ,. ,. +. +.
K-Citymarket, non-food . . +. +.
Kespro . . +. +.
Others and eliminations . . +. +.
Total ,. ,. +. +.
Net sales for the grocery trade division amounted to €,. million (€,. million),
an increase of .%. Sales to K Group grocery store chains grew by .%. Net sales for
K-Citymarket’s home and speciality goods (non-food) grew by .%.
The total retail grocery market in Finland (incl. VAT) is estimated to have grown by
approximately .% (Finnish Grocery Trade Association PTY) and retail prices are estimated
to have risen by some .% (incl. VAT, PTY). K Group's grocery sales grew by .% (incl.
VAT). K Group’s sales grew in all chains. Online sales of groceries grew by .%, and
accounted for approximately .% of K Group’s grocery sales (incl. VAT). Net sales for
Kespro’s foodservice business grew by .%. The total market for the foodservice business
is estimated to have grown by .% (PTY).
Comparable operating profit for the grocery trade division totalled €. million (€.
million), up by €. million. Profitability improved for the grocery store chains, Kespro and
K-Citymarket’s home and speciality goods (non-food) trade, impacted by sales growth and
improved cost ratio. Operating profit for the grocery trade division totalled €. million
(€. million). Items affecting comparability totalled €. million (€-. million).
Capital expenditure for the grocery trade division totalled €. million (€. million),
of which €. million (€. million) was in store sites. Capital expenditure for the
comparison period was increased by the acquisition of the property of K-Citymarket in
Järvenpää.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Building and technical trade
The change in Kesko Senukai’s consolidation method from a subsidiary to a joint venture
as of July has impacted the performance indicators for building and technical
trade in segment information. Due to the change in consolidation method, in the
Group changed the internal reporting to its chief operating decision maker, i.e. the Group
Management Board. Consequently, Kesko Senukai has been reported in the income statement
figures for the building and technical trade segment information for -/ as if it had
been consolidated on one line before operating profit in accordance with ownership interest,
as opposed to the subsidiary consolidation method used up until June . Such a
change has not been made to internally reported balance sheet figures or personnel numbers.
–/ –/
Net sales, € million ,. ,.
Building and technical trade excl. speciality goods trade ,. ,.
Building & home improvement trade ,. ,.
Onninen ,. ,.
Speciality goods trade . .
Operating profit, comparable, € million . .
Building and technical trade excl. speciality goods trade . .
Building & home improvement trade . .
Onninen . .
Speciality goods trade . .
Kesko Senukai . .
Operating margin, comparable, % . .
Building and technical trade excl. speciality goods trade . .
Building & home improvement trade . .
Onninen . .
Speciality goods trade . .
–/ –/
Return on capital employed, comparable, % . .
Capital expenditure, € million . .
Personnel, average , ,
Net sales, € million –/ –/ Change, %
Change, %,
comparable
Building and home improvement
trade, Finland ,. . +. +.
K-Rauta, Sweden . . +. +.
K-Bygg, Sweden . . +. +.
Byggmakker and Carlsen Fritzøe,
Norway . . +. +.
Building and home improvement
trade, total ,. ,. +. +.
Onninen, Finland ,. . +. +.
Onninen and MIAB, Sweden . . +. +.
Onninen, Norway . . +. +.
Onninen, Baltics . . +. +.
Onninen, Poland . . +. +.
Onninen, total ,. ,. +. +.
Building and technical trade excl.
speciality goods trade total ,. ,. +. +.
Leisure trade, Finland . . +. +.
Machinery trade - . - -
Speciality goods trade total . . +. +.
Total ,. ,. +. +.
Net sales for the building and technical trade division increased by .%, or by .% in
comparable terms. Net sales grew in comparable terms in all operating countries. In euro-
terms, net sales were positively impacted by the acquisitions completed in and and
the strengthening of the Swedish krona and Norwegian krone against the euro. The weakening
of the Polish zloty against the euro diminished net sales development in Poland in euro terms.
In Finland, net sales for the building and technical trade division totalled €,. million
(€,. million), up by .%. In comparable terms, net sales in Finland increased by
.%. Net sales from international operations totalled €,. million (€,. million),
up by .%. In comparable terms, net sales from international operations grew by .%.
Net sales for building and home improvement trade and Onninen grew in all operating
countries. In the speciality goods leisure trade, net sales increased clearly.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Comparable operating profit for the building and technical trade division totalled €.
million (€. million), up by €. million on the comparison year. There was marked
growth in both net sales and comparable operating profit. Comparable operating profit for
building and home improvement trade grew by €. million, growing in Finland, Sweden
and Norway. Carlsen Fritzøe, acquired in September , accounted for €. million
(€. million) of the comparable operating profit. Onninen’s profitability improved in all
operating countries. Comparable operating profit grew clearly in leisure trade in speciality
goods trade.
Comparable operating profit for the building and technical trade division totalled €.
million (€. million) in Finland, €. million (€. million) in Sweden, and €.
million (€. million) in Norway.
Operating profit for the building and technical trade division totalled €. million
(€. million). Items affecting comparability totalled €. million (€-. million).
The most significant item affecting comparability was the €. million sales gain on real
estate included in the share of result of joint ventures. The most significant items affecting
comparability in the comparison period were the €. million costs related to the
discontinuation of The Athlete's Foot and the Kookenkä chains in leisure trade, the €.
million negative profit impact of changes to the store site network in Sweden, and the €.
million sales gain on the divestment of machinery trade operations in the Baltics, completed
on March .
Capital expenditure for the building and technical trade division totalled €. million
(€. million). Capital expenditure for the comparison period included €. million in
acquisitions.
Kesko has reported Kesko Senukai Group, which is part of the building and technical trade
segment and operates in the Baltic countries and Belarus, as a joint venture on one line in the
consolidated income statement and balance sheet as of July . Kesko Senukai Group
was reported as a subsidiary until June . The following table shows Kesko Senukai’s
financials for the reporting period and comparison periods and the share of result of joint
ventures consolidated in Kesko’s consolidated financial statements as of July and
reported in segment information and the illustrative comparison figures as of January .
Kesko Senukai financials, € million –/ –/
Net sales ,. .
Operating profit . .
Operating profit, comparable . .
Net profit for the period . .
Net profit for the period, comparable . .
Kesko Group’s share of result of joint ventures . .
Kesko Group’s share of result of joint ventures, comparable . .
// //
Assets . .
Liabilities . .
Equity . .
The figures include Kesko Senukai’s business and real estate companies. A €. million profit impact from fair
value allocation has been deducted from Kesko Group’s share of result of joint ventures for the comparison period
-/.
Car trade
–/ –/
Net sales, € million ,. .
Operating profit, comparable, € million . .
Operating margin, comparable, % . .
Return on capital employed, comparable, % . .
Capital expenditure, € million . .
Personnel, average , ,
Net sales, € million –/ –/ Change, %
Change, %,
comparable
Car trade ,. . +. +.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Main objectives and results achieved in sustainability
Kesko's operations create value and generate economic benefits for various stakeholders in
Kesko’s operating countries and markets. Key stakeholders include shareholders, customers,
personnel, retailers, suppliers and service providers, and the society. Kesko promotes the
growth of wellbeing throughout its supply chain, also in developing countries.
The most important cash flows comprise revenue from sales of goods and services to
customers and retailers, purchases from suppliers of goods and service providers, dividends
paid to shareholders, salaries and wages paid to personnel, taxes, and capital expenditure.
Kesko employs , people and in paid €. million in wages. In , income
taxes paid by Kesko to Finland totalled €. million, and to other countries €. million.
Kesko also pays real estate and property taxes, and collects, reports and remits indirect
taxes, such as value added tax and excise duties. Kesko’s investments have a positive
financial impact on e.g. operators in the construction sector and furniture, equipment and
data system providers. Kesko’s capital expenditure in totalled €. million. At the
end of , Kesko had , registered shareholders, and dividends paid for the year
totalled € million.
Key commitments, policies and principles
Our operations are based on Kesko’s value “The customer and quality – in everything we
do”, and our vision and mission. Key Group-level policies that guide operations include
governance policy, human resources policy, sustainability policy, risk management policy,
disclosure policy, data protection policy, information security policy, and tax policy.
Kesko’s operations are based on data and the processing of data in Kesko’s operating
environments. Ensuring data protection is a part of Kesko’s compliance activity, risk
management, and the K Code of Conduct. Kesko’s data protection policy determines the
principles, procedures and responsibilities to ensure the lawful processing of personal data
and a high level of data protection at Kesko.
Net sales for the car trade division increased by .%, positively impacted by an increase in
the demand for brands imported by Kesko and growth in market share.
The combined market performance of first registrations of passenger cars and vans was
.%. The combined market share of the Volkswagen, Audi, SEAT, CUPRA, Porsche and
Bentley passenger cars and Volkswagen and MAN vans imported by Kesko’s car trade was
.% (.%).
Comparable operating profit for the car trade division totalled €. million (€. million).
The division’s comparable operating profit grew by €. million, thanks to growth in sales
and sales margins and cost savings. Operating profit for the car trade division totalled €.
million (€. million). Items affecting comparability consisted of €. million expenses and
impairment charges related to division restructuring (€-. million).
Capital expenditure for the car trade division totalled €. million (€. million).
Changes in Group composition
Kesko acquired Byggarnas Partner, a company that serves professional builders in Sweden.
The acquisition further strengthens Kesko’s position in the Swedish building and home
improvement trade market, especially in the Stockholm area. (Investor news release
..)
Kesko Group’s structure in Norway was simplified by merging Byggmakker Sør AS and
Byggmakker Nord AS with their parent company Byggmakker Handel AS. The merger does
not affect Byggmakker’s operations in Norway.
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Kesko is committed to promoting the UN’s Sustainable Development Goals (SDGs)
in its operations. For Kesko and its stakeholders, the three main goals are Responsible
consumption, Decent work and economic growth, and Climate action. In accordance with its
human rights commitment, Kesko respects all internationally recognised human rights.
Sustainability is a core part of Kesko’s strategy. We promote sustainability in the whole
value chain from production to customer choices. The focus areas of our sustainability work
include mitigating climate change, sustainable purchasing, and responsibility for people. We
create value extensively for the whole society.
Our sustainability work is guided by Kesko’s sustainability policy and sustainability strategy
and the K Code of Conduct.
We employ a materiality assessment to determine the most important sustainability themes
for Kesko and its stakeholders. The materiality assessment guides Kesko’s sustainability
and stakeholder work and actions to meet stakeholder expectations. Our most recent
materiality assessment was conducted in autumn , when we conducted an extensive
survey and in-depth interviews to determine stakeholder views. The materiality assessment
was published in January . The most significant changes compared with the previous
materiality assessment were the increase in the importance of climate change, sustainable
products, and biodiversity. Purchasing chain responsibility and personnel responsibility
remained among the most important themes.
In autumn , we began extensive work to update our sustainability strategy based on the
materiality assessment of autumn . The updated sustainability strategy will be published
in spring .
Since , Kesko has reported on its actions annually in accordance with the Global
Reporting Initiative (GRI) guidelines for reporting on sustainable development. The
Sustainability section of Kesko’s Annual Report is prepared in accordance with the GRI
Standards: Core option, and covers the key areas of economic, social, and environmental
responsibility. Kesko’s sustainability principles, management, objectives, processes and
results are described in more detail in the Sustainability section of Kesko’s Annual Report.
Kesko in sustainability indices
As a result of its long-term commitment to corporate responsibility and sustainability, Kesko
is listed on several major sustainability indices, such as the Dow Jones Sustainability Index
the DJSI World, the MSCI ESG Ratings index, the FTSEGood Index, and the STOXX Global
ESG Leaders Index.
In November , Kesko was included in the Dow Jones Sustainability Index the DJSI
World. Kesko received the industry best overall scores, for example, in the areas of climate-
related targets, eco-efficiency, emissions, packaging commitment, human rights assessment
and codes of conduct. Kesko has previously been included in the DJSI World from to
, and again from to .
In the MSCI ESG Ratings, Kesko received the highest AAA grade (scale of AAA-CCC) in
. MSCI ESG Research gives MSCI ESG sustainability ratings to listed and certain private
companies on a rating scale of AAA to CCC. The ratings are based on industry-specific ESG
risks and how well corporations are managing them compared to their peers.
Kesko made the best A list in CDP’s international climate change questionnaire for the
second year in a row in .
Kesko ranked th on the Global list of the Most Sustainable Corporations in the World
in (th in ). Kesko is the only company in the world to have been on the Global
list every year since it was established in .
EU Taxonomy
Kesko’s reporting on EU Taxonomy complies with Regulation (EU) / of the
European Parliament and of the Council ( June ). The EU Taxonomy is a classification
system for sustainable financing, designed to help companies and investors assess whether
an economic activity can be considered environmentally sustainable. The Taxonomy defines
a set of criteria for a business activity that enables assessing to what extent the company’s
activities support the attainment of environmental and climate objectives.
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Companies that are required to publish non-financial information under the Non-Financial
Reporting Directive (NFRD), shall from onwards disclose information on how and
to what extent their activities can be deemed environmentally sustainable in the manner
referred to in the EU Taxonomy based on six environmental objectives. Preliminary criteria
were published in for the first two of the six objectives, ‘climate change mitigation’ and
‘climate change adaptation’. The other four environmental objectives are ‘sustainable use
and protection of water and marine resources’, ‘transition to a circular economy’, ‘pollution
prevention and control’, and ‘protection and restoration of biodiversity and ecosystems’. The
criteria for these four objectives will be published later. Regulation concerning the Taxonomy
is currently being developed, and it is expected to be further complemented and interpreted.
The reporting requirements defined in the EU Taxonomy are applied for by identifying
Taxonomy-eligible activities. Of these, the key performance indicators, which are the
proportion of Taxonomy-eligible activities of the company’s net sales (turnover), capital
expenditure (CapEx), and operating expenditure (OpEx) as defined in the Taxonomy, are
disclosed. So far, the Taxonomy has been complemented by a delegated act that details
technical screening criteria to specify economic activities deemed to contribute substantially
to climate change mitigation and climate change adaptation and deemed material for
reducing greenhouse gas emissions and for climate resilience. These economic activities
are ‘forestry’, ’environmental protection and restoration activities’, ’manufacturing’, ‘energy’,
‘water supply, sewerage, waste management and remediation’, ‘transport’, ‘construction
and real estate activities’, ‘information and communication’ and ‘professional, scientific and
technical activities’.
Currently, the Taxonomy does not specifically mention activities that are typical of the
trading sector, meaning that trading sector companies report on the aforementioned
activities within Taxonomy scope if they engage in them. The biggest climate impacts in the
sector come from emissions from own operations as well as emissions from the value chain
of products. In the value chain, emissions come from the lifecycle emissions of products
and services sold, including the primary production of raw materials and ingredients,
manufacture of products, packaging, transport and product use. Emissions from Kesko’s
own operations are related to the electricity and heat consumed in properties, and fuel
consumption in transports. Emissions from our own operations are estimated to account
for some % of the total emissions of the value chain. Kesko’s direct environmental impacts
and emissions reduction targets and actions are described in more detail later in the section
“Climate andenvironment”.
Taxonomy-eligible activities
In accordance with the Taxonomy regulation, Kesko reports Taxonomy-eligible activities
for the year , disclosing the proportion of Group activities that are referred to in the
Taxonomy. For , the Group will also report Taxonomy-aligned activities, which refer
to the proportion of Group activities that meet all six environmental objectives of the
classification system.
The primary economic activities from which Kesko Group recognises revenue are the sales
of goods and services to customers and retailers. The sale of goods is not included within the
Taxonomy scope. Services, such as transport services and digital services, are mostly related
to products sold. Certain income for the Group, such as those from fees paid by retailers in
relation to chain operations and lease income, are reported under Other operating income
in the consolidated income statement. The inclusion of a Taxonomy-eligible activity in the
three KPIs reported is primarily tied to recognition of revenue, which is why in Taxonomy-
compliant reporting, the proportion of Taxonomy-eligible activities of all Kesko Group
activities is minor.
In accordance with the Taxonomy regulation, the proportion of Group net sales, capital
expenditure, and operating expenditure derived from activities referred to in the Taxonomy
are reported as Taxonomy-eligible activities. In Kesko, we have identified the following
activities whose Taxonomy eligibility we have analysed: owning, using and leasing properties,
logistics transports, and leasing operations in car trade. As a result of our analysis, we have
identified the leasing operations in car trade and certain transport services provided by
Kesko’s logistics as Taxonomy-eligible activities. In Kesko’s financial reporting, activities
related to owning, using and leasing properties are not revenue generating activities, and are
therefore not included in the calculation of the reported KPIs.
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Turnover
The numerator covers revenue derived from the Taxonomy activities .. Transport by
motorbikes, passenger cars and light commercial vehicles and .. Freight transport services
by road. This entails the car leasing business and logistics transports. The denominator is the
net sales in Kesko Group’s income statement.
Capital expenditure
The numerator covers the capital expenditure for the Taxonomy activity .. Transport by
motorbikes, passenger cars and light commercial vehicles, namely the capital expenditure
for car leasing operations. The denominator covers the aggregate sum of Kesko Group’s
investments in tangible and intangible assets and additions to the right-of-use assets
recognised in the balance sheet based on lease agreements.
Operating expenditure
The numerator covers the operating expenditure for the Taxonomy activity .. Transport by
motorbikes, passenger cars and light commercial vehicles, related to car leasing operations.
These are the direct costs for lease cars in accordance with the denominator established in
the calculation of the indicator, relating to car servicing and necessary to ensure
the continued
and effective functioning of the cars. The denominator covers Kesko Group’s direct
non-
capitalised costs that relate to research and development, building renovation measures,
maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of
assets of property, plant and equipment by the company or a third party to whom activities are
outsourced that are necessary to ensure the continued and effective functioning of such assets.
The following table depicts the relative proportion of Taxonomy-eligible activities of all
Group activities for the three Taxonomy KPIs.
EU Taxonomy KPIs Net sales
Capital
expenditure
(CapEx)
Operating
expenditure
(OpEx)
Taxonomy-eligible activities .% .% .%
Taxonomy non-eligible activities .% .% .%
Total, € million ,
At this stage, the EU Taxonomy focuses on economic activities estimated to be material for
reducing greenhouse gas emissions and building climate resilience. Kesko’s primary business
operations are not currently included within the Taxonomy scope. Sustainability is a central
part of Kesko’s strategy. We promote sustainability in the whole value chain from production
to customer choices. Our ambitious emissions reduction targets extend to the whole value
chain and are science-based. We provide regular reporting on progress made with the
targets, and independent organisations regularly assess whether the targets are ambitious
enough and the results achieved sufficient.
Climate and environment
Kesko’s sustainability policy guides the climate and environmental actions of Kesko Group
and K Group stores in all operating countries.
Kesko’s most significant direct environmental impacts are emissions from the production of
electricity and heat energy consumed by properties, emissions from transports, and waste
produced in warehousing operations and the stores. The biggest indirect impacts are related
to the primary production and manufacture, use, and disposal of products sold. Kesko’s
grocery trade plays a significant role in reducing food waste together with the food supply
chain, from primary production to customers.
Kesko is committed to the Paris Climate Agreement objective of mitigating climate change.
In , Kesko was the first company in Finland to set targets approved by the Science
Based Targets Initiative (SBTi) for emissions from its own operations and supply chain. In
autumn , SBTi approved Kesko’s new tighter science-based emissions reduction targets
with which Kesko commits to the target of limiting global warming to . degrees Celsius.
K Group aims to become carbon neutral by . Kesko will seek to systematically reduce
emissions to reach zero emissions from its own operations by . From onwards, we
will offset the remaining emissions from our own operations.
In addition to emissions from our own operations, the biggest climate impact comes from
emissions from the value chain of products. Indirect Scope emissions come from the
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lifecycle emissions of products and services sold, including the primary production of raw
materials, manufacture of products, packaging, transport, and product use. Our objective is
to have science-based reduction targets set for two-thirds of our direct supplier emissions
by . To meet the target, we challenge some of our biggest suppliers (measured in
purchases) that account for two-thirds of our purchases in euro terms. Kesko takes part in
the CDP Supply Chain programme and challenges the suppliers to reduce their emissions and
report their climate targets and actions via CDP’s Climate Change questionnaire.
All Kesko divisions have the opportunity – and as large operators, the responsibility – to
offer customers solutions that help them reduce their climate impact, as living, food, and
transportation are the biggest sources of greenhouse gas emissions in private consumption. We
guide customers towards more sustainable choices by, for example, offering them a service that
enables them to track e.g. the carbon footprint and nutritional values of their grocery purchases.
K Group is moving towards carbon neutrality by increasing the use of electricity and heat
produced with renewable energy, improving energy efficiency, and switching to biofuels in
transports in Finland. Kesko participates in the Energy Efficiency Agreement for -
for the trading sector in Finland, and has committed to reducing its energy consumption by
at least GWh, equalling .% of the energy consumption in . This target was already
achieved in : K Group now saves over GWh of energy per year compared to ,
which corresponds to the annual consumption of some K-Supermarket stores. One of
the most important ways to increase efficiency in energy consumption is the heat recycling
system developed for our grocery stores, which can reduce heat consumption by as much as
%, making the store almost carbon neutral in terms of energy. Our objective is to have the
system installed in all K Group grocery stores by .
All electricity purchased by Kesko for K-stores and other Kesko properties in Finland is
produced with renewable energy. In , the electricity purchased by Kesko was produced
using hydropower, bioenergy, and wind power. Electricity is also produced using our own
solar power plants. At the end of , there were a total of solar power plants at
K Group stores and other properties, with a combined electricity generation capacity of
approximately . GWh.
Emissions from logistics, self-generated heating, and electricity purchases in operating
countries outside Finland decreased. Winter - was colder in Northern Europe
than the previous winter, which increased the need for district heating energy. As a result,
total emissions in Q/–Q/ increased slightly compared to Q/-Q/.
Climate-related opportunities and risks
Kesko has begun examining climate change-related risks and opportunities in accordance
with the TCFD framework. In , the objective is to deepen our risk assessment by
assessing climate change-related risks in grocery trade based on selected scenarios. The
impacts of climate change are twofold:
• Impacts on Kesko related to increasing regulation and extreme weather phenomena.
• Impacts of Kesko’s operations on the climate related to the lifecycle impact of products
and services sold and Kesko’s energy solutions and emissions.
Opportunities
In addition to emissions from own operations, the biggest climate impact in the trading
sector comes from emissions from the value chain of products. In addition to our own
operations, we extend emissions reduction targets to the whole value chain. We are
increasing the purchase of renewable energy as well as our own energy production, and
improving energy efficiency.
All Kesko divisions can offer customers solutions that help them reduce their climate impact,
as living, food and transportation are the biggest sources of greenhouse gases in private
consumption.
Risks
Climate change-related transition risks for Kesko are increasing regulation, which
necessitates changes in business operations and leads to additional costs, and in the longer
term, changes in consumer behaviour that require changes to business models. Increase in
extreme weather phenomena is a physical risk that can impact product availability and cause
disturbances in logistics and the store site network. In addition, rising average temperatures
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and changes in rainfall will impact the growing conditions of certain products and their
availability in the long term.
Human rights and sustainable purchasing
In , Kesko published its human rights commitment and impact assessment in
compliance with the UN's Guiding Principles on Business and Human Rights. The human
rights assessment is reviewed every three years by the Corporate Responsibility Management
Team, and the most recent review took place in .
In accordance with its human rights commitment, Kesko respects all internationally
recognised human rights. Kesko’s purchasing is guided by Kesko’s ethical principles for
purchasing, which are based on the fundamental rights at work accepted by the International
Labour Organisation (ILO), the UN Declaration of Human Rights, and the UN Convention on
the Rights of the Child.
The sustainability and transparency of purchasing chains is one of the focus areas of Kesko’s
sustainability work.
According to Group guidelines, K Code of Conduct contract clauses must be added to
all agreements under which Kesko Group companies purchase products or services from
external parties.
Kesko employs sustainability policies to guide the sourcing of products containing raw
materials identified as critical from a social and environmental responsibility perspective. At
the end of , Kesko had such policies.
In its purchasing chains, Kesko pays special attention to human rights issues and working
conditions in high-risk countries. Kesko utilises international social responsibility assessment
systems for supplier audits in high-risk countries, primarily amfori BSCI auditing. Kesko is a
member of amfori and participates in the amfori Business Social Compliance Initiative (amfori
BSCI). Kesko’s principle in high-risk countries is to collaborate only with suppliers that are
already included in the scope of social responsibility audits or that start the process when
cooperation begins. The audits focus on e.g. the observance of working time regulations,
management practices at factories, and occupational health and safety of the workers.
In , Kesko joined the International Accord for Health and Safety in the Textile
and Garment Industry to promote occupational health and safety in textile factories in
Bangladesh. Kesko is a member of the Center for Child Rights and Business, an organisation
that promotes children’s rights in China.
In an effort to improve the transparency of its supply chains, Kesko hosts the ‘Tracing our
products’ website at kesko.fi/producttracing. Focus is especially on own brand products
where the sustainable production of ingredients or raw materials is challenging and where
K Group uses its own sustainability policies to guide purchasing. In , a section detailing
the purchasing chain of a T-shirt in Kesko’s mywear range and the sourcing of more
sustainable cotton was added to the website.
Product safety
Kesko and K Group stores together with suppliers are responsible to the products' end-users
for ensuring that the products comply with all the requirements of Finnish and EU legislation,
are safe for users and meet quality promises. Product labelling complies with legislative
requirements and recommendations from authorities. All food product operations have a
self-control system in place, as required by law.
The assessment of the health and safety impacts of products is part of the operations of
the Quality and Product Development unit in Kesko’s grocery trade. The manufacturers
of Kesko’s own brand food products are required to have international certifications that
assure product safety. The standards approved by Kesko’s grocery trade include: BRC, IFS,
FSSC and GlobalGAP. The laboratory of the Quality and Product Development unit
monitors the safety and quality of own brand products and own imports in the grocery trade.
It is a testing laboratory T which has been accredited by the FINAS accreditation services
and approved to comply with the SFS-EN ISO/IEC standard.
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Financing linked to sustainability targets
During the financial year, Kesko prematurely repaid a € million loan whose interest
margin accounted for Kesko’s ability to meet the sustainability targets set for its carbon
footprint, food waste, and audits in high-risk countries. Kesko drew down a new € million
bilateral loan whose interest margin also accounts for the same sustainability criteria as the
repaid loan.
Personnel
Personnel –/ –/
Average number of personnel converted into full-time
employees , ,
// //
Personnel at the end of the reporting period
Finland , ,
Other countries , ,
Total , ,
The change in the consolidation method of Kesko Senukai as of July had an impact
on the number of Group employees outside Finland. The impact is reflected on the average
number of personnel in -/ compared to -/.
Since the beginning of the Covid- pandemic, ensuring the safety of personnel and
customers has been a key priority for K Group. As the pandemic has endured, our focus has
been in particular on ensuring the health and safety of personnel in logistics and stores, while
also employing all means to offer safe shopping for customers.
In , Kesko continued to manage the special circumstances caused by the pandemic.
Kesko was able to fully utilise its personnel in their assigned duties, with no significant
temporary lay-offs or changes in role. Sickness absences did not increase to an extent that
would have required extensive special arrangements.
Professional and committed personnel forms the foundation for our operations. Kesko’s
HR management is guided by its human resources policy, the K Code of Conduct, and
common operating principles. Kesko respects internationally recognised human rights and
complies with the ILO fundamental principles. Kesko’s human resources policy is based on
the company’s mission, vision, strategy, value and responsible operating and management
principles. The purpose of the human resources policy is to ensure that skilled and committed
employees who are familiar with both their personal goals and Kesko’s direction forms a
foundation for the achievement of good and sustainable financial results.
To ensure the execution of Kesko’s strategy, the Group employs performance and
competence management models. The performance management process comprises target
setting, continuous performance management, and performance evaluation. Remuneration
supports strategy execution and performance (pay for performance). Competence
management comprises strategic competencies and identifying competence development
and development measures at various organisational levels. Personnel recruitments are
based on strategy and need, an approved resourcing plan, and identified change projects.
In recruitments, we are committed to equality, non-discrimination and selection based on
factors that predict success at a position.
In , we measured employee experience at Group-level via means of personnel survey,
pulse surveys, and special occupational health reviews. Surveys and measurements form the
basis for plans for development measures and targeting of actions at various organisational
levels. Pre-emptive management of personnel wellbeing and working ability is used to ensure
that personnel members are able to work and function, sickness absences are under control,
and occupational accidents and premature retirement due to disability can be prevented.
In accordance with its non-discrimination plan, Kesko has established a working group
comprising representatives of the employer, personnel and the labour protection function,
to handle matters related to non-discrimination and equality within the Group. Combatting
discrimination is at the core of the group’s activities. The group reviews matters related to
e.g. recruitment, career development and training, remuneration, and the reconciliation of
work and family life.
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In preparing our sustainability strategy, we utilise the previously launched programme to
build a more diverse and inclusive K Group. Our objectives include, for example, offering
more work to representatives of linguistic minorities and supporting people with partial
work ability in their work. A diverse work community and inclusive culture are built on the
behaviour, attitudes and choices of everyone at Kesko.
Compliance
Kesko Group implements the K Compliance operating model confirmed by Kesko’s Board to
ensure compliance in Kesko’s operations. To strengthen the K Compliance operating model,
a Group-level Compliance & Ethics function was established in . The Compliance &
Ethics function manages measures in accordance with the K Compliance operating model at
Group-level, and reports to the Audit Committee of Kesko’s Board.
The K Code of Conduct, which applies to all personnel and business partners, is the
foundation and core of the K Compliance operating model. A development project to ensure
compliance with the K Code of Conduct was launched in , which led to increased
awareness of the K Code of Conduct, and the guidelines were integrated as part of other
business and support processes.
Kesko’s Group-level compliance programme is based on ensuring the responsibility and
compliance of operations through the use of the K Compliance operating model and
establishing the necessary K Compliance programmes on the basis of risk. The programmes
are related to key pieces of legislation and other requirements the breach of which could
result in significant negative consequences, such as human rights violations or serious
financial or reputational risks. Kesko’s K Compliance programme themes in were data
protection, competition law, consumer protection, and anti-corruption and anti-bribery.
Objectives have been established for each programme, and progress is reported to the
Board’s Audit Committee every six months.
A steering model in line with the K Compliance operating model was fully implemented
in . Emphases in compliance operations are steered by the identification of key
compliance risks with regard to Kesko’s strategy and business. The Compliance & Ethics
function, risk management, and the businesses regularly map and prioritise risks. Based
on risk area prioritisation, Kesko’s President and CEO confirms the necessary compliance
programmes on the basis of the proposal by the Governance, Risk and Compliance (GRC)
steering group. The Audit Committee monitors the scope and efficiency of Kesko’s K
Compliance operating model, and as of , also the development of the maturity of
Kesko’s compliance programme.
Prevention of corruption and bribery
The prevention of corruption and bribery is one of the focus areas of Kesko’s compliance
operations. The main guidelines for the K Compliance programme focused on anti-corruption
and anti-bribery are provided in the K Code of Conduct, which is complemented by more
detailed instructions as necessary. The K Code of Conduct is a means to ensure that everyone
at Kesko has the same understanding of the principles and practices that guide their daily
work. The K Code of Conduct has been published in nine languages and the principles
regarding anti-corruption and anti-bribery are the same for all Kesko employees in all
operating countries. The K Code of Conduct offers Kesko employees and business partners
guidance on the demands of responsible operations. All Kesko Group personnel members are
asked annually to confirm their commitment to compliance with the K Code of Conduct.
Kesko’s zero tolerance towards bribery and corruption is described in the K Code of Conduct
sections ”We do not offer or accept bribes”, ”We comply with the Kesko policies on
hospitality and gifts”, and “We avoid conflicts of interest”. In , contents of the guidelines
were included in the training organised for new Kesko employees. In total, new employees
took part in the training. During , , Kesko employees carried out the K Code of
Conduct online training, in addition to which , Kesko employees carried out a K Code
of Conduct online revision course. Both online courses include training on the prevention of
corruption and bribery.
