Hakon_Prospekt_en

This document is a translation of the Swedish original prospectus.
In the event of any differences between this translation and the
Swedish original, the latter shall prevail.
Offering
to acquire
shares in
Hakon Invest
AB (publ)
Contents
Terms and conditions in brief
1
Hakon Invest in brief
SELLING PRICE
5
Offering to acquire shares in Hakon Invest
6
Terms, conditions and instructions
Expected to be set in the interval SEK 68–77 per share. The selling price to the
public will not exceed SEK 77 per share.
9
Background and reasons
10
President’s message
12
Hakon Invest
23
Hakon Invest’s holdings and financial management
24
ICA AB
Application period for the public
Application period for
institutional investors
Setting of selling price
Payment date for the public
Expected first day for trading
on Stockholm Stock Exchange O-List
November 23 – December 2, 2005
November 23 – December 5, 2005
On or about December 6, 2005
December 8, 2005
32
ICA Sverige
37
ICA Norge
40
ICA Meny
42
ICA Banken
F I N A N C I A L I N F O R M AT I O N
44
Etos
FROM HAKON INVEST
46
Netto
48
Rimi Baltic
Year-end report January–December 2005
Annual General Meeting
51
54
58
59
February 27, 2006
May 10, 2006
Financial overview ICA AB
Forma Publishing Group AB
Financial overview Forma
Financial Management
63
Financial overview Hakon Invest
68
Comments on financial development
80
Supplementary information
86
Risk factors
90
Board of Directors, Group Management, auditors
98
On or about December 8, 2005
Share capital and ownership structure
102
Tax considerations in Sweden
105
Articles of Association
107
Interim Report, January–September 2005
119
Financial Statements
133
Consolidated financial statements in accordance with IFRS
for the 2004 fiscal year
156
Audit report
OTHER
ISIN code
Trading symbol Stockholm Stock Exchange
Trading post
SE0000652216
HAKN
200 shares
NOTE
Note that the notice of allotment to the general public is made through forwarding
of transactions notes, which is expected to occur on December 6, 2005. After payment for the allotted shares is received by Handelsbanken Capital Markets, the
paid shares will be transferred to the securities account or VP-account specified by
the buyer. The time required by Sweden Post to deliver the sent transactions notes
and the time to transfer payments and the paid shares to buyers in the general
public could result in certain of these buyers will not have acquired shares available
in the specified securities account or VP-account before trading in Hakon Invest’s
common shares has begun on the Stockholm Stock Exchange O-List. Refer to the
chapter “Terms, conditions and instructions,” section “Offering to the public,” under
the headline “Payment and receipt of shares.”
In this prospectus, “Hakon Invest,” “the Company ” or “the Group” refers to Hakon Invest AB or the group in which Hakon Invest AB is the parent company, depending on context.
In this prospectus “ICA AB” refers to ICA AB or the group in which ICA AB is the parent company, depending on the context.
“Forma Publishing Group” or “Forma” in this prospectus refers to Forma Publishing Group AB or the group in which Forma Publishing Group AB is the parent company, depending on context.
The shares in this offering in accordance with this prospectus (“the Offering”) have not been and will not be registered in accordance with the United States Securities Act of 1933 in its
present form, nor in accordance with any securities legislation in any state in the US nor in accordance with any securities legislation in any province in Canada, and may not, other than in
cases that do not require registration, be offered for sale or transfer in the US or Canada to persons domiciled there. Neither is the Offering directed to persons whose participation would
require additional prospectuses, registration or other measures than those pursuant to Swedish law. The prospectus may not be distributed in any country in which distribution or the Offering
requires measures pursuant to the preceding sentence or would be in conflict with any law or regulations in such country. Application for the acquisition of shares contrary to the above may
be deemed invalid.
In conjunction with the Offering, the principal owner in Hakon Invest ICA-handlarnas Förbund (ICA-handlarnas Förbund,“ the Association” or “the Seller”) issued an option (“Over-allotment option”) to Handelsbanken Capital Markets. The Over-allotment option, which can be exercised up to and including the date 30 days after the first day of trading, gives
Handelsbanken Capital Markets the right to request that the seller sells another maximum of 1,300,000 shares in Hakon Invest, with the aim of covering any over-allotment. In conjunction
with the Offering, Handelsbanken Capital Markets can carry out transactions on the Stockholm Stock Exchange and in a potential, unofficial trading that stabilizes the shares’ market price or
supports this price at a level that would vary from what would otherwise apply. Such measures, at any given time without warning, can be discontinued and can be taken up to and including
30 days from the earlier of the day when the selling price in the Offering is made public and the first day of trading on the Stockholm Stock Exchange. Any guarantee that stabilization
measures will be taken up cannot be given.
Statements in this prospectus about future outlook and other forward-looking statements are based on current market conditions and in other respects prevailing external factors. The
reader is advised that these statements, as well as all forward-looking assessments, are related to risks.
Disputes relating to the Offering pursuant to this prospectus shall be settled exclusively in accordance with Swedish law and by a Swedish court.
This prospectus has been registered by the Swedish Financial Supervisory Authority pursuant to the provisions of Chap 2, Section 4 of the Financial Instruments Trading Act (1991:980).
Note that such registration does not constitute a guarantee from the Swedish Financial Supervisory Authority that the factual content of the prospectus is accurate or complete.
Hakon Invest in brief
Hakon Invest conducts active and long-term investment operations
in retail-oriented companies in the Nordic region.
Hakon Invest owns 40% of ICA AB, the leading retail company
with focus on food. The remaining 60% is owned by the Dutch company Royal Ahold (“Ahold”). Through the shareholders’ agreement
between Hakon Invest and Ahold, and which is valid through and
including 2040, the two owners have equal influence in ICA AB.
ICA AB is a central holding for Hakon Invest. Through being an
active owner with significant influence, Hakon Invest shall contribute
to the development and strengthening of the ICA concept and create value growth for ICA AB.1)
In addition to the holding in ICA AB, Hakon Invest owns 100%
of the shares in Forma Publishing Group, which is one of Sweden’s
largest publishers. Forma also conducts operations in Finland and
the Baltic States.
tion of the ICA retailers in Sweden, and about 25% owned by
about 3,400 private shareholders, of which most are ICA retailers
or former ICA retailers.
In conjunction with the listing, Hakon Invest’s share structure will
change to comprise 49% common shares and 51% Series-C
shares. All C shares will be owned by ICA-handlarnas Förbund and
will not be listed. Prior to the listing of the Company’s common
shares, ICA-handlarnas Förbund intends to offer investors the opportunity to acquire about 8 percentage points of Hakon Invest’s existing common shares. After the sale, ICA-handlarnas Förbund will
own at least a total of 67% of the shares in Hakon Invest, distributed
among 16 percentage points of common shares and 51 percentage points of C shares, of which the latter are not entitled to dividends.2) This means that the total cash dividend each year is only
distributed among 49% of the shares.
O P E R AT I O N S
Hakon Invest is debt-free and has financial assets amounting to about
SEK 2.8 billion as of September 30, 2005. These financial assets
are for use for investments, mainly in unlisted companies in the Nordic
retail sector. Hakon Invest has substantial expertise, experience as
well as access to a comprehensive network within retail and retailrelated businesses. The Company has established an investment
organization that works actively with existing holdings as well as evaluation of new, attractive investment objects. Based on a substantial
and active ownership, Hakon Invest shall contribute to the company
having the conditions and resources to develop and grow profitably.
Hakon Invest’s investment strategy builds on a tradition of entrepreneurship and a long-term focus. Investment shall be made mainly
in companies that have an existing market position, with a distinct
concept, stable, favourable cash flow and a strong and motivated
management. In addition, the company shall have favorable
growth and return potential that can be realized by an active, committed and long-term owner.
In total, this means that Hakon Invest offers the parties in the
equity market a unique possibility to invest in unlisted retail-oriented
companies in the Nordic region, with ownership in ICA AB as a
strong foundation.
OWNERS, SHARE STRUCTURE AND DIVIDENDS
Prior to the Offering, Hakon Invest is 75% owned by ICA-handlarnas Förbund , a non-profit association that is the member organiza-
1)
2)
Overview of ownership and operations structure
Hakon Invest AB
40%1)
Portfolio companies
ICA AB2)
Forma Publishing Group
1)
According to the shareholders’ agreement with
Ahold, Hakon Invest has a common controlling
interest in ICA AB in that it stipulates unity in
decisions at the Annual General Meeting and
in the Board of Directors.
2) See section about ICA AB under “Hakon
Invest’s holdings and financial management”
for an overview of the company’s organization.
100%
Future Investment
See section about Hakon Invest for description of the ICA concept.
See section “Articles of Association” for a description of the possibility for ICA-handlarnas Förbund to convert Series C shares to common shares. This can be done in 2016 at the earliest.
1
GOALS
• The dividend payout ratio for Hakon Invest shall normally amount
to at least 50% of the Parent Company’s profit after taxes.
• The Hakon Invest Group strives for an equity/assets ratio over
time that is not less than 70%.
• The goals set for ICA AB are:
– to be the market leader in those countries in which ICA AB is
represented,
– to over the long term to increase sales faster than the total
market increases in each submarket,
– an operating margin (EBIT-margin) of 3.5–4.0%,
– that return on equity over a business cycle shall be at
least 14–16%,
– that the equity ratio long term shall be 30–35%.
• In accordance with the shareholders’ agreement between the parties, Hakon Invest and Ahold have undertaken to ensure that ICA
AB distributes at least 40% of the ICA group’s profit after taxes.
However, a condition, among others, is that this is not in conflict
with good business practice and that due consideration is taken
with regard to the ICA group’s investment plans and operational
needs.
• The average total return on Hakon’s own invested capital, for
Forma and future investments in portfolio companies, shall exceed
15% over the holding period for each specific holding.
HOLDINGS
ICA AB
ICA AB is the Nordic regions leading retail company with focus on
food and meals. ICA AB comprises ICA Sverige, ICA Norge, Etos
2
and the partly owned companies Rimi Baltic and Netto, which combined have a large network of stores in Sweden, Norway and the
Baltic States. It also includes ICA Meny AB, which specializes in
distribution to restaurants, caterers and convenience stores. ICA AB
also offers financial services to Swedish customers through ICA
Banken AB.
The ICA group originated in the ICA concept, where individual
retailers join together in areas such as sourcing, IT and logistics to
achieve the same economies of scale as wholly owned chains.
Local retailers and ICA AB’s various areas of operation serve customers in their own markets through locally adapted stores and
offerings, while the group coordinates functions that customers do
not see. The ICA concept is ICA AB’s greatest strength in meeting
the challenges and opportunities currently facing the company. The
key is to utilize economies of scale combined with local adaptations as close to customers as possible.
ICA AB’s operations include the management of sourcing and
logistics, the development of strategies for various store concepts
and marketing, the management of communications and human
resources issues, as well as the development of sales, operations
and store establishment. Sales development should stimulate sales to
consumers. ICA AB’s activity takes place in cooperation with the ICA
retailers, who often own and operate the stores. ICA AB’s efforts in
these areas are aimed at increasing sales to consumers and, hence,
to the stores, as well as increasing the profitability of the stores and of
ICA AB in order to ensure that the operations will be successful in the
long-term. Sales in 2004 amounted to about SEK 72 billion, with
profit after tax of SEK 1.5 billion. Some of the most important areas
of operations are described in general below.
Hakon Invest in brief
Overview ICA AB1)
SALES
(SEK M)
NO. OF EMPLOYEES
( AV E R A G E ) 2 )
547
474
ICA Sverige 4)
ICA Sverige is one of the leading retail companies in the country with focus on food and
meals. ICA Sverige’s operations comprise sales, operations and new establishments 5) 43,373
4,407
ICA Norge 4)
ICA Norge is one of the leading retail companies in the country with focus on food and
meals with stores operated on a proprietary basis or as franchises. ICA Norge’s
operations comprise sales, operations and new establishments 5)
19,896
5,540
ICA Meny
ICA Meny is one of Sweden’s leading food-, beverage- and kitchen equipment
suppliers to restaurants, caterers and convenience stores.
ICA Banken
ICA Banken shall make it easier for the ICA stores’ customers to manage their
economy and as a result strengthen customer loyalty.
PA R E N T C O M PA N Y
ICA AB 3)
The operations of the parent company are described below:
Finance
Finance includes financial control, accounting, shared services,
treasury & tax, legal, internal audit and strategic projects.
Retail
Retail includes marketing, business development, market analysis,
corporate communications, human resources, etc.
Supply Chain
Supply Chain includes sourcing, logistics development and IT.
W H O L LY O W N E D O P E R AT I O N S
4,355
899
58
121
PA R T LY O W N E D O P E R AT I O N S
Rimi Baltic (ICA Baltic) 6)
As of 2005, Rimi Baltic is equally owned by ICA AB and Kesko Livs, who jointly are
developing one of the most modern retail chains in the Baltic with wholly owned stores.
3,307
5,286
Netto 7)
Netto is equally owned by ICA AB and Dansk Supermarked A/S.
Netto operates on a hard discount basis. The concept was developed in Denmark,
where Dansk Supermarked A/S manages the chain.
1,194
540
1)
2)
3)
4)
5)
6)
7)
Figures in the table pertain to 2004.
Refers to the average number of employees calculated based on 1,800 hours of working time.
Includes the specialty retail chain Etos with sales of about SEK 31 million and 23 employees. Etos has wholly owned stores and combines products for health and beauty. Also includes some
subsidiaries within importing and finance.
Within each national operations area, the consumer goods operations are reported integrated with property management.
Sales refer to ICA Sverige and ICA Norway shall help to stimulate sales to consumers. Operations means providing the stores with advise and measures to achieve efficient store operations. Establishments involves identifying and developing new store locations and to participate in the development of existing stores through renovation and expansion.
Figures in the table refer to the wholly owned operations ICA Baltic developed by ICA AB during 2004. Rimi Baltic is a joint venture with Kesko Livs (50/50) formed in 2005.
ICA AB’s share amounts to 50%.
F I N A N C I A L O V E R V I E W, I C A A B
Net sales, SEK M
2002
2003
2004
ADJUSTMENT
IFRS
2004
IFRS
2004
JAN–SEP
2005
JAN–SEP
70,908
71,980
71,811
1,720
73,531
53,996
52,514
Operating profit (EBIT), SEK M
2,535
2,120
1,866
111
1,977
1,621
1,341
Profit/loss for the year, SEK M
1,710
1,777
1,518
–3
1,515
1,221
1,068
Total assets, SEK M
34,071
31,554
29,683
1,405
31,088
29,820
32,257
Equity, SEK M
11,939
12,169
7,399
–305
7,094
12,293
7,937
589
664
6,228
–
6,228
Dividend, SEK M
Operating margin (EBIT-margin)
3.6%
2.9%
2.6%
2.7%
3.0%
2.6%
Equity ratio
35.8%
38.7%
25.0%
22.8%
41.2%
24.6%
Interest-bearing net debt excluding ICA Banken, SEK M
6,323
3,188
7,161
7,161
1,602
7,032
Net debt/equity ratio, excluding ICA Banken, multiple
0.5
0.3
1.0
1.0
0.1
0.9
Hakon Invest in brief
–
3
Facts about Forma Publishing Group
BUSINESS CONCEPT
To provide people with knowledge and inspiration in their private and professional lives through publishing operations in the Nordic and Baltic markets.
2002
2003
2004
JAN–SEP 2005
658.9
630.8
596.2
433.3
Operating profit/loss (SEK M)
–4.3
36.4
59.3
23.3
No. of employees (average)
349
321
303
299
Sales (SEK M)
FORMA PUBLISHING GROUP AB
Forma Publishing Group AB is a wholly owned subsidiary of Hakon
Invest and one of Sweden’s largest publishers focusing on production and distribution of consumer periodicals, trade magazines and
books. The predominant topics are food, the home, recreation and
retailing. Among other periodicals, Forma’s consumer magazine
operations publish Sweden’s largest weekly magazine, ICA-kuriren,
and Sweden’s largest monthly magazine, Hus & Hem. Forma also
conducts operations in Finland (including Kotivinki, the country’s
largest home magazine), in Estonia (the country’s largest monthly
magazine) and in Latvia (the country’s largest monthly magazine).
Forma also produces customer magazines and assignments
include some of Sweden’s largest customer magazines. Among others, Forma produces the food magazine Buffé, which is sent to ICA
AB’s 2.3 million active regular customers. Forma has leading-edge
expertise in food and retailing gathered within the leading trade
magazines in the field.
Forma works after a new strategy with a focus on profitability
and growth, organically as well as through acquisitions. In 2004,
the company reported sales of SEK 596 million, with an operating
profit of SEK 59 million.
F I N A N C I A L O V E R V I E W, H A K O N I N V E S T
2000
2001
2002
2003
2004
ADJUSTMENT
2004
IFRS
2004
JAN–SEP
2005
JAN–SEP
Net sales, SEK M
905.2
778.0
658.9
630.8
621.9
–
621.9
459.0
445.7
Result from participation in associated
companies, gross, SEK M
523.1
469.9
635.6
544.5
511.6
–
–
–
–
Share in profits from companies reported
according to the equity method, SEK M
Operating profit/loss (EBIT), SEK M
–
–
–
–
–
466.2
349.4
416.5
418.3
563.3
528.0
496.4
–11.1
485.3
331.6
392.2
Profit/loss for the year, SEK M
1,717.2
274.3
–975.7
352.7
497.3
81.3
578.6
333.3
608.1
Total assets, SEK M
8,304.5
8,527.8
7,443.4
7,295.7
7,639.0
–73.6
7,565.4
7,355.9
8,077.6
Equity, SEK M
7,832.1
7,854.0
7,050.3
6,947.7
7,277.4
–33.7
7,243.6
7,007.4
7,682.5
5.0
–
–
–
–
–
–
–
–
–4,869.1 –4,110.7 –3,334.6 –2,975.0
–5.6
–2,969.4
---
–3,049.9
Minority interests, SEK M
Interest-bearing net debt, average, SEK M
Net debt/equity ratio, average, multiple
Earnings per share in the Group, SEK
Equity per common share in the Group
according to IFRS, SEK1)
Equity per share, SEK
1)
4
–
488.7
–4,919.8
–0.6
–0.6
–0.6
–0.5
–0.4
12.17
1.70
–6.06
2.19
3.09
–
–0.4
–
–0.4
–
2.07
3.78
–
–
–
–
–
–
2.38
–
–
48.67
48.81
43.81
43.18
45.22
–0.21
45.01
43.55
47.74
Earnings per preference share in the Group according to IFRS: SEK 7.31.
Hakon Invest in brief
Offering to acquire shares in Hakon Invest
Hakon Invest’s principal owner, ICA-handlarnas Förbund, has
decided that in conjunction with the common shares in the
Company being listed on the Stockholm Stock Exchange’s O-List to
carry out a further broadening of ownership in the Company in
addition to the Company’s approximately 3,400 shareholders. The
broadening will be effected through an offering from the Seller for
acquisition of at maximum of 11,700,000 existing common
shares, each at a par value of SEK 2.50. The Offering is being
made to the public in Sweden and institutional investors in Sweden
and internationally. Hakon Invest’s common shares have been
approved by the Stockholm Stock Exchange for listing on the O-List
of the Exchange. The first day for trading in the Company’s common
shares is expected to be on or about December 8, 2005.
ICA-handlarnas Förbund has undertaken, at the request of
Handelsbanken Capital Market, up to the date that is 30 days after
the first day of trading, to sell an additional maximum of
1,300,000 common shares to cover any over-allotment (“Overallotment option”) in conjunction with the Offering.
At full acceptance of the Offering, the Seller’s remaining holding will represent about 68.1% of the shares and votes outstanding
in Hakon Invest. If the Over-allotment option is exercised in full, the
Seller’s remaining holding will represent about 67.3% of the shares
and votes outstanding in Hakon Invest. In addition, when the
Offering is made, there are about 3,400 other owners who hold
slightly less than 25% of the shares in the Company.
The Seller has undertaken, without the approval of
Handelsbanken Capital Markets, not to divest additional shares in
the Company for at least 300 days after the first day of trading. The
Board of Directors and senior executives in Hakon Invest as well as
the Board of Directors and senior executives in the principal owner
ICA-handlarnas Förbund, have agreed to a similar undertaking.
An offering is hereby made to acquire a maximum of
11,700,000 common shares in Hakon Invest in accordance with
the terms and conditions in this prospectus, corresponding to a maximum of 7.3% of the capital and votes, if the Offering is fully subscribed. If the Over-allotment option is exercised in full, the Offering
comprises a maximum of 13,000,000 common shares, corresponding to a maximum of slightly more than 8% of the capital and votes
in Hakon Invest.
The selling price for all common shares in the Offering will be
determined through a book-building process among institutional
investors within the interval SEK 68–77 per share. The selling price
to the general public will not exceed SEK 77 per share.
Assuming that the Offering is accepted in its entirety and that
the Over-allotment option is exercised in full, the value of the
Offering will amount to between SEK 884 and 1,001 million.
In other respects, reference is made to the presentation in this
prospectus, which has been prepared by the Board of Directors of
Hakon Invest in conjunction with the Offering and the listing of the
Company’s common shares on the O-List of the Stockholm Stock
Exchange.
Stockholm, November 17, 2005
Hakon Invest AB (publ)
Board of Directors
ICA-handlarnas Förbund
Board of Directors
5
Terms, conditions and instructions
THE OFFERING
ALLOTMENT
The Offering covers a maximum total of 11,700,000 shares of common shares1), corresponding to about 7.3 % of the total number of
shares in Hakon Invest. The Offering is divided into two parts. The
first part is directed towards institutional investors in Sweden and
abroad; the second part is focused on the public in Sweden, including members of the ICA-handlarnas Förbund and certain employees
in companies in which the ICA-handlarnas Förbund directly or indirectly holds shares2). The price at which the shares of common shares
are offered is referred to as the selling price.
A decision regarding the allotment of shares will be made by the
Seller in consultation with Handelsbanken Capital Markets. The
objective of the allotment is to attain a solid institutional ownership
base and a broad spread of shares among the public as parts of
efforts to permit regular and liquid trading in the shares in Hakon
Invest on the Stockholm Stock Exchange.
OVER-ALLOTMENT OPTION
The Offering will include an additional maximum 1,300,000
shares of common shares, if the Over-allotment option is utilized
(refer to “Offering to acquire shares in Hakon Invest” for a more
detailed description). If the over-allotment option is fully exercised,
the Offering will encompass a total of 13,000,000 shares.
DISTRIBUTION OF SHARES
The Offering to institutional investors is intended to involve
5,850,000 shares of common shares and the Offering to the public 5,850,000 shares. In the Offering to the public, certain employees in companies whose shares are owned directly or indirectly by
ICA-handlarnas Förbund are entitled to acquire common shares in
multiples of 100 shares, with, however, a maximum of the number
of shares that is equivalent to SEK 30,000, based on the final price
of common shares and members of ICA-handlarnas Förbund have
preferential rights to acquire a maximum of 1,400 shares of common shares in the Company. Members may make application to
subscribe for additional shares within the framework of their preferential rights, whereby such application will be taken into account in
the manner described in the section “Allotment”. Members who are
partners have similar preferential rights to subscribe for up to 1,400
shares of common shares. In such cases, members may elect to
utilize the Offering through the company operating the member
store. Otherwise, the aforementioned employees and members
may not transfer their rights to buy shares. If the rights of employees
and members are fully utilized, these rights will encompass a total of
2,340,000 shares or 20% of the common shares covered by the
Offering, or almost 1.5% of the shares in the Company. Retailers
and employees may also acquire shares in the Offering to the public without preferential rights.
The distribution of common shares to each part of the Offering
will be performed on the basis of demand and, thus, redistribution
may be conducted.
SELLING PRICE
The selling price in the Offering is expected to be set within the
interval of SEK 68–77 per share. The selling price is determined in
the bidding procedure described below and is planned to be
announced on or about December 6, 2005. The selling price to
the public will not exceed SEK 77 per share. Commission will not
be charged.
1)
2)
6
OFFERING TO THE PUBLIC
Applications
Applications from the public to acquire shares shall cover at least
200 shares. Application for purchase may be made only for round
lots of 200 shares. Application is to be made using the printed
application form and must be undertaken during the period
November 23 – December 2, 2005 and submitted to any of
Handelsbanken’s offices.
Customers of Handelsbanken who are connected to Internet
services may apply for the purchase of shares via the Internet in
accordance with instructions on the bank’s website, www.handelsbanken.se.
Applications must be received by a Handelsbanken office not
later than December 2, 2005 before closing hours.
Application via Handelsbanken’s Internet services can be made
from 12:00 p.m. midnight, Sunday December 4. Application via
the Internet requires that the person submitting the application has a
VP-account in any Swedish account-handling institution of choice or
a securities account in Handelsbanken.
The application is binding. Late applications may be disregarded without any further action. Applications via telefax will not
be approved. No amendments or addendums may be made to the
printed text. Incomplete or incorrectly filled in application forms may
be disregarded without further action. Application forms and
prospectuses are available from all Handelsbanken offices and via
Internet; www.hakoninvest.se or www.handelsbanken.se/
aktuellaerbjudanden.
Those making application to purchase shares must have a securities (VP) account or a securities depot at a Swedish account-handling
institution. Those who do not have a securities account or securities
depot must open one prior to submitting the application. Note that
the opening of a securities account or securities depot can take time.
A securities account with restricted utilization rights, such as a
pledge account or reconfiguration (so called VKI-account) may not
be used.
Applications from members of the ICA-handlarnas Förbund and
certain employees
Application from members of ICA-handlarnas Förbund and employees of companies whose shares are held directly or indirectly by the
ICA-handlarnas Förbund are to be made using the form designed
for this purpose, which are to be made available to Hakon Invest
not later than November 30 in accordance with special instructions.
Applications are binding. Late applications may be disregarded without further action. Applications via telefax will not be
approved. No amendments or addendums may be made to the
printed text. Incomplete or incorrectly filled in application forms may
be disregarded without further action. Application forms for the
aforementioned employees and members of ICA-handlarnas
Excluding the shares that may be sold in connection with over-allotment.
All employees in Hakon Invest AB and ICA-handlarnas Medlemsservice AB and executive management groups in Forma Publishing Group and ICA AB.
Förbund will be posted to them. Additional application forms may
be received from ICA-handlarnas Förbund. Prospectuses are available from all Handelsbanken offices and via Internet; www.hakoninvest.se or www.handelsbanken.se/aktuellaerbjudanden.
Those making application to purchase shares must have a securities (VP) account or a securities depot at a Swedish account-handling
institution. Those who do not have a securities account or securities
depot must open one ahead prior to submitting the application.
Note that the opening of a securities account or securities depot can
take time.
A securities account with restricted utilization rights, such as a
pledge account or reconfiguration (so called VKI-account) may not
be used.
Allotment
Allotment is not dependent on when during the application period
the application is received. Only one application per person will be
considered. Allotment will be made only in round lots of 200
shares. Allotment to certain employees in companies in which ICAhandlarnas Förbund directly or indirectly owns shares will, however, be done in round lots of 100 shares. In the event of over-allotment, allotment may not be conducted (for other than members) or
may be performed with a lower number of shares than that
requested in the application, as a result of which allotment may be
done fully or partly by lottery. Allotment to those who receive shares
will be initially to the aforementioned employees and to members
up to the number of shares indicated above under “Distribution of
shares.”
If, using preferential rights, members apply for amounts above the
stated amount of 1,400 common shares while other members have
applied for fewer, redistribution among members will be made within
the total of 2,340,000 common shares. Such redistribution will be
conducted so that a certain number of shares are allotted per application.
In the event of over-subscription by the public, allotment will primarily be conducted so that a certain number of shares are allotted
per application and subsequently primarily with a similar percentage share of the excess number of shares covered by the application, rounded off to the nearest multiples of 200 shares.
In addition, certain customers of Handelsbanken will be given
special consideration. Allotment may also be made to certain
employees in Handelsbanken, although these will not have priority.
Allotment in these cases will be performed in accordance with the
rules of the Swedish Securities Dealers Association and the instructions of the Swedish Financial Supervisory Authority1).
Notice of allotment
Following the allotment of shares, a transactions note will be mailed to
those receiving allotment. This is expected to occur on or around
December 6, 2005. Those who have not been allotted shares will
not be notified.
Payment and receipt of shares
Full payment for allotted shares is to be made in cash not later than
December 8, 2005 in accordance with the instructions in the
mailed transactions note. In conjunction with application, those
wishing to pay via the debiting of their account in Handelsbanken
should indicate the account number on the application form. Buyers
from the general public who have specified a securities account in
Handelsbanken are expected to have their allotted, but unpaid,
shares available in the securities account on Wednesday,
December 7, 2005.
1)
Buyers from the general public who have specified a debiting
account in Handelsbanken and have a VP-account in Handelsbanken or other Swedish account-handling institution, and had
funds available in the debiting account not later than 12:00 midnight on Thursday, December 8, are expected to have the acquired
Hakon Invest common shares available in the specified VP-account
on Thursday, December 8, however, not earlier than 10:00 a.m.
Buyers from the general public who have specified a debiting
account in Handelsbanken and have specified a securities account
at another trustee and had funds available in the debiting account
not later than 12:00 midnight on Thursday, December 8, are
expected to have the acquired Hakon Invest common shares available in the specified VP-account on Thursday, December 8, however, not earlier than 10:00 a.m. Each trustee will then registers the
shares in the respective customer’s securities account in accordance
with each trustee’s routines.
Buyers from the general public who pay for allotted shares in
accordance with the instructions on the transactions note, that is,
have not specified a debiting account in Handelsbanken, will have
allotted and paid shares transferred to the specified VP account or
securities account, when payment has been received by
Handelsbanken Capital Markets. Depending on where, how and
at what time of the day payment is made, this may take two to three
bank days from the payment date.
If full payment is not made within the prescribed time or funds
are not available in the indicated account, the allotted shares may
be re-allotted and sold to another party. If the selling price in conjunction with such sale is less than the price according to the
Offering, the party who first received the allotment may be compelled to pay the difference.
After payment has been made and registered, a securities (VP)
note will be mailed showing that the paid-up shares are available in
the buyer’s securities account. Although certain buyers will have
paid shares available on December 8, no buyer, however, will
have received a VP-notice on December 8 that shows that paid
shares are available in the buyer’s VP-account since the shares are
booked in the VP-account not earlier than December 8.
OFFERING TO INSTITUTIONAL INVESTORS
Bidding procedure
As part of efforts to attain a market-based pricing of the shares encompassed by the Offering, institutional investors will be given the opportunity to participate in a bidding procedure based on their expression
of interest. The bidding procedure will extend from November 23 to
December 5, 2005. The selling price will be fixed within the framework of this procedure. The bidding procedure may be suspended
earlier. Notification of any such suspension of the procedure will be
provide via one or several news agencies. Bids are to be presented
to Handelsbanken Capital Markets in accordance with special
instructions.
Allotment
The intention is that expressions of interest, which are essentially
deemed to be equal, will be treated equally. Expressions of interest
by institutional investors who are deemed to be long-term shareholders in Hakon Invest will be given priority. No guarantee of allotment
is provided for certain institutional investors.
Notification of allotment
Institutional investors are expected to be notified of allotment on or
about December 6, 2005, following which a transactions note will
be mailed.
The Seller, ICA-handlarnas Förbund , approves the participation of employees of Handelsbanken on these conditions.
7
Payment
Full payment for allotted shares is to be made in cash not later than
December 9, 2005. Special routines, terms and conditions governing notification of allotment, payment and delivery may apply.
If full payment is not made within the prescribed time or if funds
are not available in the indicated account, the allotted shares may
be re-allotted to and sold to another party. If the selling price in conjunction with such transfer is less than the selling price according to
the Offering, the party first receiving allotment may be compelled to
pay the difference.
DIVIDEND RIGHTS
Shares acquired via the Offering carry rights to participation in
Hakon Invest’s earnings as of the 2005 fiscal year. Any dividend for
the 2005 fiscal year will be set at the 2006 Annual General
Meeting of shareholders and will be distributed by VPC (Swedish
Central Securities Depository & Clearing Organization).
TERMS AND CONDITIONS FOR FULFILLMENT
The Offering is conditional on the non-emergence of circumstances
that may entail that the date for the completion of the Offering is
deemed inappropriate. Such circumstances may be of an economic, financial or political nature and may pertain to circumstances in Sweden as well as abroad, or that interest in participation in the Offering is viewed by the Seller as being insufficient.
Accordingly, the Offering may be partly or fully revoked.
Notification in this respect will be provided as soon as possible via
a press release.
MARKET LISTING AND
CONDITIONAL UNOFFICIAL TRADING
A listing of the common shares in Hakon Invest on the O-List of the
Stockholm Stock Exchange will take place when required registrations have been made with Bolagsverket and VPC. This is expected
to take place on Wednesday, December 7. Therefore, trading on
the Stockholm Stock Exchange is estimated to start on Thursday,
December 8, 2005. A trading lot consist of 200 shares. However,
the purchase and sale of shares will also be possible in smaller lots.
With normal post, it is expected that most persons who
received an allotment will have received notification about the allotment prior to when trading in Hakon Invest’s common shares begins
on the Stockholm Stock Exchange.
For some persons, depending on when and how payment for
allotted shares is made and where the shares are to be delivered,
the acquired shares may be available after trading on the
Stockholm Stock Exchange begins – see section “Offering to the
public,” under the headline “Payment and receipt of shares” earlier
in this chapter.
Before trading in Hakon Invest’s common shares commences on
the Stockholm Stock Exchange, which is expected to happen on
Thursday, December 8, an unofficial trading may start with
Handelsbanken Capital Markets or another securities institution.
Such unofficial trading will be conditional upon the required registrations being made with Bolagsverket and VPC. This is expected to
happen on Wednesday, December 7. If the required registrations
do not take place, any shares delivered shall be returned and any
payments shall be returned.
S H A R E P R I C E S TA B I L I Z AT I O N
In conjunction with the Offering, Handelsbanken Capital Markets
may conduct transactions in a potential, unofficial trading and on
the Stockholm Stock Exchange that stabilize, support or in some
other manner affect the share price of the Hakon Invest share. Such
commenced measures may be suspended at any time without
notice and may not extend beyond 30 days following the earlier of
the day when the selling price in the Offering is announced and the
first trading day on the Stockholm Stock Exchange. No guarantee is
provided that these stabilization measures will be undertaken.
S U M M A RY D E S C R I P T I O N O F T H E E F F E C T O F T H E O F F E R I N G A N D M A R K E T I N G L I S T I N G
ON THE SHARE OWNERSHIP AND SHAREHOLDER STRUCTURE
Share ownership and shareholder
structure prior to the Offering
Share ownership and shareholder structure after the Offering
Hakon Invest is made up of shares of common shares
Hakon Invest is made up of shares of common shares and Series-C shares
ICA-handlarnas Förbund holds slightly more than 75%
Series-C shares may be issued in an amount representing a maximum 51% of all shares
All shares confer equal rights in the Company
ICA-handlarnas Förbund has transformed common shares, representing almost 51% of the
total number of shares in the Company, to Series-C shares
Other shareholders,
25%
All Series-C shares are held by ICA-handlarnas Förbund
ICA-handlarnas Förbund is entitled to reclassify Series-C shares to common
shares and thereby receive a cash dividend no earlier than 2016.
However, ICA-handlarnas Förbund has refrained from taking a dividend over
a protracted period and there are currently no plans to reclassify Series-C
shares to common shares and thus receive a cash dividend after 2016
25%
75%
The common shares are listed on the O-List of the Stockholm Stock Exchange.
Series-C shares are not listed
ICA-handlarnas Förbund,
75%
Pursuant to the Offering, ICA-handlarnas Förbund has sold about 8%
(corresponding to 13,000,000 shares) of its common shares and thus
it is assumed that the over-allotment option is utilized
Both the public and institutional investors have acquired these shares
25%
51%
8%
16%
New shareholders, 8%
ICA-handlarnas Förbund,
67%1)
Series-C
Common shares
Common shares
1)
8
Other shareholders,
25%
Series-C shares do not confer entitlement to cash dividends
Requires that ICA-handlarnas Förbund sells about 8% of its holding.
Terms, conditions and instructions
Background and reasons
Hakon Invest is one of two principal owners in ICA AB. Over the
years, ICA AB has developed favorably and is one of the Nordic
region’s leading retail companies with focus on food and meals.
Hakon Invest’s holding of 40% of the shares in ICA AB will continue
to be a central holding for Hakon Invest who shall be a strong owner
with significant influence through which to safeguard, strengthen and
develop the ICA concept1) and thereby increase ICA AB’s value.
In addition to the holding in ICA AB, Hakon Invest owns 100% of
the shares in Forma Publishing Group (formerly ICA Förlaget AB).
Moreover, Hakon Invest has a substantial liquidity management
amounting to about SEK 2.8 billion as of September 30, 2005.
Management of these assets has previously been focused on having
a good liquidity as preparedness prior to any ownership change in
ICA AB. The reason for this was that Hakon Invest needed to have the
possibility to take action due to the as of 2004 earliest expected sale
of Canica AS’s 20% holding in ICA AB. In May 2004 Canica
announced that the company wished to sell their shares in ICA AB.
After concluding an agreement with Ahold, which in accordance with
the shareholders’ agreement acquired Canica’s shareholding, to
acquire half off the shareholding, Hakon Invest increased its ownership in ICA AB in 2004 by 10% to 40% of the shares in ICA AB. The
remaining 60% is owned by Ahold. However, as the result of a shareholders’ agreement, the owners have equal influence over ICA AB.
After Hakon Invest’s and Ahold’s acquisition of Canica’s shareholding, a stable ownership situation is foreseen in ICA AB. Against
this background, Hakon Invest’s principal owner and Board of
Directors during the past year reviewed the Company’s future direction. With the aim of securing a long-term favorable ownership structure in the Company, it was decided in the spring of 2005 to prepare
for a listing of Hakon Invest on the Stockholm Stock Exchange O-List.
Furthermore, it was decided that Hakon Invest’s operations shall be
broadened and move in a partly new direction based on the expertise and the network the Company has in retailing. In the future,
Hakon Invest shall, while retaining a significant owner influence in
ICA AB and with the successful ICA concept as a base, conduct an
active and long-term investment operation with a focus on retailoriented companies. The Company’s financial assets shall be used for
investment primarily in unlisted retail companies in the Nordic region.
Based on a significant and active ownership, Hakon Invest shall contribute to ensuring that the companies in which it invests are provided
the conditions and resources to develop and grow profitably. In total,
this means that Hakon Invest is offering the parties on the stock market
a unique opportunity to invest in unlisted retail-oriented companies in
the Nordic region, with ICA AB as a strong base.
Prior to the Offering, Hakon Invest is about 75.4% owned by of
the ICA-handlarnas Förbund, a non-profit association that is the
member organization for the ICA retailers in Sweden, and by
slightly less than 25% by about 3,400 private shareholders, of
which most are ICA retailers or former ICA retailers. Until the listing,
the Hakon Invest share is covered by a preemptive clause and has
until September 30, 2005 been traded between shareholders
through ICA-handlarnas Förbund.
At the Annual General Meeting in ICA-handlarnas Förbund on May
10, 2005, and at Hakon Invest’s Annual General Meeting on May 11,
2005, the required decisions were made to facilitate an application for
listing of the Hakon Invest common share on the O-List of the Stockholm
Stock Exchange as well as a concurrent broadening of ownership of the
shares in the Company. The ownership broadening will be effected
through the principal owner, ICA-handlarnas Förbund, selling a maximum of about 8%, corresponding to 13,000,000 common shares
including the over-allotment option, so that ICA-handlarnas Förbund’s
ownership thereafter is not less than 67%.
The purpose of the Offering and the listing of common shares in
the Company on the O-List of the Stockholm Stock Exchange is to stimulate trading in the Hakon Invest share, to make the share more liquid,
and to obtain a distinct market price determination of the share and
that the Company gains access to capital markets. In addition, the
Board of Hakon Invest assesses that a market listing of the Company’s
common shares will result in increased awareness from the capital markets, mass media and the general public, which in turn will further
increase knowledge about and interest in Hakon Invest and its investments and thereby have a positive impact on Hakon Invest’s operations
and conditions for future development.
This prospectus has been prepared in conjunction with the listing of the Hakon Invest share on the O-List of the Stockholm Stock Exchange and
the sale of Hakon Invest shares that ICA-handlarnas Förbund is effecting in conjunction herewith. The Board of Directors of Hakon Invest is
responsible for the content of the prospectus. The Board of Hakon Invest hereby assures that, to the knowledge of the Board, the information in
the prospectus complies with the factual circumstances and that nothing of material significance has been omitted that could influence the
image of the Company as conveyed by the prospectus.
Stockholm, November 17, 2005
Hakon Invest AB (publ)
Board of Directors
1)
See section “Hakon Invest” for a description of the ICA concept.
9
President’s message
ACTIVE OWNERSHIP AND
E N T R E P R E N E U R S H I P C R E AT E VA L U E
In conjunction with Ahold’s entry as owner in ICA AB in 2000,
Hakon Invest was established to insure a significant and long-term
influence in ICA AB. In that it was possible together with Ahold to
create an ownership structure in ICA AB during 2004 that we consider stable over the long term, prerequisites were created for developing Hakon Invest’s operations. Against this background, we are
now working with a partially new business focus and strategy.
Hakon Invest is today a company for investors who with indirect
ownership ICA AB as the foundation wish to invest in Nordic retail
operations. We will continue to be a significant owner in ICA AB
with the objective of strengthening the ICA concept. However, we
will now become more aggressive in investing the Company’s financial assets, currently amounting to about SEK 2.8 billion, and in
leveraging the substantial expertise and extensive network that the
Company possesses in the retail sector.
I am very enthusiastic about leading the development of our
business. I strongly believe in retail as a sector for investment, as
well as in our capacity to create value in this area. During the past
year, we have built up an organization that is well prepared for the
task, and we have a Board of Directors with a background, knowledge and a contact network that will open many doors.
Owner responsibility and long-term commitment
A significant component in Hakon Invest’s investment philosophy is
a belief in owner responsibility and long-term commitment. The companies in which we invest should be able to feel secure in the
knowledge that we are in for the long term and that we will take
active part in development of the business. The fact that Hakon
Invest has a strong financial position and that we in turn are supported by a clearly identifiable, long-term and responsible owner in
the form of ICA-handlarnas Förbund further increases credibility.
Another important component is the approach to entrepreneurship.
10
We see clear links between exercising and leveraging entrepreneurship and the dynamics thus arising. We therefore consider it an
advantage in future investments that those who have built up the
business continue to be its owners.
Stable foundation in ICA AB with substantial opportunities
At the same time as I am enthusiastic about an exciting future with
new investments, I also wish to emphasize the value and the opportunities inherent in our existing holdings in ICA AB and Forma
Publishing Group.
With a 40% ownership share, Hakon Invest is one of two principal owners of ICA AB. As a long-term and active owner, we have
contributed to developing ICA AB into one of the Nordic region’s
leading retail companies with focus on food and meals. ICA AB currently has a strong position in Sweden and Norway, as well as in the
Baltic countries through joint-venture stores in all countries. At the
same time, ICA AB, in part through its 50% ownership share in the
Netto chain and the introduction of a new, cost-effective organization, has taken a position that allows it to meet the increased competition from low-price chains. The major successes noted by ICA AB
during the year with its broad price-reduction campaigns are further
proof of this. Given the company’s Nordic strategy, there is also
scope for geographic expansion, and the goal is to be the market
leader in all markets in which the company is active. We see substantial opportunities for continued creation of value within ICA AB.
The ICA concept – entrepreneurship and collaboration
An important underlying reason for ICA AB’s success lies in what we
call the ICA concept in which local retailers operate their own stores
but collaborate in the areas of logistics, sourcing and administration, thus achieving economies of scale. Through combining the
driving force of entrepreneurship and collaboration with others,
opportunities are increased for achieving both short- and long-term
profits for individual stores, as well as the ICA group. ICA-handlar-
nas Förbund, Hakon Invest and ICA AB therefore have a strong
common interest in strengthening and continuing to enhance the
ICA concept. Successful retailers benefit ICA AB and thereby also
create increased value for Hakon Invest.
The ICA concept thus reflects a belief in the individual and what
committed individuals can accomplish both on their own and
through cooperation. This also implies a belief that ownership,
responsibility and involvement in daily operations provide the best
foundation for a successful business. This approach will also
characterize Hakon Invest’s work with new investments.
Stable and aggressive Forma
We also see excellent prospects for growth and value creation in
Forma, in which Hakon Invest is the sole owner. With publications
that include ICA-kuriren, Hus & Hem and such customer magazines
as Stadium Magazine, Tiebreak etc. Forma is one of Sweden’s
largest magazine publishers. In addition, Forma is the leader in specialist books. The company is also active in Finland with several
leading publications. We view media as an attractive sector in
which the restructuring now in progress will create future opportunities. Today, Forma is a stable company with sound finances that has
excellent prospects for playing an active role in creating new structural solutions in this sector.
Creating value for existing and new owners
With the spreading of ownership now about to take place and the
exchange listing of the share being planned, we are at a milestone
in the development of Hakon Invest. I see many advantages with
this. Up until now, the share has only been traded within a closed
group of current or former ICA retailers. With the listing, Hakon
Invest will achieve a broader and more varied shareholder structure. In previous trading of the share, the price has always been
determined by a technical model, but I see a great advantage in
that the share will now have a market price. New owners, as well
as trading on the Stockholm Stock Exchange, will ensure a more liquid share. An additional positive consequence of the listing is that
Hakon Invest will gain access to the capital market. At present,
however, we see no need for new capital, since our existing funds
are more than adequate. The Company is also debt-free.
As a listed company, we will create clear added value for our
shareholders, and we will do so in several ways. One way will be
through our collective expertise and capacity to create growth in
value in the retail sector both in existing and future investments.
Another way will be through pursuing a policy of a high and stable
dividend level based on Hakon Invest’s strong financial position
and the fact that our principal owner has
elected to refrain from cash dividends
for the major share of its holding. I see
much that indicates that Hakon Invest
will be an attractive addition to the
Stockholm Stock Exchange and
welcome both existing and
new investors to be a part of
our future development.
Claes-Göran Sylvén
President
11
Hakon Invest
The name Hakon Invest, which was adopted by the 2005 Annual
General Meeting, derives from Hakonbolaget, which was founded
by Hakon Swenson in 1917 and which constitutes the foundation
for today’s ICA AB.
B A C K G R O U N D A N D H I S T O RY
Hakon Swenson founded Hakonbolaget in 1917 in Västerås,
Sweden. His idea was that individual store owners could join
together in purchasing centers to achieve economies of scale via
joint purchases, store establishments and joint marketing. ICA AB
Inköpscentralernas Aktiebolag) then developed from the purchasing
centers that had adopted Hakon Swenson’s ideas.
ICA-handlarnas Förbund, the non-profit members’ organization
for Sweden’s ICA retailers, was established in 1940. Through an
organizational change in 1972, ICA-handlarnas Förbund became
the principal owner of ICA AB, with about 60% of the capital and
about 70% of the voting rights. In other respects, there were a large
number of passive owners in ICA AB at that time. One of ICA-handlarnas Förbund’s tasks was and remains to exercise owner influence
in ICA AB, thus ensuring the company’s long-term development
through refinement of the ICA concept. The ICA concept is defined
as “voluntary cooperation of individual retailers between their share
(the store) and the whole (the ICA group).“ This means that local
businessmen operate the stores but that they realize that cooperation increases their ability to achieve short- and long-term profitability both for the stores and for the ICA group.
With ICA-handlarnas Förbund as principal owner, ICA AB developed into one of the Nordic region’s leading retail companies with a
focus on food and meals. In 1992, ICA AB acquired a minority share
of the Norwegian company that owned and operated the Rimi stores
in Norway and later also in Latvia. On January 1, 1999, the remaining shares in the Norwegian company were acquired from Stein Erik
Hagen’s family-owned company Canica AS. Payment was effected
through newly issued shares in ICA AB. ICA-handlarnas Förbund
remained as principal owner in ICA AB with about 38% of the shares
and about 55% of the voting rights. Canica AS received about 26%
of the shares and 19% of the voting rights. Other owners at that time
were ICA retailers and former ICA retailers.
During 1999, ICA-handlarnas Förbund and the Dutch food
retailer Ahold began discussions on ownership in ICA AB, with the
result that the plans then current for a listing of ICA AB were discontinued. Instead, the ICA group in 2000 underwent the greatest
change in ownership up until that date when Ahold entered as
owner. After the transaction, which was effected formally as a purchase of ICA AB as it existed then by a newly established company,
the owners of the ICA group were Ahold with a 50% share, Hakon
Hakon Invest
40% 1)
50%
Rimi Baltic
50%
Netto
ICA Sverige
1)
12
ICA Norge
ICA Meny
Portfolio companies
ICA AB
ICA Banken
Etos
Forma Publishing Group
Future Investment
According to the shareholder agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
100%
Invest1) with a 30% share and Canica with a 20% share. Prior to the
change in ownership in 2000, Hakon Invest received as assignment
from ICA-handlarnas Förbund to exercise an active ownership role in
ICA AB and to strengthen and develop the ICA concept. In conjunction with the ownership change, a target new share issue in Hakon
Invest was implemented such that shares were issued to former owners of ICA AB. Following that share issue, ICA-handlarnas Förbund
owned some 75% of the shares in Hakon Invest, while other owners,
primarily ICA retailers and former ICA retailers, owned about 25%.
As a result of the change in ownership of the ICA group, a
shareholders’ agreement was established in 2000 between Hakon
Invest, Canica and Ahold. The agreement, which extends until yearend 2040, contains clear rules for when and how changes in the
parties’ ownership may take place. Among other restrictions, the
agreement prevented the parties from transferring shares during the
first four years after the agreement was signed. After April 24,
2004, any party that so wished could reduce or completely divest
its ownership, whereby the remaining owners had the right, and in
certain cases, the obligation to acquire the offered shares subject to
certain conditions.
With the support of the ownership agreement, Canica extended
an offer to Hakon Invest in May 2004 to acquire its 20% of the
shares in ICA AB. Hakon Invest decided to decline the offer. Canica
then extended an offer to Ahold to acquire the shares in accordance
with the shareholders’ agreement. Ahold and Hakon Invest entered
an agreement in which Hakon Invest pledged to purchase half of the
shares that Canica offered. On October 25, 2004, Ahold and
Canica finally agreed on the terms for the transaction, and Hakon
Invest acquired half of the shares that Ahold acquired from Canica.
After these transactions, Ahold owns 60% and Hakon Invest
40% of the shares in ICA AB. The shareholders’ agreement from
2000 still applies between Hakon Invest and Ahold with a number
of supplements and amendments from 2004. According to the
agreement, as long as each party’s ownership amounts to between
30% and 70%, the parties have equal influence in ICA AB through
a stipulation in the agreement that decisions by the Annual General
Meeting and the Board of Directors must be in unity. Neither Hakon
Invest’s nor Ahold’s influence in ICA AB was thus changed through
the share transaction during 2004. See Supplementary information
for further information regarding the shareholders’ agreement.
In addition to the 40% holding in ICA AB, Hakon Invest currently also includes the wholly owned subsidiary Forma (formerly
ICA Förlaget AB). Forma was previously included in ICA AB but
1)
was acquired by ICA-handlarnas Förbund in 1999 in anticipation
of the planned exchange listing of ICA AB, which thus focused its
operations on food retailing.
Hakon Invest’s assets also include a securities portfolio consisting of short-term investments in interest-bearing securities and
shares. The management of these assets was previously focused on
maintaining high liquidity as a contingency in the event of possible
changes in ownership in ICA AB. The value of managed financial
assets, which are without pledges, amounted to some SEK 2.8 billion at September 30, 2005.
F U T U R E O R I E N TAT I O N
Following the acquisition of Canica’s shareholding by Hakon
Invest and Ahold, a stable ownership structure is anticipated in ICA
AB. Against this background, Hakon Invest’s principal owner and
the Board of Directors reviewed the Company’s future direction
during the past year. In order to ensure a favorable ownership
structure over the long term, a decision was taken during the spring
of 2005 to prepare for a listing of Hakon Invest on the O-List of the
Stockholm Stock Exchange. Furthermore, it was decided that
Hakon Invest’s operations should be expanded and given a partially new focus based on the expertise and the contact network
that the Company possesses in the retail sector. In future, Hakon
Invest shall pursue an active and long-term investment strategy
based on the successful ICA concept and with a focus on retail-oriented companies while continuing to exercise significant ownership influence in ICA AB. The Company’s financial assets shall be
used for investments primarily in unlisted companies in the Nordic
region. With significant and active ownership as the starting point,
Hakon Invest will contribute to providing the conditions and
resources for the operations in which the Company invests to
develop and grow profitably.
In summary, this means that Hakon Invest offers stock market
players a unique opportunity to invest in unlisted retail companies in
the Nordic region, with ownership in ICA AB as a strong foundation.
The name change to Hakon Invest, which was formally implemented in May 2005, is a step towards clarifying the new direction
in which the Company is working, as well as contributing to emphasizing that its operations are separate from ICA AB.
Vision
Hakon Invest, with ownership in ICA AB as a foundation, shall be
one of the Nordic region’s leading companies investing in the retail
Hakon Invest at this time was named ICA Förbundet Invest AB.
13
sector. Hakon Invest shall be the natural partner for retail companies
that wish to develop their business.
Mission
Hakon Invest, with its origins and ideals in the ICA concept and
through its financial capacity, shall create prerequisites for entrepreneurship, growth and profitability in retailing.
Business concept
Hakon Invest shall make long-term investments, primarily in the retail
sector in the Nordic region, with a sound spreading of risk and
shall secure the ICA concept over the long term. Added value for
shareholders will be created through growth in value in the investments and favorable direct returns achieved through being an
active and responsible owner.
Goals
• The dividend level for Hakon Invest shall normally amount to at
least 50% of the Parent Company’s profit after tax.
• The Hakon Invest Group strives to maintain an equity/assets ratio
of at least 70% over time.
• The goals established for ICA AB are:
– to be the market leader in the countries in which ICA AB is represented
– to increase sales over the long term faster than the total market
is increasing in each sub-market
– to achieve an operating margin (EBIT) of 3.5% to 4.0%
– to achieve a return on shareholders’ equity of at least 14% to
16% over a business cycle
– to maintain an equity/assets ratio of 30% to 35% over the long
term
• Hakon Invest and Ahold have pledged in the shareholders’
agreement to ensure that at least 40% of the ICA group’s earnings after tax will be paid as a dividend. A prerequisite among
other, however, is that this does not contradict sound business
practice and that due consideration is taken to the ICA group’s
investment plans and operational requirements.
• The average total return on Hakon’s own invested capital, for
Forma and future investments in portfolio companies, shall
exceed 15% over the holding period for each specific holding.
Investment focus
Hakon Invest’s investment strategy is based on a tradition of familyowned businesses, entrepreneurship and a long-term perspective.
Investments will primarily be made in unlisted Nordic retail companies that are characterized by an existing market position with a
clear concept, stable and sound cash flows and strong and motivated management. Investments will be made in companies that
have favorable growth and return potential that can be realized by
an active and committed long-term owner.
14
The following guidelines apply for Hakon Invest’s investments:
• Type of holding
Hakon Invest will primarily invest in unlisted companies, in part
as new investments and in part as supplementary acquisitions to
existing investments.
• Industrial sector
Hakon Invest will primarily invest in retail-oriented companies,
which is the sector in which the Company has the best prerequisites for being able to contribute to value-generating growth.
• Investment size
Hakon Invest indends to build a portfolio of 8–10 companies,
where the initial equity investment is estimated to amount to
around SEK 100–500 million.
• Geographical focus
Hakon Invest will primarily invest in the Nordic and Baltic countries.
• Investment phase
Hakon Invest prioritizes investments in companies that require
external capital, expertise and networks for continued expansion, in companies that need to implement structural changes or
in companies that need a change of ownership, for example in
conjunction with a change in generations.
• Company characteristics
Hakon Invest will invest in companies with a clear concept, stable
positive cash flows, favorable growth opportunities and strong
and motivated management. Furthermore, it is important that the
companies have an entrepreneurial culture or that the introduction
of such a culture is deemed to be able to create such values.
• Investment horizon
Hakon Invest will work with its investments over the long term.
Consequently, there is no established time period within which
an investment must be divested. Divestments will take place when
the time is considered right.
INVESTMENT CRITERIA
• Unlisted
• Retail-oriented
• Nordic and Baltic
countries
• Positive cash flow
• Favorable growth
prospects
• Clear concept
• Entrepreneurship
• Strong and motivated
management/owner
Hakon Invest
• Ownership role
Hakon Invest will exercise clear owner control, thereby being a
responsible and active owner. This demands that Hakon Invest
has a significant ownership share, normally between 20 and
49%. Hakon Invest also sees it as an advantage if previous owners remain in the company in some way. Being a long-term,
responsible and active owner is an important part of Hakon
Invest’s investment strategy.
Other criteria that Hakon invest takes into consideration are
strategy, previous performance, the organization’s competence,
company culture, entrepreneurial drive and financial and operative
risks. With a scope for investment of SEK 2.8 billion, Hakon Invest’s
portfolio will consist of and be focused on primarily unlisted holdings of varying sizes. The ambition is to keep financial risk at a low
level through low borrowing and high liquid capacity.
Hakon Invest’s long-term perspective on ownership will enable
portfolio companies and their management to work over the long
term to develop market positions and competitiveness.
BUSINESS STRUCTURE,
O R G A N I Z AT I O N A N D P E R S O N N E L
The Group consists of the Parent Company and the wholly owned
subsidiary Forma plus the holding in ICA AB, which is a joint-venture company owned together with Ahold. The companies operate
independently with responsibility for earnings and profits and with
Hakon Invest as an active and responsible owner with representation on the companies’ boards of directors.
At September 30, 2005, the Parent Company had an organization consisting of 11 employees, of whom four constitute Group
management. In the new investment organization that was established in line with Hakon Invest’s new focus, there are four employees (two investment managers and two controllers) reporting to the
Chief Financial Officer. Three persons work with accounting and
finance plus administration. All employees in the Parent Company
work in the head office in Solna, Sweden.
During 2004, the Parent Company had an average of 15
employees. However, as part of the preparations for exchange listing, the new investment organization was built up and the organization was strengthened, while service operations for members of
ICA-handlarnas Förbund were transferred as of July 1, 2005 to the
independent company ICA-handlarnas Medlemsservice AB.
Hakon Invest considers that the Company at present has sufficient personnel. If Hakon Invest at some future date should require
additional personnel, the Company expects to be able to recruit
suitable personnel without difficulty.
Hakon Invest is managed by the President, who is responsible
for ensuring that daily administration of the Group takes place in
accordance with the guidelines and instructions established by the
Board of Directors. Furthermore, it is the President’s responsibility to
ensure that the Group’s accounts are maintained in accordance
A G E D I S T R I B U T I O N I N T H E PA R E N T C O M PA N Y
Overview of ownership and operations structure
(SEPTEMBER 30, 2005)
4
Hakon Invest AB
3
2
40%1)
1
Portfolio companies
0
25–35
35–45
45–55
55–65
ICA AB2)
Forma Publishing Group
100%
G E N D E R D I S T R I B U T I O N I N T H E PA R E N T C O M PA N Y
1)
According to the shareholders’ agreement with
Ahold, Hakon Invest has a common controlling
interest in ICA AB in that it stipulates unity in
decisions at the Annual General Meeting and
in the Board of Directors.
2) See section about ICA AB under “Hakon
Invest’s holdings and financial management”
for an overview of the company’s organization.
Future Investment
(SEPTEMBER 30, 2005)
Women
3 persons
Men
8 persons
Översiktlig ägar och verksamhetsstruktur
Hakon Invest
15
with laws and recommendations and to ensure that there is a well
functioning accounting and reporting system. The President is also
responsible for personnel matters. The President is the chairman of
the management group, which meets regularly with minutes
recorded for each meeting.
Hakon Invest’s investment organization consists as described
above of four persons reporting to the Chief Financial Officer. The
Company’s investment managers have strong industrial and financial
expertise. These persons work actively with existing holdings while
continuously evaluating attractive new investment objects. In addition,
external financial and legal counsel will be engaged as required.
The Finance and Accounting function consists of two persons
reporting to the Chief Financial Officer. The function’s personnel are
responsible for preparing the Group’s accounts, forecasts and
budgets, for central finance operations and for rationalization and
increasing the efficiency of finance and accounting work within the
Group. The Finance and Accounting function is also responsible for
management of financial assets, which at September 30, 2005
were valued at SEK 2.8 billion.
The Legal function consists of the Chief Legal Officer, who is
responsible for matters of a legal nature. The Chief Legal Officer assists
associated companies with legal services as required on market terms.
The Information function consists of the information manager,
who is responsible for the Group’s external and internal communication. In addition, Hakon Invest has employed an IR manager who
will be responsible for investor relations and similar issues.
Hakon Invest assesses that the Parent Company’s ongoing
expenses, excluding transaction costs, amount to about SEK 35 million on an annual basis.
Selection: Hakon Invest will work actively to identify investment
objects in line with the above strategy and investment mandate. The
network that exists in and around Hakon Invest offers excellent opportunities for identifying investment objects. Developing its own initiatives and business flows are strategically important for Hakon Invest.
Evaluation: New investments are preceded by an intensive examination of the investment object. The evaluation includes company
visits, interviews with the management group and a review of their
qualifications, estimation of potential market growth, analysis and
valuation of the company’s strategy, positioning and concept. In
addition, an analysis of the company’s financial position is performed that provides the basis for the investment calculation and its
assumptions regarding such factors as future sales growth, margins,
working capital and cash flow. When a basic scenario has been
established, the opportunities for creating added value through
operational improvements, structural changes and financial measures are analyzed. This analysis constitutes an important part of
Hakon Invest’s investment plan and its role as owner. Persons in
Hakon Invest’s broad network with the appropriate expertise and
experience are included in the evaluation phase.
The result of the evaluation phase together with an analysis of
legal commitments, the company’s financial reporting and social
responsibility, provide the foundation for the final investment decision.
INVESTMENT PROCESS AND OWNERSHIP ROLE
Investment: If the company is deemed attractive, a more thorough
analysis is performed with respect to certain factors. After this analysis, supporting materials are compiled for an investment decision and
decision is taken. If the decision is positive, the financial structure and
circumstances are adjusted in each individual case to allow an active
and committed ownership role on the part of Hakon Invest.
Investment process
Hakon Invest works actively to identify potential investment objects.
Work with investments follows a structured process.
Owner control: To achieve favorable long-term growth in value,
Hakon Invest focuses on each individual holding, stimulates entre-
INVESTMENT PROCESS
Selection
16
Evaluation
Investment
Owner control
Divestment
Hakon Invest
preneurial thinking, uses and develops the network and contributes
capital. Active ownership is primarily exercised through work on the
board of directors and is adapted to the company’s specific requirements and challenges.
Together with any other owners and company management,
Hakon Invest develops a strategy and business plan that includes
specific measures and milestones intended to improve the company’s strategic position, growth and profitability. This plan will then
be followed up continuously and adapted to prevailing market conditions. Companies in which Hakon Invest invests should feel secure
in having Hakon Invest as an owner. As a result, the company and
its management should be able to focus all energy and resources
on further development of operations.
Divestment: Divestment of companies will take place when the time
is deemed appropriate and take place in a responsible manner that
takes the company’s long-term development into consideration. The
sale should always take place with the objective of generating as
great a return as possible for Hakon Invest’s shareholders.
Owner control in ICA AB and Forma
In all work with its holdings, Hakon Invest will strive to leverage its
experience and industrial networks and to contribute to the sharing
of knowledge, ideas and methods among the portfolio companies.
Hakon Invest’s owner role in ICA AB is primarily exercised
through active work on the Board of Directors, where Hakon Invest’s
President Claes-Göran Sylvén is the Board Chairman and its Chief
Legal Officer Fredrik Hägglund is a Board member. Ahold and
Hakon Invest each appoint four of the eight members of the Board of
Directors of ICA reserved for the owners. In addition to Claes-Göran
Sylvén and Fredrik Hägglund, Hakon Invest appointed the ICA retailers Peter Berlin and Per-Anders Olofsson as Board members. Ahold
appointed Anders Moberg, CEO and President of Ahold, Dirk
Anbeek and Arthur Brouwer as Board members in ICA AB.
Previously, Hannu Ryöppönen was also a member of the Board of
Directors of ICA AB, but this assignment was terminated when he
resigned his employment in Ahold. There is thus at present on position vacant on the Board. Hakon Invest monitors ICA AB’s financial
and operational development carefully through established reporting
routines for ICA AB and frequent meetings with ICA AB’s group management. The Board of Directors of ICA AB appointed Chairman
Claes-Göran Sylvén, Vice Chairman Anders Moberg and President
Kenneth Bengtsson as an Executive Committee. This committee meets
Hakon Invest
more frequently than the Board of Directors and monitors the ongoing operations of ICA AB and its various business areas, in part with
the support of a special reporting package. The committee has been
formed with the purpose to prepare items to be discussed and
decided by the Board of Directors and to support the CEO of the
Group to carry out the decisions made by the Board. The Board may
delegate to the committee to take action or decide on certain issues.
The committee has received mandate from the Board to decide on
investments and divestments of a maximum of SEK 100 million and
of financial positions beyond ICA AB’s financial policy. The committee has not received any other decision mandate. The committee
prepares minutes on the decisions taken and reports regularly to the
Board. The Board has the overall responsibility and exclusive competence to decide in more important matters affecting the Company.
Board members nominated by Hakon Invest also participate in the
work of the Board’s Remuneration Committee and its Audit
Committee.
Forma has also shown strong growth with Hakon Invest as
owner. Hakon Invest’s owner role in Forma is actively exercised
through work on the Board of Directors and through support in
strategic matters. Claes-Göran Sylvén is the Board Chairman and
Göran Hesseborn is a Board member. The Board actively works
with strategic questions and business development. Hakon Invest
also carefully monitors Forma’s financial and operative development
through well-established reporting routines. In addition to work on
the Board of Directors and meetings, Claes-Göran Sylvén and
Göran Hesseborn both work together with the President and management on major issues.
Shareholders’ agreement with Ahold
During 1999, ICA-handlarnas Förbund and the Dutch food retail
group Ahold initiated discussions regarding ownership in ICA AB.
As a result of these discussions, the plans for an exchange listing of
ICA, which were being considered at the time, were terminated.
Instead, the ICA group underwent the most extensive change in its
ownership to date, when Ahold became an owner in 2000. The
transaction was formally implemented as an acquisition of the then
ICA AB via a company that was newly formed by the owners and
which directed an offering to shareholders of ICA AB at that time
through a targeted share issue, whereupon the newly established
company called for compulsory redemption of outstanding shares
and obtained preferential rights to them. After the transaction, 50%
17
of the ICA group was owned by Ahold, 30% by Hakon Invest1), the
company through which ICA-handlarnas Förbund’s ownership of ICA
AB was exercised, and 20% by Canica. In conjunction with this, a
private placement in Hakon Invest was implemented, which resulted
in preference shares being issued to the former owners of ICA AB,
who mainly consisted of ICA retailers and former ICA retailers. The
newly established company and the former ICA AB were merged in
2002 and comprise the company that is currently ICA AB.
As a result of the ICA group’s ownership change, Hakon Invest,
Canica and Ahold formulated a shareholders’ agreement in 2000.
Among other points, the agreement, which expires at the end of
2040, contains clear-cut rules for when and how changes in any of the
parties’ ownership may be conducted. The agreement prevented the
parties from transferring their shares during the first four years after the
agreement was signed. After April 27, 2004, any party who so
desired was permitted to reduce or completely terminate its ownership,
whereby the remaining owners were entitled, and in certain cases
obliged, to acquire the shares on offer, subject to certain conditions.
In May 2004, supported by a provision in the shareholders’
agreement, Canica offered Hakon Invest the opportunity to acquire
Canica’s 20% interest in ICA AB. Hakon Invest decided not to accept
this offer. Canica subsequently invited Ahold, in accordance with the
shareholders’ agreement, to acquire the shares. Ahold and Hakon
Invest entered into an agreement pursuant to which Hakon Invest
undertook to acquire half of the ICA AB shares offered by Canica. By
October 25, 2004, Ahold and Canica had finally agreed on the
terms and conditions for the transaction, and Hakon Invest acquired
half of the shares that Ahold had acquired from Canica.
Following these transactions, Ahold owns 60% and Hakon
Invest 40% of ICA AB. The shareholders’ agreement from 2000 is
still in effect, subject to a number of supplements and revisions
agreed during 2004. According to the agreement, as long as both
of the parties’ ownership amounts to between 30% and 70%, the
parties retain equal influence over ICA AB through a contractual
requirement of consensus on resolutions made by the Annual
General Meeting and by the Board of Directors. Accordingly, neither Hakon Invest’s nor Ahold’s influence over ICA AB was changed
by the share transaction implemented in 2004.
In other respects, the shareholders’ agreement, with the supplements and revisions agreed during 2004, has the following main
implications:
1)
18
• ICA AB’s operations shall be further developed in the Nordic and
Baltic region, with the exception of Denmark, which since 2004
is no longer included in the agreed geographical area of activity.
• ICA AB’s Board of Directors shall consist of eight members
elected by the Annual General Meeting and four deputy members. Of these, Hakon Invest and Ahold each have the right to
nominate four members and two deputy members. The Board
shall also include representatives of the employees.
• The parties are subject to a right-of-first-refusal clause permitting
them to acquire shares at market price in connection with the
transfer of shares. Shares may only be transferred to a party who
signs the shareholders’ agreement. Hakon Invest may exercise its
right of first refusal for all shares or for a portion of the shares, so
that the Company’s holding would amount to 50% of the shares
in ICA AB. Since 2004, Hakon Invest no longer has an option to
sell its shares to Ahold.
• The parties may not directly or indirectly engage in operations
that compete with ICA AB in the geographical markets covered
by the agreement. The term “operations that compete with ICA
AB” is not intended to include operations that to a material extent
(in terms of more than 95% of profits or sales) pertain to activities
other than food wholesale or retail operations.
• If a party’s ownership falls below 30%, the requirement for consensus in respect of all resolutions made by the Annual General
Meeting and the Board of Directors no longer applies and only
applies to certain typical intervention decisions.
• If a party’s ownership falls below 20%, the agreement ceases to
apply.
• The earliest date that notice may be served terminating the
agreement is at the end of 2040.
• If ICA-handlarnas Förbund should sell additional shares in Hakon
Invest, or if the Förbund’s ownership interest is reduced in any
another manner and another party secures an ownership interest
that exceeds 50% of the shares or votes in Hakon Invest, this
would be a breach of the shareholders’ agreement. In the event
of such a breach of agreement, Ahold would be entitled to
acquire Hakon Invest’s shares in ICA AB. ICA-handlarnas
Förbund’s Articles of Association state that the Förbund shall own
a minimum of 51% of the shares in Hakon Invest.
Hakon Invest was at this time named ICA Förbundet Invest AB.
Hakon Invest
• From the end of 2004 and during a subsequent maximum period
of five years, the parties are obliged, at the request of either
party and in certain agreed situations relating to company acquisitions and in the event of a serious financial situation for the ICA
Group, to contribute, to an extent proportional to their shareholding in ICA AB, a total of not more than SEK 1.8 billion through
the issue of new shares. For Hakon Invest, the conditional undertaking corresponds to a maximum of SEK 720 million. Neither of
the parties has raised the matter of such a new issue of shares
and nor is such a matter the subject of discussion between the
parties or in ICA AB’s Board of Directors. The probability of this
conditional undertaking actually being realized is deemed to be
very unlikely, but is under continual review.
• Since 2004, each party has the right to initiate the matter of an
exchange listing of shares in ICA AB, including the sale of all or
part of such a party’s shares.
• Since 2004, the parties have contributed to ensuring that ICA AB’s
internal control and financial reporting are adapted to Ahold’s obligations in accordance with US Sarbanes-Oxley legislation pertaining to Ahold’s ownership in ICA and to Hakon Invest’s obligations
in accordance with generally accepted accounting practice.
Purchase guarantee in accordance with
Framework Agreement on behalf of Ahold
In the agreement, named the Framework Agreement, which regulated the terms and conditions for Ahold’s acquisition of shares in
the ICA Group in 2000, Hakon Invest made certain guarantees,
including guarantees pertaining to certain relationships concerning
ICA’s dealings with Ahold. With respect to most of these guarantees
and special undertakings, the period within which Ahold is to forward any such claims has now expired without any such claims
having been made. Claims may possibly be made up to May
2010 with respect to a certain environmental matter in the US
related to a company in the former Hakon Gruppen AS Group.
There is also a possibility that claims relating to the right of ownership to the transferred shares in ICA AB or to ICA AB’s subsidiaries
may still be made. Hakon Invest’s liability is formally limited to SEK
1,340 million. Hakon Invest is not aware of any circumstance that
entails a significant risk that Ahold could make a claim for which the
Company would be responsible.
Hakon Invest
SECTOR FOCUS
With its roots in the ICA sphere, Hakon Invest possesses substantial
retail expertise and has an extensive network. This core competence means that Hakon Invest is primarily focused on Nordic
unlisted retail companies.
The Nordic retail sector – market trends
The market for retail sales and infrequently purchased goods shows
stable and favorable growth over the entire Nordic region driven by
the increase in private consumption in recent years. The positive trend
is expected to continue, primarily as a result of low interest rates, anticipated tax reductions and somewhat lower unemployment.
Nordic retail sector today
There is a tradition in the Nordic countries of developing new, successful retail companies. An important reason for the success of
these players is that they have built a business on a clear and
uniquely formulated concept that appeals to many consumers and
that has proven to be sustainable over a longer period. Many
Nordic retail companies have also been successful in establishing
their concepts outside their home countries. Examples include IKEA;
H&M, Jysk, Elkjöp, Clas Ohlsson, K-Rauta and Mekonomen.
Retail sales in the Nordic region are still to a high degree a
local phenomenon, however. The presence of international retail
chains is low, compared with the rest of Europe. One reason for this
is that the Nordic countries, with their small populations and large
distances between population centers, have not been prioritized by
retail companies in international expansion. The presence of international retailers is increasing constantly, however, particularly
through Nordic companies expanding in the Nordic region. In
these cases, Sweden is particularly attractive, given its geographic
location and its large population relative to its Nordic neighbors.
What is also characteristic of Nordic retailing is the geographic concentration to major cities, a trend that has accelerated
with the strong growth of shopping centers and hypermarkets over
the past 15 years. This is most evident in Sweden and Norway. In
the other countries, the number of shopping centers is lower due to
geographic prerequisites and legal restrictions with regard to localization and size.
The market is also influenced by the fact that a few players have
gained a strong position in various segments where low prices are
often a significant factor.
19
Trends
There are many indications that the presence of international players will continue to increase, as will the concentration of retail sales
to population centers and their shopping centers. Consumers are
increasingly price conscious, and many retail companies will continue to build successful businesses on clear concepts with price as
the primary means of competition. To be able to offer lower prices
to the consumer, companies must continue their work to reduce purchasing costs, centralize such functions as purchasing, marketing
and product development and utilize sales space and personnel
more effectively. The concept-driven retail companies are expected
to continue taking market shares from specialty retailers.
Apart from these general trends in the Nordic retail market,
there are a number of more or less evident trends. The following are
some examples:
– Standardization of the major retail companies’ stores is expected
to continue, with an increasingly uniform image, store layout,
location, etc. Clarity of concept is strengthened to achieve
greater recognition and a more similar experience for the consumer, which is assumed to increase customer loyalty. Individual
stores tend to be larger but fewer in number.
– Vertical integration in the retail value chain is increasing.
Suppliers strive for forward integration and to take control over
the customer relation, at the same time as retailers integrate backwards and to an increasing degree market products under their
own brands.
– Retail companies’ use of customer loyalty systems, such as customer cards and membership cards linked to bonus systems is
also expected to increase. This phenomenon is for the time being
most prevalent in Sweden.
– At the same time, the increasingly uniform offering, in which the
same stores are found in more and more cities and in the same
shopping centers, creates opportunities for innovative new players with new concepts. There is always room for new concepts
that are developed in pace with changes in people’s life styles
and preferences. Notable examples are the increasing number
of single-person households and the trend towards a 24x7 society in which consumers want to be able to make their purchases
at different times during the day and in the week.
20
– When many of the major retailers’ concepts are based on price as
the primary competitive factor, at the cost of location, quality,
product selection and service level, scope is also created for players who place the primary emphasis on an attractive shopping
environment for the consumer. This may mean offering a more personal relation, for example, or investing in store fittings and products design and attracting customers with store activities.
– The Internet’s share of total retail sales remains limited but is
expected to continue to increase. Internet retailing is most prevalent in Sweden, and the most popular goods sold on the Internet
are CDs/music, books, electronics and travel. Here there are
also substantial opportunities for new players with innovative,
clear and economically viable concepts.
HAKON INVEST AND THE MARKET FOR
I N V E S T M E N T S I N U N L I S T E D C O M PA N I E S
Since Hakon Invest will invest primarily in unlisted companies in the
Nordic retail sector, this means that Hakon Invest will be active in
the market for unlisted companies, which is called the private equity
market.
Risk capital
Risk capital
Public Equity
Private Equity
Venture capital
for listed companies
Venture capital
for unlisted companies
Business Angles
Venture Capital
Buyout
Investments by
private persons
Investments in seed or
start-up companies or
expansion phases
Buyout deals
supplemented by
loan financing
Source: Swedish Private Equity & Venture Capital Association.
Hakon Invest
Development of market for investments in unlisted companies
The private-equity market has shown variable growth over the past
six years, both in Europe and in Sweden. The average increase in
investments between the years 1999 to 2004 amounted to 8% per
year in Europe, while the corresponding figure for Sweden was 9%.
In 2004, capital managed by private-equity companies in
Sweden amounted to about SEK 215 billion, of which some SEK
115 billion was invested. During that year, about SEK 17 billion
Venture Capital
Buyout
Cash flow
Market for investments in unlisted companies
What characterizes a private-equity company is that it works with
risk capital investments in unlisted companies. The private equity concept is usually considered to include investment both in the earlier
and later phases of a company’s development. Private-equity companies can be divided into two types, which are private-equity companies that manage private-equity funds and private-equity companies
that use funds available in operations for investments in various companies. Characteristic of private-equity funds is that they are owned
by several different investors (such as banks, pension funds and insurance companies) and a management company. Usually the fund is
limited both in its amount and its duration. The management company is then responsible for managing the fund, which includes
acquisitions of portfolio companies, their development and in the
final stage divestment. Examples of private-equity companies responsible for private-equity funds are Altor, EQT, Industri Kapital, Nordic
Capital, Procuritas, Segulah and Priveq. Characteristic of the second
type of private-equity companies is that they are often limited liability
companies that obtain capital for investments via share capital from
the owners or borrowed capital from credit institutions. Some examples of companies of this type is Ratos, 3i, Stena Adactum and
Novax. This is also the structure that is most comparable with the
structure that Hakon Invest will have. However, Hakon Invest differs
from private-equity companies in general in that Hakon Invest will
have a more long-term perspective on its investments and work without any established time limit for divestments and that it will have a
clear sector focus for its investments.
Hakon Invest considers that likely competitors are found both
among the privat-equity funds and among the limited liability companies.
Maturity
Decline
Expansion
Time
Seed and start-up
Source: Swedish Private Equity & Venture Capital Association.
A M O U N T I N V E S T E D I N E U R O P E A N U N L I S T E D C O M PA N I E S
EUR
billion
40
35
30
25
20
1999
2000
2001
2002
2003
2004
Source: EVCA/Thomson Venture Economics/PriceWaterhouseCoopers.
A M O U N T I N V E S T E D I N S W E D I S H U N L I S T E D C O M PA N I E S
SEK
billion
20
15
10
5
1999
2000
2001
2002
2003
2004
Source: Swedish Private Equity & Venture Capital Association.
Hakon Invest
21
was invested in unlisted companies, corresponding to 0.58% of
GDP. This put Sweden in second place in Europe after the UK. The
figure above left shows the ten European countries with the highest
share of venture capital investments. The figure also shows the
European average.
The buyout segment, meaning investments in more mature and
established companies, accounts for the largest share of the
invested capital. The fact that the buyout segment is larger than the
venture-capital segment in which capital is invested in companies in
early stages of development is natural, since buyout investments
often take place in companies that have had time to build up substantial value in comparison with newly started companies.
With respect to the number of players active in the Swedish private-equity market, the number has increased sharply in recent
years. Although buyout players account for the major share of the
total invested capital, most players are active in the venture capital
segment.
The venture capital market and private-equity companies are an
important source of financing for many companies and thus for both
growth and development of industry. The availability of venture capital, however, is not the only thing that private-equity companies
contribute. What characterizes private-equity companies is that they
contribute to a company’s development in other ways. Private-equity
companies are often active in their portfolio companies, particularly
with respect to strategic and financial issues and recruitment.
Characteristic of companies supported by a private-equity company is that they often make significant investments and show rapid
growth, which naturally creates jobs. In this way, private-equity
companies also perform an important social function.
R I S K C A P I TA L I N V E S T M E N T S A S % O F G D P 2 0 0 4
%
1.2
1.0
0.8
0.6
0.4
0.2
0.0
s
y
kSpanien
n UK
in
ce Storbritannien
al
dFrankrike
nd wayTyskland
geHolland
Portugal
arEuropa
anDanmark
de
la Norge
an Sverige
ug Finland
pa ragenomsnitt
an
rt
Po
Fin
or
N
er
m
G
nm
S
De
ea
op
e
n
av
l
er
Fr
eth
N
e
Sw
r
Eu
Source: EVCA/Thomson Venture Economics/PriceWaterhouseCoopers.
DISTRIBUTION OF THE NUMBER OF INVESTMENT IN
D I F F E R E N T P H A S E S , U N L I S T E D C O M PA N I E S 2 0 0 4
No.
800
700
600
500
400
300
200
100
0
t
l
t
n
se
ed Start-up
up
Sådd
Buyout
Totalt
ta
en
io Replacement
ou Fashaokänd
rt- Expansion
To
Se
ns
uy
em
p
ta
S
a
xp
E
c
a
pl
B
Re
o
kn
Un
Phases
wn
Source: Swedish Private Equity & Venture Capital Association.
D I S T R I B U T I O N O F C A P I TA L I N V E S T E D I N
U N L I S T E D C O M PA N I E S , S E K M 2 0 0 4
SEK M
20,000
15,000
10,000
5,000
0
t
l
t
n
se
ed Start-up
up Expansion
Sådd
Buyout
Totalt
ta
en
io Replacement
ou Fashaokänd
rtTo
Se
ns
uy
em
p
ta
S
E
a
xp
c
Re
a
pl
B
Un
Phases
n
ow
kn
Source: Swedish Private Equity & Venture Capital Association.
22
Hakon Invest
23
Hakon Invest’s holdings and
financial management
Hakon Invest has holdings in ICA AB and the Forma Publishing Group, as well as financial investments to manage the Company’s cash flow.
ICA AB
Hakon Invest’s holding in ICA AB is a joint-venture company with Ahold. The description of ICA AB is based on information published by ICA AB
and information provided by ICA AB at the request of Hakon Invest. After consultation with ICA AB, Hakon Invest has decided how the information
would be presented in the prospectus. Hakon Invest’s Board of Directors is responsible for the contents of this prospectus.1) As a part of the
Stockholm Stock Exchange’s review process prior to the exchange listing of Hakon Invest, a legal review of ICA AB has been conducted.
ICA AB is one of the Nordic region’s leading retail companies with
focus on food and meals, with slightly more than 2,600 of its own
and associated stores in Sweden, Norway and the Baltic countries.
The company has net sales of more than SEK 71 billion and is 40%
owned by Hakon Invest and 60% by Ahold. However, by agreement, the owners have equal influence over ICA AB.
ICA AB comprises ICA Sverige, ICA Norge, Etos and the partly
owned companies Rimi Baltic and Netto Marknad, which combined
have a large network of stores in Sweden, Norway and the Baltic countries. It also includes ICA Meny, which specializes in distribution to
restaurants, caterers and convenience stores. ICA AB also offers financial services to Swedish customers through ICA Banken.
Hakon Invest
40% 1)
50%
Rimi Baltic
50%
Netto
ICA Sverige
1)
ICA Norge
ICA Meny
Portfolio companies
ICA AB
ICA Banken
Forma Publishing Group
Etos
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
About ICA AB
HAKON INVEST
40%
60%
Influence1)
50%
50%
B O A R D M E M B E R S A P P O I N T E D B Y:
Sales (SEK M)
Operating profit (SEK M)
Number of employees (average)
Number of stores (at year-end) 4)
1)
2)
3)
4)
1)
24
AHOLD
Ownership share
3)
HAKON INVEST
AHOLD
Claes-Göran Sylvén (President, Hakon Invest)
Anders Moberg (President and CEO, Ahold)
Fredrik Hägglund
(Chief Legal Officer Hakon Invest)
Dirk Anbeek
(Senior Vice President Business Control, Ahold)
Peter Berlin (ICA retailer)
Arthur Brouwer (Chief Business Support Officer, Ahold)
Per-Anders Olofsson (ICA retailer)
Vacant
2 0 0 2 2)
2 0 0 3 2)
2 0 0 4 2)
2 0 0 4 ( I F R S ) 2)
JAN–SEP 2005 (IFRS)
70,908
71,980
71,811
73,531
52,514
2,535
2,120
1,866
1,977
1,341
15,732
16,836
17,206
18,781
12,295
2,955
2,829
2,628
2,628
2,581
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in
the Board of Directors.
The figures include business areas that were divested during the year.
Refers to the average number of employees calculated on the basis of 1,800 annual working hours.
Also includes joint venture stores (Netto and Rimi Baltic).
See section “Background and reasons”.
Hakon Invest’s holdings and financial management
ICA AB’s geographic market and operations
ICA AB views the Nordic region and Baltic countries as its primary geographic market. ICA
AB is currently represented in Sweden, Norway, Estonia, Latvia and Lithuania. The goal is
to be the market leader in the countries where ICA AB is represented.
The following table provides a general description of ICA AB and its various areas of
operation. The areas of operation are described in more detail later in this prospectus.
Overview of ICA AB1)
PA R E N T C O M PA N Y
ICA AB 3)
The operations of the parent company are described below:
Finance
Finance includes financial control, accounting, shared services, treasury & tax,
legal, internal audit and strategic projects.
Retail
Retail includes market, business development, market analysis,
corporate communications, human resources, etc.
Supply Chain
Includes sourcing, logistics development and IT.
SALES
(SEK M)
NO. OF EMPLOYEES
( AV E R A G E ) 2 )
547
474
W H O L LY O W N E D O P E R AT I O N S
ICA Sverige 4)
ICA Sverige is one of the leading retail companies with focus on food and meals.
ICA Sverige’s operations comprise sales, operations and new establishments. 5)
43,373
4,407
ICA Norge 4)
ICA Norge is one of the leading retail companies with focus on food and meals with
stores operated on a proprietary basis or as franchises. ICA Norge’s operations
comprise sales, operations and new establishments. 5)
19,896
5,540
ICA Meny
ICA Meny is one of Sweden’s leading food, beverage and kitchen equipment
suppliers to restaurants, caterers and convenience stores.
4,355
899
ICA Banken
ICA Banken shall make it easier for Swedish ICA stores’ customers to manage their
economy and as a result strengthen customer loyalty.
58
121
PA R T LY O W N E D O P E R AT I O N S
Rimi Baltic (ICA Baltic) 6)
As of 2005, Rimi Baltic is equally owned by ICA AB and Kesko Livs, who jointly are
developing one of the most modern retail chains in the Baltic with wholly owned stores.
3,307
5,286
Netto 7)
Netto is equally owned by ICA AB and Dansk Supermarked A/S.
Netto operates on a hard discount basis. The concept was developed in Denmark,
where Dansk Supermarked A/S manages the chain.
1,194
540
1)
2)
3)
4)
5)
6)
7)
Figures in the table refers to 2004.
Refers to the average number of employees calculated based on 1,800 hours of working time.
Includes the specialty retain chain Etos with sales of about SEK 31 million and 23 employees. Etos has wholly owned stores and combines products for health and beauty. Also includes
some subsidiaries within importing and finance.
Within each national operations area, the consumer goods operations are reported integrated with property management (see more information under ”Finance group function” below).
Sales refer to ICA Sverige and ICA Norway shall help to stimulate sales to consumers. Operations means providing the stores with advise and measures to achieve efficient store operations. Establishments involves identifying and developing new store locations and to participate in the development of existing stores through renovation and expansion.
Figures in the table refer to the by ICA AB during 2004 wholly owned operations ICA Baltic. Rimi Baltic is a joint venture with Kesko Livs (50/50) formed in 2005.
ICA AB’s share amounts to 50%.
Hakon Invest’s holdings and financial management
25
Revenue sources
ICA AB’s main revenue sources can be divided into retail sales,
product supply, ICA agreements/franchising and property, services
and bank – as shown in the following table.
Business model
The ICA group originated in the ICA concept, where individual
retailers join together in areas such as sourcing, IT and logistics to
achieve the same economies of scale as wholly owned chains.
Local retailers and ICA AB’s various areas of operation serve customers in their own markets through locally adapted stores and
offerings, while the group coordinates functions that customers do
not see. The ICA concept is ICA AB’s greatest strength in meeting
the challenges and opportunities currently facing the company –
from new competitors, the growing popularity of eating out and
increased consolidation among suppliers. The key is to utilize
economies of scale combined with local adaptations as close to
customers as possible.
ICA AB’s operations include the management of sourcing and
logistics, the development of strategies for various store concepts
and marketing, the management of communications and human
resources issues, as well as the development of sales, operations
and store establishment. Sales development should stimulate sales
to consumers. In developing its operations, ICA AB aims to assist
the stores by providing advice and undertaking specific measures
to achieve more efficient store operations. In conjunction with store
establishment, ICA AB will identify and develop entirely new store
locations and help develop existing store locations through refurbishment, modernization and additions. ICA AB’s activity takes
place in cooperation with the ICA retailers, who often own and
operate the stores. ICA AB’s efforts in these areas are aimed at
increasing sales to consumers and, hence, to the stores, as well as
increasing the profitability of the stores and of ICA AB in order to
ensure that the operations will be successful in the long-term.
Retailing. Through certain of its areas of operation, ICA AB conducts
retailing operations – that is, sales to consumers. ICA Sverige receives
revenue from the consumer by operating Maxi Special. Maxi Special
is a special department of the Maxi stores that sells home and leisure
articles. As of 2005, revenues are also consolidated from the retail
companies in which ICA AB during the start-up period following the
store establishment owns more than 50% of the shares. Retail sales
are also a key area in Norway, where ICA AB owns many of the
stores, as well as in Rimi Baltic and Netto, in which the stores are
owned by the particular company. As regards Etos, ICA AB owns all
stores and consequently consolidates all retail sales.
Product supply. ICA AB functions both as a purchaser and product
coordinator that purchases goods and coordinates logistics and distribution and then sells these goods and services to the company’s
customers, which are the ICA stores in Sweden and Norway.
Goods are also supplied via ICA Meny to restaurants, caterers and
convenience stores.
According to prevailing business terms, sale of consumer goods
takes place from ICA Sverige to the stores with a fixed, specific
markup on the goods with the exception of private label goods that
the stores may only purchase from ICA AB and for which the
markup varies among different items. In Norway, the markup occurs
at the item level.
Sources of revenue
ICA SVERIGE
26
ICA MENY
ICA BANKEN
ETOS
R I M I B A LT I C
NETTO
Retail sales
From Maxi Special
From wholly
and stores where
owned stores
ICA Sverige owns more
than 50% of the shares
ICA NORGE
–
–
From
wholly
owned
stores
From
wholly
owned
stores
From
wholly
owned
stores
Product supply
From deliveries to
ICA stores and
Maxi Special
From wholly
owned franchise
and associated
stores
From
restaurants,
catering and
service sales
–
–
–
–
ICA Agreement/
Franchising
From royalties
and/or profit
sharing
From
franchise
fees
–
–
–
–
–
Real estate
From rental
income and
real estate sales
From rental
income and
real estate sales
–
–
–
–
–
Services
From sales of such
–
services as advertising
production, training
and store technology
–
–
–
–
–
Banking
–
–
From sales
of financial
services
–
–
–
–
Hakon Invest’s holdings and financial management
Stores in Sweden also pay a sales-based fee to ICA Sverige to
cover the costs of joint resources and development of ICA’s operations. In Norway, the corresponding fee is included in the franchise
fee described below.
ICA agreements/Franchise. One source of revenue is the royalty
and/or portion of profit or franchise fee that ICA AB receives from
the stores that are not wholly owned by ICA Sweden or Norway.
The stores pay for using ICA AB’s brand name and store locations.
The royalty and the franchise fee are sales-based – which implies
that it is in ICA AB’s interests that these stores perform as well as possible. In Sweden, the stores pay a royalty and/or a portion of their
profit, whereas the stores in Norway pay a franchise fee.
Properties. ICA AB’s property operations own the franchise stores in
many cases or hold leases on the store premises. For using the store
premises, the individual retailers in both Sweden and Norway thus
pay rent on market terms. The sale of properties is another source of
revenue for ICA AB.
Services. ICA AB sells services to those retailers who so desire. ICA
AB offers such services as advertising production, training and store
technology. Most of the services currently offered are only available
in the Swedish market.
Bank. The sale of financial services is ICA Banken’s source of revenue.
Financial targets
ICA AB’s long-term goal is to increase sales faster than the total market is growing in each sector.
The profitability goal is an operating margin (EBIT) of
3.5–4.0%. The return on equity over a business cycle should be at
least 14–16% and the long-term equity/assets ratio 30–35%.
According to the shareholders’ agreement, Hakon Invest and
Ahold have pledged to ensure that ICA AB will pay a dividend of at
least 40% of the ICA group’s profit after tax. This assumes, however,
that the dividend does not contradict sound business practice and
that due consideration is taken to the ICA group’s investment plans
and operational requirements.
ICA’s private labels
One of the ICA group’s strategies is to increase the
share of its own labels. The range of ICA privatelabel (PL) products should offer customers quality
products at low prices while strengthening customer loyalty.
Hakon Invest’s holdings and financial management
Vision
ICA AB’s aim is to make every day a little easier.
Mission
ICA AB’s mission is to be the leading retail company focusing on
food and meals.
Strategies
ICA AB should be a farsighted, dynamic company with solid
finances and a commitment to the environment and social issues.
The keys to ICA AB’s approach are prioritization, coordination, simplicity and cost reduction. In specific terms, this means the group
has formulated the following strategies for its operations:
• Utilize ICA AB’s economies of scale by
coordinating central functions and concepts
ICA AB will increase coordination of central functions and concepts at the Nordic level to take advantage of synergies between
companies. These efficiencies will be largely reinvested in lower
prices, to strengthen ICA AB’s profitability and position in the
Nordic food retail market.
• Locally adapted concepts
At the same time that it uses its scale to coordinate and benefit
from synergies, ICA AB will continue to adapt its local offerings
to consumers’ wishes. These local adjustments can be made by
the individual retailer or through concepts designed for various
geographic markets.
• Cost efficiency
The ICA group is working to improve the efficiency of its operations and reduce costs.
• Common format strategy
The ICA group has adopted a format strategy for its operations in
Sweden and Norway consisting of concepts for hypermarkets,
supermarkets, convenience stores and discount stores.
• Price and assortment
ICA AB will increasingly focus on cutting prices while developing
its product range and improving efficiencies.
ICA is the umbrella brand and should be
associated with the core values simple, personal,
safe, inspiring and modern. The products are sold
in ICA stores in Sweden and Norway.
Euroshopper is ICA AB’s low-price assortment. Euroshopper was developed in cooperation
with nine European companies in 15 countries,
including Kesko, Albert Heijn, Dansk
Supermarked and ICA AB.
27
• Adapt to changing consumer buying habits
By improving its stores and offerings, ICA will adapt to changing
consumer buying habits.
• Offer an attractive product range focused on private labels, fresh
foods and non-food items
ICA AB will continue to emphasize fresh foods, non-food items
and private label (PL) products. The group’s range of PL products
gives consumers greater choice, high quality and lower prices.
These measures will increase sales and profitability for the ICA
group and the retailers.
The products profile ICA AB by representing quality and
value for money. Many of the products also have added value
that other products lack. ICA AB has ecological and fairly
labeled products, for example, as well as alternatives for persons
with allergies. The share of sales continues to increase. In
Sweden, it amounts to about 12% and in Norway to 6.5%.
• Social responsibility
The ICA group contributes to a sustainable society by minimizing
the negative impact of its operations on the environment and taking responsibility for the conditions under which its own products
are produced. ICA AB also promotes the health of its customers
and employees by offering safe and nutritious products and
through continuous improvements in its working environments.
Organization
The ICA group’s goal is to be the market leader in the areas in
which it competes. To meet the increasingly challenging competition, ICA AB is focusing even more on sales-enhancing measures
and cost effectiveness in all operations. Coordination within and
between the group’s different operations is a top priority.
A joint venture in the Baltic region with Finnish Kesko Livs was
established in a bid to attain market leadership in this region more
quickly.
ICA Sverige and ICA Norge are strictly sales companies with
responsibility for operations, sales and new establishments. ICA
Meny is also focused on sales. The underlying operations Finance,
Retail Sales and Supply Chain function as support functions for the
sales companies.
ICA AB is the parent company of the ICA group. The parent
company, including the wholly-owned Etos and certain import and
finance-oriented subsidiaries that comprise the ICA AB operations
segment, have net sales of SEK 547 million, of which external net
sales account for SEK 202 million and internal net sales for SEK 345
million. The external net sales consist of IT services and sales in Etos.
The internal net sales consist of fruit import. The internal net sales are
eliminated in conjunction with the preparation of consolidated
accounts. The parent company also includes several cost items.
These are mainly costs for personnel and external services. Otherwise, revenues and expenses that arise in ICA AB are distributed
among the subsidiaries.
ICA AB includes three overall group functions: Finance, Retail
and Supply Chain. These functions support the sales companies
28
ICA Sverige, ICA Norge and ICA Meny, as well as the individual
stores, in various matters. The three overall group functions are
described in further detail below. Detailed descriptions of the other
areas of operation are provided in subsequent sections.
Finance group function
The group’s Finance function includes Financial Control,
Accounting, Shared Services, Treasury & Tax, Legal, Internal Audit
and Strategic Projects. The Finance unit is a group support function
but it is also a support function that individual retailers can take
advantage of, for a fee.
Financial Control’s areas of responsibility cover all parts of the
ICA group – that is, the Finance, Retail and Supply Chain group
functions, as well as the sales companies. The Accounting unit
includes all employees involved in the preparation of reports to
management and the Board of Directors. The Shared Services unit
handles accounting, payments, and payroll administration, and the
unit’s services are purchased by a large proportion of the individual
retailers. The Treasury & Tax unit handles borrowing, cash flow and
tax issues, whereas Legal is responsible for legal issues. The Internal
Audit unit reports directly to the ICA AB’s audit committee, so indirectly it reports to the Board as well. The Strategic Projects unit evaluates acquisitions and sales of various operations.
During 2004, the group completed a major restructuring of the
internal bank function. This function, which was previously provided
through ICA Finans and to a certain extent in ICA AB, now operates
as a Swedish branch of one of the group’s Dutch subsidiaries.
Several treasury functions are handled by employees in this branch.
The branch office has in turn acquired ICA Finans AB from a Dutch
subsidiary with the objective of managing group lending through this
subsidiary. The branch office and ICA Finans together comprise the
group’s entire internal banking function. See also the heading
ICA AB’s organization
ICA AB
CEO and President
Rimi Baltic AB
50%
Netto Marknad AB
50%
Finance
ICA Fastigheter AB
Retail
Supply Chain
Etos AB
ICA Banken AB
ICA Sverige AB
ICA Norge AS
ICA Meny AB
Hakon Invest’s holdings and financial management
“Supply chain group function” where sourcing operations in the
Dutch subsidiary are described.
The ICA group’s real estate operations report to the Finance
function. Real estate operations are an integral part of ICA AB’s
business model and provide important support for retail operations
in which success is essential for ICA AB’s long-term success. The purpose of the real estate operations is to provide serviceable premises
and strategically located business locations for the ICA group and
the ICA retailers by developing, buying, selling and actively managing properties. Attractive store locations provide an important
basis on which to achieve strong store profitability, so the real estate
operations play a key role in the group.
Real estate operations follow ICA AB’s store-opening plans,
meaning that the real estate portfolio increases when the rate of store
openings is greater than property divestments and vice versa. In conjunction with store openings, it is the real estate operations that handle the actual acquisition of the site and the construction of the property, whereas the store-opening unit finds an appropriate location.
Negotiations with the municipality and property owner are handled
by ICA AB’s store-opening unit or the real estate unit, depending on
which unit has the best prerequisites in the individual case.
Accordingly, there is a clear division of roles between the real estate
operations and the other units of the ICA group – even though in
terms of their operations they are very dependent upon one another.
The real estate operations are conducted under market-level return
requirements, which implies that all stores pay market-level rent and
that new store establishments or renovations are never carried out if
the store cannot subsequently carry market-level rent, which results in
an acceptable return on the real estate operations.
The real estate operations supporting business operations are
conducted in Sweden through ICA Fastigheter Sverige AB and in
Norway through ICA Eiendom Norge AS. ICA AB owns a large pro-
PRICE
Positioning of store concept
e stores
ienc
Co
n
n
ve
Su
kets
rmar
pe
D
pe
Hy
ts
oun
isc
ets
r m ark
tores
RANGE
1)
2)
portion of the store properties through its real estate operations, or
holds the leases on the store premises in Sweden and Norway.
These premises are then leased out at market terms to individual ICA
stores and to Maxi Special AB in Sweden, which is one of the
wholly owned subsidiaries of ICA AB that is in charge of the special
product range sold in the Maxi stores. There are also a small number
of tenants that are not ICA retailers. The total proportion of rent revenue that derives from ICA retailers accounts for approximately 93%.
Rental revenue is reported under ICA Sverige and ICA Norge.
On September 30, 2005, ICA Fastigheter Sverige AB owned
approximately 264 properties1) occupying a total of approximately
606,000 square meters of store floor space, and leased approximately 480,000 square meters of office and warehouse space
and approximately 822,000 square meters of store space distributed among approximately 535 stores. The rental revenue from the
owned properties amounts to approximately SEK 680 million annually. Over the next three years, ICA Fastigheter Sverige AB as part
of ICA Sverige’s business plan intends to continue its extensive
investments in opening and building new stores.
On September 30, 2005, ICA Eiendom Norge AS owned
approximately 120 properties2) occupying a total of approximately 372,000 square meters and leased approximately
600,000 square meters of store floor place, distributed among
approximately 540 properties throughout Norway. The rental revenue from the owned properties amounts to approximately SEK
360 million annually. In accordance with ICA Norge’s business
plan, ICA Eiendom plans to continue its extensive investments over
the next three years in the opening and building of new stores as
well as in modernizing existing stores. The investments are integral
part of ICA Norge’s restructuring of its store holdings and store profiling, which will also involve property divestments.
Retail group function
The purpose of the group Retail function is to create profitability in
the ICA group by leading and developing customer-driven offerings. In specific terms, this implies that Retail deals with business
development – developing store layouts and formats, as well as
marketing. As regards store format, Retail is in charge of developing strategies for the market positioning of the stores and store profiles in a manner that is optimal for the group (see figure to the left)
and assisting the other operations in, for example, streamlining and
more clearly positioning store concepts. ICA Sverige has four store
formats: ICA Nära, ICA Supermarket, ICA Kvantum and Maxi ICA
Stormarknad. ICA Norge also has four store profiles – ICA Nær,
ICA Supermarked, ICA Maxi and Rimi. The different store formats
meet customer needs in different ways.
In addition to business development, the Retail group function is
responsible for market communications in Sweden and Norway,
market analysis, consumer and quality issues, corporate information
(including various forms of communication strategies, and the devel-
On September 30, 2005, the book value of these properties amounted to SEK 5,431 million.
On September 30, 2005, the book value of these properties amounted to SEK 4,648 million.
Hakon Invest’s holdings and financial management
29
opment of an intranet), as well as human resources issues (such as
skills development and the identification of potential future executives).
ICA AB’s customer card base consists of some 3.1 million
active customers. Of the active customers, 1.4 million pay with
cards, while the remainder only register bonus points. The customer
card database is a significant asset for ICA AB that contributes to
customer loyalty. It allows offers to be specially matched to customers while providing overall knowledge of buying patterns. The
customer database provides important support for decisions in all of
ICA AB’s business areas.
In terms of corporate structure, Etos AB and ICA Banken AB are
also part of the Retail group function. ICA Banken, however, does not
report to the group function, but instead to ICA Banken’s Board of
Directors. The bank’s operations are under the supervision of the
Swedish Financial Supervisory Authority. Both Etos AB and ICA
Banked are described in more detail further on in the prospectus.
Supply Chain group function
The group’s Supply Chain function includes sourcing, logistics and
IT. The purpose of the Supply Chain function is to achieve coordination and economies of scale in the group in these areas.
An important area for coordination within the group is sourcing,
where it is estimated that additional major savings can be
achieved. By consolidating purchasing volumes for ICA Sverige
and ICA Norge as a first step, ICA AB will become a stronger
negotiating partner, and thus obtaining better terms. ICA AB
believes there is considerable potential for more efficient purchases
and product range since a relatively small proportion of the products, both within food and non-food, account for a large percentage of the retail sales volume. Supply Chain will therefore focus on
creating a more customer-oriented product range, whereby purchases are steered more by customer preferences than today
instead of by what suppliers can offer. In conjunction with this,
Supply Chain will also improve the efficiency of the product range
to save costs. A key component in this respect involves assessing
how deep and broad the range must be in order for consumers to
be satisfied. To succeed in this task, the sourcing organization will
New distribution network
ICA warehouse
ICA stores
Suppliers
TODAY
30
ICA warehouse
ICA stores
Suppliers
2008
be strengthened so that the Supply Chain function can accumulate
in-depth knowledge about the value chain for each specific product
and product group, thereby enabling greater efficiency in terms of
production and logistics chains from producer to store. This, in turn,
is expected to reduce sourcing costs for ICA AB, thereby enhancing
the ICA system’s competitiveness.
Operations in PL products, produce, goods not for resale (e.g.
store fixtures) and home & leisure are currently managed jointly
within ICA AB at the Nordic level. However, there is further potential
for cooperation with other companies in the supply chain. In PL products, for example, synergies can be achieved by consolidating purchases with each supplier and coordinating package design, while
the products themselves can be sold under different brand names in
different countries. Another example is the Euroshopper brand,
which is the result of cooperation between nine European companies in 15 countries, including Kesko, Albert Heijn, Dansk
Supermarked A/S and ICA AB. Euroshopper is the ICA group’s discount product brand and is available in Sweden, Norway and the
Baltic countries. The brand is also used by other companies involved
in the cooperation. Supply Chain devotes considerable efforts to
developing private labels since these strengthen the group’s negotiating power with brand suppliers, and also provide the stores with
an opportunity to offer good value alternatives while at the same time
also generating considerable revenue for ICA AB and the stores. In
2004, private labels accounted for about 12% of retail sales in
Sweden. This figure is low compared with many international players, implying that there is still considerable potential in this area.
Through its companies in the Netherlands (ICA Sourcing and
Services BV and ICA International Services BV), ICA AB also cooperates with Ahold, to facilitate sourcing of fresh goods with an
emphasis on fruit, vegetables, fish, shellfish, meat and flowers as
well as sourcing of private label items. As part of this cooperation,
a number of sourcing agreements have been negotiated with various suppliers that can be utilized by all subsidiaries and companies
associated with Ahold. These contracts normally extend for one
year with certain rights with respect to extension and termination
period. Furthermore, the company’s cooperation with the Aholdowned chain Albert Heijn includes the development of IT systems for
retail stores. Investments in IT systems are often substantial. By cooperating with other companies, ICA AB is able to considerably
reduce its portion of these investments.
In addition to sourcing and IT, Supply Chain is responsible for
the entire logistics flow and works actively with logistics development, an area in which ICA AB has gained firmer control by setting
up a new distribution network in Sweden. The new distribution network is expected to lead to cost savings and reduced environmental
impact and will improve ICA AB’s standing with suppliers. With its
new distribution network, ICA AB takes responsibility for a larger
share of shipments. Goods that individual suppliers previously drove
directly to stores will now be shipped to a greater extent via ICA
AB’s warehouses. From there, ICA AB will coordinate goods from
Hakon Invest’s holdings and financial management
various suppliers on route to its stores, leading to more efficient
transportation, fewer emissions and thereby less harm to the environment. The change is also positive for the stores. The number of
deliveries is reduced for the same amount of goods, and stores can
work more efficiently with the reception of goods when these are
delivered more collectively. To make its distribution network more
efficient, ICA AB will keep more goods in stock. As a result, five
warehouses (Helsingborg, Malmö, Växjö and two in Stockholm)
will be shut down and four others (Borlänge, Kungälv, Umeå and
Västerås) will be rebuilt to handle larger volumes. The Board of
Directors also approved an investment of SEK one billion for a new
automated warehouse in Helsingborg. Furthermore, there are plans
for a new warehouse in the Mälardal region for which the investment will be the same – SEK one billion for full automation.
Market
Conditions in the Nordic food retail market are changing at an ever
faster pace. Competition is growing and customer behavior is
becoming more difficult to predict.
Increased competition in the Nordic region
Discounters continue to expand in the food retail market and also in
other sectors. The German discount chain Lidl has established operations in Sweden, Norway and Finland, and Germany’s Aldi has stores
in Denmark. Together with Dansk Supermarked A/S, ICA AB operates
the discount chain Netto in Sweden. In the longer term, other global
market leaders may make a move to the Nordic region as well.
More people are eating out
It is also becoming more common to eat out at restaurants and fast
food chains instead of at home, and many restaurants directly target
families. In the Nordic region, restaurants account for 26% of the
total value of food consumption, a figure that is expected to continue
to rise. In the rest of Europe, the corresponding figure is 35% and in
the US it is 51%. Food retailers have long had a tendency to underestimate the competition from restaurants, but ICA AB has taken up
the fight, in part by expanding its range of prepared foods.
Food is becoming less expensive
Since 1995, Swedish food prices have risen by only 0.4% per
year, while the annual inflation rate during the same period is 1.2%.
Swedes are spending less of their disposable income on food. The
same trend is evident in Norway, where food prices have risen by
1.6% annually since 1995, while inflation has averaged 2.2%. A
basket of groceries costs no more today than it did ten years ago. A
growing share of private label products has contributed to lower
prices, as has the increased competition.
Customers are less loyal
Due to these changes in the market, customers are no longer as
loyal to a particular chain of stores or brand. Instead they have
1) This
become much more flexible. Consumer habits even differ depending on the day of the week. One day a customer might go to a
hypermarket or discounter for a major shop, then the next day stop
at a local store for fresh deli items. Customers want shopping to be
easy, which is why location and convenience are still important factors that determine where people choose to shop.
The highly successful ICA customer card is one example of a
measure introduced to increase customer loyalty at ICA stores.
Purchasing negotiations
Suppliers are also affected by growth among discounters and in
retailers’ PL offerings. To meet the rising price pressures and be more
competitive, many food suppliers are merging forces. Several suppliers in the Nordic region have been acquired by larger international
groups. In some product categories, two or three suppliers account
for 80-100% of the ICA group’s purchases. As ICA AB increases its
share of PL products, however, the brand suppliers’ bargaining
power is reduced, as is ICA AB’s dependence on these suppliers.
This is also one reason why many suppliers have also begun to
produce PL products for retailers. For small suppliers, this can offer a
way to survive the competition – and slow the trend toward consolidation.
ICA AB cuts prices to strengthen its market position
The emergence of new discount players in recent years has intensified competition in the Nordic food retail market. This trend has led
to an increased focus on price. One measure taken by ICA AB in
response to this change involves implementing extensive strategic
price cuts in Norway and Sweden.
In Sweden, ICA AB and the individual ICA stores reduced the
prices on two occasions, in March and August, on between 3,000
and 4,000 items, depending on the store size. Since ICA retailers
own their own business, they set their own prices and determine
their own assortment. Price reductions at the store level were mainly
possible through offering the stores lower purchasing prices from
ICA AB. The total value of the price cuts in the ICA stores in Sweden
was on the order of SEK one billion on an annual basis.
In Norway, ICA AB and the Rimi stores lowered the prices of
about 300 items in May 2005. The total value of the retail price
cuts in Norway amounted to NOK 350 million on an annual basis.
The price reductions were financed retroactively through
increased cost efficiency in the individual stores, cost rationalization
within the ICA group and more favorable purchase prices from suppliers. This had an initially negative effect on ICA AB’s earnings during the first half of 2005. The initially negative effect on earnings for
ICA AB will gradually improve as the gains from negotiations with
suppliers are realized and cost reductions produce effects.
Since the price reductions in Sweden began in March,
sales in the ICA stores increased each month by more than the
industry average1).
applies to the period until September 30, 2005.
Hakon Invest’s holdings and financial management
31
ICA SVERIGE
ICA Sverige is one of the country’s leading retail companies, with a focus on food and consumables. ICA Sverige is the main supplier to the
ICA retailers. All ICA retailers own and manage their stores as independent businesses. Annual sales in the more than 1,500 stores amount
to around SEK 79 billion, including VAT. Sales revenues for ICA Sverige total approximately SEK 43 billion.
ICA Sverige is in an aggressive development phase and is continuing its successful focus on private label products, non-food items and
fresh foods. ICA Sverige will continue its efforts to reduce retail prices and lower costs, making the ICA stores more competitive and improving ICA Sverige’s sales. The rate of new store openings will remain high.
Hakon Invest
40% 1)
50%
Rimi Baltic
ICA Sverige
1)
ICA Norge
Portfolio companies
ICA AB
50%
Netto
ICA Meny
ICA Banken
Etos
Forma Publishing Group
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
ICA Sverige in brief
BUSINESS CONCEPT
ICA Sverige will be the leading retail chain in Sweden with a focus on food and meals.
2002
2003
2004
2004 (IFRS)
JAN–SEP 2005 (IFRS)
42,505
43,086
43,373
45,039
34,333
Operating profit (SEK M)
1,884
2,794
1,892
1,774
1,054
Number of employees (average)1)
4,189
4,384
4,407
5,982
5,768
Number of stores (year-end)
1,764
1,668
1,506
1,506
1,421
Sales (SEK M)
1)
2)
32
Market share
36.3%
2)
Refers to average number of employees based on 1,800 annual working hours.
Based on the ICA stores’ share of retail sales of food and consumables.
Hakon Invest’s holdings and financial management
Operations
The food retailer ICA Sverige operates throughout Sweden,
together with the independent retailers who own and manage their
stores. ICA Sverige’s activities include sales, operations and new
establishments. “Sales” means that ICA Sverige shall stimulate sales
to consumers. “Operations” entails that ICA Sverige shall assist the
stores with advice and tangible measures to help them operate
more efficiently. “New establishments” involves researching and
developing new store locations and helping to develop existing
stores through modernization or store enlargement.
ICA retailers in Sweden undertake on average 70% of their purchases directly or indirectly via ICA Sverige. The remaining 30%
mainly comprises fresh produce, fruit and vegetables, colonial produce and bread, which in many cases come from local producers or
suppliers. Since there is no requirement for independent retailers’ purchases from ICA AB, the group has always been exposed to competition from other suppliers. The fact that ICA retailers in Sweden purchase as much as 70% from ICA Sverige serves as proof that the
economies of scale and efficiency that have been achieved over
time satisfy the earnings targets of ICA AB and the independent
retailers, as well as customers’ wishes in terms of product range,
quality and price. The fact that ICA AB competes with other suppliers
means that it is always in ICA AB’s best interests to develop competitive prices and provide consumers with an attractive produce range.
It is also in individual ICA retailers’ best interests to make their purchases via ICA Sverige and thereby help ICA AB achieve a high
level of efficiency and lower costs.
It is this cooperation, the entrepreneurial spirit of ICA retailers
and the mutual understanding that both parties’ ultimate aim is to
make money, that forms the core of the entire ICA concept and that
has made the system so successful.
Dealings between ICA AB and the independent retailers
Ever since the inception of Inköpscentralernas AB (now ICA AB) in
1939, the importance of the retailer’s role has been emphasized in the
dealings between retailer and the product supply. Through their awareness of consumer demand, the retailers possess important knowledge
that can improve the efficiency of product supply operations.
The interplay between ICA Sverige AB and the retailers is an
important success factor in the Swedish operations.
A “Sweden committee” has been set up to provide support for
ICA Sverige AB’s overall strategic efforts. The committee is made up
of the chairmen from each of the store profile areas. The Sweden
committee acts as an advisor and a sounding board for ICA
Sverige AB with regard to overall strategic issues. There are four
store profiles within ICA Sverige AB: Nära, Supermarket, Kvantum
and Maxi. Each profile area has a “profile committee” of elected
retailer representatives. These committees act as advisors for important issues relating to their particular store profile.
Neither the committees nor the independent ICA retailers who
are members of committees within the ICA group have been issued
Hakon Invest’s holdings and financial management
with any decision-making authority from ICA AB or ICA Sverige.
The role of the committees and their ICA retailers is advisory and
therefore provides ICA AB with valuable information. Neither are
the ICA retailers permitted to disclose matters with binding effect discussed in the committees to other ICA retailers.
Business model
ICA Sverige’s operations are based on “ICA agreements” with ICA
retailers. This is complemented by profiling agreements with ICA
retailers, through which the stores join forces under the ICA name to
secure better purchasing terms and create a clearer image in the
marketplace.
ICA agreements
Many of the approximately 1,500 Swedish ICA stores have an ICA
agreement, which is a shareholder and financing agreement
whereby ICA AB retains the rights to the store location while the
retailer – either by himself or jointly with ICA AB – owns and runs the
store through a limited company. ICA Fastigheter Sverige owns a
large proportion of the store properties or holds leases for the store
premises, meaning that the stores also pay rent to the ICA group.
Normally, all stores with sales exceeding SEK 20 million or that are
considered to have a strategic location have an ICA agreement. The
ICA agreement contains a clause on right of first refusal if the ICA
retailer wishes to sell the business and specifies the annual compensation that the store must pay to ICA Sverige, in the form of royalty
and/or profit sharing. The agreements are entered on market terms.
New stores are usually established by ICA Sverige which in
conjunction with the establishment offers the retailer financing for
taking the store into operation. Since the individual retailer often
cannot afford to acquire the entire store at the time of establishment,
the retailer initially owns only a small portion of the limited company
through which the store is operated, while ICA Sverige owns the
remainder. As cash flows from the store improve, the retailer can
then acquire all shares but one of the limited company from ICA
Sverige. Pursuant to the terms of the ICA agreement, the retailer then
pays a royalty and in some cases a profit share to ICA Sverige,
related to the store’s size and annual sales. As of 2005, the store is
consolidated by ICA Sverige as long as the ownership share
exceeds 50%. This however does not affect ICA Sverige’s reported
profit after tax.
Maxi agreements
ICA Maxi is ICA AB’s hypermarket concept, comprising 37 stores
at the end of 2004. An ICA Maxi hypermarket consists of two legal
entities: a subsidiary that is wholly owned by ICA Sverige AB (“the
subsidiary”) and that sells specialty/non-food items, and a contractual company that is owned and operated by an independent ICA
retailer and that sells food retail and convenience goods (“the contractual company”). The consumer, however, perceives ICA Maxi as
being one company with a comprehensive customer offering.
33
The ICA Sverige subsidiary ICA Maxi Special AB (“Maxi
Special”) is responsible for all non-food operations in ICA Maxi
stores. For example, the subsidiary has its own lease agreement
with the store owner for the shop floor space that is at the subsidiary’s disposal. The contractual company assumes responsibility
for joint services, such as checkouts and customer services, and the
subsidiary compensates the contractual company at market rates for
its share of these joint services. This is regulated in detail through a
partnership agreement (Maxi agreement).
The contractual company’s ICA agreement with ICA Sverige AB
contains a pre-emption clause for the event that the ICA retailer
wishes to sell his business. The agreement also states the annual
compensation that the contractual company must pay ICA Sverige
for the right to use the shop location. This compensation takes the
form of a royalty based on a pre-determined percentage of the contractual company’s net sales.
Sources of revenue
ICA Sverige’s earnings are derived from retail sales, product supply,
royalty and/or profit sharing, property, and the sale of services.
Retail earnings derive from Maxi Special, which sells home and nonfood items in the Maxi stores. In addition, some retail revenue is
attributable to the Swedish stores in which ICA Sverige during the
start-up period after establishment owns more than 50% of the
shares. Revenues from the supply chain derive from ICA Sverige’s
wholesale operations, in which ICA Sverige purchases goods and
then sells these goods to the independent ICA retailers in Sweden.
The stores in Sweden also pay a sales-based fee to ICA Sverige to
cover the costs for joint resources and the development of ICA’s operations. Another source of income is the royalty payments and/or
profit share that ICA Sverige receives from the independent retailers.
The stores pay for the right to use the ICA brand and for use of the
store location. In many cases, ICA AB’s property operations either
own the store properties or hold the leases on them. The independent retailers pay rent at market prices for use of shop premises.
Another source of revenue is the property operations’ sale of properties. In addition, ICA Sverige also certain optional services for retailers, which are charged at a fee.
Store concepts
ICA Sverige has four store concepts – ICA Nära, ICA Supermarket,
ICA Kvantum and Maxi ICA Stormarknad – that meet customer
demand in different ways.
During 2004, ICA stores in Sweden decreased their share of
the Swedish food retail market to 36,3%, compared with 36,6%
the preceding year. The number of customers rose by 2%, as did
the number of goods sold. However, the average sales amount
dropped. This is a general trend affecting all players in the Swedish
market.
The ICA Nära convenience stores increased their sales by
3.7% in 2004. During the year, 75 new ICA Nära stores were
added as a result of many previously non-profiled ICA stores
becoming computerized and being profiled as ICA Nära. ICA
Supermarket noted a sales decrease in 2004 of 3.0%, compared
with 2003. This was in large part due to the number of ICA
Supermarket stores declining by 19 stores in 2004 from 532 to
513. The ICA Kvantum stores increased sales by 1.9% in 2004.
ICA Sverige’s hypermarket concept Maxi ICA Stormarknad has continued to develop positively, with sales rising by more than 11% in
2004. This is partly the result of the one-stop shopping trend, where
ICA Sverige’s store profiles
STORE PROFILE
NO. OF STORES,
DEC. 31, 2004
S A L E S I N C L . VAT
( S E K M ) , 2 0 0 4 1)
NO. OF ITEMS
PER STORE
ICA Nära are smaller and easily accessible food
stores with good service, a limited selection and
good fresh foods Many ICA Nära stores function
as agents for Apoteket, Systembolaget and ATG.