Kesko’s Compliance & Ethics function, Legal Affairs unit, and K Code of Conduct
ambassadors representing various country organisations and units provide personnel support
in questions related to the application of the K Code of Conduct. The K Code of Conduct
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ambassador network was expanded in , and the ambassadors received training to
ensure uniform communication on the subject.
SpeakUp is a confidential reporting channel for Kesko employees and business partners,
meant for reporting crime and malpractice suspicions when, for one reason or another, the
information cannot be passed directly to Kesko's persons in charge. The channel can also be
used to report suspected breaches of securities market regulations. In , the Compliance
& Ethics function assumed responsibility for investigating reports submitted through the
channel. The Board’s Audit Committee began to monitor the timeframe within which the
cases are processed, using new KPIs.
Main targets and results achieved
Climate and environment
Target Method Result in
Reducing the climate and environmental
impact of Kesko’s operations
Kesko has committed to the Energy Efficiency Agreement for the trading
sector in Finland and to employing measures to reduce its annual energy
consumption by .% between and .
Energy consumption in properties managed by Kesko in all operating
countries (Q/–Q/) () GWh.
All electricity purchased by Kesko for K-stores and other Kesko properties in
Finland is produced with renewable energy.
Kesko has built solar power plants at K Group stores and properties.
Renewable electricity purchases () GWh; number of own solar
power plants (); electricity production in Finland . (.) GWh.
Kesko has set Science Based Targets for reducing emissions from its
facilities, transportation, and supply chains. Kesko has committed to
reducing its direct and indirect (scope and ) emissions by % by ,
using a base year.
Scope and emissions in all operating countries (Q/–Q/)
, (,) tCO
e.
Having science-based reduction targets
set for two-thirds of our direct supplier
emissions by
Using the CDP Supply Chain programme to invite our suppliers to cut their
emissions and report them to CDP.
We invited of our biggest suppliers to reduce their emissions and report
them to CDP. Of the invited suppliers, .% accepted the challenge and
reported their emission reduction targets to CDP.
Sustainable purchasing
Target Method Result in
The social responsibility of the production
of our own direct imports from high-risk
countries has been assured
Valid social responsibility audits and certifications for suppliers in high-risk
countries.
() suppliers in high-risk countries had valid social responsibility
audits and certifications.
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Product safety
Target Method Result in
Products are safe for users and meet quality
promises
The manufacturers of Kesko’s own brands of food products have
international certifications to assure product safety.
() suppliers have an audit certificate.
The Quality and Product Development Unit monitors the safety and quality
of own brand products and own imports in the grocery trade.
Product samples analysed by the Quality and Product Development unit
laboratory and test kitchen , (,).
If a fault is detected in the quality of a product on the market, a recall is
made.
Product recalls: (), of which () K Group’s own brand products;
public recalls of own brand products (cases where a fault in the product
could endanger consumer health) ()
Personnel
Target Method Result in
Kesko has the professional and committed
personnel required to implement its
strategy
Employees agree upon their personal objectives together with their
managers in accordance with the performance management process.
Objectives have been set for approximately % (%) of the target group.
Personnel satisfaction and commitment are measured in personnel surveys
conducted every other year. The K Voices survey was conducted in . K
Voices is complemented by pulse surveys conducted when necessary.
Personnel commitment in was % (: %). Of the personnel,
% (: %) would recommend K Group as an employer.
Active early identification and intervention are applied to sickness absences
to promote personnel wellbeing and working capacity.
Sickness absences .% (.%), premature retirement due to disability
().
Compliance
Target Method Result in
Compliance with the K Code of Conduct in
all operations.
All Kesko employees and business partners must commit to the K Code of
Conduct. All personnel members are invited to confirm their commitment
to the K Code of Conduct every year. ”We do not offer or accept bribes,
”We comply with the Kesko policies on hospitality and gifts”, and We avoid
conflicts of interest” are key statements of the K Code of Conduct.
Some % of personnel submitted their annual commitment.
The Board’s Audit Committee monitors responses to and investigations into
reports sent via Kesko’s SpeakUp channel.
KPI : All cases opened and confirmation of receipt sent to the reporting
person within days.
KPI : % of cases investigated within eight weeks, all reporting persons
provided with feedback within months from the receipt of the original
report.
Reports received via the SpeakUp channel in : ()
Meeting target timeframes:
- KPI : %
- KPI : %, feedback provided to all reporting persons within the target
timeframe.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Key events during the financial year
Riikka Joukio, M.Sc. (Tech.), eMBA, was appointed Executive Vice President in charge of
sustainability and public affairs, and a member of Kesko’s Group Management Board. Joukio
assumed her position on April . (Stock exchange release ..)
On March , Kesko published its Annual Report in Finnish and in English. The
report contains the financial statements, Report by the Board of Directors, Corporate
Governance Statement, and Remuneration Report for Governing Bodies, as well sections on
Kesko’s direction and sustainability. (Stock exchange release ..)
Matti Virtanen, M.Sc. (Tech.), was appointed as President of Kesko’s car trade division
and a member of Group Management Board as of April . (Stock exchange release
..)
The Board of Directors of Kesko Corporation and the company’s President and CEO Mikko
Helander agreed to amend Helander’s managing director's contract so that Helander will
continue to act as President and CEO for the time being. According to the previous contract,
Helander would have retired in June when he turns . Helander has acted as the
President and CEO of Kesko since . (Stock exchange release ..)
Kesko Corporation’s Annual General Meeting was held on Monday April . The
meeting was held at Kesko Corporation’s K-Kampus headquarters without any shareholders
or their representatives present. To limit the spread of the Covid- pandemic, Kesko’s
Board of Directors decided to have exceptional meeting procedures based on the temporary
legislative act / in place. Read more in the section: Resolutions of the Annual
General Meeting and decisions of the Board's organisational meeting. (Stock exchange
releases .. and ..)
Positive profit warning: Kesko raised its guidance for its comparable operating profit in ,
estimating that its comparable operating profit in would be in the range of €-
million. Before, the company estimated that the comparable operating profit would be in the
range of €- million. The guidance upgrade was based on better-than-anticipated
sales development in all divisions and a more positive outlook for the remainder of the year.
The illustrative comparable operating profit in was € million. (Stock exchange
release ..)
The Board of Directors of Kesko Corporation confirmed an updated version of the company’s
strategy and new medium-term financial targets for the company. Kesko’s growth strategy
centres on profitable growth in three selected business divisions: grocery trade, building
and technical trade, and car trade. The new medium-term financial targets for profitability
are a comparable operating margin of over .% (previously .%) and a comparable return
on capital employed of over .% (previously .%). As for financial position, the Group
continues to target a maximum interest-bearing net debt/EBITDA of ., excluding the
impact of IFRS . (Stock exchange release ..)
Kesko issued a positive profit warning based in particular on stronger-than-anticipated
development in building and technical trade, and raised its profit guidance for . Kesko
estimated that its comparable operating profit in would be in the range of €-
million. Before, the company estimated that its comparable operating profit would be in the
range of €- million. (Stock exchange release ..)
Kesko acquired Byggarnas Partner, a company that serves professional builders in Sweden.
The acquisition further strengthens Kesko’s position in the Swedish building and home
improvement trade market, especially in the Stockholm area. (Investor news release
..)
Kesko Corporation issued a positive profit warning and provided preliminary information
on its third-quarter net sales and comparable operating profit. Kesko estimated that its
comparable operating profit in would be in the range of €- million. Before, the
company estimated that the comparable operating profit would be in the range of €-
million. The guidance upgrade was based on better-than-anticipated sales growth and profit
development especially in the building and technical trade division, and the division’s more
positive outlook for the remainder of the year. (Stock exchange release ..)
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
K Group will be investing tens of millions of euros in upcoming years in automating the
collection of online grocery orders. The objective is to improve customer experience further
while ensuring more efficient processes and an even stronger market-leading position in
online grocery. The first partially-automated collection system in a grocery store in Finland
will be located in K-Citymarket Ruoholahti. The store’s central location in Helsinki translates
into large customer volumes for online grocery that make utilising automation sensible. The
system is expected to be ready in H/. (Investor news release .., press release
..)
Kesko will acquire Kungälvs Trävaruaktiebolag, a company that serves professional builders
in Sweden. The acquisition will strengthen Kesko’s position in the Swedish building and home
improvement market in the Gothenburg region. (Investor news release ..)
Events after the financial year
There were no material events after the financial year.
Resolutions of the 2021 Annual General Meeting and
decisions of the Board's organisational meeting
The Annual General Meeting of Kesko Corporation on April adopted the financial
statements for . The Annual General Meeting resolved to distribute a dividend of €.
per share on shares held outside the company. The dividend was paid in two instalments. The
record date of the first dividend instalment of €./share was April and the pay
date April . The record date of the second dividend instalment of €./share was
October and the pay date October .
The Annual General Meeting discharged the Board members and the Managing Director
from liability for the financial year , and approved the Remuneration Report for
Governing Bodies for . The resolution concerning the Remuneration Report is advisory
in nature.
The Annual General Meeting resolved the following regarding Board members' fees and the
basis for reimbursement of their expenses in -:
• Board Chair, an annual fee of €,
• Board Deputy Chair, an annual fee of €,
• Board member, an annual fee of €,
• Board member who is the Audit Committee Chair, an annual fee of €,
• A meeting fee of €/meeting for a Board meeting and its Committee's meeting. A
meeting fee of €,/Board meeting for the Board Chair. However, a meeting fee of
€,/Committee meeting is to be paid to a Committee Chair who is not the Chair or
Deputy Chair of the Board. The meeting fees are to be paid in cash.
• Daily allowances and the reimbursements of travel expenses are paid to the Board
members in accordance with the general travel rules of Kesko.
The aforementioned annual fees will be made in Kesko Corporation’s B shares and in cash,
with approximately % of the fees paid in shares. After the transfer of shares, the remaining
amount will be paid in cash. The company will acquire the shares or transfer shares held
by the company as treasury shares in the name and on behalf of the Board members. The
company is responsible for the costs arising from the acquisition of the shares. The shares
were to be acquired or transferred to the Board members on the first working day to follow
the publication of the interim report for the first quarter of . A Board member cannot
transfer shares obtained in this manner until either three years have passed from the day the
member has received the shares or their membership on the Board has ended, whichever
comes first.
The Annual General Meeting resolved that the number of Board members be seven for the
three-year term of office provided in the company’s Articles of Association, ending at the
close of the Annual General Meeting. The Annual General Meeting re-elected Esa
Kiiskinen, Peter Fagernäs, Jannica Fagerholm, Piia Karhu and Toni Pokela as members of the
company’s Board of Directors, and elected Jussi Perälä and Timo Ritakallio as new members
of the Board. In its organisational meeting held after the Annual General Meeting, the Board
of Directors of Kesko Corporation elected Esa Kiiskinen as its Chair and Peter Fagernäs as
its Deputy Chair. The Board elected Jannica Fagerholm as Chair, Timo Ritakallio as Deputy
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Chair, and Piia Karhu as a member of the Audit Committee, and Esa Kiiskinen as Chair, Peter
Fagernäs as Deputy Chair, and Timo Ritakallio as a member of the Remuneration Committee.
The Annual General Meeting resolved that the Auditor's fee and the reimbursement of
the Auditor's expenses will be paid according to an invoice approved by the company. The
Annual General Meeting elected the firm of authorised public accountants Deloitte Oy as the
company’s Auditor, with APA Jukka Vattulainen as the auditor with principal responsibility.
The Annual General Meeting resolved, in accordance with the Board’s proposal, to authorise
the Board to decide on the issuance of new B series shares as well as of own B shares held
by the company as treasury shares. The number of B shares thereby issued would total at
maximum ,,. The authorisation is valid until June .
The Annual General Meeting resolved to authorise the Board to decide on donations in
a total maximum of €, for charitable or corresponding purposes until the Annual
General Meeting to be held in , and to decide on the donation recipients, purposes of
use, and other terms and conditions of the donations.
Information contained in the notes
to the financial statements
Information on the Group’s personnel is disclosed in note ..
Financial risks are presented in note . and information on financial instruments measured
at fair value is disclosed in note ..
Related party transactions are disclosed in note ..
Information on disputes and legal and authority proceedings is disclosed in note ..
Risk management
The objective of risk management is to support Kesko in achieving targets and implementing
strategy. Risk management in Kesko Group is an essential part of internal control and guided
by the risk management policy approved by Kesko's Board of Directors. The policy defines
the purpose and principles of Kesko Group’s risk management, as well as the related steering
model and responsibilities. In the management of financial risks, the Group's treasury
policy, approved by Kesko's Board of Directors, is observed. The management of business
operations and common functions are responsible for the execution of risk management.
Strategic risks at Kesko Group are identified and assessed as part of the strategy process.
Risks related to climate change are assessed applying the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations. In assessing climate risks, the Group
utilises selected scenarios for the future that enable identifying and assessing transitional
and physical risks and opportunities significant for the strategy. The likelihood and impact
of strategic risks is assessed not only for the strategy period but also in the medium term
(- years) and long term (over years). Operational and financial risks related to achieving
strategic targets are assessed in the short term (- years), using damage scenarios,
simulation and stress testing. The purpose of risk management is to ensure that key risks are
systematically identified, assessed, managed, monitored and reported as part of business
operations at Group, division, company and function levels throughout the Group.
Kesko’s risk appetite is driven by strategy, vision, values, risk tolerance and risk bearing
capacity. Risk tolerance and risk bearing capacity are assessed and tested at regular
intervals based on selected key financial figures and indicators and loss scenarios.
Kesko’s risk appetite is divided into three categories depending on the risk assessed.
Risk appetite is considered low in cases where it does not involve significant financial or
business opportunities (e.g. risks related to personnel and customer safety). Risk appetite
is considered moderate with risks where the Group is able to optimise the cost-efficiency
of risk management (e.g. property risk and business disruption risks). High risk appetite is
limited to risks that also involve significant opportunities. Risk appetite is also materially
impacted by the likelihood of realisation and related financial impacts.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
The Group's most significant risks and uncertainties, as well as material changes in,
responses to, and indicators for them are reported to the Kesko Board's Audit Committee
quarterly in connection with the review of interim reports, the half-year financial report,
and financial statements. The Audit Committee Chair reports on risk management to the
Board as part of Audit Committee reporting. The most significant risks and uncertainties
are reported to the market by the Board in the Report by the Board of Directors, and any
material changes in them in the interim reports and the half-year financial report.
Significant risks and uncertainties
Impact of prolonged inflation and rising interest rates on costs and
consumer behaviour (growing short-term and medium-term risk)
The rise in energy and raw material prices is reflected in rising production chain costs,
impacting the purchase costs and prices of products. If prolonged, inflation will result in
rising overall cost levels and wages. Rising interest rates would impact consumer purchasing
power and consumer behaviour, thus leading to even tighter price competition.
The Covid- pandemic (short-term risk)
The continuation of the Covid- pandemic and changes in infection rates continue to pose
risks on business continuity, personnel health, and global supply chains. Large numbers of
sick employees in the logistics centres or stores and key members of personnel getting sick
could endanger the continuity of K Group’s critical operations. The pandemic will also result
in further disruptions in global supply chains, creating challenges for product availability and
delivery times. Significant changes in the prices of some product categories pose challenges
for inventory management and product pricing.
Cybercrime (short-term risk)
Growing professional cybercrime has increased the risk on business continuity and loss of
critical information. Targets of cyber-attacks may include, for example, data systems critical
for business continuity, or personal data. Cyber-attacks may result in disruptions in sales,
loss of customer trust, or fines imposed by authorities.
Employee retention and availability
(growingmedium-term and long-term risk)
The implementation of strategies and the achievement of targets require competent and
motivated personnel. The Covid- pandemic has made the workforce more mobile and
lowered the threshold of changing jobs. Challenges related to the availability of skilled
personnel in logistics and retail are also more pronounced.
Climate change (growing medium-term and long-term risk)
The medium-term and long-term risks for Kesko caused by climate change are assessed
based on selected scenarios, and are mainly related to increasing regulation and extreme
weather phenomena. Increasing regulation necessitates changes in business operations
and leads to additional costs. Increase in extreme weather phenomena can impact product
availability and cause disturbances in logistics and the store site network. The impacts
of Kesko’s operations on the climate, in turn, are related to Kesko’s energy solutions and
emissions, and the lifecycle impact of products and services sold in the whole supply chain.
Geopolitical risk (growing short-term and medium-term risk)
Heightened tensions in European security and tightening of military and economic rivalry
between superpowers could have a significant impact on the global economy and business
environment.
Product safety (short-term risk)
A failure in product safety control or supply chain quality assurance could result in financial
losses, loss of customer trust and reputation, or, in the worst case, a health hazard to
customers.
Legislation and agreements (growing medium-term risk)
Changes in legislation and authority regulations could necessitate significant changes and
result in additional costs. Compliance with laws and agreements is an important part of
Kesko's corporate responsibility. Non-compliance can result in fines, claims for damages and
other financial losses, as well as loss of trust and reputation. The EU General Data Protection
Regulation has placed more importance on the need to protect personal data.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Store sites and properties (medium-term and long-term risk)
In terms of business growth and profitability, good store sites are a key competitive factor.
The acquisition of store sites can be delayed by town planning and permit procedures and
the availability and pricing of plots. Considerable amounts of capital or lease liabilities are
tied up in properties for years. As a result of urbanisation, changes in the market situation,
growing significance of e-commerce, or a chain concept proving inefficient, there is a risk
that a store site or a property becomes unprofitable and operations are discontinued while
long-term liabilities remain.
Responsible operating practices and reputation management
(growing medium-term and long-term risk)
Various aspects of corporate responsibility, such as ensuring responsibility in the purchasing
chain of products, fair and equal treatment of employees, the prevention of corruption, and
environmental protection, are increasingly important to customers. Any failures in corporate
responsibility could result in negative publicity for Kesko and cause operational and financial
damage. Challenges in Kesko’s corporate responsibility work include communicating
responsibility principles to customers and ensuring responsibility in the supply chain of products.
Reporting to market (short-term risk)
In its investor communication and financial reporting, Kesko follows the disclosure policy
approved by Kesko’s Board of Directors. Kesko's objective is to produce and publish reliable
and timely information. Disclosure follows the principle of providing all market participants
information in a timely manner and non-selectively to form the basis for the price formation
of Kesko’s financial instruments such as shares. If any information published by Kesko proved
to be incorrect, or communications failed to meet regulations in other respects, it could
result in loss of investor and other stakeholder trust and in possible sanctions. Significant
business arrangements, tight disclosure schedules and the dependency on information
systems pose challenges for the accuracy of financial information.
Risks of damage (short-term risk)
Accidents, natural phenomena and epidemics can cause significant damage to people, property
or business. In addition, risks of damage may cause unpreventable business interruptions.
Proposal for profit distribution
The Board of Directors of Kesko Corporation proposes to the Annual General Meeting to
be held on April that a dividend of €. per share be paid for the year based
on the adopted balance sheet on shares held outside the company at the date of dividend
distribution. The remaining distributable assets will remain in equity. The Board proposes that
the dividend be paid in four instalments.
The first instalment of €. per share is to be paid to shareholders registered in the company's
register of shareholders kept by Euroclear Finland Ltd on the instalment’s record date April
. The Board proposes that the dividend instalment pay date be April .
The second instalment of €. per share is to be paid to shareholders registered in the
company's register of shareholders kept by Euroclear Finland Ltd on the instalment’s record date
June . The Board proposes that the dividend instalment pay date be June .
The third instalment of €. per share is to be paid to shareholders registered in the
company's register of shareholders kept by Euroclear Finland Ltd on the instalment’s record
date September . The Board proposes that the dividend instalment pay date be
September .
The fourth instalment of €. per share is to be paid to shareholders registered in the
company's register of shareholders kept by Euroclear Finland Ltd on the instalment’s record
date December . The Board proposes that the dividend instalment pay date be
December . The Board proposes it be authorised to decide, if necessary, on new
dividend payment record dates and pay dates for the second, third and/or fourth instalments,
if the rules and statutes of the Finnish book-entry system change or otherwise so require.
As at the date of the proposal for the distribution of profit, February , a total of
,, shares were held outside the company, and the corresponding total amount of
dividends was €,,..
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
The distributable assets of Kesko Corporation total €,,,., of which profit for
the financial year is €,,..
Annual General Meeting
The Board of Directors decided that the Annual General Meeting will be held on April
at . pm (EET).
Shares and securities markets
At the end of December , the total number of shares in Kesko Corporation was
,,, of which ,, or .%, were A shares, and ,, or
.%, were B shares. On December , Kesko Corporation held ,, of its
own B shares as treasury shares.
These treasury shares accounted for .% of the total number of B shares, .% of the
total number of shares, and .% of the votes attached to all shares in the company. The
total number of votes attached to all shares was ,,,. Each A share carries
ten () votes and each B share one () vote. The Company cannot vote with own shares
held by it as treasury shares and no dividend is paid on them. At the end of , Kesko
Corporation's share capital was €,,.
The price of a Kesko A share quoted on Nasdaq Helsinki was €. at the end of , and
€. at the end of , representing an increase of .%. Correspondingly, the price
of a B share was €. at the end of , and €. at the end of , representing
an increase of .%. In , the highest A share price was €. and the lowest
€.. The highest B share price was €. and the lowest €.. The Nasdaq Helsinki
All-Share index (OMX Helsinki) was up by .% and the weighted OMX Helsinki Cap index
by .% in . The Retail Sector Index was up by .%.
At the end of , the market capitalisation of the A shares was €, million. The
market capitalisation of the B shares was €, million, excluding the shares held by the
parent company. The combined market capitalisation of the A and B shares was €,
million, an increase of €, million from the end of .
In , a total of . million A shares were traded on Nasdaq Helsinki. The exchange value
of the A shares was €. million. Meanwhile, . million B shares were traded, with an
exchange value of €,. million. Nasdaq Helsinki accounted for over % of the trading
on Kesko’s A and B shares in . Kesko shares were also traded on multilateral trading
facilities, the most significant of which was Turquoise (source: Euroland).
At the end of , the number of registered shareholders was ,. This is the highest
figure in the company’s history, and represents an increase of , shareholders compared
to the end of . At the end of December, foreign ownership of all shares was .%,
and foreign ownership of B shares .%.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Share performance and turnover
Share price as at Dec.
A share* € . . .
B share* € . . .
Average share price
A share* € . . .
B share* € . . .
Market capitalisation as at
Dec., A share € million ,. ,. ,.
Market capitalisation as at
Dec., B share € million ,. ,. ,.
Turnover
A share Million pcs ** **
B share Million pcs ** **
Relative turnover rate
A share % . . .
B share % . . .
Diluted average number of
shares*
Thousand
pcs , , ,
* Kesko Corporations ‘s Annual General Meeting on April decided on a share issue without payment (share
split) in which three () new A shares were issued for each existing A share, and three () new B shares for each
existing B share. The share-specific indicators have been calculated using the post-share split number of shares.
Share-specific indicators for the comparison periods have been adjusted to correspond to the post-share split number
of shares.
** Calculated with post-split number of shares
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Analysis of shareholding
Analysis of shareholding by shareholder type as at Dec.
All shares Number of shares, pcs Percentage of all shares, %
Nominee-registered and non-Finnish holders ,, .
Non-financial corporations and housing
corporations ,, .
Households ,, .
General government* ,, .
Non-profit institutions serving households** ,, .
Financial and insurance corporations ,, .
Total ,, .
A shares
Number of
shares, pcs
Percentage of
A shares, %
Percentage of
all shares, %
Non-financial corporations and housing
corporations ,, . .
Households ,, . .
General government* ,, . .
Non-profit institutions serving households** ,, . .
Nominee-registered and non-Finnish holders ,, . .
Financial and insurance corporations ,, . .
Total ,, . .
B shares
Number of
shares, pcs
Percentage of
B shares, %
Percentage of
all shares, %
Nominee-registered and non-Finnish holders ,, . .
Households ,, . .
Non-financial corporations and housing
corporations ,, . .
General government* ,, . .
Non-profit institutions serving households** ,, . .
Financial and insurance corporations ,, . .
Total ,, . .
* General government, for example, municipalities, the provincial administration of Åland, authorised pension
providers and social security funds
** Non-profit institutions, for example, foundations awarding scholarships, organisations safeguarding certain
interests and various charitable associations
Analysis of shareholding by number of shares held as at Dec.
All shares
Number of shares
Number of
shareholders, pcs
Percentage of
shareholders, % Share total, pcs
Percentage of
shares, %
− , . , .
− , . ,, .
−, , . ,, .
,−, , . ,, .
,−, , . ,, .
,−, , . ,, .
,−, . ,, .
,−, . ,, .
,− . ,, .
Total , . ,, .
A shares
Number of shares
Number of
shareholders, pcs
Percentage of
A shareholders, %
A share total,
pcs
Percentage of
A shares, %
− , . , .
− , . , .
−, , . , .
,−, , . ,, .
,−, . ,, .
,−, . ,, .
,−, . ,, .
,−, . ,, .
,− . ,, .
Total , . ,, .
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
B shares
Number of shares
Number of
shareholders, pcs
Percentage of
B shareholders, %
B share total,
pcs
Percentage of
B shares, %
− , . , .
− , . ,, .
−, , . ,, .
,−, , . ,, .
,−, , . ,, .
,−, , . ,, .
,−, . ,, .
,−, . ,, .
,− . ,, .
Total , . ,, .
largest shareholders by number of
shares held as at Dec.
Number of
shares, pcs
Percentage of
shares, %
Number of
votes
Percentage of
votes, %
. K-Retailers' Association ,, . ,, .
. Ilmarinen Mutual Pension
Insurance Company ,, . ,, .
. Vähittäiskaupan Takaus Oy ,, . ,, .
. Foundation for Vocational
Training in the Retail Trade ,, . ,, .
. Varma Mutual Pension
Insurance Company ,, . ,, .
. Elo Mutual Pension Insurance
Company ,, . ,, .
. K-Food Retailers' Club ,, . ,, .
. Heimo Välinen Oy ,, . ,, .
. The State Pension Fund ,, . ,, .
. Food Paradise Oy ,, . ,, .
Does not contain shares held by Kesko Corporation, amounting to ,, on Dec..
largest shareholders by number of votes as at Dec.
Number of
shares, pcs
Percentage of
shares, %
Number of
votes
Percentage of
votes, %
. K-Retailers' Association ,, . ,, .
. Ilmarinen Mutual Pension
Insurance Company ,, . ,, .
. Vähittäiskaupan Takaus Oy ,, . ,, .
. Foundation for Vocational
Training in the Retail Trade ,, . ,, .
. K-Food Retailers' Club ,, . ,, .
. Heimo Välinen Oy ,, . ,, .
. Food Paradise Oy ,, . ,, .
. OP-Finland mutual fund ,, . ,, .
. T.A.T. Invest Oy , . ,, .
. Pokela Oy Iso Omena , . ,, .
Management's shareholdings
At the end of December , Kesko Corporation's Board members, the President and
CEO and the corporations controlled by them held ,, Kesko Corporation A
shares and , Kesko Corporation B shares, i.e. a total of ,, shares, which
represents .% of the total number of shares and . % of votes carried by all shares of
theCompany.
At December , the President and CEO held , Kesko Corporation A shares and
, B shares, which represented .% of the total number of shares and .% of
votes carried by all shares of the Company. At December , the Group Management
Board including the President and CEO held , Kesko Corporation A shares and
, Kesko Corporation B shares, which represented .% of the total number of
shares and .% of votes carried by all shares of the Company.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Board authorisations
Kesko has a share-based commitment and incentive scheme. To implement the scheme,
Kesko’s Board of Directors may decide, within share issue authorisations granted by the
company’s General Meeting, to transfer Kesko B shares held by the company as treasury
shares. In , Kesko Corporation transferred , Kesko B shares held as treasury
shares to members of management and other selected key persons in accordance with the
terms and conditions of share award plans. , B shares were returned to the company
without consideration based on the same terms and conditions. Kesko issued related stock
exchange releases on .., .., .. and .., .. and
... Kesko issued a stock exchange release on February regarding the most
recent share-based commitment and incentive plans. Kesko Corporation also transferred a
total of , of its own B shares held by the company as treasury shares to the members of
Kesko’s Board of Directors as part of the Board members’ annual remuneration, and issued a
related stock exchange release on April .
Kesko’s Annual General Meeting of April authorised the Board to decide on the
issuance of a total maximum of ,, new B shares and B shares held by the company
as treasury shares. The authorisation is valid until June . The authorisation was
communicated in a stock exchange release on April .
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Group's key performance indicators
Income statement
Net sales € million ,. ,. ,.
Change in net sales % . -. .
Change in net sales, comparable % . . .
Operating profit, comparable € million . . .
Operating profit as percentage of net sales,
comparable % . . .
Operating profit € million . . .
Operating profit as percentage of net sales % . . .
Profit for the year (incl. non-controlling interests) € million . . .
Profit for the year as percentage of net sales % . . .
Profitability
Return on equity, group % . . .
Return on equity, comparable, group % . . .
Return on capital employed % . . .
Return on capital employed, comparable % . . .
Funding and financial position
Interest-bearing net debt, group € million ,. ,. ,.
Interest-bearing net debt excluding lease
liabilities € million . . -.
Gearing, group % . . .
Equity ratio, group % . . .
Interest-bearing net debt/EBITDA excluding the
impact of IFRS , group . . .
Other performance indicators
Capital expenditure € million . . .
Capital expenditure as percentage of net sales % . . .
Cash flow from operating activities € million . ,. ,.
Cash flow from investing activities € million -. -. -.
Cash flow from operating activities, discontinued
operations € million . - -
Cash flow from investing activities, discontinued
operations € million . - -
Personnel, average for the period, group total , , ,
Personnel, as at Dec., group total , , ,
Share performance indicators
Earnings/share, basic and diluted**
Continuing operations € . . .
Discontinued operations € . - -
Group total € . . .
Earnings/share, comparable, basic** . . .
Equity/share** € . . .
Dividend/share* € . . .
Payout ratio % . . .
Payout ratio, comparable % . . .
Cash flow from operating activities/share,
adjusted, group total** € . . .
Cash flow from operating activities/share,
adjusted, continuing operations** € . . .
Price/earnings ratio (P/E), A share, adjusted . . .
Price/earnings ratio (P/E), B share, adjusted . . .
Effective dividend yield, A share % . . .
Effective dividend yield, B share % . . .
* Proposal to the General Meeting
**Kesko Corporations ‘s Annual General Meeting on April decided on a share issue without payment (share
split) in which three () new A shares were issued for each existing A share, and three () new B shares for each
existing B share. The share-specific indicators have been calculated using the post-share split number of shares.
Share-specific indicators for the comparison periods have been adjusted to correspond to the post-share split number
of shares.
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Calculation of performance indicators
Kesko uses alternative performance measures to reflect business performance and
profitability. The alternative performance measures should be examined together with the
IFRS-compliant performance indicators.
Change in comparable net sales is used to reflect changes in the Group’s business volume
between periods. The indicator reflects the change in net sales excluding the impact of
acquisitions and divestments, in local currencies. The comparable net sales have been
calculated by including in the net sales the business operations that have been part of
Kesko Group in both the financial year as well as the comparison year. Other structural
arrangements related to acquisitions and divestments have been adjusted in the same
manner as acquisitions.
Performance indicators reflecting comparable profit and profitability are used to improve the
comparability of operational performance between periods. Gains and losses on disposal of
real estate, shares and business operations, impairment charges and significant restructuring
costs are identified as items affecting comparability. Gains on disposal have been presented
within other operating income, and losses on disposal within other operating expenses in the
income statement.
In addition, the financial performance indicators required by the Decree of the Ministry
of Finance on obligation of securities issuers to disclose periodic information have been
presented as alternative performance measures. The management uses these indicators to
monitor and analyse business performance, profitability and financial position.