830
12,623
3,000–5,000
At ICA Supermarket, customers can do most of their
shopping for both daily needs and parties. There is a
high level of personal sevice, and the stores have a
wide range of fresh foods.
513
29,878
6,000–10,000
ICA Kvantum are larger food stores with both daily food,
products for people with allergies, environmental products
and delicacies from the whole world. ICA Kvantum also
offers nearly everything in beauty, health and media.
126
22,003
15,000
14,192
Food:
12,000–18,000 articles
Special:
20,000–25,000 articles
DESCRIPTION
Maxi ICA Stormarknad offers everything in a single location
at low prices. In addition to the wide range of food procucts,
there are books, clothes, household items, sporting goods and
everything for gardening. The stores have generous opening
hours and are easily accessible for shoppers with cars.
1)
34
37
Total store sales (including specialty items).
Hakon Invest’s holdings and financial management
customers prefer to buy everything in one place. Maxi ICA hypermarkets were Sweden’s leading hypermarket chain in the beginning
of 2005.
1.3 million visitors each month, ranking it among Sweden’s 20-30
most popular sites overall. Customers of ICA Banken can also perform bank transactions via the site.
Brand and customer relations
According to independent and internal surveys, ICA Sverige has
the industry’s highest ranking in terms of customer satisfaction. In the
latest Swedish Quality Index survey, for example, ICA ranked
higher than both Axfood and Coop – as has been case since the
surveys were first begun. The 2004 Confidence Barometer compiled by the Media Academy at Göteborg University showed that
seven out of ten Swedes have great confidence in ICA AB.
Internal customer satisfaction surveys also prove year after year
the strong competitive strength of ICA stores compared with the
industry in general. To find out what customers think about their ICA
stores, ICA Sverige launched a survey in 2004 called the Customer
Compass. ICA AB’s card customers are asked to award grades for
price, product selection and service in their local store. Their
responses are fed back to ICA Sverige centrally and to the store,
which can resolve any issues right away.
In 2004, for the third consecutive year, ICA Sverige won the
prestigious Golden Egg Award presented by the Swedish advertising industry for the best ad of the year. In terms of brand recognition, nearly 100% of viewers recognized the company behind the
ads. ICA AB also received a prize for its consistent long-term branding in the “100 Wattaren” contest arranged by the business daily
Dagens Industri in cooperation with the Association of Swedish
Advertisers and the Advertising Association of Sweden.
ICA Sverige’s website, www.ica.se, is Sweden’s largest food
site, containing more than 5,000 recipes. The site attracts around
Market
The Swedish food retail market is dominated by three nationwide
chains – ICA AB, Coop and Axfood – while a fourth,
BergendahlsGruppen, is mainly active in southern Sweden.
However, BergendahlsGruppen recently opened a store in the
Stockholm region and signed a wholesale agreement with
VI-handlarna.
Overview of the Swedish convenience goods market 2004
No. of stores
4,500 (plus a number of smaller stores)
Total market, conveniece goods,
including VAT (SEK M)
207,160
Growth
2.7%
Store structure*– proportion of sales
in different store sizes
<400m2 – 12.7%
400–999m2 – 27.4 %
1,000–2,499m2 – 38.5%
>2,500m2 – 21.3 %
Low-price retailers (soft and hard discount)
9% (soft)
2% (hard)
Proportion own brands*
12.9%
Source: ICA AB and AC Nielsen/Nordic Grocery Market Insight 2005 figures
marked with *).
ICA Sverige and the largest competitors
Owner
No. of stores
(Dec. 31, 2004)
ICA SVERIGE
COOP SVERIGE
AXFOOD
BERGENDAHLS
LIDL SVERIGE
NETTO SVERIGE
ICA AB (100%)
Coop Norden
(100%) of which
KF owns 42%
Exchange-listed,
principal owner
Axel Johnson AB
(45%)
Bergendahl
family
(100%)
Lidl Schwarz Stiftung
(100%)
Dansk
Supermarked AB,
ICA AB (50/50%)
1,506
821
487
140
76
58
ICA Nära
ICA Supermarket
ICA Kvantum
Maxi ICA Stormarknad
Coop Nära
Coop Konsum
Coop Extra
Coop Forum
Hemköp
Willys
Willys Hemma
Vivo (up until 2004)
AG:s
City Gross
Eko
Vi (as of 2005)
Lidl
Netto
17.1%
16.7%
2.9%
0.8%
0.6%
Store profiles
Market
share (2004)
36.3%1)
Source: ICA AB.
1) Based on the ICA stores’ share of retail sales of food and consumables.
Hakon Invest’s holdings and financial management
35
MARKET SHARES,
S W E D I S H F O O D M A R K E T, 2 0 0 4
Other
25%
Netto 1%
Lidl 1%
Bergendahl 3%
Axfood
17%
ICA1)
36%
Coop
17%
Source: ICA AB.
1) Based on the ICA stores’ share of retail sales of food and consumables.
The Swedish food retail sector grew 2.7% in 2004, compared
with 2.6% in 2003. Sales in 2004 amounted to slightly more than
SEK 207 billion, including VAT. The favorable growth was
achieved despite many companies cutting their prices to counter
competition from discounters. Increased PL sales are also contributing to lower food prices. Consumer goods prices were 0.5% lower
at year-end 2004 than at the beginning of the year.
Pure discount stores, known as hard discount, are increasing
their presence in Sweden. Typically these stores offer prices below
what are regarded as the standard level in the food retail sector
and usually carry a more limited product range. They are also distinguished by their very low costs. Axfood’s discount chain, Willys,
currently has some 90 stores. In the discount segment, Axfood has
also developed another concept, Willys Hemma, with 45 wholly
owned stores as its base. The Willys Hemma concept is based on a
limited product range. The German chain Lidl, which started operations in Sweden in September 2003, continues to gain ground and
now has around 80 stores that generally carry a narrow range of
about a thousand items at very low prices. ICA AB’s discount chain
Netto, which is jointly owned with Dansk Supermarked A/S, was
launched in Sweden in 2002 and had grown to 72 stores at
September 30, 2005.
Ongoing efforts within ICA Sverige
ICA Sverige’s strategy for tackling the competition from discounters
is to focus on fresh foods, private labels and non-foods. Fresh foods
accounted for about 54% of ICA Sverige’s sales in 2004, while private labels contributed about 12% and non-food about 6%. It was
also decided to launch a price offensive together the ICA retailers.
In Sweden, this initiative was initiated in March 2005. The aim is to
reduce prices on a large number of common products by squeezing
costs at every level and negotiating lower purchasing prices.
36
Higher demand for prepared and healthy foods
Another of ICA AB’s focuses is prepared meals, which are becoming increasingly popular among customers. In connection with the
launch of its own fresh meats, ICA Sverige reorganized its infrastructure to better handle refrigerated products. This also makes it easier
to provide customers prepared foods of consistently high quality.
The increasing health consciousness of consumers has spurred
interest in healthy foods. To meet this demand, ICA launched a special line of products, ICA Gott Liv, in Sweden in 2005 to make it
easier and less expensive to eat nutritiously.
Establishment policy
ICA Sverige is always looking for opportunities to open new stores
and expand its presence in the market. The new store department
has been strengthened and is working to find new locations and
prepare the necessary documentation for building permits. A number of new permits have been received and ICA Sverige is
expected to expand substantially in the near future. The focus will
remain on new stores in growth areas and near large cities.
Stores in rural and sparsely populated areas
ICA stores account for the largest share of grocery stores in rural
areas. In communities with only one grocery store, about 40% are
run by ICA. Many of these stores also provide other services to their
communities, including pick-ups for Systembolaget and Apoteket, the
state-run alcohol and pharmacy monopolies, and postal services.
To strengthen its smallest stores, ICA invested approximately SEK
30 million in 2003 in computerization, among other things.
Technology helps small stores to work more efficiently and fully utilize
the support available centrally from ICA Sverige. These measures
have helped to stabilize the situation for stores in rural communities
and reduce the number of stores that have been forced to close.
Outlook
ICA Sverige will continue its focus on private labels, non-foods and
fresh foods. The company will also continue to work with cost
rationalization and measures to reduce price levels in the stores. In
late 2004, a savings program was presented that entails cutting the
number of employees in ICA Sverige in 2005. This is part of an
effort to reduce costs and create an efficient organization focused
on higher sales and more satisfied retail customers.
The rate of new store openings is high. Three new Maxi ICA
hypermarkets, one ICA Kvantum, one ICA Supermarket and two
ICA Nära were opened during the period December 31, 2004
until September 30, 2005, and a further two Maxi ICA hypermarkets, two ICA Kvantum, one ICA Supermarket and two ICA Nära
are scheduled to open during the year. As of September 2005, the
sales area had increased by 35,000 square meters since the end
of 2004. The ambition is to maintain the rate of new store openings
at the same level during 2006.
Hakon Invest’s holdings and financial management
ICA NORGE
ICA Norge is one of Norway’s leading retailers, with a focus on food and consumables and nearly 1,000 stores. The stores are operated
as wholly owned subsidiaries or as franchises. Store sales amount to approximately NOK 22 billion, excluding VAT. ICA Norge’s sales
were more than NOK 18 billion in 2004.
ICA Norge will focus actively on generating cost savings and improving efficiency. In addition, a large number of existing stores will be
updated and several new stores opened.
Hakon Invest
40% 1)
50%
Rimi Baltic
ICA Sverige
1)
ICA Norge
Portfolio companies
ICA AB
50%
Netto
ICA Meny
ICA Banken
Forma Publishing Group
Etos
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
ICA Norge in brief
BUSINESS CONCEPT
ICA Norge will be the leading retail chain in Norway with a focus on food and meals.
Market share
22.4%2)
2002
2003
2004
2004 (IFRS)
JAN–SEP 2005 (IFRS)
20,930
20,740
19,896
19,896
13,836
782
200
214
382
353
Number of employees (average)1)
5,545
5,465
5,540
5,540
4,234
Number of stores (year-end)
1,079
1,028
978
978
911
Sales (SEK M)
Operating profit (SEK M)
1)
2)
Refers to average number of employees based on 1,800 annual working hours.
Based on the share of ICA Norge’s wholly owned stores, franchise stores and associated stores of all types of sales in Norway’s food stores.
Operations
ICA Norge’s activities include sales, operations and new establishments. “Sales” means that ICA Norge shall stimulate sales to consumers. “Operations” entails that ICA Norge shall assist the stores
with advice and tangible measures to help them operate more efficiently. “New establishments” involves researching and developing
new store locations and helping to develop existing stores through
modernization or store enlargement. All stores are supported by an
integrated system for sourcing, product range, product supply,
administration and marketing.
Hakon Invest’s holdings and financial management
Business model
Ownership and operation of ICA Norge’s stores is divided into two
main models: wholly owned branch stores and retailer-owned franchises. There are also associated stores.
Wholly owned stores
The stores that are wholly owned by ICA Norge comprise approximately one third of the Rimi stores and nearly all ICA Supermarked
and ICA Maxi stores.
37
Stores with franchise agreements
In this form, the retailers operate their stores as independent franchises
and pay a fee based on a percentage of sales to ICA Norge. ICA
Norge provides the ICA and Rimi brands, as well as a number of central services including marketing, concept development and administration. ICA Norge owns or holds leases on most of the franchise
properties. Franchise stores are operated within ICA Nær, which is
primarily a franchise chain, and within Rimi. At the end of 2004,
approximately 60% of Rimi stores were operated as franchises.
Associated stores
There are also associated store chains that ICA Norge assists primarily with sourcing and distribution. Examples of associated stores
include Livi and Servicemat.
Sources of revenue
ICA Norge’s revenues are derived from retail sales, product supply,
franchise operations and properties. Retail earnings derive from the
wholly owned stores. Revenues from goods supply derive from ICA
Norge’s wholesale operations, in which ICA Norge buys in goods,
and then sells these goods and services to the stores in Norway.
Another source of income is the franchise fees that ICA Norge receives
from the franchise holders as payment for the right to use the ICA
brand. In most cases, ICA AB’s property operations either own the
store properties or hold the leases on them. The retailers pay rent at
market prices for the use of the shop premises. Another source of revenue is the property operations’ sale of properties.
Store concepts
ICA Norge has a format strategy consisting of hypermarkets, supermarkets, convenience stores and discount stores. In recent years, ICA
Norge has worked to streamline and more clearly position its store
concepts – ICA Maxi, ICA Supermarked, ICA Nær and Rimi – and
build a strong store structure for the future.
At the same time as consumers are becoming more price conscious, many are also asking for larger stores and a wider range of
prepared and fresh foods. With its four store concepts, ICA Norge
tries to meet these needs and cover every position in the market.
ICA Norge is working on the introduction of a long-term pricing
strategy that will make Rimi competitive in the discount segment, while
ICA-branded stores will remain competitive in their segments. ICA
Norge is also raising the number of franchise stores (currently more
than 500), since it sees entrepreneurship as an important driving force.
In 2004, the share of Rimi franchises rose from 40% to 60% of Rimi
stores. The goal is to increase that figure to 75% by year-end 2005.
A growing number of ICA-branded stores are also being operated as
franchises, including both the small and medium-sized store formats.
Market
The Norwegian food retail market (excluding convenience stores and
gas stations) increased by about 4% in 2004 compared with the preceding year. Total sales exceeded NOK 100 billion (excluding VAT).
ICA Norge’s market share declined slightly in 2004 to 22.4%, compared with 23.6% the preceding year. ICA Norge and its largest
competitors – Coop Norge, NorgesGruppen and Rema – together
account for practically all the sales in the market in Norway, a market
where about half of sales take place via discount chains. In 2004,
the German chain Lidl opened its first discount stores in Norway and
at year-end had around twenty stores around the country.
Ongoing efforts within ICA Norge
Cost adjustments and efficiency improvements
ICA Norge has been working to adjust its cost level in order to maintain
and develop a strong competitive position. This work has involved every
function in administration and the stores. The number of employees in
ICA Norge decreased in 2004 by around 120, mainly in Rimi. The former regional offices have been replaced by five local sales offices and
the store profile areas now have joint management and staff and support
functions. The efforts to adjust costs and improve efficiency will continue
for some time.
ICA Norge’s store profiles
STORE PROFILE
DESCRIPTION
NO. OF STORES,
D E C . 3 1 , 2 0 0 4 1)
S A L E S I N C L . VAT
( N O K M ) , 2 0 0 4 2)
NO. OF ITEMS
PER STORE
ICA Nær are smaller and easily accessible food
stores with good service, an adapted selection
and local suppliers.
1)
2)
38
357
2,572
3,000–6,000
ICA Supermarked stores are designed for customers
who appreciate good food and a wide variety. Personal
service is high, and there is a wide range of fresh foods,
including deli counters offering the latest in food trends.
70
2,010
about 10,000
Maxi ICA Stormarknad offers everything in a single location
at affordable prices. In addition to the wide range of food
procucts, there are books, clothes, household items and
media items. Conveniently located for customers traveling by car.
16
2,046
20,000–24,000
Rimi is a discount chain that makes it easy and convenient for
customers to do their daily shopping. With modern, conveniently
laid out stores, Rimi offers customers what they need at
affordable prices.
374
14,918
about 3,000
In addition, there were 161 associated stores as of December 31, 2005. Sales were about NOK 894 million in 2004.
Total store sales.
Hakon Invest’s holdings and financial management
Overview of the Norwegian convenience goods market 2004
No. of stores
MARKET SHARES,
N O R W E G I A N F O O D M A R K E T, 2 0 0 4
4600 (increasing)
Total market, convenience goods,
including VAT (NOK M)
101,000
Growth
Rema
17%
4%
<400 m2 – 25.4%
400–999 m2 – 48.7 %
1,000–2,499 m2 – 20.3%
>2,500 m2 – 5.7 %
Store structure* – proportion of sales
in different store sizes
Low-price retailers (soft and hard discount)
NorgesGruppen
35%
ICA
22%
51.5% (soft)
0.5% (hard)”
Proportion own brands*
Other
1%
Coop
25%
8.5%
Source: ICA AB.
Source: ICA AB and AC Nielsen/Nordic Grocery Market Insight 2005 figures
marked with *).
Store network
ICA Norge is working to optimize the store network. Several stores
are too small and many stores need modernizing (see also
“Outlook”). The opening of ICA Maxi Sjølyst, ICA Norge’s first
Nordic compact hypermarket, in 2004 was part of this modernization strategy. The store concept is based on a platform developed by
ICA in the Baltic countries, where it has proven very successful. It
offers a diverse product range with an emphasis on fresh foods, complemented by a well-balanced assortment of non-foods. The new store
is an expression of ICA Norge’s long-term aim to become the market
leader by offering value.
Investments in product assortment
ICA Norge is also working with a number of projects that will create
a better range of fresh and prepared foods. For instance, it is looking
into opportunities to offer a larger selection of prepackaged meals,
including better solutions for fresh fish.
Outlook
ICA Norge expects strong growth and is planning to invest NOK 2-2.5
billion in the next few years. There are plans to renovate a large number
of Rimi stores and modernize several ICA Supermarked and ICA Nær
stores. Many new stores will therefore be opened in the near future and
several smaller stores will be shut down or sold. Despite the fact that the
net total number of stores is expected to decline, the sales area, on the
other hand, is intended to increase. At September 30, 2005, sales
floor space had increased by 9,745 square meters since December
31, 2004. It is also the company’s ambition to increase sales floor
space at a significantly higher rate during 2006 than in 2005.
Three ICA Maxi stores, two ICA Nær stores and four Rimi stores
have been opened to date in 2005 (as per September 30) and there
are plans to open an additional ICA Maxi store, one ICA
Supermarked and five Rimi stores during the year.
With a clearer store concept, ICA Norge has a good platform to
meet the competition from new and established players.
ICA Norge and the largest competitors
Owner
ICA NORGE
COOP NORGE
NORGESGRUPPEN
REMA 1000
LIDL NORGE
ICA AB (100%)
Wholly owned stores, franchise
stores and associated stores
Members
(approx. 900,000),
241 cooperatives
Johan Johannson AS
(78%) and
three smaller chains
Odd Reitan
and family
(100%)
Lidl Schwarz Stiftung
(100%)
No. of stores
(Dec. 31, 2004)
Store profiles
Market share (2004)
978
940
1,911
381
20
ICA Naer
ICA Supermarked
ICA Maxi
RIMI
Coop Marked
Coop Mega
Coop OBS!
Coop Prix
Bunnpris + other smaller chains
Joker
Kiwi
Meny/Meny Champion
Spar
Ultra/Centra
REMA 1000
Lidl
22.4%
24.6%
34.8%
17.5%
0.1%
Source: ICA AB & AC Nielsen.
Hakon Invest’s holdings and financial management
39
ICA MENY
ICA Meny is one of the Nordic region’s leading suppliers to restaurants, caterers and convenience stores and has sales exceeding
SEK 5.2 billion.
ICA Meny will focus on increasing its share of private labels and improving operational efficiency.
Hakon Invest
40% 1)
50%
Rimi Baltic
50%
Netto
ICA Sverige
1)
ICA Norge
ICA Meny
Portfolio companies
ICA AB
ICA Banken
Forma Publishing Group
Etos
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
ICA Meny in brief
BUSINESS CONCEPT
ICA Meny shall provide customers with increased profitability and growth through a broad product range and a portfolio of value-added products and services.
2002
2003
2004
2004 (IFRS)
JAN–SEP 2005 (IFRS)
4,042
4,030
4,355
4,355
4,353
Operating profit/loss (SEK M)
–46
–19
–37
–36
–1
Number of employees (average) 1)
903
921
899
899
1,016
Sales (SEK M)
1)
Refers to average number of employees based on 1,800 annual working hours
Operations
ICA Meny is one of the Nordic region’s leading suppliers to restaurants, caterers and convenience stores. Restaurants and caterers
account for more than 80% of sales, and convenience stores for the
remainder.
In recent years, ICA Meny has worked to increase the focus on
operational efficiency and assets to support increased efficiency,
40
primarily IT, logistics and premises, as well as pricing, cost levels
and controls, which have not functioned satisfactorily given the
demands placed on ICA Meny by its complex customer and logistics environment.
In parallel with these efforts and in accordance with a decision
in 2002 to expand operations through acquisitions, ICA Meny
acquired the companies Restaurangpartner with sales of about SEK
Hakon Invest’s holdings and financial management
200 million in 2002 and Arvid Nordqvist with sales of about SEK
300 million in 2003. Neither of these companies contributed positively to ICA Meny’s earnings at the time of the acquisitions. In
2004, ICA Meny Norge with sales of about NOK 809 million was
transferred to ICA Meny. ICA Meny Norge was previously a part of
ICA Norge but is consolidated as of January 1, 2005 in ICA
Meny. The objective was to coordinate operations, thus achieving
economies of scale. During 2004, a two-year contract valued at
more than SEK 300 million was signed with Compass Group, the
world’s largest catering company. The company acquisitions and
the transfer of ICA Meny Norge has affected the internal efficiency
work and required resources and resulted in costs for integration
and restructuring of operations. The loss-generating acquired operations also had a direct negative effect on ICA Meny’s earnings.
ICA Meny continues to have a need to focus efforts on improving
profitability, but the work completed to date, the measures already
implemented and investments during 2005 have begun to show
effect.
Restaurants and caterers
ICA Meny supplies food, spirits and restaurant equipment to restaurants and catering firms. ICA Meny is distinguished from the competition by its nationwide presence and one-stop offering of food, beverages and equipment. Other competitive advantages include
ICA’s Meny’s competence in wine and spirits and in delicatessen
products. Low operating costs and ICA AB’s purchasing power are
the cornerstones of its strategy.
Much of the development in the culinary arts takes place in
restaurants. The trends make their way to the retail sector over time.
Through ICA Meny, ICA AB’s has insight into the restaurant industry,
picking up on new trends that can be transferred to the stores.
Convenience stores
ICA Meny is also one of the leading suppliers to convenience
stores, including service stations and other local shops. ICA Meny
Convenience focuses on small stores. Low operating costs, competitive prices and a range of services make it an attractive partner to
both individual stores and chains. In addition, ICA Meny serves as
a supplier of specialty/non-food items to certain ICA stores. ICA
Meny has two service concepts: Nära Dej and TIME, both of which
are available for independent retailers with smaller stores.
Sources of revenue
ICA Meny’s derives its income entirely from product supply operations, since the company acts as a wholesaler, buying in food and
alcoholic beverages for resale to restaurants, caterers and convenience stores.
Market
The Swedish and Norwegian market for supplies to restaurants,
caterers and convenience stores amounts jointly to approximately
SEK 63 billion. The market is fragmented and consists partly of
large companies that also have retail operations and partly of small
wholesalers and food producers at the local level.
In 2004, the Swedish restaurant and catering market was relatively stable. ICA Meny raised its volume in this segment by 15% in
2004. Other suppliers to the restaurant and catering sector in
Sweden include Servera, Martin Olsson and Servicegrossisterna.
The Swedish market for convenience stores was stable in
2004, while ICA Meny’s sales in this segment dropped 9%. Other
major suppliers to this sector include Axfood, Servicegrossisterna,
Svensk Snabbmat and Privab.
The Norwegian catering market was stable in 2004.
However, ICA Meny increased its volumes by as much as 25%.
Also in 2004, ICA Meny commenced deliveries to convenience
stores, and now has a market share of about 25%. The convenience market is judged to be stable. Three main players dominate
the Norwegian catering and convenience market. These are ICA
Meny, NorgesGruppen and Servicegrossisterna.
Outlook
Lower costs and an increased share of private labels, an improved
pricing model, more efficient IT systems and a changed customer
mix are important components for developing ICA Meny and
achieving stable profit. However, operational efficiency will continue to remain in focus. Rationalization of the warehouse structure
will continue and the number of warehousing units in Stockholm will
be reduced. ICA Meny Norge will be integrated with the Swedish
operations and a joint Nordic offering will be developed. In addition, ICA Meny will work to develop synergies with other companies in ICA AB’s, mainly in the supply chain, sourcing and administrative systems.
Business model
ICA Meny is one of Nordic region’s leading suppliers to restaurants, caterers and convenience stores. ICA Meny not only offers
goods, but also logistics matched to customer needs, consumption
statistics for individual customers and other services related to ICA
Meny’s delivery of goods. ICA Meny is what is called a Food
Service Provider in the industry.
Hakon Invest’s holdings and financial management
41
ICA BANKEN
ICA Banken offers financial services that make life a little easier for ICA AB’s customers and in the process strengthen their loyalty to ICA AB
and ICA retailers. As a result of various marketing initiatives in the past years, ICA Banken experienced a very strong flow of customers. ICA
Banken will continue its marketing activities, with the goal of further raising business volume.
Hakon Invest
40% 1)
50%
Rimi Baltic
50%
Netto
ICA Sverige
1)
ICA Norge
ICA Meny
Portfolio companies
ICA AB
ICA Banken
Forma Publishing Group
Etos
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
ICA Banken in brief
BUSINESS CONCEPT
To make life a little easier for ICA’s customers through its financial services and to increase their loyalty to ICA and to reduce transaction costs for ICA stores and
ICA AB from customers who use other bank and credit cards.
2002
2004
2004 (IFRS)
JAN–SEP 2005 (IFRS)
9,672
9,672
11,885
5,219
5,219
5,958
4,480
6,288
Deposits, SEK M
3,789
4,451
–174
–166
–123
–123
–58
141
130
121
121
134
Operating profit/loss, SEK M
Number of employees, average 1)
Equity, SEK M
604
Total assets, SEK M
5,925
Risk-weighted assets, SEK M
3,605
Tier 1 capital, SEK M
Return on equity, %
Capital coverage, %
1)
42
2003
Business volume (deposits + lending
incl. mortgage loans), SEK M
425
–18.3
11.8
Refers to average number of employees based on 1,800 annual working hours.
Hakon Invest’s holdings and financial management
Operations
A fair interest rate on current accounts, unambiguous terms and low
fees are the philosophy at ICA Banken. The bank offers the simplified services customers want and which increase their loyalty to
ICA’s Swedish stores. When customers use their ICA AB card, it
also reduces the processing fees paid by ICA retailers and ICA AB.
ICA Banken began its operations in 2001. As one of the first
measures, the deposit limit for the previous deposit card was eliminated. In 2002, other bank services were offered after basic investments in systems and operations were completed. Over the past
few years, ICA Banken has focused on market communications,
which has resulted in a significant increase in both business volume
and the number of bank cards. For example, in 2004 lending by
ICA Banken grew by 300% and total business volume increased by
54% during the same period.
In terms of earnings, ICA Banken reported a loss during its first
years of operation while its operations were being built up. The
change during 2005 of the model for credit management together
with a continued positive trend for lending contributed to continued
improvements in earnings. To this will be added accounting effects
as a result of the final write-offs of the major share of implemented
investments being completed by year-end 2006 and year-end
2007, respectively. The rage of depreciation of investments that
will be completely written off by year-end 2006 amounts to about
SEK 40 million per year, while depreciation on investments to be
written off by year-end 2007 is about SEK 17 million per year.
Source of revenue
The sale of financial services is ICA Banken’s source of revenues.
Bank cards
As of December 31, 2004 ICA AB had a base of about 3.1 million active card customers. Of them, 1.4 million pay with their ICA
cards; the rest use them to accumulate bonus points. The number of
banking customers – those who utilize ICA Banken’s banking services – is nearly 200,000. The customer database is a significant
asset for ICA AB and contributes to loyal customers. It allows offers
to be specially matched to customers, while providing overall
knowledge of buying patterns. The customer database provides
important support for decisions in all of ICA AB’s business areas.
In 2004, ICA Banken increased its number of bank cards in
issue by 61,500, to nearly 142,000. The category of customers
who have an ICA Banken bank card shop an average of 30%
more at ICA stores than the average regular ICA-card customers.
In 2004, ICA-Banken received an award for “Bank Card of the
Year” from the magazine Privata Affärer. The award was given to
ICA Bankkort Plus in part because it does not charge fees, including
exchange fees, on purchases in foreign currency.
Hakon Invest’s holdings and financial management
Internet bank
ICA Banken continued to improve its Internet bank, which now
includes functionalities such as e-giro, autogiro and mortgage loans
with quick loan decisions.
Loans
ICA Banken provides customers with unsecured loans and through
its cooperation with SBAB, mortgage loans. The bank has also
started offering second mortgages as an alternative, which is likely
to further increase mortgage sales.
ICA Banken experienced unsatisfactory levels of credit losses
on unsecured lending in 2003 and 2004. As a result, ICA Banken
has adjusted the criteria for this type of lending, thus also adapting
its product portfolio. However, there is some delay before these
measures are expected to achieve full effect.
ATMs
ICA Banken in collaboration with ICA retailers has established
ATMs adjacent to stores. By the end of 2005, some 40 ATMs are
expected to be in operation.
Cooperation with Nordea and FöreningsSparbanken
In late 2003, ICA Banken signed a cooperation agreement with
Nordea whereby Nordea’s customers can withdraw cash in
around 1,500 ICA stores that provide banking services. In 2004,
ICA Banken signed a similar agreement with
FöreningsSparbanken.
Market
Traditionally, customers in Sweden tend to stick with the same bank.
The four major banks – SEB, Handelsbanken, FöreningsSparbanken
and Nordea – account for about 80% of the market. Smaller niche
banks such as ICA Banken, Skandiabanken and Länsförsäkringar
Bank continue to slowly but surely capture market share from the
bigger four in specific product segments.
More transparent pricing of banking services is putting pressure
on the major established banks. Through its product offering and
pricing, ICA Banken has helped to improve terms for many customers of other banks as well.
Outlook
To make its services more accessible, ICA Banken will continue to
install ATM’s in selected ICA stores. ICA Banken will also continue
its marketing activities, with the goal of further raising business volume.
43
ETOS
The specialty retail chain Etos has eight stores that bring health and beauty products together under one roof. Etos is also a strategic development company that provides its experience to other parts of the ICA group. In the past year, the company continued to prepare for the
expected deregulation of the market for non-prescription medications. The company can in many respects be regarded as ICA AB’s development unit for a deregulated pharmaceuticals market
Hakon Invest
40% 1)
50%
Rimi Baltic
Netto
ICA Sverige
1)
ICA Norge
Portfolio companies
ICA AB
50%
ICA Meny
ICA Banken
Forma Publishing Group
Etos
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
Etos in brief
BUSINESS CONCEPT
Etos shall be the customer’s natural choice with regard to well-being and rejuvenation.
Sales (SEK M)
Operating profit/loss (SEK M)
Number of employees (average) 1)
Number of stores (year-end)
1)
44
2002
2003
2004
2004 (IFRS)
11
26
31
31
JAN–SEP 2005 (IFRS)
24
–15
–24
–34
–34
–15
13
23
23
23
25
6
9
8
8
8
Refers to average number of employees based on 1,800 annual working hours.
Hakon Invest’s holdings and financial management
Operations
Etos is the first company in Sweden to clearly offer health and
beauty products as part of a unified concept. The concept comes
from the Netherlands, where there are around 430 Etos stores
today. In Sweden, Etos is a subsidiary of ICA AB and its stores are
operated as an integrated specially chain.
Within the ICA group, Etos serves as a development company
specialized in health and beauty. This means that Etos symbolizes
knowledge, new sales solutions, range development and relationships in the field that can and must be used in other parts of the
group.
In addition to product synergies, Etos is cooperating closely
with other companies in the ICA group to find common solutions in
logistics, IT and human resources, among other areas.
Business model
Etos is a specialty retail chain that operates eight stores that combine products in the areas of health and beauty.
Sources of revenue
Etos’ revenues are entirely attributable to the stores in the area of its
operations – that is, to retail sales.
Store concept
Etos was launched in Sweden in 2002 and operates eight stores in
greater Stockholm, Linköping and Västerås. Stores have been opened
in attractive locations in city centers or popular shopping centers.
1)
Etos stores are inspired by the drugstore concept popular in
other countries. The product range is divided into four segments:
beauty, body, health and gifts. The stores sell products under the
Etos label as well as products from the leading suppliers in the market. Etos also holds the sole right to sell products from British drugstore chain Boots in Sweden.
Market
The health trend is growing stronger. In 2004 the Swedish market
for health and beauty products generated sales of approximately
SEK 14 billion1) including VAT. Etos is alone in offering health and
beauty products as part of the same concept and has no clear-cut
competitor. In health products, the closest competitors are the staterun pharmacy chain Apoteket and health food chains such as Hälsa
För Alla Sverige AB and Naturapoteket. In beauty products, the
main competitors are Kicks, Åhléns, H&M and Body Shop.
Outlook
The focus is on working with the current stores, getting them to grow
and testing new concepts. At the same time, there is considerable
development potential for ICA in the area of Health & Beauty,
which means Etos is well placed to contribute to many internal projects and earnings in this area. Non-prescription medications may
be part of this area in the future.
Source: Chemical-Technical Suppliers’ Association and the Health Food Council.
Hakon Invest’s holdings and financial management
45
NETTO
ICA AB’s joint venture with Dansk Supermarked A/S for the discount segment is Netto, which offers customers high-quality goods at a low
price. Netto has recently undergone sharp expansion and will continue to expand the Swedish operations by adding another 20–25 stores
per year in southern Sweden and Mälardalen in central Sweden.
Hakon Invest
40% 1)
50%
Rimi Baltic
Netto
ICA Sverige
1)
ICA Norge
Portfolio companies
ICA AB
50%
ICA Meny
ICA Banken
Forma Publishing Group
Etos
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
Facts Netto
BUSINESS CONCEPT
Netto offers customers high-quality products at low price. The stores are simple and rationally organized for fast and efficient daily shopping.
SEP 2001–
AUG 2002
SEP 2002–
DEC 2003
2004
2004 (IFRS)
JAN–SEP 2005 (IFRS)
Sales (SEK M)
142
822
1,194
1,194
Not public
Operating profit/loss (SEK M)
–33
–111
–119
–119
Not public
Number of employees (average) 1)
90
238
540
540
Not public
Number of stores (year-end)
11
28
58
58
72
1)
46
Refers to average number of employees based on 1,800 annual working hours.
Hakon Invest’s holdings and financial management
Operations
The discount chain is jointly owned by ICA AB and Dansk
Supermarket A/S in Sweden. Netto maintains a strictly hard discount profile in Sweden and offers high-quality products at the lowest food prices in the market. The concept, which comes from
Denmark, where Dansk Supermarket A/S operates the chain, is to
offer quality products at low prices close to where customers live.
Because of its locations, Netto serves as the convenience store for
many of its consumers, making it easy for them to shop inexpensively every day.
In contrast to other discounters, Netto prefers to be close to residential areas, although it also prioritizes stores that are easy to
reach by car or in city centers by mass transit. The typical Netto
store is about 1,000 square meters in size, of which 750 square
meters is sales area. This is in addition to 60–80 parking spaces –
a requirement that does not apply to city centers. Netto prefers to
build new, but will move into an existing property if the location and
logistics are right.
Netto acts independently in relation to the owners since the lowprice concept places other demands on purchasing, logistics and
distribution. Today, while there is some cooperation on purchasing
to achieve volume advantages, these functions are not coordinated
with ICA AB. Netto also compares itself with Netto in Denmark, to
develop and optimize its operations.
Business model
Netto is a food retail chain that through its stores offers customers
goods of high quality at a low price.
Hakon Invest’s holdings and financial management
Sources of revenue
ICA AB’s revenue from Netto is attributable to retail. Since Netto’s
operations are conducted as a joint venture with Dansk Supermarked A/S, ICA AB receives 50% of the company’s earnings.
Store concept
Netto’s concept is based on self-service and its stores are very simply and efficiently designed. The product range is limited to popular
products, which is one reason why prices can be kept so low. It is
believed that the approximately 1,000 articles in Netto’s range
cover approximately 90% of consumers’ requirements.
Netto offers a mix of private label and brand name products
familiar to Swedish consumers. Since the strategy is to always offer
low prices, there are no discounts. Each week, however, new products are purchased in lots and sold under the “Bargain of the week”
banner.
Market
In 2004, discounters continued to gain a larger share of the food
retail market. Price pressure is coming mainly from new discounters,
one of which is Netto. Netto expects that the price pressure in the
market will continue and the discounters’ market share will increase.
Lidl and Willy’s are the main competitors here.
Outlook
The falling price trend is expected to continue in 2005. Netto sees
no indications of a slowdown in sales and expects a further
increase in revenues. Netto will expand its Swedish operations by
a further 20–25 stores a year in southern Sweden and Mälardalen.
47
R I M I B A LT I C
In January 2005, ICA AB and the Finnish company Kesko Livs AB formed a joint venture that combines both companies’ operations in the
region, creating one of the leading and most modern food chains in the Baltic regions. The name of the new company is Rimi Baltic AB. ICA
AB and Kesko Livs AB each own 50% of the combined operations.
The near-term focus will be on developing Rimi Baltic and establishing new stores throughout the region.
Hakon Invest
40% 1)
50%
Rimi Baltic
50%
Netto
ICA Sverige
1)
ICA Norge
ICA Meny
ICA Banken
Etos
Forma Publishing Group
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
Operations
The purpose of the formation of Rimi Baltic is to achieve strong
growth and profitability and eventually to become the market leader
in the region with a combined market share of 25% within three
years. Synergies will be gained mainly in sourcing, logistics and
new store openings. At present Rimi Baltic has a market share of
approximately 13% and a strong second-place position in the Baltic
food retail market. The two companies complement each other in
the region, with Kesko being the strongest in Estonia while ICA the
strongest presence in Latvia, creating an excellent foundation for
cooperation through Rimi Baltic.
The Baltic region is ICA AB’s fastest growing geographic
market within food retail. The majority of Rimi Baltic’s customers are
48
Portfolio companies
ICA AB
families with average to high incomes that demand and appreciate
a wide range of fresh foods and high quality.
Business model
Rimi Baltic owns all stores and operates a coordinated supply chain
for them.
Sources of revenue
Revenue in the Baltic region is attributable to retail operations. Since
Rimi Baltic’s operations are conducted as a joint venture with Kesko
Livs, ICA AB receives 50% of the company’s earnings.
Hakon Invest’s holdings and financial management
RIMI Baltic in brief1)
BUSINESS CONCEPT
Rimi Baltic’s stores should be the customer’s first choice in the fast growing
markets in Estonia, Latvia and Lithuania. Together with Kesko Livs, ICA AB
aims to make Rimi Baltic the leading retail food chain in the Baltic countries.
JAN–SEP 2005 (IFRS)
Sales (EUR M)
581
Operating profit/loss (EUR M)
Number of employees (average) 2)
Number of stores (year-end)
1)
2)
–4
8,584
169
Rimi Baltic was established in 2005 as a joint venture between ICA AB and Kesko
Livs AB, meaning that there are no historical figures for the company.
Refers to the average number of employees based on 1,800 annual working hours.
Store concept
ICA Baltic introduced the store concepts Rimi Supermarket and Rimi
Hypermarket to the cooperation with Kesko Livs. Rimi originated
with the Norwegian Rimi stores but has been locally adapted to the
Baltics. In the supermarket concept, the focus is on fresh foods and
good service, and the stores have deli, meat, hot and cold meal
solutions and fresh fish counters. Several hypermarkets were converted in 2004 to the new Compact Hypermarket concept, which
was launched in 2003.
The stores focus on fresh foods and non-food products, with an
emphasis on atmosphere, comfort and efficient use of space. The
new concept has been successful, and new Compact
Hypermarkets have also been opened in Tallinn (Estonia),
Daugavpils and Liepaja (Latvia) and Kaunas (Lithuania). Expansion
of the concept will continue.
At the time of the formation of the joint venture with ICA Baltic,
Kesko Livs had a total of eleven Citymarket stores located in Estonia
and Latvia. In Estonia, Kesko Livs also owned Säästumarket, the
country’s largest low-price chain with 47 stores. Kesko Livs also had
25 SuperNetto stores – some in Estonia, but most in Latvia.
The new company Rimi Baltic operates in six formats.
Rimi Baltic
STORE PROFILE
DESCRIPTION
NO. OF STORES,
DEC. 31, 2004
Customers do their daily shopping at Rimi Supermarket, where they can
find high-quality fresh food. These stores are conveniently located close to
where customers live and work.
At Rimi Compact Hypermarket and Rimi Hypermarket, customers can find everything
at reasonable price in a single location. In addition to food, these stores sell apparel,
housewares, multimedia, toys, sporting goods and cosmetics. The stores are conveniently
located for customers traveling by car and have extended opening hours.
68
NO. OF PRODUCTS
PER STORE
8,000 –10,000
RIMI COMPACT HYPERMARKET
5
20,000–25,000
RIMI HYPERMARKET
5
35,000
Super Netto is a discount chain in Latvia.
25
1,200
Säästumarket is the first discount chain in the Estonia retail sector. The first store opened
in 1999 to give customers an opportunity to save money. Strong price focus with limited
range and acceptable quality.
47
1,200
Citymarket
In this hypermarket concept, the customer should be able to find everything under
one roof. A wide range of food products is mixed with a non-food assortment with the
focus on apparel, textiles and shoes. The concept is used in Estonia and Latvia.
11
25,000–30,000
Cash & Carry
The Cash and Carry concept is focused on smaller restaurants and companies.
Hakon Invest’s holdings and financial management
1
49
Market
Approximately 7.5 million people live in the three Baltic countries:
Estonia, Latvia and Lithuania. Lithuania, with a population of nearly
3.5 million, is the largest geographic market, followed by Latvia
with 2.5 million inhabitants and Estonia with 1.5 million inhabitants. The Baltic countries became full-fledged members of the EU
on May 1, 2004. Membership has led to higher inflation in all
three countries due to the inflow of goods from other EU member
states. The economic growth rate in the countries is high, ranging
between 6 and 8%.
The Baltic market for consumer goods grew by just over 9% in
2004, to approximately SEK 47 billion including VAT. The discount
market continued to develop strongly. Households spend about
35% of their disposable income on food, compared with Sweden,
for example, where the corresponding figure is 15%. As incomes
rise, there is also a growing interest in more sophisticated products
and international brands in all areas.
In Latvia, in 2004 ICA Baltic had sales corresponding to
approximately 14% of the total market. Kesko Livs’s share of the market in 2004 amounted to approximately 6%, so Rimi Baltic’s total
market share amounted pro forma to approximately 20%. Its largest
competitor is Lithuania-based Vilnius Prekyba, with approximately
16% of the market, followed by Mego and Elvi with approximately
4% of the market each.
In 2004, ICA Baltic was the fourth largest player in Lithuania,
with approximately 6% of the market. Kesko Livs, on the other hand,
had no operations in Lithuania. Vilnius Prekyba was clearly dominant, with approximately 37% of the market, followed by the
domestic chain IKI, with 14% and Norfa with approximately 11%.
In Estonia, ICA Baltic had a limited market share in 2004,
while Kesko was the market leader, with a market share of approximately 26%. Cooperative ETKs were the second-largest player in
the Estonian market, with a market share amounting to approximately 23%. The Selver chain had a market share of 7%, while the
Finnish Prisma company had a market share of approximately 6%.
As a whole, Vilnius Prekyba was the market leader in the region
in 2004, with around 20%, followed by ICA Baltic with approximately 7%, Kesko Livs with slightly more than 6% and IKI with
slightly more than 5%.
Outlook
In the near future, the focus will be on developing Rimi Baltic
together with Kesko Livs. Expansion efforts will continue and new
stores will be opened throughout the region. Expansion focus will
be placed in the fastest growing formats of hard-discount and
Compact Hypermarkets. The German hard-discount chain Lidl is
expected to establish operations in the Baltic region in
2005/2006.
50
MARKET SHARES,
L AT V I A N R E TA I L F O O D M A R K E T, 2 0 0 4
Other
56%
Rimi Baltic
20%
Vilnius Prekyba
16%
Mego 4%
Elvi 4%
Source: ICA AB.
MARKET SHARES,
L I T H U A N I A R E TA I L F O O D M A R K E T, 2 0 0 4
Other
32%
Vilnius Prekyba
37%
Rimi Baltic 6%
Norfa 11%
IKI 14%
Source: ICA AB.
MARKET SHARES,
E S T O N I A N R E TA I L F O O D M A R K E T, 2 0 0 4
Other
38%
Prisma 6%
Selver 7%
Rimi Baltic
26%
ETKs
23%
Source: ICA AB.
Hakon Invest’s holdings and financial management
F I N A N C I A L O V E R V I E W I C A A B 1)
I N C O M E S TAT E M E N T
SEK M
Net sales
Cost of goods sold
Gross profit
Selling- and administration expense
2002
2003
2004
IFRS
A D J U S TMENT
ACCORDING TO IFRS
2004
2004
JAN–SEP
2005
JAN–SEP
70,908
71,980
71,811
1,7202)
73,531
53,996
52,514
–61,988
–63,130
–62,810
–1,2952)
–64,105
–47,095
–45,812
8,920
8,850
9,001
425
9,426
6,901
6,702
–6,652
–7,430
–7,626
–3033)
–7,929
–5,753
–5,620
Other operating income
435
1,292
544
–2284)
316
300
356
Result from participation in associated companies
124
30
426
–
426
435
–97
–292
–622
–480
2185)
–262
–262
–
2,535
2,120
1,866
111
1,977
1,621
1,341
Goodwill amortization and write-down
Operating profit (EBIT)6)
Financial income
Financial expenses
Profit before tax (EBT)
Tax on income for the year
Minority interests
NET PROFIT FOR THE YEAR
115
154
114
–
114
81
59
–566
–466
–251
–997)
–350
–260
–242
2,084
1,808
1,729
12
1,741
1,442
1,158
–350
–32
–213
–138)
–226
–221
–90
–24
1
1
–1
–
–
–
1,710
1,777
1,518
–3
1,515
1,221
1,068
2004
2004
JAN–SEP
2005
JAN–SEP
1,609
BALANCE SHEET
SEK M
Goodwill
Other intangible non-current assets
Tangible non-current assets
Financial non-current assets
Total non-current assets
ACCORDING TO IFRS
2002
2003
2004
IFRS
A D J U S TMENT
2,422
2,009
1,548
2179)
1,765
1,695
340
279
250
–
250
331
365
14,469
11,639
12,118
1,0677)
13,185
13,081
13,125
4,047
3,936
1,706
–1412)
1,565
1,731
2,384
21,278
17,863
15,623
1,143
16,765
16,838
17,483
Inventory and current receivables
7,120
7,502
9,648
1012)
9,749
8,517
11,339
Cash, bank and other current investments
3,967
4,476
3,111
1162)
3,227
3,318
3,079
Other current assets
1,706
1,713
1,301
45
1,346
1,147
356
Total current assets
12,793
13,691
14,061
262
14,323
12,982
14,774
TOTAL ASSETS
34,071
31,554
29,683
1,405
31,088
29,820
32,257
Equity
7,937
11,939
12,169
7,399
–30510)
7,094
12,293
Minority interests
258
34
33
–33
–
–
–
Interest-bearing provisions
645
672
730
–
730
659
846
Non-interest bearing provisions
Interest-bearing liabilities
Non-interest bearing liabilities
TOTAL EQUITY AND LIABILITIES
1,009
884
803
4
807
890
678
11,387
8,855
13,005
1,23111)
14,236
8,245
15,378
8,833
8,940
7,713
5082)
8,221
7,733
7,418
34,071
31,554
29,683
1,405
31,088
29,820
32,257
Due to rounding off, some of the columns may not total exactly.
Consolidation of stores.
3) Consolidation of stores, goodwill and sale/lease-back of properties.
4) Sale lease-back of properties.
5) Reversal of goodwill.
6) Net items of non-recurring nature amounted to around SEK +160 million in 2004 and around
SEK +230 million in 2003. In 2002 the net effect was around SEK +250 million.
7) Consolidation of stores and sale/lease-back of properties.
8) Tax on reported adjustments.
9) Reversal of goodwill amortization.
10) Sale/lease-back of properties and reporting of financial instruments.
11) Sale/lease-back of properties.
1)
2)
Hakon Invest’s holdings and financial management
S U M M A RY O F E F F E C T S O F I F R S 2 0 0 4
I N C O M E S TAT E M E N T
SEK M
BALANCE SHEET
IFRS 3
179
IFRS 3
IFRS 5
8
IFRS 5
SEK M
193
3
IFRS 18
–183
IFRS 18
873
IFRS 27
–5
IFRS 27
318
IFRS 39
–2
IFRS 39
18
51
C A S H - F L O W S TAT E M E N T
2004
2,968
2,524
37
2,561
1,935
1,873
–99
–2,849
72
–2,776
–1,715
–1,010
2,702
2,869
–324
109
–215
220
863
Investments in non-current assets
–3,287
–2,676
–2,500
–122
–2,622
–2,119
–1,829
Divestments of non-current assets
1,263
3,742
1,138
–
1,138
233
627
Other items from investing activities
–263
–93
2,398
36
2,435
2,746
–57
Cash flow from investing activities
–2,287
973
1,037
–86
951
860
–1,259
828
–2,369
4,199
–
4,199
–1,475
1,074
–
73
–
–
–
–
–
Dividend
–589
–664
–6,228
–
–6,228
–728
–607
Other items from financing activities
–199
–400
32
–2
30
–
–
Cash flow from financing activities
40
–3,359
–1,997
–2
–1,999
–2,203
467
455
484
–1,285
211)
–1,263
–1,123
71
2004
2004
JAN–SEP
2005
JAN–SEP
SEK M
Cash flow from operating activities before
working capital changes
2002
2003
2,969
–268
Working capital changes
Cash flow from operating activities
Changes in loans
Shareholder contributions
CASH FLOW FOR THE YEAR
K E Y D ATA
2004
JAN–SEP
2004
2005
JAN–SEP
ACCORDING TO IFRS
2002
2003
2004
IFRS
A D J U S TMENT
Operating profit before depreciation and write-downs (EBITDA)
4,103
4,437
3,570
–303
3,267
2,671
2,159
Operating profit before amortization of goodwill (EBITA)
2,827
2,742
2,346
–369
1,977
1,883
1,341
Operating margin before depreciation and write-downs (EBITDA margin) 5.8%
6.2%
5.0%
4.4%
4.9%
4.1%
Operating margin before amortization of goodwill (EBITA margin)
3.8%
3.3%
2.7%
3.5%
2.6%
4.0%
Operating margin (EBIT margin)
3.6%
2.9%
2.6%
2.7%
3.0%
2.6%
Profit margin (EBT margin)
2.9%
2.5%
2.4%
2.4%
2.7%
2.2%
Return on shareholders’ equity, excluding ICA Banken2)
16.5%
15.7%
16.5%
16.9%
–
14.1%
Return on capital employed, excluding ICA Banken2)
15.6%
13.1%
12.8%
12.9%
–
11.0%
Equiry/assets ratio
35.8%
38.7%
25.0%
22.8%
41.2%
24.6%
Interest-bearing net debt, excluding ICA Banken3), SEK M
6,323
3,188
7,161
7,161
1,602
7,032
0.5
0.3
1.0
1.0
0.1
0.9
38.4%
41.0%
27.4%
25.1%
43.7%
26.5%
Net debt/equity ratio, excluding ICA Banken, multiple
Proportion of risk-bearing capital
Interest coverage ratio, multiple
Untaxed reserves in the parent company, SEK M
Average number of employees
Dividend ratio
4.7
4.9
7.9
6.0
6.5
5.8
1,573
1,671
–
1,573
1,671
15,732
16,836
17,206
589
664
6228
34.4%
37.4%
410.3%
12,295
411.1%
ICA AB’S RETURN ON EQUITY
ICA AB’S EQUITY/ASSETS RATIO
COMPARED WITH TARGET OF 14.0–16.0%
COMPARED WITH TARGET OF 30.0–35.0%
4
%
20
%
40
3
15
30
2
10
20
1
5
10
0
0
02
03
04
Target interval
EBIT margin
3)
– 4)
6,228
I C A A B ’ S O P E R AT I N G M A R G I N ( E B I T )
0
2)
18,781
–
COMPARED WITH TARGET OF 3.5–4.0%
%
1)
–
1,492
Dividend, SEK M 5)
52
ACCORDING TO IFRS
IFRS
A D J U S TMENT
Consolidation of stores.
For quarterly figures, the key data are calculated on a
rolling twelve-month basis.
Interest-bearing liabilities (excluding pensions and interest-
02
03
04
02
Target interval
Return on equity
bearing provisions) minus interest-bearing liabilities from
real estate transactions reported as financing (sale-lease
back with sublease to ICA retailers) minus cash, bank and
short-term investments. Everything excluding ICA Banken.
03
04
Target interval
Equity/assets ratio
4)
5)
Not available.
Dividend refers to dividend paid during the year. In 2004,
the dividend included an extraordinary dividend of SEK
5,500 million.
Hakon Invest’s holdings and financial management
Note to the financial overview of ICA AB
In conjunction with the changed ownership structure of the ICA
group in 2000, ICA Ahold AB was established and acquired all
shares of ICA AB (publ). During 2002 ICA AB (publ) and ICA
Ahold AB were merged and during 2003 the company changed
name to ICA AB. Neither Swedish nor international accounting
recommendations have previously provided guidelines for how this
transaction should be reported. The company has previously
elected to treat this transaction as a company acquisition in accordance with Swedish accounting practice. In March 2004, a new
international recommendation regarding reporting of company
acquisitions was issued (IFRS 3 and IAS22). As a result of international guidance becoming available, the company elected in
2004 to change the reporting of ICA Ahold’s acquisition of ICA AB
(publ). The change entailed the elimination of goodwill in the consolidated balance sheet which affected goodwill, amortization on
goodwill, and equity, but had no effect on consolidated cash flow.
The years 2002 and 2003 were also recalculated retroactively.
Hakon Invest’s holdings and financial management
Comments on adjustments attributable to IFRS
The accounts according to IFRS for 2004 and the periods from January
to September 2004 and 2005 were prepared in accordance with the
IFRS principles expected to apply as of December 31, 2005. IFRS is
subject to ongoing review and interpretation by the EU, whereby
changes may arise that affect the accounts for the specified periods.
The company has provided long-term financing or guarantees to a
number of ICA retailer and franchisees. The company does not consider that it controls the operations in these stores. In accordance with
IFRS (IAS 27 and SIC 12), however, the determination is that ICA has
control over about 100-150 ICA retailers and franchisees, which,
accordingly, should be consolidated by ICA. A consolidation of these
ICA retailers and franchisees would result in an increase in net sales,
gross profit and total assets, but not significantly affect earnings for the
period and equity. The company plans to divest the financing operations during the fourth quarter of 2005, which means that the consolidation requirement ceases for most of these ICA retailers and franchisees. Accordingly, the company assesses that a consolidation of
these ICA retailers and franchisees for 2004 and part of 2005 would
not provide a correct view of the company’s operations. Consequently,
the company has decided not to consolidate them.
53
Forma Publishing Group AB
Hakon Invest
40% 1)
50%
Rimi Baltic
50%
Netto
ICA Sverige
1)
ICA Norge
ICA Meny
Portfolio companies
ICA AB
ICA Banken
Forma Publishing Group
Etos
100%
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
Forma Publishing Group in brief
BUSINESS CONCEPT
Through publishing operations in the Nordic and Baltic markets, to give people knowledge and inspiration in their private and working lives.
2002
2003
2004
JAN–SEP 2005
658.9
630.8
596.2
433.3
Operating profit/loss (SEK M)
–4.3
36.4
59.3
23.3
Number of employees (average)
349
321
303
299
Sales (SEK M)
Forma Publishing Group AB (Forma) is one of Sweden’s largest publishers focused on production and distribution of consumer periodicals, trade magazines and books. The dominant subject areas are
food, home, recreation and retailing.
Forma’s consumer magazine operations produce such publications as Sweden’s largest weekly magazine ICA-kuriren and
Sweden’s largest monthly magazine Hus&Hem. The editorial staff of
Hus&Hem also produces Sweden’s largest home buyer’s magazine
Metro Hus&Hem in collaboration with the free newspaper Metro.
Forma also produces customer magazines, with assignments
that include Sweden’s largest customer magazines. These include
54
Sweden’s largest food magazine Buffé, which is sent to ICA’s 2.3
million active customers. Forma has leading expertise in food and
retail, which is focused in the leading trade magazines. Operations
are currently conducted in Sweden, Finland, Estonia and Latvia.
In recent years, the company has undergone an extensive
change program with favorable results. In addition to a positive
financial trend, the company has won a number of awards, such as
Magazine of the Year and the Year’s One-shot from the industry
magazine Resumé. Forma was then also nominated as Publisher of
the year. The company has also been nominated as Sweden’s best
workplace by the Alecta insurance company.
Hakon Invest’s holdings and financial management
Background and history
Hakon Invest’s subsidiary Forma (formerly ICA Förlaget AB) was previously included in ICA AB, but in conjunction with the preparations
for the planned exchange listing of ICA AB in 2000, ICA decided to
focus operations on food retailing. This resulted in ICA AB decided
to divest Forma. Hakon Invest acquired Forma in 1999 and has
since developed the company so that it now generates a profit.
Forma changed its name in 2004, but since ICA has a strong
and well-established brand, the company decided to continue
using it in its operations (i.e. ICA-kuriren, ICA Bokförlag) with the
support of ICA-handlarnas Förbund’s agreement with ICA AB which
regulates the use of the brand. The agreement also includes ICAhandlarnas Förbund’s subsidiaries and their subsidiaries. Forma is
not dependent on ICA AB in other respects. In 2004, for example,
sales to ICA AB comprised less than 15% of Forma’s sales.
Magazine operations are organized in a matrix in which each
magazine is built up around three functions: Editorial Board,
Marketing and Advertising. The Editorial Board delivers the journalistic content. Marketing and Advertising are central functions that
exploit economies of scale within the organization. The Advertising
department’s sales staff are thus integrated, meaning that advertisement sales personnel represent Forma as a whole, not an particular
magazine or publication. The Marketing department is organized
in the same manner and is responsible for subscriptions and singlecopy sales. In addition, the company has staff functions for
Personnel, Accounting and IT and purchasing.
Forma places great emphasis on its employees and was
recently nominated by Alecta as Sweden’s best workplace. In
recent year, Forma has sharply improved profitability, reduced
absence due to illness and increased employee satisfaction.
Business concept and strategy
To provide people with knowledge and inspiration in their private
and professional lives through publishing operations in the Nordic
and Baltic markets. This means that Forma’s primary arena in the
media industry is printed materials.
Forma’s strategy consists of developing existing and new business. The positive earnings trend in recent years was possible by
focusing on profitable core operations. Extensive development work
is in progress both in trade magazine publishing and in consumer
magazines, which has resulted in completely new magazines, as
well as more efficient use of the brands that already exist.
Furthermore, Forma will grow by implementing acquisitions in the
areas in which Forma is currently active.
Business areas
Consumer magazines
ICA-kuriren
Forma publishes Sweden’s largest weekly magazine, ICA-kuriren,
which is a broad magazine focused on food and leisure. ICAkuriren has a circulation of 272,300 copies and is read each week
by some 861,000 readers.1)
During 2004, Forma published a number of special editions of
its ordinary magazines. The editors of ICA-kuriren published the
travel magazine Columbus, the dog magazine Vovve and the food
magazine Smak, which will be published twice during 2005 and is
planned for publication five times next year. The magazine Vovve
will be published four times during 2005, and eight issues are
planned for 2006. The launch form one-shot titles as a method for
live tests of a magazine with low financial risk will be increasingly
common for Forma over the coming years.
Financial targets
Forma has established the following targets:
• Sales shall amount to SEK 1,000 million by 2010.
• Profit before tax shall amount to SEK 100 million by 2010.
• Growth over time shall be 10% per year.
Organization
Forma conducts operations in Sweden, Finland, Estonia and Latvia
with around 300 employees. The major share of operations are
conducted in Västerås.
The company’s business areas are:
• Consumer magazines
• Specialty magazines
• Customer magazines
• ICA Bokförlag
• Finland and Baltic countries
1)
2)
Hus&Hem
Hus&Hem is Sweden’s largest monthly magazine with a circulation of
142,1002) and a focus on good living and home decoration. The
magazine, which is intended to inspire, provide tips and illustrate current topics, has some 625,000 readers1). Hus&Hem also produces
Sweden’s largest home buyer’s magazine, Metro Hus&Hem, in collaboration with the newspaper Metro. The editorial board of Hus&Hem
produces all editorial material, and it is hoped that it will be possible to
expand the partnership with more magazines in additional markets. In
competition with 117 new magazines, Metro Hus&Hem received the
award as the Best Magazine of 2004 from the industry magazine
Resumé. During 2005, the editorial board of Hus&Hem will also test
three new one-shot titles: Antik nu, Bohem and December.
Source: Orvesto.
Source: TS.
Hakon Invest’s holdings and financial management
55
Specialty magazines
Within the framework of Forma’s operations, specialty magazines
in the areas of food and retail are also published. Knowledge of
retailing in general and food retailing in particular are utilized for
development in a broader perspective. New products emerge and
existing media are enriched with supplementary distribution channels. Forma’s specialty magazines are Snabba köp, Praktiskt butiksarbete, ICA-nyheter, Restaurang & Storhushåll and Supermarket.
Specialty trade magazine operations also publish books and
guides linked to food and retailing.
Customer magazines
Forma’s customer magazine operations, Idé & Media, are the market leader in assignments towards consumers. Together with customers, the unit works to develop solutions that are customized for
different reader groups. This includes editorial work, advertising
sales, purchasing of printing services, distribution and Internet solutions. In addition, analyses and effectiveness measures are performed for the product. These operations even include production
on assignment focused on business-to-business, primarily in retail
and food sales. Customers include Stadium, Swedish Houseowners
Association, the Swedish Tennis Association, the Swedish
Equestrian Federation and ABB.
On assignment from ICA AB, Forma also publishes Buffé,
Sweden’s largest food magazine, which is distributed to ICA’s 2.3
million active regular customers. Buffé is ICA’s most important
medium for promoting the joy of cooking. The magazine should
strengthen the ICA brand while rewarding customer loyalty, but also
encourage retailers to implement loyalty-enhancing measures.
ICA Bokförlag
Forma includes ICA Bokförlag, which is one of Sweden’s largest
specialty book publishers with more than 450 titles in its catalogue.
Publication is very broad and comprises primarily practical handbooks in the areas of cooking, home decoration, gardening, health
and leisure. Among the unit’s successes is the baking book Sju
sorters kakor, which is Sweden’s best-selling book after the Bible.
Finland and Baltic countries
Three successful magazines are published in Finland: Kotivinki,
Trendi and Talo & Koti. These all have strong positions with substantial circulation. In Estonia, the magazines Kodu & Aed and Trend
are published. In Latvia, Forma only publishes Majas & Därtz.
Revenue model
Some 33% of Forma’s revenues in Sweden derive from advertising,
while 47% come from readers through subscription fees and newsstand sales. The remaining 20% includes revenues from book sales
and customer magazine operations.
C O U N T RY
S TA R T O F
P U B L I C AT I O N
C I R C U L AT I O N
ICA Kuriren
Sweden
1942
272,300
Sweden’s largest weekly
Hus & Hem
Sweden
1987
142,100
Sweden’s largest monthly
Vovve
DESCRIPTION
CONSUMER MAGAZINES
Sweden
2004
30,000
Sweden’s first life-style magazine for dog owners
Kotivinki
Finland
1983
186,000
Finland’s largest magazine for the home
Trendi
Finland
1989
62,000
Magazine for young women
Talo & Koti
Finland
2000
55,000
Finland’s Hus & Hem
Kodu & Aed
Estonia
1999
30,000
Estonia’s largest monthly
Trend
Estonia
2003
12,000
Magazine for young women
Majas & Därtz
Lettland
2000
26,000
Latvia’s largest monthly
ICA-nyheter
Sweden
1968
19,600
News magazine for food retailers
Snabba köp
Sweden
1998
14,300
Magazine for convenience stores
Praktiskt Butiksarbete
Sweden
1941
9,300
Magazine for store employees
Restaurang & Storhushåll
Sweden
1979
6,900
Magazine for the hotel and restaurant sector
Supermarket
Sweden
1960
4,600
Magazine for retailing decision makers
TRADE MAGAZINES
Source: Forma Publishing Group.
56
Hakon Invest’s holdings and financial management
Market and outlook1)
Advertising is an important source of revenue for Forma. Growth in
this market is driven by generic and cyclical factors. The generic
factors drive develop over the long term and consist of structural
changes in the market, such as the emergence of new media, product development in existing media and changes in competition. The
market for media and publishing is currently undergoing structural
change. In addition to changing consumer patterns as a result of
new media, a consolidation is in progress in which the players are
becoming larger and fewer in number. Growth through acquisitions
is therefore a prioritized area for Forma, and its future competitiveness and profitability will depend on the company’s growth capacity.
The cyclical factors dominate growth in a shorter perspective
and are in turn dependent on general economic conditions.
Growth, particularly in private consumption, and business profitability are important factors in the advertising market. The cyclical prerequisites are expected to remain stable during 2006 with a growth
rate of 5.2% for total advertising investments.
The market for advertising investments in specialty magazines
amounted to SEK 1,435 million during 2004, with growth
expected to amount to 4.5% due to a strengthening of the economy.
The popular press market amounted to SEK 678 million in
2004. The influx of new titles, which has been great in recent years,
as well as a large number of one-shot titles, has probably saturated
the market and made greater discounts necessary. In addition, competition is fierce from free newspapers and the evening newspapers’
supplements, which in large part have the same editorial content as
the popular press. The strengthening of private consumption, however, should provide prerequisites for anticipated growth in the market for advertising investments in the popular press of 2.9% during
2006.
The launch of Metro Hus&Hem in the beginning of 2004 contributed strongly to a redistribution of advertising revenues from primarily metropolitan dailies to free newspapers during the year.
Advertising in free newspapers and magazines amounted to SEK
2,153 million and is expected to continue to show stronger growth
than the average for the media market, amounting to some 7%.
The free publication segment also includes customer and company magazines. During 2004, advertising revenues in this segment declined by 0.8% to SEK 450 million due to price pressures.
During the first quarter of 2005, however, advertising revenues
increased by 4.2%. Customer and company magazines benefit
from the advertisers’ desire to profile their brands by starting their
own customer magazines. Many companies also start magazines
1)
2)
3)
4)
5)
6)
for the purpose of creating relations. Customer magazine production thus gains from this regrouping of advertisers’ marketing efforts
and constitute a method for Forma to increase its exposure to the traditional advertising market. Forma has excellent prospect for taking
additional market shares in the segment for customer and company
magazines, and the trend towards increased demand is expected
to continue with growth in 2006 anticipated to amount to 2.4%.
Forma’s share of the advertising market is 10.6% in the popular
press, 5% in the consumer magazine segment and 2.4% in the specialty press2). Other major players in the customer magazine market
are Hachette Filipacchi Sverige AB and OTW. Hachette Customer
Publishing produces customer magazines for external business partners and is part of the magazine publishing company Hachette
Filipacchi Sverige AB, with sales of some SEK 164 million in
2004.3) OTW is an associated company to Forma and has sales
of about SEK 75 million.4)
The largest competitors in the publishing market are Prisma
(within the KF Media Group) and Bonnier. The KF Media Group is
owned by Kooperativa Förbundet (KF) and has five main business
areas: book stores, book publishing, magazines, interactive media
and Internet book sales. The group has sales of some SEK 2 billion
with about 1,000 employees.5)
Bonnier AB is a family-owned media group with its base in
Sweden. The company’s business areas Bonnier Magazine Group
and Bonnier Books had sales of SEK 3,248 million and SEK 4,573
million, respectively, in 2004.6)
Forma has a strong market position with several products that
are the market leaders in their respective area and customer segments. Customer magazine operations within the Idé & Media business area lead the market for contracted magazines towards consumers. ICA Bokförlag is the leader in the segment for practical
handbooks for consumers.
Forma works continuously to retain and enhance its competitive
position in the market. Forma’s management and its Board of
Directors conducted a comprehensive review of the company’s business strategy, assignments, business concept, vision, values, goals
and strategy during 2004. Forma will strive to pursue the new direction and strategy for developing existing operations while making
acquisitions and developing new business. The company will also
continue to develop work methods and increase efficiency in the
organization. Opportunities still remain for improving financial control, for example, and increase sales of publications and advertising.
Source for information in this section is unless otherwise specified: Institute for Advertising and Media Statistics, Advertising and Media Forecast, June 2005.
Source: IRM.
Source: Hachette Filipacchi Sverige AB’s Annual Report.
Ownership share 12.5%. Source: Forma Publishing Group.
Source: www.kf.se
Source: Bonnier’s 2004 Annual Report.
Hakon Invest’s holdings and financial management
57
F I N A N C I A L O V E R V I E W F O R M A 1)
I N C O M E S TAT E M E N T
SEK M
Net sales
C A S H - F L O W S TAT E M E N T
2002
2003
2004
2005
2004 JAN–SEP JAN–SEP
658.9
630.8
596.2
439.9
433.3
–357.6
–346.1
–300.9
–194.3
–230.1
301.2
284.7
295.4
245.6
203.2
Selling expense
–206.5
–161.2
–153.8
–133.7
–110.5
Administration expense
–109.5
–90.3
–87.5
–77.7
–71.0
Other operating income
10.5
3.1
5.3
3.5
Operating profit (EBIT)
–4.3
36.4
59.3
37.7
Cost of goods sold
Gross profit
Result from participation in
associated companies
Income from other securities
and receivables
Interest income and
similar items
Interest expense and
similar items
Profit before tax (EBT)
Tax on profit for the year
Minority interests
NET PROFIT FOR
THE YEAR
Goodwill
2003
2004
2005
2004 JAN–SEP JAN–SEP
Cash flow from operating
activities before working
capital changes
–22.9
39.9
52.6
35.0
48.5
Working capital changes
12.0
24.9 –101.5
–59.1
–53.3
Cash flow from
operating activities
–10.9
64.8
–48.9
–24.1
–4.8
1.5
Investments
–11.7
–9.8
–24.6
–14.7
–10.0
23.3
Divestments
92.2
7.8
5.5
0.8
0.5
Cash flow from
investing activities
80.5
–2.0
–19.2
–13.9
–9.5
–5.0
1.9
0.2
1.0
1.8
–10.5
–
–
–
–
Changes in long-term
liabilities
4.1
–20.3
5.9
–62.1
–
5.1
Changes in long-term
receivables
8.6
0.2
0.5
0.6
0.0
Group contributions and
other cash flow items
–1.7
8.7
5.9
4.1
–8.0
–7.8
–6.0
–4.7
–1.9
–29.6
39.1
59.4
38.1
28.3
–0.8
–10.0
–16.5
–10.7
–7.8
0.5
–
–
–
–
–29.9
29.1
42.9
27.4
20.5
0.5
–14.4
–21.6
–20.0
–
Cash flow from
financing activities
13.1
–34.5
–15.1
–81.5
0.0
Cash flow for the year
82.7
28.3
–83.2
–119.5
–14.3
Cash equivalents on the
opening date
103.4 174.52)
202.9
203.2
119.2
CASH EQUIVALENTS
AT YEAR-END
186.1
202.9
119.7
83.7
105.0
2002
2003
2004
2005
2004 JAN–SEP JAN–SEP
3.0
45.6
69.0
K E Y D ATA
BALANCE SHEET
SEK M
2002
SEK M
2002
2003
2004
2005
2004 JAN–SEP JAN–SEP
0.1
–
–
–
–
Tangible non-current assets
63.4
63.0
75.2
71.4
74.9
Financial non-current assets
26.2
16.9
13.5
14.7
5.9
Total non-current assets
89.7
79.9
88.7
86.1
80.7
Operating profit before
depreciation and write-downs
(EBITDA)
Operating profit before
amortization of goodwill
(EBITA)
Inventory and
current receivables
141.0
107.1
152.8
188.7
181.2
Gross margin
Cash, bank and other
current investments
186.1
216.5
132.1
95.7
128.1
Total current assets
327.1
323.6
284.9
284.4
309.2
Operating margin before
depreciation and write-downs
(EBITDA margin)
TOTAL ASSETS
Equity
Interest-bearing provisions
Non-interest bearing
provisions
Interest-bearing liabilities
Non-interest bearing
liabilities
TOTAL EQUITY AND
LIABILITIES
416.8
403.5
373.6
370.5
390.0
43.7
59.5
80.6
86.3
101.6
103.0
110.6
115.4
118.8
119.8
2.5
2.6
3.7
13.4
11.5
27.9
–
–
–
–
239.7
230.8
173.9
152.0
157.1
416.8
403.5
373.6
370.5
390.0
2)
3)
4)
58
Due to rounding off, some of the columns may not total exactly.
Changed definition in the 2003 Annual Report meaning that current investments totaling
SEK 11.6 million were excluded from liquid funds in 2003.
For quarterly figures, the key data are calculated on a rolling twelve-month basis.
Not available.
14.1
–4.3
36.3
59.3
37.7
23.3
45.7%
45.1%
49.5%
55.8%
46.9%
0.5%
7.2%
11.6%
6.4%
3.3%
Operating margin before
amortization of goodwill
(EBITA margin)
–0.7%
5.8%
9.9%
8.6%
5.4%
Operating margin
(EBIT margin)
–0.7%
5.8%
9.9%
8.6%
5.4%
–4.5%
6.2%
10.0%
8.7%
6.5%
–50.0%
56.4%
61.2%
42.2%
31.8%
Profit margin before tax
(EBT margin)
Return on equity3)
Return on capital employed3)
–3.2%
27.2%
35.7%
27.3%
20.5%
Equity/assets ratio
10.5%
14.7%
21.6%
23.3%
26.1%
Interest-bearing net debt,
SEK M
–81.5 –122.8
–14.2
–30.2
8.4
–1.9
–2.1
–0.4
0.1
–0.1
Proportion of risk-bearing capital 11.1%
15.4%
22.6%
26.9%
29.0%
Net debt/equity ratio, multiple
1)
28.0
Interest coverage ratio, multiple
–2.7
6.0
10.9
9.1
15.7
Average number of employees
349
321
303
– 4)
299
Hakon Invest’s holdings and financial management
Financial Management
Hakon Invest
40% 1)
50%
Rimi Baltic
50%
Netto
ICA Sverige
1)
ICA Norge
ICA Meny
Portfolio companies
ICA AB
ICA Banken
Etos
100%
Forma Publishing Group
Future Investment
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in
ICA AB in that it stipulates unity in decisions at the Annual General Meeting and in the Board of Directors.
Hakon Invest AB has a substantial liquidity management, which at
September 30, 2005 amounted to about SEK 2.8 billion including
cash and bank balances of around SEK106 million used in the daily
operations. Liquid funds not used in current operations are managed
externally and internally. External management is handled by
Carlson Investment Management. Proprietary management is carried out in accordance with the Company’s existing investment policy
and financial policy. The aim of proprietary management is to
handle the Company’s holding in Ahold shares as well as cash and
bank balances.
As a consequence of Hakon Invest via Ahold acquiring half of
Canica AS’s 20% interest in ICA AB in 2004, a stable ownership
situation in ICA AB is foreseen. This means that Hakon Invest no
longer needs to hold as high a liquidity position as previously, when
the Company wanted to have the possibility to acquired Canica’s
shareholding that was expected to be divested in 2004. In turn, this
means that the liquidity in financial management can now be
reduced, which increases the conditions for achieving a higher
return. As a result, Carlson Investment Management’s assignment
was realigned in January 2005. Previously, the management was
evaluated against index, but now an absolute target is applied. The
goal is as a minimum to achieve a return that corresponds to the
change in the CPI (Consumer Price Index) plus 4 percentage points.
The rules for financial management are set in a financial policy
and attest procedure adopted by the Board of Directors. The
Board’s Audit Committee monitors compliance.
Trading in equities is carried out within the framework of the
management.
In total, around 78% of the management of the liquid funds not
used in operations is managed externally, while around 20% is handled internally.
Hakon Invest’s holdings and financial management
The funds invested under external and internal management,
including the funds used in the daily operations, shall be distributed
within the following framework:
Cash and bank balances
>5% of total funds under management
Proprietary management
<25%
External management
< 80%
The aim is an average return of 5% annually.
SEK M
2003
–1,463
–161
65
284
–44%
–5%
3%
11%
3,314 3,114 2,567
2,716
– of which, value under external management 2,152 2,631 1,974
2,195
Result from financial management
Return on financial management
Value of total capital under management
(end of period)
– of which, value under
proprietary management
1,162
483
2004
30 SEP
2005
2002
593
521
P R O P R I E TA RY F I N A N C I A L M A N A G E M E N T
Financial situation and structure
At September 30, 2005, proprietary financial management
amounted to SEK 521 million. Investments were distributed 94% in
equities and 6% in hedge funds.
Return goal
The goal is a return of 5% annually.
59
Equities
The equities holding is largely in shares in Ahold (8,341,326
shares). The shares in Ahold are a financial investment. The value of
the Ahold shares at September 30, 2005 amounted to SEK 490
million, which is 17% of the financial management at that date.
Hedge funds
The hedge fund holdings are entirely in the Amplus hedge fund. The
value at September 30, 2005 was SEK 31 million.
Other
During the first half of 2005, the Company divested its interest in
the Skandia Investment venture capital fund. The investment in
Skandia Investment has yielded a positive return since 1998.
In addition, there are smaller investments in Swedish equities
funds in the Forma subsidiary. The value of the fund units at
September 30, 2005 amounted to SEK 14 million. These units
were transferred to the Parent Company in the third quarter.
Investment rules
Permitted asset types
The portfolio’s funds may be invested in the following asset categories:
a) Fixed-income securities denominated in Swedish and foreign currencies.
b) Swedish and foreign equities, certificates of deposit and equityrelated instruments.
Mutual funds including hedge funds may be used in the management of so-called structured products.
Single-party undertakings
The market value of directly owned shares, bonds and other financial instruments attributable to a single issuer, or issuers in the same
group, may only amount to a maximum of 10% of the portfolio’s
total market value, with the exception of the current investment in
Ahold shares.
Exceptions to this limit are issuer categories 1, 2 and 3 in the
table below (see column “Maximum share of portfolio per issuer, %”).
Fixed-income securities
The limits in the table below apply for directly owned fixed-income
securities in Swedish and foreign currencies. The percentages in the
table refer to the share of the assets’ (proprietary management) total
market value.
Interest risk
The portfolio’s fixed-income securities, both directly owned and
through fixed-income funds, may have a duration of not more than
five years.
Equities
At least 90% of the portfolio’s investments in Swedish and foreign
shares, certificates of deposit and equity-related instruments must be
exchange listed, that is, subject to regular trading on a marketplace
open to the public and which is supervised by an authority or other
regulatory body.
A maximum of 50% of the assets under proprietary management must be invested in shares, of which 50% in foreign shares
(corresponding to 25% of the assets under proprietary management, with the exception of the investment in the Ahold shares).
Derivatives
May only be used to hedge exchange rates in foreign currencies.
Issuer category
ISSUER
C AT E G O RY
MAX. SHARE OF PORTFOLIO
P E R I S S U E R C AT E G O RY %
MAX. SHARE OF
PORTFOLIO PER ISSUER, %
1.
Securities issued by the Swedish State or guaranteed by
Swedish State; securities with rating AAA / Aaa
100
100
2.
Swedish mortgage institutions
70
30
3.
Swedish municipalities and counties securities with rating AA / Aa
50
20
4.
Securities with rating A / A
40
10
1)
60
I S S U E R / S E C U R I T Y 1)
Rating according to Standard & Poor’s and/or Moody´s. As appropriate, issuers/securities should be rated by at least one of this institutes. In the event of a “split rating,” the lowest rating
shall be applied.
Hakon Invest’s holdings and financial management
Liquidity risk
Liquidity risk is managed through specifying that 90% must be in
listed securities.
Currency risk
Ahold shares at a value of EUR 55 million as of September 12,
2005, are hedged at a rate of SEK/EUR 9.26 through to January
13, 2006.
Evaluation
Evaluation of management is carried out continuously against the goal
of 5% that applies to the return on proprietary management. This is
carried out by the CFO, who reports to the Board at each Board
meeting.
EXTERNAL FINANCIAL MANAGEMENT
External financial management, which as of 2005 is carried out
Carlson Investment Management, amounted at September 30, 2005
to SEK 2,196 million. Distribution of the investments was 37%
equities, 23% hedge funds, fixed-income securities 39% and bank
funds 1%.
Return goal
The management goal is to achieve an annual average real return
over a rolling five-year period of 4% on the portfolio’s assets. Real
return is defined as nominal return adjusted for inflation in Sweden,
measured as the change in CPI. The managements’ benchmark
return is CPI plus 4% per year.
Investment rules
Permitted asset types
The portfolio’s funds may be invested in the following asset categories:
a) Fixed-income securities denominated in Swedish and foreign currencies.
b) Swedish and foreign equities, certificates of deposit and equityrelated instruments,
Mutual funds including hedge funds may be used in the management as well as so-called structured products.
Derivatives
With the aim of enhancing the efficiency of management and for
the purpose of increasing returns or hedging an investment, the portfolio’s manager may use derivatives, that is, options, futures, swaps
and FRAs (Forward Rate Agreement), related to currencies and
securities in which the manager is permitted to invest funds, or
indexes related to such securities. The manager may also enter into
repo agreements pertaining to fixed-income securities. There is no
limit on how much that may be invested in derivative instruments in
accordance with the above.
Single-party undertakings
The market value of directly owned shares, bonds and other financial instruments attributable to a single issuer, or issuers in the same
group, may only amount to a maximum of 10% of the portfolio’s
total market value.
Exceptions to this limit are issuer categories 1, 2 and 3 in the
table below (see column “Maximum share of portfolio per issuer, %”).
Fixed-income securities
The limits in the table below apply for directly owned fixed-income
securities in Swedish and foreign currencies. The percentages in the
table refer to the share of the assets’ (external management) total
market value.
Issuer categories
ISSUER
C AT E G O RY
I S S U E R / S E C U R I T Y 1)
MAX. SHARE OF PORTFOLIO
P E R I S S U E R C AT E G O RY %
MAX. SHARE OF
PORTFOLIO PER ISSUER, %
1.
Securities issued by the Swedish State or guaranteed by
Swedish State; securities with rating AAA / Aaa
100
100
2.
Swedish mortgage institutions
70
30
3.
Swedish municipalities and counties securities with rating AA / Aa
50
20
4.
Securities with rating A / A
40
10
5.
Securities with rating BBB / Baa
30
10
6.
Securities with rating BB / Ba; issuers without a rating but with
a assessed creditworthiness corresponding to at least BB / Ba
20
10
1)
Rating according to Standard & Poor’s and/or Moody´s. As appropriate, issuers/securities should be rated by at least one of this institutes. In the event of a “split rating,” the lowest rating
shall be applied.
Hakon Invest’s holdings and financial management
61
Interest risk
The portfolio’s fixed-income securities, both directly owned and
through fixed-income funds, may have a duration of not more than
ten years.
Equities
At least 90% of the portfolio’s investments in Swedish and foreign
shares, certificates of deposit and equity-related instruments must be
exchange listed, that is, subject to regular trading on a marketplace
open to the public and which is supervised by an authority or other
regulatory body.
Risk in the portfolio
The risk in the fixed-income securities is measured continuously and
defined as the value risk in the event of a one (1) percentage unit
change. At September 30, 2005, the value risk was SEK 20
million.
Investments in hedge funds have been made in which the goal
for the standard deviation is 4%.
Investments in Swedish and foreign equities is carried out with
at least 90% in exchange-listed shares and with a favorable
spread. Accordingly, the risk in this part of management is not less
the exchange in general.
62
Liquidity risk
All funds under external management are available to Hakon Invest
within a maximum of five days.
Currency risk
The table below presents the portion of the portfolio that is exposed
against various currencies at September 30, 2005. All currencies
that represent more than 1% of the portfolio are shown in the table.
CURRENCY
AMOUNT (SEK M)
SHARE OF PORTFOLIO
SEK
1,910
87.0%
USD
146
6.7%
EUR
42
1.9%
GBP
29
1.3%
YEN
27
1.2%
Other
42
1.9%
2,196
100%
Total
Evaluation
Evaluation of management is carried out continuously against the
goal that applies to the portfolio’s return in the form of the change in
the CPI plus 4 percentage points per year. This is carried out by the
CFO, who reports to the Board at each Board meeting.
Hakon Invest’s holdings and financial management
Financial overview
Hakon Invest
Financial overview Hakon Invest
I N C O M E S TAT E M E N T 1 )
ACCORDING TO IFRS
SEK M
Net sales
Cost of goods sold
Gross profit
2001
2002
2003
2004
2004
2004
JAN–SEP
2005
JAN–SEP
905.2
778.0
658.9
630.8
621.9
–
621.9
459.0
445.7
–666.9
–521.4
–357.6
–346.1
–300.9
–
–300.9
–194.3
–230.1
238.2
256.6
301.2
284.7
321.1
–
321.1
264.7
215.6
Selling expenses
–152.1
–204.1
–206.3
–161.2
–153.8
–
–153.8
–133.7
–110.5
Administrative expenses
–151.2
–138.5
–155.4
–159.0
–187.7
–153.4
–152.3
–131.0
523.1
469.9
635.6
544.5
511.6
–
–
–
–
Result from participation in
associated companies, gross4)
Share in profit from companies reported
according to the equity method4)
34.3 3)
–
–
–
–
–
–
466.2
349.4
416.5
Other operating income
18.3
37.4
13.8
18.9
5.3
–
5.3
3.5
1.5
Other operating expenses
–3.6
–2.9
–0.1
–
–
–
–
–
–
Items affecting comparability
16.0
–
–25.4
–
–
–
–
–
–
488.7
418.3
563.3
528.0
496.4
–11.1 5)
485.3
331.6
392.2
Operating profit (EBIT)
Financial income
Result from the sale of associated companies6)
Change in value due to fair valuation
Financial expense
108.4
151.0
170.9
732.3
159.0
–99.8
59.1
18.57)
295.97)
1,794.3
–
–
–
–
–
–
–
–
–
–
–
–
–
58.6
58.6
–
–
–182.0
–195.6
–1,633.5
–893.6
–94.3
85.1
–9.2
–5.97)
–11.97)
Result from financial investments
1,720.7
–44.6
–1,462.7
–161.3
64.7
43.9 8)
108.6
12.6
284.0
Profit before tax (EBT)
2,209.4
373.7
–899.3
366.7
561.1
32.8
593.9
344.2
676.1
–491.3
–99.4
–76.8
–14.0
–63.8
48.5 9)
–15.3
–10.8
–68.0
–0.9
–
0.5
–
–
–
–
–
–
1,717.2
274.3
–975.7
352.7
497.3
81.3
578.6
333.3
608.1
Tax on profit for the year
Minority interests
NET PROFIT FOR THE YEAR
1)
2)
3)
4)
5)
6)
7)
8)
9)
64
2000
A D J U S T M E N T 2)
IFRS
Due to rounding off, some of the columns may not total exactly.
IFRS accounts for full-year 2004 and the interim periods January–September 2004 and 2005 have been prepared in accordance with the IFRS principles expected to apply on December 31,
2005. Since IFRS is subject to continual review and interpretation as well as EU approval, changes may occur that affect the accounting for the above-stated periods. For comments regarding
adjustments attributable to IFRS, refer to the section entitled “2004 accounts in accordance with IFRS.”
Differences in net present value and pension costs in accordance with defined benefit pension plans. Net present value and pension cost pertaining to pension commitments not reported
previously. Goodwill adjustment for acquisitions.
Share in profit from associated companies are reported above in operating profit, while in the annual reports for 2000–2004 they were included in result from financial investments. Result from
participation in associated companies are reported gross for the years 2000–2004, but net in accordance with IFRS 2004.
See note 3 above and “Goodwill amortization for investments in companies reported according to the equity method.” Regrouping of tax expense in companies reported according to the equity
method.
After estimated standard tax, the net gain regarding the sold shares in ICA AB amounted to SEK 1,464 million.
Includes change in value due to fair valuation.
Change in the fair value of financial instruments.
Deferred tax on pension expenses. Regrouping of tax expense in companies reported according to the equity method.
BALANCE SHEET
SEK M
Goodwill
Tangible and other intangible non-current assets
Participations in companies reported
according to the equity method
Other financial assets
Total non-current assets
Inventories
ACCORDING TO IFRS
2000
2001
2002
2003
2004
A D J U S T M E N T 1)
IFRS
2004
2004
JAN–SEP
2005
JAN–SEP
78.9
72.3
65.9
61.7
57.6
4.1 2)
61.7
61.7
61.7
125.4
133.6
63.5
63.1
75.2
–
75.2
71.4
74.9
2,806.1
3,119.7
3,619.7
3,657.5
4,592.7
–91.7 3)
4,501.0
3,666.2
4,828.6
69.2
49.3
44.0
59.5
105.1
–14.9 4)
90.2
70.5
15.0
3,079.6
3,374.9
3,793.1
3,841.7
4,830.5
–102.4
4,728.1
3,869.8
4,980.1
38.5
38.2
29.4
21.7
22.5
–
22.5
23.8
25.3
212.2
222.5
120.3
101.0
85.8
–
85.8
99.7
122.7
Securities under special management5)
2,727.4
2,646.1
2,163.9
2,644.9
1,986.4
1,798.8
2,531.7
2,231.8
Other shares7)
2,082.7
2,144.3
1,137.0
456.5
425.2
–
425.2
388.8
490.0
164.1
101.8
199.8
229.9
288.5
216.56)
505.0
442.1
227.6
Total current assets
5,224.8
5,152.8
3,650.3
3,454.0
2,808.4
28.9
2,837.3
3,486.1
3,097.4
TOTAL ASSETS
8,304.5
8,527.8
7,443.4
7,295.7
7,639.0
–73.6
7,565.4
7,355.9
8,077.6
Equity
7,832.1
7,854.0
7,050.3
6,947.7
7,277.4
–33.8
7,243.6
7,007.4
7,682.5
5.0
–
–
–
–
–
–
–
–
Interest-bearing provisions
84.3
91.8
113.7
124.7
121.4
5.7 8)
127.1
177.8
120.0
Interest-free provisions
17.8
8.5
2.5
2.6
50.1
–45.6 3)
4.5
5.8
23.2
Interest-bearing liabilities
39.3
31.4
27.9
–
–
–
–
–
–
326.0
542.1
249.1
220.8
190.2
–
190.2
164.9
251.9
8,304.5
8,527.8
7,443.4
7,295.7
7,639.0
–73.6
7,565.4
7,355.9
8,077.6
2004
2004
JAN–SEP
2005
JAN–SEP
389.4
Current receivables
Cash and bank balances/cash equivalents
Minority interests
Interest-free liabilities
TOTAL EQUITY AND LIABILITIES
–187.6 6)
C A S H - F L O W S TAT E M E N T
SEK M
Cash flow from operating activities
before working capital changes
ACCORDING TO IFRS
2000
2001
2002
2003
2004
A D J U S T M E N T 1)
IFRS
22.9
106.0
–13.8
39.0
1,918.2
–1,659.1
259.1
262.0
Working capital changes
–403.7
–9.8
99.0
–1.3
–16.1
0.6
–15.5
–60.4
–32.9
Cash flow from operating activities
–380.7
96.3
85.2
37.6
1,902.1
–1,658.5
243.6
201.6
356.5
–2,184.3
–65.6
–30.1
–20.7
–2,419.2
–
–2,419.2
–32.6
–10.0
2,497.0
16.0
77.3
7.8
20.6
1,648.2
1,668.8
13.5
0.5
–
–
–
–
–
706.0
706.0
–43.4
–300.6
–310.1
Investments in non-current assets
Sale of non-current assets and other items
Change in current investments
Cash flow from investing activities
Change in long-term liabilities and provisions
Change in current investments9)
Dividend paid and shareholders’ contribution
312.7
–49.5
47.3
–12.9
–2,398.5
2,354.2
–44.4
–62.5
13.1
225.5
–211.8
–27.9
43.0
–43.0
–
–
–
–2,695.6
13.0
136.7
199.5
689.8
–689.8
–
–
–
–324.7
2,761.8
–343.7
33.7
–166.3
–140.6
–
–140.6
–140.6
Other items from financing activities
–10.8
–3.9
6.9
0.2
–37.1
37.1
–
–
0.9
Cash flow from financing activities
68.5
–109.1
–34.5
5.4
555.1
–695.7
–140.6
–140.6
–323.8
Cash flow for the year
0.4
–62.3
98.0
30.1
58.7
–
58.7
–1.4
–277.4
Cash and cash equivalents at January 1
163.6
164.1
101.8
199.8
229.9
–
229.9
229.9
505.0
CASH AND CASH EQUIVALENTS
AT DECEMBER 31
164.1
101.8
199.8
229.9
288.5
216.5
505.0 10)
442.1 11)
227.6
IFRS accounts for the full year 2004 and the interim periods January–September 2004 and 2005 have been prepared in accordance with the IFRS principles expected to apply on December 31,
2005. Since IFRS is subject to continual review and interpretation as well as EU approval, changes may occur that affect the accounting for the above-stated periods. For comments regarding
adjustments attributable to IFRS, refer to the section entitled “2004 accounts in accordance with IFRS.”
2) Reversed goodwill amortization.
3) Recalculation for companies reported according to the equity method.
4) Change in the fair value of financial instruments.
5) Market values: SEK 2,020.6 million (2004), SEK 2,644.9 million (2003).
6) Reclassification of current investments with an original maturity of less than 3 months.
7) Refers to shares in Ahold reported at market value on the closing date. 2004: 8,341,376 shares at EUR 5.66; 2003: 8,341,376 shares at EUR 6.04; 2002: 10,004,826 shares at
EUR 11.93; 2001: 10,004,826 shares at EUR 32.68.
8) Differences in net present value and pension costs in accordance with defined benefit pension plan.
9) Changed definition in the 2001 annual report entails that current investments of SEK 2,695 million were excluded from cash and cash equivalents from year 2000.
10) Includes reclassification to cash and cash equivalents in an amount of SEK 216.4 million.
11) Includes reclassification to cash and cash equivalents in an amount of SEK 213.6 million.
1)
65
K E Y D ATA
ACCORDING TO IFRS
SEK M
A D J U S T M E N T 1)
IFRS
2004
2004
JAN–SEP
2005
JAN–SEP
51.6%
51.6%
57.7%
48.4%
82.1%
79.3%
73.9%
90.1%
2000
2001
2002
2003
2004
Gross margin
26.3%
33.0%
45.7%
45.1%
Operating margin before depreciation and
write-downs (EBITDA margin)
57.9%
58.3%
87.2%
85.8%
Operating margin before goodwill amortization
(EBITA margin)
54.7%
54.6%
86.1%
84.4%
80.5%
78.0%
72.2%
88.0%
Operating margin (EBIT margin)
54.0%
53.8%
85.5%
83.7%
79.8%
78.0%
72.2%
88.0%
244.1%
Profit margin (EBT margin)
48.0%
–136.5%
58.1%
90.2%
95.5%
75.0%
151.7%
Return on equity2)
21.9% 3)
3.5%
–13.1%
5.0%
7.0%
8.2%
–
11.6%
Return on capital employed2)
30.0% 3)
7.1%
9.7%
17.7%
9.1%
9.4%
–
17.3%
7,977.2
7,191.9
7,072.4
7,398.7
–28.0
7,370.7
7,185.2
7,802.5
95.7%
95.3%
95.1%
–2,969.4
–
–3,049.9
Capital employed, SEK M
7,960.6
Equity/assets ratio
Average interest-bearing net debt, SEK M4)
94.4%
92.1%
94.7%
95.2%
95.3%
–4,919.8
–4,869.1
–4,110.7
–3,334.6
–2,975.0
–5.6
–
Net debt/equity ratio, average4)
–0.6
–0.6
–0.6
–0.5
–0.4
–0.4
–
–0.4
Proportion of risk-bearing capital
95.3%
92.8%
94.8%
95.3%
95.3%
95.8%
95.3%
95.4%
Interest coverage ratio, multiple
13.1
2.9
0.4
1.4
6.9
65.5
Average number of employees
409
417
363
336
318
318
12.17
1.70
–6.06
2.19
3.09
Earnings per share in the Parent Company, SEK
14.13
0.73
–7.27
–0.06
11.64
Equity per share, SEK
48.67
48.81
43.81
43.18
45.22
10.2
343.7
332.6
166.3
140.6
Earnings per share in the Group, SEK
Earnings per common share in the
Group according to IFRS, SEK6)
Dividend, SEK M
0.25
8.40
8.40
4.20
3.55
Dividend ratio
1.2%
20.0%
121.3%
–
39.9%
142
147
199
1,868
n.m. 9)
2000
Number of preference shares on closing date
237
3.78
43.55
47.74
2.38
Dividend per preference share, SEK7)
Dividend received from ICA AB, SEK M
–5)
2.07
2001
2002
2003
–0.21
45.01
n.m. 8)
2004
2004
JAN–SEP
2005
JAN–SEP
40,917,436
40,917,436
39,599,936
39,599,936
39,599,936
39,599,936
–
Total number of shares on closing date
160,917,436
160,917,436
160,917,436
160,917,436
160,917,436
160,917,436
160,917,436
Average total number of shares
141,117,468
160,917,436
160,917,436
160,917,436
160,917,436
160,917,436
160,917,436
Sale price, SEK
68.0–77.0
P/E ratio calculated on sale price, multiple10)
12.8–14.5
Sale price/Equity per share, %
142.4–161.3
IFRS accounts for the full year 2004 and the interim periods January–September 2004 and 2005 have been prepared in accordance with the IFRS principles expected to apply on December 31,
2005. Since IFRS is subject to continual review and interpretation as well as EU approval, changes may occur that affect the accounting for the above-stated periods. For comments regarding
adjustments attributable to IFRS, refer to the section entitled “2004 accounts in accordance with IFRS.”
2) For quarterly figures, the key data are calculated on a rolling twelve-month basis.
3) Calculated on basis of closing balance in 2000.
4) Net debt and equity are calculated as the average of the opening and closing balances. Calculated on basis of closing balance for 2000.
5) Not available.
6) Earnings per preference share in the Group according to IFRS: SEK 7.31.
7) Based on other dividend criteria than those applicable today. The dividend criteria were established in an older Articles of Association. The share structure during those years was also different
from the structure that will be implemented in conjunction with the market listing.
8) Not measurable. No information on net profit according to IFRS 2003.
9) Not measurable. Reorganization took place in 2000. IFAB’s (current Hakon Invest) annual report does not report any dividend but only profit share.
10) Refers to the period September 30, 2004 – September 30, 2005.
1)
66
Financial overview Hakon Invest
K E Y D ATA D E F I N I T I O N S
The definitions apply to Hakon Invest, Forma, and ICA unless otherwise specified.
Gross margin
Gross profit/loss as a percentage of sales.
Operating margin before depreciation and write-downs
(EBITDA margin)
Operating profit before depreciation and write-downs as a percentage of sales.
Operating margin before goodwill amortization (EBITA margin)
Operating profit before goodwill amortization as a percentage of
sales.
Operating margin (EBIT margin)
Operating profit as a percentage of sales.
Profit margin (EBT margin)
Profit before tax as a percentage of sales.
Return on equity (ROE)
Net profit calculated on a rolling 12-month basis, as a percentage
of average equity during the same period. Equity does not include
minority shares in subsidiaries.
Return on capital employed (ROCE)
Profit after net financial items plus financial expense, calculated on
a rolling 12-month basis, as a percentage of average capital
employed during the same period.
Capital employed
Total assets reduced by non interest-bearing liabilities and non
interest-bearing provisions.
Equity/assets ratio
Equity including minority shares, as a percentage of total assets.
Financial overview Hakon Invest
Interest-bearing net debt
Interest-bearing provisions and liabilities reduced by financial assets
and liquid funds. Calculated on the closing date unless otherwise
specified.
Net debt/equity ratio
Interest-bearing net debt as defined above divided by equity including minority interests. Calculated on the closing date unless otherwise specified.
Proportion of risk-bearing capital
The total of equity including minority interests and deferred tax liability divided by total assets.
Interest coverage ratio
Profit before tax plus financial expense divided by financial
expense.
Average number of employees
New employees, part-time employees, etc. are restated as full-time
positions based on total working time of 1,800 hours per year.
Earnings per share
Profit after tax divided by the average number of shares.
Equity per share
Equity divided by the number of shares on the closing date.
Dividend ratio
Dividend as a percentage of net profit for the year.
P/E ratio calculated on sale price
Sale price divided by earnings per share.
67
Comments on financial development
OVERVIEW
Hakon Invest owns 40% of the shares1) in ICA AB and 100% of the
shares in Forma and had assets under management totaling some
SEK 2.8 billion at September 30, 2005.
ICA AB is one the leading retail companies in the Nordic region
focusing on food and meals, with operations in Sweden and Norway, as well as in the Baltic region through its 50% holding in Rimi
Baltic with operations in Estonia, Latvia and Lithuania. The wholly
owned subsidiary Forma is consolidated in the Hakon Invest Group.
Forma is a publishing company with operations in Sweden, Finland,
Estonia and Latvia. Financial management has historically been handled by external asset managers but is now also conducted under
the company’s own auspices.
Hakon Invest conducts active and long-term investment operations
in retail-oriented companies in the Nordic region. Hakon Invest is also
one of two principal owners in ICA AB and currently has an extensive
financial management. Conducting trading in securities is also
included in the scope of these operations. Up until June 30, 2005,
Hakon Invest was also responsible for certain service operations for
members of ICA-handlarnas Förbund. The Group’s sales and operating profit thus include the operations of Forma and the Parent Company. From 2000 to 2004, ICA AB was reported as an associated
company according to the equity method and was reported together
with results from financial management under the heading “Income
from financial investments.” As of 2005, income from shares in ICA
AB is reported on a separate line in Hakon Invest’s income statement.
In the “Financial Overview Hakon Invest” and “The consolidated
financial statements in accordance with IFRS for the 2004 fiscal
year”, income from shares in ICA AB is reported on a separate line in
Hakon Invest’s income statement with the purpose of making comparisons over time easier.
ACQUISITION OF 10% OF ICA AB
On November 4, 2004, Ahold acquired 20% of the shares in ICA
AB from Canica AS for SEK 7.35 billion, whereupon Hakon Invest
acquired 10% of the shares in ICA AB from Ahold for SEK 2.89 billion. Prior to these transactions, Ahold owned 50% of the shares in
ICA AB, Hakon Invest 30% and Canica AS the remaining 20%.
After the transactions, Ahold owns 60% and Hakon Invest 40% of
the shares in ICA AB. A shareholders’ agreement between Ahold
and Hakon Invest dating from 2000 still applies, however. See also
the “Supplementary information” section. This agreement stipulates
that for a shareholding of 30–70% between Hakon Invest and
Ahold, each party has equal influence in ICA AB, meaning that neither party currently consolidates ICA AB. Influence in ICA AB was
thus not changed by the share transactions.
1)
68
In conjunction with the above transaction, ICA AB granted an
extra dividend of SEK 5,500 million, of which Hakon Invest
received SEK 2,200 million.
Pro forma accounts as a result of Hakon Invest’s increased ownership in ICA AB have not been prepared.
FA C T O R S A F F E C T I N G H A K O N I N V E S T ’ S N E T S A L E S
Hakon Invest’s consolidated sales for 2002–2004 comprised primarily
Forma’s sales, as well as the Parent Company’s now separate service
operations for members of ICA-handlarnas Förbund. Sales in the service
operations in the form of membership and service fees amounted to SEK
25.7 million in 2004 and SEK 15.8 million in 2003. The service operations were separated from Hakon Invest on July 1, 2005 and placed
in a subsidiary wholly owned by ICA-handlarnas Förbund.
Forma
Hakon Invest’s consolidated sales consist primarily of Forma’s publishing
activities in consumer magazines, trade magazines, customer magazines and book publishing. Of Forma’s revenues in 2004, 33% were
attributable to advertising sales and 47% to revenues from subscriptions
and newsstand sales. The remaining 20% derived from publishing operations and customer magazines. Forma’s sales depend primarily on the
advertising market, subscription demand, single-copy sales of consumer
and trade magazines, and demand for specialist books.
Advertising market
The advertising market is largely driven by general economic conditions,
which in turn affect private consumption as well as profitability among the
companies that are the largest advertisers. In addition, Forma’s advertising revenues are affected by the share of the total advertising market
occupied by various media, since Forma is only active in certain segments of the total market, which includes daily, weekly and monthly publications, TV, radio, outdoor advertising and other advertising channels.
Demand for subscriptions and single-copy sales of consumer and
trade magazines
Demand in Forma’s Consumer Magazines and Trade Magazines
business areas is affected by the general economic trend, which
influences private consumption, and also by magazine consumption
trends and earnings trends in the segments that Forma’s trade magazines target, primarily the food retail, hotel and restaurant sectors.
Demand for specialist books
Demand for the products of Forma’s subsidiary ICA Bokförlag AB is
primarily steered by general economic conditions and private consumption, as well as trends in demand for books, particularly hand-
According to the shareholders’ agreement with Ahold, Hakon Invest has a common controlling interest in ICA AB in that it stipulates unity in decisions at the Annual General Meeting and by the
Board.
books. ICA Bokförlag primarily publishes practical handbooks in a
large number of areas, with leisure, food, home furnishing and gardening as important subject areas.
amounted to SEK 96.1 million in 2004, SEK 64.6 million in 2003
and SEK 71.0 million in 2002. The normal cost level on the administrative costs of the companies is SEK 35–40 million per year.
FA C T O R ’ S A F F E C T I N G
Goodwill
Hakon Invest’s goodwill is attributable to the acquisition of Forma
from ICA AB in 1999 and amounted to SEK 57.6 million on December 31. Goodwill is amortized over 20 years with respect to the
acquisition of Forma, since it was an acquisition of well-established
operations of strategic value. Goodwill amortization for the period
from 2002 to 2004 amounted to around SEK 4.1 million net per
year. Gross amortization amounted to SEK 5.9 million per year.
Since Hakon Invest owned 30% of ICA AB on the date of the transaction relating to Forma, an internal gain arose that reduced the
annual goodwill amortization for Forma by SEK 1.8 million.
As previously, goodwill is reported in 2005 as an intangible asset in
the balance sheet. According to IFRS, goodwill is not amortized, but
instead the value is impairment tested each year to establish possible
write-down needs. The value of goodwill is also tested with respect to
write-down requirements when events or changed circumstances indicate that it may not be possible to recover the reported value. Goodwill
was not recalculated as per January 1, 2004, but is instead reported on
the opening date at the value as per December 31, 2003.
H A K O N I N V E S T ’ S O P E R AT I N G E X P E N S E S
Hakon Invest’s primary costs are attributable to Forma’s operations
and costs for operating the Parent Company.
Forma
Forma’s costs primarily comprise cost of goods sold, selling
expenses and administrative expenses.
Cost of goods sold
Cost of goods sold primarily comprises costs relating to personnel,
IT, printing and distribution. Cost of goods sold is the largest cost
item, amounting to 50.5% of net sales in 2004.
Selling expenses
Selling expenses consist primarily of costs for personnel and the cost
of advertising directed toward readers and the advertising market.
Selling expenses amounted to 25.8% of net sales in 2004.
Administrative expenses
Administrative expenses consist mainly of personnel and IT costs, as
well as direct costs for infrastructure. Administrative expenses
amounted to 14.7% of net sales in 2004.
Depreciation/amortization
Depreciation of non-current assets is distributed among the above cost
items. Depreciation relates to depreciation of buildings and land,
machinery and equipment (including IT systems) and new construction
in progress. In 2004, depreciation corresponded to 1.6% of net sales.
Computer equipment is depreciated over three years and other equipment over five to ten years. Intangible assets are amortized over five
years and industrial buildings are depreciated over 33 years.
Parent Company
The Parent Company’s costs consist primarily of personnel costs for
management and operation of the Parent Company and costs for
external consultants. The Parent Company’s administrative expenses
ICA AB’s profit after taxes
O T H E R FA C T O R S A F F E C T I N G
H A K O N I N V E S T ’ S O P E R AT I N G P R O F I T
Result from participation in ICA AB
The earnings level in the ICA group depends on many factors,
including the general economic situation, development of the ICA
group’s market position, price trends in the convenience goods
industry, ICA AB’s ability through the initiated cost-reduction program
and negotiations with suppliers to further increase their competitiveness and in appropriate cases profit sharing and/or royalties in
accordance with the ICA agreement.
Hakon Invest’s result from participation in ICA AB amounts to 40% of
ICA AB’s profit after taxes. This 40% after amortization of surplus values
comprises ICA AB’s contribution to Hakon Invest’s consolidated earnings.
Hakon Invest’s earnings in the Parent Company as well as cash
flow in the Parent Company and the Group regarding earnings attributable to ICA AB comprise dividends received. In accordance with
the shareholders’ agreement between parties, Hakon Invest and
Hakon Invest’s consolidated earnings
100
Hakon Invest’s share
40%
40
less amortization of surplus values1)
Hakon Invest’s earnings in the Parent Company
and cash flow in the Parent Company and Group
Normally at least 16
Ahold’s share
60%
1)
These amount to around SEK 15 million after taxes on a yearly basis in Hakon Invest.
69
R E S U LT F R O M F I N A N C I A L I N V E S T M E N T S
operating profit. Result from participation in 2004 according to
IFRS and in the financial overview is reported according to the
same principle.
Hakon’s tax rate amounted to 11.4% in 2004, 3.8% in 2003
and 8.5% in 2002. Please refer to section ”Consolidated financial
statements in accordance with IFRS for the 2004 fiscal year”, footnote 10 for more information. This is partly because Hakon Invest
AB’s subsidiaries and joint ventures conduct operations in several
European countries with different national tax rates. In addition,
non-taxable revenue both of a recurring and non-recurring nature
has arisen. Hakon Invest’s current assessment is that the Company’s
effective tax rate is not temporary.
Unutilized tax loss carryforwards in Hakon Invest at September
30, 2005 amounted to SEK 0 million.
Hakon Invest does not have a tax status as an investment company.
Hakon Invest’s current assessment is that there is probably no
possibility to obtain tax status as an investment company.
Hakon Invest assesses that the Company’s securities trading
activities are not of such a nature that permits tax deductions for
write-downs.
Hakon Invest’s income from financial investments consists foremost
of result from financial management.
CURRENCY EFFECTS
Ahold have undertaken to ensure that ICA AB distributes at least 40%
of the ICA group’s profit after taxes. However, a condition, among
others, is that this is not in conflict with good business practice and
that due consideration is taken with regard to the ICA group’s investment plans and operational needs. As a result of Hakon Invest’s
share in ICA AB of 40%, Hakon Invest receives 16% of ICA AB’s
profit after taxes in dividend. The correlation between ICA AB’s profit
after taxes and Hakon Invest’s consolidated earnings, earnings in
Hakon Invest’s Parent Company and cash flow in the Parent Company and the Group is illustrated on the preceding page.
Non-recurring items
Several items of a non-recurring nature are included in ICA AB’s earnings during 2002–2004. Such items include property write-downs,
capital gains from property sales and divestments of associated companies. The net effect of such items in 2004 amounted to around SEK
+160 million and around SEK +230 million in 2003. In 2002, the
approximate net effect was SEK +250 million.
FA C T O R S A F F E C T I N G
Result from financial management
Result from financial management are linked both to interest-rate
and share-price trends and to Hakon Invest’s ability to successfully
direct the management of capital for that part of asset management
that is handled by external managers.
Dividends, interest income, capital gains from sales and the
reversal of previously made write-downs of securities as a result of
the sale of the written-down securities are all reported under the
heading “Financial income.”
The “Financial expense” heading primarily includes capital losses
on sales but also interest expense and exchange-rate differences.
Capital losses are reported gross when the entire capital loss is
reported under “Financial expense” and the previously made writedown is reversed and reported under “Financial income.”
Result from the sale of associated companies in 2000 primarily
refer to the sale of shares in ICA AB.
TA X
Hakon Invest’s tax expense 2000–2004 derives both from the
Hakon Invest Group and ICA AB, since Hakon Invest reports its
share of ICA AB’s tax expense. Tax consists primarily of Swedish
corporate taxes, but also of corporate taxes in Finland, Estonia and
Latvia through Hakon Invest. ICA AB conducts operations in Sweden, Norway, the Netherlands (see section entitled “Group function
Supply Chain” under the description of ICA AB) and through Rimi
Baltic, in Estonia, Latvia and Lithuania.
From 2005 the result from participation in ICA AB, including
the tax portion, is reported on a separate line in Hakon Invest’s
70
Hakon Invest
Currency risk is defined as the risk of unfavorable exchange-rate
movements affecting the Group’s earnings and equity in SEK. Transaction exposure arises when expenses and revenues for a product
or service are not matched.
Hakon Invest’s net cash flows in foreign currency amounted in
2004 to SEK 21 million, of which SEK 9 million was in EUR, SEK 5
million in NOK, SEK 2 million in DKK and SEK 5 million in other currencies. Net foreign currency exposure in 2004 amounted to SEK
14 million, nearly all of which pertained to EUR. Normally, cash
flows in foreign currency are not to be hedged. The Company
could, however, decide to deviate from this policy. The currency distribution within financial management at September 30, 2005
entailed foreign currency exposure of SEK 286 million.
Balance-sheet exposure arises when Hakon Invest has net
assets and liabilities in foreign currency and these are translated to
SEK. The Company hedges balance-sheet exposure by using forward contracts, loans and options.
On the reporting date, income statements and balance sheets
are translated from foreign currencies to SEK, which means that
Hakon Invest’s earnings and financial position are affected by fluctuations among the above currencies.
Assets and liabilities are translated at the closing rate, while revenues and expenses are based on average exchange rates for the
period.
Ahold shares valued at EUR 55 million at September 12, 2005
are hedged at a SEK/EUR rate of 9.26 until January 13, 2006.
During 2004, 75% of the Group’s revenues were in SEK, 23%
in EUR and 2% in other currencies.
Comments on financial development
ICA AB
Of ICA AB’s sales of SEK 71,811 million in 2004, 66% were generated in SEK, 28% in NOK and 6% were distributed among sales
in Denmark, Estonia, Latvia and Lithuania. ICA AB’s Danish operations were sold, however, and as a result of the establishment of a
joint venture, Rimi Baltic, with the Finnish company Kesko Livs, the
Baltic operations are no longer consolidated. The currency risk arising as a result of a portion of ICA AB’s equity being invested in foreign subsidiaries, which constitutes translation exposure, is not
hedged with financial instruments. There are natural hedges, however, since assets and liabilities are matched in the various currencies. The ICA group is thus exposed to the various interest-rate levels
in the countries in which operations are conducted.
Transaction exposure in foreign currency arises when a selling
price is stated in a currency different from the purchase currency.
The risk norm stipulated in ICA AB’s financial policy is that 100% of
the outstanding currency risk shall be hedged, although the finance
department has the authority to deviate from this norm, depending
on cost and currency trends. Approved instruments for currency
hedging are spot, currency forward and currency swap contracts.
J A N U A RY – S E P T E M B E R 2 0 0 5 C O M PA R E D W I T H
J A N U A RY – S E P T E M B E R 2 0 0 4 ( I F R S )
Sales
Hakon Invest posted sales of SEK 445.7 million in January–September 2005, compared with SEK 459.0 million for the corresponding
period in 2004, a decline of SEK 13.3 million or 3%.
lion, or 38%. The decline in profit was due to previous expenses for
subscription campaigns, shutdown of unprofitable publications and
investments in new products.
Parent Company
Operating profit at the Parent Company amounted to SEK 190 million for the period January–September 2005, compared with SEK
163 million for the corresponding period the preceding year, an
increase of SEK 27 million or 17%. The dividend from ICA AB is
included in the Parent Company’s operating profit according to
IFRS. The Parent Company’s administrative expenses remained at
the same level as the preceding year, however, earnings in both
years were charged with non-recurring expenses. The normal cost
level for the Parent Company’s administrative expenses is SEK
35–40 million per year.
Hakon Invest’s result from participation in ICA AB
Hakon Invest’s result from participation in ICA AB amounted to SEK
416.5 million for the period January–September 2005, compared
with SEK 349.4 million for the corresponding period in the preceding year, an increase of SEK 67.1 million, or 19%. Hakon Invest’s
ownership interest as of September 30, 2005 amounted to 40%,
compared with 30% on the corresponding date in 2004.
Information about ICA AB
F I N A N C I A L D ATA I C A A B
SEK M
JAN–SEPT 2004
JAN–SEPT 2005
53,996
52,514
Net sales
Forma
Forma had sales of SEK 433.3 million in January–September
2005, compared with SEK 439.9 million in the corresponding
period a year earlier, a decline of SEK 6.6 million or 2%. The
decline was due mainly to lower subscription rates on consumer
publications as well as lower advertising revenues.
Parent Company
The Parent Company had sales of SEK 12 million in January–September 2005, compared with SEK 19 million for the corresponding
period in the preceding year. The Parent Company’s lower sales
were due to the transfer of service operations for ICA-handlarnas
Förbund members to one of ICA-handlarnas Förbund’s whollyowned subsidiaries on July 1, 2005.
Operating profit (EBIT)
Operating profit at Hakon Invest amounted to SEK 392.2 million for
the period January–September 2005, compared with SEK 331.6
million for the period January–September 2004, an increase of SEK
60.6 million, or 18%.
Forma
Operating profit at Forma amounted to SEK 23.3 million for the
period January–September 2005, compared with SEK 37.7 million
for the corresponding period in 2004, a decline of SEK 14.4 milComments on financial development
Operating profit before depreciation
and write-downs (EBITDA)
2,671
2,159
Operating profit (EBIT)
1,6211)
1,341
Profit before tax (EBT)
1,4421)
1,158
Net profit
1,2211)
1,068
Total capital employed
29,820
32,257
Operating margin, %
3.0
2.6
Equity/assets ratio, %
41.2
24.6
1)
Including gain on the sale of Statoil Detaljhandel AB.
Sales
January–September
ICA AB had sales of SEK 52,514 million during the period January–September 2005, compared with SEK 53,996 million for the
corresponding period in 2004, a decline of SEK 1,482 million, or
2.7%. The decline is attributable to ICA Baltic no longer being consolidated since ICA Baltic’s operations were transferred in January
2005 to a joint venture with Finnish Kesko Livs Ab, as well as the
sale of the Danish operation in August 2004. Adjusted for these
transactions, revenues rose by 3.7% for the period. ICA Banken, ICA
Meny and ICA Sverige experienced better sales trends compared
with their competitors, thereby increasing their market shares. ICA
Norge had lower sales due to increased competition and the conversion of wholly-owned stores into franchises, as well as the disposal of
stores.
71
Third quarter
For the period July–September 2005, ICA AB had sales of SEK
18,029 million, compared with SEK 18,189 million for the corresponding period in 2004, a decline of SEK 160 million, or 1%.
Adjusted for the changes mentioned above regarding ICA Baltic
and ICA Danmark, revenues increased by 5.2% during the third
quarter of 2005, compared with the corresponding quarter the preceding year. The price offensive that was initiated in Sweden’s ICA
stores in March and in Norway’s Rimi stores in May has been a success. ICA’s volumes in the Swedish market have been growing
faster, on average, than its competitors, since March. In Norway,
price differences between Rimi and Rema have diminished and
market share stabilized.
Operating profit/loss (EBIT)
O P E R AT I N G P R O F I T / L O S S
SEK M
JAN–SEP 2004
JAN–SEP 2005
1,238
1,054
ICA Norge
434
353
ICA Baltic
–104
19
ICA Danmark
–268
0
ICA Meny
–26
–1
ICA Banken
–94
–58
ICA Sverige
ICA AB
1)
4411)
–26
1,621
1,341
Including gain on the sale of Statoil Detaljhandel AB.
January–September
ICA AB’s operating profit for the period January–September 2005
amounted to SEK 1,341 million, compared with SEK 1,621 million
for the corresponding period in 2004, a decline of SEK 280 million, or 17%. Earnings in 2004 included earnings participations
and the gain on the sale of ICA AB’s 50% ownership interest in
Statoil Detaljhandel AB of SEK 457 million, as well as a write-down
to market value of ISO ICA A/S. ICA Sverige and ICA Norge
reported lower earnings due to the implementation of price reductions. ICA Baltic earnings for 2004 included the wholly-owned ICA
Baltic AB operation. In January 2005, it was transferred, together
with Kesko’s Baltic operations, to the jointly owned company Rimi
Baltic, which is accounted for applying the equity method. Rimi
Baltic’s sales during the period January-September 2005 amounted
to EUR 581 million, an increase of 21.5% compared with the corresponding period in the preceding year.
ICA Meny and ICA Banken had considerably improved earnings compared with the preceding year. Those earnings improvements were the result of increased volume. Net profit for the year
was impacted by expenses relating to the implementation of the
new Nordic organization. Due to organizational changes, the number of employees will drop by approximately 500 fulltime positions
through the end of 2006, 300 of which will be achieved by the
end of third quarter 2005.
72
Third quarter
For the period July–September 2005, ICA AB’s operating profit
amounted to SEK 683 million, compared with SEK 470 million for
the corresponding period in 2004, an increase of SEK 213 million,
or 45%. The operating margin increased to 3.8% during July–September 2005, compared with 2.6% for the corresponding period
in 2004. Improvements during the third quarter were made according to plan and were achieved through increased sales volumes
and cost reductions in Sweden and Norway, improved earnings
from property management and increased volumes at ICA Banken.
ICA Baltic improved its earnings both through lower losses in Rimi
Baltic and through gains on the sale of remaining ICA Baltic AB
properties.
During the third quarter of 2005, revenues were received by
ICA Norge related to supplier negotiations that are partly attributable to prior quarters in 2005. Since these effects lack significance
for the period January-September 2005, this period is more representative for the underlying margin pertaining to ICA Norge. It is
assessed that the effects of the above time lag of revenues in ICA
Norge is not significantly important to an evaluation of ICA AB’s
margin during the third quarter 2005.
Profit after tax
ICA AB’s profit after tax for the period January–September 2005
amounted to SEK 1,068 million, compared with SEK 1,221 million
for the corresponding period the preceding year, a decline of SEK
153 million, or 13%. For the third quarter of 2005, profit after tax
increased by SEK 104 million, or 27%, to SEK 492 million, up from
SEK 388 million for the corresponding period in 2004.
Result from financial investments
Result from financial investments for the period January–September
2005 amounted to SEK 284.0 million, compared with SEK 12.6
million for the corresponding period in 2004, an increase of SEK
271.4 million.
Financial investments under own management as of September
30, 2005, amounted to SEK 521 million. Return for the period January–September was 11%, or SEK 59 million. Investment distribution as of September 30, 2005, was 94% equities and 6% hedge
funds. During the second quarter, the Company divested its investments within the framework of Skandia Investment. Earnings refer to
positive development of Ahold shares, compared with a sharp
downturn during the period January–September 2004.