Profitability
Operating profit, comparable Operating profit +/– items affecting comparability
Items affecting comparability
– gains on disposal + losses on disposal + impairment charges
+/-structural arrangements
Return on equity, %
(Profit/loss before tax − Income tax) x
Shareholders' equity, average of the beginning and end of the
financialyear
Return on equity,
comparable, %
(Profit/loss adjusted for items affecting comparability before
tax − Income tax adjusted for the tax effect of the items affecting
comparability) x
Shareholders' equity, average of the beginning and end of the
financialyear
Return on capital employed, %
Operating profit x
(Non-current assets + Inventories + Receivables + Other current assets
- Non-interest-bearing liabilities) on average for months
Return on capital employed,
comparable, %
Comparable operating profit x
(Non-current assets + Inventories + Receivables + Other current assets
- Non-interest-bearing liabilities) on average for months
EBITDA
Operating profit + Depreciation and amortisation
+Impairmentcharges
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Funding, capital expenditure and financial position
Equity ratio, %
Shareholders' equity x
(Balance sheet total − Advances received)
Gearing, %
Interest-bearing net debt x
Shareholders' equity
Interest-bearing net debt
Interest-bearing liabilities + Lease liabilities – Other current financial
assets – Cash and cash equivalents
Interest-bearing net debt
excluding lease liabilities
Interest-bearing net debt – Lease Liabilities
Capital expenditure
Performance indicator includes investments in tangible and intangible
assets, subsidiary shares, shares in associates and joint ventures
and other shares. Additions of right-of-use assets for leases in
the consolidated statement of financial position are not capital
expenditure. Redemption of a leased property (right-of-use asset) is
reported as capital expenditure.
Interest-bearing net debt
excluding lease liabilities /
EBITDA excluding the impact
of IFRS
Interest-bearing net debt excluding lease liabilities / EBITDA excluding
the impact of IFRS
Share performance indicators
Earnings/share, diluted
Net profit/loss - Share of non-controlling interests of net profit/loss
Average number of shares adjusted for the dilutive effect
Earnings/share, basic
Net profit/loss − Share of non-controlling interests of net profit/loss
Average number of shares
Earnings/share, basic,
comparable
Net profit/loss adjusted for items affecting comparability − Share of
non-controlling interests of net profit/loss adjusted for items affecting
comparability
Average number of shares
Equity/share
Equity attributable to equity holders of the parent
Basic number of shares at the balance sheet date
Payout ratio, %
(Dividend/share) x
(Earnings/share)
Price/earnings ratio (P/E)
Share price at balance sheet date
(Earnings/share)
Effective dividend yield, %
(Dividend/share) x
Share price at balance sheet date
Market capitalisation Share price at balance sheet date x Number of shares
Cash flow from operating
activities/share
Cash flow from operating activities
Average number of shares
Yield of A share and B share Change in share price + Annual dividend yield
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
Reconciliation of alternative performance
measures to IFRS financial statements
€ million –/ –/
Items affecting comparability
Gains on disposal . .
Losses on disposal . -.
Impairment charges -. -
Structural arrangements . .
Items in operating profit affecting comparability -. .
Items in financial items affecting comparability . .
Items in income taxes affecting comparability . .
Total items affecting comparability . .
Items in EBITDA affecting comparability . .
Operating profit, comparable
Operating profit . .
Net of
Items in operating profit affecting comparability -. .
Operating profit, comparable . .
EBITDA
Operating profit . .
Plus
Depreciation and impairment charges . .
Depreciation and impairment charges for right-of-use assets . .
EBITDA ,. ,.
EBITDA, comparable
EBITDA ,. ,.
Net of
Items in EBITDA affecting comparability . .
EBITDA, comparable ,. ,.
€ million –/ –/
Profit before tax, comparable
Profit before tax . .
Net of
Items in operating profit affecting comparability -. .
Items in financial items affecting comparability . .
Profit before tax, comparable . .
Net profit, comparable
Comparable profit before tax . .
Net of
Income tax . .
Items in income taxes affecting comparability . .
Net profit, comparable . .
Net profit attributable to owners of the parent, comparable
Net profit, comparable . .
Net profit attributable to non-controlling interests - .
Net profit attributable to owners of the parent, comparable . .
Earnings/share, comparable, €
Net profit attributable to owners of the parent, comparable . .
Average number of shares, basic, , pcs , ,
Earnings/share, comparable, € . .
Return on capital employed, %
Operating profit . .
Capital employed, average ,. ,.
Return on capital employed, % . .
Return on capital employed, comparable, %
Operating profit, comparable . .
Capital employed, average ,. ,.
Return on capital employed, comparable, % . .
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
€ million –/ –/
Group
Return on equity, %
Net profit . .
Equity, average ,. ,.
Return on equity, % . .
Return on equity, comparable, %
Net profit, comparable . .
Equity, average ,. ,.
Return on equity, comparable, % . .
Equity ratio, %
Shareholders’ equity ,. ,.
Total assets ,. ,.
Advances received . .
Equity ratio, % . .
CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
THE REPORT BY THE BOARD OF DIRECTORS
FINANCIAL
STATEMENTS
KESKO ANNUAL REPORT 2021
Consolidated income statement
€ million Note
1 Jan.–31 Dec.
2021 %
1 Jan.–31 Dec.
2020 %
Net sales 2.1 11,300.2 100.0 10,669.2 100.0
Material and services 2.3 -9,695.3 -85.8 -9,148.3 -85.7
Change in inventory 43.1 0.4 -6.9 -0.1
Other operating income 2.4 957.3 8.5 930.9 8.7
Employee benefit expenses 2.5 -764.0 -6.8 -750.7 -7.0
Depreciation, amortisation and impairment charges 3.2 3.3 -176.8 -1.6 -170.2 -1.6
Depreciation, amortisation and impairment charges for right-of-use assets 3.4 -310.3 -2.7 -325.8 -3.1
Other operating expenses 2.5 -607.2 -5.4 -605.5 -5.7
Share of result of joint ventures 28.0 0.2 7.5 0.1
Operating profit 775.2 6.9 600.2 5.6
Interest income and other finance income 4.4 12.5 0.1 12.4 0.1
Interest expense and other finance costs 4.4 -8.6 -0.1 -11.2 -0.1
Interest expense for lease liabilities 4.4 -71.3 -0.6 -83.3 -0.8
Foreign exchange differences 4.4 -0.8 0.0 -4.7 0.0
Total finance income and costs 4.4 -68.2 -0.6 -86.8 -0.8
Share of result of associates 5.9 0.1 14.3 0.1
Profit before tax 712.9 6.3 527.6 4.9
Income tax 2.7 -141.1 -1.2 -92.3 -0.9
Net profit for the year 571.8 5.1 435.3 4.1
Net profit for the year attributable to
Owners of the parent 571.8 433.4
Non-controlling interests - 2.0
Earnings per share for net profit attributable to owners of the parent
Basic and diluted, Group total, € 2.8 1.44 1.09
CONSOLIDATED FINANCIAL STATEMENTS (IFRS)
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
38KESKO'S YEAR 2021 I FINANCIAL REVIEW
Consolidated statement of comprehensive income
€ million Note 1 Jan.–31 Dec. 2021 1 Jan.–31 Dec. 2020
Net profit for the year 571.8 435.3
Items that will not be reclassified subsequently to profit or loss
Actuarial gains and losses 2.10 3.7 40.0 0.8
Items that may be reclassified subsequently to profit or loss
Currency translation differences related to a foreign operation 2.10 9.8 -2.8
Share of other comprehensive income of associates and joint ventures 2.10 -0.5 -
Cash flow hedge revaluation 2.10 11.1 -2.7
Others 2.10 - -0.3
Total comprehensive income for the year, net of tax 60.4 -4.9
Total comprehensive income for the year 632.1 430.5
Comprehensive income for the year attributable to
Owners of the parent 632.1 432.6
Non-controlling interests - -2.2
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
39KESKO'S YEAR 2021 I FINANCIAL REVIEW
Consolidated statement of financial position
€ million Note 31 Dec. 2021 % 31 Dec. 2020 %
ASSETS
Non-current assets
Property, plant and equipment 3.2 1,537.6 1,450.8
Goodwill 3.3 588.8 572.1
Intangible assets 3.3 190.1 205.2
Right-of-use assets 3.4 1,735.0 1,819.0
Shares in associates and joint ventures 3.8 5.2 234.6 199.1
Other investments 4.3 4.5 15.5 22.7
Non-current receivables 4.3 4.5 72.6 73.8
Deferred tax assets 2.7 1.1 1.5
Pension assets 3.7 94.7 89.6
Total non-current assets 4,470.1 64.2 4,433.8 66.8
Current assets
Inventories 3.5 894.3 836.9
Interest-bearing receivables 3.6 4.5 4.1 12.3
Trade receivables 3.6 4.3 4.5 909.2 776.5
Income tax assets 3.6 0.1 1.6
Other non-interest-bearing receivables 3.6 4.5 299.9 265.0
Other financial assets 2.9 4.3 4.5 107.9 51.7
Cash and cash equivalents 2.9 279.8 254.3
Total current assets 2,495.4 35.8 2,198.2 33.1
Non-current assets classified as held for sale 0.5 0.0 9.9 0.1
Total assets 6,966.0 100.0 6,641.9 100.0
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
40KESKO'S YEAR 2021 I FINANCIAL REVIEW
€ million Note 31 Dec. 2021 % 31 Dec. 2020 %
EQUITY AND LIABILITIES
Share capital 4.2 197.3 197.3
Share premium 4.2 197.8 197.8
Other reserves 4.2 266.9 266.8
Currency translation differences 4.2 -10.2 -20.0
Revaluation reserve 4.2 9.1 -2.0
Retained earnings 1,868.6 1,549.3
Total equity 2,529.5 36.3 2,189.3 33.0
Non-current liabilities
Interest-bearing non-current liabilities 4.3 4.5 4.6 206.4 408.7
Lease liabilities 4.5 4.6 1,610.7 1,712.3
Non-interest-bearing non-current liabilities 4.3 4.5 24.8 29.5
Deferred tax liabilities 2.7 37.9 16.4
Pension obligations 0.4 0.4
Provisions 3.9 15.4 20.3
Total non-current liabilities 1,895.6 27.2 2,187.7 32.9
Current liabilities
Current interest-bearing liabilities 4.3 4.5 4.6 160.1 182.6
Lease liabilities 4.5 4.6 317.9 312.7
Trade payables 4.3 4.5 1,332.6 1,091.3
Other non-interest-bearing liabilities 4.3 4.5 232.3 218.1
Income tax liabilities 4.5 28.9 35.2
Accrued liabilities 4.3 4.5 454.8 405.1
Provisions 3.9 14.3 17.7
Total current liabilities 2,540.9 36.5 2,262.6 34.1
Liabilities related to available-for-sale non-current assets - - 2.3 0.0
Total liabilities 4,436.5 63.7 4,452.6 67.0
Total equity and liabilities 6,966.0 100.0 6,641.9 100.0
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
41KESKO'S YEAR 2021 I FINANCIAL REVIEW
Consolidated statement of cash flows
€ million Note
1 Jan.–31 Dec.
2021
1 Jan.–31 Dec.
2020
Cash flows from operating activities
Profit before tax 712.9 527.6
Adjustments
Depreciation according to plan 171.4 170.2
Depreciation and impairment for right-of-use assets 310.3 325.8
Finance income and costs -3.1 3.5
Interest expense for lease liabilities 71.3 83.3
Other adjustments 2.9 9.0 -54.3
Change in working capital
Current non-interest-bearing receivables, increase (-)/
decrease (+) -146.8 -64.3
Inventories, increase (-)/decrease (+) -53.2 5.5
Current non-interest-bearing liabilities, increase (+)/
decrease (-) 283.7 287.9
Interest paid and other finance costs -7.0 -7.7
Interest paid on lease liabilities -71.3 -83.3
Interest received 10.5 9.1
Dividends received 1.6 0.7
Dividends received from associated companies and
joint ventures - 2.5
Income taxes paid -137.2 -54.0
Net cash flows from operating activities, total 1,152.0 1,152.4
€ million Note
1 Jan.–31 Dec.
2021
1 Jan.–31 Dec.
2020
Cash flows from investing activities
Payments for acquisition of subsidiary shares, net of
cash acquired 3.1 -13.2 -155.7
Payments for investments consolidated using the
equity method 2.9 -0.1 -
Payments for property, plant, equipment and intangible
assets 2.9 -239.4 -203.9
Proceeds from sale of subsidiaries and businesses, net
of cash deducted 2.8 19.6
Impact of change in Kesko Senukai’s consolidation
method 3.1 - -92.7
Proceeds from equity accounted investments - 5.7
Proceeds from sale of property, plant, equipment and
intangible assets 13.3 10.6
Proceeds from sale of other investments 0.1 0.1
Loan receivables and other financial assets, increase
(-)/decrease (+) -55.9 -4.9
Net cash flows from investing activities, total -292.3 -421.3
Cash flows from financing activities
Interest-bearing liabilities, increase (+)/decrease (-) 2.9 -223.4 18.9
Repayments for lease liabilities 2.9 -323.2 -363.3
Interest-bearing receivables, increase (-)/decrease (+) 2.9 10.7 -0.9
Dividends paid -297.8 -249.9
Other items -0.7 -4.7
Net cash flows from financing activities, total -834.4 -600.0
Change in cash and cash equivalents 25.2 131.2
Cash and cash equivalents as at 1 January 2.9 254.3 124.4
Currency translation difference adjustment and change
in value 0.2 -1.2
Cash and cash equivalents assets as at 31 December 2.9 279.8 254.3
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
42KESKO'S YEAR 2021 I FINANCIAL REVIEW
Consolidated statement of changes in equity
€ million Share capital Reserves
Currency
translation
differences
Revaluation
reserve Treasury shares
Retained
earnings Total equity
Balance as at 1 January 2021 197.3 464.7 -20.0 -2.0 -31.4 1,580.7 2,189.3
Share-based payments 1.1 1.1
Dividends -297.8 -297.8
Other changes 0.0 4.7 4.7
Transactions with owners, total 0.0 1.1 -293.1 -291.9
Comprehensive income
Net profit for the year 571.8 571.8
Actuarial gains/losses 40.0 40.0
Currency translation differences related to
a foreign operation 9.8 9.8
Share of other comprehensive income of
associates and joint ventures -0.5 -0.5
Cash flow hedge revaluation 11.1 11.1
Total comprehensive income for the year,
net of tax 9.8 11.1 39.5 60.4
Total comprehensive income for the period 9.8 11.1 611.2 632.1
Balance as at 31 December 2021 197.3 464.7 -10.2 9.1 -30.3 1,898.9 2,529.5
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
43KESKO'S YEAR 2021 I FINANCIAL REVIEW
Attributable to owners of the parent
€ million Share capital Reserves
Currency
translation
differences
Revaluation
reserve Treasury shares
Retained
earnings
Non-
controlling
interest Total equity
Balance as at 1 January 2020 197.3 464.8 -21.3 0.6 -35.4 1,419.8 115.0 2,140.8
Share-based payments 4.0 4.0
Dividends -249.9 -249.9
Increase in share capital 1.2 1.2
Disposal of subsidiaries 0.0 -21.2 -4.1 -25.4
Change in Kesko Senukai's consolidation
method -0.1 -109.9 -110.0
Other changes -1.9 -1.9
Transactions with owners, total -0.2 4.0 -273.0 -112.8 -382.0
Comprehensive income
Net profit for the year 433.4 2.0 435.3
Actuarial gains/losses 0.8 0.8
Currency translation differences related to
a foreign operation 1.3 0.1 -4.1 -2.8
Cash flow hedge revaluation -2.7 -2.7
Other items -0.3 -0.3
Total comprehensive income for the year,
net of tax 1.3 -2.7 0.6 -4.1 -4.9
Total comprehensive income for the period 1.3 -2.7 434.0 -2.2 430.5
Balance as at 31 December 2020 197.3 464.7 -20.0 -2.0 -31.4 1,580.7 0.0 2,189.3
Further information on share capital and reserves is disclosed in note 4.2, on components of other comprehensive income in note 2.10 and on share-based compensation plans in note 5.4.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
44KESKO'S YEAR 2021 I FINANCIAL REVIEW
IN THIS SECTION
1.1 Basic information about the Company 46
1.2 Basis of preparation 46
1.3 Critical accounting estimates and assumptions 46
1.4 Critical judgements in applying accounting policies 47
1.5 Consolidation principles 48
1.6 Discontinued operations and non-current assets classified
as held for sale and related liabilities 49
1.7 New IFRS standards and IFRIC interpretations and
the impact of new and updated standards 50
1.8 Change in accounting policy 50
Accounting policies are stated in each note in sections 2–5.
Notes to the consolidated financial statements
1. ACCOUNTING POLICIES FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
45KESKO'S YEAR 2021 I FINANCIAL REVIEW
The notes to the consolidated financial statements have been grouped into sections based on
their nature. The basis of preparation is described as part of this note (Accounting policies
for the consolidated financial statements), while the accounting policies directly related to
a specific note are presented as part of the note in question. The notes contain the relevant
financial information as well as a description of the accounting policies and key estimates and
judgements applied for the topics of the individual note.
1.1 Basic information about the Company
trade, the building and technical trade, and the car trade.
The Group's parent company, Kesko Corporation , is a Finnish public limited company
constituted in accordance with the laws of Finland . The Company's business ID is
0109862-8, it is domiciled in Helsinki, Finland and its registered address is PO Box 1,
FI-00016 KESKO. Copies of Kesko Corporation's financial statements and the consolidated
financial statements are available from Kesko Corporation , PO Box 1, Helsinki, FI-00016
kesko.fi.
Kesko's Board of Directors has approved these financial statements for disclosure on
2February 2022.
Kesko is issuing an XHTML financial review complying with the ESEF requirements on
Kesko’s website. The Audit firm Deloitte Oy has provided to company an independent
auditor’s reasonable assurance report in accordance with ISAE 3000 (Revised) on Kesko’s
ESEF Financial Statements.
1.2 Basis of preparation
Kesko's consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) approved for adoption by the European
Union, and they comply with the IAS and IFRS standards and respective SIC and IFRIC
Interpretations effective on 31 December 2021. The International Reporting Standards refer
to standards and their interpretations approved for adoption within the EU in accordance
with the procedure enacted in EU regulation (EC) 1606/2002, included in the Finnish
Accounting Act and regulations based on it. The Group has applied new and amended
standards that became effective in the financial year that began on 1 January 2021.
The improvements and amendments to existing standards did not have an impact on the
consolidated financial statements. Accounting standards not yet effective have not been
adopted voluntarily for the consolidated financial statements. The notes to the consolidated
financial statements also include compliance with Finnish accounting and corporate
legislation.
All amounts in the consolidated financial statements are in millions of euros and based on
original cost, with the exception of items specified below, which have been measured at fair
value in compliance with the standards.
1.3 Critical accounting estimates and assumptions
The preparation of consolidated financial statements in conformity with international
accounting standards requires the use of certain estimates and assumptions about the future
that affect the reported amounts of assets and liabilities, contingent liabilities, and income
and expense. The actual results may differ from these estimates and assumptions. The most
significant circumstances for which estimates have been required are described below.
The estimates and judgements made are continuously evaluated, and they are based on
historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
46KESKO'S YEAR 2021 I FINANCIAL REVIEW
Measurement of assets acquired and liabilities assumed
Assets acquired and liabilities assumed in business combinations are measured at their fair
values at the date of acquisition. The fair values on which the allocation of costs and liabilities
is based are determined by reference to market values to the extent they are available.
If market values are not available, the measurement is based on the estimated earnings-
generating capacity of the asset and its future use in Kesko's operating activities. The
measurement of intangible assets, in particular, is based on the present values of future cash
flows and requires management estimates regarding future cash flows and the use of assets.
More detailed information in Note 3.1.
Impairment test
The recoverable amounts of cash generating units have been determined using calculations
based on value in use. In the calculations, forecast cash flows are based on financial plans
approved by management, covering a period of three years. More detailed information in
Note 3.3.
Employee benefits
The Group operates both defined contribution pension plans and defined benefit pension
plans. Items relating to employee benefits are calculated using several factors that require
the application of judgement. Pension calculations under defined benefit plans in compliance
with IAS 19 are based on, among others, the following factors that rely on management
estimates:
• discount rate used in calculating pension expenses and obligations and net finance cost
for the period
• future salary level trend
• employee service life
Changes in these assumptions can significantly impact the amounts of pension obligation and
future pension expenses. In addition, a significant part of the pension plan assets is invested
in real estate and shares, whose value adjustments impact the recognised amount of pension
assets. More detailed information in Note 3.7.
Measurement of inventories
The Group regularly reviews inventories for obsolescence and turnover, and for possible
reduction of net realisable value below cost, and records an impairment as necessary. Such
reviews require assessments of future demand for products. Possible changes in these
estimates may cause changes in inventory measurement in future periods. More detailed
information in Note 3.5.
Trade receivables
The Group companies apply a uniform practice to measuring receivables past due. Possible
changes in customers' solvency may cause changes in the measurement of trade receivables
in future periods. More detailed information in Note 3.6.
Provisions
The existence of criteria for recognising provisions and the amounts of provisions are
determined based on estimates of the existence and amount of the obligation. Estimates may
differ from the actual future amount of the obligation and with respect to the existence of the
obligation.
Leases
When recognising leases in the balance sheet, assessments must be made concerning the
lease term, use of extension options and the discount rate used. When assessing the lease
term of a new lease, extension options are not acknowledged until a commitment has been
made to use the extension option. The assessments may differ from the actualised future
lease terms and conditions. More detailed information in Note 3.4.
1.4 Critical judgements in applying accounting policies
The Group's management uses its judgement in the adoption and application of accounting
policies in the financial statements. The management has exercised its judgement in the
application of accounting policies in the income statement with regard to the presentation
of profits (Note 2.1), the existence of control over subsidiaries (Note 3.1), measuring
receivables, determining provisions for restructuring, and measuring assets and liabilities
recognised in the balance sheet based on leases (Note 3.4).
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
47KESKO'S YEAR 2021 I FINANCIAL REVIEW
1.5 Consolidation principles
Subsidiaries
The consolidated financial statements combine the financial statements of Kesko
Corporation and subsidiaries controlled by the Group. Control exists when the Group has
more than half of the voting rights of a subsidiary or otherwise exerts control. An investor
controls an investee when it is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the
investee. Acquired subsidiaries are consolidated from the date on which the Group gains
control until the date on which control ceases. The existence of potential voting rights has
been considered when assessing the existence of control in the case that the instruments
entitling to potential control are currently exercisable. Subsidiaries are listed in Note 5.2.
Mutual shareholding is eliminated by using the acquisition cost method. The cost of
assets acquired is determined on the basis of the fair value of the acquired assets as at the
acquisition date, the issued equity instruments and liabilities resulting from or assumed
on the date of the exchange transaction. The identifiable assets, liabilities and contingent
liabilities acquired are measured at the fair value at the acquisition date, gross of non-
controlling interest.
Intragroup transactions, receivables and payables, unrealised profits and internal distributions
of profits are eliminated when preparing the consolidated financial statements. Unrealised
losses are not eliminated if the loss is due to the impairment of an asset. Non-controlling
interest in the profit for the period is disclosed in the income statement and the amount of
equity attributable to the non-controlling interests is disclosed separately in equity.
The Group accounts for its real estate company acquisitions as acquisitions of assets.
Associates
Associates are companies over which the Group has significant influence but not control. In
Kesko Group, significant influence accompanies a shareholding or agreement of between
20% and 50% of the voting rights. Investments in associates are accounted for using the
equity method and are initially recognised at cost.
The Group’s share of post-acquisition profits or losses is recognised in the income statement.
The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. If the Group’s share of losses in an associate equals or exceeds its interest in the
associate, the Group does not recognise further losses.
Unrealised gains on transactions between the Group and the associates are eliminated to the
extent of the Group’s interest in the associates. Unrealised losses are also eliminated, unless
the transaction provides evidence of an impairment of the asset transferred. Dividends
received from associates are deducted from the Group's result and the cost of the shares. An
investment in an associate includes the goodwill generated by the acquisition. Goodwill is not
amortised.
Joint agreements
Joint agreements are arrangements in which the sharing of joint control has been
contractually agreed between two or more parties. Joint control exists only when decisions
about the relevant activities require the unanimous consent of the parties sharing control.
A joint venture is a joint agreement whereby the parties that have joint control of the
agreement have rights to the net assets of the agreement. Investments in joint ventures are
accounted for using the equity method, and on initial recognition, they are recognised at
cost.
The Group’s share of post-acquisition profits or losses is recognised in the income statement.
The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. If the Group’s share of losses in a joint venture equals or exceeds its interest in
the joint venture, the Group does not recognise further losses.
Unrealised gains on transactions between the Group and the joint ventures are eliminated
to the extent of the Group’s interests in the joint ventures. Unrealised losses are also
eliminated, unless the transaction provides evidence of an impairment of the asset
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
48KESKO'S YEAR 2021 I FINANCIAL REVIEW
transferred. Dividends received from joint ventures are deducted from the Group's result and
the cost of the shares. An investment in a joint venture includes the goodwill generated by
the acquisition. Goodwill is not amortised.
Mutual real estate companies are consolidated as common functions on a line-by-line basis
in proportion to ownership. The Group's share of mutual real estate companies' loans and
reserves is accounted for separately in the consolidation.
Subsidiaries, associates and joint ventures and proportionately consolidated mutual real
estate companies are listed in Note 5.2.
Foreign currency items
The consolidated financial statements are presented in euros, which is both the functional
currency of the environment in which the Group’s parent operates and the presentation
currency. On initial recognition, the amounts with respect to the result and financial position
of the Group companies located outside the euro zone are recorded in the functional
currency of each of their operating environments.
Foreign currency transactions are recorded in euros by applying the exchange rate at the
date of the transaction. Receivables and liabilities denominated in foreign currency are
translated into euros using the closing rate. Exchange rate gains and losses on foreign
currency transactions as well as receivables and liabilities denominated in foreign currency
are recognised in the income statement, with the exception of monetary items that form a
part of a net investment in a foreign operation and loans designated as hedges for foreign
net investments and regarded as effective. These exchange differences are recognised
in equity and their changes are presented in other comprehensive income. The exchange
differences are presented in the income statement on disposal of the foreign operation or
settlement of the hedges. The Group has currently no loans designated as hedges for foreign
net investments. Foreign exchange gains and losses resulting from operating activities are
included in the respective items above operating profit. Foreign exchange gains and losses
from foreign exchange forward contracts and options used for hedging financial transactions,
and from foreign currency borrowings are included in finance income and costs.
The income statements of the Group companies operating outside the euro zone have been
translated into euros at the average rate of the financial year, and their balance sheets at
the closing rate. The foreign exchange difference resulting from the use of different rates,
the translation differences arising from the elimination of the acquisition cost of subsidiaries
outside the euro zone, exchange differences arising from monetary items that form a part
of a net investment in a foreign operation and the hedging results of net investments are
recognised in equity, and the changes are presented in other comprehensive income. In
connection with the disposal of a subsidiary, translation differences are recognised in the
income statement as part of the gains or losses on the disposal.
Goodwill arising on the acquisition of foreign operations and the fair value adjustments of
assets and liabilities made upon their acquisition are treated as assets and liabilities of these
foreign operations and translated into euros at the closing rate.
1.6 Discontinued operations and non-current assets
classified as held for sale and related liabilities
Non-current assets (or a disposal group) are classified as held for sale if their carrying
amount will be recovered principally through the disposal of the assets and the sale is highly
probable. If their carrying amount will be recovered principally through their disposal rather
than through their continuing use, they are measured at the lower rate of the carrying
amount and fair value net of costs to sell.
The comparative information in the income statement is adjusted for operations classified
as discontinued during the latest financial period being reported. Consequently, the result of
discontinued operations is presented as a separate line item also for the comparatives. The
Group did not have discontinued operations in the 2021 and 2020 financial years.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
49KESKO'S YEAR 2021 I FINANCIAL REVIEW
1.7 New IFRS standards and IFRIC interpretations
and the impact of new and updated standards
IFRIC interpretations, amendments to existing
standards, and new and updated standards
Annual improvements or amendments to existing standards that become effective for annual
periods beginning on or after 1 January 2022 are not estimated to have a material impact on
the consolidated financial statements.
1.8 Change in accounting policy
The classification of cash and cash equivalents in the consolidated statement of financial
position and the consolidated statement of cash flows has been changed. Some of the
assets previously reported in the consolidated statement of financial position under current
assets on line "Financial assets at fair value through profit or loss" are now classified in the
consolidated statement of financial position and the consolidated statement of cash flows
on line ”Cash and cash equivalents”. On 31 December 2020, the reclassified assets totalled
€99.9 million. The cash and cash equivalents subject to reclassification are investments in
money market funds with an investment horizon of less than three months. The Group makes
short-term investments with extra liquidity in money market funds as an alternative to bank
deposits. The risk profile of these fund investments is very low, and in terms of liquidity and
return, they correspond to bank deposits. Assets reclassified as cash and cash equivalents
belong to level 2 on the hierarchy of financial assets at fair value presented in the table in
Note 4.5.
Following the reclassification, presentation of those financial assets at fair value through
profit or loss that are not classified as cash and cash equivalents in the new classification was
changed in the consolidated statements of cash flows so that the changes in those financial
instruments are presented under cash flows from investing activities instead of cash flows
from financing activities.
The balance sheet lines ”Financial assets at fair value through profit or loss” and ”Financial
assets at amortised cost”, previously reported under current assets, have also been combined
on the balance sheet line ”Other financial assets.” The reclassification has been made to the
consolidated statement of financial position and the consolidated statement of cash flows for
the comparison periods. The management sees that the reclassification enables better and
more meaningful information and corresponds to operational liquidity management.
Effect of reclassification of cash and cash equivalents
€ million
Consolidated statements of financial position 31 Dec. 2021 31 Dec. 2020
Cash and cash equivalents, reported 279.8 154.5
Effect of reclassification - +99.9
Cash and cash equivalents, reclassified 279.8 254.3
Consolidated statement of cash flows
1 Jan.–31 Dec.
2021
1 Jan.–31 Dec.
2020
Net cash used in investing activities, reported -292.3 -413.7
Effect of reclassification - -7.6
Net cash used in investing activities, reclassified -292.3 -421.3
Net cash used in financing activities, reported -834.4 -707.5
Effect of reclassification - +107.5
Net cash used in financing activities, reclassified -834.4 -600.0
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
50KESKO'S YEAR 2021 I FINANCIAL REVIEW
IN THIS SECTION
. Revenue recognition
. Segment information
. Material and services
. Other operating income
. Operating expenses
. Foreign exchange differences recognised in operating profit
. Income tax
. Earnings per share
. Notes related to the statement of cash flows
. Components of other comprehensive income
Notes to the consolidated financial statements
. FINANCIAL RESULTS
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Revenue recognition
Accounting policies
In the consolidated income statement, net sales comprise the sales of goods, services
and energy based on customer agreements. The share of sales of services and energy of
total net sales is not significant. The Group sells products to retailers and other business
customers and engages in own retailing. Income from sales of goods and services is
recognised when the customer obtains control of the goods or services. Customers obtain
control when they have the ability to direct the use of and obtain the benefits from the
goods or services. As a rule, income from sales of goods can be recognised at the time of
transfer. Income from services is recognised after the service has been performed. Sales
to retailers and business customers are based on invoicing. Sales to consumers are mainly
in cash or by credit card.
When calculating net sales, sales revenue is adjusted for indirect taxes, sales adjustment
items and the exchange differences of foreign-currency-denominated sales. In businesses
in Finland that are part of the K-Plussa customer loyalty scheme, sales adjustment
items include loyalty award credits, recognised as part of sales transactions. Income
from corresponding sales is recognised when the award credits are redeemed or expire.
Contract liability is recognised in the balance sheet. Loyalty award credits affect the net
sales of those businesses that grant K-Plussa customer loyalty award credits in Finland
and engage in retailing.
Other operating income includes income other than that associated with the sale of goods
or services based on customer agreements, such as lease income, store site and chain
fees charged from retailers, and various other service fees and commissions. Fees charged
from retailer entrepreneurs are based on a partnership agreement (chain agreement)
based on which the retailers engage in business in line with the chain’s operating
models and objectives. Store site fees and chain fees vary depending on the growth
and profitability of the retailer’s business operations under the chain agreement. Chain
marketing fees and data system fees are cost-based charges. More detailed information
on other operating income is presented in Note ..
Other operating income also includes gains on the disposal of property, plant and
equipment and intangible assets as well as gains on disposal of businesses and realised
and unrealised gains on derivatives used for hedging foreign currency risks associated
with commercial transactions.