Financial investments under external management as of September 30, 2005, amounted to SEK 2,195 million. Return for the
period was 11%, or SEK 222 million. Investment allocation as of
September 30, 2005, was 37% equities, 23% hedge funds, 39%
fixed-income securities and 1% cash equivalents. Development on
both the Swedish and international exchanges positively affected
earnings.
Other financial revenues totaled SEK 3 million.
Comments on financial development
Profit before tax (EBT)
Profit before tax for the period January–September 2005 amounted
to SEK 676.1 million, compared with SEK 344.2 million for the
corresponding period in 2004, an increase of SEK 331.9 million,
or 96%.
The increase is attributable mainly to a larger share in profits
from ICA AB amounting to SEK 67.1 million, as well an improved
result from financial investments amounting to SEK 284.0 million.
2 0 0 4 C O M PA R E D W I T H 2 0 0 3
ment in these systems totaled SEK 5 million, which will be amortized
over five years.
Parent Company
The Parent Company generated an operating loss of SEK 70.4 million in 2004, compared with a loss of SEK 48.8 million in 2003.
The SEK 21.6 million deterioration compared with the preceding
year was primarily attributable to non-recurring pension costs, but
also to costs in conjunction with the acquisition of 10% of ICA AB
from Ahold.
(NOT ACCORDING TO IFRS)
Sales
Hakon Invest generated sales of SEK 621.9 million in 2004, compared with SEK 630.8 million in 2003, a decline of SEK 8.9 million or 1%.
Forma
Forma had sales of SEK 596.2 million in 2004, compared with
SEK 630.8 million in 2003. This represents a decline of SEK 34.6
million or 5% compared to the preceding year, attributable primarily
to discontinuation of unprofitable products and lower advertising
revenues.
Parent Company
The Parent Company reported sales of SEK 25.7 million in 2004,
which consisted primarily of membership and service fees for members of ICA-handlarnas Förbund. In 2003, service fees amounted
to SEK 15.8 million but were reported under the heading “Other
income” and were therefore not included in net sales. The increase
between sales for 2004 and other income for 2003 was primarily
the result of the introduction from July 1, 2003 of a service charge
for service operations provided to ICA-handlarnas Förbund members. The service charge is calculated based on store sales. Service
fees were received throughout 2004.
Operating profit (EBIT)
Hakon Invest reported an operating profit of SEK 496.4 million in
2004, compared with SEK 528.0 million in 2003. Goodwill
amortization amounting to a net of around SEK 4.1 million per year
was charged against the Hakon Invest Group’s operating profit in
2004 and 2003.
Forma
Operating profit in Forma amounted to SEK 59.3 million during
2004, compared with SEK 36.4 million in 2003, an increase of
SEK 22.9 million or 63%. The improvement was primarily attributable to a comprehensive action program implemented during 2003
and 2004 entailing personnel reductions, discontinuation of unprofitable products, investments in IT systems and more efficient premises. Actions taken during 2004 included new systems for subscriptions, sales support, booking of advertising and payroll. The invest-
Comments on financial development
Hakon Invest’s result from participation in ICA AB
Hakon Invest’s result from participation in ICA AB amounted to SEK
511.6 million in 2004, compared with SEK 544.5 million in
2003, a decrease of SEK 32.9 million or 6.0%. Hakon Invest’s participating interest was 40% at December 31, 2004, compared
with 30% at December 31, 2003.
Information about ICA AB
F I N A N C I A L D ATA , I C A A B
SEK M
2003
2004
71,980
71,811
Operating profit before depreciation
and write-downs (EBITDA)
4,437
3,570
Operating profit (EBIT)
2,120
1,866
Profit before tax (EBT)
1,808
1,729
Net profit for the year
1,777
1,518
31,554
29,683
Net sales
Total assets
Operating margin, %
2.9
2.6
Equity/assets ratio, %
38.7
25.0
Sales
ICA AB’s net sales in 2004 amounted to SEK 71,811 million, a
decline of SEK 169 million or 0.2% compared with the sales of SEK
71,980 million reported in 2003. The decline was due to lost sales
during a transport worker conflict in Norway, the sale of Danish
operations on August 31, 2004 and a stronger Swedish currency.
Adjusted for these factors, sales increased by 1.7% during 2004.
Operating profit (EBIT)
O P E R AT I N G P R O F I T, S E K M
ICA Sverige
2003
2004
2,794
1,892
ICA Norge
200
214
ICA Baltic
–471
–112
ICA Danmark
–273
–263
ICA Meny
ICA Banken
ICA AB
–19
–37
–166
–123
55
295
2,120
1,866
73
ICA AB reported operating profit of SEK 1,866 million in 2004,
compared with SEK 2,120 million in 2003, a reduction of SEK 254
million or 12.0%. The decline in earnings for ICA Sverige compared
with 2003 was largely attributable to significant capital gains from
the sale of 14 distribution properties and three shopping centers
being included in earnings for 2003. ICA Norge reported an
improvement in earnings. The five-week long transport worker strike
had a negative impact on earnings for 2004, but profit was
nonetheless higher than in 2003, when write-downs of properties
were charged against earnings. The earnings improvement for ICA
Baltic was largely attributable to write-downs of properties, goodwill
and stores being charged against earnings in 2003. ICA Banken
reduced its loss compared with the preceding year, while ICA Meny
showed somewhat poorer earnings. In addition, profit for ICA AB for
2004 was affected positively by a capital gain from the sale of the
ownership stake in Statoil Retail Stores to Statoil and negatively by a
capital loss from the sale of ISO-ICA A/S to the Danish company
Dagrofa A/S.
Development of ICA AB’s subsidiaries
ICA Sverige’s operating profit for 2004 amounted to SEK 1,892 million, compared with SEK 2,794 million in 2003, a decline of SEK
902 million or 32%. During 2004, two new ICA Maxi hypermarkets, two ICA Kvantum stores and two ICA Nära stores were
opened. In addition, intensive work was devoted to the re-profiling
and development of stores. During the year, ICA Sverige laid the
groundwork for an intensive year of new establishments during
2005. In 2004, ICA Sverige decided that the new central warehouse for southern Sweden would be located in Helsingborg.
For ICA Norge, 2004 was a year during which the store concept was streamlined and cost adjustments were made in all operative functions. Of the largest and smallest Rimi stores, 240 were converted to ICA Supermarkets and ICA Nær stores. Three new ICA
Maxi were opened during the year. ICA Norge was negatively
affected, as were other major competitors except Coop Norway, by
the transport worker conflict during the spring, when distribution to
the stores stood still for five weeks. In spite of this, profit improved
compared with 2003, when earnings were charged with property
write-downs. Operating profit increased by SEK 14 million or 7.0%,
from SEK 200 million in 2003 to SEK 214 million in 2004.
ICA Baltic’s operating result improved by SEK 359 million to an
operating loss of SEK 112 million in 2004, compared with an operating loss of SEK 471 million for 2003, when earnings were negatively affected by write-downs of property, goodwill and stores.
During 2004, the company completed all preparations for starting a
joint venture, Rimi Baltic, together with Kesko Livs AB in January
2005. At the start, Rimi Baltic had 160 stores and some 8,300
employees.
ICA Meny achieved sales successes in the Restaurant and Catering business area and a strong increase was noted in the number of
stores adopting the Nära Dej service concept. Market share
increased in the restaurant and catering sector, but declined in serv-
74
ices. Operating earnings deteriorated by SEK 18 million to a loss of
SEK 37 million in 2004, compared with a loss of SEK 19 million in
2003. The deterioration was primarily due to a combination of
weaker margins, increased distribution costs and restructuring costs.
ICA Banken experienced a strong inflow of customers, with
some 61,000 newly issued bank cards and a 54% increase in the
total business volume. Operating earnings improved by SEK 43 million to a loss of SEK 123 million, compared with a loss of SEK 166
million in 2003. ICA Banken received the “Banking Card of the
Year” award from Swedish business magazine Privata Affärer.
The specialty retail chain Etos with eight stores in the Stockholm
area, Västerås and Linköping prepared for a possible deregulation
of the sale of non-prescription drugs.
Netto, a joint venture between ICA AB and Dansk Supermarked
A/S, opened 30 stores in 2004 and had 58 stores in Sweden at
the end of the year. Particularly in Stockholm, the stores were very
well received by customers.
Profit after tax
Profit after tax amounted to SEK 1,518 million in 2004, compared
with SEK 1,777 million in 2003, a decline of SEK 259 million or
14.6%.
Result from financial investments
Result from financial investments amounted to a profit of SEK 64.7
million in 2004, compared with a loss of SEK 161.3 million in
2003, an improvement of SEK 226.0 million.
2004
The SEK 64.7 million in result from financial investments for 2004 is
the net of financial income of SEK 159.0 million and financial
expense of SEK 94.3 million.
Financial income primarily comprised dividends, interest income
and capital gains on the sale of securities, at a combined total of
SEK 121.1 million, as well as an adjustment of SEK 37.9 million in
previously made write-downs of securities. The adjustment in the previously made write-down should be linked to the capital loss reported
under “Financial expense.”
Financial expense primarily consisted of a capital loss of SEK
84.9 million on the sale of securities. Interest expense and
exchange-rate differences totaled SEK 9.4 million.
2003
Income from financial investments in 2003 amounted to a loss of
SEK 161.3 million. This is the net of financial income of SEK 732.3
million and financial expense of SEK 893.6 million.
Financial income primarily comprised dividends, interest income
and capital gains on the sale of securities, at a combined total of
SEK 101.9 million, as well as an adjustment of SEK 630.4 million in
previously made write-downs, notably the Ahold shares. The adjustment in previously made write-downs should be linked to the capital
loss reported under “Financial expense.” After the estimated stan-
Comments on financial development
dard tax, the net loss regarding the Ahold shares amounted to SEK
289 million.
Financial expense primarily consisted of a capital loss of SEK
884.7 million on the sale of securities. Interest expenses totaled SEK
8.9 million.
Change between the years
The largest change between the years is attributable to capital losses
and the adjustment in previously made write-downs in 2003 that
arose upon the sale of 5,000.000 shares in Ahold for SEK 392 million. In addition, Ahold implemented a new share issue, in which
Hakon Invest subscribed for shares for SEK 145 million. The above
changes, combined with a sharp price drop for the Ahold share, led
to a write-down of SEK 433 million in the year-end accounts for
2003. At December 31, 2003, the value of the Ahold shareholding
amounted to SEK 456 million.
Financial management
At December 31, 2004, cash and bank balances accounted for
SEK 288.5 million of the Company’s liquid funds, compared with
SEK 229.9 million at December 31, 2003. The value of the Ahold
shareholding (8,341,376 shares) at December 31, 2004
amounted to SEK 425.2 million, compared with SEK 456 million at
year-end 2003. Other liquid funds amounted to SEK 1,986.4 million at December 31, 2004, compared with SEK 2,644.9 million
at year-end 2003. The decline of SEK 658.5 million is attributable
to the acquisition of 10% of the shares in ICA AB from Ahold for SEK
2,887.2 million and the extra dividend of SEK 2,200 million from
ICA B, giving a net negative effect of SEK 687.2 million.
The Company has no established management organization for
other liquidity, which was instead handled by Carlson Investment
Management and Handelsbanken during 2004. By purchasing
management services, the Company gained access to professional
management processes and expertise that would have been difficult
to maintain in its own organization, which has relatively limited
assets under management. Investments were made in the Group’s
own name according to guidelines that were identical for each manager. The guidelines for asset types during 2004 were 50% fixedincome, 25% Swedish equities and 25% foreign equities. Asset liquidity increased gradually during the year, in anticipation of
Canica’s sale of ICA AB shares.
The stock market developed positively during 2004. The Stockholm Stock Exchange index, for example, rose by about 18%.
Profit before tax (EBT)
Profit before tax amounted to SEK 561.1 million in 2004, compared
with SEK 366.7 million in 2003, an increase of SEK 194.4 million
or 53%.
The increase is primarily attributable to improved result from
financial management 2004, where a profit of SEK 64.7 million
was reported for 2004, compared with a loss of SEK 161.3 million
in 2003, an improvement of SEK 226.0 million. The operating profit
Comments on financial development
2004 of SEK 496.4 million means a decrease of SEK 31.6 million
compared to 2003.
2003 COMPARED WITH 2002 (NOT ACCORDING TO IFRS)
Sales
Hakon Invest reported sales of SEK 630.8 million in 2003, compared with SEK 658.9 million in 2002, a decline of SEK 28.1 million or 4%. Sales were attributable in their entirety to Forma.
Forma
Forma reported sales of SEK 630.8 million, compared with SEK
658.9 million in 2002, a decline of SEK 28.1 million or 4%. The
decline was a consequence of the structural program that was established during the year and that comprised personnel reductions, discontinuation of unprofitable products, investments in IT systems and
more efficient premises.
Parent Company
The Parent Company’s revenues in the form of member fees for service operations for members of ICA-handlarnas Förbund amounted to
SEK 15.8 million in 2003 and were reported under “Other operating income”in 2003. The Parent Company had no sales in 2002.
Operating profit (EBIT)
Operating profit in Hakon Invest amounted to SEK 528.0 million in
2003, a decrease of SEK 35.3 million, or 6%, from SEK 563.3 million in 2002. Net goodwill amortization of around SEK 4.1 million
per year was charged against Hakon Invest’s earnings in 2003 and
2002.
Forma
Forma reported operating profit of SEK 36.4 million in 2003, compared with a loss of SEK 4.3 million in 2002. This represented an
earnings improvement of SEK 40.7 million, primarily as a result of
the extensive action program that was initiated in 2003 and that
comprised personnel reductions, discontinuation of unprofitable
products, investments in IT systems and more efficient premises.
Parent Company
The Parent Company’s operating loss in 2003 amounted to SEK
48.8 million, compared with a loss of SEK 63.8 million in 2002.
The earnings improvement in the Parent Company was primarily
attributable to the introduction of a service fee for services targeting
members of ICA-handlarnas Förbund.
Hakon Invest’s result from participation in ICA AB
Hakon Invest’s result from participation in the gross earnings of ICA
AB amounted to SEK 544.5 million in 2003, compared with SEK
635.6 million in the preceding year, a decline of SEK 91,1 million or
14.3%. At December 31, 2003, Hakon Invest’s participating interest
in ICA AB was 30%, which was unchanged from December 31,
2002.
75
Information about ICA AB
F I N A N C I A L D ATA , I C A A B
SEK M
2002
2003
70,908
71,980
Operating profit before depreciation
and write-downs (EBITDA)
4,103
4,437
Operating profit (EBIT)
2,535
2,120
Profit before tax (EBT)
2,084
1,808
Net profit for the year
1,710
1,777
34,071
31,554
Net sales
Total assets
Operating margin, %
3.6
2.9
Equity/assets ratio, %
35.8
38.7
Sales
ICA AB’s net sales in 2003 amounted to SEK 71,980 million, an
increase of SEK 1,072 million or 1.5% compared with 2002,
when sales amounted to SEK 70,908 million. Adjusted for
exchange-rate movements, sales increased by 4.5%, despite price
reductions in Sweden. ICA Banken and the new operations in Etos
showed the greatest percentage increases. In the Baltic region,
sales developed favorably in Estonia and Latvia but declined somewhat in Lithuania. In calculating sales growth for ICA Baltic, Rimi
Lithuania’s sales for the whole of 2002 were included. Sales in
Norway developed favorably.
Operating profit (EBIT)
O P E R AT I N G P R O F I T, S E K M
ICA Sverige
2002
2003
1,884
2,794
ICA Norge
782
200
ICA Baltic
–36
–471
ICA Danmark
–16
–273
ICA Meny
–46
–19
–174
–166
ICA Banken
ICA AB
141
55
2,535
2,120
ICA AB’s operating profit before goodwill amortization related to the
acquisition of ICA AB in 2003 amounted to SEK 2,120 million,
compared with SEK 2,535 million in 2002, a decline of SEK 415
million or 16.4%. During the year, properties with 14 distribution
centers and three ICA Maxi hypermarkets were sold. These sales
resulted in capital gains of SEK 1.1 billion. According to Swedish
and international accounting principles, a comparison is made each
year between the fair value and the book value of all assets. These
comparisons resulted in consolidated earnings in 2003 being
charged with SEK 0.9 billion in write-downs related to goodwill,
properties and stores in the Baltic countries, Denmark and Norway.
The substantial improvement in earnings in ICA Sverige was predominantly attributable to capital gains from property sales. Most of the
76
decline in earnings in ICA Norge, ICA Baltic and ICA Denmark was
an effect of write-downs. ICA Meny and ICA Banken improved their
earnings in comparison with the preceding year.
Developments in ICA AB’s subsidiaries
ICA Sverige noted greater sales increases than its main competitors
Axfood and Coop. During the year, eight new ICA stores were
opened. ICA Sverige also presented plans for a new distribution network that will be completed by 2008. The distribution network will
entail an investment of slightly less than SEK 2 billion. Operating profit
in 2003 amounted to SEK 2,794 million, compared with SEK 1,884
million in 2002, an increase of SEK 910 million or 48.3%. Operating profit included a capital gain of SEK 845 million deriving from
property sales.
During 2003, ICA Norge continued its intensive repositioning
work. Operating profit amounted to SEK 200 million after property
write-downs of SEK 346 million. Compared with operating profit of
SEK 782 million in 2002, this was a decrease of SEK 582 million or
74.4%. The name change was the first step toward relaunching the
ICA brand in Norway. ICA Norge’s new store platform strategy was
scheduled for presentation during the spring of 2004.
ICA Baltic reported an operating loss of SEK 471 million after
write-downs of SEK 349 million pertaining to properties, goodwill
and stores. This compares with a loss of SEK 36 million for 2002.
During the year, a successful new compact hypermarket concept
was launched under the Rimi brand. In December 2003, ICA AB
and Kesko Livs AB signed a letter of intent to form a joint venture for
the Baltic consumables markets.
ICA Meny reported an operating loss of SEK 19 million in
2003, compared with a loss of SEK 46 million in 2002, continuing
the positive trend, and gained several new customers such as
Scandic Hotels Sverige AB and O’Leary’s Trademark AB. During the
year, ICA Meny acquired Arvid Nordquist’s restaurant division.
During 2003, ICA Banken focused on cost control and efficiency improvements, as well as on increasing sales. An operating
loss of SEK 166 million was reported, compared with a loss of SEK
174 million in 2002. ICA Banken was named “Bank of 2003” by
the Swedish magazine Privata Affärer.
During 2003, Etos opened three stores in Haninge, Linköping
and Västerås, bringing the chain’s total number of stores in Sweden
to nine.
In November, ICA Danmark A/S became a wholly owned subsidiary of ICA AB. ICA AB stated in 2003 that it intended to sell the
company.Netto, in which Dansk Supermarked A/S owns 50%,
opened ten stores in Sweden during 2003, bringing the total number of stores to 28. Most Netto stores in Stockholm were scheduled
to open after the summer of 2004.
Statoil Detaljhandel Skandinavia AS continued to establish ICA
Express stores (convenience stores at Statoil’s gasoline stations). ICA
AB announced that it intended to sell its 50% share in Statoil
Detaljhandel Skandinavia AS. ICA AB and Statoil negotiated a sale
Comments on financial development
of shares and a partnership agreement regarding product sales and
concept development for the ICA Express stores.
Profit after tax
In 2002, profit after tax amounted to SEK 1,777 million, compared
with SEK 1,710 million in 2002, an increase of SEK 67 million or 4%.
Result from financial investments
Financial investments in 2003 generated a loss of SEK 161.3 million, compared with a loss of SEK 1,462.7 million in 2002, corresponding to an improvement in earnings of SEK 1,301.4 million.
2003
Financial investments in 2003 generated a loss of SEK 161.3 million, the net of financial income of SEK 732.3 million and financial
expense of SEK 893.6 million.
Financial income primarily comprised dividends, interest income
and capital gains on the sale of securities, in a combined total of SEK
101.9 million, as well as an adjustment of SEK 630.4 million of the
previously made write-down of Ahold shares. The adjustment in the
previously made write-down should be linked to the capital loss
reported under “Financial expense.” After the estimated standard tax,
the net loss regarding the Ahold shares amounted to SEK 289 million.
Financial expense primarily consisted of a capital loss of SEK
884.7 million on the sale of securities. Interest expense amounted to
SEK 8.9 million.
2002
Financial investments in 2002 generated a loss of SEK 1,462.7 million, the net of financial income of SEK 170.9 million and financial
expense of SEK 1,633.5 million.
Financial income primarily comprised dividends, interest income
and capital gains in a combined total of SEK 185.8 million, as well
as an adjustment of SEK 14.9 million of the previously made writedown. The adjustment of the previously made write-down should be
linked to the capital loss reported under “Financial expense.”
Financial expense primarily consisted of write-downs of securities holdings in an amount of SEK 1,352.8 million, a capital loss of
SEK 254.9 million on the sale of securities and interest expense
amounting to SEK 25.8 million. The write-down of SEK 1,352.8 million was mainly attributable to the decline in the value of the Ahold
holding. After the estimated standard tax, the net loss regarding the
Ahold shares amounted to SEK 1,007 million. The capital loss of
SEK 254.9 million derived from sale of other shares.
Change between the years
In 2003, substantial capital losses arose as well as a significant
adjustment in the previously made write-down as a result of the sale
of Ahold shares. In addition, a sharp price drop for Ahold shares led
to a write-down of SEK 433 million being included in the year-end
accounts for 2003. At December 31, 2003, the value of the Ahold
Comments on financial development
shareholding amounted to SEK 456 million. Also in 2002, the value
of the Ahold shareholding fell sharply, resulting in a write-down of
SEK 1,007.3 million being made. This write-down was partly
reversed in 2003 in conjunction with the sale of 5,000,000 Ahold
shares. In addition, the securities portfolio was written down by SEK
345.6 million in 2002 and a capital loss of SEK 254.9 million
arose on the sale of securities in the portfolio.
Financial management
Liquid assets under management at December 31, 2003 amounted
to SEK 2,644.9 million, compared with SEK 2,163.9 million at yearend 2002. In 2002 and 2003, liquidity management was handled
by Carlson Investment Management and Handelsbanken, giving the
Company access to professional management processes and expertise that would have been difficult to maintain in its own organization,
given the relatively limited assets under management. Investments
were made in the Company’s own name according to guidelines that
were identical for each manager. The guidelines for asset types were
50% fixed-income, 25% Swedish equities and 25% foreign equities.
The stock market had developed negatively for several years,
but the markets rose during 2003 when the Stockholm Stock
Exchange climbed around 30%. At the end of 2003, however, the
stock exchange index was half the value of March 2000, despite
the sharp upturn.
Profit before tax (EBT)
Profit before tax improved by SEK 1,266.0 million, from a loss of
SEK 899.3 million in 2002 to a profit of SEK 366.7 million in
2003.
The improvement was primarily attributable to an improved result
from financial management, where the loss of SEK 1,462.7 million
posted in 2002 was reduced by SEK 1,301.4 million to a loss of
SEK 161.3 million in 2003. The operating loss of SEK 528.0 million was a decrease of SEK 35.3 million compared to the operating
profit of SEK 563.3 million in 2002.
SENSITIVITY ANALYSIS
Hakon Invest’s earnings are affected by a number of factors.
Reported effects should only be seen as an indication and do not
include any effect of the compensating measures that could be taken
if certain events were to occur.
The table on the following page is based on the revised accounts
for 2004 and shows the hypothetical effect of changes in a number
of factors. A corresponding table based on 2004 according to IFRS
would give an equivalent outcome. The table should be interpreted
cautiously, since it is improbable that any individual factor would
change in isolation or that no compensatory measures would be
taken. With regard to most fresh goods within ICA AB, full compensation is for instance normally obtained through adjustment of prices for
end consumers.
77
FINANCIAL
SEK M
FORMA
I C A A B 1)
+/–1% change in sales
+/– 3
+/– 252)
+/–1% change in cost of
goods sold
–/+ 3
–/+ 626
MANAGEMENT
Effect on earnings of:
+/–1% change in personnel costs –/+ 2
–/+ 53
+/–1% change in transport costs
–/+ 14
+/–1% change in SEK
+/– <1
+/– 23)
+/– 7
+/–1% change in interest rates
+/– 4
+/–1% change in share index
+/– 5
1)
2)
3)
The above figures relate to ICA AB. Hakon Invest owns 40% of ICA AB.
Not including royalty and profit share from stores.
Pertains to SEK/NOK.
Hakon Invest’s sensitivity with respect to interest-rate and exchangerate movements is considered limited, since the Company’s borrowing is low and the Group’s revenues are predominantly denominated in SEK. However, ICA AB has significant exposure to NOK,
since 28% of ICA AB’s sales in 2004 were in NOK.
FINANCING AND FINANCIAL POSITION
Hakon Invest has a strong financial position, with assets in the form of
financial investments and shares in Ahold with a total value of SEK 490
million at September 30, 2005. On the same date, Hakon Invest had
a bank credit facility of SEK 300 million, of which SEK 0 million was
utilized. The company’s total interest-bearing liabilities and provisions
at the same date amounted to SEK 120.0 million, resulting in a net
debt of –2,844.4 million on the closing date.
ICA AB’s net debt at the same date amounted to SEK 7,032
million.
C R E D I T FA C I L I T I E S
The company has an overdraft facility of SEK 300 million, of which
SEK 0 million had been utilized at September 30, 2005.
Pledged assets amount to less than SEK 3 million and primarily
pertain to pension commitments.
INVESTMENTS
Hakon Invest
Acquisitions and supplementary investments
Historically, Hakon Invest’s acquisitions and supplementary investments have primarily consisted of the acquisition of Forma for SEK
78
200 million in 1999 and the supplementary investment in ICA AB
of SEK 2,887.2 million in 2004.
Non-current assets excluding acquisitions
During the period January to September 2005, Hakon Invest
invested SEK 10.0 million in non-current assets. Investments in noncurrent assets in 2004 amounted to SEK 19.9 million. Depreciation
of non-current assets, excluding goodwill amortization in the Hakon
Group, amounted to SEK 9.8 million in 2004 and SEK 9.2 million
during January to September 2005.
Hakon Invest is of the opinion that, above and beyond investing
activities, investments in non-current assets over the next three years
will consist of replacement investments for existing assets in an
amount of SEK 2–3 million per year and investments in a new
accounting system and changes in terms of premises in Stockholm
for an additional SEK 1–2 million per year.
ICA AB
During January to September 2005, ICA AB invested SEK 1,829
million. Investments comprised mainly store properties and store
fittings in Norway and Sweden.
In 2004, ICA AB invested SEK 2,500 million in non-current
assets, mainly related to store properties and store interiors in Norway and Sweden. Over the most recent four-year period, ICA AB
has invested an average of SEK 3,100 million in non-current assets
annually.
Future major investments during the coming three-year period
within ICA AB, in addition to the normal replacement investments that
are currently known, will consist primarily of the establishment of a new
distribution network in Sweden, modernization of the store network in
Norway and the establishment of new stores in Sweden and Norway.
New distribution network
Two new warehouse facilities with a high degree of automation will
be built in Helsingborg and the Stockholm area. The new distribution network is expected to be completed by 2008, with the investment totaling nearly SEK 2 billion. In addition to the two new warehouses, five warehouses will be closed and four facilities will be
expanded to handle larger volumes. These investments are intended
to make it possible to meet increased demand for fresh goods and
frozen foods.
Comments on financial development
Modernization of the store network in Norway
Large portions of the store network will be renewed over the coming
years. This will include renewal of all Rimi stores over a two-year
period, and a large number of ICA Supermarked and ICA Nær
stores will also be modernized. In total, the modernization of the store
network is expected to require investments of about SEK 500 million.
Establishment of new stores in Sweden and Norway
In Sweden, the focus will be on establishing new stores in growth
areas close to major cities. In Norway, new establishments will primarily be ICA Maxi and Rimi stores. New store establishment is
expected to require investments averaging SEK 1,000 million per
year over the coming years.
ICA AB currently intends to finance these investments through
internally generated cash flows.
CASH FLOW
Hakon Invest
Cash flow from operating activities before working capital
changes
Cash flow during the period January through September 2005
amounted to SEK 389.4 million and SEK 262.0 million in the corresponding period of 2004.
Cash flow from operating activities before working capital
changes amounted to SEK 1,918.2 million in 2004, compared
with SEK 39.0 million in 2003 and a negative cash flow of SEK
13.8 million in 2002.
Working capital changes
The working capital changes during the period January through
September 2005 amounted to SEK –32.9 million and in the
corresponding period in 2004 SEK –60.4 million.
The working capital changes during 2004 amounted to SEK
–16.1 million. The reduction in working capital was primarily
attributable to decreased sales in Forma. This can be compared
with a reduction of SEK 1.3 million in 2003, another year in which
Forma’s sales declined. The working capital changes in 2002
amounted to SEK 99.0 million and was mainly due to the transfer of
funds from current investments to bank accounts.
Comments on financial development
Cash flow from investing activities
During January through September 2005 the cash flow from investing activities was a negative SEK 310 million and in the corresponding period in 2004 a negative SEK 62.5 million.
During 2004, an additional 10 percentage points of the shares
in ICA AB were acquired from Ahold for SEK 2,887.2 million. This,
together with sales of non-current assets and other items, resulted in
a negative cash flow of SEK 2,398.5 million, compared with a
negative figure of SEK 12.9 million for 2003 and a positive cash
flow of SEK 47.3 million for 2002. No major investments were
implemented during 2002 and 2003.
Financing activities
Cash flow from financing activities January through September
2005 amounted to a negative SEK 323.8 million and in the corresponding period in 2004 a negative SEK 140.6 million.
Cash flow from financing activities for 2004 amounted to SEK
555.1 million and was primarily attributable to changes in current
investments. A dividend to shareholders totaling SEK 140.6 million
was paid in 2004. In 2003, cash flow from financing activities
amounted to SEK 5.4 million, since the dividend to shareholders of
SEK 166,3 million largely corresponded to net changes in current
investments, long-term liabilities and provisions. In 2002, cash flow
from financing activities was a negative SEK 34.5 million, mainly
as a consequence of debt repayment.
Cash flow for the year
Cash flow during the January–September 2005 period amounted
to a negative SEK 277.4 million and in the corresponding period a
year earlier to a negative SEK 1.4 million.
The cash flow for 2004 amounted to SEK 58.7 million, compared with SEK 30.1 million in 2003 and SEK 98.0 million in
2002.
CASH AND BANK BALANCES
Hakon Invest’s cash and bank balances amounted to SEK 288.5
million at December 31, 2004, compared with SEK 229.9 million
at December 31, 2003. At September 30, 2005, cash and bank
balances amounted to SEK 227.6 million and at September 30,
2004 to SEK 442.1 million.
79
Supplementary information
HAKON INVEST
R E L AT I O N S H I P B E T W E E N H A K O N I N V E S T
holding in ICA AB, Hakon Invest will maintain, develop and
strengthen the ICA concept. This matter is also specifically regulated
in the shareholders’ agreement between Hakon Invest and Ahold.
AND ICA-HANDLARNAS FÖRBUND
Hakon Invest’s largest owner is ICA-handlarnas Förbund, a nonprofit organization with some 1,580 ICA retailers as members. As
with other non-profit organizations, ICA-handlarnas Förbund is governed by its Articles of Association. These Articles of Association
contain provisions, inter alia, stipulating that ICA-handlarnas Förbund must own at least 51% of the share capital and voting rights in
Hakon Invest and that the Förbund shall propose Board members
for ICA-handlarnas Förbund’s subsidiaries and ICA AB, which is a
joint venture with Ahold. Against this background, the formal work
plan for Hakon Invest’s Board of Directors contains a provision stipulating that nomination of members to the Board of ICA AB shall take
place after consultation with ICA-handlarnas Förbund.
By the provisions of the agreement with ICA Sverige AB (see the
section below entitled “ICA agreements”), the ICA retailers are obligated to be members of ICA-handlarnas Förbund. ICA-handlarnas
Förbund has, both independently and through the subsidiary company ICA-handlarnas Medlemsservice AB, also entered into a number of agreements, including agreements with Hakon Invest and
Forma, as described below under the headings “Agreements with
related parties, etc.” and “Intellectual rights.”
From 2000 to the spring of 2005, the Boards of Directors and
the management of Hakon Invest and ICA-handlarnas Förbund consisted of the same persons. As part of the preparations for an
exchange listing, the composition of Hakon Invest’s Board was
changed during the spring of 2005, and company management
was gradually supplemented and strengthened. For both Hakon
Invest AB and ICA-handlarnas Förbund, the Company’s shareholding in ICA AB is particularly important, both from a purely financial
standpoint, since it is by far the largest asset, and as a means of
maintaining and developing the ICA concept, particularly in the
Swedish operations. As described in greater detail in the section
“Hakon Invest’s holdings and financial management,” the basic
premise in this concept is to combine the ICA store owner’s local
knowledge and commitment with the ICA group’s collective
resources. Higher sales in the stores result in increased sales and revenues for ICA Sverige, which in turn results in greater profit for ICA
AB, thus providing favorable dividend capacity for the benefit of
Hakon Invest and its dividend-entitled owners. The ICA concept and
the ICA group’s business models have proven successful for both the
group and the stores for several decades. Within the framework of
its basic objective of generating profit for shareholders in accordance with the Articles of Association and, in part, through its share-
80
H A K O N I N V E S T ’ S P O S I T I O N I N R E L AT I O N T O T H E
MAJORITY OWNER, ICA-HANDLARNAS FÖRBUND
Prior to the implementation of the Offering, ICA-handlarnas Förbund, the non-profit organization for Sweden’s ICA retailers, owns
about 75% of the capital and votes in Hakon Invest. Hakon Invest is
therefore consolidated in ICA-handlarnas Förbund’s consolidated
accounts. One of ICA-handlarnas Förbund’s main tasks is to exercise ownership influence in ICA AB and thereby ensure the company’s development by developing the ICA concept.
In addition to its holding in Hakon Invest, ICA-handlarnas Förbund has a wholly owned subsidiary, ICA-handlarnas Medlemsservice AB, which has 10 employees. These were earlier employed by
the Company but as a preparation for the listing these are now following an agreement between the Company and ICA-handlarnas
Medlemsservice AB, employed by ICA-handlarnas Medlemsservice
AB. ICA-handlarnas Medlemsservice AB conducts operations targeting members of ICA-handlarnas Förbund and finances these
operations through a service fee payed by the members. Net sales
for the Parent Association, ICA-handlarnas Förbund, amounted to
some SEK 2.7 million in 2004 and total assets amounted to
approximately SEK 563.8 million. The major portion of assets comprised the holding in Hakon Invest and liquid funds of approximately SEK 36.6 million.
DISPUTES AND OTHER LEGAL ISSUES
Hakon Invest, its subsidiaries and joint ventures are involved in various legal disputes that occasionally arise within operations. None
of the disputes individually or the disputes as a whole are of material importance to the Hakon Invest Group.
TA X M AT T E R S
Correspondence has taken place between the National Tax Board
and Hakon Invest regarding the right to deduct input VAT attributable
to certain services for financial and strategic counseling and service
fees for services provided to ICA stores. The National Tax Board has
decided that it will not grant Hakon Invest the right to deduct approximately SEK 1.3 million of VAT. The Company intends to appeal
against this decision.
SIGNIFICANT AGREEMENTS
Hakon Invest’s current operations consist mainly of the management of
the holdings in ICA AB and Forma and the management of the Com-
pany’s financial investments. The Company’s operations depend on
the shareholders’ agreement entered into with Ahold, which regulates
the Company’s ownership in ICA AB. This shareholders’ agreement is
described under the heading “Shareholders’ agreement with Ahold.”
Apart from this agreement, Hakon Invest does not significantly
depend on any individual commercial agreement. However, the most
important agreements are summarized below.
Shareholders’ agreement with Ahold
For more information please refer to section “Hakon Invest” under the
heading ”Agreements with Ahold”.
Guarantee in accordance with
purchase law on behalf of Royal Ahold
For more information please refer to section “Hakon Invest” under
the heading ”Agreements with Ahold”.
Agreement with B. Carlson Investment Management AB
The Company has entered into an agreement regarding the discretionary management of financial assets with an initial value of
approximately SEK 2 billion with B. Carlson Investment Management AB as manager. The agreement applies from January 2005
until further notice, with a mutual right for both parties to give notice
of immediate termination of the agreement. For these management
services, the Company pays B. Carlson Investment Management
AB a fee depending on the volume of assets managed.
mercial. Hakon Invest has not accounted for any investment related
to the new property. Hakon Invest assesses that the property is in
good condition and is well suited for the Company’s operations.
There is room for expansion, although there is currently no need for
any comprehensive expansion.
Forma Publishing Group is the owner of the Linaberg 11 property in Stockholm city. The property is currently for sale. Previous valuations have shown that the market value does not materially deviate from the book value. This is also the assessment of the company.
I M M AT E R I A L P R O P E R T Y R I G H T S
Hakon Invest has Swedish and international trademark applications
regarding the “Hi Hakon Invest” logotype. The application refers to
the classes 35 (services regarding business management, organizational development, etc.) and 36 (financial affairs, etc.). The registered trademark “HAKON,” however, is owned by ICA AB.
Hakon Invest’s applications refer, however, to classes other than
those included in ICA AB’s registration.
Forma has the necessary publication authorization for the magazines that the company issues. In addition, Forma has trademark
protection for the “Forma Publishing Group” trademark. Forma also
has the right to use the “ICA” trademark under an agreement
entered into between ICA-handlarnas Förbund and ICA AB (see
description under “ICA AB” and “Agreements with related parties,
etc.” below.)
USE OF THE SALES PROCEEDS
O B L I G AT I O N S A N D O T H E R C O M M I T M E N T S
Apart from investment commitments and issued surety and guarantees, the Group has no obligations that could have a material negative financial impact on the Group.
Hakon Invest will not receive any portion of the sales proceeds for
the common shares sold by ICA-handlarnas Förbund in accordance
with this prospectus.
INSURANCE
A G R E E M E N T S W I T H R E L AT E D PA R T I E S , E T C .
Hakon Invest has commercial insurance covering the companies
and operations included in the Hakon Invest Group. The insurance
was arranged by the subsidiary, Forma. The insurance covers
assets/property, consequential loss, liability for pure damage to
property, crime against property, personal liability of the managing
director and board, global liability and legal protection. In the opinion of Hakon Invest, the Company is adequately insured to cover
the liabilities resulting from its ordinary operations.
The Company has entered into an agreement with ICA-handlarnas
Medlemsservice AB, a wholly owned subsidiary of ICA-handlarnas
Förbund, according to which the parties have agreed to purchase
legal, financial and information services from each other. Each
party is entitled to charge the opposite party a certain number of
hours per year. The Company assesses that the agreement is based
on strictly commercial terms.
PROPERTIES
In August 2005, Hakon Invest relocated to a new head office in
Solna, which is in the same building as ICA AB’s head office. The
premises are leased by ICA Fastigheter Sverige AB from the property owner, Fastighets AB Alrum. In turn, Hakon Invest subleases certain premises in part of the property from ICA Fastigheter Sverige
AB. In addition, agreements concerning additional services related
to the lease exist with ICA AB. Terms and conditions are strictly com-
Agreement between Forma and ICA AB
Forma has entered into a number of agreements with different companies within the ICA AB group. Such agreements include an
agreement between Forma and ICA Sverige AB concerning editorial and technical production of the “Buffé” magazine and an
agreement between Forma and ICA AB concerning the procurement of printing and distribution suppliers and associated services.
All of these agreements are on strictly commercial terms.
81
SIGNIFICANT DIVESTMENTS AND ACQUISITIONS, ETC.
During the current year and the three most recent fiscal years,
Hakon Invest completed the following significant divestments and
acquisitions of companies. All of the transactions were implemented
on strictly commercial terms.
In November 2004, the Company acquired an additional
10% of the shares in ICA AB from Ahold, which had in turn
acquired the shares from Canica AS. This acquisition is described
in more detail under the heading “Shareholders’ agreement with
Ahold.”
In April 2005, Hakon Invest divested its holding in Skandia
Investment Fond II, a venture capital fund in which investments were
made in part through Skandia Investment KB and in part through
Skandia Investment I AB, to Pulsen Fastighets AB. The total final purchase price for the Company’s shareholdings and commitments in
Skandia Investment Fond II amounted to approximately SEK 60
million. The Company’s guarantee commitments are limited. Any
guarantee claims must be issued in writing not later than December
30, 2005. The Company is not aware of any circumstance that
could give rise to a guarantee claim.
bonus to which these retailers are entitled. The parties have agreed
that Deloitte & Touche will investigate the matter further, but no
agreement has been reached regarding the formal aspects of the
investigation.
SIGNIFICANT AGREEMENTS
ICA agreements
A large number of the approximately 1,500 Swedish ICA stores have
entered into “ICA agreements.” These agreements are shareholder
and financing agreements, the terms of which among other things
entail that ICA AB owns the rights to the store’s location but that the
retailer, either alone or jointly with ICA Sverige AB during a transition
period, owns and operates the store through a limited liability company. Stores with sales exceeding SEK 20 million or which are
deemed as having strategic locations normally have an ICA agreement. The terms of agreement require the ICA retailer to be a member
of ICA-handlarnas Förbund. In addition to the rights and obligations
following from the ICA agreement, the ICA retailer is also obligated to
follow the Articles of Association of ICA-handlarnas Förbund applying
at any given time. See also the section “Hakon Invest’s holdings and
financial management” in the “ICA Sverige” section.
ICA AB
DISPUTES AND OTHER LEGAL ISSUES
Sweden
In connection with a comprehensive organizational change within the
former ICA AB (publ) group, shareholders of the three regional companies – ICA Eol AB, ICA Essve AB and ICA Hakon AB – were
offered an opportunity to divest their shares in the regional companies
in exchange for either becoming shareholders of ICA AB (publ) or for
cash. In November 1989, ICA AB (publ) called for compulsory
redemption of the shares and was granted advance access to the
shares in the regional companies in May 1990. The arbitration rulings in these three cases were announced in June 1997 after a protracted process, following which the claim made by ICA AB (publ)
with respect to the size of the redemption amount was accepted in
full. However, the trustee representing the minority shareholders of the
three regional companies appealed the arbitration rulings to the district court. In April 2004, the district court announced its verdict,
reaching the same conclusion as the arbitration boards. The trustee
has appealed the district court’s ruling to the court of appeal. The
hearing in the court of appeal has yet to take place. If the trustee’s
claim for the redemption amount is approved in full, this would mean
that ICA AB may be forced to pay up to approximately SEK 85 million. Interest will be added to this amount and may exceed the
amount itself.
Norway
A discussion is underway between ICA Detalj AS and an alliance
of retailers in Møre, Norway, concerning the calculation of the
82
Joint venture in the Baltic countries
In the Baltic countries, ICA Baltic AB (“ICA Baltic”) – a wholly
owned subsidiary of ICA AB – has entered into a joint venture
agreement with Ruokakesko Oy (“Kesko Livs”) pertaining to ICA’s
operations in the Baltic countries. The agreement became effective
on January 3, 2005, following approval by the competition authorities. Via a joint venture agreement, ICA Baltic and Kesko Livs
formed RIMI Baltic AB (“RIMI Baltic”), a jointly owned company.
Kesko Livs and ICA Baltic each own 50% of the shares and voting
rights in RIMI Baltic and neither of the parties has a controlling influence. A shareholders’ agreement regulates how the operations of
the jointly owned company are to be conducted, how the company
shall be managed and how a sale of the shares in the company or
the issue of new shares should be conducted. The shareholders’
agreement also specifies the financial commitments of each shareholder. A shareholder may not, without the consent of the other
party, transfer the shares to anyone outside his own group. According to the shareholders’ agreement, the parties, or companies
related to the parties (including Hakon Invest), may not conduct
operations that compete with RIMI Baltic’s operations in the Baltic
countries or own more than 5% of the share capital in companies
that directly or indirectly compete with RIMI Baltic’s operations.
Joint venture agreement pertaining to
Netto Marknad, ICA & DSG AB
In August 2001, ICA AB entered into a joint venture agreement with
the Danish company Dansk Supermarked A/S (“DSG”). DSG is a
retail trading company that operates food retail operations in Den-
Supplementary information
mark through the Netto discount chain. Through the joint venture
agreement, ICA AB and DSG formed the joint venture company
Netto Marknad, ICA & DSG AB (“Netto Marknad”). The aim of the
partnership is to spread and develop the Netto discount chain. ICA
AB and DSG each own 50% of the shares and voting rights in
Netto Marknad and neither of the parties has a controlling influence. The agreement regulates how the company is to be managed
and how a sale of the shares in the company or the issue of new
shares should be implemented. The agreement also specifies the
financial commitments of each shareholder. If a shareholder wishes
to transfer its shares to a third party outside of its own group, the
shareholder must first offer the other party an opportunity to acquire
the shares. DSG owns the intellectual property rights to the Netto
trademark. However, the joint venture company Netto Marknad
and its subsidiaries are legally entitled through a licensing agreement to use and market the trademark in their operations.
Agreements with suppliers
ICA AB has entered into agreements with a large number of different suppliers. These are generally agreements with relatively short
contractual periods or which are valid until further notice based on
a short mutual period of termination. The agreements apply generally to both groceries and fresh products and to private label and
non-food products. The supplier agreements are generally based on
certain standard agreements and general delivery terms formulated
by ICA AB. Prices are generally renegotiated on an annual basis.
Since 2003, ICA Sverige AB has an agreement with Hilton
Food Group relating to deliveries of meat from the Hilton Food
Group’s meat refinement facility in Västerås. The agreement, which
runs initially for a period of ten years, gives ICA Sverige AB some
influence over operations both with respect to purchasing and other
meat processing. The agreement also contains certain exclusivity
obligations for each party, as well as the right to terminate the
agreement prematurely under certain conditions. The agreement
can be terminated prematurely in the event that ICA Sverige AB
does not attain certain agreed volumes. This would lead to certain
costs for ICA Sverige AB.
Financing agreements
ICA AB manages the financing of the group through its subsidiary
ICA Finans AB, which in April 2005 entered into an agreement
with a bank syndicate concerning a credit limit of SEK 5 billion.
Certain regulations in the agreement pertain to the bank syndicate’s
right to premature repayment in connection with a change in ownership/control corresponding to more than 50% of the voting rights in
the borrower (ICA Finans AB) or the guarantor (ICA AB). A number
of financial covenants also exist as well as certain restrictions on further increases in indebtedness. In addition, ICA Finans has
Supplementary information
arranged five different credit facilities with five different banks for a
total SEK 3.75 billion.
I M M AT E R I A L R I G H T S
To a material extent, ICA AB’s operations depend on the right to use
the “ICA” trademark, which is owned by the company. ICA AB has
granted ICA-handlarnas Förbund the license to use the “ICA” trademark. The license agreement is described below under the heading
“Agreements with related parties, etc.”
ICA AB’s operations also depend to a material extent on the
right to use trademarks in which the “ICA” trademark is included,
such as “ICA Nära,” “ICA Supermarket,” “ICA Kvantum”, “ICA
Maxi” and “Maxi ICA Stormarknad”. These trademarks are owned
and held by ICA AB. Otherwise, ICA AB’s operations do not, to
any material extent, depend on any individual immaterial property
right. However, ICA AB’s immaterial property rights are, when considered as a whole, of material importance to ICA AB’s operations.
ICA AB owns or alternatively holds the license on the use of the intellectual property rights that the company considers necessary for its
operations.
The “Euroshopper” brand represents the ICA AB group’s lowprice range. Euroshopper has been developed in cooperation with
nine European companies in 15 countries. These companies
include Kesko, Albert Heijn, Dansk Supermarked A/S and the ICA
group. The Euroshopper trademark is owned by AMS Marketing
Service AG. The Etos trademark is owned by Ahold.
SWEDISH COMPETITION AUTHORITY’S INVESTIGAT I O N O F T H E C O N T R A C T U A L R E L AT I O N S H I P B E T W E E N
I C A A B A N D T H E I C A R E TA I L E R S
The Swedish Competition Authority is currently investigating
whether the ICA cooperation is compatible with competition regulations. The investigation started in December 2003 and the Competition Authority has not indicated when the investigation might be
expected to be completed nor has it specified in detail what the
Authority is investigating. Judging from the questions being asked by
the Competition Authority, the investigation appears primarily to be
an assessment of whether the cooperation between the ICA group
and the individual ICA retailers is in compliance with competition
regulations. The Authority’s questions have concerned pricing,
including price profiles and maximum prices, purchasing activities,
control of the ICA stores’ product range and the right of first refusal
upon the sale of the company’s stores.
ICA AB and ICA-handlarnas Förbund have expressed the view
that the ICA cooperation cannot be considered to violate competition regulations. Hakon Invest shares this view and also makes the
assessment that the ICA cooperation is in compliance with competition regulations. (See also the section on “Risk factors”).
83
A G R E E M E N T S W I T H R E L AT E D PA R T I E S , E T C .
SIGNIFICANT DIVESTMENTS AND ACQUISITIONS
Licensing agreement between ICA AB and ICA-handlarnas
Förbund pertaining to licensing of the “ICA” trademark
In April 2000, ICA AB and ICA-handlarnas Förbund entered into a
licensing agreement under which ICA AB grants ICA-handlarnas
Förbund a non-exclusive right to use, free of charge, all trademarks
containing the word ICA (“the Trademarks”) in Sweden, Denmark,
Norway, Finland, Iceland, Estonia, Latvia and Lithuania. ICA-handlarnas Förbund is entitled to grant sublicenses to its subsidiaries and
members. Each sublicensee and the terms and conditions that are to
apply for each sublicense must be approved in advance by ICA
AB. Use of the Trademarks is limited to the operations that ICAhandlarnas Förbund and the ICA retailers conduct and may not
deviate from the “ICA Concept.” The license agreement applies
without any time limitations. ICA AB may terminate the agreement
with immediate effect if Hakon Invest ceases to be a shareholder of
ICA AB. Hakon Invest’s subsidiary, Forma, uses various combinations of the Trademarks in its operations, supported by this licensing
agreement.
From time to time, ICA AB completes acquisitions and divestments
as part of its operations. The most significant divestments and acquisitions of companies and operations are presented below. All of
these divestments and acquisitions took place on market terms.
Leasing contracts in Norway
ICA Norge AS’s head office in Norway was previously leased from
a party that was associated with ICA AB at the time the leases were
signed. The leases were concluded on relatively long durations; the
lease with the longest duration expires on December 31, 2015.
Under these leases, ICA Norge AS is subject to obligations in
excess of normal obligations according to the Norwegian Rental
Act and the rent can to a certain extent be considered to exceed
market rents. The property in question was acquired during 2005
by a Norwegian syndicate of private investors. The leasing contract
remains unchanged, however.
There are additional leasing contracts pertaining to store premises, warehouses and offices which were signed with parties associated with ICA AB at the time when the leases were signed. These
also contain aspects that could be argued deviate from conditions
on the market.
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Sale of shares in
Statoil Detaljhandel Skandinavia AS to Statoil ASA
ICA AB sold all of its shares in Statoil Detaljhandel Skandinavia AS
(“SDS”), corresponding to 50% of the total number of shares, to Statoil ASA (“Statoil”) in May 2004. Cooperation between ICA and
Statoil was initiated in 1999 and Statoil owned the remaining 50%
of the shares in SDS. The EU’s competition authorities approved the
transfer on July 1, 2004 and ICA AB received payment for the
shares on July 8, 2004. The agreement contains customary guarantees from ICA AB. ICA AB also undertakes not to own, purchase or
develop, either in its own name or through a related company, a
proprietary gasoline/fuel-station network in Scandinavia during a
period of four years after the transaction. However, ICA AB will be
entitled to invest in the fuel-related operations required to be able to
compete efficiently in the markets in which the ICA group is active.
As part of the divestment of the SDS shares, ICA AB and Statoil
also entered into a cooperation agreement and a number of related
agreements. The agreements were mainly concluded in order to
regulate ICA AB’s continued supply of products to Statoil’s retailing
operations in Norway and Sweden. The cooperation is conducted
on a non-exclusive basis, meaning that Statoil is not obliged to
order products from ICA AB. The cooperation agreement has an initial duration of three years. ICA Sverige AB undertakes not to grant
to any party other than Statoil the right to establish gasoline stations
at hypermarket locations without the consent of Statoil.
Divestment of ISO-ICA A/S
In July 2004, ICA Danmark A/S sold all of the shares in ISO-ICA
A/S to Dagrofa A/S. ISO-ICA A/S had constituted ICA AB’s store
operation in Denmark and, following this divestment, ICA AB does
Supplementary information
not conduct any operations in Denmark. The transfer amount was
approximately DKK 250 million, of which some DKK 70 million
constituted the purchase price and the remaining amount was the
company’s cash balance. ICA Danmark A/S’s liability for damage
resulting from non-fulfillment of guarantees is limited to the purchase
price. The agreement includes customary guarantees and ICA AB
has entered into a surety for ICA Danmark A/S for the fulfillment of
its guarantees.
ICA Fastigheter Sverige AB
ICA AB’s property operations are an integral part of ICA AB’s business model and provide important support for retail operations. As
a result of this, property operations follow ICA AB’s store-opening
plan. Ownership of properties is not regarded as strategically
important, as long as store operation can be assured through longterm leases. The property unit thus divests properties when attractive
terms are achieved. As a result, the property portfolio increases
when the rate of store openings is greater than the rate of divestments and decreases when the opposite situation applies.
ICA Fastigheter Sverige AB (“ICA Fastigheter”) has continuously
divested a large number of incorporated properties in order to
finance investments in new properties intended for ICA stores. ICA
Fastigheter, or alternatively ICA Sverige AB, thereafter concludes
leases with the companies concerned pertaining to the current ICAstore premises at the particular property. In turn, ICA Fastigheter or
ICA Sverige AB subleases the existing ICA-store premises to the
retailers who operate the actual ICA store at the particular property.
In the past three years, ICA Fastigheter has divested a large number
of companies containing properties. An account of the most significant divestments is presented below.
In July 2003, ICA Fastigheter sold all of the shares in a number
of subsidiaries to a joint venture formed between LR Swedish Properties AB and GE Capital Real Estate (Sweden) AB. The transferred
companies contained 11 properties, which were transferred to the
companies concerned from various companies in the ICA group.
The purchase price for the total shares amounted to approximately
Supplementary information
SEK 1.6 billion. The existing leases have an average remaining
duration of approximately 11 years.
In September 2003, ICA Fastigheter sold three subsidiaries
containing three properties to Eurocommercial Properties Sweden
AB. The total purchase price for the shares was approximately SEK
320 million. The existing leases have an average remaining duration of approximately 15 years.
In June 2004, ICA Fastigheter sold two subsidiaries containing
three properties to Alecta Retail Holding AB. The total purchase
price for the shares was approximately SEK 285 million. ICA
Fastigheter provided customary guarantees for the sale. The guarantees expire in January 2006, with the exception of guarantees for
taxes and fees. The existing leases have an average remaining
duration of approximately 12 years.
In May 2005, ICA Fastigheter sold all of the shares in Fastic
Holding AB, including the shares in its 20 subsidiaries, to Kungsleden Lövet AB. All of the transferred companies contained one or
more properties or leaseholds. The total purchase price for the
shares was approximately SEK 437 million. ICA Fastigheter provided customary guarantees for the sale. The guarantees expire in
May 2006, with the exception of guarantees for taxes and fees.
The existing leases have an average remaining duration of approximately 7 years.
Divestment of holding in Linstow Senterutvikling
During February 2004, the ICA AB’s wholly owned subsidiary, ICA
Baltic AB, sold its 25% shareholding in Linstow Senterutvikling AS to
Linstow International AS and Varner-gruppen AS. The sales price for
the shares was approximately NOK 135 million.
Divestment of Åsane Holding AS
In October 2002, ICA Detalj AS sold its shares in Åsane Holding
AS to Nordea Liv Norge AS for approximately NOK 330 million.
ICA has undertaken not to establish store operations or a shopping
center on the site covered by the agreement for a period of ten
years from the date of the sale.
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Risk factors
All securities investments are associated with risk, which means that
an invested amount could increase or decrease in value or be lost
entirely. Accordingly, prior to investing in securities in Hakon Invest,
the following risk factors should be carefully considered, together
with all the other information in this prospectus. The list of risk factors
below is not intended to be complete, nor are the risk factors and
considerations described listed in any particular order of priority.
Due to differences between the operations of ICA AB and Forma,
the risk factors associated with these companies differ. A comprehensive evaluation of the Offering and Hakon Invest should include
other information in this prospectus along with an overall analysis of
external factors.
HAKON INVEST
R I S K S R E L AT E D T O B U S I N E S S O P E R AT I O N S
Dependency on company management and other key persons
Hakon Invest’s future development depends on the knowledge,
experience and commitment of management and other key persons. Hakon Invest could be negatively affected if one or more of
these key persons leave the Group. If Hakon Invest is unable to
recruit new qualified employees, this could affect Hakon Invest’s
ability to develop the business.
Hakon Invest’s new investment organization
Two experienced and skilled investment managers have been
recruited to the newly established organization for investments in
unlisted companies. This organization already contains personnel
from Hakon Invest. Although each of these persons has a solid
background and extensive experience, the organization is as yet
unproven in that no investments have yet been made. If the organization does not function as expected, the return on Hakon Invest’s
investments in unlisted companies may be negatively affected.
Hakon Invest’s investments and sales
All investments are associated with uncertainty. Prior to an investment, an evaluation will be performed that is intended to identify
and, if possible, reduce the risks that may be associated with the
investment. Among other measures, Hakon Invest will carefully evaluate the company’s development with respect to personnel, business concept and customer relations, as well as administrative and
legal issues. However, performing such an evaluation prior to an
investment is not always sufficient to ensure success.
In conjunction with the sale of an investment, Hakon Invest may
undertake guarantees in its capacity as the seller. Future divestments
86
will be preceded by careful analyses to determine the scope of
future guarantee commitments. Such guarantees may vary in scope
with respect to both their amount and duration. Any possible need
to fulfill such guarantees could affect Hakon Invest negatively.
Financing of future investments
At present, Hakon Invest has significant liquid assets. In addition,
current investments and holdings are unencumbered.
However, external financing may be needed in the future to
finance investments. At present, Hakon Invest has significant potential for obtaining loans from credit institutions. The Company may
also elect to implement new cash issues or to use its own shares to
finance in full or in part business operations or new investments,
which could lead to dilution of existing shareholdings. This also
applies to investors who invest in Hakon Invest’s shares within the
framework of the Offering. Implementation of new share issues
requires a decision by a General Meeting of shareholders.
However, the ability to finance investment cannot be guaranteed, and depending on the terms for an investment, investments
may be limited by conditions in the loan agreement or the market’s
view and assessment of the Hakon Invest share. In addition, it is
possible that the sellers of potential investment objects will not be
willing to accept shares in the Company as payment. If liquid funds
are insufficient and the Company cannot use its own shares as payment, investment opportunities may be limited or prevented.
Operations in several countries
Since Hakon Invest and its subsidiaries and associated companies
are active in several countries, the operations are exposed to the
type of risks to which international business operations are associated. Hakon Invest is subjected to different regulatory systems within
different jurisdictions and is exposed to changes in such regulations.
The regulations pertain to such matters as trading restrictions, such
as import duties and tariffs, requirements for import and export
licenses and other trading impediments, restrictions affecting capital
mobility, withholding tax on transfers and payments made by subsidiaries, the potentially negative effect of changes in tax regulations and, in certain countries or regions, political and economic
conditions. These changes could have a materially adverse impact
on Hakon Invest’s operations, earnings and financial position.
R I S K S R E L AT E D T O H O L D I N G S A N D I N V E S T M E N T S
Stock exchange trends and interest rates
Negative stock market trends could affect the estimated value of
both Hakon Invest’s listed shareholdings and the value of Hakon
Invest’s unlisted holdings. Interest rates are another factor that could
affect the estimated value of holdings. Interest rates also affect the
cost of loan financing.
Decrease in the value of financial portfolio and shareholdings
Adjustments are made to the book value of Ahold’s financial portfolio and shareholding, which had a combined value of SEK
2,670 million on September 30, 2005, to reflect changed share
prices and exchange rates, which could have a negative impact on
Hakon Invest.
Factors related to holdings
Hakon Invest’s earnings are affected significantly by its portion of
the earnings of its holdings. Consequently, factors that could negatively affect the operations, financial position or earnings of a subsidiary or associated company would therefore affect, to a not
insignificant degree, Hakon Invest.
The future trend for unlisted holdings and/or changes in external
factors could affect assessments of the value of these holdings and –
in those instances when an assessment leads to an estimate of a
reduction in value – could require impairments of the book values.
Operational risk associated with holdings
ICA AB and Forma have different specific operational risks, just as
other future holdings will have. Since ICA AB currently comprises
such a large portion of Hakon Invest’s assets, ICA AB’s development
and operational risks are especially important when assessing
Hakon Invest. Consequently, operational risks related to ICA AB are
described in greater detail below.
ICA AB
Operational risks
Greater competition results in downward price pressure
In recent years, discounters in the food retail sector have made
advances in the Swedish and Norwegian food retail markets. New
competitors such as Lidl and Netto have established a presence, and
have been singled out as one of the causes for falling real prices for
food and convenience goods in recent years. The trend towards a
greater focus on price could result in further price reductions and thus
to lower margins in the retail food industry if no measures are taken
to compensate for those falling price levels, which, however, ICA AB
is doing. Swedish and Norwegian consumers are spending increasingly less of their disposable income on consumables.
The food retail industry in the Baltic countries is relatively unconsolidated and immature. Consumers spend a relatively high propor-
tion of their disposable income on consumables, approximately
35% – compared with about 15% in Sweden – which could
change as the industry consolidates and new discounters establish
themselves in the marketplace, resulting in lower prices.