Interest income is recognised on a time apportionment basis using the effective interest
method. Dividend income is recognised when the right to receive payment is established.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
reported as part of other operating income and expenses to the extent that they hedge
the divisions’ foreign exchange risk.
The assets and liabilities of a division's capital employed consist of operating items that
can be justifiably allocated to the divisions. The assets of capital employed comprise
property, plant and equipment and intangible assets, right-of-use assets related to
leases, interests in associates and joint ventures and other investments, pension assets,
inventories, trade receivables and other non-interest-bearing receivables, interest-bearing
receivables, and assets held for sale. The liabilities of capital employed consist of trade
payables, the share of other non-interest-bearing liabilities and provisions. The Group’s
real estate assets and the revenue and costs generated from them have been allocated
to the divisions. Capital employed does not include deferred tax assets and liabilities,
financial assets at fair value through profit or loss with the exception of fair value of
foreign exchange forward contracts recognised in the balance sheet, cash and cash
equivalents, or interest-bearing liabilities.
The same revenue recognition policies apply to segment information as to the
consolidated financial statements and consolidated statement of financial position. The
revenue recognition policies are presented in Note ..
Kesko’s business models
Kesko’s principal business model in the Finnish market is the chain business model, in
which independent K-retailers run retail stores in Kesko's chains, and BB trade. Kesko
manages the operations of the chains made up of the stores. Chain operations ensure
higher competitiveness and a strong operational basis for K-retailers in terms of purchasing
goods, building selections, marketing, and price competition. Outside Finland, Kesko mainly
engages in own retailing and BB trade. Retailer operations accounted for % (%) of
the Group’s net sales in . BB trade accounted for % (%) of the Group’s net
. Segment information
Accounting Policies
The Group's reportable segments are composed of the Group's divisions, namely the
grocery trade, the building and technical trade, and the car trade.
Division information is reported in a manner consistent with the internal reporting
provided to the chief operating decision maker. The chief operating decision maker,
responsible for allocating resources to the divisions, has been identified as the Group
Management Board. The reportable operating segments derive their net sales from the
grocery trade, the building and technical trade, and the car trade. Sales between divisions
are charged at prevailing market rates. The change in Kesko Senukai’s consolidation
method from a subsidiary to a joint venture as of July impacted performance
indicators in the comparison period segment information for the building and technical
trade. Due to the consolidation change, the Group changed internal reporting to its
chief operating decision maker, the Group Management Board, so that Kesko Senukai
was reported in the income statement figures for the building and technical trade as if it
had been consolidated on one line before operating profit in accordance with ownership
interest, as opposed to the subsidiary consolidation method used before. Such a change
has not been made for internally reported balance sheet figures.
The Group Management Board uses alternative performance measures alongside
the IFRS financial statements indicators in the Group’s results reporting. The Group
Management Board assesses the divisions' performances based on operating profit,
comparable operating profit, and comparable return on capital employed. Results
reporting to management corresponds to the accounting policies of the consolidated
financial statements apart from items affecting comparability and the treatment of the
change in the consolidation method of Kesko Senukai, detailed above. Finance income
and costs are not allocated to the divisions as the Group’s cash and cash equivalents and
financial liabilities are managed by the Group Treasury. Changes in the fair values of intra-
Group foreign exchange forward contracts entered into and realised gains and losses are
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
sales in . Kesko’s own retailing accounted for % (%) of the Group’s net sales.
The management views that these categories depict how the nature, amount, timing and
uncertainty of revenue and cash flows are affected by economic factors.
Grocery trade
The grocery trade comprises the wholesale and BB trade of groceries and the retailing of
home and speciality goods in Finland. Kesko's grocery trade operates under the K-retailer
business model. There are approximately , K-food stores operated by K-retailers in
Finland. These stores form the K-Citymarket, K-Supermarket, K-Market and Neste K grocery
retail chains. Kespro is a foodservice provider and wholesaler in Finland. K-Citymarket's
home and speciality goods trade operates in home and speciality goods retailing in Finland.
Building and technical trade
The building and technical trade operates in the wholesale, retail and BB trade in Finland,
Sweden, Norway, the Baltic countries and Poland. In the building and home improvement
trade, Kesko is responsible for the chain concepts, marketing, purchasing and logistics
services and the store site network in all operating countries, and for retailer resources in
Finland, where the retailer business model is employed. Kesko itself acts as a retail operator
in Sweden and Norway. The retail store chains are K-Rauta (Finland and Sweden), K-Bygg
(Sweden) and Byggmakker (Norway). The building and home improvement stores serve both
consumers and professional builders. Onninen provides HEPAC and electrical products and
services to BB customers in the Baltic Sea area and Scandinavia, and has around places
of business in Finland, Sweden, Norway, Poland and the Baltic countries.
Speciality goods trade is included in the building and technical trade division, and comprises
leisure trade in Finland, with the Intersport and Budget Sport chains. The operations of the
Kookenkä and The Athlete’s Foot shoe store chains were discontinued in as part of the
strategy for leisure trade. The machinery trade operations in the Baltics were divested during
the financial year.
Car trade
Car trade comprises the business operations of new cars, used cars, services and leasing.
The new cars business includes the operations for importing, marketing and retailing of
Volkswagen, Audi, SEAT, CUPRA, Porsche and Bentley passenger cars and of Volkswagen
and MAN commercial vehicles in Finland, and of SEAT and CUPRA passenger cars in the
Baltics. The used car business includes the purchasing of used cars in Finland and abroad
and the retailing of the cars in Finland. Service operations include repair and maintenance
services, spare parts sales and accessories services in Finland. The leasing business provides
car leasing services to both private and corporate customers. Services provided by the car
trade division also include the K-Charge charging network for electric vehicles.
Common functions
Common functions comprise Group support functions.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Segment information
Profit
€ million Grocery trade
Building and
technical trade Car trade
Common
functions Total
Division net sales ,. ,. ,. . ,.
of which intersegment sales -. . -. -. -.
Net sales from external customers ,. ,. ,. -. ,.
Change in net sales in local currency excluding
acquisitions and disposals, % . . . - .
Change in net sales, % . . . - .
Other division income . . . . .
of which intersegment income -. -. -. -. -.
Other operating income from external customers . . . . .
Depreciation and amortisation -. -. -. -. -.
Depreciation and impairment charges
for right-of-use assets -. -. -. -. -.
Share of result of joint ventures . .
Operating profit . . . -. .
Items affecting comparability . . -. -. -.
Comparable operating profit . . . -. .
Finance income and costs -.
Share of result of associates .
Profit before tax .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Assets and liabilities
€ million
Grocery
trade
Building
and
technical
trade Car trade
Common
opera-
tions
Elimina-
tions Total
Property, plant, equipment
and intangible assets ,. . . . -. ,.
Right-of-use assets ,. . . . ,.
Interests in associates and
joint ventures and other
investments . . . . -. .
Pension assets . . . .
Inventories . . . .
Trade receivables . . . . -. .
Other non-interest-bearing
receivables . . . . -. .
Interest-bearing receivables . . .
Non-current assets
classified as held for sale . .
Assets included in capital
employed ,. ,. . . -. ,.
Unallocated items
Deferred tax assets .
Other financial assets .
Cash and cash equivalents .
Total assets ,. ,. . . -. ,.
€ million
Grocery
trade
Building
and
technical
trade Car trade
Common
opera-
tions
Elimina-
tions Total
Trade payables . . . . -. ,.
Other non-interest-bearing
liabilities . . . . -. .
Provisions . . . . .
Liabilities included in
capital employed . ,. . . -. ,.
Unallocated items
Interest-bearing liabilities .
Lease liabilities ,.
Other non-interest-bearing
liabilities .
Deferred tax liabilities .
Total liabilities . ,. . . -. ,.
Total capital employed
as at December ,. ,. . . -. ,.
Average capital employed ,. ,. . . -. ,.
Return on capital
employed, %, comparable . . . .
Number of personnel
as at December , , , ,
Average number of
personnel , , , ,
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Segment information
Profit
€ million Grocery trade
Building and
technical trade Car trade Common functions
Segment
information total
Impact of change
in Kesko Senukai’s
consolidation method
Total
Division net sales ,. ,. . . ,. . ,.
of which intersegment sales -. . -. -. -. . -.
Net sales from external customers ,. ,. . -. ,. . ,.
Other division income . . . . . . .
of which intersegment income -. -. . -. -. . -.
Other operating income from external customers . . . . . . .
Depreciation and amortisation -. -. -. -. -. -. -.
Depreciation and impairment charges
for right-of-use asses -. -. -. -. -. -. -.
Share of result of joint ventures . . -. .
Operating profit . . . -. . . .
Items affecting comparability -. -. -. -. -. .
Comparable operating profit . . . -. . . .
Finance income and costs -.
Share of result of associates .
Profit before tax .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Assets and liabilities
€ million
Grocery
trade
Building
and
technical
trade Car trade
Common
opera-
tions
Elimina-
tions Total
Property, plant, equipment
and intangible assets ,. . . . -. ,.
Right-of-use assets ,. . . . ,.
Interests in associates and
joint ventures and other
investments . . . . -. .
Pension assets . . . .
Inventories . . . .
Trade receivables . . . . -. .
Other non-interest-bearing
receivables . . . . -. .
Interest-bearing receivables . . . . .
Non-current assets
classified as held for sale . . . .
Assets included in capital
employed ,. ,. . . -. ,.
Unallocated items
Deferred tax assets .
Other financial assets .
Cash and cash equivalents .
Total assets ,. ,. . . -. ,.
€ million
Grocery
trade
Building
and
technical
trade Car trade
Common
opera-
tions
Elimina-
tions Total
Trade payables . . . . -. ,.
Other non-interest-bearing
liabilities . . . . -. .
Provisions . . . . .
Liabilities related to assets
held for sale . .
Liabilities included in
capital employed . . . . -. ,.
Unallocated items
Interest-bearing liabilities .
Lease liabilities ,.
Other non-interest-bearing
liabilities .
Deferred tax liabilities .
Total liabilities . . . . -. ,.
Total capital employed
as at December ,. ,. . . -. ,.
Average capital employed ,. ,. . . -. ,.
Return on capital
employed, %, comparable . . . .
Number of personnel
as at December , , , ,
Average number of
personnel , , , ,
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Alternative performance measures in segment reporting
Kesko uses alternative performance measures in internal reporting of business performance
and profitability to the highest operational decision-making body, i.e. the Group
Management Board. The alternative performance measures should be examined together
with the IFRS-compliant performance indicators.
Change in comparable net sales is used to reflect changes in the Group’s business volume
between periods. The indicator reflects the change in net sales excluding the impact of
acquisitions and divestments, in local currencies. The comparable net sales have been
calculated by including in the net sales the business operations that have been part of Kesko
Group in both the reporting period as well as the comparison period. Other structural
arrangements related to acquisitions and divestments have been adjusted in the same
manner as acquisitions.
Exceptional transactions outside the ordinary course of business are treated as items
affecting comparability. Performance indicators reflecting comparable profit and profitability
are used to improve the comparability of operational performance between periods. As
items affecting comparability are identified gains and losses on the disposal of real estate,
shares and business operations, impairments and significant restructurings as items affecting
comparability. Gains on disposals are presented in the income statement within other
operating income, and losses on disposals within other operating expenses. Impairment
charges and significant profit and loss items related to changes in leases are presented in the
income statement under depreciation, amortisation and impairment charges.
Alternative performance measures that have been adjusted for the impact of IFRS
are used to illustrate continuity in business profitability and financial position and the
achievement of certain financial targets. The EBITDA excluding the impact of IFRS
corresponds to EBITDA before the adoption of IFRS , and the interest bearing net debt
excluding lease liabilities correspond to interest-bearing net debt before the adoption of
the standard. These restated indicators are included as components in the Group’s financial
targets’ performance indicators. The indicator is presented in Note . Capital management.
Items affecting comparability
€ million
Gains on disposal . .
Losses on disposal -. -.
Impairment -. -
Structural arrangements . .
Items in operating profit affecting comparability, total -. .
The most significant items affecting comparability were the €. million sales gains from
grocery trade properties, the €. million sales gain on real estate in the building and
technical trade division, included in the share of result of joint ventures, and the €. million
costs related to the restructuring of the car trade division and impairment charges.
Items related to structural arrangements are presented on the following lines in the
consolidated income statement: material and services (€. million), change in inventory
(€. million), employee benefit expenses (€-. million), depreciation, amortisation and
impairment charges (€-. million), depreciation, amortisation and impairment charges for
right-of-use assets (€. million), other operating expenses (€. million) and share of result
of joint ventures (€. million).
In the most significant items affecting comparability were the positive profit impact
of €. million resulting from the change in the consolidation method of Kesko Senukai;
the negative €. million profit impact of changes in the store site network in Sweden; the
€. million sales gain from the divestment of machinery trade operations in the Baltics,
completed on March , the €. million costs related to corporate restructuring, and
the €. million costs related to the discontinuation of the Kookenkä and The Athlete’s Foot
shoe store chains in the leisure trade.
Items related to structural arrangements are presented on the following lines in the
consolidated income statement: materials and services (€-. million), change in inventory
(€-. million), other operating income (€. million), employee benefit expenses (€-.
million), depreciation, amortisation and impairment charges (€-. million), depreciation,
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
amortisation and impairment charges for right-of-use assets (€-. million), and other
operating expenses (€-. million).
Reconciliation of alternative performance measures to IFRS financial statements
€ million
Operating profit, comparable
Operating profit . .
Net of
Items in operating profit affecting comparability -. .
Operating profit, comparable . .
Return on capital employed, comparable, %
Operating profit, comparable . .
Capital employed, average ,. ,.
Return on capital employed, comparable, % . .
Comparable change in net sales
€ million
Net sales, building and technical trade ,. ,.*
Foreign exchange effects -.
Effect of acquisitions and divestments -. -.
Change in net sales, comparable, % .
Net sales, Group ,. ,.*
Foreign exchange effects -.
Effect of acquisitions and divestments -. -.
Change in net sales, comparable, % .
* Net sales, illustrative
Calculation of performance indicators
Operating profit, comparable
Operating profit +/– items affecting comparability
Return on capital employed, comparable, %
Comparable operating profit x
(Property, plant and equipment + Goodwill + Intangible assets + Right-of-use assets + Shares in
associates and joint ventures + Financial assets at fair value through profit or loss + Non-current
receivables + Pension assets + Inventories + Trade receivables + Income tax assets + Other non-
interest-bearing receivables + Non-current assets classified as held for sale - Non-interest-bearing
non-current liabilities - Pension obligations - Provisions - Trade payables - Other non-interest bearing
liabilities - Income tax liabilities - Accrued liabilities - Liabilities related to available-for-sale non-current
assets) on average for the reporting period
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Geographical information
The Group operates in Finland, Sweden, Norway, Estonia, Latvia, Lithuania and Poland.
The grocery trade operates in Finland. The building and technical trade operates in Finland,
Sweden, Norway, the Baltic countries and Poland, and the car trade operates in Finland. Net
sales, assets, capital expenditure and personnel are presented by location.
€ million Finland
Other
Nordic countries Baltic countries Others Eliminations Total
Net sales ,. ,. . . -. ,.
Assets included in capital employed ,. ,. . . ,.
Average number of personnel , , ,
€ million Finland
Other Nordic
countries Baltic countries Others Eliminations
Segment information
total
Impact of change
in Kesko Senukai’s
consolidation
method Total
Net sales ,. ,. . . -. ,. . ,.
Assets included in capital
employed ,. ,. . . - - ,.
Average number of
personnel , , , - - ,
Net sales are nearly completely derived from sales of goods. The amount derived from sales
of services is minor.
Kesko Group does not have income derived from a single customer amounting to more than
% of Kesko Group’s total income.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Material and services
€ million
Material and services -,. -,.
External services -. -.
Total -,. -,.
. Other operating income
Revenue recognition, including the definition of income reported under other operating
income, is presented in Note ..
€ million
Income from services . .
Lease income . .
Gains on disposal of property, plant, equipment
and intangible assets . .
Gains on disposal of businesses . .
Realised gains on derivative contracts and changes in fair value . .
Others . .
Total . .
Income from services mainly comprises chain and store site fees paid by retailers' chain
companies.
More information on lease income is provided in Note ..
. Operating expenses
Accounting policies
Other operating expenses include expenses other than the cost of goods sold, such as
employee benefit expenses, marketing costs, property and store site maintenance costs,
information system expenses, and lease payments recognised in the income statement
on leases classified as short-term leases or leased assets classified as of low value. Other
operating expenses also include losses on the disposal of property, plant and equipment
and intangible assets, losses on disposal of business operations as well as realised and
unrealised losses on derivatives used for hedging foreign currency risks associated with
commercial transactions.
Employee benefit expenses
€ million
Salaries and fees -. -.
Social security costs -. -.
Pension costs
Defined benefit plans -. -.
Defined contribution plans -. -.
Share-based payment -. -.
Total -. -.
Information on the defined benefit plans is presented in Note .. Information on
the employee benefits of the Group’s management personnel and other related party
transactions are presented in Note ., and information on share-based compensation in
Note ..
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Average number of the Group personnel
Grocery trade , ,
Building and technical trade , ,
Car trade , ,
Common functions
Total, Group , ,
Other operating expenses
€ million
Marketing costs -. -.
Property and store site maintenance expenses -. -.
ICT expenses -. -.
Lease payments in the income statement -. -.
Losses on disposal of property, plant, equipment
and intangible assets -. -.
Realised losses on derivative contracts and changes in fair value -. -.
Other operating expenses -. -.
Total -. -.
Lease payments in the income statement consist of payments for short-term leases and
payments for leases of low-value assets as well as variable lease payments. Property and
store site maintenance expenses also include maintenance expenses for leased properties.
More information on lease expenditure is provided in Note ..
Auditors' fees
€ million
Audit . .
Tax consultation . .
Other services . .
Total . .
The Annual General Meeting of April elected Deloitte Oy as Kesko Corporation’s
Auditor.
. Foreign exchange differences recognised in operating profit
€ million
Sales -. -.
Other income . .
Purchases -. -.
Other expenses -. -.
Total . -.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Income tax
Accounting policies
The taxes recognised in the consolidated income statement include the Group companies'
taxes on current net profits on an accrual basis, prior period tax adjustments and changes
in deferred taxes. The Group companies' taxes have been calculated from the taxable
income of each company determined by local jurisdiction. The tax impact of items
recognised in other comprehensive income has been recognised correspondingly in other
comprehensive income.
Deferred tax assets and liabilities are recognised on temporary differences arising
between the tax bases and carrying amounts of assets and liabilities and for unused tax
losses. Deferred tax liability has not been calculated on goodwill insofar as goodwill is
not tax deductible. Deferred tax on subsidiaries' undistributed earnings is not recognised
unless a distribution of earnings is probable, causing tax implications.
Deferred tax has been determined using the tax rates enacted at the balance sheet
date, and as the rates changed, at the known new rate. A deferred income tax asset is
recognised to the extent that it is probable that it can be utilised against future taxable
income. The Group's deferred income tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority.
The most significant temporary differences arise from leases, defined benefit pension
plans, property, plant and equipment (depreciation difference), provisions and
measurements at fair value of asset items in connection with acquisitions.
The Group’s tax positions are assessed regularly to identify situations requiring
interpretation. The Group prepares for situations in which it is deemed unlikely that the
Group’s interpretation will be approved, in the calculation of income tax. An uncertain tax
position may affect taxes or deferred taxes for the financial year or both.
€ million
Current tax -. -.
Tax for prior years . -.
Deferred tax -. -.
Total -. -.
Reconciliation between tax expense shown in the income
statement and tax calculated at parent's rate
€ million
Profit before tax . .
Tax at parent's rate .% -. -.
Effect of foreign subsidiaries' different tax rates -. -.
Effect of tax-free income . .
Effect of expenses not deductible for tax purposes -. -.
Effect of unrecognised deferred tax assets . .
Effect of consolidation of share of result of associates
and joint ventures . .
Tax for previous years . -.
Adjustment and revaluation of deferred tax for previous years -. .
Effect of change in tax rate - .
Others -. .
Tax charge -. -.
Effective tax rate .% .%
In the Group’s effective tax rate decreased due to a positive profit impact of €.
million arising from the change in the consolidation method of Kesko Senukai, and by
tax-exempt sales gains and share of result of associates and joint ventures totalling
€.million.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Movements in deferred tax in
€ million
Jan.
Income
statement
charge
Tax
charged/
credited
to equity
Exchange
differences
Other
changes
Dec.
Deferred tax assets
Leases . -. . .
Provisions . . . . .
Defined benefit pension
plans . . .
Tax loss carry-forwards . -. . .
Other temporary differences . -. -. . -. .
Total . -. -. . -. .
Deferred tax liabilities
Difference between
accounting depreciation
andtax depreciation . . . .
Fair value allocation . . . -. .
Defined benefit pension
plans . -. . .
Other temporary differences . -. . . .
Total . -. . . -. .
Net deferred tax asset (+)/
liability (-) -. -.
Balance sheet division of net deferred tax asset
€ million
Deferred tax assets . .
Deferred tax liabilities . .
Total -. -.
Movements in deferred tax in
€ million
Jan.
Income
statement
charge
Tax
charged/
credited
to equity
Exchange
differences
Other
changes
Dec.
Deferred tax assets
Leases . . . -. .
Provisions . . . . .
Defined benefit pension
plans . . .
Tax loss carry-forwards . -. . -. .
Other temporary differences . . . -. -. .
Total . -. . -. -. .
Deferred tax liabilities
Difference between
accounting depreciation
andtax depreciation . . . .
Fair value allocation . -. -. . .
Defined benefit pension
plans . -. . .
Other temporary differences . -. . -. -. .
Total . . . -. . .
Net deferred tax asset . -.
Tax loss carry-forwards
As at December , the Group had €, million of unused tax losses for which deferred
tax assets have not been recognised, because at the balance sheet date, the realisation of the
related tax benefit through future taxable profits is not probable.
Tax losses carried forward for which tax assets have not been recognised expire as
follows:
€ million - Total
. . . .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Earnings per share
Accounting policies
Basic earnings per share are calculated by dividing the net profit for the period attributable
to the parent’s equity holders by the weighted average number of shares outstanding
during the period. Diluted earnings per share are calculated by adjusting the weighted
average number of all shares to assume conversion of all potentially dilutive shares.
Kesko Corporations ‘s Annual General Meeting on April decided on a share
issue without payment (share split) in which three () new A shares were issued for each
existing A share, and three () new B shares for each existing B share. The share-specific
indicators have been calculated using the post-share split number of shares. Share-
specific indicators for the comparison periods have been adjusted to correspond to the
post-share split number of shares.
Net profit for the period attributable to equity holders of the
parent, € million . .
Number of shares
Weighted average number of shares outstanding ,, ,,
Diluted weighted average number of shares outstanding ,, ,,
Earnings per share from net profit attributable to equity
holders of the parent
Basic and diluted, Group total, € . .
. Notes related to the statement of cash flows
Capital expenditure and non-cash financing activities
€ million
Total acquisitions of property, plant, equipment
and intangible assets . .
Total acquisitions of subsidiaries and investments in associates
and other investments . .
Total capital expenditure . .
of which cash payments . .
Loans relating to acquired companies and cash
and cash equivalents . .
Payments arising from prior period investing activities -. -.
Capital expenditure financed with liabilities . .
Total . .
Adjustments to cash flows from operating activities
€ million
Adjustment of non-cash transactions in the income statement
and items presented elsewhere in the statement of cash flows:
Change in provisions -. .
Share of results of associates and joint ventures -. -.
Impairments . -
Credit losses . .
Gains on disposal of property, plant, equipment
and intangible assets and business operations -. -.
Losses on disposal of property, plant, equipment
and intangible assets and business operations . .
Share-based compensation -. -.
Defined benefit pensions . .
Others . .
Total . -.
The group ‘Others’ within the adjustments to cash flows from operating activities includes
the adjustment of unrealised foreign exchange gains and losses on purchases and sales, and
the adjustment of other transactions of a non-cash nature.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Cash flow from leases
€ million
Interest expense for lease liabilities -. -.
Repayments of lease liabilities -. -.
Lease payments in the income statement -. -.
Total -. -.
Information on leases is presented in Note ..
Cash and cash equivalents
€ million
Financial assets at fair value through profit or loss . .
Financial assets at amortised cost
(maturing in less than months) . .
Cash and cash equivalents . .
Total . .
Cash and cash equivalents include cash on hand and deposits with banks as well as liquid
funds measured at amortised cost which are invested in instruments with maturities of less
than three months from acquisition, and financial assets measured at fair value through profit
or loss. Change in accounting policy regarding the classification of cash and cash equivalents
is described in more detail in Note ..
Reconciliation of cash and debt
€ million
Financial assets at fair value through profit or loss . .
Financial assets at amortised cost
(maturing in less than months) . .
Cash and cash equivalents . .
Borrowings - repayable within one year (including overdraft) -. -.
Lease liabilities - repayable within one year -. -.
Borrowings - repayable after one year -. -.
Lease liabilities - repayable after one year -,. -,.
Cash and debt, net -,. -,.
€ million
Cash and cash equivalents and financial assets at fair value
through profit or loss and financial assets at amortised cost
(maturing in less than months) . .
Gross debt - fixed interest rates -. -.
Gross debt - variable interest rates -. -.
Lease liabilities -,. -,.
Cash and debt, net -,. -,.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Other assets Finance-related debt
€ million Cash and overdraft
Financial assets at
fair value through
profit or loss
Financial assets at
amortised cost
Lease liabilities
due within year
Lease liabilities
due after year
Borrowings due
within year
Borrowings due
after year Total
Cash and debt, net as at Jan. . . . -. -,. -. -. -,.
Cash flows . -. . . . . .
Acquisitions of subsidiaries . -. -. -.
Net changes of lease liabilities -. . -.
Foreign exchange adjustments . -. -. . . -.
Cash and debt, net as at Dec. . . . -. -,. -. -. -,.
Other assets Finance-related debt
€ million Cash and overdraft
Financial assets at
fair value through
profit or loss
Financial assets at
amortised cost
Lease liabilities
due within year
Lease liabilities
due after year
Borrowings due
within year
Borrowings due
after year Total
Cash and debt, net as at Jan. . . . -. -,. -. -. -,.
Cash flows . . . . -. . .
Acquisitions of subsidiaries . -. -. -. -. -.
Sale of subsidiaries -. . . -.
Impact of change in Kesko Senukai’s
consolidation method -. . . . . .
Net changes of lease liabilities -. . -.
Foreign exchange adjustments -. . . . . .
Cash and debt, net as at Dec. . . . -. -,. -. -. -,.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Components of other comprehensive income
€ million
Before tax
Tax charge/
credit After tax
Before tax
Tax charge/
credit After tax
Items that will not be reclassified subsequently to profit or loss
Actuarial gains and losses . -. . . -. .
Items that may be reclassified subsequently to profit or loss
Currency translation differences relating to a foreign operation . . -. -.
Share of other comprehensive income of associates
andjointventures -. -. - -
Cash flow hedge revaluation . -. . -. . -.
Others - - -. -.
Total . -. . -. . -.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
IN THIS SECTION
. Business acquisitions, disposals of assets, and non-current assets
classified as held for sale and related liabilities
. Property, plant and equipment
. Intangible assets
. Leases
. Inventories
. Trade and other current receivables
. Pension assets
. Shares in associates and joint ventures
. Provisions
Notes to the consolidated financial statements
. CAPITAL EMPLOYED
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
.. Business acquisitions, disposals of assets, and non-current
assets classified as held for sale and related liabilities
Acquisitions in
Byggarnas Partner i Sverige AB
Kesko’s subsidiary Fresks Försäljning AB acquired the entire capital stock of Byggarnas
Partner i Sverige AB, a Swedish building and home improvement trade business for
professional builders, on September . The consideration paid was €. million. The
acquisition strengthens Kesko’s position in the building and home improvement market
especially in the Stockholm region, where Byggarnas Partner has a network of five stores.
According to the purchase price allocation concerning Byggarnas Partner i Sverige AB,
the assets acquired for Kesko Group amounted to €. million and the liabilities assumed
to €. million. The fair value of the intangible assets acquired (including customer
relationships and trademark) at the date of acquisitions totalled €. million. The goodwill
arising from the acquisition is not tax deductible. The Group income statement includes
minor acquisition-related costs from the acquisition under “Other operating expenses”,
presented as items affecting comparability. The impact of the acquired business to the
Group’s net sales and operating profit was minor.
Acquisitions in
Carlsen Fritzøe Handel AS and Flokkmann
Kesko’s subsidiary Byggmakker Handel AS acquired the entire capital stock of the Norwegian
building and home improvement trade company Carlsen Fritzøe Handel AS on September
. The consideration paid was €. million, and the amount of cash and cash
equivalents obtained was €. million. The acquisition strengthens Kesko’s position in the
Oslo fjord region, where the Carlsen Fritzøe Handel network of stores complements
Kesko’s existing Byggmakker store network. The €. million goodwill arising from the
acquisition reflects the synergies expected to be achieved in sales, purchasing, selections,
logistics and operational efficiency. The Group income statement includes €. million
in acquisition-related costs under “Other operating expenses”, presented as items
affectingcomparability.
On October , Kesko’s subsidiary Byggmakker Nord AS acquired the entire capital
stock of both Reidar Flokkmanns Eftf AS, which is part of the Norwegian Byggmakker chain,
and the store property Arn Eiendom AS (together Flokkmann). The consideration paid was
€. million, and the amount of cash and cash equivalents obtained was €. million. The
Group income statement includes minor acquisition-related costs for Flokkmann under
“Other operating expenses”, presented as items affecting comparability.
Mark & Infra i Sverige AB and Bygg & Interiör
Kesko’s Swedish subsidiary Fresks Försäljning AB acquired the Bygg & Interiör building and
home improvement trade stores for professional builders in Sweden on September .
On April , Kesko’s Swedish subsidiary Kesko AB acquired the Swedish Mark & Infra
i Sverige AB (MIAB), a company specialising in the sales of water and sewage products. The
combined consideration paid for the acquisitions completed in Sweden was €. million,
and the amount of cash and cash equivalents obtained was €. million. The acquisitions
completed in Sweden complement Kesko’s K-Bygg chain for professional builders in the
Mälaren Valley region as well as Onninen’s technical wholesale offering for Infra customers
inSweden.
The following table provides a summary of the consideration paid, the values of assets
acquired and liabilities assumed by Kesko Group at the date of acquisition, and the cash flow
impact of the acquisitions.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
€ million
Byggarnas
Partner i
Sverige AB
Carlsen
Fritzøe
Handel AS and
Flokkmann
Mark & Infra
i Sverige AB
and Bygg &
Interiör
Debt-free acquisition price . . .
Fair values of assets acquired and liabilities
assumed at the date of acquisition
Intangible assets . . .
Property, plant, equipment, right-of-use assets and
investments . . .
Inventories . . .
Receivables . . .
Deferred tax asset .
Cash and cash equivalents . .
Total assets . . .
Trade payables, other payables, provisions, lease
liabilities . . .
Deferred tax liability . . .
Total liabilities . . .
Net assets acquired, total . . .
Goodwill . . .
Cash flow impact of acquisition
Consideration paid -. -. -.
Cash and cash equivalents acquired . .
Unpaid share .
Cash flow impact of acquisition -. -. -.
Non-current assets classified as held for sale and related liabilities
Non-current assets held for sale and related liabilities,
€million
Intangible assets - .
Property, plant and equipment . .
Inventories - .
Trade receivables - .
Other receivables - .
Non-current assets held for sale . .
Trade payables - -.
Other liabilities - -.
Liabilities related to assets held for sale - -.
At the end of the financial year, non-current assets classified as held for sale
and related liabilities mainly comprised items related to two building and home
improvementstores.
Change in Kesko Senukai’s consolidation method in
the consolidated financial statements
Kesko is reporting Kesko Senukai Group, which is part of Kesko’s building and technical
trade segment and operates in the Baltic countries and Belarus, as a joint venture as of July
. Kesko Senukai Group was reported as a subsidiary until June . The change
in consolidation was made due to significant disagreements concerning the management of
and exercise of control over Kesko Senukai. Kesko’s management exercised its judgement in
reassessing control over and conditions for subsidiary consolidation of Kesko Senukai under
IFRS .