Review of ICA cooperation by the Swedish Competition Authority
As mentioned under the section “Supplementary information,” the
Swedish Competition Authority is currently investigating whether collaboration between the ICA group and ICA retailers violates competition regulations. Should the Swedish Competition Authority conclude that this collaboration violates competition regulations, the
Authority could act against the ICA group. In such a case, the matter would be definitively determined in a court of law. The most farreaching consequence of a negative outcome from such a process
would be that the form of cooperation between the ICA group and
ICA retailers would have to be changed significantly and, in the
event that the transgression is regarded as serious, that the ICA
group would be forced to pay damages for restricting competition.
According to the Swedish Competition Authority, the damages for
restricting competition could be as low as SEK 5,000 or as high as
SEK 5 million or a higher amount not exceeding 10% of the company’s
sales. In that case, Hakon Invest’s operations, earnings and financial
position would be negatively affected to a material degree.
Economic trends and taxes
Developments within the food retail industry are closely linked to
general economic trends, the GDP trend and real wage trends.
Political factors such as taxes (VAT) are also important to the economic development of the food retail industry. A downward economic trend and higher taxes (VAT) could negatively affect ICA AB’s
sales and earnings.
In a June 2005 progress report – “Uniform or differentiated value
added tax” SOU 2005:57 – the Value Added Tax Commission proposed lowering the normal VAT rate from 25% to 21.7%, financing
the change through the elimination of the current system of reduced
tax rates. Among other proposed changes, VAT would be increased
from the current 12% to the proposed 21.7%. According to the Commission’s calculations, food prices would increase by 8.4% over the
long term and demand would drop by just under 3.5% on average.
Differences would arise between various categories of products, however. The Commission’s proposal will now be circulated for consideration. Reactions from various political parties to this proposal have
been mixed and the Company currently believes that, over the short
or medium term, it would be unlikely that the proposal in its entirety
would serve as the basis for new legislation.
87
Customers
ICA retailers in Sweden decide independently about which suppliers they choose to use. In those instances where ICA AB does not
offer competitive terms, the company risks losing its customers to
competitors. Currently, however, ICA retailers in Sweden make an
average of 70% of their overall purchases directly or indirectly via
ICA AB. The remaining 30% consist primarily of perishable items –
fruits and vegetables, produce and bread – that, in many instances,
originate from local producers and suppliers.
Suppliers
Structural changes are under way among ICA AB’s suppliers,
whereby increased consolidation has occurred in recent years and
is anticipated to continue into the future as well. In the event that the
suppliers’ negotiating strength vis-à-vis ICA AB increases, this could
result in less favorable purchase terms and higher purchase prices,
which could have a negative impact on ICA AB’s earnings. However, ICA AB occupies a very strong position in those markets
where the company is active, and suppliers in turn are therefore
dependent on being able to sell their goods in ICA stores.
With respect to meat supplies, ICA Sverige AB is relatively significantly dependent on deliveries from Hilton Food Group’s meat-processing plant in Västerås. If problems were to arise at this plant,
whereby no deliveries were received for a protracted period of time,
this could have a negative impact on ICA Sverige’s earnings.
Risks associated with acquisitions
Historically, ICA AB has implemented a number of acquisitions and
could also be expected to do so in the future. As a result, ICA AB
could be exposed to acquisition-related risks, such as the integration
of acquired companies, which, in some instances, could be costly
and time-consuming. Often, this could also require management
resources that could otherwise be focused on current operations.
There is also the risk that an acquired company might not develop
according to plan in terms of growth and margins, and that anticipated synergies would not be achieved. Potential acquisitions
could also require external financing. There is no guarantee that it
will be possible to receive such financing in the future.
Key individuals
ICA AB depends on a number of key individuals continuing to make
strong contributions. ICA AB could be adversely affected should
any of these key individuals leave the company.
88
Financing of investments and future expansion
Historically, ICA AB has invested significant sums in opening new
stores and has recently decided to modernize its distribution network by, among other measures, building new, centralized warehouses in Helsingborg and Stockholm. In order to maintain and
strengthen ICA AB’s position in its respective markets, significant
investments will continue to be made in the above areas.
OTHER
R I S K S R E L AT E D T O T H E O F F E R I N G
Previously, the shares have only been traded through the agency
of ICA-handlarnas Förbund
Prior to the Offering, there was no general trading in the shares of
Hakon Invest. The previous unofficial share turnover may have taken
place at prices that are no longer representative. Although the
shares have been approved for listing on the Stockholm Stock
Exchange’s O List, no undertakings can be given regarding the
future trend of trading in the share, or the share price. Liquidity in the
share may turn out to be limited and the share price could fall below
the selling price in the Offering. There is no guarantee that investors
will recoup their invested capital.
ICA-handlarnas Förbund a controlling shareholder
There are 160,917,436 shares in the Company, of which the
Seller will hold at least 109,617,500 shares after the Offering,
corresponding to at least around 68.1% of the shares outstanding
(at least around 67.3% if the Over-allotment option is fully utilized).
This means that, at General Meetings, the Seller will be able to
secure the passage of most of the resolutions that require approval
from the Company’s shareholders.
Present shareholders’ future sale of shares
If a large number of shares are offered in the market after the Offering, or if the market perception is that a comprehensive sell-off could
occur, this could have a materially adverse impact on the share
price. Apart from the direct negative impact that a lower share price
has for a shareholder, such a price decline could have a negative
impact on Hakon Invest’s ability to procure capital or acquire other
assets through additional issues of shares or securities. However, a
fall in the share price resulting from these factors would probably
only be temporary.
Risk factors
It is important to note that by being a major shareholder in
Hakon Invest, ICA-handlarnas Förbund’s main purpose is to have a
major influence over ICA AB and thus be in a position to preserve,
develop and strengthen the ICA concept. A shareholding in Hakon
Invest is thus strategically important for ICA-handlarnas Förbund. Furthermore, ICA-handlarnas Förbund does not anticipate, within the
foreseeable future and following the divestment of shares in Hakon
Invest in accordance with the terms of this prospectus, having any
additional need for liquid funds.
The Seller has undertaken not to divest any additional shares in
the Company, without the consent of Handelsbanken Capital Markets, until at least 300 days after the first day of trading. The Board
of Directors and senior executives of Hakon Invest and the Board of
Directors and senior executives of the principal shareholder ICAhandlarnas Förbund, have made a corresponding undertaking. For
further information regarding the shares in Hakon Invest, see also
“Share capital and ownership structure.”
S P E C I A L C O N S I D E R AT I O N S
Limited value of historical financial information
Hakon Invest’s operations and structure have recently undergone
substantial changes, mainly as a result of the formation of an investment organization. The financial information given in this prospectus does not reflect the financial situation as it would have been if
this organization had existed historically. Accordingly, Hakon
Invest’s historical audited consolidated financial reports and the
financial information given in this prospectus are not necessarily a
reliable guide regarding Hakon Invest’s future earnings trend and
financial position.
ground, the reader’s attention is drawn to the fact that the market statistics presented in this prospectus are subject to uncertainty, and
that no guarantee of their accuracy can be given.
Forward-looking information
Hakon Invest and, in certain instances, the Seller provide forwardlooking information in this prospectus. Any statement that does not
consist exclusively of historical facts constitutes such forward-looking
information. Forward-looking information comprises assertions about
what Hakon Invest “believes”, “expects”, “anticipates” or “intends” to
happen in the future. Against this background, any such statements
should be regarded as currently applicable judgments as to what is
expected to happen in the future, with full awareness that such expectations may not be fulfilled and that intentions can change.
Neither Hakon Invest, the Seller, nor any other party participating in the Offering gives any undertakings or provides any guarantee that the anticipated market conditions, transactions (including
acquisitions and divestments), results (including operational and
financial targets), decisions (including notice and payment of dividends), or other future events and circumstances that may be
inferred from the forward-looking information in this prospectus, will
take place as described or will take place at all.
It is hereby brought to the attention of potential investors that
actual future results may diverge from what is explicitly or indirectly
stated in the forward-looking information in this prospectus. With
the exception of what is required by law or by the terms of the listing
agreement with the Stockholm Stock Exchange, neither Hakon
Invest, the Seller, nor any other party intends to update the forwardlooking information, even if the business relations between Hakon
Invest and the Seller should change in the future.
Market statistics subject to uncertainty
Market statistics are inherently subject to uncertainty and do not necessarily reflect actual market conditions. The value of comparisons
of statistics for different markets is limited for several reasons – for
example, due to the fact that markets are defined differently, and
that data is gathered using different methods and based on different
assumptions. Some of the statistics in this prospectus were compiled
by Hakon Invest, with a number of assumptions made by the Company in the process. While Hakon Invest maintains that the compilation method and assumptions are reasonable, it has been possible
only to a limited extent to secure from independent sources confirmation or verification of the assertions made. Against this back-
Risk factors
89
Board of Directors, Group Management, auditors
BOARD OF DIRECTORS
Lars Otterbeck
NAME
YEAR OF BIRTH
Lars Otterbeck
1942
Chairman
Anders Fredriksson
1954
Deputy Chairman
Cecilia Daun Wennborg
1963
Board Member
Jan-Olle Folkesson
1939
Board Member
–
Stig Lundström
1948
Board Member
64,380
Cecilia Daun Wennborg
–
1956
Board Member
14,172
Jan Olofsson
1948
Board Member
–
Including holdings of relatives and companies.
Lars Otterbeck, born 1942, Chairman of the Board
Lars is Chairman of the Swedish Industry and Commerce Stock Exchange Committee, Deputy Chairman of the Corporate Governance Council and the Third AP Fund and Member of the Board of Lindex AB, Aberdeen Property Investors AB and Kaupthing Bank Sverige. Formerly, Lars was President
and Chief Executive Officer of D & D Dagligvaror AB (currently Axfood). Lars has also been President and Chief Executive Officer of Alecta Pensionsförsäkring. Lars was elected Member of the
Hakon Invest Board at the 2005 Annual General Meeting.
Anders Fredriksson, born 1954, Deputy Chairman of the Board
Anders is Chairman of the Board of ICA-handlarnas Förbund and ICA retailer in ICA Kvantum
Hjertbergs in Lidköping. Anders was elected Member of the Hakon Invest Board at the 1997
Annual General Meeting.
Jan-Olle Folkesson
Cecilia Daun Wennborg, born 1963
Cecilia is a Board Member of companies including Skandiabanken AB and Nefab AB. Until April
2005, Cecilia was Acting President of Skandiabanken and previously she was in charge of Skandia’s Swedish operations, President of SkandiaLink Livförsäkrings AB and Financial and Administrative Director of SkandiaLink Livförsäkrings AB. Cecilia was elected Member of the Hakon Invest
Board at the 2005 Annual General Meeting.
Jan-Olle Folkesson, born 1939
Jan-Olle is Chairman of the Board of the Sixth AP Fund, CBN AB, Sporthaus Mexter AB and a
number of other companies. He is also a Board Member of Lennart Wallenstam Byggnads AB.
Jan-Olle has extensive experience of ICA’s operations, gained in the capacity of President of ICA
EOL in 1986–1990 and President of ICA Företagen in 1990–1991. Jan-Olle was elected Member of the Hakon Invest Board at the 2005 Annual General Meeting.
Stig Lundström
Olle Nyberg
Jan Olofsson
–
350,000
Olle Nyberg
1)
Anders Fredriksson
POSITION
HOLDING BEFORE
THE OFFERING
S H A R E S 1)
Stig Lundström, born 1948
Stig is Deputy Chairman of ICA-handlarnas Förbund and ICA retailer in MAXI ICA Stormarknad
Torslanda, Gothenburg. Formerly, Stig was Chairman of AB Lindex and Affärshälsan i Göteborg
AB, Deputy Chairman of Ellos and Member of the Board of Stena Line. Stig was elected Member of
the Hakon Invest Board at the 1999 Annual General Meeting.
Olle Nyberg, born 1956
Olle is Member of the Board of ICA-handlarnas Förbund and ICA retailer in ICA Kvantum in Söderhamn. Olle was elected Member of the Hakon Invest Board at the 2000 Annual General Meeting.
Jan Olofsson, born 1948
Jan is a bank director and Senior Advisor at Handelsbanken Capital Markets. Between 19922005 Jan was Head of Mergers & Acquisitions within Handelsbanken. Prior to that he held a number of leading positions within Esselte AB, including Deputy CEO between 1985–91. Jan is Chairman of Silva Sweden AB and Init AB. Jan was elected Member of the Hakon Invest Board at the
2005 Annual General Meeting.
90
WORKING PROCEDURES
FOR THE BOARD OF DIRECTORS
In preparation for Hakon Invest’s market listing, the Board of Directors has undergone major changes since the end of the 2004 fiscal
year (see also the “Supplementary information” section).
In 2004, Hakon Invest’s Board of Directors consisted of 19
members and held 15 Board meetings at which minutes were kept;
11 physical meetings and four telephone meetings. In addition, an
Extraordinary General Meeting was held. The Board also held a
joint Board conference with ICA-handlarnas Förbund, at which ICA
AB’s areas of operation were studied in-depth and a review was
made of the competitors that are active or may become active in the
market in the future.
The two overall issues addressed by Hakon Invest’s Board during 2004 were the change in ICA AB’s ownership and the market
listing of the Hakon Invest share. The working climate within the
Board of Directors was good during 2004, unanimity concerning
major issues addressed was great and cooperation with Hakon
Invest’s Group Management was excellent.
According to a resolution made at the 2005 Annual General
Meeting, Hakon Invest’s Board currently comprises seven regular
members. The Board’s statutory meeting was held after the Annual
General Meeting. The Board must hold at least five meetings a
year, one of which must be devoted to the budget and to long-term
planning issues. In the future, the timing of Board meetings will coincide with the dates announced for release of financial information.
When necessary, extraordinary meetings will be held to address
specific issues.
The rules of procedure for the Board, which are adopted for
one year at a time, govern such matters as the division of responsibilities among the Board of Directors, the Chairman of the Board,
the President and the Board’s Remuneration Committee, Investment
Committee and Audit Committee. According to the rules of procedure, the Board of Directors shall resolve upon issues that do not
concern the ongoing management and also issues of major importance, such as significant financial undertakings and agreements
and significant organizational changes. The Company’s finance
and investment policies are adopted by the Board.
Hakon Invest’s scheduled Board meetings address such matters
as the business status, financial reporting, personnel matters and
legal issues. They also address matters including the annual
accounts, interim reports, budget, raising of loans, acquisitions and
investments, as well as such overall matters as strategy and business-intelligence analyses. At the Board meeting that addresses the
annual report, the Company’s auditors present the observations
made from their examination of Hakon Invest’s internal controls and
annual accounts. Strategic and operational matters are presented
by the Chief Executive Officer and accounting and financial matters
by the Chief Financial Officer.
Hakon Invest intends to comply with the Swedish Code of
Corporate Governance.
91
GROUP MANAGEMENT
HOLDING BEFORE
COMPLETION OF
THE OFFERING
SHARES
NAME
EMPLOYEE OF
HAKON INVEST
SINCE
YEAR OF
BIRTH
Claes-Göran Sylvén
2003
1959
President and CEO
Göran Hesseborn
2005
1960
CFO
1,500
Fredrik Hägglund
2002
1967
Senior Legal Counsel
2,000
Anders Hallgren
2000
1952
Vice President
Corporate Communications
3,000
POSITION
317,196
Claes-Göran Sylvén
Claes-Göran Sylvén, born 1959, President and Chief Executive Officer
Claes-Göran has been employed since 2003. Claes-Göran is President of ICA-handlarnas Förbund
and ICA-handlarnas Medlemsservice AB. He is Chairman of the Board of ICA AB and Forma Publishing Group AB and Member of the Board of Svensk Handels and UGAL. Claes-Göran was originally an ICA retailer, and together with his family he owns ICA Kvantum Flygfyren in Norrtälje.
Göran Hesseborn
Göran Hesseborn, born 1960, Chief Financial Officer
Göran has been employed since 2005. He joined Hakon Invest from Spendrups AB, where he
was Deputy President and CFO in 2001–2005. From 1995 to 2001, Göran was Deputy President and CFO of Servera R&S. Göran is a Member of the Board of Forma Publishing Group AB.
Fredrik Hägglund, born 1967, Senior Legal Counsel
Fredrik has been employed since 2002. He has a Bachelor of Law degree and worked as a
lawyer at Clifford Chance, Brussels (1999–2002) and assistant lawyer at Linklaters (1996–1999).
Fredrik was also a trainee within Anita Gradin’s cabinet for the European Commission. Since
2004, he has been a Member of the ICA AB Board and of the Board of Directors of Eurocommerce
and Institutet Mot Mutor (Anti-bribery Institute).
Fredrik Hägglund
Anders Hallgren
Anders Hallgren, born 1952, Vice President Corporate Communications
Anders has been employed since 2000. Anders was previously information manager at ICA
(1990–2000) and was previously a journalist at VLT and ICA Nyheter (1972–1990).
92
Board of Directors, Group Management, auditors
President and Chief Executive Officer
Claes-Göran Sylvén has been employed as President of Hakon
Invest since 2003. As a result of his position within Hakon Invest,
Sylvén is also Chairman of the Board of ICA AB and Forma Publishing Group, and Member of the Board of the Swedish Federation of
Trade (Svensk Handel) and UGAL.
Since 2003, Sylvén has also been President of ICA-handlarnas
Förbund and its subsidiary ICA-handlarnas Medlemsservice AB,
which conducts the business operations related to the provision of
services to ICA-handlarnas Förbund’s members, their stores and
store companies. During 2005, Göran Nygren was appointed
Chief Operating Officer of ICA-handlarnas Medlemsservice AB.
Management of ICA-handlarnas Förbund’s assets, apart from the
shares in Hakon Invest, is conducted by external managers (also
refer to the “Supplementary information” section). Sylvén’s assignment for ICA-handlarnas Förbund’s and Medlemsservice mainly
entails managing the head of operations and participation by conducting representative duties at member meetings and other internal
meetings and through external contacts. Sylvén is remunerated by
ICA-handlarnas Förbund for these duties.
Hakon Invest’s significant holdings in ICA AB and the financial
importance of the continued development of business operations
based on the ICA concept and the commercial links with the ICA retailers warrant a close relationship between Hakon Invest and ICA-handlarnas Förbund. Accordingly, holding the position of President of ICAhandlarnas Förbund/ICA-handlarnas Medlemsservice AB in parallel
with the employment as President of Hakon Invest has been regarded
as beneficial to Hakon Invest and its shareholders, as part of efforts to
develop the strategic holding in ICA AB. In addition, following the
stock-exchange listing, Hakon Invest will need to uphold the confidence of the members of ICA-handlarnas Förbund. For more detailed
information, refer to the section “Supplementary Information” under
“Relationship between Hakon Invest and ICA-handlarnas Förbund”.
Board of Directors, Group Management, auditors
Claes-Göran Sylvén and his family own all of the shares in the
Sycava AB Group. Sycava has two subsidiaries: (i) Varuhuset Flygfyren AB, which is owned to 99.7%, engages in grocery retailing
through ICA Kvantum Flygfyren in Norrtälje. The other shares in
Flygfyren are owned, according to contract, by ICA Sverige AB
and by the ICA retailer Conny Holmlund. Sylvén is not actively
engaged in the store operation but is a Member of the Board; (ii)
SYFA AB, which is 100% owned, engages in property leasing but
is currently dormant. Sycava also has two associated companies: (i)
Centrumfastigheter i Norrtälje AB, which is owned to 20%, and
engages in real estate management; and (ii) Grand Arctic Sweden
AB, which is owned to 33.3%, and conducts hotel operations in
Överkalix. Sylvén is not actively engaged in the associated companies; nor is he a Member of the Board of these companies. Finally,
Sylvén is a partner of Grand Arctic Stockholm HB investors’ club.
Sylvén was formerly partner and Chairman of the Board of
Skärgårdsupplevelser på Lidö AB but has terminated both his ownership and involvement in this company. The Hakon Invest shareholding reported in the table above is owned personally by Sylvén.
Hakon Invest’s Board of Directors has approved Sylvén’s significant assignments and financial involvement outside the Company.
The Board of Directors’ rules of procedure and working instructions for the President and Chief Executive Officer particularly regulate the handling of and decisions regarding agreements and other
transactions between Hakon Invest and ICA-handlarnas Förbund.
R E M U N E R AT I O N T O T H E B O A R D O F D I R E C T O R S
AND SENIOR EXECUTIVES
The Chairman and Board Members receive director fees resolved
by the Annual General Meeting. The remuneration paid to the President and other senior executives consists of a fixed basic salary,
other benefits and remuneration and pensions. Other senior executives are defined as those employees who, together with the President, comprise Group Management; see “Group Management.”
93
Remuneration and other benefits
The table below contains a specification of remuneration and other
benefits pertaining to the 2004 fiscal year. Since the Board of
Directors and Hakon Invest’s Group Management have changed
during the current year, the table below also shows the estimated
payments that will be made to the Board of Directors, President and
other senior executives during 2005.
No director fees are paid to Hakon Invest personnel representing the Company on the Boards of Directors of companies owned
by Hakon Invest.
Pensions
The Company and the President have a mutual right to request that
the President retires at age of 65. Within the aforementioned gross
salary framework, the President decides the size of the pension provisions to be made.
Principles for remuneration to other senior executives
Remuneration
For other senior executives, remuneration will be paid in accordance with the table. No variable remuneration will be paid in
2005.
Principles for remuneration paid to the President, as of 2005
Remuneration
The President will be remunerated in accordance with the amounts
shown in the table. An agreement has been reached with the President regarding a gross salary framework of SEK 4.5 million for
2005. The framework includes vacation payments, social security
fees, pension costs and other overheads in the form of cars and so
forth. The President will not receive any variable payment in 2005.
The President is entitled to freely dispose of amounts within the
framework in a manner that is cost-neutral for the Company.
Termination notice and severance pay
The President is entitled to termination notice of six months both if his
employment is terminated by the Company and by himself, during
Termination notice and severance pay
The Company and other senior executives within the Hakon Invest
Group have a mutual six months period notice. In addition, the
other senior executives are under certain circumstances entitled to
severance pay corresponding to 18 monthly salaries if notice is
served by the Company. The severance pay is not deductible
against other income. If notice is served by the executive, entitlement to compensation arises in certain cases, due to a ban on
engaging in competitive activities for a period of six months from
F I X E D A N N U A L S A L A RY /
DIRECTOR FEES
B E N E F I T S 2)
PENSION
COST
OTHER
R E M U N E R AT I O N
250
–
–
–
250
Other Members of the Board (total)3)
1,447
–
–
–
1,447
President4)
1,238
100
1,935
8
3,281
Other senior executives (total)5)
8,788
462
9,395
38
18,683
11,723
562
11,330
46
23,661
2 0 0 4 ( S E K T H O U S A N D S ) 1)
Chairman of the Board
1)
2)
3)
4)
5)
T O TA L
Remuneration, excluding social security fees.
Pertains to company car benefit.
In 2004, the Board had 18 members (apart from the Chairman of the Board) up to the Annual General Meeting. Subsequently, it had six members.
The President disposes of a gross salary framework totaling SEK 4.4 million, including vacation payment, social security fees, pension costs and other overheads in the form of a free car, etc.
There were five other senior executives in 2004.
F I X E D A N N U A L S A L A RY /
DIRECTOR FEES
B E N E F I T S 2)
PENSION
COST
OTHER
R E M U N E R AT I O N
500
–
–
–
500
Other Members of the Board (total)3)
1,300
–
–
–
1,300
President4)
1,200
–
2,279
–
3,479
Other senior executives (total)5)
4,095
397
1,719
48
6,259
7,095
397
3,998
48
11,538
2 0 0 5 ( S E K T H O U S A N D S ) 1)
Chairman of the Board
1)
2)
3)
4)
5)
94
which time the aforementioned gross salary framework may be disposed of by 1/12 per month. The President is not entitled to severance pay.
T O TA L
Remuneration, excluding social security fees.
Pertains to company car benefit.
In 2005, the Board had six members (apart from the Chairman of the Board).
The President disposes of a gross salary framework totaling SEK 4.5 million, including vacation payment, social security fees, pension costs and other overheads in the form of a free car, etc.
The other senior executives are Göran Hesseborn (employed since April), Ulf Nyström (employed up to March), Fredrik Hägglund and Anders Hallgren.
Board of Directors, Group Management, auditors
the date upon which employment is terminated. The maximum
amount of such compensation is 60% of fixed cash salary and it is
only payable during the period when the ban on competitive activities is applicable.
Pensions
The other senior executives are covered by a defined-contribution
pension plan, under which the Company today pays a maximum of
35% of the pensionable salary, or not more than 10 price base
amounts annually. The pensionable salary is calculated in accordance with the rules for the ITP plan. In addition, the other senior
executives are entitled to retire at the age of 62. If they retire at the
age of 62, 75% of the senior executives’ salary immediately prior to
retirement is payable for the period that remains until normal retirement age. Pension for the period after normal retirement age is
payable in the amount the executives would have received had they
continued to work until the age of 65. Pension benefits are vested,
which means they are not conditional upon future employment.
T R A N S A C T I O N S W I T H R E L AT E D PA R T I E S
Apart from what is stated in the “Supplementary information” section above, there are no contractual relationships or transactions
between Hakon Invest and related parties. No Board Member or
senior executive has, or has had, any direct or indirect participation
in any business transaction with the Company or the Group during
the current or preceding fiscal year that is or was unusual by nature
or with respect to terms and conditions, and which in any respect
remains unsettled or incomplete. Nor have the auditors been
involved in the type of business transaction described above. Nor
has the Company granted any loans, issued guarantees or entered
into sureties with, or on behalf of, any Board Member, senior executive or auditor of the Company.
INCENTIVE PROGRAM
As soon as the exchange-listing of Hakon Invest has been completed, ICA-handlarnas Förbund has decided to implement an
incentive program aimed at all employees of the Parent Company
Hakon Invest AB and ICA-handlarnas Medlemsservice AB. The
incentive program will comprise an offer to acquire a total of
480,000 call options, corresponding to 0.3% of the share capital
and voting rights in the Company, assuming full acceptance of the
offer and full exercise of the call options, which will carry entitlement to the purchase of common shares in Hakon Invest. Each call
option will carry entitlement to the purchase of one common share
during the period July 1, 2008 to December 31, 2008 at an exercise price corresponding to 110% of the average stock-exchange
price of the Hakon Invest share during a period of five trading days
that begins six trading days after the listing and up to and including
the tenth trading day after the listing (“the measurement period”).
The financial outcome of the call options will be limited by a cap,
Board of Directors, Group Management, auditors
meaning that if the share price on redemption exceeds 200% of the
share price during the measurement period (“the cap”), the option
holder will receive only half of the value appreciation exceeding the
cap. ICA-handlarnas Förbund intends to subsidize the offer. Hakon
Invest will not participate in the incentive program. ICA-handlarnas
Förbund will make the payments and ultimately bears the cost for
the program. According to IFRS 2, however, amounts will also be
reported within Hakon Invest, by means of a cost in the income
statement corresponding to an increase in equity.
BOARD COMMITTEES
Remuneration Committee
The role of the Remuneration Committee is to formulate and propose
principles for remuneration to the Company’s management team, in
terms of, for example, salary structure, pension plans, incentive programs and other terms and conditions of employment etc. The proposed remuneration principles will be presented by the Board of
Directors to the Annual General Meeting for approval. The principles
will include the relationship between fixed and variable remuneration
and the relationship between performance and remuneration, the
main terms for bonus and incentive programs, the main terms for nonmonetary benefits, pensions, employment termination and severance
pay, as well as which circle of senior executives that is covered.
The Committee will be viewed as a subcommittee of the Board
of Directors and will not assume any responsibility assigned to the
Board as a whole with respect to remuneration, etc.
The Remuneration Committee will comprise the number of members thought fit by the Board, but never fewer than two. Committee
members will comprise Board Members and may not comprise
Company employees. At least one Committee member must be
independent of the Company’s major shareholders. The chairman
will be appointed by the Board and shall, in consultation with the
other members, establish the number of Committee meetings to be
held and the times of these meetings. However, the number of meetings must not be less than two per year (of which, one must be held
in December). If necessary, the HR manager or the person assigned
responsibility for HR matters will be invited to attend meetings.
The Remuneration Committee must issue regular reports to the
Board on the progress of its activities and the decisions it has made,
and must issue the minutes of the Committee’s meetings to all Board
Members and to the Board’s secretary.
The Remuneration Committee will consist of Lars Otterbeck and
Anders Fredriksson. Lars Otterbeck is Chairman.
Investment Committee
The Investment Committee is appointed annually by the Board, primarily to, on behalf of the Board, examine the decision-making
basis for acquisition matters, recommend decisions and monitor
compliance with the Company’s investment policy.
95
The Committee shall be viewed as a subcommittee of the Board
and will not assume any responsibility assigned to the Board as a
whole with respect to investment decisions or the management of
portfolio companies.
The Investment Committee’s duties are to:
• examine the decision-making basis for acquisitions, supplementary investments and the divestment of portfolio companies
• recommend decisions about investments, acquisitions and the
financing of acquisitions and divestments
• review the terms and conditions for agreements regarding acquisitions or divestments
• assess compliance with the Company’s investment policy
• quality assure the Company’s decision-making basis and the
work conducted on investment operations.
The Investment Committee will comprise the number of members as
deemed appropriate by the Board, but never fewer than four. Committee members will comprise Board Members and may not comprise Company employees. At least two members of the Committee
must be independent of the Company’s major shareholders. The
chairman will be appointed by the Board and will convene meetings when investment decisions need to be addressed. The number
of meetings must never be less than one per year, at which working
instructions and the Company’s investment policy will be revised.
The Investment Committee must issue regular reports to the
Board on the progress of its activities and the decisions it has made,
and must issue the minutes of the Committee’s meetings to all Board
Members and to the Board’s secretary.
The Board has decided that the Investment Committee will consist of the entire Board at present. Lars Otterbeck is chairman.
Audit Committee
The Audit Committee is appointed annually by the Board, primarily
to, on behalf of the Board, monitor the accounting and reporting of
financial information and obtain information about the audit of the
Group. The Committee shall also monitor risk analyses within the
Company.
The Committee shall be viewed as a subcommittee of the Board
and will not assume responsibility assigned to the Board as a whole
96
with respect to reporting matters and internal controls, nor will it
reduce the requirement regarding the auditor’s communication with
the Board as a whole, which must take place at least once annually.
The Committee’s duties are to:
• be responsible for preparing the Board’s work on quality assuring
the Company’s financial reporting and formulating proposals for
the Board’s annual report on the evaluation of internal control
over financial reporting.
• obtain information about the Company’s risk situation and evaluate the President’s (where applicable, Group Management’s) risk
assessment and risk management systems.
• engage in in-depth discussions with the President and the legal
affairs unit, or other concerned personnel, regarding the design
of internal controls and follow up observations made by auditors
and others.
• annually assess compliance with the Group’s finance policy,
investment policy and the overall management of policies.
• monitor and assess the handling of complex accounting issues
and the choice of accounting principles, and in this context to
take the auditors’ opinions into account.
• establish guidelines for services other than the audit that may be
procured from the Company’s auditors.
• estimate whether the total information provided to the market suitably reflects the Company’s operations and risk situation, and in
this context to take the auditors’ opinions into account.
• annually discuss the auditing input proposed by the auditors, the
scope of their work, coordination between the external and internal audits and views on the Company’s risks.
• annually evaluate the auditors’ work and inform the Company’s
Nomination Committee of the results of such evaluation.
• assist the Nomination Committee in proposing auditors and audit
fees, based on proposals from the auditors.
• obtain and review the written assignment letter from the auditors,
which clarifies the division of responsibility between the auditors
and company units, etc.
• be responsible for the procurement process for the audit, if this is
decided.
• inform the Board and propose the measures to be decided by
the Board as a result of the duties described above.
Board of Directors, Group Management, auditors
The Audit Committee will comprise the number of members as
deemed appropriate by the Board, but never fewer than two. Since
ICA AB has its own Audit Committee on which the Company is represented, it is estimated that two members will suffice. Committee
members will comprise Board Members and may not comprise
Company employees. At least one member must be independent of
the Company’s major shareholders. The chairman will be
appointed by the Board and shall, in consultation with the other
members, establish the number of Committee meetings to be held
and the times of these meetings. However, the number of meetings
must never be less than three per year.
The Audit Committee must issue regular reports to the Board on
the progress of its activities and the decisions it has made, and must
issue the minutes of the Committee’s meetings to all Board Members
and to the Board’s secretary.
The Audit Committee comprises Cecilia Daun Wennborg and
Stig Lundström. Cecilia Daun Wennborg is chairman.
N O M I N AT I O N C O M M I T T E E
The role of the Nomination Committee is to formulate proposals
regarding the following matters prior to their presentation for resolution at the Annual General Meeting:
• motion concerning chairman of the meeting.
• motion concerning Members of the Board.
• motion concerning Chairman of the Board.
• motion concerning the fees to be paid to Members of the Board
(divided among the Chairman of the Board, Deputy Chairman and
other members, and any remuneration to be paid for the Nomination Committee’s work, plus other remuneration for Board work).
• where applicable, motion concerning the election of an auditor
or auditors, or motion concerning the fees to be paid to the Company’s auditors.
abstain from its right to appoint a representative to the Nomination
Committee, this right reverts to the shareholder who following the
aforementioned shareholder has the largest shareholding. Members
of the Board shall not constitute a majority of the Nomination Committee. The President or any other member of Company Management must not be a member of the Nomination Committee. The
Chairman or another Member of the Board must not be chairman of
the Nomination Committee.
Unless the members agree on another course of action, the chairman of the Nomination Committee shall be one of the members representing the shareholder with the greatest number of voting rights,
ICA-handlarnas Förbund. The chairman shall have the casting vote.
The Nomination Committee shall have a term of office extending until a new Nomination Committee has been appointed.
The names of the shareholder representatives and the names of
the shareholders they represent must be disclosed no later than six
months prior to the Annual General Meeting. Ahead of the 2006
Annual General Meeting, these names must be disclosed no later
than three months before the Meeting.
AUDITORS
Ire Lindstrand, born 1943, and Authorized Public Accountant from
SET Revisionsbyrå AB, is the Company’s auditor. Ire Lindstrand has
been auditor of the Company since 2000. At the 2005 Annual
General Meeting, Erik Åström, born 1957 and Authorized Public
Accountant from Ernst & Young AB, and Ire Lindstrand were elected
Hakon Invest’s joint auditors until the 2007 Annual General Meeting.
In 2004, the Company’s auditors received payment of SEK 0.7
million for auditing the Parent Company. No consultation payment was
made by the Parent Company to the auditors in 2004. For the Group,
total payment to the Company’s auditors amounted to SEK 1.2 million,
of which SEK 1.0 million was for the audit and SEK 0.2 million for consultation.
The Nomination Committee’s proposals must be presented in the
notice convening the meeting and on the Company’s website.
The Nomination Committee shall comprise four members representing the Company’s shareholders. Two members are to be nominated by the largest shareholder, ICA-handlarnas Förbund, and two
members are to be nominated by the two next largest shareholders.
In the event that any of the three largest shareholders decides to
Board of Directors, Group Management, auditors
97
Share capital and ownership structure
GENERAL
S H A R E C A P I TA L
Hakon Invest is a public limited liability company. The Company’s
corporate registration number is 556048-2837. Hakon Invest was
registered at the Swedish Companies Registration Office on September 23, 1946 under the registered name of AB Hakonett and
has conducted its current operations since 2000. The current registered name was registered June 23, 2005, following a Annual
General Meeting resolution made on May 11, 2005. The Company’s legal form of business identity is governed by the Swedish
Companies Act (1975:1385). The Company is a VPC company
whose share register is maintained by VPC (the Swedish Securities
Register Center).
According to the Articles of Association, the Company’s share
capital must amount to not less than SEK 300,000,000 and not
more than SEK 1,200,000,000. Hakon Invest’s share capital
amounts to SEK 402,293,590, represented by 160,917,436
shares, each with a par value of SEK 2.50. At General Shareholder Meetings, all shareholders can vote for the full number of
shares owned or represented, without any restrictions in terms of voting rights. In connection with votes, each share carries entitlement to
one vote.
The table below describes the changes in the Company’s share
capital that have occurred since Hakon Invest’s formation and that
will occur up to the listing of the Company’s shares.
Hakon Invest’s Board resolved on May 24, 2005 to convert all
the preference shares issued in 2000 into common shares. The resolution was registered by the Swedish Companies Registration
Office on June 23, 2005. Subsequently, all Company shares are
common shares. Also see under “Types of shares” and “Conversion
of shares between classes of share” below.
TIME
TRANSACTION
Before 1990
1)
98
1990
New issue
1996
Bonus issue 2:1
1997
Restamping
1997
New issue
1998
New issue (preference shares A)
1998
Split 100:1
2000
New issue (preference shares B)
TYPES OF SHARES
Assuming that all of the criteria are in place for a listing on the Stockholm Stock Exchange’s O List, the Annual General Meeting held on
May 11, 2005 resolved to amend the Company’s Articles of Association, which will result in the following share capital structure.
Shares may be issued in two series, common shares and SeriesC shares. Common shares may be issued in a number not exceeding 100% of all of the shares in the Company and Series-C shares
in a number not exceeding 51% of all of the shares in the Company. The intention is that the Articles of Association will be submit-
CHANGE
IN NUMBER OF
SERIES
A SHARES (COMMON)
CHANGE
IN NUMBER OF
SERIES
B SHARES
CHANGE
IN NUMBER OF
SERIES
C SHARES
CHANGE
IN NUMBER OF
PREFERRED
SHARES SERIES
A SHARES
CHANGE
IN NUMBER OF
PREFERRED
SHARES SERIES
B SHARES
–
–
–
–
–
–
130
–
–
–
200
130
–
–
–
260
–260
–
–
–
1,199,340
–
–
–
–
–
–
–
13,175
–
118,800,000
–
–
1,304,325
–
–
–
–
–
39,599,936
2002
Conversion (preference shares A)
1,317,500
–
–
–1,317,500
–
2005
Conversion (preference shares B)
39,599,936
–
–
–
–39,599,936
2005
Conversion (common shares)1)
–82,067,892
–
82,067,892
–
–
Subject to the condition that all of the criteria for a listing on Stockholm Stock Exchange’s O List are satisfied.
ted to the Swedish Companies Registration Office for registration as
soon as the said conditions have been met.
RIGHT TO PROFIT DISTRIBUTION
A N D S H A R E S I N T H E C O M PA N Y ’ S A S S E T S
Series-C shares do not carry entitlement to cash profit distribution.
However, Series-C shares carry the same rights as common shares
to profit distribution that takes the form of a distribution in kind of dividend of shares or other participations in ICA AB (Corp. Reg. No.
556582-1559) or in the current or future subsidiaries or associated
companies of the ICA AB group or in companies that may take over
the operations conducted or that may be conducted in the future by
the ICA AB group.
In the event of the Company’s liquidation, Series-C shares carry
the same rights as common shares to participation in the Company’s assets. If the Company’s restricted equity is reduced through
payment to the Company’s shareholders or by means of the repurchase of shares, Series-C shares only carry entitlement to payment
or compensation in accordance with the regulations for profit distribution described in the preceding paragraph.
CHANGE IN
NUMBER OF
SHARES
INCREASE IN
S H A R E C A P I TA L ,
SEK
T O TA L
NUMBER OF
COMMON
SHARES
T O TA L
NUMBER OF
SERIES
B SHARES
CONVERSION OF SHARES
BETWEEN CLASSES OF SHARES
Holders of common shares are entitled to request conversion of their
common shares to Series-C shares by making a written request to this
effect to the Company’s Board. The Board must address matters involving the conversion of shares in the order in which the requests are
received. Decisions regarding conversions must be announced without
delay. ICA-handlarnas Förbund has requested the conversion of a number of its Hakon Invest common shares, corresponding to 51% of the
shares in Hakon Invest, to Series-C shares. The conversion will be
effected prior to the listing and after the application period for the
Offering expires. Since the number of Series-C shares may not exceed
51% of all the shares in Hakon Invest, this means that subsequently
there will not be any scope remaining for conversions.
As of 2011, holders of Series-C shares are entitled to request
conversion of their Series-C shares into common shares by making a
written request to this effect to the Company’s Board. The Board of
Directors must make a decision regarding conversion as soon as possible during the month of January in the fifth year after the conversion
request was received, meaning not earlier than in January 2016.
T O TA L
NUMBER OF
SERIES
C SHARES
T O TA L
NUMBER OF
PREFERRED
SHARES SERIES A
AND B SHARES
T O TA L
NUMBER OF
SHARES
PA R
VA L U E , S E K
T O TA L
S H A R E C A P I TA L ,
SEK
–
–
200
–
–
–
200
250.00
50,000
130
32,500
200
130
–
–
330
250.00
82,500
130
82,500
400
260
–
–
660
250.00
165,000
–
–
660
–
–
–
660
250.00
165,000
1,199,340
299,835,000
1,200,000
–
–
–
1,200,000
250.00
300,000,000
13,175
3,293,750
1,200,000
–
–
13,175
1,213,175
250.00
303,293,750
120,104,325
–
120,000,000
–
–
1,317,500
121,317,500
2.50
303,293,750
39,599,936
98,999,840
120,000,000
–
–
40,917,436
160,917,436
2.50
402,293,590
–
–
121,317,500
–
–
39,599,936
160,917,436
2.50
402,293,590
–
–
160,917,436
–
–
–
160,917,436
2.50
402,293,590
–
–
78,849,544
–
82,067,892
–
160,917,436
2.50
402,293,590
99
PREFERENTIAL RIGHTS IN
CONNECTION WITH SHARE ISSUES
Preferential rights in connection with future share issues are regulated in the Articles of Association; see Paragraph 5 under the “Articles of Association” section.
SHAREHOLDER STRUCTURE
ICA-handlarnas Förbund is the principal owner of Hakon Invest,
holding approximately 75.4% of the shares prior to the Offering.
The remaining nearly 25% of the shares are held by about 3,400
individual shareholders, most of them current or former ICA retailers.
The table below is a specification of major shareholders prior to
completion of the Offering.
As a result of completion of the Offering, which comprises
13,000,000 common shares corresponding to slightly more than 8
percentage points of all of the shares in Hakon Invest, assuming that
the Over-allotment option is utilized in full, ICA-handlarnas Förbund’s
holding will be reduced to a total of 108,317,500 common shares,
corresponding to approximately 67.3 percentage points of all of the
shares in Hakon Invest. If the Over-allotment option is not utilized, ICAhandlarnas Förbund’s holding will be reduced to a total of
109,617,500 common shares, corresponding to approximately
68.1 percentage points of all of the shares in Hakon Invest. ICAHandlarnas Förbund has decided to implement an incentive program
as soon as possible after the exchange-listing of Hakon Invest, which
will be directed to all employees of Hakon Invest and ICA-handlarnas
Medlemsservice AB and will correspond to 0.3% of the Company’s
share capital and voting rights. Also refer to the “Incentive program”
section. Series-C shares are not included in the Offering.
The table below shows how Hakon Invest’s ownership structure
prior to the completion of the Offering is distributed among the various size categories, based on the Company’s share register on September 30, 2005.
( AT S E P T E M B E R 3 0 , 2 0 0 5 )
S I Z E C AT E G O R I E S
NUMBER
OF SHARES
%
NUMBER OF
SHAREHOLDERS
%
245,801
0.1
738
21.7
1–500
501–1,000
1,001–10,000
10,001–50,000
320,974
0.2
391
11.5
5,956,433
3.7
1,467
43.1
14,377,861
8.9
641
18.9
50,001–100,000
7,493,272
4.7
108
3.2
100,001–150,000
3,211,327
2.0
26
0.8
150,001–200,000
1,862,398
1.2
11
0.3
200,001–250,000
1,110,430
0.7
5
0.1
250,001–300,000
830,600
0.5
3
0.1
125,508,340
78.0
11
0.3
300,001–
160,917,436 100.0
3,401 100.0
SHAREHOLDER
( O N S E P T E M B E R 3 0 , 2 0 0 5 ) 1)
NUMBER OF
COMMON
SHARES
PORTION OF
C A P I TA L A N D
V O T E S , % 2)
NUMBER OF
SHARES OF
S E R I E S C 3)
PORTION OF
C A P I TA L A N D
V O T E S , % 2)
T O TA L
NUMBER OF
SHARES
PORTION OF
C A P I TA L A N D
V O T E S , % 2)
ICA-handlarnas Förbund, Solna
39,249,608
24.4
82,067,892
51.0
121,317,500
75.4
Samuelsson, Tomas, Stockholm
745,000
0.5
745,000
0.5
Jönsson, Leif, Stockholm
538,280
0.3
538,280
0.3
Ottosson, David, Sigtuna
416,032
0.3
416,032
0.3
Andersson, Lars & Mats, Tyresö
404,950
0.3
404,950
0.3
Persson, Sverker, Eskilstuna
400,516
0.2
400,516
0.2
Olofsson, Håkan, Boden
398,000
0.2
398,000
0.2
Ehn, Karl-Gustav, Jönköping
366,500
0.2
366,500
0.2
Carlson, Rolf, Uppsala
354,344
0.2
354,344
0.2
Davidson, Ulf, Danderyd
350,772
0.2
350,772
0.2
Fredriksson, Anders & Doris, Lidköping
350,000
0.2
350,000
0.2
Lönnroth, Markus, Ekerö
325,776
0.2
325,776
0.2
Sylvén, Claes-Göran, Sollentuna
317,196
0.2
317,196
0.2
Öhlander, Lars, Stockholm
304,200
0.2
304,200
0.2
Hero, Lennart, Gothenburg
290,000
0.2
290,000
0.2
Johansson, Mai, Gothenburg
290,000
0.2
290,000
0.2
Others
33,748,370
21.0
33,748,370
21.0
Total
78,849,544
49.0
160,917,436
100.0
1)
2)
3)
100
82,067,892
51.0
Including related parties and companies.
Series-C shares do not carry entitlement to cash dividends; also refer to “Entitlement to cash dividends and participation in the Company’s assets.”
Conversion of certain of ICA-handlarnas Förbund’s common shares to Series-C shares is subject to the condition that all of the criteria for a listing on Stockholm Stock Exchange’s O List are satisfied.
Share capital and ownership structure
SHAREHOLDERS’ AGREEMENTS
A N D S H A R E H O L D E R A S S O C I AT I O N S
As far as the Board of Directors of Hakon Invest is aware, there are
no shareholders’ agreements or shareholder associations involving
Hakon Invest.
THE SHARE
Hakon Invest’s share has not previously been listed officially,
although it has been possible for the shareholders to sell their holdings through ICA-handlarnas Förbund, whereby ICA-handlarnas
Förbund’s subsidiary, ICA-handlarnas Medlemsservice AB, has
functioned as an intermediary. Previously, the value of the share has
not been set continuously on the basis of changes in the value of the
assets of Hakon Invest (ICA AB, Forma Publishing Group and other
financial assets). The largest asset, ICA AB, is not listed and, in
order obtain a continuous valuation of ICA AB, an index was
designed and applied, which was based on the share performance
of six listed publicly traded European food retail groups, following
which ICA AB’s earnings during the most recently reported fiscal
year was related to this index. Subsequently, the estimated value of
the shares in the subsidiary Forma and the daily market value of the
financial assets was added to the value obtained. Accordingly, the
Share capital and ownership structure
value of the share was formerly established with the help of a predetermined valuation model and not on the basis of supply and
demand. In other words, historical share trading and price setting
cannot be used as a guide to share trading and price setting involving the Hakon Invest share.
During 2004, 433 transactions involving the share were completed. In total, 1,629,891 shares were traded. Trading in the
share was suspended on September 30, 2005. During 2005,
182 transactions were completed. In total, 280,772 shares were
traded.
CONVERTIBLE DEBENTURES AND OPTIONS
No convertible debentures or options related to the Hakon Invest
share have been issued by Hakon Invest. Nor are there currently
any plans to issue such financial instruments.
101
Tax considerations in Sweden
This is a summary of the primary tax implications that may rise in
conjunction with the ownership of common Hakon Invest shares
listed on the Stockholm Stock Exchange’s O List or as a result of the
Offering. The summary is not designed as an exhaustive account
covering all tax implications arising from the holding of shares, but
is instead meant as general information on current tax rules for holders of common shares in Hakon Invest who are subject to unlimited
tax liability in Sweden, unless otherwise stated.
The summary does not cover situations in which shares are held
as inventory in business operations or by a partnership. Also, the
rules governing tax exemption for capital gains and dividends on
shares in business-related shares in the corporate sector and the
accompanying prohibition of deductions for capital losses are dealt
with only summarily1).
The tax implications for individual shareholders may also depend
on special circumstances in individual cases. Each shareholders or
other interested party is thus advised to consult a tax advisor regarding the tax implications that the Offering may entail for them.
I N D I V I D U A L S : I N C O M E F R O M C A P I TA L
In the case of individuals (and the estates of deceased persons) who
have unlimited tax liability in Sweden, income from capital, such as
interest, dividends and capital gains, is taxed as income from capital at a tax rate of 30%. What are referred to as exemption rules,
which primarily apply to holdings in unlisted companies and which
entail that dividends and capital gains – to a certain extent and subject to certain detailed conditions – are not reported as income are
commented on below.
Capital gains and capital losses are calculated as the difference between the sales proceeds after deductions for selling
expenses, and the acquisition cost. The acquisition cost for shares
acquired through purchases consists of the purchase payment and
any purchase expenses, such as commission. The acquisition cost
for all shares of the same type and class is aggregated and calculated jointly using the average method. This means that the average
acquisition cost for the shares held is normally affected through the
acquisition of additional shares of the same type and class. Common shares and shares of Serie C are not considered to be of the
same type and class. As an alternative to the average method, the
standard rule may be used for listed shares. This rule entails that the
acquisition cost – if the tax subject so desires – may be calculated
as 20% of the sales price, after deductions for selling expenses. The
standard rule may be applied to the sale of listed common shares in
Hakon Invest.
1)
102
Capital losses on shares and other listed ownership rights are fully
deductible against capital gains in the same year on shares and other
listed ownership rights, except for units in Swedish fixed income
funds. Capital gains that cannot be offset in this manner are
deductible in an amount of 70% against other income from capital. If
a loss arises in income from capital, a reduction of tax on income from
employment and business operations and property tax is permitted.
This tax reduction is granted in an amount of 30% of the deductible
loss that does not exceed SEK 100,000 and in an amount of 21% of
any subsequent loss. The loss may not be saved for later fiscal years.
In the case of individuals who have unlimited tax liability in
Sweden, preliminary tax of 30% on dividends is withheld. The preliminary tax is normally withheld by VPC or, in the case of shares
held by a trustee, by the trustee.
EXEMPTION RULES
For individuals (and the estates of deceased persons), there are provisions that entail a certain limit on the reporting for tax purposes of
dividends and capital gains on shares in unlisted companies. If a
company’s shares are listed, the exemption rules apply through the
tenth calendar year after the company has been listed. After listing,
the rules apply only to shares that were distributed prior to the listing
date or prior to the announcement of a prospectus and which, after
listing, have not been transferred to a new owner through purchases, exchange or in some similar manner. The exemption rules
thus continue to be applicable to the shares that are not acquired
after listing. However, the rules also apply to shares acquired by
means of shares distributed prior to listing, such as through a rights
issue or a bonus issue. The rules cease to apply if Hakon Invest is
deemed an investment company.
According to the exemption rules, dividend distribution is to be
reported only when it exceeds a certain exemption amount, which
consists of the total base for the exemption amount multiplied by
70% of the interest rate on government loans at the end of November in the year preceding the taxation year (on November 30,
2004, this rate was, for example, 3.95 % and 70% of this is
2.77%) and any saved scope for exemption. The basis for the
exemption amount is the total of the acquisition cost that the owners
would have used if their shares had been sold, any saved exemption scope and a payroll amount made up of the payroll expensebased pay and other remuneration in the Hakon Invest Group during the year prior to the taxation year, distributed among all shares
in the Company. In recent years, Hakon Invest has paid dividends
to such an extent that there are no saved dividends.
Listed shares are viewed as being related to business operations if, among other considerations, the holding represents a capital asset for certain types of legal entities and the holding either
amounts to 10% of the voting rights or the shareholding is required by the operations pursued by the owner or if another company can be viewed as being closely related to the holding company.
On October 27, 2005, the Swedish Government referred to a
Law Council proposal involving a reform of taxation rules for owners of closely held companies. The proposal also suggests the
removal of exemption rules for the taxation of dividends and capital
gains from unlisted shares. The proposal is planned to come into
effect on January 1, 2006.
MEMBERS OF ICA-HANDLARNAS FÖRBUND
Presuming that application is completed at the right time and in the
correct manner, members of ICA-handlarnas Förbund have preferential rights to acquire 1,400 shares in Hakon Invest on the same
terms and conditions that apply to the public or otherwise according to the Offering. Preferential rights may be used either by the
member personally or through the store that is a member of the ICAhandlarnas Förbund. However, members are not entitled to transfer
the preferential rights to another party.
According to Chapter 42, Section 18 of the Income Tax Act,
any distribution – above and beyond membership fees paid –
made to members on the dissolution of a non-profit association or
when a member leaves the association or in similar cases should be
taxed as a dividend. In view of the limited scope and purpose of
the preferential rights, Hakon Invest does not expect any special tax
consequences to arise for members who use their preferential rights
or who refrain from them, pursuant to the aforementioned provision.
Furthermore, there is possibly a question as to whether the tax legislation includes a general basis for taxing members who utilize the
preferential rights for any positive difference between the market
value of the acquired shares and the purchase price of the shares
pursuant to the Offering. Hakon Invest believes that the risk of such
taxation is relatively low.
EMPLOYEES
The main rule is that not only salary but also benefits and all other
income received through employment must be reported as a taxable income. This also applies if the benefit is received from, or is
paid by a party other than, the employer. However, Chapter 11,
Section 15 of the Income Tax Act includes a provision that exempts
certain acquisitions of shares from taxation. The provision means
that for closely held companies, benefits are not to be taxed if the
employee acquires shares in the company or in another company in
the same group on the same conditions as those applying to the
public or otherwise pursuant to the Offering, if the employees and
the shareholders in the company with preferential rights do not
acquire more than 20% of the shares on offer and the employee
does not acquire shares for more than SEK 30,000.
In view of the extent of the preferential rights for members of the
Förbund, who are also largely shareholders in the Company, and
for the employees, Hakon Invest believes that there is a basis for
applying the exemption from special tax consequences for
employed members of the Hakon Invest and in its subsidiary Forma
Publishing Group who acquire shares in Hakon Invest from the Förbund based on preferential right or who refrain from doing so.
However, ICA AB is not part of the Hakon Invest Group. The
special exemption rule is thus not directly applicable to the employed
members of ICA AB who acquire shares based on preferential rights.
Neither is the exemption rule directly applicable to members who
are employed in ICA-handlarnas Medlemsservice AB, a wholly
owned subsidiary of the Förbund. However, the preferential rights for
these members are also limited and the acquisition of shares is
effected at the same price and on the same conditions that apply to
the public and for employed members of Hakon Invest Group. In
addition, those employees who are encompassed by the Offering
have not been able to affect the scope of the Offering or the conditions. In view of this and supported by certain older legal practices,
Hakon Invest is of the opinion that the members of ICA AB’s group
management and the employees of ICA-handlarnas Medlemsservice
who use or refrain from using the Offering of preferential rights and
acquire shares in Hakon Invest should not be taxed for benefits.
L E G A L E N T I T I E S – I N C O M E F R O M C A P I TA L
For limited liability companies and other legal entities, except for
the estates of deceased people, interest, dividends and capital
gains are taxable and capital losses are deductible. The capital
gains and capital loses are essentially calculated in the same manner as that for individuals. Taxation of income from capital for legal
entities is calculated as income from business operations and is subject to a tax rate of 28%.
Certain rules apply to shares that are viewed as being related
to business operations. Capital gains and dividends on such shares
are tax-exempt if certain other conditions are fulfilled, such as a
holding period of at last one year in the case of listed shares. Capital losses on business-related shares are not deductible. For limited
liability companies, deductions are granted for capital losses on
shares and subscription rights only against taxable capital gains on
shares and other participating rights. If certain conditions are fulfilled, a capital loss may be offset against such capital gains in
companies within the same group, provided that group contributions are permitted among the companies. Capital losses that cannot be utilized in any year may be saved and deducted from taxable capital gains on shares and other participating rights during
subsequent taxation years, with no limits in terms of time. For certain
corporate categories, such as investment companies, securities
funds and limited partnerships, special rules apply.
CONVERSION OF PREFERENCE SHARES
AS COMMON SHARES
The Board of Hakon Invest decided on May 24, 2005 to convert
the preference shares issued in 2000 as common shares. The deci-
103
sion was registered by the Swedish Companies Registration Office
on June 23, 2005 and VPC AB shortly thereafter reregistered the
shares as common shares. A conversion of this type is deemed to
have been completed when the conversion is registered by the
Companies Registration Office.
According to a preliminary decision from the Revenue Law
Commission in February 2005, regarding a request from a shareholder in Hakon Invest, this conversion of preference shares to common shares is to be viewed as a sale. Three of the seven members
differed and did not believe that the conversion of the shares should
be viewed as a taxable transaction. The preliminary decision has
been appealed to Supreme Administrative Court and is ready for a
decision, but a final decision is not expected before the second half
of 2005 or during 2006.
For those shareholders who are individuals (or estates of
deceased people) the preliminary decision, if it gains legal force,
means that taxable income, or in certain cases essentially a
deductible capital loss, may have arisen. The payment for the converted shares is regarded as the market value of the common shares
at the time of the conversion. Any capital gain or capital loss should
be calculated as the difference between the market value and the
acquisition cost. If such taxation is applied, the acquisition expense
for the acquired shares will be the amount used for providing the
basis for taxation. At the time of the decision concerning the conversion, ICA-handlarnas Förbund bought and sold common shares in
Hakon Invest for SEK 77.85 per share and ICA-handlarnas Förbund and Hakon Invest are of the opinion that this amount should
be viewed as the market value of the shares. However, the valuation question has not been examined by the Swedish Tax Board or
by a court. For the many previous owners of preference shares who
acquired these in the share issue of 2000, this entails that a taxable
gain of about SEK 7.85 arose per share. The actual acquisition
cost of the preference shares must be used, however.
For shareholders who are limited liability companies, preference shares normally represent so called business-related shares
and no taxable capital gain (or deductible capital loss) arises as a
result of the conversion.
NON-SWEDISH SHAREHOLDERS
Shareholders with limited tax liability in Sweden and who do not
conduct operations from a permanent location in Sweden are not
normally taxed for capital gains on the sale of shares. However,
these shareholders may be subject to tax in their country of domicile. According to a special rule, individuals with limited tax liability
in Sweden can be subject to capital gains tax in Sweden from the
sale of, for example, Swedish shares if they at any time during the
year of sale or the ten calendar years preceding that year had been
residing or permanently domiciled in Sweden. The applicability of
the rule is, however, in most cases limited through double taxation
agreements concluded by Sweden with other countries.
In the case of shareholders who are not domiciled in Sweden for
tax purposes, Swedish withholding tax is normally paid on dividends
from Swedish limited liability companies. However, the tax rate of
30% is largely reduced via double taxation agreement concluded by
Sweden with other countries for the purpose of avoiding or reducing
double taxation. Deductions for withholding tax are normally made
by VPC, or by the trustee in the case of shares lodged with a trustee.
In the event that 30% withholding tax is withheld on dividends to a
person who is entitled to be taxed according to a lower rate, repayment of the excess amount can be requested from the Swedish Tax
Board before the end of the fifth year after the dividend.
W E A LT H TA X
The intention is that the common shares in Hakon Invest be listed on
the Stockholm Stock Exchange’s O List and, based on current rules,
shares listed on this list are exempt from wealth tax, with certain
exemptions that Hakon Invest does not regard as applicable to
shareholders in Hakon Invest. Wealth tax of 1.5% is levied on part
of the taxable estate that exceeds a tax liability threshold, which is
SEK 1.5 million for individuals and the estate of deceased persons.
Spouses and co-habitants with the joint custody of children are
taxed jointly and as of the 2006 tax year have a tax liability threshold of SEK 3 million. Children living at home and under the age of
18 are taxed jointly with their parents.
I N H E R I TA N C E A N D G I F T TA X
Inheritance and gift tax ceased as of December 17, 2004.
104
Tax considerations in Sweden
Articles of Association
Hakon Invest would like to emphasize that the Articles of Association
entail that all of the shares, both common shares and Series-C shares,
carry the same voting rights. While the common shares carry unlimited
dividend entitlement, Series-C shares carry no right to cash dividends.
Such a right may accrue to Series-C shares in 2016 at the earliest.
However, Series-C shares carry entitlement to dividends in kind. See
below for more detailed information. The Annual General Meeting on
May 11, 2005 passed the resolution adopting this wording of the Articles of Association. The resolution concerning an amendment of Article
5, regarding the share capital structure (introduction of Series-C shares)
and the removal of the right-of-first-refusal clause are subject to the condition that all of the criteria for a listing on Stockholm Stock Exchange’s
O List are satisfied. The revised Articles of Association presented below
will have been registered before the Offering has been completed and
before trading in the common shares commences.
ARTICLE 1
The registered name of the Company is Hakon Invest Aktiebolag.
The Company is a public limited liability company.
ARTICLE 2
The object of the Company is to purchase, manage and sell fixed property and chattels and to engage in other associated activities.