Due to the loss of control, Kesko decided to classify Kesko Senukai as a joint venture as of
July . None of the shareholders exercise control over Kesko Senukai. Instead, the
shareholders exercise joint control based on a contractual arrangement, as defined in the
IFRS Joint Arrangements standard. As a joint venture, Kesko Senukai’s shareholders
are entitled to its net assets, and the shareholders’ liability for the company’s obligations is
limited to the amount of equity invested.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
As a result of the change in classification, the assets, liabilities, share of non-controlling
interests, and accumulated currency translation differences were no longer recognised in the
consolidated statement of financial position, and the share of joint ventures was recognised
at fair value on the balance sheet. Consequently, a profit of €. million was recognised
under “Other operating income” on the consolidated income statement, which arose when
the share of joint venture related to Kesko Senukai was valued at fair value. The fair value
of the share of joint venture has been determined using discounted cash flow. Due to the
change in classification, from July onwards Kesko Senukai is consolidated as a joint
venture on one line “Share of result of joint ventures” before operating profit in Kesko’s
consolidated income statement, instead of the previous line-by-line subsidiary consolidation.
In the consolidated statement of financial position, the change means that the share of Kesko
Senukai’s net assets is presented on one line “Shares in associates and joint ventures” instead
of the previous line-by-line consolidation of assets and liabilities.
Calculation of impacts of the change in Kesko Senukai’s classification, € million Jul.
Kesko Senukai’s net assets in the consolidated statement of financial position -.
Carrying amount of non-controlling interests .
Fair value of ownership interest in joint venture .
Translation differences in comprehensive income -.
Profit recognised in income statement for measurement at fair value .
Kesko Senukai’s assets and liabilities included in the consolidated statement of
financial position, € million Jun.
Assets
Property, plant and equipment .
Right-of-use assets .
Intangible assets .
Deferred tax assets and other long-term receivables .
Total .
Inventories .
Non-interest-bearing receivables .
Other interest-bearing receivables .
Cash and cash equivalents .
Total .
Total assets .
Non-current interest-bearing liabilities .
Lease liabilities .
Deferred tax liabilities .
Total .
Current interest-bearing liabilities .
Lease liabilities .
Non-interest-bearing liabilities .
Total .
Total liabilities .
Net assets .
Disposals of assets in
On March , Kesko sold its remaining stake in its Baltic machinery trade subsidiaries
in the building and technical trade division to the Danish Agro Group company DA Agravis
Machinery Holding A/S.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Property, plant and equipment
Accounting policies
Property, plant and equipment mainly comprise land, buildings, machinery and equipment.
Property, plant and equipment are carried at historic cost net of depreciation and possible
impairment. The property, plant and equipment of acquired subsidiaries are measured at
fair value at the date of acquisition.
Subsequent costs relating to items of property, plant and equipment are included in the
asset’s carrying amount or recognised as a separate asset only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of
the item can be measured reliably. The carrying amount of any component accounted
for as a separate asset is derecognised when replaced. The machinery and equipment of
buildings are treated as separate assets and any significant expenditure related to their
replacement is capitalised. All other repair, service and maintenance expenditures of
items of property, plant and equipment are charged to the income statement during the
financial period in which they are incurred.
Depreciation on property, plant and equipment is calculated using the straight-line
method over their estimated useful lives. Land is not depreciated.
The most common estimated useful lives are:
Buildings − years
Components of buildings − years
Machinery and equipment − years
Cars and transport equipment years
The residual values and useful lives of property, plant and equipment are reviewed at least
at the end of each financial year. If the estimates of useful life and the expected pattern
of economic benefits are different from previous estimates, the change in the estimate is
accounted for.
Depreciation of property, plant and equipment ceases when an item is classified as a non-
current asset held for sale.
Gains and losses on disposals of property, plant and equipment are recognised in the
income statement and stated as other operating income and expenses.
The Group has not capitalised interest costs incurred as part of the acquisition of assets,
because the Group does not have qualifying assets.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
€ million
Land and
waters Buildings
Machinery
and
equipment
Other
tangible
assets
Prepayments
and
construction
in progress
Total
Cost
Cost as at January . ,. . . . ,.
Exchange differences . . . -. . .
Additions . . . . . .
Acquisitions . . . .
Deductions -. -. -. -. -. -.
Transfers between items . . . . -. .
Cost as at December . ,. . . . ,.
Accumulated depreciation
and impairment charges
Accumulated depreciation
and impairment charges
as at January -. -. -. -. -.
Exchange differences . . . . .
Accumulated depreciation
on deductions . . . . .
Accumulated depreciation
on transfers -. . . .
Depreciation and impairment
charges for the year -. -. -. -. -.
Accumulated depreciation
and impairment charges
as at December -. -. -. -. . -.
Carrying amount
as at January . . . . . ,.
Carrying amount
as at December . . . . . ,.
€ million
Land and
waters Buildings
Machinery
and
equipment
Other
tangible
assets
Prepayments
and
construction
in progress
Total
Cost
Cost as at January . ,. . . . ,.
Exchange differences -. -. -. -. -. -.
Additions . . . . . .
Acquisitions . . . . .
Impact of change in Kesko
Senukai’s consolidation
method -. -. -. -. -. -.
Deductions -. -. -. -. -. -.
Transfers between items . . . . -. -.
Cost as at December . ,. . . . ,.
Accumulated depreciation
and impairment charges
Accumulated depreciation
and impairment charges
as at January -. -. -. -. -.
Exchange differences . . -. .
Impact of change in Kesko
Senukai’s consolidation
method . . . .
Accumulated depreciation
on deductions . . . .
Accumulated depreciation
on transfers . . . .
Depreciation and impairment
charges for the year -. -. -. -.
Accumulated depreciation
and impairment charges
as at December -. -. -. -. -.
Carrying amount
as at January . . . . . ,.
Carrying amount
as at December . . . . . ,.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Intangible assets
Accounting policies
Goodwill a
nd trademarks
Goodwill is not amortised but is instead tested for impairment annually and whenever
there is an indication of impairment. For testing purposes, goodwill is allocated to the
cash generating units. Goodwill is measured at initial cost and that acquired prior to
January , at deemed cost net of impairment. Any negative goodwill is immediately
recognised as income. For goodwill, a recognised impairment loss is not reversed.
Intangible assets with indefinite useful lives are not amortised. They are tested for
impairment annually and whenever there is an indication of impairment. Costs for
intangible assets without indefinite useful lives are recognised in the balance sheet as
costs during the useful lives of the assets. These intangible assets include trademarks
capitalised upon acquisition, recorded at their fair values at the acquisition date.
Other intangible assets
The cost of intangible assets with definite useful lives are recorded in the balance sheet
and recognised as expenses during their useful lives. Such intangible assets include
software licences, customer relationships and licences measured at the fair value at the
date of acquisition, and leasehold interests that are amortised during their probable
leaseterms.
The estimated useful lives are:
Software and licences − years
Customer and supplier relationships - years
Licences years
Research and development expenses
The costs of research and development activities have been expensed as incurred,
because the Group does not have development costs eligible for capitalisation.
Development costs previously recognised as an expense are not recognised as an asset in
subsequent periods.
Software
Costs directly attributable to the development of new software are capitalised as part of
the software cost. On the balance sheet, software is included in intangible assets and its
cost is amortised over the useful life of the software. Costs associated with maintaining the
software are recognised as an expense as incurred.
Impairment of non-financial assets
At each balance sheet date, the Group assesses whether there is any indication that an
asset may be impaired. If any such indication exists, the recoverable amount of the asset is
estimated. The recoverable amount of goodwill and intangible assets with indefinite useful
lives is assessed every year whether or not there is an indication of impairment. In addition,
an impairment test is performed whenever there is an indication of impairment.
The recoverable amount is the higher of an asset's fair value less costs to sell and value in
use. Often, it is not possible to estimate the recoverable amount for an individual asset.
Then, as in the case of goodwill, the recoverable amount is determined for the cash
generating unit to which the goodwill or asset belongs.
An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable
amount. The impairment loss is recognised in the income statement. An impairment loss
recognised for an asset in prior years is reversed, if the revaluation shows an increase in the
recoverable amount. However, the reversal of an impairment loss of an asset should not
exceed the carrying amount of the asset without impairment loss recognition. For goodwill,
a recognised impairment loss is not reversed under any circumstances.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
€ million Goodwill Trademarks
Other
intangible
assets
Pre-
payments
Total
Cost
Cost as at January . . . . .
Exchange differences . . . . .
Additions . . . .
Acquisitions . . . .
Deductions . -. -. -.
Transfers between items . -. -.
Cost as at December . . . . ,.
Accumulated amortisation and
impairment charges
Accumulated amortisation and
impairment charges as at January -. -. -. -.
Exchange differences . -. -. -.
Accumulated amortisation and
impairment charges on disposals . .
Amortisation and impairment
charges for the year -. -. -.
Accumulated amortisation and
impairment charges as at
December -. -. -. -.
Carrying amount as at January . . . . .
Carrying amount as at December . . . . .
€ million Goodwill Trademarks
Other
intangible
assets
Pre-
payments
Total
Cost
Cost as at January . . . . .
Exchange differences . -. -. -.
Additions . . .
Acquisitions . . . .
Impact of change in Kesko Senukai’s
consolidation method -. -. -.
Deductions -. -. -.
Transfers between items -. . -. .
Cost as at December . . . . .
Accumulated amortisation and
impairment charges
Accumulated amortisation and
impairment charges as at January -. -. -. -.
Exchange differences -. . . .
Accumulated amortisation and
impairment charges on disposals . .
Impact of change in Kesko Senukai’s
consolidation method . . .
Accumulated amortisation on
transfers . .
Amortisation and impairment
charges for the year . -. -. -.
Accumulated amortisation and
impairment charges
as at December -. -. -. -.
Carrying amount as at January . . . . .
Carrying amount as at December . . . . .
Other intangible assets include other non-current expenditure, of which €. million
(€. million) are software and licence costs.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Impairment testing for goodwill and intangible rights
Intangible assets with indefinite useful lives are tested annually for impairment and whenever
there is an indication of impairment.
The useful lives of some trademarks (brands) included in intangible assets have been
classified as indefinite, because it has been estimated that the period over which they
generate cash inflows is indefinite. This is because no foreseeable limit to the period over
which they are expected to generate net cash inflows for the Group can be seen. Trademarks
are part of assets acquired in connection with acquisitions.
The Group has identified six cash-generating units. Cash-generating units have been
identified at maximum at the level of reportable segments.
€ million
Trade-
marks
Goodwill
Pre-tax
discount
rate
Trade-
marks
Goodwill
Pre-tax
discount
rate
Grocery trade
Grocery trade, chain
operations . . . .
Grocery trade, Kespro . . . . . .
Building and technical trade
Byggmakker, Norway . . . . . .
Onninen . . . . . .
K-Bygg, Sweden . . . . .
Car trade . . . .
Total . . . .
The recoverable amount of a cash-generating unit is determined based on value-in-use
calculations in impairment testing. In the calculations, forecast cash flows are based on
financial plans approved by management, covering a period of three years. The plans are
based on external sources concerning projections for total market growth, weighted with
the cash-generating unit’s own business’ share of the market in question. Profitability
trends, including changes in store site network, product and service selection, pricing and
movements in operating costs, are based on management-approved plans. The average
compound annual growth rate for the forecast period was .-.% and the EBITDA
ratio range .-.%. Cash flows after the period are estimated based on a .-.%
(.−.%) growth projection, taking into account country-specific differences. The
growth projection for chain operations in grocery trade in Finland for the period following
the forecast period is .%, while the projection for Kespro is .% and for the car trade
.%. The projected growth for K-Bygg in Sweden and Byggmakker in Norway is .%. The
projected growth for Onninen, which operates in seven countries, after the forecast period
is.%.
The discount rate used is the weighted average cost of capital (WACC) after tax, specified
for each division and country and adjusted for tax effect in connection with the test. The
WACC formula inputs are risk-free rate of return, market risk premium, industry-specific
beta factor, target capital structure, borrowing cost and country risks.
Impairment losses
There were no impairment charges recognised on goodwill or intangible rights in the financial
years and .
Sensitivity analysis
The key variables used in impairment testing are the growth percentage, EBITDA margin and
discount rate after the forecast period. The plans are based on external sources concerning
projections for total market growth, weighted with the cash-generating unit’s own business’
share of the market in question.
The most sensitive to movements in assumptions is the goodwill impairment test for K-Bygg.
K-Bygg’s net sales in totalled €. million, and the comparable change in net sales
(calculated in local currency and excluding the impact of acquisitions and divestments) was
.%. During the forecast period, the range for change in K-Bygg’s net sales is .-,%.
The growth forecast for K-Bygg’s net sales for the period following the forecast period is
%. By the end of the forecast period, K-Bygg’s EBITDA margin is expected to have grown
by . percentage points from the EBITDA margin achieved in . Impairment would be
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Leases
Accounting policies
Group as a lessee
The Group leases properties, machinery and equipment for use in its business operations
in all operating countries. At inception of a contract the Group determines whether
the contract is, or contains, a lease. A contract is deemed as a lease if it gives the right
to control the use of an identified asset for a specified period of time in exchange for
consideration. At the commencement date of the lease, the Group recognises in its
balance sheet a right-of-use asset and a lease liability, except for leases of low-value
assets and for leases for which the lease term is months or less, for which the Group
applies the practical expedient of the standard. Lease payments for the short-term leases
and leases of low-value assets are recognised as an expense on a straight-line basis
over the lease term. The Group separates the non-lease components, such as service
components, and expenses them as they incur.
A lease liability is recognised at the commencement date of the lease and measured at
the present value of the future lease payments payable during the lease term. The lease
payments are discounted using the interest rate implicit in the lease, if readily available.
The interest rate implicit in the lease is not available for all leases. In such cases, the
incremental borrowing rate is used, which comprises the reference rate, credit spread for
the incremental borrowing, and a potential country and currency risk premium. At the
commencement date of the lease, the measurement of the lease liability includes fixed
lease payments, variable lease payments that depend on an index or a rate, potential
residual value guarantees, and the price of a purchase option if it is reasonably certain the
option will be exercised. Payments of penalties for terminating the lease are also included
in the measurement of the lease liability if the lease term reflects the option to terminate
the lease.
The lease liability is subsequently remeasured if there is a change in lease term due
to reassessment of an option to continue or terminate the lease, or when there is a
recognised if the post-forecast period EBITDA margin would decrease by more than .
percentage points, if the post-forecast period growth percentage would be below -.%, or
if the pre-tax discount rate was above .%. In K-Bygg’s impairment test, the recoverable
amount exceeded the carrying amount of the assets tested by €. million ( Dec.
: €. million).
The impairment testing sensitivity of Byggmakker’s goodwill has been reduced by the
increase in the share of own retailing following the acquisition of Carlsen Fritzøe, which has
increased the profitability of the cash-generating unit.
The impairment testing sensitivity of the goodwill in car trade has been reduced by the
improvement in business profitability.
With regard to the other cash generating units, according to management estimates, a
foreseeable change in any key variable would not create a situation in which the unit’s
recoverable amount would be lower than its carrying amount.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
change in future lease payments due to changes of an index or a rate. The amount of the
remeasurement of the lease liability is recognised as an adjustment to the right-of-use
asset. If the reduction in lease liability exceeds the right-of-use asset, the difference is
recognised in profit or loss.
A right-of-use asset is measured at cost at the commencement date of the lease. The
cost of the right-of-use asset comprises the amount of the initial measurement of the
lease liability. In addition, the cost comprises any lease payments made at or before the
commencement date, less any lease incentives received, any initial direct costs incurred
and an estimate of costs to be incurred to restore the asset. Subsequently the right-of-
use asset is measured at cost less any accumulated depreciation and impairment losses
and adjusted with any remeasurement of the lease liability. The right-of-use asset is
depreciated from the commencement date of the lease to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term.
If the use of a leased asset is discontinued or a sublease is made to the lease at a lower
rate, the lease contract becomes loss-making and an impairment is recognised for the
corresponding right-of-use asset.
In sale and leaseback transactions, the Group assesses whether the transfer of the asset
satisfies the requirements of IFRS for a sale. If the transfer is accounted for as a sale,
the right-of-use asset recognised in the balance sheet will be measured by the portion
of the carrying amount of the original asset that corresponds to the value of the right
to use that remains with the seller. Only the portion of the sales proceeds of the asset
corresponding to the rights transferred to the buyer is presented as sales gain or loss.
If the consideration for the sale of the asset or payments for the lease do not equal the
fair value, the difference is recognised as an adjustment to the asset’s sales proceeds.
Any below-market terms are accounted for as a prepayment of lease payments, and any
above-market terms are accounted for as financial liability. If the requirements for a sale
are not satisfied, the Group will continue to recognise the transferred asset in its balance
sheet, and will present the transfer proceeds as financial liability.
Right-of-use assets
The Group leases for its business operations facilities required for retail and for the logistics
operations serving retail. The Group's lease contracts are typically fixed term and in line with
local market practices. Some of the leases for the properties contain extension options. The
Group also leases machinery and equipment used in its business operations, such as vehicles,
logistics machinery and equipment, and equipment for recycling waste at stores and logistics
operations. The Group has classified office machinery and equipment as low-value assets,
and lease payments for them are recognised as an annual expense in the income statement.
€ million
Land and
buildings
Machinery and
equipment Total
Carrying amount as at January ,. . ,.
Additions . . .
Acquisitions . . .
Depreciation -. -. -.
Impairment charges -. . -.
Deductions -. -. -.
Exchange differences . . .
Carrying amount as at December ,. . ,.
€ million
Land and
buildings
Machinery and
equipment Total
Carrying amount as at January ,. . ,.
Additions . . .
Acquisitions . .
Transfers between items . . .
Impact of change in Kesko Senukai’s
consolidation method -. -. -.
Depreciation -. -. -.
Impairment charges -. -.
Deductions -. -. -.
Exchange differences -. -. -.
Carrying amount as at December ,. . ,.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
The future cash flows for leases not yet commenced and not reflected in the measurement
of the lease liability but to which the Group is committed at the balance sheet date totalled
€. million (€. million).
Income statement amounts
€ million
Operating profit
Depreciation and impairment charges on right-of-use assets -. -.
Lease payments for short-term leases -. -.
Lease payments for low-value assets -. -.
Variable lease payments -. -.
Financial expenses
Interest expenses for lease liabilities -. -.
Total -. -.
Cash flows from lease liabilities are detailed in Note ., and the maturity of lease liabilities
and related finance costs are detailed in Note ..
Group as a lessor
In lessor accounting leases are classified as operating leases or finance leases. The Group
assesses at the commencement date of a lease whether it is classified as an operating
lease or a finance lease. Leases where the risks and rewards incidental to ownership are
transferred to the lessee are classified as finance lease agreements. At the commencement
date of the lease, the lessor recognises in the balance sheet a finance lease receivable
that corresponds to the net investment in the lease. Lease income for operating leases is
recognised in the income statement on a straight-line basis over the lease term.
Kesko leases premises to entrepreneurs other than K-retailers to ensure that the combination
of services at a store site supports Kesko’s overall profit generation. Such premises typically
include so-called store entrance shops at large retail outlets. Kesko has store entrance shops
both in its own properties and in leased properties. The entrance shops in leased properties
include a sublease agreement where Kesko has the head lease. The leases for entrance shops
and the subleases are classified as operating leases. The business premises owned or rented
by Kesko and used by K-retailers to conduct chain operations are provided to the retailers
under chain agreements, and are not treated as leases. The treatment of income based on
chain agreements is detailed in Note ..
Lease income
€ million
Lease income for operating leases . .
Lease income for subleases . .
Total . .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Inventories
Accounting policies
Inventories are measured at the lower of cost and net realisable value. Net realisable value
is the estimated selling price in the ordinary course of business less direct costs necessary
to make the sale. The cost is determined using weighted average costs. The cost of certain
categories of inventory is determined using the FIFO method. The cost of finished goods
comprises all costs of purchase including freight. The cost of self-constructed goods
comprises all costs of conversion including direct costs and allocations of variable and
fixed production overheads. The cost excludes borrowing costs.
€ million
Goods . .
Prepayments . .
Total . .
Write-down of inventories to net realisable value . .
. Trade and other current receivables
Accounting policies
Trade receivables are recognised in the amounts of initial sale. According to the IFRS
impairment model, impairments must be recognised on the basis of expected credit
losses. The Group has adopted the standard’s simplified approach for recognising
impairment of trade receivables using the provision matrix. For the impairment model,
Group companies have been classified into risk categories on the basis of their business
model and realised historical credit losses. In addition, impairment is recognised, if there
is other evidence of a debtor's insolvency, bankruptcy or liquidation. Impairment is
recognised as an expense in other operating expenses. If an amount previously written off
is subsequently settled, it is recognised as a reduction of other operating expenses.
€ million
Interest-bearing receivables
Interest-bearing loans and receivables . .
Total interest-bearing receivables . .
Trade receivables . .
Income tax assets . .
Other non-interest-bearing receivables
Non-interest-bearing loans and receivables . .
Prepaid expenses . .
Total other non-interest-bearing receivables . .
Total ,. ,.
A total amount of €. million (€. million) of trade receivables has been recognised within
credit losses in the income statement. The credit risk is described in more detail in Note ..
Prepaid expenses mainly comprise allocations of purchases.
The fair values of current trade and loan receivables, and those of current interest-bearing
receivables are estimated to equal the carrying amounts due to their short maturities.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Pension assets
Accounting policies
The Group operates both defined contribution pension plans and defined benefit pension
plans. The contributions payable under defined contribution plans are recognised as
expenses in the income statement for the period to which the payments relate. In defined
contribution plans, the Group does not have a legal or constructive obligation to pay
further contributions, in case the payment recipient is unable to pay the retirement
benefits.
In defined benefit plans, the Group may incur obligations or assets after the payment of
the contribution. The pension obligation represents the present value of future cash flows
from the benefits payable. The present value of pension obligations has been calculated
using the projected unit credit method. Pension costs are expensed during employees'
service lives based on actuarial calculations. The discount rate assumed in calculating
the present value of the pension obligation is the market yield of high-quality corporate
bonds. Their maturity substantially corresponds to the maturity of the pension liability.
The assets corresponding to the pension obligation of the retirement benefit plan are
carried at fair values at the balance sheet date. Actuarial gains and losses are recognised
in comprehensive income in the income statement.
The Group operates several pension plans in different operating countries. In Finland,
the statutory pension provision of personnel is provided through pension insurance
companies and the voluntary supplementary pension provision is mainly provided through
Kesko Pension Fund. The statutory pension provision provided through pension insurance
companies is a defined contribution plan. The supplementary pension provision provided
through Kesko Pension Fund is a defined benefit plan.
Pension plans in foreign subsidiaries are managed in accordance with local regulations and
practices, and they are defined contribution plans.
Kesko Pension Fund
Kesko Pension Fund is a pension provider of its members providing supplementary
retirement benefits to employees who are beneficiaries of the Pension Fund. New members
have not been included in the Pension Fund after May . As the conditions set out
in the Fund's rules are met, beneficiaries between and years of age are granted an
old-age pension. The amount of retirement benefit granted by the Fund is the difference
between the employee's retirement benefit based on his/her pensionable salary calculated
in accordance with the Fund's rules and the statutory pension. In addition to the individually
calculated pensionable salary, the retirement benefit amount of each beneficiary is impacted
by the duration of his/her membership of the Pension Fund. The Pension Fund had ,
beneficiaries, of whom were active employees and , were retired employees. Kesko
Group's contribution to the Pension Fund's obligation is .% (.%). The notes present
Kesko Group's interest in the Pension Fund except for the analysis of assets by category and
the maturity analysis of the obligation.
In addition to its rules, the Pension Fund's operations are regulated by the Employee Benefit
Funds Act, the decrees under the Act and official instructions, and the Fund's operations are
controlled by the Financial Supervisory Authority. The regulations include stipulations on
the calculation of pension obligation and its coverage, for example. The pension obligation
shall be fully covered by the plan assets, any temporary deficit is only allowed exceptionally.
In addition, the regulations include detailed stipulations on the acceptability of the covering
assets and the diversification of investment risks.
Kesko Pension Fund did not charge contributions from its shareholders during this or the
previous financial year. In Kesko Pension Fund paid €. million in total in return
of surplus assets to Finnish Group companies. Kesko Group does not expect to pay
contributions to the Pension Fund in .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
The defined benefit asset recognised in the
balance sheet is determined as follows:
€ million
Present value of defined benefit obligation -. -.
Fair value of plan assets . .
Net assets recognised in the balance sheet . .
Movement in the net assets recognised in the balance sheet:
As at January . .
Income/cost recognised in the income statement -. -.
Remeasurement . .
Return of surplus assets -. .
Contributions to plan and plan costs . .
As at December . .
€ million
Present value of
defined benefit
obligation
Fair value
of plan assets Total
As at January -. . .
Current service cost -. -.
Gains or losses on settlement -. -.
Interest cost/income -. . .
Plan costs -. -.
-. . -.
Remeasurement
Return on plan assets . .
Gain/loss from changes in demographic
assumptions . .
Gain/loss from changes in financial
assumptions . .
Experience gains/losses -. -.
. . .
Contributions to plan . .
Return of surplus assets -. -.
Benefit payments . -. .
As at December -. . .
€ million
Present value of
defined benefit
obligation
Fair value
of plan assets Total
As at January -. . .
Current service cost -. -.
Gains or losses on settlement -. -.
Interest cost/income -. . .
-. . -.
Remeasurement
Return on plan assets . .
Gain/loss from changes in demographic
assumptions .
Gain/loss from changes in financial
assumptions -. -.
Experience gains/losses . .
-. . .
Contributions to plan and plan costs . .
Return of surplus assets . .
Benefit payments . -. .
As at December -. . .
Plan assets were comprised as follows in
€ million Quoted Unquoted Total
Europe
Equity instruments . .
Debt instruments . . .
Investment funds . . .
Properties . .
United States
Equity instruments .
Investment funds . .
Other countries
Investment funds . .
Total . . .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Plan assets were comprised as follows in
€ million Unquoted Quoted Total
Europe
Equity instruments . .
Debt instruments . . .
Investment funds . . .
Properties . .
United States
Equity instruments .
Investment funds . .
Other countries
Investment funds . .
Total . . .
€ million
Kesko Corporation shares included in fair value - -
Properties leased by Kesko Group included in fair value . .
Principal actuarial assumptions:
Discount rate .% .%
Salary growth rate .% .%
Inflation .% .%
Pension growth rate .% .%
Average service expectancy, years
Weighted average duration of pension obligations and expected
maturity analysis of undiscounted pension obligations
Weighted average duration of pension obligations, years
Expected maturity analysis of undiscounted pension obligations,
€ million
Less than year , .
Between − years , .
Between − years , .
Between − years , .
Over years , .
Total , .
Risks related to pension plan
Asset related risks
The Pension Fund's investment assets comprise properties, equity index funds, private equity
funds, unlisted shares and both long-term and short-term money market investments. The
Pension Fund's investment policy defines the investment restrictions pertaining to classes of
assets and the allowed investees. The investment plan, annually confirmed by the Pension
Fund board, sets the investment allocation and return targets for the year ahead. The
objective of investing activity is to secure a return on the investments and their convertibility
into cash, as well as ensuring appropriate diversity and diversification of investments. On an
annual basis, the objective is to exceed the Pension Fund's obligation expenses and costs,
so that contributions need not be charged to the members. The long-term target return
on investment activity is .%. The risks involved in investment activity are managed by
continuously monitoring market developments and analysing the adequacy of the return and
risk potential of the investments. The returns compared to chosen reference indices and the
breakdown of investments are reported on a monthly basis. In , the realised return on
investing activity was .%.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
If the return on investment assets underperforms the discount rate applied to the calculation
of the present value of defined pension obligation, a deficit in the plan may arise. The
diversification of assets is aimed to reduce this risk in varying financial conditions. If a
deficit is created in the pension plan, such that the pension obligation is not fully covered,
Pension Fund members are obligated to pay contributions to the Fund in order to cover
the obligation. Calculated in compliance with the IAS standard, the amount of plan
assets exceeded the plan obligation by €. million as at December . Local rules
concerning the Pension Fund may also create a contribution obligation in situations in which
the IAS obligation is fully covered. In such a case, the amount of contributions charged
increases the amount of pension assets according to IAS .
Obligation related risks
In addition to the general level of interest rates, the defined benefit obligation is impacted
by changes in the statutory pension provision, future salary increases, index-based
pension increases and changes in life expectancy. The pension promise made to the Fund's
beneficiaries is tied to the amount of pensionable salary and it is a lifelong benefit. The
total pension amount consists of the statutory pension and the supplementary pension
provided by the Fund. Salary increases will increase the future pension amount. Changes
in statutory pension provision, such as an increase in the retirement age or a reduction of
pension provision, which are compensated to pensioners by the supplementary pension
and, consequently, the changes would increase the defined benefit obligation. The amount
of future pensions is adjusted annually with an index-based increase in accordance with the
terms and conditions of the plan. The extension of life expectancy will result in an increase in
plan obligation.
Changes in the general level of interest rates and the market yield of high-quality bonds have
an impact on the present value of the defined benefit obligation. When the level of interest
rates falls, the present value of the defined benefit obligation rises. Because the Pension
Fund's investment assets are invested and their return targets are set for long terms, changes
in the annual return on investments do not necessarily correlate in the short term with
changes in the discount rate applied to the defined benefit obligation.
Sensitivity analysis
The sensitivity of the defined benefit obligation to changes in the principal assumptions is
presented in the following table.
Actuarial assumption
Change in
assumption
Impact on
defined benefit
obligation,
increase
Impact on
defined benefit
obligation,
decrease
Discount rate .% -.% .%
Salary growth rate .% .% -.%
Pension growth rate .% .% .%
Discount rate .% -.% .%
Salary growth rate .% .% -.%
Pension growth rate .% .% -.%
The impacts of sensitivity analysis have been calculated so that the impact of a change in
the assumption is calculated while assuming that all other assumptions are constant. In
practice, this is unlikely to occur, and changes in some of the assumptions may correlate with
each other. The sensitivity of the defined benefit obligation has been calculated using the
same method as when calculating the pension obligation recognised within the statement of
financial position.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Shares in associates and joint ventures
Associates and joint ventures
Associates and joint ventures are treated as equity-accounted investments. The shares in
associates and joint ventures are not quoted on the market. Associates and joint ventures are
listed in Note .. Related party information is presented in Note ..
Significant joint ventures
The Group has a significant joint venture, UAB Kesko Senukai Lithuania. Kesko Senukai
Group engages in building and home improvement trade in Lithuania, Estonia, Latvia and
Belarus. The Group’s parent company, UAB Kesko Senukai Lithuania, is a limited liability
company registered in Lithuania. Kesko Group has a .% holding in Kesko Senukai Group.
UAB KS Holding is a limited liability company registered in Lithuania that engages in real
estate development and real estate rental. Its operations are closely related to the operations
of Kesko Senukai Group. The real estate companies owned by KS Holding in Lithuania, Latvia
and Estonia rent and build store properties primarily for the use of Kesko Senukai Group.
Kesko Group’s holding in KS Holding Group is .%.
Kesko Senukai and KS Holding were consolidated as a subsidiary in the consolidated financial
statements up until June ; as of July , they have been consolidated as joint
ventures. Due to the change in classification, from July onwards the companies are
consolidated as joint ventures on one line “Share of result of joint ventures” before operating
profit in Kesko’s consolidated income statement. The reclassification had a positive impact
of €. million on the balance sheet value of associates and joint ventures. The change
in consolidation methods, the grounds for the change and the financial impacts have been
detailed in Note ..
Summary of financials of significant joint ventures, € million Dec. Dec.
Current assets . .
Non-current assets . .
Current liabilities . .
Non-current liabilities . .
The above-mentioned balance sheet items contain the following
items:
Cash and cash equivalents . .
Current interest-bearing liabilities . .
Non-current interest-bearing liabilities . .
Jan.– Dec.
Jul.– Dec.
Net sales ,. .
Net profit attributable to owners of the parent . .
Comprehensive income for the year attributable to owners of
the parent . .
Group share of profit for the year . .
Fair value allocation of inventories - -.
Share of result of the joint venture consolidated in the
consolidated financial statements . .
Share of other comprehensive income of the joint venture
consolidated in the consolidated financial statements . .
The above-mentioned income statement items contain the
following items:
Depreciation, amortisation and impairment -. -.
Interest income . .
Interest expense -. -.
Income tax -. -.
Dividends received from Kesko Senukai during the financial year - -.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation for balance sheet value of joint ventures,
€million
Net assets of joint ventures . .
Minority interest in net assets . .
Group interest in net assets . .
Goodwill . .
Fair value allocations . .
Balance sheet value of joint ventures . .
Significant associates
Mercada Oy is a limited liability company registered in Finland, which operates in real estate
investment. Mercada owns, manages and develops retail sites mainly used by Kesko Group
in Finland. Kesko Corporation's holding in Mercada is .%. Mercada’s three shareholders
have equal stakes in the company.
Summary of financials of a significant associate, € million
Current assets . .
Non-current assets . .
Current liabilities . .
Non-current liabilities . .
Equity attributable to equity holders of the parent . .
Net sales . .
Net profit for the year . -.
Parent company owners' share of comprehensive income for
the year . -.
Comprehensive income for the year, total . -.
Reconciliation for balance sheet value of an associate,
€million
Net assets of the associate . .
Group interest in net assets . .
Balance sheet value of the associate . .
Other associates
Summary of financials of other associates, € million
Group share of profit for the year . .
Group share of comprehensive income for the year . .
Balance sheet value of associates in the consolidated statement
of financial position . .
The table depicts the associates Vähittäiskaupan Takaus Oy and Vähittäiskaupan Tilipalvelu
Oy, which sell services to Kesko and retail companies of K-retailers, as well as business
property companies that have leased their properties for use by Kesko Group.
The associate Valluga-Sijoitus Oy was dissolved during . In the dissolution, Kesko
Corporation received shares in Vähittäiskaupan Takaus Oy and minor liquid assets as share in
the distribution. The dissolution of Valluga-Sijoitus Oy resulted in a €. million profit in the
consolidated income statement. The dissolution had a positive impact of €. million on the
balance sheet value of associates and joint ventures.
Mutual real estate companies
Mutual real estate companies are consolidated in the consolidated financial statements in
proportion to ownership. The figures in the table below are the Group’s share of real estate
companies’ assets and liabilities and net profit, included in the consolidated statement of
financial position and income statement. Mutual real estate companies have been treated as
common functions in proportion to ownership.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
€ million
Non-current assets . .
Current assets . .
Non-current liabilities . .
Current liabilities . .
Net assets . .
Income . .
Costs . .
Net profit for the year -. -.
. Provisions
Accounting policies
A provision is recognised when the Group has a present legal or constructive obligation
as the result of a past event, and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation, and that a reliable estimate can
be made of the amount of the obligation. Provision amounts are reviewed on each balance
sheet date and adjusted to reflect the current best estimate. Changes in provisions are
recorded in the income statement in the same item in which the provision was originally
recognised. The most significant part of the Group's provisions relates to warranties given
to products sold by the Group.
A warranty provision is recognised when a product covered by warranty provisions
is sold. The provision amount is based on historical experience about the level of
warrantyexpenses.
€ million
Warranty
provisions
Other
provisions Total
Provisions as at Jan. . . .
Foreign exchange effects . . .
Additional provisions . . .
Unused amounts reversed -. -. -.
Amounts charged against provision -. -. -.
Changes in the Group structure . -. .
Provisions as at Dec. . . .
Analysis of total provisions
Non-current . . .
Current . . .
The biggest items in other provisions are costs related to care plans of vehicles and machines
sold by Group companies, real estate costs for empty store sites, and restructuring costs.
The average duration for care plans is - years.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
IN THIS SECTION
. Capital management
. Shareholders' equity
. Financial risks
. Financial income and costs
. Financial assets and liabilities by category
. Other contingent liabilities
Notes to the consolidated financial statements
. CAPITAL STRUCTURE AND FINANCIAL RISKS
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Capital management
Kesko Group’s objectives in capital management include target rates set for the Group’s
solvency and liquidity. The Group’s capital structure (equity-to-debt ratio) is managed at
Group level. The targets for the Group’s solvency and liquidity are set with the purpose of
securing the Group’s liquidity in all market situations, enabling the implementation of Group
strategy, and increasing shareholder value. The targets have been set for the performance
indicator ‘interest-bearing net debt/EBITDA’. Some of the Group’s interest-bearing liabilities
include covenants, whose terms and conditions have been taken into account in the above
target rate. The Group does not have a credit rating from any external credit rating institution.
Target levels for Kesko Group’s performance indicators are approved by the Board of Directors
of Kesko Corporation. The Board confirmed an updated version of the company’s strategy and
new medium-term financial targets for the company on May . The new medium-term
financial targets for profitability are a comparable operating margin of over .% (previously
.%) and a comparable return on capital employed of over .% (previously .%). As for
financial position, the Group continues to target a maximum interest-bearing net debt/EBITDA
of ., excluding the impact of IFRS .
€ million
Interest-bearing liabilities and lease liabilities in
theconsolidated statement of financial position ,. ,.
- Lease liabilities ,. ,.
- Other current financial assets . .
- Cash and cash equivalents . .
Interest-bearing net debt excluding lease liabilities -. .
Operating profit . .
+ depreciation, amortisation and impairment . .
+ depreciation and impairment charges for right-of-use-assets . .
- lease payments for right-of-use-assets . .
EBITDA excluding the impact of IFRS . .
Interest bearing net debt/EBITDA excluding
the impact of IFRS . .
. Shareholders' equity
Accounting policies
The Group classifies the instruments it has issued either in equity or in financial liabilities
based on their nature. An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its liabilities. Expenses related
to the issuance or acquisition of equity instruments are presented as an allowance for
equity. If Kesko Corporation acquires equity instruments of its own, their cost is deducted
fromequity.
The dividend proposed by the Board of Directors to the General Meeting has not been
deducted from equity. Instead, dividends are recognised on the basis of the resolution by
the General Meeting.
The number of shares in Kesko Corporation increased during following the resolution
of the April Annual General Meeting to conduct a share issue without payment
(share split). In the share issue without payment, new shares were issued without payment to
the shareholders in proportion to their existing holdings, so that three () new A shares were
issued for each A share held, and three () new B shares for each B share held. At the end
of December , the total number of shares in Kesko Corporation was ,,, of
which ,,, or .%, were A shares and ,, or .%, were B shares.
All issued shares have been paid in full. The maximum number of A shares is million and
the maximum number of B shares is million, and the maximum number of total shares
million. Each A share carries ten () votes and each B share one () vote. The total
number of votes attached to all shares was ,,,. At the end of December ,
Kesko Corporation's share capital totalled €,,.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Treasury shares
Authorised by the General Meeting, the Board acquired a total of , of the Company’s
own B shares during the financial year. The Board also acquired a total of ,, of
the Company’s own B shares during the financial years and . The shares are held
by the Company as treasury shares and the Company’s Board is entitled to transfer them.
The acquisition cost of the B shares held by the Company and acquired during the
financial year was €. million, and the acquisition cost of the shares acquired during the
and financial years was €. million. These costs have been deducted from
retained earnings in equity. The Board has the authorisation granted by the Annual General
Meeting on April to decide on the issuance of at maximum ,, B series
shares. The authorisation is valid until June . Information on share-based payments
has been given in Note ..
pcs
B shares held by the Company as at Dec. ,,
Transfer, share-based compensation plan -,
Returned during the period ,
B shares held by the Company as at Dec. ,,
Change in share numbers and equity reserves
Number of shares
Share capital A B Total
Share capital
€ million
Reserve of invested
non-restricted
equity € million
Share premium
€ million Total € million
January ,, ,,* ,,* . . . .
Number of shares after the split ,, ,, ,,
Transfer of treasury shares , ,
December ,, ,,* ,,* . . . .
Transfer of treasury shares , ,
December ,, ,,* ,, . . . .
Number of votes ,,, ,, ,,,
* Excluding treasury shares, which totalled ,, (,,) at the end of the financial year.
Dividends
After the balance sheet date, the Board of Directors proposed the distribution of a dividend
of €, per share. The dividend distributed for the profit for was €, per share.
Equity and reserves
Equity consists of share capital, share premium, reserve of invested non-restricted equity,
other reserves, revaluation reserve, currency translation differences and retained earnings
net of treasury shares.
Share premium
The amount exceeding the par value of share received by the Company in connection with
share subscriptions was recorded in the share premium in cases where options had been
granted under the old Limited Liability Companies Act ( Sept. /). As at the end
of the financial year, the share premium was €. million.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Reserve of invested non-restricted equity
The reserve of invested non-restricted equity, €. million, includes the other equity-
related investments and share subscription prices to the extent not designated to be included
in share capital.
Other reserves
Other reserves, a total of €. million, have mainly been created and increased as a result
of resolutions by the General Meeting. Other reserves mainly comprise contingency reserves
to a total amount of €. million at the end of the financial year.
Currency translation differences
Currency translation differences arise from the translation of foreign operations’ financial
statements. Exchange differences arising from monetary items that form a part of a net
investment in a foreign operation or exchange differences from loans designated as hedges
for foreign net investments and regarded as effective, are also included in currency
translation differences. The change in currency translation differences is stated within
comprehensive income.
Revaluation reserve
The revaluation reserve includes the effective portion of the change in the fair value of
derivatives for which cash flow hedge accounting is applied. Cash flow hedges include
electricity derivatives. The change in the reserve is stated within comprehensive income. The
result of cash flow hedging has been presented in Note . Financial risks.
. Financial risks
With respect to financial risk management, the Group observes a uniform treasury policy
that has been approved by the Company's Board of Directors. Compliance with this
policy and developments in the Group’s financial situation are monitored by the Board’s
Audit Committee. The Group Treasury is centrally responsible for obtaining financial
resources for the Group, for liquidity management, relations with providers of finance,
and the management of financial risks. In the main, the Group’s financial resources have
been obtained through the parent company, and the Group Treasury arranges financial
resources for subsidiaries in their functional currencies. For subsidiaries with significant
external ownership, the Group has not guaranteed financial liabilities in excess of its
ownershipinterest.
Foreign exchange risks
Kesko Group conducts business operations in seven countries, in addition to which it makes
purchases from numerous countries. In consequence, the Group is exposed to various
foreign exchange risks arising from net investments in foreign operations (translation risks)
and from assets, liabilities and forecast transactions (transaction risks) denominated in
foreign currencies.
The Group companies’ financial resources are arranged in their functional currencies. The
parent company bears the ensuing foreign exchange risk and hedges the risk exposure using
derivatives or borrowings denominated in the relevant foreign currencies.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Translation risks
The Group is exposed to foreign currency translation risks relating to net investments in
subsidiaries outside the euro zone held on the balance sheet. This balance sheet exposure
has not been hedged. The hedge can be designated if equity is repatriated, or if a currency
is expected to be exposed to a significant devaluation risk. The most significant translation
exposures are the Norwegian krone and the Swedish krona. Relative to the Group's volume
of operations and the balance sheet total, the foreign currency translation risk is low.
Group's translation exposure as at Dec.
€ million NOK SEK PLN
Net investment . . .
Group's translation exposure as at Dec.
€ million NOK SEK PLN
Net investment . . .
The following table shows how a % weakening or strengthening of the functional
currencies of Group companies against the euro would affect the Group’s equity.
Sensitivity analysis, impact on equity as at Dec.
€ million NOK SEK PLN
Weakening % -. -. -.
Strengthening % . . .
Sensitivity analysis, impact on equity as at Dec.
€ million NOK SEK PLN
Weakening % -. -. -.
Strengthening % . . .
Transaction risks
International purchasing activities and foreign currency denominated financial resources
arranged by the parent to subsidiaries expose the Group to transaction risks relating to
several currencies. The currency-specific transaction risk exposure comprises foreign
currency denominated receivables and liabilities in the balance sheet, forecast foreign
currency cash flows, and foreign subsidiaries’ liabilities and receivables with respect to
the parent. The risk is commercially managed by, for example, transferring exchange rate
changes to selling prices, or by replacing suppliers. The remaining exposures are hedged
using foreign currency derivatives. The subsidiaries report their foreign exchange exposures
to the Group Treasury on a monthly basis.
In the main, the subsidiaries hedge their risk exposures with the Group Treasury, which
in turn hedges risk exposures using market transactions within the limits confirmed
for each currency. Intra-Group derivative contracts are allocated to the segments in
segmentreporting.
As a rule, the Group does not apply hedge accounting in accordance with IFRS to hedge
the transaction risk relating to purchases and sales. In initial measurement, derivative
instruments are recognised at fair value and subsequently in the financial statements, they
are remeasured at fair value. The change in fair value of foreign currency derivatives used for
hedging purchases and sales is recognised in other operating income or expenses.
Insofar as the Group applies hedge accounting to hedge purchases, the valuation of
derivatives is recognised in the revaluation reserve of equity. When a derivative matures, it is
treated similarly to the hedged item.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Group's transaction exposure as at Dec.
€ million USD SEK NOK PLN
Group's transaction risk -. . . .
Hedging derivatives . -. -. -.
Open exposure . -. . .
Group's transaction exposure as at Dec.
€ million USD SEK NOK PLN
Group's transaction risk -. . . .
Hedging derivatives . -. -. -.
Open exposure . . . .
The Group monitors the transaction risk exposure in respect of existing balances and
forecast cash flows. The table above depicts transaction exposure excluding future cash
flows. It does not depict the Group’s actual foreign exchange risk after hedging. When
forecast amounts are included in the transaction exposure, the most significant difference to
the table is in the USD exposures. As at December , the exposure with respect to
USD was €-. million.
A sensitivity analysis of the transaction exposure shows the impact on profit or loss of a
+/-% exchange rate change in intra-Group receivables and liabilities denominated in
foreign currencies and foreign currency derivatives and borrowings used for hedging.
Sensitivity analysis, impact on pre-tax profit
as at Dec.
€ million USD SEK NOK PLN
Change + % -. . -. -.
Change - % . -. . .
Sensitivity analysis, impact on pre-tax profit
as at Dec.
€ million USD SEK NOK PLN
Change + % -. -. -. -.
Change - % . . . .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Dec. Dec.
€ million < year - years > years Total < year - years > years Total
Maturities of financial liabilities and related finance costs
Borrowings from financial institutions . . . . . . . .
finance costs . . . . . . . .
Pension loans . . . . . . . .
finance costs . . . . . . . .
Lease liabilities . . . ,. . ,. . ,.
finance costs . . . . . . . .
Payables to K-retailers . . . .
finance costs
Other interest-bearing liabilities . . . . . . .
finance costs . .
Non-current non-interest-bearing liabilities . . . . . . . .
Current non-interest-bearing liabilities
Trade payables ,. ,. ,. ,.
Accrued expenses . . . .
Other non-interest-bearing liabilities . . . .
Financial liabilities in the balance sheet include €. million (€. million) in items related to
derivatives, of which €. million will mature within the next months.
Liquidity risk
Liquidity risk management aims to maintain sufficient liquid assets and credit facilities in
order to ensure the ongoing availability of sufficient financial resources for the Group’s
operating activities.
Liquid assets comprise cash and cash equivalents in the balance sheet, financial assets at
amortised cost, and current financial assets at fair value through profit or loss. Changes in
these balance sheet items are presented in the consolidated statement of cash flows under
change in cash and cash equivalents for cash and cash equivalents, and in cash flow from
investing activities for other financial assets.
The Group’s liquid assets have mainly been invested in the debt instruments of major Finnish
companies, in certificates of deposit and deposits with banks operating in Kesko’s market area,
in bonds of selected companies and in corporate bond funds. The return on these investments in
was .% (-.%) and the duration . years at the end of the financial year. The maximum
credit risk is the fair value of these investments on the balance sheet at the balance sheet date.
The Group had liquid assets of €. million (€. million) on December .
Interest-bearing liabilities on December totalled €,. million (€,.
million), of which lease liabilities accounted for €,. million (€,. million).
interest-bearing net debt totalled €,. million (€,. million), and interest-bearing
net debt excluding lease liabilities totalled €-. million (€. million)
More information on leases is presented in Note ..
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Dec. Dec.
€ million < year - years > years Total < year - years > years Total
Cash flows of derivatives
Payables
Foreign currency derivatives . . . .
Interest rate derivatives . . . . . . . .
Electricity derivatives . . . . . .
Receivables
Foreign currency derivatives . . . .
Interest rate derivatives . . . . . .
Electricity derivatives . . . . . .
Payables to K-retailers consist of two types of interest-bearing liabilities by Kesko to
K-retailers: retailers’ prepayments to Kesko and Kesko’s chain rebate liabilities to retailers.
During the financial year, Kesko prematurely repaid a € million loan whose interest
margin accounted for Kesko’s ability to meet the sustainability targets set for its carbon
footprint, food waste, and audits in high-risk countries. Kesko drew down a new € million
bilateral loan whose interest margin also accounts for the same sustainability criteria as the
repaid loan.
At the balance sheet date, the total equivalent of undrawn committed long-term credit
facilities was € million (€ million). According to the terms and conditions of loan
agreements, at change of control, the lenders have the right to terminate the credit facility
and loan amounts possibly drawn. According to the terms and conditions of the loan facility,
the change of ownership to retailers or an association of retailers does not constitute a
change of control. In addition, the Group’s uncommitted financial resources available
contained commercial paper programmes denominated in euros totalling an equivalent of
€ million (€ million).
Interest rate risk on borrowings and sensitivity analysis
Changes in the interest rate level have an impact on the Group’s interest expense. The policy
for hedging interest rate risk is aimed at balancing the effects of changes in the interest rate
level on profit or loss for different financial periods.
The interest rate risk is centrally managed by the Group Treasury, which adjusts the duration
by using interest rate derivative contracts. The target duration is three years, which is
allowed to vary between one and a half and four years. The actual duration during the
financial year was . (.) years on average.
The sensitivity analysis for changes in interest rate level in respect of commercial paper liabilities
realised during the financial year has used average balance values. At the balance sheet date of
December , the effect of variable rate borrowings on the pre-tax profit would have been
€-/+. million (€-/+. million), if the interest rate level had risen or fallen by percentage point.
Pension loans, €. million in aggregate, have fixed rates, and their effective interest cost
was .%. Other borrowings from financial institutions have variable interest rates. At the
end of the financial year, the average rate of these borrowings, payables to retailers, and
other interest-bearing liabilities was .%.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Supply chain financing arrangements
The Group has established a supply chain financing scheme with three banks. Trade payables
in the consolidated statement of financial position on December totalled €,.
million, of which €. million were liabilities related to open purchase accounts covered
by the schemes. In supply chain financing, the supplier utilises the buyer’s credit rating
when selling its receivables to a financing institution. Once the buyer approves the purchase
accounts, the bank pays them to the supplier without a right of recourse, meaning the
supplier has quick access to the cash flows related to trade receivables. The Group does not
pay commission to the banks for the supply chain financing, and the payment terms do not
materially deviate from the payment terms applied with suppliers. Open purchase accounts
covered by the scheme are presented under trade payables on the Group balance sheet. The
impact of these trade payables can be seen in cash flow from operating activities as change
in working capital.
Current interest-bearing receivables and sensitivity analysis
The objective is to invest liquidity consisting of financial assets in the money markets using
efficient combinations of return and risk. At regular intervals, the Group’s management
approves the investment instruments and limits for each counterparty among those analysed
by the Group Treasury. The risks and actual returns on investments are monitored regularly.
Financial assets at amortised cost
€ million
Carrying amount as at January . .
Changes . -.
Carrying amount as at December . .
The financial assets at amortised costs include investments in commercial papers, certificates
of deposits and other interest rate instruments.
In the sensitivity analysis of floating rate receivables, average annual balances of invested
assets have been used. The receivables include customer financing receivables, other
interest-bearing receivables, and within investments money market funds. The sensitivity of
money market funds has been determined based on duration. If the interest rate level had
changed by +/- percentage point, the effect of these items on the pre-tax profit would have
been €+/-. million (€+/-. million).
Maturity of non-current receivables
Maturity analysis of non-current
receivables as at Dec.
€ million − Total
Non-interest-bearing non-current
receivables . . . . . .
Loans and receivables from associates
and joint ventures . . . . . .
Other non-current receivables . . .
Total . . . . . .
The carrying amount of non-interest-bearing non-current receivables equals their fair value.
Maturity analysis of non-current
receivables as at Dec.
€ million − Total
Non-interest-bearing non-current
receivables . . . . . .
Loans and receivables from associates
and joint ventures . . . . . .
Other non-current receivables . . .
Total . . . . . .
Credit and counterparty risk
Business entities are responsible for managing the credit risk associated with amounts due
from customers. Terms and conditions of credit sale and collateral requirements as well
as decision-making authorisations for credit facilities have been determined for managing
credit risk within businesses. Credit control identifies customers with risk and ensures
that credit decisions are based on up-to-date information on a customer’s solvency and
any changes in solvency are considered. The amount of credit losses remained moderate
despite the pandemic. The economic uncertainty relating to expected credit losses has been
acknowledged in the measurement of trade receivables. The Group’s trade receivables are
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
from a large number of individual customers, and balance sheet receivables do not contain
significant risk concentrations. In Finland, the main part of the Group’s business activities
is carried out in cooperation with retailers. According to retailer agreements, retailers shall
arrange overdraft facilities to be held as collateral for their trade payables by the relevant
Kesko subsidiary. The seasonality of businesses impacts the amount of trade receivables in
the consolidated statement of financial position.
According to the IFRS impairment model, impairments must be recognised on the basis
of expected credit losses. The Group has adopted the standard’s simplified approach for
recognising impairment of trade receivables using the provision matrix. For the impairment
model, the Group has classified Group companies into risk categories on the basis of their
business model and realised historical credit losses. In addition, impairment is recognised,
if there is other evidence of a debtor's insolvency, bankruptcy or liquidation. As for
other financial assets, the change in impairment model has not had a material impact
on the consolidated financial statements. The ageing analysis of trade receivables as at
December is presented in the following table.
Ageing analysis of trade receivables
€ million
Trade receivables fully performing . .
− days past due trade receivables . .
− days past due trade receivables . .
− days past due trade receivables . .
over days past due trade receivables . .
Total . .
Within trade receivables, €. million (€. million) were from chain retailers. The
collateral for chain retailer receivables is an overdraft facility granted by a Kesko associate,
Vähittäiskaupan Takaus Oy, with the maximum always limited to the realisable value of the
countersecurity from the K-retailer's company and its entrepreneur to Vähittäiskaupan
Takaus Oy. At the end of the financial year, the aggregate value of countersecurities was
€. million (€. million). In addition, the collateral for receivables includes other
collaterals, such as business mortgages and other pledged assets.
Trade receivables include an impairment charge to a total of €. million (€. million).
The aggregate amount of credit losses and impairments recognised in the profit for the
financial year was €. million (€. million).
The amount of receivables with renegotiated terms totalled €. million (€. million).
Financial credit risk
Financial instruments involve the risk of non-performance by counterparties. Credit risk
is managed with agreements with financially sound Finnish and foreign banks, financial
institutes and brokers, within the counterparty risks limits set in the treasury policy. Financial
assets are also invested in money market funds and the bonds, commercial papers and
certificates of deposit issued by conservatively selected companies and banks. Due to the
Covid- pandemic, target-specific limits in line with the Group’s investment policy were
reduced to a minimum. The limits are reviewed regularly depending on the market situation.
Commodity risks and their sensitivity analysis
The Group uses electricity derivatives for the purpose of balancing out energy costs. The
electricity price risk is assessed for five-year periods. The changes in the value of derivatives used
for
hedging the price of electricity supplied during the financial year are recognised within
adjustments to purchases. Hedge accounting is applied to contracts hedging future purchases.
Hedge accounting is applied in accordance with IFRS to hedge the risk component. The effective
portion of the change in the value of derivatives that qualify for hedge accounting is recognised
in the revaluation reserve of equity. The change in the revaluation reserve recognised in equity is
presented in the statement of comprehensive income under Revaluation of cash flow hedge.
Result of cash flow hedging
As a result of hedge accounting applied to electricity, an amount of €. million (€. million)
was removed from equity and included in the income statement as purchase cost adjustment, and
€. million (€-. million) was recognised in equity, respectively. Their combined effect on the
revaluation reserve for the year was €. million (€-. million) before accounting for deferred tax.
As at the balance sheet date, a total quantity of ,, MWH (, MWH) of
electricity had been purchased with electricity derivatives and ,, MWH (,
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
MWH) under fixed price purchase agreements. The – month hedging level was %
(%), the – month level was % (%), the – month level was % (%), the
– month level was % (%), and the - month level was %.
The sensitivity analysis of electricity derivatives assumes that derivatives maturing in less than
months have an impact on profit. If the market price of electricity derivatives changed by
-/+% from the balance sheet date December , it would contribute €-/+. million
(€-/+. million) to the income statement and €-/+. million (€-/+. million) to
equity. The impact has been calculated before taxes.
Derivatives
Fair values of derivative contracts
€ million
Dec.
Positive
fair value
(balance
sheet value)
Dec.
Negative
fair value
(balance
sheet value)
Dec.
Positive
fair value
(balance
sheet value)
Dec.
Negative
fair value
(balance
sheet value)
Interest rate derivatives . -. . -.
Foreign currency derivatives . -. . -.
Electricity derivatives . -. . -.
Notional principal amounts of
derivative contracts
€ million
Dec. Notional
principal amount
Dec. Notional
principal amount
Interest rate derivatives . .
Foreign currency derivatives . .
Electricity derivatives . .
The fair values of derivatives are presented as gross amounts. Kesko has entered into netting
arrangements under ISDA contracts with all counterparties engaged in transactions with
derivatives. All of these contracts provide for mutual posting of collateral. The threshold
level for collateral posting had not been exceeded at the balance sheet date. Analysed by
counterparty, derivative financial liabilities could be set off in a total of €. million.
The maximum credit risk from derivatives is the fair value of the balance sheet at the
reporting date.
. Finance income and costs
€ million
Interest income and other finance income
Income on investments at amortised cost . .
Interest income on loans and receivables . .
Income on investments at fair value through profit or loss . .
Other finance income . .
Total interest income and other finance income . .
Interest expense and other finance costs
Interest expense on financial liabilities at amortised cost -. -.
Losses on investments at amortised cost . -.
Losses on investments at fair value through profit or loss -. -.
Other finance costs . -.
Total interest expense and other finance costs -. -.
Interest expense for lease liabilities -. -.
Exchange differences
Exchange differences and changes in fair values of derivatives,
borrowings denominated in foreign currencies not qualifying for
hedge accounting, and cash at bank -. -.
Total exchange differences -. -.
Total finance income and costs -. -.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Financial assets and liabilities by category
Accounting policies
Financial assets
The Group classifies financial assets into three groups in accordance with IFRS .
Financial assets are classified either as instruments measured at amortised cost, or as
instruments measured at fair value through profit or loss or in other comprehensive
income, depending on the business model targets and cash flows based on agreements.
Regular way purchases or sales of financial assets are recognised on settlement date.
Financial assets are classified as non-current, if they have a maturity of more than
months after the balance sheet date. If financial assets are expected to be settled within
months, they are classified as current.
Financial assets are derecognised when the rights to receive cash flows from the financial
asset have expired or have been transferred from the Group, and when the risks and
rewards of ownership have been transferred from the Group.
Financial assets at amortised cost and financial assets at fair value are only invested in
counterparties deemed creditworthy. The impairment model for expected credit losses
in line with the standard requires credit losses to be recognised with a forward-looking
approach. As for other financial assets, lacking historical credit losses, counterparty risk is
monitored actively and credit losses are recognised if risk is observed.
Financial assets at amortised cost
Financial assets at amortised cost consist of assets that are to be held to maturity and
whose cash flows consist solely of payments of principal and interest. Financial assets at
amortised cost also include trade receivables and other receivables.
Financial assets at fair value
Financial assets at fair value in other comprehensive income comprise derivatives that
meet the hedge accounting criteria. Financial assets that do not meet the criteria of the
other groups are classified as financial assets measured at fair value through profit or loss.
Level instruments are traded in active markets and their fair values are directly based
on quoted market prices. The fair values of level instruments are derived from market
data. The fair value of level instruments is not based on observable market data (inputs
notobservable).
Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits with banks as well as liquid
funds measured at amortised cost which are invested in instruments with maturities of less
than three months from acquisition. Investments in money market funds recognised at fair
value through profit or loss, for which liquidity is assessed as very good, are also classified
as cash and cash equivalents. Cash and cash equivalents also include amounts relating to
the retail operations of Group companies, used as cash floats in stores, or amounts being
transferred to the respective companies.
Financial liabilities
Financial liabilities have initially been recognised at fair value, net of transaction costs.
In the financial statements, financial liabilities are measured at amortised cost using
the effective interest rate method. Arrangement fees paid on the establishment of loan
facilities and financial liabilities are amortised over the period of the facility to which it
relates. Financial liabilities having maturities of more than months after the balance
sheet date are classified as non-current liabilities. Those maturing within months after
the balance sheet date are classified as current liabilities.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Derivative financial instruments and hedge accounting
When derivative contracts are entered into, they are recognised at fair value and in the
financial statements, they are re-measured at their fair value. The recognition of changes
in the fair value of derivatives depends on whether the derivative instrument qualifies for
hedge accounting or not and, if so, on the hedged item. When entered into, derivative
contracts are treated either as fair value hedges of receivables or liabilities, or in the
case of interest rate risk and electricity price risk, as cash flow hedges, as hedges of net
investments in a foreign entity, or as derivative contracts that do not meet the hedge
accounting criteria. If the hedge accounting criteria are not met, the results of instruments
hedging a commercial foreign exchange risk are recognised in profit or loss within other
operating income or expenses. Concerning derivatives hedging financial transactions, the
amount to be recognised in the income statement is included in financial items.
When a hedging arrangement is entered into, the relationship between the hedged item
and the hedging instrument, as well as the objectives of the Group's risk management
are documented. The effectiveness of the hedge relationship is tested regularly and the
effective portion is recognised, according to the nature of the hedged item, against the
change in the fair value of the hedged item, in translation differences in equity, or in the
revaluation reserve. The ineffective portion is recognised, according to its nature, either in
financial items or other operating income and expenses.
Hedge accounting is discontinued when the hedging instrument expires or is sold, or when
the contract is terminated or exercised. Any cumulative gain or loss existing in equity at
that time remains in equity until the forecast transaction has occurred.
Measurement principles
The fair value of forward rate agreements is determined by reference to the market prices
at the balance sheet date. The fair value of interest rate swaps is calculated on the basis
of the present value of future cash flows, using the market prices at the balance sheet
date. The fair value of foreign exchange forward contracts is determined by measuring
the forward contracts at the forward rate at the balance sheet date. Currency options are
measured using the counterparty's price quotation, but the Group also verifies the price
by applying the Black−Scholes method. Electricity derivatives are measured at fair value
using the market quotations at the balance sheet date.
Hedging a net investment in foreign operations
During the financial year, the Group has not hedged net investments in foreign operations.
If a hedge is initiated, the Group applies hedge accounting in accordance with IFRS to
hedge foreign currency net investments in foreign operations. Foreign exchange forward
contracts or foreign currency borrowings are used as hedging instruments. Spot price
changes in foreign exchange forward contracts are recognised in translation differences
under equity, and disclosed in other comprehensive income. The premiums of forward
contracts are recognised as income under financial items. The exchange difference of
foreign currency borrowings is recognised in translation differences under equity. When a
foreign operation is partially or wholly disposed of or wound up, cumulative gains or losses
from the hedging instruments are recognised in profit or loss.
Embedded derivatives
The Group has prepared method descriptions for identifying embedded derivatives and
applies fair value measurement to them. In Kesko Group, embedded derivatives can be
included in binding commercial contracts denominated in a currency which is not the
functional currency of either party and not commonly used in the economic environment
in which the transaction takes place. The fair value of embedded derivatives is determined
using the market prices at the measurement date and the change in fair value is
recognised in the income statement.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
As at December
Balance, € million
Fair value through
profit or loss Amortised cost
Fair value through
other comprehensive
income Carrying amount Fair value Level Level Level
Non-current financial assets
Other investments . . . .