Within the framework of the fundamental objective of generating
profits for the shareholders, the Company shall also, either directly or
through shareholdings in ICA AB or interests in other companies, maintain, develop and strengthen the ICA concept, which entails that retailers
own and operate stores that have access to economies of scale and
intangible rights through the ICA AB Group or through other companies.
ARTICLE 3
The registered office of the Board of Directors shall be in Stockholm
Municipality, Sweden.
ARTICLE 4
The Company’s share capital shall not be less than three hundred million Swedish kronor (SEK 300,000,000) and not more than twelve
hundred million Swedish kronor (SEK 1,200,000,000).
ARTICLE 5
The par value of the shares shall be SEK 2.50 each.
The shares may be issued in two series, designated common
shares and Series-C shares. Common shares may be issued in a
number not exceeding 100% of all of the shares in the Company
and Series-C shares in a number not exceeding 51% of all of the
shares in the Company.
Common shares may be converted into Series-C shares. Owners
of common shares are entitled to have them converted into Series-C
shares following a written request to the Company’s Board. The
request shall stipulate the number of shares to be converted and, if the
request does not pertain to the entire shareholding, exactly which
shares are to be converted. The Board shall address matters pertaining to the conversion of shares in the order in which the requests
arrive. Conversion decisions shall be announced without delay. Conversions shall be reported to the Companies Registration Office for
registration without delay and conversion is effective as soon as registration in the Companies Register has been completed and a notation
has been made in the VPC Register.
In connection with votes, each share entitles the holder to one vote.
Series-C shares do not carry entitlement to cash profit distribution. However, Series-C shares carry the same rights as common
shares to profit distribution that takes the form of a cash-in-kind dividend of shares or other participations in ICA AB (Corp. Reg. No.
556582-1559) or in the current or future subsidiaries or associated
companies of the ICA AB group or in companies that may take over
the operations conducted or that may be conducted in the future by
the ICA AB group. In the event of the Company’s liquidation, SeriesC shares carry the same rights as common shares to participation in
the Company’s assets. If the Company’s restricted equity is reduced
through payment to the Company’s shareholders or by means of the
repurchase of shares, Series-C shares only carry entitlement to payment or compensation in accordance with the regulations for profit
distribution described in the preceding paragraph.
Series-C shares may be converted into common shares in the following manner: As of 2011, holders of Series-C shares are entitled to
request conversion of their Series-C shares into common shares by making a written request to this effect to the Company’s Board. The request
shall stipulate the number of shares to be converted and, if the request
does not pertain to the entire shareholding, exactly which shares are to
be converted. The Board must make a decision regarding conversion
as soon as possible during the month of January in the fifth year after
the conversion request was received, meaning not earlier than in January 2016. Conversions shall be reported to the Companies Registration Office for registration without delay and conversion is effective as
soon as registration in the Companies Register has been completed
and a notation has been made in the VPC Register.
In the event that the Company decides to issue new common
shares and Series-C shares through a cash issue, owners of both share
classes shall have preferential rights to the subscription of new shares of
the same type in relation to the number of shares already held (primary
preferential right). Shares not subscribed for on the basis of primary
preferential rights shall be offered for subscription to all shareholders
(subsidiary preferential right). If the number of shares offered in this
manner is insufficient for subscription based on subsidiary preferential
rights, the shares shall be distributed in relation to the number of shares
already held and, to the extent that this is not possible, by lottery.
105
In the event that the Company decides that new common shares
or new Series-C shares alone shall be issued through a cash issue, all
shareholders, irrespective of whether they own common shares or
Series-C shares, shall have preferential rights to the subscription of
new shares in relation to the number of shares already held.
The aforementioned stipulation shall not constitute any infringement on the possibility to make a decision regarding a cash issue in
which the preferential rights of shareholders are disapplied. Notwithstanding the regulations pertaining to dividends, in the event of an
increase in share capital through a bonus issue, new shares of each
series shall be issued in relation to the number of shares of the same
series already held. In such cases, shares of a specific series carry
entitlement to new shares of the same series. The aforementioned stipulation shall not constitute any infringement on the possibility, following
the requisite amendment in the Articles of Association, to issues shares
of a new series through a bonus issue.
7.
ARTICLE 6
ARTICLE 10
In addition to the members who, according to law, are to be elected
by a body other than a General Shareholder Meeting, the Board of
Directors shall consist of not fewer than five (5) and not more than
nine (9) members. The Board members are elected annually at the
Annual General Meeting for the period extending to the close of the
following Annual General Meeting.
At a General Meeting, each person is entitled to exercise unlimited voting rights on the full number of shares that he or she owns or represents.
ARTICLE 7
For the purpose of examining the Company’s annual report and financial accounts and the administration of the Board of Directors and the
President, the Annual General Meeting shall elect at least one and not
more than two auditors, or one or two authorized firm of accountants,
for the period extending to the close of the Annual General Meeting
held during the fourth fiscal year after the election of auditors.
ARTICLE 8
The Company’s fiscal year shall extend from January 1 to December
31.
ARTICLE 9
The Annual General Meeting shall be held once a year in Stockholm, Nacka, Sigtuna, Sollentuna or Solna.
At the Annual General Meeting, the following items of business
shall be addressed:
1. Election of Chairman of the Meeting;
2. Preparation and approval of the list of shareholders entitled to
vote at the Meeting;
3. Approval of the agenda;
4. Election of the secretary and two minute-checkers who, in addition to the Chairman, are to sign the minutes;
5. Determination of whether the Meeting has been duly convened;
6. Presentation of the annual report and the auditors’ report and of
the consolidated financial accounts and the auditor’s report on
the consolidated financial accounts;
106
8.
9.
10.
11.
12.
13.
Motions concerning the adoption of the income statement and
balance sheet and, where applicable, of the consolidated
income statement and consolidated balance sheet;
Motions concerning the disposition to be made of the Company’s profits or losses as shown in the balance sheet adopted
by the Meeting and, where applicable, taking into account
profits or losses shown in the consolidated balance sheet;
Motions concerning the discharge of the members of the Board
of Directors and of the President from personal liability;
Determination of the number of Board Members and, where
applicable, the number of auditors;
Determination of the fees to be paid to the Board members and,
where applicable, to the auditors;
Election of Board Members and, where applicable, the auditors.
Other business to be addressed by the Meeting in accordance
with the Swedish Companies Act or the Articles of Association.
ARTICLE 11
Those persons registered in the share register, or the type of list specified in Chapter 3, Section 12 of the Swedish Companies Act
(1975:1385), on the stipulated record date shall be deemed to be
entitled to receive dividends and, in connection with bonus issues,
new shares to which the shareholder is entitled, and to exercise
shareholder’s preferential right to participate in the issue.
ARTICLE 12
Notice of a General Meeting of Shareholders shall be made in the
form of an announcement in an advertisement in the Official Gazette
(Post och Inrikes Tidningar), and in Dagens Nyheter, Svenska Dagbladet or another national Swedish newspaper.
Notice of the Annual General Meeting and of Extraordinary
General Meetings convened to address amendments to the Articles
of Association shall be issued not earlier than six weeks and not later
than four weeks prior to the Meeting. Notice of other General Meetings shall be issued not earlier than six weeks and not later than two
weeks prior to the Meeting
To be entitled to participate in the business of a General Meeting, shareholders shall, firstly, be registered in the transcript of the
entire share register pertaining to the conditions prevailing ten days
prior to the Meeting and, secondly, notify the Company of their intention to attend the Meeting not later than the day stipulated in the
notice convening the General Meeting. The latter mentioned day
must not be a Sunday, any other public holiday, a Saturday, Midsummer’s Eve, Christmas Eve or New Year’s Eve and must not be more
than the five weekdays before the Meeting.
Shareholders are only entitled to be accompanied by assistants if
the shareholder notifies the Company of the number of assistants, not
more than two, in the manner stated in the preceding paragraph.
Articles of Association
Interim report January – September 2005
Hakon Invest AB, Interim report, January – September 2005
• Net sales amounted to SEK 446 million (459)
• Profit after tax amounted to SEK 608 million (333)
Overview, operating structure
• Earnings per share amounted to SEK 3.78 (2.07)
• Work on exchange listing continuing according to plan
Hakon Invest AB
• ICA increases market share
• ICA AB’s sales increased by 3.7% for comparable units
40%
This interim report relates to the period from January through
September 2005.
HAKON INVEST IN BRIEF
Hakon Invest AB (formerly ICA Förbundet Invest AB) conducts active
and long-term investment activities with a focus on retail-oriented
companies in the Nordic region.
Hakon Invest owns 40% of ICA AB, the Nordic region’s leading
retail company with a focus on food. The remaining 60% is owned
by the Dutch company Royal Ahold. Through the shareholders’
agreement between Hakon Invest and Ahold that extends through
the year 2040, the two owners have joint influence in ICA.
The Hakon Invest Group also includes the wholly owned subsidiary Forma Publishing Group.
In addition, Hakon Invest’s assets include securities consisting of
current investments in interest-bearing commercial paper and
shares.
ICA AB is a central investment for Hakon Invest. By being an
active owner with significant influence, Hakon Invest will contribute
to strengthening and enhancing the ICA concept and creating value
in ICA AB.
In addition to being a strong owner of ICA AB, Hakon Invest will
strive to create value for shareholders by making long-term investments, primarily in unlisted companies in the Nordic retail sector.
Hakon Invest has significant expertise and experience, as well as
access to an extensive network in retail and associated operations.
Hakon Invest is 75% owned by ICA-handlarnas Förbund, a
non-profit organization for Sweden’s ICA retailers. The remaining
shares are owned individually by current and former ICA retailers.
ICA-handlarnas Förbund has decided to sell shares, thus reducing its ownership in Hakon Invest to 67% and thereby spreading
ownership in the Company. For this reason, the Annual General
Meeting on May 11 decided
– to change the name from ICA Förbundet Invest AB to Hakon
Invest,
108
Portfolio companies
ICA AB
Forma Publishing Group
100%
Future investments
O W N E R S H I P S T R U C T U R E H A K O N I N V E S T A B ( S E P. 3 0 , 2 0 0 5 )
25%
Översiktlig ägar- och verksamhetsstruktur
distributed among
efter marknadsnoteringen
slightly more than
3,400 shareholders
75%
ICA-handlarnas
Förbund
– to adopt new Articles of Association that create prerequisites for a
listing of the share on the O-List of the Stockholm Stock Exchange,
– to elect a new Board of Directors with broader competence, and
– to change the Company’s share capital structure.
Against the background of the planned listing of the Hakon Invest
share on the O-List of the Stockholm Stock Exchange, operations in
the Company during the year were characterized by work to meet
the requirements and expectations on the Company from the stock
exchange and the market. Work with the exchange listing continues
to proceed according to plan.
Interim report January – September 2005
For the core holding in ICA AB, positive effects are now evident
from the major price initiative started during the spring. During the
third quarter, ICA captured market shares in the Swedish market
and increased both sales and earnings. During the period from January through September, ICA AB increased sales by 3.7%, after
adjustment for the sale of operations in Denmark and the fact that
operations in the Baltic countries are no longer consolidated. The
reported net sales declined. Operating profit increased during the
third quarter to SEK 683 million (470), an increase of 45%.
The participation in ICA AB’s earnings amounted to SEK 415
million (348). The capital share increased from 30% to 40%.
Forma’s sales during the period declined somewhat by SEK 7
million due to the discontinuation of unprofitable magazines and a
lower subscription rate for consumer magazines. Operating income
was also adversely affected by lower advertising revenues.
Financial management was positively affected by generally favorable stock market trends and reported a profit of SEK 284 million
(13).
SIGNIFICANT EVENTS DURING THE THIRD QUARTER
Work with the planned exchange listing continued.
The Company strengthened its organization during the autumn
through recruitment of a number of employees, particularly with a
focus on investment operations.
The holding was hedged from declines in the exchange rate to
9.26 SEK/EUR until January 2006.
ICA-handlarnas Förbund has an important mission to support
and stimulate ICA retailers as independent business owners and to
utilize ICA’s expertise and resources with respect to both sourcing
and specialist support functions. This assignment was performed by
Hakon Invest during the first six months of 2005 and financed by
the ICA stores paying a service fee that during the first half of the
year amounted to SEK 12 million (13). As of July 1, 2005, this
assignment and the associated revenues and costs were transferred
to Hakon Invest’s associated company ICA-handlarnas Medlemsservice AB. The effect of this change on earnings is negligible.
The Parent Company Hakon Invest’s administrative expenses
were at the same level as last year, although there were additional
non-recurring costs during the period of SEK 18 million related to
the forthcoming exchange listing.
During the first six months of the year, the Group conducted
operations in two segments, service operations and publishing
operations, while operations in the third quarter consisted entirely of
publishing. In addition, there were holdings in ICA AB and the
financial management.
The trends in publishing operations and in ICA AB are
described under the heading ”Holdings”.
FINANCIAL POSITION
C O N S O L I D AT E D S A L E S A N D E A R N I N G S
DURING THE PERIOD
Consolidated revenues declined during the period to SEK 446 million from SEK 459 million for the corresponding period in the preceding year. The decline was due to lower advertising and subscription revenues for Forma’s consumer magazines and the discontinuation of unprofitable specialty magazines. In addition, no service fee was received from member service operations during the
third quarter, since these operations were separated.
Hakon Invest’s profit for the period was SEK 608 million (333)
after tax.
The share of ICA AB’s income increased to SEK 415 million
(348) on the closing date, due to rising stock market prices and an
increasing EUR/SEK exchange rate. During September, the holding
was hedged at SEK/EUR 9.26 until January 2006.
The value of the shares in Ahold has during 2005 increased
from SEK 425 million by year-end 2004 to SEK 490 million at the
end of the period thanks to a rising stock price and a rising euro.
Interim report January – September 2005
The current value of the Group’s liquid funds and short-term investments amounted to SEK 2,949 million at September 30, 2005,
compared with SEK 2,729 million at January 1. Liquid funds
declined to SEK 228 million.
The Group and the Parent Company have a strong financial
position.
The Company had no long-term liabilities, SEK 0 million (0).
The equity/assets ratio was 95.1% (95.3) at September 30,
2005.
There were no changes in contingent liabilities during the quarter.
CASH FLOW
The change in liquid funds during the period was a deficit of SEK
277 million. Cash flow was primarily affected by the dividend totaling SEK 8.20 per share, which amounted to SEK 325 million and
was paid during May 2005.
109
FINANCIAL ACCOUNTS
Condensed consolidated income statement
(SEK 000s)
Revenue
Q1–Q3 2005
Q1–Q3 2004
Q3 2005
Q3 2004
FULL-YEAR
2004
445,695
458,993
136,563
136,475
621,945
Cost of sales
–230,100
–194,297
–66,771
–28,403
–300,850
Gross profit
215,595
264,696
69,792
108,072
321,095
Other income
1,520
3,525
309
2,149
5,279
Selling expenses
–110,492
–133,726
–41,520
–64,410
–153,822
Administrative expenses
–130,967
–152,300
–35,802
–70,916
–153,400
Shares in companies reported in accordance with the equity method
416,530
349,394
174,953
98,811
466,167
Operating profit
392,186
331,589
167,732
73,706
485,319
Net financial items
283,954
12,564
22,300
–124,523
108,571
Profit after financial items
676,140
344,153
190,032
–50,817
593,890
Income tax expense
–68,001
–10,838
–59,310
3,107
–15,285
Profit for the period
608,139
333,315
130,722
–47,710
578,605
Profit for the year attributable to equity holders in
the Parent Company
608,139
333,315
130,722
–47,710
578,605
Earnings per share (SEK)
110
Basic
3.78
2.07
0.81
–0.30
3.60
Diluted
3.78
2.07
0.81
–0.30
3.60
Interim report January – September 2005
Condensed consolidated balance sheet
(SEK 000s)
S E P T. 3 0 , 2 0 0 5
S E P T. 3 0 , 2 0 0 4
DEC. 31, 2004
ASSETS
Fixed assets
Goodwill
Participation in earnings of companies reported according to equity method
61,666
61,666
61,666
4,828,580
3,666,249
4,501,033
Other non-current assets
89,900
141,903
165,444
Total non-current assets
4,980,146
3,869,818
4,728,143
Current assets
Other current assets
147,955
123,523
108,286
Current investments
2,721,902
2,920,500
2,224,023
Cash equivalents
227,554
442,073
504,952
Total current assets
3,097,411
3,486,096
2,837,261
TOTAL ASSETS
8,077,557
7,355,914
7,565,404
EQUITY AND LIABILITIES
Equity
7,682,450
7,007,413
7,243,642
Long-term liabilities and provisions
143,220
183,601
131,581
Current liabilities
251,887
164,900
190,181
8,077,557
7,355,914
7,565,404
Q1–Q3 2005
Q1–Q3 2004
FULL-YEAR
2004
7,243,642
6,848,479
6,848,479
152,764
–33,801
–42,742
–324,719
–140,580
–140,580
608,139
333,315
578,605
7,682,450
7,007,413
7,243,642
Q1–Q3 2005
Q1–Q3 2004
FULL-YEAR
2004
Cash flow from operating activities
356,479
201,636
243,628
Cash flow from investment activities
–310,067
–62,488
–44,396
Cash flow from financing activities
–323,810
–140,580
–140,580
Cash flow for the period
–277,398
–1,432
58,652
504,952
229,875
229,875
213,630
216,425
442,073
504,952
TOTAL EQUITY AND LIABILITIES
C H A N G E S I N C O N S O L I D AT E D E Q U I T Y
(SEK 000S)
Opening equity
Translation differences
Items booked directly under equity from companies reported in accordance with the equity method
Dividend
Profit for the period
Closing equity
2,624
–120
Condensed consolidated cash flow statement
(SEK 000S)
Cash and cash equivalents at January 1
Reclassification of cash and cash equivalents
Cash and cash equivalents at September 30
Interim report January – September 2005
227,554
111
112
ACCOUNTING PRINCIPLES
T H E C O M PA N Y ’ S S H A R E
Hakon Invest’s financial reports up to and including 2004 were prepared according to the Annual Accounts Act and the general recommendations issued by the Swedish Financial Accounting Standards Council. These principles also apply for the Parent Company
for 2005. As of 2005, the consolidated accounts were prepared
according to the International Financial Reporting Standards (IFRS).
How the transition to IFRS should be reported is described in IFRS 1
First-Time Adoption of IFRS. The basic rule is that the new principles
must be applied retroactively and that comparison figures must be
recalculated. The most significant effects for the Group of the transition to IFRS relate to the reporting of goodwill, pensions and financial instruments. These effects are presented according to the new
accounting principles in restated consolidated accounts for 2004 in
which the new principles are also described. There the valuation
methods and the additional information that should be provided
according to IFRS is also described. For more complete information,
see Consolidated accounting for the 2004 fiscal year on the Company’s website.
The application of IFRS for the 2005 accounts means that the
accounts must be prepared in accordance with the standards that
applied as of December 31, 2005 and which were approved by
the EU. The effects of the transition to IFRS that are described in the
consolidated accounts mentioned above and in this interim report
are based on the prevailing standards and their interpretation.
These may change with subsequent effects on the reported figures,
which are thus preliminary. Certain adjustments were made in the
presentation of effects in the documents for 2004 mentioned above
in relation to the published six-month report.
This interim report was prepared in accordance with the Annual
Accounts Act and IAS 34 Interim Financial Reporting, which is in
agreement with the Swedish Financial Accounting Standards Council’s recommendation RR 31 Interim Reporting for Corporate
Groups. The accounting principles applied are those described in
the recalculated consolidated accounts for 2004. During 2004, no
interim report was prepared for the period from January to September, meaning that there is no reconciliation against previous principles in this report.
According to the Articles of Association, the Company’s share capital shall amount to not less than SEK 300 million and not more than
SEK 1,200 million. Hakon Invest’s share capital amounts to SEK
402,293,590 distributed among 160,917,436 shares, each
with a par value of SEK 2.50. On May 24, 2005, the Board of
Directors of Hakon Invest decided to convert all preferential shares
issued in 2000 to common shares. After implementation of this
decision, the Company has only common shares.
The total number of outstanding shares amounts to
160,917,436 (160,917,436), of which ICA-handlarnas Förbund
owns 75%. Hakon Invest’s share has not been officially listed, but
ICA Förbundet Intressenter AB has conducted unofficial trading.
During the period from January to September 2005, 182 (335)
trades were implemented involving 280,772 (1,299,988) shares.
The bid and ask prices were based on a technical valuation model.
At September 30, 2005, the bid price was SEK 81.25 (68.45).
During the second quarter, a dividend of SEK 8.20 per share
was paid. ICA-handlarnas Förbund declined the dividend on its
121,317,500 common shares. This was not subject to any conditions.
Unofficial trading ceased on October 1, 2005.
Earnings per share amounted to SEK 3.78 (2.07).
ICA-handlarnas Förbund has taken a decision to implement an
incentives program targeted to all employees in the Parent Company Hakon Invest and ICA-handlarnas Medlemsservice AB directly
after the exchange listing. The incentives program includes an offer
to acquire a total of 480,000 call options, corresponding to 0.3%
of the share capital and voting rights in the Company, assuming full
subscription and full exercise of the call options entitling the holder
to purchase of common shares in Hakon Invest.
As of September 30, 2005, there is only one type of share. The
preferential shares that were converted to common shares carried
preferential rights to dividends. Earnings per share for previous periods were based on outstanding shares at the 30th September
2005, meaning as if conversion had taken place before the beginning of 2004.
Interim report January – September 2005
PA R E N T C O M PA N Y
The Parent Company’s revenues amounted to SEK 12 million (19)
during the period and SEK 0 (5) during the quarter following the
transfer of service operations. Profit after tax amounted to SEK 410
million (172). The current value of the Parent Company’s liquid
funds and current investments amounted to SEK 2,821 million at
September 30, 2005, compared with SEK 2,597 million at January 1. No investments were made except within financial management.
marked A/S and offers a network of discount stores in Sweden. In
the Baltic countries, ICA has a joint venture, Rimi Baltic AB, together
with the Finnish company Kesko Livs AB.
Ownership share
Hakon Invest AB’s ownership share amounts to 40% of the shares.
The remaining 60% are owned by Royal Ahold. Through a shareholders’ agreement, the parties have joint influence over the company and equal voting rights.
Market
The Nordic retail market for consumer goods has been characterized by increasingly fierce competition in recent years, both in the
form of new players and through intensified marketing – price
reductions – from established players. In Sweden, the ICA stores
launched a price campaign in which prices were reduced on two
occasions during the period in March and August. These price
reductions were made possible by ICA AB reducing prices to the
stores, while implementing rationalization measures at both the
group and store levels.
The effect of the price reductions in Sweden thus far has been
that the ICA stores have attracted more customers and increased
sales by more than the industry average. Overall, the ICA stores
increased their market share in the Swedish retail market.
The price campaign had positive effects on all ICA store profiles and on ICA Supermarket and ICA Nära in particular.
Price cuts were also implemented in Norway in ICA and Rimi
stores during the period which have had a positive effect on sales
thus far. Above all, however, price levels in the Rimi stores moved
closer as planned to those of the Rema 1000 stores, which are the
nearest competitor, and market shares were stabilized.
Operations
ICA AB is the parent company of the ICA group. Within ICA AB,
there are three joint corporate functions for Finance, Retail and Supply Chain. ICA Sverige and ICA Norge are exclusively sales companies with responsibility for operations, sales and establishment.
ICA Meny is today exclusively a sales company for restaurants,
caterers and convenience stores. ICA Banken offers financial services for Swedish customers. ICA AB has two joint ventures. One is
Netto Marknad AB, which is owned jointly with Dansk Super-
Important events during the period
– The price cuts begun in March in the Swedish stores and in May
in Norwegian Rimi stores were successful. ICA’s volumes in the
Swedish market increased more rapidly than the industry average since March. Additional price cuts were implemented in
August.
– ICA’s new organization took effect on June 1. The organizational
changes affected both the Swedish and Norwegian organizations
and were intended to simplify daily work while improving coordi-
SALES TREND
S A L E S T R E N D , I C A’ S P R O F I L E S
Holdings
ICA AB
• Revenues increased by 3.7% for comparable units during the
period and by 5.2% during the quarter.
• Operating profit declined to SEK 1,341 million (1,621) during
the period but increased during the third quarter to SEK 683 million (470), an increase of 45%.
• Total assets amounted to SEK 32,257 million (29,820).
• Market share increased in the Swedish market.
%
%
6
20
5
15
4
3
10
2
5
1
0
0
–1
–5
Jan Feb March Apr May June July Aug Sep
Industry
ICA Retailers
Interim report January – September 2005
Jan Feb March Apr May June July Aug Sep
ICA Retailers
Maxi
Supermarket
Kvantum
Nära
113
nation within the Group. Against the background of the organizational changes, the number of employees will be reduced by some
500 full-time positions by the end of 2006. As of September 30,
2005, a level of about 300 had been attained.
– In January, the subsidiary ICA Baltic’s operations were transferred
to a joint venture with Finland’s Kesko Livs AB.
– During the period, three Maxi ICA Hypermarkets, one ICA Kvantum, one ICA Supermarket and two ICA Nära stores were
opened in Sweden. In Norway, three ICA Maxi, two ICA Nær
and four Rimi stores were opened during the same period.
Sales and earnings
The ICA group’s sales declined to SEK 1,482 million or by 2.7%
during the period to SEK 52,514 million (53,996). The decline
was due to the fact that ICA Baltic was no longer consolidated and
to the sale of Danish operations in August 2004. Adjusted for these
changes, sales increased by 3.7% during the period. ICA Banken,
ICA Meny and ICA Sverige reported higher sales growth than their
competitors and thus increased market share. Sales in ICA Norge
declined due to stiffer competition, as well as the conversion of
wholly owned stores to franchise stores and the sale of stores.
Operating profit for the period declined by SEK 280 million or
17.3% to SEK 1,341 million (1,621). Income for the comparison
period included an earnings share and a capital gain from the
sales of the 50% owned company Statoil Detaljhandel amounting
to SEK 457 million and an impairment of the market value of ISOICA A/S. ICA Sverige and ICA Norge reported lower earnings as
a result of price cuts. ICA Baltic included the wholly owned company ICA Baltic AB in 2004. On January 1, 2005, these operations were transferred together with Kesko’s Baltic operations to the
jointly owned company Rimi Baltic, which is reported according to
the equity method. Rimi Baltic’s sales during the period amounted to
EUR 581.1 million, an increase of 21.5%, compared with the cor-
114
responding period in the preceding year.
ICA Meny and ICA Banken reported sharply improved earnings, compared with the preceding year. The earnings improvement
was the result of increased volumes. Costs for implementation of the
new organization were charged against the year’s earnings.
During the quarter, sales declined by SEK 160 million or 0.9%.
However, after correction for ICA Baltic and ICA Denmark (see
above), sales increased by 5.2% during the third quarter.
Operating profit for the third quarter increased by SEK 213 million and was primarily due to increased sales volumes and cost
reductions in Sweden and Norway, improved income from property management, increased volumes in ICA Banken and improved
earnings in the Baltic countries, all of which was according to plan.
Summary of ICA AB’s income statement
(SEK M)
Q1–Q3 2005
Revenue
52,514
53,996
Cost of sales
–45,812
–47,095
Gross profit
6,702
6,901
Other operating income
Selling and administrative expenses
Participation in earnings of companies
reported according to equity method
Operating profit
Net financial items
Profit after financial items
Q1–Q3 20004
356
300
–5,620
–6,015
–97
4351)
1,341
1,621
–183
–179
1,158
1,442
Income tax expense
–90
–221
Profit for the period
1,068
1,221
1)
Includes a capital gain from the sale of the 50% share in Statoil Detaljhandel AB, as well as
an impairment of ISO A/S.
Interim report January – September 2005
ICA’s sales and operating profit/loss by segment January – September 2005
SALES
(SEK M)
O P E R AT I N G P R O F I T / L O S S
Q1–Q3 2005
Q1–Q3 2004
Q1–Q3 2005
Q1–Q3 2004
ICA Sverige
34,333
33,092
1,054
1 238
ICA Norge
13,836
13,884
353
434
15
2,355
19
–104
ICA Baltic
ICA Danmark
ICA Meny
0
1,011
0
–268
4,353
3,711
–1
–26
67
42
–58
–94
562
375
–26
4411)
ICA Banken
ICA AB
Internal sales
Total
1)
–652
–474
52,514
53,996
1,341
1 621
Includes a capital gain from the sale of the 50% share in Statoil Detaljhandel AB, as well as an impairment of ISO A/S.
Summary of ICA AB’s balance sheet
(SEK M)
Summary of ICA AB’s cash flow statement
S E P T. 3 0 ,
2005
S E P T. 3 0 ,
2004
DEC. 31,
2004
ASSETS
Intangible non-current assets
1,974
2,026
2,015
Tangible non-current assets
13,125
13,081
13,185
Financial non-current assets
2,384
1,731
1,565
Total non-current assets
17,483
16,838
16,765
Other current assets
11,695
9,664
11,095
Current investments
2,527
3,019
2,705
Cash and cash equivalents
552
299
523
Total current assets
14,774
12,982
14,323
TOTAL ASSETS
32,257
29,820
31,088
Equity
7,937
12,293
7,094
Long-term liabilities and provisions
7,175
3,073
3,205
Current liabilities
17,145
14,454
20,789
TOTAL EQUITY AND LIABILITIES
32,257
29,820
31,088
(SEK 000s)
Q1–Q3 2005
Q1–Q3 2004
Cash flow from operating activities
863
220
Cash flow from investment activities
–1,259
860
467
–2,203
71
–1,123
3,228
4,571
Cash flow from financing activities
Cash flow for the period
Cash and cash equivalents at January 1
Translation differences
Cash and cash equivalents at September 30
–220
–130
3,079
3,318
Cash flow during the 2004 fiscal year includes non-recurring effects from the sale of operations
and redemption of loans.
EQUITY AND LIABILITIES
Interim report January – September 2005
115
FORMA PUBLISHING GROUP
• Sales were stable and amounted to SEK 433 million (440).
• Operating profit amounted to SEK 23 million (38).
• Total assets increased by SEK 20 million to SEK 390 million
(370).
• Several new assignments were received by Idé and Media.
• The magazine Vovve was introduced as a periodical.
Summary of Forma’s income statement
(SEK M)
Q1–Q3 2005 Q1–Q3 20004
Revenue
433
440
Cost of sales
–230
–194
Gross profit
203
246
Other operating income
Selling and administrative expenses
Ownership share
Hakon Invest AB’s ownership share in Forma Publishing Group AB
amounts to 100% of the capital and voting rights.
Operating profit
Operations
Forma Publishing Group is the parent company of a group consisting of wholly and partially owned subsidiaries in Sweden, Finland,
Estonia and Latvia. In addition, there are associated companies in
Sweden and Norway. The group’s business areas comprise consumer magazines, specialty magazines, customer magazines,
books and test kitchens.
ICA Bokförlag is a specialty book publisher with a catalogue of
some 450 titles that publishes around 80 new titles each year. Consumer magazines include ICA-kuriren and Hus&Hem, which are the
most prominent and largest products. Among specialty magazines,
ICA-Nyheter is the largest and targets the owners of food stores. Idé
& Media works on assignment from external customers and produces primarily customer and employee magazines.
During the spring of 2005, the consumer magazine Vovve was
started as a periodical for dog owners. In addition, a number of consumer-oriented special edition editions were published in Sweden
and Finland. Operations within Idé & Media were developed
through new assignments from the Swedish Lawn Tennis Association,
the Swedish Equestrian Federation, ABB and other customers. During
the period, Forma received considerable publicity as a result of several nominations and awards, including Magazine of the Year, the
Year’s One-shot, Publisher of the Year and Sweden’s Best Workplace.
Sales and earnings
Sales declined from SEK 440 million to SEK 433 million, compared
with the period from January to September in 2004. This was
largely due to a lower subscription rate for consumer publications
and lower advertising revenues. Forma therefore decided to intensify its efforts to develop additional new magazines and new concepts for magazine supplements.
Operating profit amounted to SEK 23 million (38). The decline
in earnings was due to earlier booking of costs for subscription campaigns, costs for the discontinuation of unprofitable magazines and
costs for investments in new products, such as Vovve.
Other business areas, as well as central units, reported an earnings improvement, compared with the preceding year.
Net financial items amounted to SEK 5 million (0).
Tax expenses declined during the period to SEK –8 million (–11).
Total assets increased by SEK 20 million, primarily through an
increase in liquid funds.
116
Net financial items
1
4
–181
–212
23
38
5
0
28
38
Income tax
–7
–11
Profit for the period
21
27
S E P T. 3 0 ,
2004
FULL-YEAR
2004
Profit after financial items
Summary of Forma’s balance sheet
(SEK M)
S E P T. 3 0 ,
2005
ASSETS
Tangible non-current assets
75
71
75
Financial non-current assets
6
15
14
81
86
89
Other current assets
181
189
153
Current investments
23
12
12
105
83
120
Total non-current assets
Cash and cash equivalents
Total current assets
309
284
285
TOTAL ASSETS
390
370
374
EQUITY AND LIABILITIES
Equity
102
86
81
Long-term liabilities and provisions
131
132
119
Current liabilities
157
152
174
TOTAL EQUITY AND LIABILITIES
390
370
374
Summary of Forma’s cash flow statement
(SEK M)
Q1–Q3 2005 Q1–Q3 20004
Cash flow from operating activities
–5
–24
Cash flow from investment activities
–10
–14
Cash flow from financing activities
0
–82
Cash flow for the period
–15
–120
Cash and cash equivalents at January 1
120
203
Cash and cash equivalents at September 30
105
83
Interim report January – September 2005
Financial management in Hakon Invest
Financial investments under own management amounted to SEK
521 million at September 30, 2005. Return for the period from January through September was 11% (SEK 59 million). At September
30, 2005, the investments were distributed among shares (94%)
and hedge funds (6%). During the second quarter, the Company’s
investments within the framework of Skandia Investment were
divested. The earnings were attributable to a positive trend for the
Ahold share, compared with a sharp decline during the period from
January–September 2004.
Financial investments under external management amounted to
SEK 2,195 million at September 30, 2005. The investment return for
the period January to September 2005 amounted to 11% (SEK 222
million). At that date, these investments were distributed among equities
(37%), hedge funds (23%), fixed-income securities (39%) and liquid
funds (1%). Development of the Swedish and foreign stock markets has
a positive effect on earnings.
Other financial income was SEK 3 million.
Key data
Q1–Q3 2005
Q1–Q3 2004
FULL-YEAR
2004
Revenues
446
459
622
Operating profit
392
332
485
88.0
72.2
78.0
(SEK M)
Operating margin, %
Profit after financial items
676
344
594
Profit after tax
608
333
579
Earnings per share, SEK
3.78
2.07
3.60
8,078
7,356
7,565
Equity/assets ratio, %
95.1
95.3
95.2
Return on capital employed, %
17.3
–---
9.4
Return on shareholders’ equity, %
11.6
–---
8.2
47.74
43.55
45.01
Total assets
Equity per share, SEK
Number of shares
160,917,436 160,917,436 160,917,436
Dividend per preferential share
8.20
3.55
3.55
Reporting by segment
J A N . - S E P T. 2 0 0 5
PUBLISHING
O P E R AT I O N S
SERVICE
O P E R AT I O N S
OTHER
( I N C L . E L I M I N AT I O N S )
T O TA L
(SEK 000s)
External revenues
433,288
12,407
0
445,695
Operating profit/loss
23,254
–1,755
370,687
392,186
Profit after financial items
28,676
–1,755
649,219
676,140
Profit after tax
20,912
–1,755
588,982
608,139
Assets
390,330
0
7,687,227
8,077,557
Liabilities
288,328
0
106,778
395,106
Investments
Depreciation
J A N . - S E P T. 2 0 0 4
10,011
0
0
10,011
9,236
0
31
9,267
PUBLISHING
O P E R AT I O N S
SERVICE
O P E R AT I O N S
OTHER
( I N C L . E L I M I N AT I O N S )
T O TA L
(SEK 000s)
External revenues
439,858
19,135
0
458,993
Operating profit/loss
37,686
–10,768
304,671
331,589
Profit after financial items
38,060
–10,768
316,861
344,153
Profit after tax
27,339
–10,768
316,744
333,315
Assets
370,508
0
6,985,406
7,355,914
Liabilities
284,167
10,603
53,731
348,501
24,601
0
–5,525
19,076
7,711
0
15
7,726
Investments
Depreciation
Interim report January – September 2005
117
DEFINITIONS
R E P O R T I N G D AT E S
Equity/assets ratio Shareholders’ equity including minority interests
as a percentage or total assets
Hakon Invest’s year-end report for 2005 will be published on February 27, 2006.
The Annual General Meeting will be held in Solna, Sweden on
May 10, 2006.
Return on shareholders’ equity Net profit based on rolling 12month figures as a percentage of average shareholders’ equity during the same period. Shareholders’ equity does not include minority
interests in subsidiaries
Solna, October 27, 2005
Return on capital employed Profit after financial items plus financial expenses calculated on a rolling 12-month basis as a percentage of average capital employed during the same period
Claes-Göran Sylvén
President
Capital employed Total assets reduced by non-interest bearing liabilities including deferred tax
REVIEW REPORT
Earnings per share Profit after tax divided by the average number
of shares
S I G N I F I C A N T E V E N T S A F T E R T H E C L O S I N G D AT E
The Board of Directors of ICA-handlarnas Förbund decided that the
unofficial trading of Hakon Invest shares would cease as of October 1 pending the exchange listing.
We have reviewed this interim report in accordance with the recommendations issued by FAR, the Institute for the Accounting Profession
in Sweden. A review is considerably limited in scope compared
with an audit.
Nothing has come to our attention that causes us to believe that
the interim report does not comply with the requirements of the
Exchange and Clearing Operations Act and the Annual Accounts
Act.
Solna, October 27, 2005
Erik Åström
Authorized Public Accountant
Ernst & Young AB
118
Ire Lindstrand
Authorized Public Accountant
SET Revisionsbyrå AB
Interim report January – September 2005
Financial Statements
Income Statements
PA R E N T
C O M PA N Y
GROUP
SEK 000s
NOTE
Net sales
2, 3
Cost of goods sold
4
Gross profit
2004
2003
2002
2004
621,945
630,784
658,856
25,734
–300,850
–346,118
–357,641
–
321,095
284,666
301,215
–
Selling expense
4, 6
–153,822
–161,153
–206,321
–
Administrative expenses
5
–187,696
–158,982
–155,384
–96,086
5,279
18,911
13,776
–
–
–
–142
–
Other operating income
Other operating expenses
Items affecting comparability
–
–
–25,375
–
2
–15,144
–16,558
–72,231
–70,352
Result from participation in associated companies
7, 17
511,570
544,537
635,569
1,868,520
Income from other securities and receivables
classed as non-current assets
8
–1,229
8,258
–14,729
–1,229
Other interest income and similar items
9
160,236
724,072
185,583
156,670
Interest expense and similar items
10
Operating loss
INCOME FROM FINANCIAL INVESTMENTS
–94,307
–893,633 –1 633,534
–90,653
Total income from financial investments
576,270
383,234
–827,111
1,933,308
Profit/loss after financial items
561,126
366,676
–899,342
1,862,956
Profit/loss before tax
561,126
366,676
–899,342
1,862,956
–63,831
–14,020
–76,838
9,699
–
–
487
–
497,295
352,656
–975,693
1,872,655
Tax on profit for the year
Minority share
Net profit/loss for the year
11
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
120
Financial Statements
Cash flow statements
PA R E N T
C O M PA N Y
GROUP
SEK 000s
NOTE
2004
2003
2002
2004
O P E R AT I N G A C T I V I T I E S
Profit/loss after financial items
561,126
366,676
–899,342
1,862,956
Depreciation charged against earnings
13,871
13,413
11,454
62
Profit/loss from other non-current assets
–10,012
–
–
–
11,408
–4,796
1,367,823
11,408
Adjustment for items not affecting cash flow
–
3,137
–
–
Profit/loss from other non-current assets
–
–
–
–10,012
576,393
378,430
479,935
1,864,414
–
Changes in write-downs
Cash flow from operating activities
Share in profit from associated
companies not paid as dividend
Dividend in addition to income from associated companies
Income tax paid
Cash flow from operating activities
before working capital changes
–
–335,243
–360,009
1,356,950
–
–
–
–15,117
–4,221
–133,738
–8,072
1,918,226
38,966
–13,812
1,856,342
Working capital changes
Inventories, etc.
Receivables
Liabilities
Cash flow from operating activities
–721
7,633
8,811
–
15,175
19,328
102,219
27,813
–30,596
–28,300
–11,986
88,721
1,902,084
37,627
85,232
1,972,876
–2,419,162
–20,720
–30,060
–2,394,561
20,615
7,788
77,322
15,004
–2,398,547
–12,932
47,262
–2,379,557
INVESTMENT ACTIVITIES
Investment in non-current assets*
Divestment of non-current assets
Cash flow from investment activities
FINANCING ACTIVITIES
Change in minority share of capital
Change in long-term receivables
Change in long-term liabilities and provisions
Change in current investments
–
–
487
–
–37,120
167
8,567
–37,658
43,033
–27,913
–211,757
38,179
689,782
199,453
136,662
688,556
Adjustment of deferred tax
–
–
–2,462
–
Translation difference
–
–
357
–
Shareholder contribution received
Dividend paid
Cash flow from financing activities
Cash flow for the year
–
–
366,320
–
–140,580
–166,320
–332,640
–140,580
555,115
5,387
–34,466
548,497
141,816
58,652
30,082
98,028
Cash and cash equivalents at Jan. 1
229,875
199,793
101,765
27,008
Cash and cash equivalents at Dec. 31
288,527
229,875
199,793
168,824
* of which investment in ICA AB 2,376,608
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
Financial Statements
121
Balance sheets
ASSETS
PA R E N T
C O M PA N Y
GROUP
SEK 000s
NOTE
2004
2003
2002
2004
12
57,555
61,666
65,883
–
Buildings and land
13
40,574
41,462
41,872
–
Equipment
14
25,047
16,764
20,610
31
Construction in progress
15
NON-CURRENT ASSETS
Intangible non-current assets
Goodwill
Tangible non-current assets
Total tangible non-current assets
9,576
4,835
1,019
–
75,197
63,061
63,501
31
Financial non-current assets
Participations in Group companies
16
–
–
–
200,000
Participations in associated companies
17
4,592,719
3,657,460
3,619,650
2,959,608
Other securities held as non-current assets
18
57,260
58,238
42,572
48,863
9,371
–
–
9,371
38,430
1,310
1,477
38,358
Deferred tax asset
Other long-term receivables
19
Total financial non-current assets
4,697,780
3,717,008
3,663,699
3,256,200
Total non-current assets
4,830,532
3,841,735
3,793,083
3,256,231
22,463
21,742
29,375
–
45,921
51,773
53,220
–
3,827
7,420
141
3,827
CURRENT ASSETS
Inventories, etc.
Current receivables
Accounts receivable – trade
Receivables from Group companies
Receivables from associated companies
Other current receivables
Prepaid expenses and accrued income
20
Total current receivables
1,142
–
–
1,142
12,453
17,194
32,902
2,117
22,480
24,611
34,049
727
85,823
100,998
120,312
7,813
1,974,014
Current investments
Securities under separate management
21
1,986,376
2,644,938
2,163,851
Other shares
23
425,240
456,460
1,137,000
425,240
2,411,616
3,101,398
3,300,851
2,399,254
Total current investments
Cash and bank balances
288,527
229,875
199,793
168,824
Total current assets
2,808,429
3,454,013
3,650,331
2,575,891
Total assets
7,638,961
7,295,748
7,443,414
5,832,122
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
122
Financial Statements
EQUITY AND LIABILITIES
PA R E N T
C O M PA N Y
GROUP
SEK 000s
NOTE
EQUITY
24
2004
2003
2002
2004
402,294
402,294
402,294
402,294
–
–
–
2,689,402
83,202
Restricted equity
Share capital
Share premium reserve
Statutory reserve
–
–
–
Restricted reserves
4,400,645
5,841,660
5,794,816
–
Total restricted equity
4,802,939
6,243,954
6,197,110
3,174,898
1,977,143
351,078
1,828,873
663,619
497,295
352,656
–975,693
1,872,655
Non-restricted equity
Profit/loss brought forward
Profit/loss for the year
Total non-restricted equity
2,474,438
703,734
853,180
2,536,274
Total equity
7,277,377
6,947,688
7,050,290
5,711,172
167,717
124,684
113,686
52,277
3,686
2,599
2,462
–
171,403
127,283
116,148
52,277
Liabilities to credit institutions
–
–
27,913
–
Liabilities to Group companies
–
–
–
–
Total long-term liabilities
–
–
27,913
–
Advance payments from customers
88,821
88,057
109,475
–
Liabilities to associated companies
224
–
–
–
35,085
41,909
34,989
2,482
–
–
–
52,350
Provisions
Provisions for pensions and similar commitments
25
Provision for deferred tax liability
Total provisions
Long-term liabilities
Current liabilities
Accounts payable – trade
Liabilities to Group companies
Liabilities to associated companies
Tax liability
Other current liabilities
Accrued expenses and deferred income
26
Total current liabilities
Total equity and liabilities
–
–
–
223
7,052
–
–
6,408
13,238
38,906
68,872
1,355
45,761
51,905
35,727
5,855
190,181
220,777
249,063
68,673
7,638,961
7,295,748
7,443,414
5,832,122
Pledged assets
27
37,708
None
30,000
37,708
Contingent liabilities
28
2,923
2,451
2,280
115,504
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
Financial Statements
123
Notes and accounting principles
INTRODUCTION
The annual accounts were prepared in accordance with the Annual Accounts Act and the general recommendations issued by the
Swedish Accounting Standards Board, unless otherwise indicated. The principles were unchanged from previous years. Amounts are
in SEK 000s, unless otherwise indicated.
NOTE 1
Accounting and valuation principles
GROUP COMPOSITION
The principal owner of the Parent Company, ICA Förbundet Invest AB, is ICA-handlarnas Förbund, Corporate Registration No.
802001-5577, Stockholm, which owns 75%.
As of December 31, 2004, ICA Förbundet Invest AB has a wholly owned subsidiary, Forma Publishing Group AB (the former
ICA Förlaget AB). Forma Publishing Group AB, in turn, has 14 subsidiaries and two associated companies. The consolidated
accounts include companies in which the shareholding directly or indirectly amounts to more than 50% of the voting rights or in which
there is otherwise a controlling influence.
ICA Förbundet Invest’s 40% holding in ICA AB is reported as an associated company, in accordance with the equity method.
C O N S O L I D AT E D A C C O U N T S
The consolidated accounts include subsidiaries in which at the close of the fiscal year the Parent Company directly or indirectly held
over 50% of the voting rights or otherwise had a controlling interest. Acquired companies are consolidated from the date of their
acquisition and divested companies are consolidated up to and including the date of their divestment.
The consolidated accounts were prepared in accordance with the acquisition method. This method implies that the assets and liabilities that the acquired company owns at the time of acquisition are valued at market value – that is, the consolidated acquisition values. Any differences between the purchase price of the shares and the consolidated acquisition value are reported as consolidated
goodwill.
Only the portion of the subsidiary’s non-restricted equity that can be distributed to the Parent Company without requiring a writedown are included in the consolidated non-restricted equity.
Untaxed reserves are not reported as such on the consolidated balance sheet, but rather subdivided into deferred tax liability and
restricted equity. Consequently, the consolidated accounts do not include appropriations that imply a change in untaxed reserves. The
tax portion of this change is reported as a part of the year’s net tax expense, whereas the equity portion is included in the net
profit/loss for the year.
FOREIGN SUBSIDIARIES
The foreign subsidiaries are classified as independent or integrated. This classification determines the translation method to be
applied. All subsidiaries are classified as independent. The income statements and balance sheets of independent subsidiaries are
translated in accordance with the current method. This implies that assets and liabilities are translated at the closing rate. Equity items
are translated at the rates that applied at the time of acquisition. Income statement items are translated at the average rate during the
year. The translation difference is reported under consolidated equity.
R E P O R T I N G O F A S S O C I AT E D C O M PA N I E S
Shares in associated companies are reported in accordance with the equity method for the companies in which ICA Förbundet Invest
AB has significant influence, meaning a shareholding considered as long-term and consisting of not less than 20% and not more than
50% of the voting rights. The equity method implies that the consolidated book value of the shares in the associated company corresponds to the Group’s share of the associated company’s equity, consolidated surplus or deficit values, and the owned share of unrealized internal gains. The Group’s share of the associated company’s profit after financial income and expenses and adjusted for depreciation/reversal of acquired surplus or deficit values is reported under Income from shares in associated companies in the consolidated income statement. The Group’s share in the associated company’s reported tax expenses in included in consolidated tax
expenses.
GENERAL ACCOUNTING PRINCIPLES
The Group’s inventories, etc., are valued at the lower of acquisition value reduced by obsolescence and fair value. Receivables are
reported in the amounts in which they are expected to be received after individual assessment. Financial assets are reported at their
acquisition value, unless otherwise indicated. Liabilities are reported at their acquisition value, with the customary provisions for
accrued expenses. Provisions are made for known or anticipated risks after individual assessment.
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
124
Financial Statements
D E P R E C I AT I O N / A M O R T I Z AT I O N A C C O R D I N G T O P L A N
Depreciation/amortization according to plan is based on the assets’ acquisition value. The depreciation period is based on the estimated useful life.
Goodwill
5–20 years
Buildings
20–33 years
Computer equipment
3 years
Other equipment
5–10 years
Goodwill relating to Forma Publishing Group AB, as well as the additional investment in ICA AB, are amortized over 20 years, since
the acquisitions in question are well-established operations of strategic value.
NOTE 2
Net sales and operating profit/loss distributed by operating areas and geographic markets
The subsidiary Forma Publishing Group has one area of operation, which is media production.
ICA Förbundet Invest’s net sales and operating profit/loss are distributed among geographic markets as follows:
NET SALES
Sweden
Denmark
Finland
O P E R AT I N G P R O F I T / L O S S
2004
2003
2002
2004
2003
2002
461,967
473,644
511,665
–23,920
–17,809
–76,558
3,463
4,128
4,306
105
62
40
145,837
140,348
127,035
7,101
999
3,262
Norway
4,726
6,443
8,166
1,417
97
872
Other countries
5,952
6,221
7,684
153
93
153
621,945
630,784
658,856
–15,144
–16,558
–72,231
Total
NOTE 3
Sales to affiliated companies
Of net sales, SEK 5,800 (5,924) pertains to revenues from the other Group companies. Of other operating revenue in 2002,
SEK 7,120 pertains to revenues from the other Group companies.
NOTE 4
Average number of employees, salaries, other compensation and social fees
The number of employees is calculated based on the Group’s measure of normal working time, which is 1,800 hours.
GROUP
PARENT COMPANY
2004
2003
2002
2004
Women
134
144
156
3
Men
117
127
141
12
Total
251
271
297
15
Women
52
49
49
–
Men
15
16
16
–
Total
67
65
65
–
Women
–
–
1
–
Men
–
–
–
–
Total
–
–
1
–
Total number of women
186
193
206
3
Total number of men
132
143
157
12
Total number of employees
318
336
363
15
GROUP
Sweden
Finland
Norway
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
Financial Statements
125
GROUP
2004
PARENT COMPANY
2003
2002
2004
WA G E S , S A L A R I E S A N D O T H E R R E M U N E R AT I O N
Board of Directors, President and Vice President
Sweden
10,334
9,089
7,404
8,274
2,083
1,203
1,452
–
–
–
347
–
12,417
10,292
9,203
8,274
Sweden
98,328
105,007
107,503
8,790
Finland
20,436
18,549
16,607
–
131,181
133,848
133,313
17,064
Finland
Norway
Total
Other employees
Total wages, salaries and other compensation, Group
Statutory and negotiated social fees
52,605
48,305
39,119
16,252
Pension expenses
40,428
25,096
40,781
24,618
Total social fees and pension expenses
93,033
73,401
79,900
40,870
BENEFITS FOR SENIOR EXECUTIVES
During the year, a fee of SEK 250 was paid to the Chairman of the Board of Directors. In 2003, this fee amounted to SEK 253 and in
2002, to SEK 201. Of the pension amount, SEK 22,770 was paid to the Group’s Board of Directors, the President and the Vice
President of the Parent Company, and SEK 22,936 to the Group. The corresponding amounts were 3 485 and 3 692 in 2003 and
6 348 and 7 015 in 2002. Salary to the Company´s President amounted to 1 246 during the year. A yearly gross salary of SEK 4,4
M has been contracted with the President. The benefits package includes holiday pay, social fees, pension expenses and other overhead expenses in the form of a company car, etc. The retirement age is 65. The required period of notice is six months, during which
time the employee is entitled to 1/12 of his or her gross salary package per month.
No bonuses were paid.
PA R E N T C O M PA N Y, 2 0 0 4
NUMBER ON
C L O S I N G D AY
OF WHOM MEN,
%
BOARD MEMBERS AND SENIOR EXECUTIVES
Board members
President and other senior executives
19
89
2
100
%
2004
ABSENCE DUE TO ILLNESS
Long-term absence due to illness
0
Absence due to illness, men
1.54
Absence due to illness, women
1.15
Employees under 29
0
Employees aged 30–49
0
Employees over 50
1.84
Total absence due to illness
1.47
NOTE 5
Fees to auditors
GROUP
SET audit assignments
Other, audit assignments
Total
PARENT COMPANY
2004
2003
2002
2004
1,024
1,298
921
680
155
131
122
–
1,179
1,429
1,043
680
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
126
Financial Statements
NOTE 6
Depreciation
GROUP
Cost of goods sold
Selling expenses
Administrative expenses
Total
PARENT COMPANY
2004
2003
2002
8,103
7,784
5,593
2004
–
202
131
112
–
5,566
5,498
5,749
62
13,871
13,413
11,454
62
NOTE 7
Result from participation in associated companies
PA R E N T C O M PA N Y 2 0 0 4
Dividends
1,868,520
1,868,520
NOTE 8
Income from other securities and receivables classed as non-current assets
GROUP
Dividends
Capital gains from sales
Change in write-down
Total
PARENT COMPANY
2004
2003
2002
166
437
246
2004
166
10,013
3,025
–
10,013
–11,408
4,796
–14,975
–11,408
–1,229
8,258
–14,729
–1,229
NOTE 9
Other interest income and similar items
GROUP
Dividends
PARENT COMPANY
2004
2003
2002
2004
22,322
30,744
76,162
22,322
Interest income
36,826
42,086
70,639
33,803
Capital gains from sales
51,822
25,669
38,782
51,822
49,266
625,573
–
48,723
160,236
724,072
185,583
156,670
Change in write-down of current investments
Total
NOTE 10
Interest expense and similar items
GROUP
Interest expense
Interest expense to Group companies
PARENT COMPANY
2004
2003
2002
2004
–6,853
–8,910
–13,863
–849
–
–
–11,966
–2,350
–2,516
–
–
–2,516
Change in write-down of current investments
–
–
–345,565
–
Write-down of other shares
–
– –1,007,283
Exchange-rate differences
–
Capital gains from sale of securities
–84,938
–884,723
–254,857
–84,938
Total
–94,307
–893,633 –1,633,534
–90,653
NOTE 11
Tax on profit for the year
GROUP
PARENT COMPANY
2004
2003
2002
2004
Current tax for the year
–15,117
–4,221
829
–8,072
Share of tax in associated companies
–56,998
–9,662
128,832
–
8,284
–137
–52,823
9,371
Deferred tax
Tax effect of Group contributions
Total
–
–
–
8,400
–63,831
–14,020
76,838
9,699
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
Financial Statements
127
NOTE 12
Goodwill
2004
2003
2002
91,149
91,149
140,457
GROUP
Acquisition value on opening date
Changes during the year
– Sales and scrappings
Accumulated acquisition value on closing date
Depreciation on opening date
–
–
–49,308
91,149
91,149
91,149
–29,483
–25,266
–68,170
47,180
Changes during the year
– Sales and scrappings
– Depreciation
Accumulated depreciation on closing date
Residual value according to plan on closing date
–
–
–4,111
–4,217
–4,276
–33,594
–29,483
–25,266
57,555
61,666
65,883
2004
2003
2002
43,929
43,770
43,152
NOTE 13
Buildings and land
GROUP
Acquisition value on opening date
Changes during the year
– Purchases
–
159
618
Accumulated acquisition value on closing date
43,929
43,929
43,770
Depreciation on opening date
–2,822
–1,898
–1,036
Changes during the year
– Sales and scrappings
– Depreciation
–
–
–60
–861
–901
–802
– Translation differences
Accumulated depreciation value on closing date
–27
–23
–
–3,710
–2,822
–1,898
355
–
–
–
Write-ups on opening date
Changes during the year
– Write-ups
–
355
355
355
–
Residual value according to plan on closing date
40,574
41,462
41,872
Value for tax purposes of buildings in Sweden
12,400
29,440
30,590
6,051
9,681
10,059
18,451
39,121
40,649
Accumulated write-ups on closing date
Value for tax purposes of land in Sweden
NOTE 14
Equipment
GROUP
PARENT COMPANY
2004
2003
2002
2004
102,058
98,175
224,413
169
19,864
5,442
10,173
17
–
–
3,090
–
– Sales and scrappings
–42,677
–1,422
–139,501
–
– Translation differences
–
–137
–
–
79,245
102,058
98,175
186
EQUIPMENT
Acquisition value on opening date
Changes during the year
– Purchases
– New facilities
Accumulated acquisition value on closing date
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
128
Financial Statements
Depreciation on opening date
–85,294
–77,565
–136,016
–93
Changes during the year
– Sales and scrappings
40,016
432
64,827
–
– Depreciation
–8,899
–8,295
–6,376
–62
– Translation differences
Accumulated depreciation on closing date
Residual value according to plan on closing date
–21
134
–
–
–54,198
–85,294
–77,565
–155
25,047
16,764
20,610
31
NOTE 15
Construction in progress
2004
2003
2002
4,835
1,019
3,090
4,741
3,816
1,019
–
–
–3,090
9,576
4,835
1,019
GROUP
Acquisition value on opening date
Changes during the year
– Purchases
– Transferred to Machinery and equipment
Accrued expenses on closing date
NOTE 16
Participations in Group companies
C O R P. R E G . N O .
Forma Publishing Group AB
DOMICILE
556045-0297 Västerås
NUMBER
C A P I TA L
AND
VOTING
RIGHTS, %
30,000
BOOK
VA L U E
12/31/04
PA R
VA L U E
BOOK
VA L U E
12/31/03
BOOK
VA L U E
12/31/02
100 30,000 200,000 200,000 200,000
Subsidiaries to Forma
Publishing Group AB
Idé-förlaget i Västerås AB
556306-7783 Västerås
100
HB Tapplina
969632-5050 Stockholm
100
Tidskriften Hus o Hem AB
556609-2010 Västerås
100
Idé & Mediaproduktion i Västerås AB 556279-4940 Västerås
100
ICA Kuriren AB
100
556609-2234 Västerås
ICA Förlaget Annonsservice AB
556351-2531 Västerås
100
ICA Facktidningar AB
556372-6529 Västerås
100
ICA Bokförlag AB
556071-2241 Västerås
100
Hemma Bäst AB
556609-2028 Västerås
100
Bokklubben Hemma AB
556586-2363 Västerås
100
Kustannus OY Forma
0503546-4
100
Helsinki
Forma Publishing International OY
1510258-7
Helsinki
70
ICA Media A/S
10 555 124
Tallinn
70
ICA Media S/A
348 490
Riga
70
2004
2003
2002
Acquisition value on opening date
200,000
200,000
200,000
Accumulated acquisition value on closing date
200,000
200,000
200,000
NOTE 17
Participations in associated companies
GROUP
Acquisition value on opening date
PARENT COMPANY
2004
2003
2002
2004
3,657,460
3,619,650
3,119,678
583,000
2,376,608
–
–
2,376,608
–495
–
–153
–
–1,413,948
325,581
360,009
–
–26,906
–287,771
140,423
–
Changes during the year
– Purchases
– Sales
– Net income from associated companies not paid as dividend
– Exchange-rate differences
– Reclassifications
Accumulated acquisition value on closing date
–
–
–307
–
4,592,719
3,657,460
3,619,650
2,959,608
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
Financial Statements
129
NUMBER
PA R
VA L U E
2,000,000
200,000
SHARE
%
BOOK
VA L U E
12/31/04
BOOK
VA L U E
12/31/03
BOOK
VA L U E
12/31/02
PROFIT
SHARE
40.0
4,587,649
3,652,056
3,605,212
511,409
750
750
GROUP
ICA AB
(30.0)
Bra Förlag AB
250
25.0
750
Radio 106,1 KB
1,267
Kruunuhaan Mediatehtas OY
5,375
Västerås Reklamradio AB
33
Elektronikkforlaget AS
40
20.0
Trade Press AS
40
40.0
334
495
4,320
4,320
5,040
4,592,719
3,657,460
3,619,650
583,000
583,000
Svenska Internetbokhandeln AB
161
1,478
Total
511,570
PA R E N T C O M PA N Y
ICA AB
2,000,000
200,000
40.0
1,500,000
150,000
30.0
2,959,608
Ownership share above refers to voting rights and is in all cases also the same as the equity share.
C O R P. R E G . N O .