Non-current receivables . . .
Non-current receivables, derivatives . . . .
Current financial assets
Trade receivables . . .
Other receivables . . .
Other receivables, derivatives . . . . .
Other financial assets . . . . .
Cash and cash equivalents . . . . .
Total financial assets . ,. . ,. ,. . .
Balance, € million
Fair value through
profit or loss Amortised cost
Fair value through
other comprehensive
income Carrying amount Fair value Level Level Level
Non-current financial liabilities
Non-current interest-bearing liabilities . . .
Non-current lease liabilities ,. ,. ,.
Non-current non-interest-bearing
liabilities . . .
Non-current non-interest-bearing
liabilities, derivatives . . . .
Current financial liabilities
Current interest-bearing liabilities . . .
Current lease liabilities . . .
Trade payables ,. ,. ,.
Other non-interest-bearing liabilities . . .
Other non-interest-bearing liabilities,
derivatives . . . . .
Total financial liabilities . ,. . ,. ,. .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
As at December
Balance, € million
Fair value through
profit or loss Amortised cost
Fair value through
other comprehensive
income Carrying amount Fair value Level Level Level
Non-current financial assets
Other investments . . . .
Non-current receivables . . .
Non-current receivables, derivatives . . . .
Current financial assets
Trade receivables . . .
Other receivables . . .
Other receivables, derivatives . . . . .
Other financial assets . . . . .
Cash and cash equivalents . . . . .
Total financial assets . ,. . ,. ,. . .
Balance, € million
Fair value through
profit or loss Amortised cost
Fair value through
other comprehensive
income Carrying amount Fair value Level Level Level
Non-current financial liabilities
Non-current interest-bearing liabilities . . .
Non-current lease liabilities ,. ,. ,.
Non-current non-interest-bearing
liabilities . . .
Non-current non-interest-bearing
liabilities, derivatives . . . .
Current financial liabilities
Current interest-bearing liabilities . . .
Current lease liabilities . . .
Trade payables ,. ,. ,.
Other non-interest-bearing liabilities . . .
Other non-interest-bearing liabilities,
derivatives . . . . .
Total financial liabilities . ,. . ,. ,. .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Non-current receivables from associates and joint ventures contain the shareholder loan
granted to Mercada Oy and the financing loans granted to UAB Kesko Senukai.
Deferred tax assets, income tax receivables, deferred tax liabilities and income tax liabilities
are not classified as financial assets or financial liabilities and are not included in the table
above. Prepayments received of €. million (€. million) are not classified as financial
liabilities and are not included in other non-interest-bearing liabilities in the table above.
The fair values of borrowings have been calculated based on the present value of future
cash flows using the .%−.% market rates of interest of the balance sheet date. The fair
value of current interest-bearing liabilities has been estimated to approximately equal their
balance sheet value. The maturity structure of non-current borrowings has been presented in
Note..
Changes in level instruments
€ million
Private equity funds and other shares and interests
as at January . .
Purchases . .
Refunds received -. -
Gains and losses through profit or loss -. -.
Changes in fair value -. .
Private equity funds and other shares and interests
as at December . .
Level includes private equity funds and other shares and interests. These investments have
been classified as financial assets at fair value through profit or loss. Level financial assets
are measured based on computations received from the companies. A loss of €. million
has been recorded on these investments for the financial year .
. Contingent liabilities
€ million
Collateral given for own commitments
Pledges . .
Mortgages . .
Guarantees . .
Other commitments and contingent liabilities . .
The guarantees given do not include guarantees related to the items presented within
liabilities in the consolidated statement of financial position or as a lease liability in Note ..
The guarantee maturities are €. million in and €. million in −.
Leases not commenced yet but to which the Group is committed at the balance sheet date
December are presented in Note ..
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
IN THIS SECTION
. Group composition
. Subsidiaries, associates, joint ventures and proportionately
consolidated mutual real estate companies
. Related party transactions
. Share-based compensation
. Legal disputes and possible legal proceedings
. Events after the balance sheet date
Notes to the consolidated financial statements
. OTHER
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Group composition
Group composition
Kesko Group had () subsidiaries on December . The Group has the majority
of voting rights in all companies. Consolidation principles are described in Note .. Kesko
Senukai was consolidated as a subsidiary in the consolidated financial statements up until
June ; as of July , it has been consolidated as a joint venture. The change
in consolidation method, the grounds for the change and the financial impacts have been
detailed in Note ..
Information about the Group composition as at the balance sheet date:
Division
Country of
incorporation
Most significant
subsidiaries
Number of
wholly-owned
subsidiaries
Number of
wholly-owned
subsidiaries
Number of
partly-owned
subsidiaries
Number of
partly-owned
subsidiaries
Grocery trade Finland K-Market Oy
Building and technical
trade
Finland, Sweden,
Norway, Estonia,
Latvia, Lithuania,
Poland
Onninen Group,
Byggmakker Group,
Kesko AB,
K-Bygg Group" - -
Car trade Finland K-Auto Oy - -
Others Finland - -
In addition, the Group has partly owned mutual real estate companies. The Group's
subsidiaries, equity-accounted investments and mutual real estate companies consolidated
using the proportionate method are listed in Note ..
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Owned by the parent Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
Kiinteistö Oy Sunan Hallitalo Helsinki, Finland . .
Kiinteistö Oy Tarkkaiikka Oulu, Finland . .
Kiinteistö Oy Voisalmen Liiketalo Helsinki, Finland . .
Klintcenter Ab Mariehamn, Åland . .
K-Market Oy Helsinki, Finland . .
Konekesko Oy Helsinki, Finland . .
Koskelan Ostokeskus Oy Oulu, Finland . .
Onninen Oy Helsinki, Finland . .
Rake Eiendom AS Oppegård, Norway . .
Reinin Liha Oy Helsinki, Finland . .
Tampereen Länsikeskus Oy Tampere, Finland . .
Vaajakosken Liikekeskus Oy Jyväskylä, Finland . .
Owned by other Group companies Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
Arn Eiendom AS Vefsn, Norway .
Oy Autocarrera Ab Helsinki, Finland .
Autocarrera Autotalot Oy Helsinki, Finland .
Byggarnas Partner Sverige AB Segeltorp, Sweden .
Bygg & Interiör i Katrineholm AB Katrineholm, Sweden .
Bygg & Interiör i Flen AB Flen, Sweden .
Bygg & Interiör i Vingåker AB Vingåker, Sweden .
Byggmakker CF AS Sandefjord, Norway .
Byggmakker Mosjøen AS Vefsn, Norway .
Fresks Försäljning AB Östersund, Sweden .
Hasti-Ari AS Oppegård, Norway .
K Auto Leasing Oy Helsinki, Finland .
K Auto Retail Oy Helsinki, Finland .
K Bygg Östergyllen AB Linköping, Sweden .
Kesko Onninen International Trading Co., Ltd Shanghai, China .
K rauta SIA Riga, Latvia .
Kestra Kiinteistöpalvelut Oy Helsinki, Finland .
Kiinteistö Oy Kokkolan Kaanaanmaantie - Kokkola, Finland .
. Subsidiaries, associates, joint ventures and proportionately
consolidated mutual real estate companies
Subsidiaries
Owned by the parent Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
Ankkuri-Energia Oy Helsinki, Finland . .
Asunto Oy Kirkkonummen Västeruddintie Kirkkonummi, Finland . .
Barker-Littoinen Oy Espoo, Finland . .
Byggmakker Handel AS Oppegård, Norway . .
Fiesta Real Estate AS Tallinn, Estonia . .
Hehku Kauppa Oy Espoo, Finland . .
Intersport Finland Oy Helsinki, Finland . .
Kalatukku E. Eriksson Oy Helsinki, Finland . .
K Auto Oy Helsinki, Finland . .
Kenkäkesko Oy Helsinki, Finland . .
Keskinäinen Kiinteistö Oy Malmin Kankirauta Helsinki, Finland . .
Keskinäinen Kiinteistö Oy Voisalmentie
Lappeenranta Helsinki, Finland . .
Kesko AB Stockholm, Sweden . .
Kesko Export Oy Helsinki, Finland . .
Kesko Real Estate Latvia SIA Riga, Latvia . .
Kiinteistö Oy Haminan Sibeliuskatu Helsinki, Finland . .
Kiinteistö Oy Helsingin Itäkeskus Helsinki, Finland . .
Kiinteistö Oy Hiukkavaaran Kauppa Oulu, Finland . .
Kiinteistö Oy Kittilän Valtatie - Helsinki, Finland . .
Kiinteistö Oy Lappeenrannan Oksasenkatu Helsinki, Finland . .
Kiinteistö Oy Lappeenrannan Rakuunaparkki
Lappeenranta,
Finland . .
Kiinteistö Oy Liike-Jaako Rovaniemi, Finland . .
Kiinteistö Oy Lohjan Ojamonharjuntie Helsinki, Finland . .
Kiinteistö Oy Pontsonkulma Helsinki, Finland . .
Kiinteistö Oy Riistaveden Keskustie Helsinki, Finland . .
Kiinteistö Oy Sarviniitynkatu Kerava, Finland . .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Associates and joint ventures
Associates and joint ventures are consolidated using the equity method.
Owned by the parent Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
Graanin Liikekeskus Oy Mikkeli, Finland . .
Kesko Senukai Lithuania UAB Vilnius, Lithuania . .
Kiinteistö Oy Itäaukio Lahti, Finland . .
Kiinteistö Oy Janakkalan Linnatuuli Janakkala, Finland . .
Kiinteistö Oy Joensuun Kaupunginportti Joensuu, Finland . .
Mercada Oy Helsinki, Finland . .
Vähittäiskaupan Takaus Oy Helsinki, Finland . .
Vähittäiskaupan Tilipalvelu VTP Oy Helsinki, Finland . .
Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
Owned by other Group companies
EDISON Data AS Oslo, Norway .
Proffsenteret AS Ringerike, Norway .
KS Holding UAB Vilnius, Lithuania .
Owned by joint ventures
A Grupa SIA Riga, Latvia .
A.EE Oü Tallinn, Estonia .
A.LT Vilnius, Lithuania .
Daugavpils project SIA Daugavpils, Latvia .
Delta turtas UAB Vilnius, Lithuania .
Inovatyvus prekybos sprendimai UAB Vilnius, Lithuania .
Kesko Senukai Digital UAB Vilnius, Lithuania .
Kesko Senukai Estonia AS Tallinn, Estonia .
Kesko Senukai Latvia AS Riga, Latvia .
Ksenukai Digital Oü Tallinn, Estonia .
Mobilukss SIA Riga, Latvia .
Nomine UAB Vilnius, Lithuania .
Owned by other Group companies Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
Kiinteistö Oy Piispansilta Espoo, Finland .
Kiinteistö Oy Vantaan Kiitoradantie Vantaa, Finland .
Kiinteistö Oy Vantaan Simonsampo Vantaa, Finland .
Kiinteistö Oy Visuveden Liiketalo Ruovesi, Finland .
KR Fastigheter i Järfälla AB Sollentuna, Sweden .
KR Fastigheter i Linköping AB Sollentuna, Sweden .
KR Fastigheter i Täby AB Sollentuna, Sweden .
K-rauta Fastigheter i Malmö AB Sollentuna, Sweden .
K-Rauta Holding Finland Oy Helsinki, Finland .
Mark & Infra i Sverige AB Täby, Sweden .
Mežciems Real Estate SIA Riga, Latvia .
Olarin Autokiinteistö Oy Espoo, Finland .
Onninen AS Skedsmo, Norway .
Onninen AS Tallinn, Estonia .
Onninen LLP Aktau, Kazakhstan .
Onninen Russia Holding Oy Helsinki, Finland .
Onninen SIA Riga, Latvia .
Onninen Sp. z o.o. Warsaw, Poland .
Onninen UAB Vilnius, Lithuania .
Peltosaaren Liikekeskus Oy Riihimäki, Finland .
Profelco Oy Vantaa, Finland .
Rake Bergen AS Oppegård, Norway .
Sørbø AS
Skedsmokorset,
Norway .
Tau & Jørpeland Eiendom Jørpeland, Norway .
TM Christensen VVS Detaljer AS Oslo, Norway .
Trøgstadveien AS Oppegård, Norway .
Övik Låsteknik AB Örnsköldsvik, Sweden .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Related party transactions
The Group's related parties include its management (the Board of Directors, President and CEO
and the Group Management Board) and the companies controlled by them, their family members
and companies controlled by the family members, Kesko’s subsidiaries, associates and joint
ventures, and Kesko Pension Fund. The subsidiaries, associates and joint ventures are listed in a
separate note (Note .).
The related party transactions disclosed consist of such transactions carried out with related
parties that are not eliminated in the consolidated financial statements.
Some members of the Kesko Board are K-retailers. The Group companies sell goods and services
to companies controlled by them. Goods and services have been sold to and purchased from
related parties on normal market terms and conditions and at market prices.
Kesko reports Kesko Senukai Group, which is part of Kesko’s building and technical trade
segment and operates in the Baltic countries and Belarus, as a joint venture using the equity
method as of July . Transactions involving Kesko Senukai Group companies have been
reported as related party transactions as of July , as Kesko Senukai has been reported as
a joint venture.
The associated company consolidated using the equity method, Mercada Oy, owns properties
which have been leased for use by the Group. Vähittäiskaupan Takaus Oy and Vähittäiskaupan
Tilipalvelu Oy sell their services to Kesko’s and K-retailers’ retail companies. The other associates
mainly comprise business property companies which have leased their properties for use by
Kesko Group. Associates that operate as mutual real estate companies have been consolidated in
the financial statements in proportion to their ownership interests.
Kesko Pension Fund is a stand-alone legal entity which manages the majority of the pension
assets related to the voluntary pensions of the Group’s employees in Finland. At the end of
or , the pension assets did not include Kesko Corporation shares. Properties owned by
Pension Fund have been leased to Kesko Group.
Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
OMA OOO Minsk, Belarus .
Penktoji Projekto Bendrové UAB Vilnius, Lithuania .
Punane Project Oü Tallinn, Estonia .
Romos Holdingas UAB Kaunas, Lithuania .
Senukai UAB Kaunas, Lithuania .
Senuku Tirdzniecibas Centrs SIA Riga, Latvia .
SPC Holding UAB Kaunas, Lithuania .
Proportionately consolidated mutual real estate companies
Owned by the parent and others Domicile
Group's
ownership
interest, %
Parent's
ownership
interest, %
Asunto Oy Harjutie Espoo, Finland . .
Asunto Oy Kajaanin Louhikatu Kajaani, Finland . .
Asunto Oy Soukan Itäinentorni Espoo, Finland . .
Asunto-Oy Punkalaitumen Pankkitalo
Punkalaidun,
Finland .
Itäkeskuksen Pysäköintitalo Oy Helsinki, Finland . .
Kiinteistö Oy Lahden Lyhytkatu Lahti, Finland . .
Kiinteistö Oy Lukonmäen Palvelukeskus Tampere, Finland .
Kiinteistö Oy Ulvilan Hansa Ulvila, Finland . .
Kiinteistö Oy Vantaanportin Liikekeskus Vantaa, Finland . .
Lapin Tehdastalo Oy Tampere, Finland . .
Munkkivuoren Ostoskeskus Oy Helsinki, Finland . .
Raksilan Paikoitus Oy Oulu, Finland . .
Talo Oy Kalevanpuisto Kuopio, Finland . .
Voisalmen Ostoskeskus Oy
Lappeenranta,
Finland .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
At the balance sheet date, receivables arisen from Kesko's sales to companies controlled
by the Board members were €. million (€. million). The receivables are collateralised
by a commercial credit granted by Vähittäiskaupan Takaus Oy, a Kesko associate, with the
maximum amount always limited to the maximum realisable value of the countersecurity
from the K-retailer company and entrepreneur to Vähittäiskaupan Takaus. At the end of the
financial year, the countersecurity was valued at €. million (€. million).
Non-current receivables from associates and joint ventures contain the shareholder loan
granted to Mercada Oy and the financing loans granted to UAB Kesko Senukai. Current
receivables contain €. million of the current portion of these loans. Other current liabilities
include, for example, chain rebate payables to companies controlled by the Kesko Board
members. Chain rebates are paid retrospectively based on criteria related to the amount of
actual annual purchases and the quality of operations.
During the financial year Kesko Corporation sold the entire capital stock of one real
estate company and , shares in Vähittäiskaupan Takaus Oy to Kesko Pension Fund. The
combined transaction price totalled €. million, based on the fair value of the assets sold.
During the financial year , Kesko Pension Fund paid in total €. million in return of
surplus assets to Finnish Group companies.
During the financial years and , Kesko Group did not pay contributions to
PensionFund.
The following transactions were carried out with related parties:
Income statement
Associates and
joint ventures
Board and
management Pension Fund
€ million
Sales of goods . . . .
Sales of services . . . . . .
Purchases of goods -. -. -. -.
Purchases of services -. -. . . -.
Other operating income . . . . .
Other operating costs -. -. -. -. . -.
Finance income . .
Finance expenses -. -.
Balance sheet
Associates and
joint ventures
Board and
management Pension Fund
€ million
Current receivables . . . . . .
Non-current receivables . .
Current liabilities . . . . . .
Non-current liabilities . .
Items related to leases
Associates and
joint ventures
Board and
management Pension Fund
€ million
Cash flow from leases -. -. -. -. -. -.
Lease liabilities . . . . .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
President and CEO's supplementary pension will be based on a defined contribution plan
as of July . The cost of the defined benefit supplementary pension for the period,
calculated on an accrual basis, was €. million (€. million) and the related pension asset in
the balance sheet was €. million (€. million). The
pension cost of the President and CEO's
statutory pension provision was €. million (€. million).
Share awards
During the reporting period, members of the Group Management Board were granted ,
shares based on PSP –, while the maximum number of shares to be granted was ,.
The number of shares represents gross earnings, from which withholding tax is deducted. During
the reporting period , shares were granted based on PSP –. The number
of shares is determined based on the number of shares after the share issue without payment (share
split) following the resolution of the April Annual General Meeting. The
number of shares
represents gross earnings, from which withholding tax is deducted.
Termination benefits
If the service contract of the President and CEO or some other Group Management Board
member is terminated by the Company, they are entitled to a monetary salary and fringe
benefits for the period of notice and a separate non-recurring termination compensation
determined on the basis of the executive's monetary salary and fringe benefits for the month of
notice. The termination compensation is not part of the executive's salary and it is not included
in the determination of the salary for the period of notice, termination compensation or, in case
of retirement, pensionable salary. If an executive resigns, they are only entitled to a salary for the
period of notice and fringe benefits. When a service relationship terminates due to retirement,
the executive is paid a pension based on their service contract without other compensations.
Shareholdings
At December , the President and CEO held , Kesko Corporation A shares and
, Kesko Corporation B shares, which represented .% of the total number of shares
and .% of votes carried by all shares of the Company. At December , the Group
Management Board, including the President and CEO, held , Kesko Corporation A shares
and , Kesko Corporation B shares, which represented .% of the total number of
shares and .% of votes carried by all shares of the Company.
Management's employee benefits
The top management comprises the Board of Directors and the Group Management Board.
The compensation paid to them for their employee services consists of the following items:
Monetary salaries, fees, fringe benefits and share-based
compensation
€,
Mikko Helander President and CEO ,. ,.
Group Management
Board other members ,. ,.
Esa Kiiskinen Board Chair . .
Jannica Fagerholm Board member . .
Peter Fagernäs Board Deputy Chair . .
Piia Karhu Board member . .
Jussi Perälä Board member (as of April ) . -
Toni Pokela Board member . .
Timo Ritakallio Board member (as of April ) . -
Matti Kyytsönen Board member (until April ) . .
Matti Naumanen Board member (until April ) . .
Total ,. ,.
Approximately % of the annual fees for Board members was paid in shares in the Company
and the remaining fee amount was paid in cash. The members of the Board of Directors were
granted , Kesko Corporation B shares in .
Retirement benefits
The statutory pension provision for the President and CEO and other members of the Group
Management Board is provided through a pension insurance company. Three Group Management
Board members are provided with a supplementary pension based on a defined benefit plan in line
with the rules of Kesko Pension Fund and personal service contracts. Five Group Management
Board members are provided with a defined contribution supplementary pension. President
and CEO Mikko Helander's old-age pension based on a defined benefit plan accrues until
June . The amount of the defined benefit based old-age pension is % of the pensionable
earnings for the final years in accordance with the Employees' Pensions Act (TyEL).
The
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Share-based commitment and incentive scheme
Kesko’s long-term share-based commitment and incentive scheme consists of four share-based
compensation plans, under which the Board can annually decide on the initiation of new share
plans. The primary plan, the Performance Share Plan (PSP), consists of annually commencing
individual share plans, each with a two-year performance period and a two-year commitment
period following the potential payment of a share award, during which the shares must not be
pledged or transferred, but the other rights attached to the shares remain in force. If a person's
employment or service relationship terminates prior to the expiry of a commitment period, the
person must, as a rule, return the shares under transfer restriction to Kesko or its designate
for no consideration. Kesko Group's tax free sales (%), Kesko Group's comparable return on
capital employed (ROCE,%) and the absolute total shareholder return (TSR, %) of a Kesko B
share are the performance criteria for the PSPs initiated between -. The recipient
of the shares is free to use them once the commitment period of the share plan ends, provided
that the person is still employed by Kesko Group. The number of shares granted based on
the share-based compensation plan represents gross earnings, from which the applicable
withholding tax is deducted and the remaining net amount is paid to the participants in shares.
Kesko Corporation’s Board decides annually whether to initiate a new plan.
The PSP was complemented with a new Key Personnel Share Plan (KPSP) decided upon by
the Board in . The KPSP is targeted at specific key persons at Kesko. The KPSP has a
one-year performance period followed by a two-year commitment period. The performance
criteria for the plan comprise indicators related to Kesko’s profitability and the profitability,
growth and capital efficiency of the participant’s area of responsibility, and Kesko’s share
performance. The shares are paid to the recipients after the commitment period. This
number of shares represents gross earnings, from which the applicable withholding tax is
deducted and the remaining net amount is paid to the participants in shares
The one-off transitional Bridge Plan for had a one-year performance period ( Jan.
– Dec. ) followed by a three-year commitment period ( Jan. –
Feb. ). Apart from that, the rules of the plan are the same as for the PSP. The Bridge
Plan aimed at covering the transitional phase from Kesko's previous long-term commitment
and incentive scheme, which was based on one-year performance periods, to the new
. Share-based compensation
Accounting policies
The costs relating to share-based payments are recorded in the income statement and
the corresponding liability for share-based payments settled in cash is recognised in
the balance sheet. The liability in the balance sheet is measured at fair value at each
balance sheet date. For equity-settled share-based payment transactions, an increase
corresponding to the expensed amount is recorded in equity.
The Company's Board of Directors has granted a share-based compensation plan to
management under which an award consisting of B series shares and an amount in cash is
paid upon fulfilling the plan’s terms. The fair value of the award paid in shares is the value
of the share at the grant date and it is recognised as an expense on a straight-line basis
over the vesting and commitment period of the plan. The expensed amount is based on the
Group's estimate of the amount of award payable in shares at the end of the vesting period.
The effects of non-market conditions are not included in the fair value of the awards.
Instead, they are accounted for in the assumptions of the number of shares expected to
vest at the end of the vesting period. A cash component is paid to cover the taxes and tax-
like charges incurred under the award. The cash component is recognised as an expense
during the vesting period. Changes in estimates are recorded in the income statement.
Following the change in IFRS Share-based Payment, effective as of January , the
Group has reclassified the cash-settled portions of its share-based compensation schemes
as equity-settled share-based payments. As a result of the change, such cash-settled
share-based payments for which the employer shall deduct, on behalf of the employee,
from the share award such number of shares which covers taxes and tax-like charges paid
in cash, shall be classified in their entirety as equity-settled share-based payments. The
change concerns the following share plans: the PSP, the Bridge Plan, and the
RSP, as well as share plans initiated after January .
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
commitment and incentive scheme adopted in with two-year performance periods.
RSP (Restricted Share Pool) is a secondary share plan for special situations, to be decided
upon separately. The plan consists of annually commencing individual share plans that each
have a three-year commitment period, after which the potentially promised share awards for
an individual plan will be paid to the participants, provided that their employment or service
relationship with Kesko Group continues until the payment of the awards.
The purpose of the share-based compensation schemes is to promote Kesko's business
and increase the Company's value by aligning the objectives of the shareholders and
executives. The schemes also aim to commit the grantees to Kesko Group and give them the
opportunity to receive Company shares upon fulfilling the objectives set in the share-based
compensationplan.
The impact of the share-based compensation plans on the Group's profit for was €-.
million (€-. million).
As at December , the amount to be recognised as expense for the financial years
− is estimated at a total of €. million. The actual amount may differ from
theestimate.
The assumptions used in accounting for the share-based compensation plan are presented in
the following tables.
Share award grant dates and fair values:
PSP, KPSP and RSP PSP KPSP RSP PSP KPSP RSP
Grant dates .. .. .. .. .. ..
Grant date fair value of share award, € . . . . . .
Share price at grant date, € . . . . . .
Share-based compensation plan duration
Performance period start date .. .. - .. .. -
Performance period end date .. .. - .. .. -
Commitment period start date .. .. .. .. .. ..
Commitment period end date .. .. .. .. .. ..
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
Share award grant dates and fair values:
PSP, RSP and Bridge plan PSP RSP PSP RSP PSP RSP
Bridge plan
Grant dates .. .. .. .. .. .. ..
Grant date fair value of share award, € . . . . . . .
Share price at grant date, € . . . . . . .
Share-based compensation plan duration
Performance period start date .. - .. - .. - ..
Performance period end date .. - .. - .. - ..
Commitment period start date .. .. .. .. .. .. ..
Commitment period end date .. .. .. .. .. .. ..
Assumptions applied in determining the fair value of share award:
PSP, KPSP, RSP, Bridge plan*
Performance
periods
-
PSP and RSP
Performance
period
KPSP
Performance
period
-
PSP and RSP
Performance
period
KPSP
Performance
period
-
PSP and RSP
Performance
period
-
PSP and RSP
Performance
period
-
PSP
Performance
period
Bridge plan
Number of share awards granted, maximum, pcs** , , , , ,, ,, ,, ,,
Changes in the number of shares granted, pcs -, -, -, -, -, -, -, -,
Actual amount of share award, pcs** , , , , ,
Number of plan participants at end of financial year
Share price at balance sheet date, € . . . . . . . .
Assumed fulfilment of performance criteria, % . . . . . . .
Estimated number of share awards returned prior to the end of
commitment period, % . . . . . . . .
* The Annual General Meeting of Kesko Corporation on April decided on a share issue without payment in which three () new A shares were issued for each existing A share, and three () new B shares each existing B share. The share
numbers and prices are presented with the post-split (share issue without payment) number of shares. Share numbers for the pre- plans have been adjusted to correspond to the post-split number of shares.
**Gross number of shares from which the applicable withholding tax is deducted and the remaining net amount is paid in shares.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
. Legal disputes and possible legal proceedings
Group companies act as plaintiffs, defendants or parties to certain legal proceedings,
disputes or investigations related to the Group’s business operations. Although according to
Kesko’s management's estimate, the outcome of pending disputes and legal and authority
proceedings is unlikely to have any material impact on the Group's financial position, the
outcome of disputes and legal and authority proceedings is difficult to predict.
Investigation by the Finnish Competition and Consumer Authority regarding Onninen Oy –
The Finnish Competition and Consumer Authority has a pending investigation concerning a
suspected infringement of competition rules by Onninen Oy. Onninen Oy was informed of
the investigation in . Kesko acquired the entire capital stock of Onninen Oy on June
. The investigation and the potential related risks are addressed in the acquisition terms
and conditions. The Finnish Competition and Consumer Authority has stated it is preparing
a proposal for penalty payment. Onninen Oy has denied claims concerning a suspected
infringement of competition rules.
Legal proceedings concerning UAB Kesko Senukai Lithuania – Kesko is party to two legal
proceedings concerning the shareholder agreement of Kesko’s joint venture UAB Kesko
Senukai Lithuania and the disagreements concerning the management and development
of the company and its subsidiary. The other parties to these legal proceedings include the
minority shareholders of UAB Kesko Senukai Lithuania.
. Events after the balance sheet date
No significant events after the balance sheet date.
THE REPORT BY THE BOARD OF DIRECTORS
SIGNATURESPARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS (FAS)
Parent company's income statement
€ Jan.– Dec. Jan.– Dec.
Net sales ,,,. ,,,.
Other operating income ,,. ,,.
Materials and services -,,,. -,,,.
Change in inventory ,,. ,,.
Employee benefit expenses -,,. -,,.
Depreciation, amortisation and impairment -,,. -,,.
Other operating expenses -,,. -,,.
Operating profit ,,. ,,.
Finance income and costs ,,. ,,.
Profit before appropriations and taxes ,,. ,,.
Appropriations
Change in depreciation reserve -,,. -,,.
Group contribution ,,. -,,.
Profit before taxes ,,. ,,.
Income taxes -,,. -,,.
Profit for the financial year ,,. ,,.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Parent company's balance sheet
€ Dec. Dec.
ASSETS
NON-CURRENT ASSETS
INTANGIBLE ASSETS
Intangible rights ,,. ,,.
Other intangible assets ,,. ,,.
Prepayments ,,. ,,.
,,. ,,.
PROPERTY, PLANT AND EQUIPMENT
Land and waters
Owned ,,. ,,.
Leasehold interests and connection fees ,,. ,,.
Buildings
Owned ,,. ,,.
Machinery and equipment ,,. ,,.
Other tangible assets ,,. ,,.
Prepayments and construction in progress ,,. ,,.
,,. ,,.
INVESTMENTS
Investments in subsidiaries ,,,. ,,,.
Investments in associates ,,. ,,.
Other investments ,,. ,,.
,,,. ,,,.
CURRENT ASSETS
INVENTORIES
Finished products/goods ,,. ,,.
,,. ,,.
€ Dec. Dec.
RECEIVABLES
Long-term
Receivables from subsidiaries ,,. ,,.
Receivables from associates ,,. ,,.
Loan receivables ,. -
Other receivables ,,. ,,.
,,. ,,.
Short-term
Trade receivables ,,. ,,.
Receivables from subsidiaries ,,. ,,.
Receivables from associates ,,. ,,.
Loan receivables ,. ,.
Other receivables ,,. ,,.
Prepayments and accrued income ,,. ,,.
,,. ,,.
OTHER FINANCIAL ASSETS ,,. ,,.
CASH AND CASH EQUIVALENTS ,,. ,,.
TOTAL ASSETS ,,,. ,,,.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
€ Dec. Dec.
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Share capital ,,. ,,.
Share premium ,,. ,,.
Reserve of invested non-restricted equity ,,. ,,.
Other reserves ,,. ,,.
Retained earnings ,,. ,,.
Profit for the financial year ,,. ,,.
,,,. ,,,.
APPROPRIATIONS
Depreciation reserve ,,. ,,.
PROVISIONS
Other provisions ,,. ,,.
LIABILITIES
Non-current
Loans from financial institutes ,,. ,,.
Pension loans ,,. ,,.
Other creditors ,,. ,,.
,,. ,,.
Current
Pension loans ,,. ,,.
Advances received ,,. ,,.
Trade payables ,,. ,,.
Payables to subsidiaries ,,. ,,.
Payables to associates ,,. ,,.
Other payables ,,. ,,.
Accruals and deferred income ,,. ,,.
,,,. ,,,.
TOTAL LIABILITIES ,,,. ,,,.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Parent company's cash flow statement
€ Jan.– Dec. Jan.– Dec.
Cash flows from operating activities
Profit before appropriations ,,. ,,.
Adjustments
Depreciation according to plan ,,. ,,.
Finance income and costs -,,. -,,.
Other adjustments ,,. -,,.
,,. ,,.
Change in working capital
Current non-interest-bearing receivables,
increase (-)/decrease (+) -,,. -,,.
Inventories increase (-)/decrease (+) -,,. -,,.
Current non-interest-bearing liabilities,
increase (+)/decrease (-) ,,. ,,.
,,. ,,.
Interests paid and other finance costs -,,. -,,.
Interests received ,,. ,,.
Dividends received ,,. ,,.
Income tax paid -,,. -,,.
-,,. -,,.
Net cash generated from operating activities ,,. ,,.
Cash flows from investing activities
Purchases of property, plant, equipment
and intangible assets -,,. -,,.
Acquisitions of subsidiaries - -,,.
Sales of subsidiaries, net of cash ,,. ,.
Acquisitions of associates -,. -,.
Proceeds from equity accounted investments - ,,.
Proceeds from other investments ,. -
Proceeds from disposal of property, plant,
equipment and intangible assets ,,. ,,.
Long-term receivables, increase (-)/decrease (+) ,,. ,,.
Other financial assets, increase (-)/decrease (+) -,,. ,,.
Net cash used in investing activities -,,. -,,.
€ Jan.– Dec. Jan.– Dec.
Cash flows from financing activities
Interest-bearing liabilities, increase (+)/decrease (-) -,,. ,,.
Short-term interest-bearing receivables,
increase (-)/decrease (+) ,,. -,,.
Dividends paid -,,. -,,.
Group contributions received and paid ,,. -,,.
Other items -,. -,,.
Net cash used in financing activities -,,. -,,.
Change in cash and cash equivalents ,,. ,,.
Cash and cash equivalents as at Jan. ,,. ,,.
Cash and cash equivalents transferred in
connection with dissolution - ,.
Impairment of financial assets at fair value through
profit or loss -,. -,.
Cash and cash equivalents as at Dec. ,,. ,,.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Notes to the parent company's financial statements
Note . Principles used for preparing the financial statements
Kesko Corporation's financial statements have been prepared in compliance with the Finnish
Accounting Standards (FAS).
Non-current assets
Intangible assets
Intangible assets are stated in the balance sheet at cost less depreciation according to plan
and possible amortisations.
Depreciation plan
Other capitalised expenditure − years
IT software and licences − years
Property, plant and equipment
Property, plant and equipment are stated in the balance sheet at cost less depreciation
according to plan and possible amortisations.
Depreciation plan
Depreciation according to plan is calculated on a straight line basis so as to write off the cost
of property, plant and equipment over their estimated useful lives.
The most common estimated useful lives are:
Buildings − years
Fixtures and fittings years
Machinery and equipment % reducing balance method
Transportation fleet years
IT equipment – years
Other tangible assets − years
Leasehold interests are depreciated during their likely lease period. Land and connection
fees have not been depreciated. The total of depreciation according to plan and the change
in depreciation reserve comply with the Finnish Business Tax Act. The change in depreciation
reserve has been treated as appropriations.
Valuation of inventories
Inventories are stated, using the moving-average cost method, at lower of direct purchase
cost, replacement cost and probable selling price.
Valuation of financial assets
Marketable securities have been valued at the lower of cost and net realisable value.
Foreign currency items
Foreign currency transactions have been recorded in euros using the rate of exchange at the
date of transaction. Foreign currency receivables and payables have been translated into
euros using the rate of exchange at the balance sheet date. If a receivable or a payable is tied
to a fixed rate of exchange, it has been used for translation. Exchange rate differences have
been recognised in profit or loss.
Derivative contracts
Interest rate derivatives
Interest rate derivatives are used to modify the durations of borrowings. The target duration
is three years and it is allowed to vary between one and a half and four years. Cash flows
arising from interest rate derivatives are recognised during the financial year as interest
income or expenses, according to the maturity date. In the financial statements, outstanding
interest rate forward contracts, interest rate future contracts, interest rate option contracts
and interest rate swap contracts are stated at fair value, but unrealised revaluation is not
stated as income. Any valuation losses are included in interest expenses.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Foreign currency derivatives
Foreign currency derivatives are used for hedging against translation and transaction risks.
Foreign currency derivatives are used for hedging against commercial foreign exchange
risk. Foreign exchange forward contracts are valued using the forward exchange rate of the
balance sheet date. The exchange differences arising from outstanding derivative contracts
are reported in financial items and adjustment items of sales and purchases. If a derivative
has been used for hedging a foreign-currency-denominated asset, the change in value
has been recognised against that of the asset item. The premiums of option contracts are
included in the balance sheet accruals until they expire, or if a value change at the balance
sheet date so requires, recognition in profit or loss.
Commodity derivatives
Ankkuri-Energia Oy, a Kesko Corporation subsidiary, uses electricity derivatives to balance
the energy costs of the Group and its retailers. Kesko Corporation is an external counterparty
in electricity derivatives with a bank, and enters into corresponding internal hedge with
Ankkuri-Energia Oy. At no stage does Kesko Corporation have derivative positions, and thus
there are no effects on profit or loss. The electricity price risk is reviewed on a -year time
span. With respect to derivatives hedging the price of electricity supplied during the financial
year, change in fair value is recognised at Kesko under finance income and cost. Unrealised
gains and losses on contracts hedging future purchases are not recognised in profit or loss.
Pension plans
Personnel's statutory pension provision is organised through pension insurance companies
and the voluntary supplementary pension provision is mainly organised through Kesko
Pension Fund. Pension costs are recognised as expense in the income statement.
Provisions
Provisions stated in the balance sheet include items committed to under agreements or
otherwise but not yet realised. Changes in provisions are included in the income statement.
Rent liabilities for vacant rented premises no longer used for the Group's business
operations, as well as losses resulting from renting the premises to third parties, are included
in provisions.
Income tax
Income tax includes the income tax payments for the period calculated based on the profit for
the period, and taxes payable for prior periods, or tax refunds. Deferred taxes are not included
in the parent company's income statement and balance sheet.
Change in accounting policy
The classification of cash and cash equivalents in Kesko Corporation's consolidated statement of
financial position and consolidated statement of cash flows has been changed. Some of the assets
previously reported in Kesko Corporation's consolidated statement of financial position under
current assets on line "Financial assets at fair value through profit or loss" are now classified in the
consolidated statement of financial position and the consolidated statement of cash flows on line
”Cash and cash equivalents”. On December , the reclassified assets totalled €. million.
The cash and cash equivalents subject to reclassification are investments in money market funds
with an investment horizon of less than three months. The Group makes short-term investments with
extra liquidity in money market funds as an alternative to bank deposits. The risk profile of these fund
investments is very low, and in terms of liquidity and return, they correspond to bank deposits.
Following the reclassification, presentation of those financial assets at fair value through
profit or loss that are not classified as cash and cash equivalents in the new classification was
changed in the consolidated statements of cash flows so that the changes in those financial
instruments are presented under cash flows from investing activities instead of cash flows
from financing activities. The reclassification had a €+. million impact on cash flow from
investing activities and a €+ . million impact on cash flow from financing activities in the
comparison period statement of cash flows.
Notes to the income statement
Note . Net sales by division
€ million
Grocery trade ,. ,.
Building and home improvement trade ,. .
Others . .
Total ,. ,.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Note . Material and services
€ million
Material and services -,. -,.
Change in inventory . .
External services -. -.
Total -,. -,.
Note . Other operating income
€ million
Gains on sales of real estate and shares . .
Rent income . .
Fees for services . .
Profits from mergers . .
Others . .
Total . .
Note . Employee benefit expenses
€ million
Salaries and fees -. -.
Social security costs
Pension costs -. -.
Other social security costs -. -.
Total -. -.
The pension costs of Kesko include a €. million return of surplus assets by Kesko
Pension Fund.
The average number of personnel at Kesko Corporation was , (,) people.
Salaries and fees to the management
€ million
Managing Director . .
Members of the Board of Directors . .
Total . .
An analysis of the management's salaries and fees is included in the notes to the
consolidated financial statements.
Note . Depreciation, amortisation and impairment
€ million
Depreciation according to plan -. -.
Impairment, non-current assets -. -.
Total -. -.
Note . Other operating expenses
€ million
Rent expenses -. -.
Marketing expenses -. -.
Maintenance of real estate and store sites -. -.
Losses on disposals of non-current assets -. -
ICT expenses -. -.
Losses from mergers -. -.
Other operating expenses -. -.
Total -. -.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Auditors' fees
€ million
Tilintarkastusyhteisö Deloitte
Audit . .
Tax consultation . .
Other services . .
Total . .
Note . Finance income and costs
€ million
Income from long-term investments
Dividend income from subsidiaries . .
Dividend income from others . .
Gains on disposal of shares - .
Gains on sales of investments . .
Income from long-term investments, total . .
Other interest and finance income
From subsidiaries . .
From others . .
Interest and finance income, total . .
Impairment of investments held as non-current assets
Impairment of shares . -.
Changes in fair value . .
Impairment and changes in fair value of investments held as
non-current assets, total . -.
Interest and other finance costs
To subsidiaries -. -.
To others -. -.
Interest and finance costs, total -. -.
Total . .
Note . Appropriations
€ million
Difference between depreciation according to plan and
depreciation in taxation -. -.
Group contributions received . .
Group contributions paid -. -.
Total . -.
As of the financial year, an increased % depreciation on machinery and equipment and
similar fixed assets acquired has been made in compliance with the Finnish Business Tax Act.
Note . Changes in provisions
€ million
Other changes -. -.
Total -. -.
Note . Income taxes
€ million
Income taxes on group contributions -. .
Income taxes on ordinary activities -. -.
Taxes for prior years -. -.
Total -. -.
Note . Deferred taxes
Deferred tax assets and liabilities have not been recorded on the balance sheet. The deferred
tax liability on accumulated appropriations is €. million. The amount of other deferred tax
liabilities or assets is not material.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
€ million
Prepayments
Acquisition cost as at Jan. . .
Increases . .
Decreases -. -.
Transfers between items -. -.
Acquisition cost as at Dec. . .
Book value as at Dec. . .
Notes to the balance sheet
Note . Intangible assets
€ million
Intangible rights
Acquisition cost as at Jan. . .
Increases . .
Decreases -. -.
Transfers between items - .
Acquisition cost as at Dec. . .
Accumulated depreciation as at Jan. -. -.
Accumulated depreciation on decreases and transfers . .
Depreciation and amortisations for the financial year -. -.
Accumulated depreciation as at Dec. -. -.
Book value as at Dec. . .
Other intangible assets
Acquisition cost as at Jan. . .
Increases . .
Decreases -. -.
Transfers between items . .
Acquisition cost as at Dec. . .
Accumulated depreciation as at Jan. -. -.
Accumulated depreciation on decreases and transfers . .
Depreciation and amortisations for the financial year -. -.
Accumulated depreciation as at Dec. -. -.
Book value as at Dec. . .
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Note . Property, plant and equipment
€ million
Land and waters, owned
Acquisition cost as at Jan. . .
Increases . .
Transferred in mergers . .
Decreases -. .
Transfers between items . .
Acquisition cost as at Dec. . .
Book value as at Dec. . .
Land and waters, leasehold interests
Acquisition cost as at Jan. . .
Decreases -. -
Transfers between items -. -
Acquisition cost as at Dec. . .
Accumulated depreciation as at Jan. -. -.
Depreciation for the financial year -. -
Accumulated depreciation as at Dec. -. -.
Book value as at Dec. . .
Buildings
Acquisition cost as at Jan. . .
Increases . .
Transferred in mergers . .
Decreases -. -.
Transfers between items . .
Acquisition cost as at Dec. . .
Accumulated depreciation as at Jan. -. -.
Transferred in mergers -. -.
Accumulated depreciation on decreases and transfers . .
Depreciation for the financial year -. -.
Accumulated depreciation as at Dec. -. -.
Book value as at Dec. . .
€ million
Machinery and equipment
Acquisition cost as at Jan. . .
Increases . .
Transferred in mergers . -
Decreases -. -.
Transfers between items . .
Acquisition cost as at Dec. . .
Accumulated depreciation as at Jan. -. -.
Transferred in mergers -. -
Accumulated depreciation on decreases and transfers . .
Depreciation for the financial year -. -.
Accumulated depreciation as at Dec. -. -.
Book value as at Dec. . .
Other tangible assets
Acquisition cost as at Jan. . .
Increases . .
Transferred in mergers . .
Decreases . .
Transfers between items . .
Acquisition cost as at Dec. . .
Accumulated depreciation as at Jan. -. -.
Transferred in mergers -. .
Accumulated depreciation on decreases and transfers . .
Depreciation for the financial year -. -.
Accumulated depreciation as at Dec. -. -.
Book value as at Dec. . .
Prepayments and construction in progress
Acquisition cost as at Jan. . .
Increases . .
Transferred in mergers . -
Decreases -. -.
Transfers between items -. -.
Acquisition cost as at Dec. . .
Book value as at Dec. . .
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Note . Investments
€ million
Investments in subsidiaries
Acquisition cost as at Jan. ,. ,.
Increases . .
Transferred in mergers . .
Decreases -. -.
Transfers between items . -.
Acquisition cost as at Dec. ,. ,.
Impairment as at Jan. -. -.
Accumulated impairments on decreases . -
Impairment for the period - -.
Impairment as at Dec. -. -.
Book value as at Dec. ,. ,.
Investments in associates
Acquisition cost as at Jan. . .
Increases . .
Decreases - -.
Transfers between items . .
Book value as at Dec. . .
Other investments
Acquisition cost as at Jan. . .
Increases . .
Transferred in mergers . -
Decreases -. .
Transfers between items -. -
Acquisition cost as at Dec. . .
Book value as at Dec. . .
An analysis of Kesko Corporation's ownership interests in other companies as at
December is presented in the notes to the consolidated financial statements.
Note . Receivables
Receivables from subsidiaries
€ million
Long-term receivables
Loan receivables . .
Long-term receivables, total . .
Short-term receivables
Trade receivables . .
Loan receivables . .
Prepayments and accrued income . .
Short-term receivables, total . .
Total . .
Receivables from associates and joint ventures
€ million
Long-term receivables
Loan receivables . .
Other receivables . .
Long-term receivables, total . .
Short-term receivables
Accrued income . .
Other receivables . .
Short-term receivables, total . .
Total . .
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Kesko Corporation has advanced a long-term loan to its associated company, Mercada Oy, in the
amount of €. million and to its joint venture, UAB Kesko Senukai, in the amount of €. million.
Prepayments and accrued income
€ million
Taxes . -
Fees for services . .
Employee benefit expenses . .
Purchases . .
Others . .
Total . .
Note . Shareholders' equity
€ million
Share
capital
Share
premium
Contin-
gency
fund
Reserve of
invested
non-
restricted
equity
Retained
earnings
Total
equity
Balance as at
January . . . . ,. ,.
Dividends -. -.
Treasury shares . .
Transfer to donations -. -.
Profit for the year . .
Balance as at
December . . . . ,. ,.
Dividends -. -.
Treasury shares . .
Transfer to donations . .
Profit for the year . .
Balance as at
December . . . . ,. ,.
In accordance with a new accounting policy, donations are recorded in the income statement
as expenses for the financial year. Donations made totalled €. million in the
financial year.
Restricted equity
Share capital . .
Share premium . .
Total . .
Non-restricted equity
Contingency fund . .
Reserve of invested non-restricted equity . .
Retained earnings ,. ,.
Total ,. ,.
Calculation of distributable profits
Other reserves . .
Retained earnings . .
Profit for the year . .
Total ,. ,.
On December , Kesko’s distributable assets totalled €,,,..
Breakdown of parent company shares Pcs
A shares ,,
B shares ,,
Total ,,
Votes attached to shares Number of votes
A share
B share
Board's authorisations to acquire and issue own shares
Authorised by the General Meeting, the Board acquired a total of , of the Company’s
own B shares during the financial year. The Board also acquired a total of ,, of
the Company’s own B shares during the financial years and . The shares are held
by the Company as treasury shares and the Board is entitled to transfer them. The acquisition
cost of the B shares held by the Company and acquired during the financial year
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
was €. million, and the acquisition cost of shares acquired during the and
financial years was €. million. These costs have been deducted from retained earnings in
equity. The Board has an authorisation, granted by the Annual General Meeting of April
and valid until June , to issue a maximum of ,, B shares.
Treasury shares
On April , Kesko Corporation transferred a total of , of its own B shares
(KESKOB) held by the Company as treasury shares to the members of Kesko’s Board of
Directors. The transfer was based on the resolution made by the Annual General Meeting on
April to pay a portion of the Board members’ annual fees in Kesko B shares.
Shares
Own B shares held by the Company as at Dec. ,,
Transferred, share-based compensation scheme -,
Transferred, Board of Directors -,
Returned during the financial year ,
Own B shares held by the Company as at Dec. ,,
Note . Provisions
€ million
Provisions for leases . .
Other provisions . .
Total . .
Note . Non-current liabilities
During the financial year, Kesko prematurely repaid a € million loan whose interest
margin accounted for Kesko’s ability to meet the sustainability targets set for its carbon
footprint, food waste, and audits in high-risk countries. Kesko drew down a new € million
bilateral loan whose interest margin also accounts for the same sustainability criteria as the
repaid loan.
Note . Current liabilities
€ million
Liabilities to subsidiaries
Trade payables . .
Accruals and deferred income . .
Other payables . .
Total . .
Liabilities to associates
Trade payables . .
Accruals and deferred income . .
Other payables . .
Total . .
Accruals and deferred income
Employee benefit expenses . .
Accruals and deferred income from purchases . .
Taxes . .
Transaction prices . .
Fees for services . .
Others . .
Total . .
Note . Non-interest-bearing liabilities
€ million
Current liabilities ,. ,.
Total ,. ,.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Note . Guarantees, liability engagements and other liabilities
€ million
Real estate mortgages
For own debt . .
For subsidiaries . .
Pledged shares . .
Guarantees
For own debt . .
For subsidiaries . .
Other liabilities and liability engagements
For own debt . .
Rent liabilities on machinery and fixtures
Falling due within a year . .
Falling due later . .
Rent liabilities on real estate
Falling due within a year . .
Falling due later ,. ,.
Foreign currency risks
The result of the Company's operating activities is affected by the amount of working capital
financing granted by the Company to its foreign subsidiaries and in part also, in its capacity
as the Group's parent company, the subsidiaries' hedgings against their parent.
The foreign currency exposure is hedged using foreign currency derivatives in accordance
with the confirmed foreign currency risk policy. The fair value of foreign currency derivatives
is calculated by measuring them based on quoted market prices at the balance sheet date.
The measurement of derivatives is based on direct market data, in other words, they are
classified at level . The maximum credit risk of these derivatives corresponds to their fair
value at the balance sheet date.
The results of derivatives are recognised in financial items.
Company's transaction exposure
as at Dec.
€ million USD SEK NOK PLN
Transaction risk -. . . .
Hedging derivatives . -. -. -.
Exposure . . . .
Company's transaction exposure
as at Dec.
€ million USD SEK NOK PLN
Transaction risk -. . . .
Hedging derivatives . -. -. -.
Exposure . . . .
The sensitivity analysis of transaction exposure shows the profit impact of a +/-%
exchange rate change on the Company's foreign currency denominated acquisitions and
hedging foreign currency derivatives.
Sensitivity analysis, impact on pre-tax profit
as at Dec.
€ million USD SEK NOK PLN
Change +% -. -. -. .
Change -% . . . .
Sensitivity analysis, impact on pre-tax profit
as at Dec.
€ million USD SEK NOK PLN
Change +% -. -. -. -.
Change -% . . . .
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
Derivatives
Fair values of derivative
contracts
€ million
Dec.
Positive fair
value
(balance sheet
value)
Dec.
Negative fair
value
(balance sheet
value)
Dec.
Positive fair
value
(balance sheet
value)
Dec.
Negative fair
value
(balance sheet
value)
Currency derivatives . -. . -.
Interest rate derivatives . -. . -.
Notional amounts of
derivative contracts
€ million Dec. Notional amount Dec. Notional amount
Currency derivatives . .
Interest rate derivatives . .
All currency derivatives mature in . Interest rate derivatives mature in , ,
and .
€ million Fair value Fair value
Liabilities arising from
derivative instruments
Values of underlying
instruments as at Dec.
Interest rate derivatives
Interest rate swaps -. -.
Foreign currency derivatives
Forward and future contracts . -.
Outside the Group . -.
Inside the Group -. .
Commodity derivatives
Electricity derivatives . .
Outside the Group . -.
Inside the Group -. .
Note . Cash and cash equivalents within
the statement of cash flows
€ million
Financial assets at fair value through profit or loss . .
Financial assets at amortised cost (maturing in less than
months) . .
Cash and cash equivalents . .
Total . .
In the statement of cash flows, cash and cash equivalents includes those recognised in the
balance sheet and portions of available-for-sale financial assets with maturities of less than
three months from acquisition and also financial assets at fair value through profit and loss.
Note . Related parties
Kesko Corporation’s related parties include the company’s management (the Board of
Directors, President and CEO and the Group Management Board) and the companies
controlled by them, their family members and companies controlled by the family members,
the Group’s subsidiaries, associates and joint ventures, and Kesko Pension Fund. The
subsidiaries, associates and joint ventures are listed in a separate note (note .).
Some members of the Kesko Board are K-retailers. Kesko Corporation sells goods and
services to companies controlled by them. Goods and services have been sold to related
parties on normal market terms and conditions and at market prices.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
KESKO'S YEAR I FINANCIAL REVIEW
PARENT COMPANY'S FINANCIAL STATEMENTS
SIGNATURES
Signatures for financial statements and
report by the Board of Directors
Helsinki, February
Esa Kiiskinen Peter Fagernäs
Jannica Fagerholm Piia Karhu Jussi Perälä
Toni Pokela Timo Ritakallio Mikko Helander
President and CEO
The Auditor's note
Our auditor's report has been issued today.
Helsinki, February
Deloitte Oy
Authorised public accountants
Jukka Vattulainen
APA
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
SIGNATURES
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
SIGNATURES
To the Annual General Meeting of Kesko Oyj
Report on the Audit of Financial Statements
Opinion
We have audited the financial statements of Kesko Oyj (business identity code -)
for the year ended December, . The financial statements comprise the consolidated
income statement, statement of comprehensive income, financial position, statement of
cash flows, statement of changes in equity and notes, including a summary of significant
accounting policies, as well as the parent company’s income statement, balance sheet,
statement of cash flows and notes.
In our opinion
• the consolidated financial statements give a true and fair view of the group’s financial
position, financial performance and cash flows in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU,
• the financial statements give a true and fair view of the parent company’s financial
performance and financial position in accordance with the laws and regulations governing
the preparation of financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with good auditing practice in Finland. Our
responsibilities under good auditing practice are further described in the Auditor’s
Responsibilities for the Audit of Financial Statements section of our report.
We are independent of the parent company and of the group companies in accordance with
the ethical requirements that are applicable in Finland and are relevant to our audit, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that we have provided
to the parent company and group companies are in compliance with laws and regulations
applicable in Finland regarding these services, and we have not provided any prohibited non-
audit services referred to in Article () of regulation (EU) /.
The non-audit services that we have provided have been disclosed in note . to the
consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
We have also addressed the risk of management override of internal controls. This includes
consideration of whether there was evidence of management bias that represented a risk of
material misstatement due to fraud.
AUDITOR’S REPORT (Translation of the Finnish original)
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
SIGNATURES
Key audit matter How our audit addressed the key audit matter
Impairment testing of Goodwill and trademarks
Refer to Note . in the consolidated financial
statements of Kesko Oyj.
Consolidated statement of financial position
includes goodwill of €. million (€.
million). In addition, consolidated statement of
financial position includes €. million (€.
million) Trademarks.
Goodwill is subject to management’s annual
impairment test. As a result of management’s
goodwill impairment test, no impairment was
identified.
Goodwill impairment testing requires substantial
management judgment over the projected future
business performance, cash flows and applied
discount rate.
Note . in the Consolidated financial statements
describes key assumptions used by management
and sensitivity analysis for the impairment tests
approved by the Board.
As part of our audit procedures we have assessed
the impairment testing calculations prepared by
management and approved by the board, and
assessed key controls over impairment testing for
each cash generating unit.
The recoverable amounts of the cash-generating
units are determined based on value-in-use
calculations. Estimated cash flows used in these
calculations are based on three-year financial plans
approved by management. The key assumptions
used for the plans are total market growth and
profitability trends, changes in store network,
product and service selection, pricing and
movements in operating costs.
We have assessed the key assumptions used by
management in the Goodwill impairment tests:
- comparing the growth and profitability estimates
to historical performance.
- comparing the estimates with the latest approved
budgets and strategic plans.
- comparing applied discount rates to external
sources.
- testing the mathematical accuracy of the
impairment calculations
We have also assessed the related disclosure
information.
We have no key audit matters to report with respect to our audit of the parent company financial
statements. There are no significant risks of material misstatement referred to in Article (c) of
Regulation (EU) No / with respect to the parent company financial statements.
Key audit matter How our audit addressed the key audit matter
Revenue recognition
Refer to accounting policies for the consolidated
financial statements and note ..
Consolidated Net Sales of Kesko Oyj amounted
to €,. million (€,. million). Kesko
operates in grocery trade, building and technical
trade, and car trade through wide sales- and retail
network.
Consolidated net sales comprise the sale of
goods, services and energy from contracts with
customers. The contribution of the sales of services
and energy to total net sales is not significant. The
Group sells products to retailers and other retail
dealers and engages in own retailing.
Due to the volume of transactions and due to the
significance of related IT systems for the revenue
process, we identified as a specific risk of error and
fraud in respect of revenue recognition, as follows:
- Improper revenue recognition relating to manual
journal entries for exceptional sales transactions.
- The operative effectiveness of general IT-system
controls pertaining to revenue recognition.
Revenue recognition due to its significance require
specific attention both from the accounting and
the auditing perspective.
We have evaluated the IT systems used for
recognizing revenue by testing access and change
management controls. We also evaluated process
level controls by performing walkthroughs of each
significant class of revenue transactions, assessed
the design of key controls and tested the operating
effectiveness of those controls.
We have analyzed the revenue transactions
recorded to net sales to identify entries
originating from automated processes and entries
from manual journals, and to focus our audit
procedures to transactions estimated as higher risk
transactions.
Our audit procedures to ensure appropriateness
of revenue recognition for sales transaction
population recorded to net sales have consisted
among others, performing comprehensive data
analytics based substantive audit procedures
together with sample based test of details.
We have made a focused risk assessment
for addressing fraud risk relating to revenue
recognition, and identified manual journal
entries by applying data analytics. Based on the
risk assessment for fraud, we have focused our
substantive audit procedures for the transactions
identified to ensure the appropriateness and
accuracy. We have assessed the basis and
appropriateness for significant credit entries
and the appropriateness of exceptional entries,
and assessed the appropriateness of applied
management judgment.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
SIGNATURES
Responsibilities of the Board of Directors and the
President and CEO for the financial statements
The Board of Directors and the President and CEO are responsible for the preparation
of consolidated financial statements that give a true and fair view in accordance with
International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial
statements that give a true and fair view in accordance with the laws and regulations
governing the preparation of financial statements in Finland and comply with statutory
requirements. The Board of Directors and CEO are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the President and CEO are
responsible for assessing the parent company’s and the group’s ability to continue as going
concern, disclosing, as applicable, matters relating to going concern and using the going
concern basis of accounting. The financial statements are prepared using the going concern
basis of accounting unless there is an intention to liquidate the parent company or the group
or cease operations, or there is no realistic alternative but to do so.
Auditor’s responsibilities in the audit of financial statements
Our objectives are to obtain reasonable assurance on whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with good auditing practice will
always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial
statements.
As part of an audit in accordance with good auditing practice, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the parent company’s or the group’s internal
control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of the Board of Directors’ and the President and
CEO’s use of the going concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the parent company’s or the group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events so that the financial statements give a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
SIGNATURES
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and communicate with
them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in
our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Other Reporting Requirements
Information on our audit engagement
We were first appointed as auditors by the Kesko’s Annual General Meeting on th of
April , and our appointment represents a total period of uninterrupted engagement of
years.
Other information
The Board of Directors and the President and CEO are responsible for the other information.
The other information comprises the report of the Board of Directors and the information
included in the Annual Report, but does not include the financial statements and our
auditor’s report thereon. We have obtained the report of the Board of Directors prior to the
date of this auditor’s report, and the Annual Report is expected to be made available to us
after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. With respect to report of the Board
of Directors, our responsibility also includes considering whether the report of the Board of
Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the report of the Board of Directors is consistent with the
information in the financial statements and the report of the Board of Directors has been
prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to
the date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in thisregard.
Other Statements
We support that the financial statements should be adopted. The proposal by the Board of
Directors regarding the use of profit shown in balance sheet and the distribution of other
unrestricted equity is in compliance with the Limited Liability Companies Act. We support
that the Members of the Board of Directors and the President and CEO of the parent
company should be discharged from liability from the financial period audited by us.
Helsinki, February
Deloitte Oy
Audit Firm
Jukka Vattulainen
Authorised Public Accountant (KHT)
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
SIGNATURES
To the Board of Directors of Kesko Oyj
We have performed a reasonable assurance engagement on whether the iXBRL tagging
of the consolidated financial statements in the ESEF consolidated financial statements
(OXHSVMCAHPB---_FI.zip) of Kesko Oyj (-) for the
financial year ..-.. has been prepared in accordance with the requirements of
Article of Commission Delegated Regulation (EU) / (ESEF RTS).
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors and Managing Director are responsible for the preparation of the
report of the Board of Directors and financial statements (ESEF financial statements) that
comply with the requirements of ESEF RTS. This responsibility includes:
• preparation of ESEF financial statements in XHTML format in accordance with Article of
ESEF RTS
• tagging the consolidated financial statements in the ESEF financial statements with iXBRL
tags in accordance with Article of ESEF RTS, and
• ensuring consistency between ESEF financial statements and audited financial statements.
The Board of Directors and the Managing Director are also responsible for such internal
control as they determine is necessary to enable the preparation of ESEF financial statements
in accordance with the requirements of ESEF RTS.
Auditor’s Independence and Quality Control
We are independent of the company in accordance with the ethical requirements that are
applicable in Finland and are relevant to the engagement we have performed, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
INDEPENDENT AUDITOR’S REPORT ON THE ESEF
CONSOLIDATED FINANCIAL STATEMENTS OF KESKO OYJ
(Translation of the Finnish original)
The auditor applies International Standard on Quality Control and, accordingly, maintains
a comprehensive system of quality control including documented policies and procedures
regarding compliance with ethical requirements, profes-sional standards, and applicable legal
and regulatory requirements.
Auditor’s Responsibilities
In accordance with the engagement letter, we express an opinion on whether the tagging of
the consolidated financial statements in the ESEF financial statements has been prepared
in all material respects in accordance with the require-ments of Article of ESEF RTS. We
conducted a reasonable assurance engagement in accordance with International Standard on
Assurance Engagements ISAE .
The engagement includes procedures to obtain evidence on:
• whether the tagging of the consolidated financial statements in the ESEF financial
statements has been pre-pared in all material respects in accordance with the
requirements of Article of ESEF RTS, and
• whether the ESEF financial statements are consistent with the audited financial statements.
The nature, timing and extent of the procedures selected depend on the auditor’s judgment.
This includes the assess-ment of risk of material departures from the requirements set out in
ESEF RTS, whether due to fraud or error.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
THE REPORT BY THE BOARD OF DIRECTORS CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY'S FINANCIAL STATEMENTS
KESKO'S YEAR I FINANCIAL REVIEW
SIGNATURES
Opinion
In our opinion, the tagging of the consolidated financial statements in the ESEF financial
statements (OXHSVMCAHPB---_FI.zip) of Kesko Oyj for the
financial year ..-.. has been prepared in all material respects in accordance with
the requirements of Article of ESEF RTS.
Our audit opinion on the consolidated financial statements of Kesko Oyj for the financial year
..-.. has been expressed in our auditor’s report dated ... In this report,
we do not express an audit opinion or any other assur-ance conclusion on the consolidated
financial statements.
Helsinki, February,
Deloitte Oy
Audit Firm
Jukka Vattulainen
APA
Head office K-Kampus
PO Box , FI- Kesko
Street address: Työpajankatu , Helsinki
tel +
www.kesko.fi/investor
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