REG. OFFICE
ICA AB
556582-1559
Stockholm
Bra Förlag AB
556424-7921
Stockholm
Elektronikkforlaget AS
975 341 550
Norway, Oslo
Trade Press AS
966 705 086
Norway, Oslo
NOTE 18
Other long-term security holdings
GROUP
PARENT COMPANY
2004
2003
2002
2004
94,324
83,376
65,204
72,867
– Investment
17,950
10,948
18,172
17,937
– Divestments
–4,992
–
–
–4,992
Accumulated acquisition value on closing date
107,282
94,324
83,376
85,812
Write-downs on opening date
–36,086
–40,804
–25,907
–25,541
–13,936
4,796
–14,975
–11,408
–
–78
78
–
–50,022
–36,086
–40,804
–36,949
57,260
58,238
42,572
48,863
Acquisition value on opening date
Change during the year
Change during the year
– Write-down
– Reclassifications
Accumulated write-downs on closing date
Book value on closing date
The Parent Company’s holdings consist mainly of investments within the framework of Skandia Investment. The book value for Skandia
Investment is SEK 47,333 (45,796), while the estimated market value is SEK 70,226 (53,652). In 2002, the book value was
30.052, which corresponded to the market value.
NOTE 19
Other long-term receivables
GROUP
PARENT COMPANY
2004
2003
2002
2004
1,310
1,477
10,044
700
37,708
574
532
37,708
–529
–532
–
–
–9
–9
–9,099
–
–50
–200
–
–50
Accumulated acquisition value on closing date
38,430
1,310
1,477
38,358
Reported value on closing date
38,430
1,310
1,477
38,358
Acquisition value on opening date
Changes during the year
– Investment
– Sales
– Transferred to current receivables
– Amortization
Of which pledged endowment assurance policies amounting to SEK 37,708.
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
130
Financial Statements
NOTE 20
Prepaid expenses and accrued income
GROUP
Production and distribution expenses
Other prepaid expenses
Other accrued income
PARENT COMPANY
2004
2003
2002
13,737
14,139
22,068
2004
–
727
1,100
823
727
8,016
9,372
11,158
–
22,480
24,611
34,049
727
NOTE 21
Securities under separate management
GROUP
Shares
Hedge funds
Interest-bearing securities
PARENT COMPANY
2004
2003
2002
2004
514,366
1,370,296
1,101,334
502,004
395,181
–
–
395,181
1,076,829
1,274,642
1,062,517
1,076,829
Book value
1,986,376
2,644,938
2,163,851
1,974,014
Market value
2,020,555
2,644,938
2,163,851
2 ,007,983
NOTE 22
Change in Parent Company equity
Amounts at Jan. 1
SHARE
C A P I TA L
PREMIUM
RESERVE
S TAT U T O R Y
RESERVE
A C C U M U L AT E D
PROFIT/LOSS
YEAR’S NET
PROFIT/LOSS
T O TA L
EQUITY
402,294
2,689,402
83,202
791,773
–9,174
3,957,497
–9,174
9,174
Allocation of earnings of the preceding year
Dividend
–140,580
–140,580
Group contribution
30,000
30,000
Tax effect of Group contribution
–8,400
Net profit/loss for the year
Amounts at Dec. 31
402,294
2,689,402
83,202
663,619
–8,400
1,872,655
1,872,655
1,872,655
5,711,172
The share capital consists of 121,317,500 common shares with a par value of SEK 2.50 and 39,599,936 preference shares with
a par value of SEK 2.50. All classes of shares carry the same number of voting rights.
NOTE 23
Other shares
Other shares consisted in 2004 of 8,341,376 shares in Royal Ahold at the price of EUR 5.66, SEK/EUR 9.01. In 2003, the holding
was 8,341,376 shares at the price of EUR 6.04, SEK/EUR 9.06. In 2002, the holding was 10,004,826 shares at the price of EUR
11.93, SEK/EUR 9.53.
NOTE 24
Change in consolidated equity
2002
Amounts at Jan. 1
SHARE
C A P I TA L
RESTRICTED
RESERVES
SHARE OF
EQUITY
NONRESTRICTED
RESERVES
402,294
2,908,436
2,517,365
–135,832
364,293
140,554
226
Transfer between restricted and non-restricted equity
Exchange-rate difference
Deferred tax liability
Dividend
Shareholder contribution received
YEAR’S NET
PROFIT/LOSS
T O TA L
EQUITY
1,751,577
274,313
7,853,985
45,852
–274,313
–2,462
– 2,462
–332,640
–332,640
366,320
Net profit/loss for the year
Amounts at Dec. 31
1)
366,320
–975,693
402,294
2,772,604
3,022,212
0
140,780
1,828,873
–975,693
–975,693 7,050,2901)
Due to rounding off a difference in equity has arisen between Jan. 1 and Dec. 31.
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
Financial Statements
131
SHARE
C A P I TA L
RESTRICTED
RESERVES
SHARE OF
EQUITY
NONRESTRICTED
RESERVES
402,294
2,772,604
3,022,210
1,828,873
2003
Amounts at Jan. 1
Appropriation of profits
–975,693
Dividend
–166,320
Transfer between restricted and non-restricted equity
–355
Exchange-rate difference
Write-up of property
333,771
–333,416
–286,925
–2,366
1)
402,294
2,772,604
T O TA L
EQUITY
–975,693 7,050,2881)
975,693
–166,320
–289,291
355
355
Net profit/loss for the year
Amounts at Dec. 31
YEAR’S NET
PROFIT/LOSS
352,656
352,656
3,069,056
351,078
352,656
6,947,688
YEAR’S NET
PROFIT/LOSS
T O TA L
EQUITY
6,947,688
Due to rounding off a difference in equity has arisen between Jan. 1 and Dec. 31.
SHARE
C A P I TA L
RESTRICTED
RESERVES
SHARE OF
EQUITY
NONRESTRICTED
RESERVES
402,294
2,772,604
3,069,056
351,078
352,656
352,656
–352,656
2004
Amounts at Jan. 1
Appropriation of profits
Dividend
–140,580
Transfer between restricted
and non-restricted equity
Exchange-rate difference
–1,414,109
1,414,109
–26,906
–120
Net profit/loss for the year
Amounts at Dec. 31
402,294
2,772,604
1,628,041
1,977,143
–140,580
–27,026
497,295
497,295
497,295
7,277,377
NOTE 25
Provision for pensions and similar commitments
GROUP
Provision, PRI pensions
Provision, other pensions
Total
PARENT COMPANY
2004
2003
2002
2004
116,534
113,477
103,694
3,192
51,183
11,207
9,992
49,085
167,717
124,684
113,686
52,277
NOTE 26
Accrued expenses and prepaid income
GROUP
Accrued vacation pay
Accrued social fees
PARENT COMPANY
2004
2003
2002
2004
14,407
13,237
13,846
1,610
4,979
4,492
6,753
526
Other accrued expenses
26,375
34,176
15,128
3,719
Total
45,761
51,905
35,727
5,855
NOTE 27
Pledged assets
GROUP
PARENT COMPANY
2004
2003
2002
2004
37,708
–
–
37,708
–
–
30,000
–
37,708
–
30,000
37,708
2004
2003
2002
2004
–
–
–
115,440
Guarantees and contingent liabilities
2,923
2,451
2,280
64
Total
2,923
2,451
2,280
115,504
Pledged endowment insurance as security for pension commitments
Real-estate credits
NOTE 28
Contingent liabilities
GROUP
Guarantees for subsidiaries
PARENT COMPANY
The financial statements for 2002–2004 were prepared in accordance with the accounting principles that applied previously. As of 2005, Hakon Invest reports in accordance with IFRS. The consolidated accounts for 2004 were recalculated in accordance with IFRS on pages 133–155.
132
Financial Statements
Consolidated financial statements in
accordance with IFRS for the 2004 fiscal year
Consolidated income statement prepared in
accordance with IFRS
SEK 000s
NOTE
Revenue
2, 3
621,945
2004
Cost of sales
4, 6
–300,850
Gross profit
321,095
Other income
4, 6
–153,822
Administrative expenses
4, 5, 6
–153,400
Share in profits of companies reported
in accordance with the equity method
16
466,167
Operating profit
2
485,319
Finance revenue
7
59,148
Finance cost
8
–9,203
Change in value in valuation at fair value
9
58,626
Profit after financial items
593,890
Profit before tax
593,890
Income tax expense
10
–15,285
Profit for the year
578,605
Profit for the year attributable to equity holders
in the Parent Company
578,605
EARNINGS PER SHARE (SEK)
Basic
Diluted
134
5,279
Selling expenses
11
PREFERENCE SHARES
COMMON SHARES
7.31
2.38
–
–
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
Consolidated balance sheet prepared
in accordance with IFRS
SEK 000s
NOTE
31 DEC, 2004
ASSETS
NON-CURRENT ASSETS
Intangible assets other than goodwill
12
9,576
Goodwill
13
61,666
Land and buildings
14
40,574
Equipment
15
25,047
Participation in companies reported in
accordance with the equity method
16
4,501,033
Other securities held as non-current assets
17
80,154
Deferred tax asset
10
9,371
Other long-term receivables
722
Total non-current assets
4,728,143
CURRENT ASSETS
Inventories, etc.
18
Accounts receivable – trade
22,463
45,921
Receivables from Group companies
3,827
Receivables from companies reported in
accordance with the equity method
1,142
Other current receivables
12,453
Prepaid expenses and accrued income
19
22,480
Investments
20
2,224,023
Cash equivalents
21
504,952
Total current assets
2,837,261
Total assets
7,565,404
EQUITY AND LIABILITIES
EQUITY
24
Share capital
402,294
Other reserves
2,772,604
Profit brought forward
3,490,139
Profit for the year
578,605
Total equity
7,243,642
Long-term liabilities and provisions
Provision for pensions and similar commitments
22
Deferred tax liability
10
Total long-term liabilities and provisions
127,073
4,508
131,581
Current liabilities
Advance payments from customers
88,821
Liabilities to companies reported in accordance with the equity method
224
Accounts payable
35,085
Income tax liability
7,052
Other current liabilities
Accrued expenses and prepaid income
Total current liabilities
Total equity and liabilities
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
13,238
23
45,761
190,181
7,565,404
135
Consolidated statement in changes in
equity prepared in accordance with IFRS
SEK 000s
Opening equity, Jan. 1, 2004
Share
capital
Other
reserves
Accumulated
profit/loss
Year’s net
profit/loss
Total
equity
402,294
2,772,604
3,320,925
352,656
6,848,479
Items booked directly under equity from
companies reported in accordance with
the equity method
–42,7421)
Appropriation of profits
352,656
Dividend
–140,580
Currency translation difference
–140,580
–120
Net profit for the year
Closing equity, Dec. 31, 2004
–42,742
–352,656
402,294
2,772,604
3,490,139
–120
578,605
578,605
578,605
7,243,642
For itemization of equity, see Note 24. For reconciliation of Opening equity in accordance with IFRS, refer to Note 29.
1)
136
The amount consists primarily of the change in value of cash flow hedges (interest swaps) and exchange-rate differences from the translation to Swedish
kronor of operations with functional currencies other than Swedish kronor.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
Consolidated cash flow statement
prepared in accordance with IFRS
SEK 000s
NOTE
2004
O P E R AT I N G A C T I V I T I E S
Profit after financial items
Adjustment for items not affecting cash flow
593,890
25
–545,201
48,689
Dividends from companies reported
in accordance with the equity method
16
Income tax paid
218,520
–8,065
Cash flow from operating activities
before working capital changes
259,144
Working capital changes
Inventories, etc.
–721
Current receivables
22,853
Current liabilities
–37,648
Cash flow from operating activities
243,628
Investing activities
Investments in non-current assets *
Dividends from companies reported in accordance with the equity method
–2,419,162
16
Sale of non-current assets
1,650,000
18,759
Change in current investments
706,007
Cash flow from investment activities
–44,396
Financing activities
Dividend paid
24
Cash flow from financing activities
–140,580
Cash flow for the year
58,652
Cash and cash equivalents at the beginning of the year
229,875
Reclassification of cash equivalents **
Cash and cash equivalents at the end of the year
–140,580
216,425
26
504,952
* of which investment in ICA AB represented SEK 2,376,608.
** previously included in current investments.
I N F O R M AT I O N O N I N T E R E S T PA I D
During the period, interest paid amounted to SEK 6,852,000. Interest received during the period amounts to SEK 30,309,000.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
137
Notes and comments
C O M PA N Y R E G I S T E R E D O F F I C E , E T C .
Hakon Invest AB conducts operations as a limited liability company and its registered office is in the City of Stockholm. It is a public
company.
The address of the Company’s Head Office is Hakon Invest AB, Box 1508, SE-171 29 Solna, Sweden.
The Company’s website is www.hakoninvest.se and its telephone number is +46-8-55 33 99 00.
The Corporate Registration Number is 556048-2837.
The Company’s operations are described in Note 2.
NOTE 1 ACCOUNTING PRINCIPLES
These consolidated accounts have been prepared as an Appendix to the prospectus accompanying the Company’s public listing in
the autumn of 2005. Hakon Invest’s Annual Report for 2004 dated March 1, 2005, on which this consolidated report is based, was
prepared in accordance with the rules of the Annual Accounts Act and the general standards of the Swedish Accounting Standards
Board.
Determinations were made on the date of the publication of the original Annual Report for 2004, and subsequent events are not
reflected in these consolidated financial statements.
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) and the statements issued by the International Financial Reporting Interpretation Committee (IFRIC) and adopted by the EU Commission, with the exception, however, of items for comparison with preceding years, which are consequently not included. The
accounts in accordance with IFRS have been prepared in accordance with IFRS principles which are in force on December 31,
2005. IFRS is subject to ongoing review and interpretation, as well as to the approval of the EU, which is why changes that affect the
preparation of accounts can occur.
While the accounting principles described apply to the Hakon Invest Group, a fair number of the principles are only applicable
within ICA AB.
All amounts are in SEK 000s, unless otherwise indicated.
VA L U AT I O N O F A S S E T S A N D L I A B I L I T I E S A S P E R J A N U A RY 1 , 2 0 0 4
Under IFRS 1, First-time application of international accounting standards, an enterprise preparing its financial statements for the first
time must establish a so-called opening balance. The valuation of assets and provisions and liabilities in the opening balance on January 1, 2004, has, with certain exceptions that are approved by IFRS, occurred with retroactive application of the valuation principles
set forth in IFRS 1. The exceptions concern business combinations, pension expenses and translation differences that arise from the
translation of foreign operations. This implies that acquisitions carried out prior to January 1, 2004, are not translated in accordance
with the new rules, that actuarial gains and losses pertaining to the period prior to January 1, 2004 are reported in their entirety in the
balance sheet, and that translation differences accumulated to and including January 1, 2004, are not documented.
B A S I S O F T H E F I N A N C I A L S TAT E M E N T S
The consolidated financial statements are based on historical acquisition values, except for derivative financial instruments and certain
financial assets, which are valued at their fair value. The reported values of assets and liabilities that have been hedged and that
belong to the categories reported at accrued acquisition value are adjusted for changes in the values of the risks hedged.
C O N S O L I D AT E D A C C O U N T S
The consolidated accounts include the Parent Company, Hakon Invest AB, and its subsidiaries. A subsidiary is included in the consolidated accounts from the date on which the Parent Company acquires a controlling interest in the enterprise and is no longer included
from the date on which the Parent Company’s controlling interest in the enterprises ends. Forma Publishing Group AB is a subsidiary of
Hakon Invest AB.
138
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
Forma Publishing Group AB includes the following subsidiaries:
C O R P. R E G . N O .
REG. OFFICE
EQUITY AND
VOTING RIGHTS, %
Idé-förlaget i Västerås AB
556306-7783
Västerås
100
HB Tapplina
969632-5050
Stockholm
100
Tidskriften Hus o Hem AB
556609-2010
Västerås
100
Idé& Mediaproduktion i Västerås AB
556279-4940
Västerås
100
ICA Kuriren AB
556609-2234
Västerås
100
ICA Förlaget Annonsservice AB
556351-2531
Västerås
100
ICA Facktidningar AB
556372-6529
Västerås
100
ICA Bokförlag AB
556071-2241
Västerås
100
Hemma Bäst AB
556609-2028
Västerås
100
Bokklubben Hemma AB
556586-2363
Västerås
100
Kustannus OY Forma
0503546-4
Helsinki
100
Forma Publishing International OY
1510258-7
Helsinki
70
ICA Media A/S
10.555.124
Tallinn
70
ICA Media S/A
348.490
Riga
70
All units included in the consolidated accounts are subject to the same set of uniform accounting principles. This also applies to enterprises reported in accordance with the equity method. All Group-internal transactions have been eliminated.
Investments in associates
Holdings in associated companies are reported in accordance with the equity method. An associated company is a unit in which the
Group holds a significant, but not controlling, interest. The application of the equity method implies that investments in associated companies are reported in the balance sheet at their acquisition value, with the addition of changes in the Group's share of the associated
company’s net assets and with the deduction of any write-down and dividend. The income statement reflects the Group’s share of the
associated company’s profit after tax. The Group’s investments in associated companies includes goodwill treated in accordance with
the accounting principles for goodwill stated below. Any impairment in reported shares in associated companies is considered in the
light of possible indications of decline in value.
Investments in joint ventures
A joint venture is a financial operation driven by two or more partners whose cooperation is contractually regulated and where the
contract implies that the parties share a controlling interest in the operation.
ICA AB is operated as a joint venture of Hakon Invest and Royal Ahold N.V. ICA AB has two joint ventures – Netto Marknad AB
and RIMI Baltic AB. Hakon Invest reports joint ventures in accordance with the equity method. Impairment tests are applied in the
same manner as described above, for associated companies.
Group companies
“Group companies” refers to the Parent Company and sister subsidiaries of Hakon Invest AB.
T R A N S L AT I O N O F F O R E I G N C U R R E N C I E S
Transactions in foreign currencies are reported in the accounts at their spot rate on the transactions date. Monetary assets and liabilities denominated in foreign currencies are reported in the balance sheet as per the closing date, translated at the exchange rate that
applies at that time. Such exchange-rate differences are reported over the income statement.
Income, expenses, assets and liabilities of operations having a functional currency other than Swedish kronor – that is, normally,
foreign subsidiaries – are reported and valued according to the functional currency. The consolidated balance sheet shows these
assets and liabilities translated into Swedish kronor according to the closing rates. Income and expenses are reported on the consolidated balance sheet translated at the average exchange rate. The exchange-rate differences that arise in the translation are reported
directly as equity. When such an operation is divested, the accumulated exchange-rate differences are reported in the income statement together with the gain or loss on the divestment.
Goodwill and adjustments to fair value that are attributable to the acquisition of operations with functional currencies other than
Swedish kronor are treated as assets/liabilities of the acquired operations.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
139
TA N G I B L E A S S E T S
Tangible assets are reported at their acquisition value less accumulated depreciation and any impairment that may apply.
The acquisition value of tangible assets is written off to its estimated residual value. Straight-line depreciation is applied over the
estimated useful life. Residual value and useful life are tested in conjunction with every period-end report and adjusted if the testing
results in a new assessment.
The reported value of tangible assets is impairment tested with a view to the possible need for an impairment when events or
changes in circumstances indicate that the reported value may not be recoverable. The review entails a comparison of the reported
value with the higher of the asset’s net sale value and its value in use. The asset’s value in use consists of the present value of the future
net cash flows generated by the asset. If a particular asset does not generate a cash flow that is independent of other assets, the cash
flow is calculated for a group of assets – a cash-generating unit. It is calculated in accordance with a discount factor before tax that
reflects the current market value of the time value of money and the risks associated with the particular asset. If the reported value
exceeds the higher of the asset’s net sale value and its value in use, the asset is written down to the highest of the net sale value and
value in use. The impairment loss is reported in the income statement.
COMPONENT ACCOUNTING
Properties are split into components. Each part of a property that has a cost that is significant in relation to the total cost of the property
is depreciated separately. Costs for parts of properties are significant if they exceed 10% of the total cost of the property. Without giving any consideration to significance, properties are divided into the following components:
Land
Land improvement
Building
Permanent equipment, service facilities, etc., in building
G O O D W I L L A N D O T H E R I N TA N G I B L E A S S E T S W I T H I N D E F I N I T E U S E F U L L I F E
Goodwill represents the portion of the acquisition cost that exceeds the fair value of the acquired share in the subsidiary’s net assets on
the date of acquisition. “Net assets” refers here to the difference between identifiable assets and liabilities in an acquired subsidiary,
associated company or joint venture. In accordance with IFRS 3, it is assumed that the useful life of the goodwill is indefinite. Intangible assets with indefinite useful life are not amortized. The reported value of intangible assets that are not amortized is tested annually
with a view to the possible need of an impairment. Any impairment loss is reported in the income statement.
The goodwill amount calculated on any corporate acquisition is attributed, in conjunction with the acquisition, to assets that generate a cash flow that is independent of other assets. If the reported value of the cash-generating unit’s assets exceeds the present
value of the future cash flow or the sale value less selling expenses, the reported value is impaired to the higher of the present value of
the cash flow and the sale value.
O T H E R I N TA N G I B L E A S S E T S
Intangible assets are reported in the balance sheet at their acquisition value. Regarding identifiable intangible assets acquired as a
part of a corporate acquisition, the acquisition value consists of the estimated fair value at the time of acquisition, if it can be reliably
estimated. The reported value of the intangible assets is impairment tested with a view to the possible need for reporting an impairment loss, when events or changes in circumstances indicate that the value may not be recoverable or in the case of indications of a
decline.
D E P R E C I AT I O N
Depreciation is based on the assets’ acquisition values. The depreciation period is based on an estimate of the assets’ useful life.
Buildings
Computer equipment
20–33 years
3 years
Equipment, other
5–10 years
Other intangible assets
5–10 years
DEVELOPMENT EXPENSES
Expenses pertaining to development are reported as a cost when they arise. However, development expenses attributable to a single
project are reported as IT Systems – that is, as assets in the balance sheet – when the amount is likely to be recovered in the future. The
asset is depreciated during the period in which it is used.
The reported value of the development costs reported as assets in the balance sheet is tested annually with a view to the possible
need for an impairment, as long as the asset has not yet been placed in use, and subsequently when events or changed in circumstances indicate that the reported value may not be recoverable.
140
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
CURRENT INVESTMENTS AND SECURITIES HELD AS NON-CURRENT ASSETS.
All investments are valued at acquisition value the first time they are reported in the balance sheet. The acquisition value corresponds
to the fair value of the consideration remitted, including expenses attributable to the acquisition.
After an investment has been reported in the accounts for the first time and classified as a financial asset, it is reported at its fair
value in the income statement or as an asset that can be sold, whereupon it is valued at its fair value. Changes in the value of assets
that can be sold are reported as a separate portion of equity until the investment has been sold, payment has been received, or the
asset has been divested in some other manner, or when the investment has been written down, when the accumulated change in value
previously reported under equity is transferred to the income statement.
For investments that are actively traded on organized finance markets, fair value is established when the market closes on the
closing day. For investments that have no market listing, fair value is established as the current market price for another instrument that
is essentially the same, or as a calculated value based on expected cash flows.
All normal acquisitions of financial assets are reported in the balance sheet on the date of the transaction – that is, the date on
which the Group commits to purchase the asset. All normal sales of financial assets are reported on the settlement day – that is, the
date on which the asset is delivered to the counterparty. “Normal acquisitions or sales” refers to acquisition or sales of financial assets
that require that the assets are delivered within the time limits customarily imposed by law or market convention.
INVENTORIES, ETC.
Inventories, etc., are valued at the lower of acquisition value and net sale value.
The net sale value corresponds to the estimated sale price under normal circumstances, less estimated manufacturing and selling
costs.
A C C O U N T S R E C E I VA B L E A N D O T H E R R E C E I VA B L E S
Receivables are reported in the amounts in which they are expected to be received. Accounts receivable, for which payment is normally due after 10–90 days, are initially reported in the invoiced amounts. An assessment of uncertain receivables is made when it is
no longer probable that the full amount will be received.
L I Q U I D F U N D S ( C A S H A N D C A S H E Q U I VA L E N T S )
Liquid funds include cash and bank balances, as well as current investments with an original maturity of not more than three months.
I N T E R E S T- B E A R I N G L O A N S A N D B O R R O W I N G
All loans are initially reported at their acquisition value, which corresponds to the fair value of the amount received, less expenses
related to the procurement of the loan.
The loan debt is subsequently reported at the accrued acquisition value, implying that the value is adjusted in that any discounts
or premiums in connection with the loan are taken up or redeemed and that costs in connection with the procurement of the loan are
distributed over the term of the loan. The distribution over time is calculated on the basis of the effective interest of the loan.
Any gain or loss arising when the loan is redeemed is reported in the income statement.
Interest expenses are reported in the income statement for the period to which they refer.
PROVISIONS
Provisions are reported in the balance sheet when the Group has a contractual or informal commitment on account of an event that has
occurred and when it is likely that an outflow of resources associated with financial advantages will be required to fulfill the commitment and
the commitment can be estimated in a reliable manner. If it is likely that reimbursement corresponding to a provision that has been made – for
example through an insurance policy – will be received, the reimbursement is reported as an asset in the balance sheet, but not until the reimbursement is almost certain. If the effect of the time value of the future payment is considered significant, the value of the provision is determined through a calculation of the present value of the expected future cash flow based on a discount factor (before tax) that reflects the current market valuation of the time value. The gradual increase in the allocated amount that results from the present value calculation is reported
as an interest expense in the income statement. Provisions are reviewed in conjunction with every period-end report.
P E N S I O N S A N D O T H E R C O M M I T M E N T S C O N C E R N I N G P O S T- R E T I R E M E N T B E N E F I T S
Pension commitments are classified as defined-contribution or defined-benefit plans. It is the responsibility of the entity to provide the
contractual benefits specified in the defined-benefit plans to current and former employees. The actuarial and investment-related risks
are borne by the entity, whereas under defined-contribution plans, the entity’s responsibility amounts to making payments to an insurance company.
The present value of defined-benefit commitments for current or former employees is calculated based on actuarial assumptions
and its carried out at least once a year. Actuarial assumptions consist of the entity’s best assessment of the various variables that determine the cost of providing the benefits. Since actuarial assumptions are used, the actual outcome will probably differ from the anticipated outcome. These differences comprise actuarial gains and losses. They may be caused, for example, by high or low personnel
turnover, salary changes and changes in the discount rate. Hakon reports current actuarial gains and losses directly as they arise.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
141
LEASE
Leases in which essentially all risks and advantages associated with ownership fall to the lessor are classified as operational leasing
contracts. Leasing fees relating to operational leases are reported in the income statement as a cost, distributed straight-line over the
term of the contract.
Key financial leasing contracts are reported in the balance sheet as non-current assets or liabilities, and the cost is reported in the
income statement as operating expense or interest.
ICA AB annually constructs a number of store properties in attractive retail locations. At the same time, older store properties are
being sold and leased back by ICA AB to be sublet to the ICA retailers on identical terms. This sale and re- and subletting is treated as
sale-lease back arrangements – that is, the proceeds from sale are distributed over the lease period, while the lease is considered as a
financial lease.
REVENUE
Income is reported to the extent to which the financial advantages are likely to accrue to the Group and income can be estimated in a
reliable manner.
Sale of goods
Income is reported when the significant risks and advantages associated with ownership of the goods have been transferred to the
purchaser and when the income amount can be estimated in a reliable manner.
Sale of services, etc.
This income consists, for example, of royalty, franchise fees, income for various forms of consulting services to ICA retailers, and
bonuses from suppliers. The income is distributed over time in the income statement as it is earned.
Interest
Interest income is reported as it is earned. Interest income is calculated on the basis of the return on the underlying asset, according to
the effective interest rate. Borrowing costs and loan interest are reported in the income statement for the period to which they refer.
Dividends
Dividend income is reported in the income statement when the right to receive the payment is established.
Rental income
Rental income from the properties is reported straight-line over the term of the lease or based on the tenant’s sales.
I N C O M E TA X
Deferred tax is reported in accordance with the balance-sheet method This implies that deferred taxes are calculated as per the closing date – that is, the difference between the tax values of the assets or the liabilities on the one hand and the values reported in the
consolidated balance sheet on the other.
Deferred tax liabilities are reported in the balance sheet for all taxable temporary differences, except
• when the temporary difference refers to goodwill or to an asset or liability in a transaction that is not a corporate acquisition and
that at the time of the transaction affected neither the reported nor the taxable profit or loss for the period, and
• when the temporary difference is attributable to investments in subsidiaries, associated companies and interests in joint ventures in
which the Group has influence on when the reversal of the temporary difference is to take place, and it is likely that the temporary
difference will not be reversed during the foreseeable future.
Deferred tax assets are reported for all deductible temporary differences and unutilized loss carry-forwards, to the extent to which
future taxable profits are likely to be available and against which the temporary differences or unutilized loss carry-forwards may be
utilized,
• except when the deferred tax assets refer to a deductible temporary difference for an asset or liability in a transaction that is not a
corporate acquisition and that at the time of the transaction affected neither the reported nor the taxable profit or loss, and
• as regards deductible temporary differences attributable to investments in subsidiaries, associated companies and interests in joint
ventures, deferred tax assets are reported to the extent to which the temporary differences are likely to be reversed during the foreseeable future and a taxable profit, against which the temporary difference can be utilized, is likely to become available.
The reported value of the deferred tax assets is reviewed in conjunction with every closing date and is reduced to the extent to which it
is no longer likely that sufficiently large taxable profit will be available to permit utilization of all or parts of the recoverable taxes.
Deferred tax assets and tax liabilities are calculated on the basis of tax rates (and legislation) currently applicable or applicable
in practice on the closing date.
142
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
Hakon Invest’s current tax consists of tax that is to be paid or received in relation to the current year. It refers to the Parent Company,
which has operations in Sweden only, and to Forma, which has operations in Sweden, Finland, Estonia and Latvia. The current tax
rate in Sweden is 28%; Finland 29%; Estonia 0%; and Latvia 15%.
D E R I VAT I V E S P E R TA I N I N G T O F I N A N C I A L I N S T R U M E N T S
The Group uses derivatives of financial instruments such as currency forward contracts and interest swaps to a limited extent to reduce
the risks involved in interest and exchange-rate fluctuations. These derivatives are reported at fair value.
FINANCIAL INSTRUMENT RECOGNITION AND DERECOGNITION
Financial instruments are recognized in the balance sheet when the Group becomes a party to the contractual conditions of the instrument.
Financial assets are derecognized from the balance sheet when the contractual rights to cash flows from the asset cease to exist.
Financial liabilities are derecognized from the balance sheet when the associated commitment is fulfilled, annulled or ceases to exist.
C A S H F L O W S TAT E M E N T
The cash flow statement is prepared in accordance with the indirect method, which implies that cash flow from operating activities is
adjusted for transactions that did not result in payment receipts or disbursements during the period and for possible income or
expenses attributable to investment activities.
FINANCIAL RISKS
Hakon Invest’s operations involve exposure mainly to currency risk, interest risk and share price risk. “Currency risk” refers to the risk
that disadvantageous exchange-rate movements will affect the Group’s earnings and equity, measured in Swedish kronor. Currency
risk consists of transaction exposure and translation exposure.
Hakon Invest uses derivatives of financial instruments such as currency forward contracts and interest swaps to a limited extent, to
reduce the risks involved in interest and exchange-rate fluctuations.
Hakon Invest has prepared guidelines and a finance policy to indicate how financial risks should be managed and restricted.
N O T E 2 S E G M E N T I N F O R M AT I O N
Hakon Invest has two segments: publishing operations and service operations. All internal reporting and follow-up is based on the
areas of operation. Therefore, for the purposes of segment reporting, the areas of operation are the Company’s primary basis of subdivision and countries its secondary basis of subdivision.
The risks and opportunities facing the joint venture ICA AB have been identified in the following areas of operation: ICA Sverige,
ICA Norge, ICA Baltic, ICA Danmark, ICA Meny and ICA Banken. The first four refer to retail and wholesale operations in the particular geographic areas, while the fifth refers to wholesale operations in catering and service operations in Sweden. The sixth refers to
banking operations.
Hakon Invest has two segments: publishing operations and service operations. All internal reporting and follow-up is based on
this division. Additional to these segments are the holdings in the ICA AB joint venture and financial management – that is, all other
operations. The service operations refer to services to ICA retailers and have been transferred to the sister subsidiary ICA-handlarnas
Medlemsservice as of July 1, 2005.
External sales
PUBLISHING
O P E R AT I O N S
SERVICE
O P E R AT I O N S
OTHER INCLUDING
E L I M I N AT I O N S
T O TA L
596,211
25,734
0
621,945
Operating profit
59,319
–14,562
440,562
485,319
Net profit
42,860
–14,562
550,307
578,605
7,191,811
7,565,404
–13,044
321,762
24,601
4
24,605
9,698
62
9,760
Assets
373,593
Liabilities
292,984
Investments
Depreciation
41,822
The publishing operations are divided in secondary segments according to the below:
P U B L I S H I N G O P E R AT I O N S
SWEDEN
FINLAND
OTHER COUNTRIES
459,573
124,528
12,110
Operating profit
52,377
7,479
–537
Net profit
38,138
5,497
–775
External sales
Assets
327,272
40,124
6,197
Liabilities
260,661
24,295
8,028
Investments
Depreciation
23,720
785
96
8,478
1,030
190
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
143
N O T E 3 S A L E S T O R E L AT E D PA R T I E S
Of net sales, SEK 5,800 (5,924) refers to revenue from ICA-handlarnas Förbund.
N O T E 4 AV E R A G E N U M B E R O F E M P L O Y E E S , WA G E S , S A L A R I E S ,
O T H E R R E M U N E R AT I O N S A N D S O C I A L S E C U R I T Y C O N T R I B U T I O N S
The number of employees is calculated based on the Group’s measure of normal work time, which amounts to 1,800 hours.
GROUP
2004
Sweden
Women
134
Men
117
251
Finland
Women
52
Men
15
67
Women
186
Men
132
Total
318
Wages, salaries and other remunerations amounted to
Board of Directors, President and Vice President
Sweden
10,334
Finland
2,083
12,417
Other employees
Sweden
98,328
Finland
20,436
Total wages, salaries and other remunerations, Group
131,181
Social security contributions stipulated by law and contract
45,812
Pension expense
17,037
Total social security contributions and pension expense
62,849
Remuneration to senior executives
The Chairman of the Board and Board members are paid fees determined by decision of the Annual General Meeting. Remuneration
to the President and other senior executives consists of a base salary, other benefits and remunerations, and pension. “Other senior
executives” refers to the individuals who, with the President, comprise Group management.
2004 (SEK 000S)*
BASE ANNUAL SALARY/
BOARD FEE
Chairman of the Board
BENEFITS*
PENSION
COST
OTHER
R E M U N E R AT I O N * *
T O TA L
250
250
Other Board members (total)***
1,447
1,447
President****
1,238
100
1,935
8
3,281
Other senior executives*****
8,788
462
9,395
38
18,683
11,723
562
11,330
46
23,661
* Remuneration
excluding social security contributions
** Refers to reimbursement for parking and business entertainment
*** In 2004 the Board consisted of 18 members in addition to the Chairman.
**** The gross salary framework of SEK 4.4 million includes vacation pay, social security contributions, pension costs and other overhead in the form of
company car, etc.
***** In
144
2004, other senior executives amounted to five individuals.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
A gross salary framework of SEK 4.4 million has been negotiated with the President. The framework includes vacation pay, social
security contributions, pension costs and other overhead in the form of company car, etc. The retirement age is 65. The requirement
period of notice is six months during which time 1/12 of the gross salary framework is available per month. No variable remuneration has been paid. No contracts concerning variable remuneration exist.
For the President, cancellation of employment initiated by either the Company or the President is subject to a period of notice of
six months, during which a monthly allotment of 1/12 of the aforementioned gross salary framework is available. The President is not
entitled to any severance pay.
The Company and the President are both entitled to demand that the President retire at 65. Within the gross salary framework
described above, the President determines the size of the pension provisions to be made.
Other senior executives received remuneration in accordance with the table: No variable remuneration was paid in 2004.
Between the Company and other senior executives of the Hakon Invest Group, termination of employment initiated by the Company is subject to a period of notice of 12 months, whereas termination initiated by the senior executives is subject to a period of
notice of six months.
The other senior executives are entitled to a pension under the ITP plan (supplementary pensions for salaried employees). Moreover, the other senior executives have the right to retire at 62. An employees retiring at 62 is entitled to 75% of his or her regular salary
immediately prior to retirement, during the period until the employee reaches the regular retirement age. During the period after the
regular retirement age, the other senior executives shall receive the same amount of pension he or she would have received if he or
she had continued to work up to the age of 65.
NOTE 5 FEES TO AUDITORS
2004
SET, audit assignments
Other, audit assignments
1,024
155
1,179
N O T E 6 D E P R E C I AT I O N
2004
Cost of goods sold
Selling expenses
8,103
202
Administrative expenses
1,455
Total
9,760
Depreciation refers mainly to equipment but also includes building additions, new buildings and cars.
NOTE 7 FINANCE REVENUE
2004
Dividends
22,322
Interest income
36,826
Total
59,148
NOTE 8 FINANCE COST
2004
Interest expense
–6,687
Exchange-rate differences
–2,516
Total
–9,203
N O T E 9 C H A N G E I N VA L U E I N VA L U AT I O N AT FA I R VA L U E
2004
Long-term securities holdings
13,643
Current investments
44,983
Total
58,626
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
145
N O T E 1 0 I N C O M E TA X
The items included in the tax expense for 2004 are listed below:
C O N S O L I D AT E D I N C O M E S TAT E M E N T
2004
Current income tax
Current income tax for the year
–15,117
Deferred tax
Deferred tax referring to change in temporary differences
Tax expense reported in the income statement
–168
–15,285
Reconciliation of effective tax expense for 2004
Profit before tax
593,890
Tax in accordance with current tax rate in Sweden, 28%
166,289
Tax effect of:
Utilized loss carry-forwards previously not reported
Earnings participation in accordance with the equity method
–20,092
–130,482
Other non-taxable revenue
–1,988
Non-deductible expenses
1,094
Other
The Group’s effective tax expense (2.6%)
464
15,285
Deferred taxes at Dec. 31 refer to the following:
Deferred tax liability
Depreciation for tax purposes in excess of plan
–1,223
Properties
–2,463
Pensions
Deferred tax liability, gross
–822
–4,508
Deferred tax assets
Temporary differences from other securities held as non-current assets
Provision for pensions
Lending to employees
Deferred tax assets, gross
–755
10,606
–480
9,371
Hakon Invest AB suffered capital losses totaling SEK 680,476,000 on its holding of Ahold shares. In terms of tax, these losses can
only be offset against gains on the sale of securities, which is why deferred tax assets are not reported.
NOTE 11 EARNINGS PER SHARE
The Company’s Articles of Association state that preference shares have a preferential right to a dividend before common shares,
amounting to SEK 4.20 annually. If it is decided to distribute an additional dividend, an amount corresponding to the total amount distributed for Series-B preference shares will be distributed among common shareholders, after which an additional dividend will be distributed equally among holders of common shares and preference shares.1) The number of shares has remained constant during the
year.
Basic earnings per share for common shares and preference shares is calculated by dividing the earnings for the year that accrue
to the holders with the weighted average number of shares outstanding during the year, for each class.
Diluted earnings per common share is not stated since a conversion of preference shares to common shares implies an increase
in earnings per share.
1) The
Articles of Association were amended in 2005, which is why the distribution of earnings no longer occurs as described here. The new Articles of
Association may be found in the section of the prospectus entitled “Articles of Association.”
146
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
The tables below show the earnings and number of shares used in the calculation of earnings per share for each share class:
2004
Net earnings that accrue to the holders of preference shares
289,303
Net earnings that accrue to the holders of common shares
289,303
THOUSANDS
Weighted average of the number of common shares
Weighted average of the number of preference shares
2004
121,317
39,600
160,917
The Board of ICA-handlarnas Förbund, which owns the common shares, has decided to propose to the Annual General Meeting of its
members to abstain from a dividend on its holdings of 121,317,500 common shares. Therefore, a dividend will be paid only to
holders of preference shares. No other transactions with common shares or potential common shares took place during the period
from the closing date to the date of preparation of these financial reports.
NOTE 12 CONSTRUCTION IN PROGRESS
DEC. 31, 2004
Opening acquisition value
4,835
Changes during the year
– Purchases
4,741
Closing paid expenses
9,576
Construction in progress consists of IT systems.
NOTE 13 GOODWILL
Goodwill amounting to SEK 61,666,000 refers to the acquisition of Forma Publishing AB, the former ICA-förlaget. The publishing
operations for newspapers, magazines and other publications are fully integrated and comprise the cash-generating unit of Forma to
which the goodwill amount refers. The recoverable amount for goodwill has been estimated on the basis of its value in use, which
exceeded the book value. The present value has been calculated based on the future cash flow from the cash-generating unit. The
future cash flow has been calculated based on four-year forecasts issued by Company management. The discount factor used is 10%.
Estimates of cash flow beyond the four-year period are based on an annual growth of 2%.
NOTE 14 LAND AND BUILDINGS
DEC. 31, 2004
Opening acquisition values
44,284
Opening depreciation
–2,822
Changes during the year
– Depreciation
– Translation differences
–861
–27
Closing accumulated depreciation
–3,710
Closing reported value
40,574
Ratable values of building in Sweden
12,400
Ratable values of land in Sweden
6,051
18,451
The land accounts for SEK 1,990,000 of the acquisition value.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
147
NOTE 15 EQUIPMENT
DEC. 31, 2004
Opening acquisition values
102,058
Changes during the year
– Purchases
19,864
– Sales and scrapping
–42,677
Closing accumulated acquisition values
79,245
Opening depreciation
–85,294
Changes during the year
– Sales and scrapping
40,016
– Depreciation
–8,899
– Translation differences
–21
Closing accumulated depreciation
–54,198
Closing reported value
25,047
N O T E 1 6 PA R T I C I PAT I O N I N C O M PA N I E S R E P O R T E D
IN ACCORDANCE WITH THE EQUITY METHOD
2004-12-31
Opening reported value
3,570,015
Changes during the year
– Acquisitions
2,376,608
– Sales
–495
– Dividend
–1,868,520
– Profit from participations reported in accordance with the equity method
466,167
– Items reported directly under Equity
–42,742
Closing reported value
GROUP
ICA AB
Bra Förlag AB
4,501,033
NUMBER
PA R VA L U E
P E R C E N TA G E %
B O O K VA L U E
DEC. 04
SHARE IN
EARNINGS
2,000,000
200,000
40.0
4,495,963
466,006
25.0
750
250
Elektronikkforlaget AS
40
20.0
Trade Press AS
40
40.0
Total
161
4,320
4,501,033
466,167
The ownership interest above indicates the share of voting rights, which is also the same, in all cases, as the share of equity.
C O R P. R E G . N O .
DOMICILE
ICA AB
556582-1559
Stockholm
Bra Förlag AB
556424-7921
Stockholm
Elektronikkförlaget AS
975 341 550
Norway, Oslo
Trade Press AS
966 705 086
Norway, Oslo
ICA AB is one of the leading retail companies focusing mainly on food in the Nordic countries. Included in ICA AB are the subsidiaries ICA Sverige AB, ICA Norge AS, ICA Baltic AB, ICA Meny AB, ICA Banken AB and Etos AB. Netto marknad is 50/50
jointly owned with Dansk Supermarked A/S, while the newly formed RIMI Baltic AB is 50/50 jointly owned, as of January 2005,
with Kesko Livs AB. The following table shows the income statement and balance sheet for the ICA AB group;
148
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
B A L A N C E S H E E T, S E K M
Intangible assets
DEC. 31, 2004
2,015
Tangible assets
13,185
Financial assets
1,565
Inventories, etc.
3,509
Current receivables
7,586
Current investments
2,704
Cash and bank balances
Total assets
524
31,088
Equity
7,094
Provisions
1,548
Long-term liabilities
1,657
Current liabilities
20,789
31,088
I N C O M E S TAT E M E N T
Income
2004
73,531
Gross profit
9,500
Operating profit
1,977
Profit after financial items
1,741
Profit after tax
1,515
In 2004, Hakon Invest AB carried out an additional acquisition of 10% of the shares in ICA AB. The difference between the purchase
price paid and the acquired stake in ICA AB’s reported equity is calculated in accordance with the accounting principles applied
within the Hakon Group and amounts to SEK 1,679,775. This amount is distributed among:
Properties
250,754
The ICA brand name
770,400
The ICA Meny brand name
The Rimi brand name
The ICA Meny customer database
21,600
129,600
3,600
Customer loyalty programs
20,160
ICA Banken software
15,120
Profit-sharing contracts
Goodwill
Total
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
77,040
391,501
1,679,775
149
NOTE 17 OTHER SECURITIES HELD AS NON-CURRENT ASSETS
Other securities held as non-current assets consist mainly of investments within the framework of Skandia Investment.
NOTE 18 INVENTORIES, ETC.
DEC. 31, 2004
Finished products:
At acquisition value
22,463
At net sale value
0
Total inventories, etc., valued at the lower of acquisition value and net sale value
22,463
The inventory consist mainly of books. For the inventory, the cost of goods sold amounts to SEK 40,806,000. Revenue from book
sales amounts to SEK 75,381,000.
N O T E 1 9 P R E PA I D E X P E N S E S A N D A C C R U E D I N C O M E
DEC. 31, 2004
Production and distribution expenses
Other prepaid expenses
Accrued income
13,737
727
8,016
22,480
NOTE 20 INVESTMENTS
Hakon Invest AB has significant liquidity management operation based partly on shares in Royal Ahold and partly on a finance portfolio that in 2004 was management by Carlson Investment Management and Handelsbanken. At year-end, Hakon Invest’s total liquidity
amounted to approximately SEK 2.5 bn.
The primary focus of the Company’s financial investments in Carlson Investment Management and Handelsbanken in 2004 was
that the distribution should be 50% interest-bearing, 25% Swedish equities and 25% foreign equities. In 2004, the liquidity of the
financial investments was gradually increased because of Canica’s anticipated sale of ICA AB shares and Hakon Invest’s interest in
purchasing the same.
The Ahold shareholding, which consists of 8,341,376 shares, was initially of a strategic nature, but in 2001 it turned into a
purely financial investment. At year-end, the fair value of the Ahold shares amounted to SEK 425 million. The Ahold shares are listed in
Euros, which implies a currency exposure.
Distribution of current investments:
Shares
540,988
Hedge funds
397,391
Fixed-income securities
860,404
Ahold shares
425,240
2,224,023
A total of SEK 859 million of the financial investments was invested in Swedish fixed-income securities, of which 99% were issued by
the Swedish state, housing finance institutions or banks. Only 7% had a remaining maturity of more than six months.
NOTE 21 LIQUID FUNDS
Liquid funds consist of cash and bank balances amounting to SEK 288,527,000 and current investments amounting to SEK
216,425,000. The bank balance is invested with Handelsbanken. The investment carries floating interest based on SHB’s prime
rate. Unutilized overdraft facilities amounted at December 31 2004 to SEK 300 million.
150
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
NOTE 22 PROVISION FOR PENSIONS AND SIMILAR COMMITMENTS
Hakon Invest has established a provision on its own balance sheet in accordance with the Pension Registration Institute (PRI) system. Its
commitments are insured through the Pensionsgaranti company (FPG). For supplementary pensions for salaried employees (the ITP
plan), the Company applies to so-called ten-point solutions involving vested premiums. Commitments over and above PRI and ITP have
been insured through endowment insurance policies.
Prior to 2005, Hakon Invest applied accounting principles in accordance with the Swedish Accounting Standards Board (BFN).
This implied that the RR 29 recommendation would not be applied. Consequently, the company-owned endowment insurance policies and corresponding pension commitment were reported in gross. After the introduction of IFRS, these items were reported net.
The ITP plan
Pension expense
Defined-benefits plans:
Expense relating to employment during the current year
2,577
Interest expense
5,702
Return on managed assets
–23
Other
437
Total cost of defined-benefit plans
8,693
Cost of defined-contribution plan
8,344
Total pension expense
17,037
W H O L LY O R PA R T I A L LY I N V E S T E D I N M U T U A L F U N D S
Present value of commitments
Fair value of managed assets
128,082
–1,009
Provisions at year-end
127,073
Opening balance
122,377
Cost of defined-benefit plans
8,693
Provisions taken into account
–4,158
Reclassifications
–31
Cost of defined-contribution plans
192
Closing balance
127,073
Assumptions for actuarial calculations:
Discount rate
5%
Return on managed assets
0%
Future annual salary increases
3%
Future annual pension increases
2%
Other pension commitments
Other pension commitments are paid in amounts corresponding to the value of funds in mortgaged endowment insurance policies.
The capital value of the commitment amounted on December 31, 2004, to SEK 37,708,000, thus corresponding to the value of the
endowment insurance.
N O T E 2 3 A C C R U E D E X P E N S E S A N D P R E PA I D I N C O M E
DEC. 31, 2004
Accrued vacation pay
Accrued social security contributions
14,407
4,979
Other accrued expenses
26,375
Total
45,761
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
151
N O T E 2 4 S H A R E C A P I TA L A N D O T H E R E Q U I T Y
Equity per December 31, 2004, subdivided in accordance with the Annual Accounts Act.
2004-12-31
RESTRICTED EQUITY
Share capital
402,294
Restricted reserves
4,308,959
NON-RESTRICTED EQUITY
Non-restricted reserves
1,953,784
Profit for the year attributable to equity holders of Parent Company
578,605
7,243,642
2004
S H A R E C A P I TA L
NUMBER OF SHARES
Common shares with a par value of SEK 2.50 per share
121,317
Preference shares (B) with a par value of SEK 2.50 per share
39,600
160,917
The shares have the same value (2.50) and the same number of voting rights. The share capital amounts to a total of SEK
402,294,000.
Series-B preference shares must carry preferential rights to a dividend ahead of the common shares, by an annual amount of SEK
4.20 per share. If it is decided to issue an additional dividend for the specific year, an amount corresponding to the total amount
payable for Series-B preference shares is to be distributed among the common shares. Any additional dividend shall be subsequently
distributed equally among all of the Company’s common shares and preference shares of Series-B.
Since the Series-B preference shares have received a dividend of not less than SEK 4.20 per share for at least three fiscal years
starting in the year 2000, the Board may decide that all Series-B preference shares are to be converted to an equal number of common shares.
The policy on the regular dividend on the Company’s preference shares is that the Company must distribute at least 70% of the
dividend it has received from ICA AB for the fiscal year for which ICA Förbundet Invest distributes a dividend. The policy presupposes
that the Company’s position and liquidity permit the distribution of a dividend of the scope specified.
RESTRICTED RESERVES
2004
Share premium reserve
2,689,402
Statutory reserve
83,202
Equity method reserve
1,536,355
4,308,959
The restricted reserves – that is, the reserves that may not be distributed – consist of the share premium reserve, the statutory reserve
and the proportion of equity.
In a limited liability company, the proceeds from subscription for shares, over and above the par value, are to be added to the
share premium reserve.
A portion of the reported net profit for the year shall be appropriated to the statutory reserve of the Parent Company, provided it is
less than 20% of the share capital. The appropriation must be not less than 10% of the portion of the net profit for the year that is not
used to cover the loss brought forward.
Hakon Invest applies the equity method to calculate its participation for holdings for which the Company has a significant interest
or joint controlling interest. An amount corresponding to the amount by which participations in companies reported in accordance
with the equity method change compared with the preceding consolidated balance sheet is thus allocated to the equity method fund.
PA I D A N D P R O P O S E D D I V I D E N D
2004
Adopted and distributed during the year:
Dividend on preference shares:
Dividend for 2003, adopted by the Annual General Meeting in 2004: SEK 3.55 per share
140,580
Proposal for dividend presented to the Annual General Meeting:
Dividend on preference shares:
Dividend for 2004: SEK 8.20 per share (of which bonus of SEK 4 per share)
152
324,719
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
ICA-handlarnas Förbund has decided to abstain from the dividend on 121,317,500 common shares, so a dividend will only be distributed for preference shares (39,599,936).
The Board of Hakon Invest AB has decided to propose to the Annual General Meeting on May 11, 2005, that a dividend of
SEK 4.20 be distributed. The Board also proposes a bonus dividend of SEK 4.00 per share. This implies that the Board is proposing
that the Annual General Meeting approve a dividend totaling SEK 8.20.
Refer also to Earnings per share, Note 11, regarding the rules on dividends in the Articles of Association.
NOTE 25 ADJUSTMENTS FOR ITEMS NOT INCLUDED IN CASH FLOW
2004
Depreciation of equipment
Valuation at fair value
Unpaid interest income
Change in provisions
Participations reported in accordance with the equity method
9,760
–58,626
–5,894
–24,274
–466,167
–545,201
Hakon Invest has not applied the RR7 recommendation of the Swedish Financial Accounting Standards Council previously, so reclassifications have now been carried out to achieve compliance with IAS 7.
N O T E 2 6 C A S H E Q U I VA L E N T S
The consolidated cash flow statement includes cash equivalents at year-end 2004, amounting to
DEC. 31, 2004
Cash and bank balances
288,527
Current investments (maturities of max. 3 months)
216,425
504,952
NOTE 27 COMMITMENTS AND CONTINGENT LIABILITIES
CONTINGENT LIABILITIES
– Försäkringsbolagets Pensionsgaranti/guarantee
– Guarantee, loan to employees
2004
2,373
142
2,515
Operational leasing contracts – Group as lessee
Future minimum lease fees payable under operation leasing contracts amount to:
2004
Expense for the year
19,882
Within one year
10,869
After one year but within five years
29,686
After five years
6,828
47,383
The operational leasing contracts specified above pertain to rent for premises, renting of office machines and car rental. In addition to
the above, Hakon Invest also rents office premises from ICA AB, for which the rental expense in 2004 amounted to SEK 1,419,000.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
153
N O T E 2 8 I N F O R M AT I O N A B O U T R E L AT E D PA R T I E S
C L O S E LY A S S O C I AT E D P E R S O N
O R C O R P O R AT E E N T I T Y
SALE
TO CLOSE
A S S O C I AT E
SEK 000S
PURCHASE
FROM CLOSE
A S S O C I AT E
SEK 000S
AMOUNT
TO RECEIVE FROM
C L O S E A S S O C I AT E
SEK 000S
AMOUNT
T O PAY T O C L O S E
A S S O C I AT E
SEK 000S
–
ICA-handlarnas Förbund
2004
5,800
–
3,678
ICA-handlarnas Medlemsservice AB
2004
200
–
150
–
ICA AB
2004
80,481
3,911
1,206
953
Board members (other transactions)
2004
–
199
20
82
86,481
4,110
5,054
1,035
ICA-handlarnas Förbund
ICA-handlarnas Förbund owns 75% of the common shares in Hakon Invest AB.
ICA-handlarnas Medlemsservice AB (formerly ICA Förbundet Intressenter AB)
ICA-handlarnas Förbund owns 100% of ICA-handlarnas Medlemsservice AB.
ICA AB
Hakon Invest owns 40% of ICA AB.
Transactions with Board members
During the year, consulting fees for assistance in corporate and legal issues were paid to the law firm of Jan Lundberg, which is owned
by Jan Lundberg. The consulting fees paid in 2004 amount to SEK 198,710.
Benefits to employees in management positions
For information on benefits to senior executives, see Note 4.
NOTE 29 TRANSITION TO IFRS
(See also Note 1)
The effect of changed accounting principles on reported earnings and on opening and closing equity.
EQUITY
JANUARY 1, 2004
PROFIT/LOSS
IN 2004
EQUITY ON DEC. 31
DECEMBER 2004
6,947,688
497,295
7,277,377
2,307
3,372
5,679
–2,744
In accordance with previously applied accounting principles
A
Differences in capital value and pension expense in
accordance with defined-benefit pension plan
B
Capital value and pension expense relating to pension
commitments previously not reported
–29,557
26,813
Deferred income tax pertaining to the above items
7,630
–8,452
–822
C
Change in fair value of financial instruments
7,856
43,871
51,727
D
Translation to IFRS accounting for companies that are
reported in accordance with the equity method
Result from participation in companies reported in accordance
with the equity method
E
154
–87,445
–27
Goodwill amortization pertaining to investment in the company
reported in accordance with the equity method
Reclassification of tax expense in companies reported in
accordance with the equity method
E
Goodwill amortization, acquisition of operations
D
Reclassification of tax expense in companies reported in
accordance with the equity method
In accordance with IFRS
–15,837
11,622
–75,850
–56,998
6,848,479
4,111
4,111
56,998
578,605
7,243,641
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
A
Defined-benefit pension commitments were previously reported in accordance with the Law on safeguarding pension commitments.
Consequently, Hakon Invest AB has not applied the RR29 recommendation of the Swedish Financial Accounting Standards Council,
Employee benefits. The Group has mainly defined-benefit pension plans. Under IAS 19, the commitment to pay pension in accordance with defined-benefit plans is reported separately for each plan via the so-called projected unit credit method (PUCM), which
takes future salary increases into account. Recalculation to comply with IAS 19 implies a reduction of the balance sheet item. Provision
for pensions and similar commitments. In the income statement, administrative expenses decrease by SEK 3,372,000.
B
In December 2004, Hakon Invest AB absorbed a SEK 29,557,000 pension expense on its income statement. Since this pension
expense referred to earnings attributable to prior years, the pension expense – that is, administrative expenses for 2004, and the balance-sheet item Provision for pensions and similar commitments – has been adjusted.
C
Investments have previously been reported in accordance with the general recommendation of the Swedish Accounting Standards
Board, which implies valuation at the lower of acquisition value and fair value. Under IAS 39, certain financial assets are reported at
fair value. For Hakon Invest, this implies that investments are valued at fair value. Hakon Invest has opted to apply the valuation rules
stipulated in IAS 39 to the recalculation of its 2004 figures as well. Under IAS 39, all investments are valued at acquisition value the
first time they are reported in the balance sheet. The acquisition value corresponds to the fair value of the consideration remitted,
including expenses attributable to the acquisition. After the first time an investment is accounted for and classified as financial assets
reported at fair value or as assets that may be sold, it is valued at fair value. Changes in the fair value of “financial assets reported at
fair value via the income statement” are reported as revenue or expenses. Changes in the value of assets that may be sold are
reported as a separate part of equity until the investment has been sold, payment has been received or the asset has been divested in
some other way, or when the investment is written down, when the accumulated change in value reported previously under equity is
transferred to the income statement. In the income statement, the value of financial instruments increases by a total of SEK
43,871,000 (share portfolio SEK 28,832,000 and long-term securities SEK 15,038,000). A total of SEK 7,856,000 referring to
long-term securities has been booked against the opening balance.
D
The financial reports for companies reported in accordance with the equity method (ICA) have been recalculated in accordance with
IFRS.
In 2004, Hakon Invest AB increased its ownership of ICA AB by 10%. The analysis of this acquisition has been adjusted in
accordance with IFRS 3. The reporting of acquisitions in accordance with IFRS 3 implies that to a greater extent than previously intangible assets may be identified and valued separately from goodwill. Such assets, assumed, and other assets and liabilities assumed,
such as commitments that may lead to payments are valued at their fair value at the time of acquisition. The same valuation method
applies to acquisitions of participations in companies reported in accordance with the equity method. The net effect of the recalculation to achieve compliance with IFRS is SEK 27,000, the sum of SEK 2,500,000 pertaining to the effect of ICA AB’s IFRS-related
changes plus a loss of SEK 2,527,000 pertaining to additional amortization of identified surplus values. For specification of surplus
values, see Note 16.
Unlike previously, the Group’s share in the tax expense of companies reported in accordance with the equity method under the
income-statement item Result from participation in companies reported in accordance with the equity method. In accordance with the
previously applied principle, this was included in the consolidated tax expense.
E
As previously, goodwill is reported as an intangible asset in the balance sheet. In accordance with IFRS, goodwill is not amortized –
however, the value is impairment tested annually to determine whether it should be written down. The amortization carried out in
2004 in accordance with previously applied principles is reversed, reducing administrative expenses relating to goodwill in Forma
and result from participation in companies reported in accordance with the equity method with respect to goodwill in ICA.
The value of goodwill is also reviewed with respect to a possible need of an impairment when events or changes in circumstances indicate that the reported value may not be recoverable. As of January 1, 2004, the value of goodwill was not recalculated
but rather reported in the opening balance at its value on December 31, 2003. No need of an impairment has been identified.
Consolidated financial statements in accordance with IFRS for the 2004 fiscal year
155
Audit report
In our capacity as the auditors of Hakon Invest AB, we have examined this prospectus. The examination has
been carried out in accordance with the recommendation issued by the institute for the accounting profession
in Sweden, FAR.
The Annual Reports for the 2002 and 2003 fiscal years have been audited by Ire Lindstrand and Jan Eriksson and the Annual Report for the 2004 fiscal year has been audited by Ire Lindstrand and Klas Alm, without
qualification in the Audit Reports. The information in the prospectus extracted from these annual reports is
reproduced correctly. We have reviewed the interim report for January to September 2005. Forward-looking
information has not been reviewed by us.
Nothing has come to our attention that causes us to believe that the prospectus does not comply with the
requirements of the Swedish Companies Act and the Financial Instruments Trading Act.
Stockholm, November 17, 2005
Ire Lindstrand
Authorized Public Accountant
SET Revisionsbyrå AB
156
Erik Åström
Authorized Public Accountant
Ernst & Young AB
Hakon Invest AB (publ)
Box 1508
SE-171 29 Solna, Sweden
Visiting address: Svetsarvägen 16
Tel. +46 8 55 33 99 00
www.hakoninvest.se